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ATOMREDMETZOLOTO 2009 ANNUAL REPORT
ATOMREDMETZOLOTO2009 ANNUAL REPORT
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APPROVEDBy the Annual General Shareholders Meeting ofJSC AtomredmetzolotoJune 30, 2010(Minutes No. 5)
This report was pre-approved by the resolution of the Board of Directors ofJSC Atomredmetzoloto dated May 31, 2010 No 47.
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Contents
1. About this Report .................................................. 62. Company’s management statement .......................... 83. About the Company ..............................................11
3.1. General Information about the Company ......... 11
3.2. Structure of the Company, Organization
of Production and Marketing Processes............. 12
3.3. Geography of the Company’s Operations.......... 14
3.4. 2009 Key Operating Results
of the Company. ............................................... 16
3.5. Key Events of 2009. .......................................... 17
4. Position of the Company in the Uranium Market and its Development Strategy .................................194.1. 2009 Natural Uranium Market.......................... 19
4.2. Uranium Market Development Prospects ......... 21
4.3. Key Development Areas
and Investment Policy....................................... 23
4.4. Competitive Advantages
and New Challenges ......................................... 26
5. Business ..............................................................295.1. Geological Exploration Appraisal of Reserves and
Resources. Licensing ........................................ 30
5.2. Uranium Mining .............................................. 31
5.3. Construction of New Production Enterprises
in Russia ........................................................... 35
5.4. Service and Other Companies ........................... 38
5.5. Non-Nuclear Material Related Projects............ 40
5.6. Efficiency Management
and Innovations ................................................ 41
6. Governance System ...............................................456.1. Goal-Oriented Governance .............................. 45
6.2. Corporate Governance System.......................... 46
6.3. Board of Directors Report on Key Operations ... 52
6.4. Key Risks and Risk Management Methods ....... 53
7. Sustainable Development .......................................577.1. Personnel.......................................................... 57
7.2. Social Policy..................................................... 61
7.3. Occupational Health and Safety........................ 62
7.4. Environmental Protection and Safety................ 64
7.5. Development of the Regions of Operation......... 67
7.6. Charity and Sponsorship................................... 68
7.7. Stakeholder Engagement .................................. 68
8. Financial Performance ...........................................739. Exhibits ...............................................................77
9.1. Abbreviations and Terms Used in the Report..... 77
9.2. Main Deposits of the Company ........................ 78
9.3. Standard Disclosures Table – Sustainability
Reporting Guidelines (Global Reporting
Initiative).......................................................... 80
9.4. Nonfinancial Reporting Assurance ................... 85
9.5. Audit Report .................................................... 86
9.6. Accounting Statements
(RAS, summary version). .................................. 88
9.7. Report of the Audit Commission....................... 91
9.8. Details of the Company
and Contact Information .................................. 92
9.9. Feedback Questionnaire ................................... 93
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ABOUT THIS REPORT
This Report describes the business of the Open Joint Stock Company Atomredmetzoloto (JSC Atomredmetzoloto, ARMZ Uranium Holding Co., Company or ARMZ) in the Russian Federation, Kazakhstan, Armenia, Namibia, Mongolia and a number of other countries in 2009, and contains information on key events of Q1 2010. This report covers the business of all key subsidiaries and affili-ates of the Company.
The performance indicators provided in this Report belong to the following perimeters:
Operating results are given for the following companies: JSC PIMCU, JSC Dalur, JSC Khiagda, ZARECHNOYE, JSC JV Akbastau, JSC Elkon MMP, JSC UMC Gornoe, JSC OMCC, JSC Lunnoe, UMC, RUSBURMASH INC, LLP JV RBM-Kazakhstan, LLC USC ARMZ, Karatau. Environmental indicators – JSC Dalur, JSC Khiagda, JSC PIMCU.HR and H&S information – JSC Atomredmetzoloto, JSC OMCC, LLC USC ARMZ, UMC, JSC PIMCU, JSC Dalur, JSC Khiagda, RUSBURMASH INC, JSC Elkon MMP, JSC Lunnoe, JSC UMC Gornoe.
There were no substantial changes in the structure of the Company’s assets that could affect the comparability with previous reports on a consolidated basis. No
substantial changes in the coverage, boundaries or measurement methods applied for the purposes of this Report occurred as compared to previous periods.
The Company publishes its reports annually. The previous report was published on July 01, 2009. In 2010 the Company prepared its second annual report which presents in an integrated form financial and non-financial performance indicators, including sustainable development aspects. This annual report reflects the company’s contribution to achieving competitiveness by the State Atomic Energy Corporation Rosatom (Rosatom or Rosatom State Corporation) in the global nuclear product and technology market, and ARMZ’s influence over social and economic development of the regions of its operation and the environment.
The Report was prepared taking into account the priorities designated by the Corporation as the key shareholder of the Company and its key stakeholders: consumers of uranium products, business partners, regional and local authorities, local communities. For the first time this Report describes strategy and risk management matters. The Report shows how Rosatom’s strategy is implemented through the strategy of ARMZ using the opportunities which became available during the economic crisis.
1. About this Report
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In particular, the Report contains a disclosure on diversification of the natural uranium resource base through acquisition of highly efficient foreign assets. These operations, together with the development of 14 projects at all stages of the life of deposits, are aimed at ensuring firmly guaranteed long-term supplies to cus-tomers. The Report shows the interplay of the strategic priorities, corporate policies and standards, governance system, including target management using the key performance indicators, and the results achieved.
The Report contains a detailed overview of the Company’s development prospects, which is based on detailed analysis of the global natural uranium market. Therefore, the Report contains forward looking state-ments. Such terms believe, anticipate, expect, intend and plan and similar terms reflect the existing forecasts and opinions of the Company’s management with respect to the future results. There is always a risk that preliminary estimates, forecasts, plans and other similar statements will not materialize. It should be taken into account that due to a whole number of material events the actual results may substantially differ from the planned or target results, expected results, estimates and intentions described in the forward-looking statements.
This Report was prepared in accordance with the requirements of the Russian laws applicable to the reporting of open joint stock companies, and the Public Reporting Policy of Rosatom State Corporation. The financial information is based on the Company’s accounting statements prepared under IFRS. A full version of the Company’s IFRS and RAS statements is provided on its web-site. In the course of preparation of this annual report the Company held consultations and hearings on the report in accordance with the international standards series AA 1000 AS. ARMZ used the recommendations of the Global Reporting Initiative (GRI) Sustainability Reporting Guidelines, and key per-formance indicators developed by the Russian Union of Industrialists and Entrepreneurs (RSPP). The Report includes a table showing the level of compliance with the GRI G3 indicators and the RSPP key performance indicators.
The level of GRI G3 compliance is rated as С+. Ac-curacy of data contained in this Report was confirmed by the Company's Audit Commission.
The annual report (the non-financial information) was audited pursuant to the international standards. PricewaterhouseCoopers acted as independent auditor.
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ADDRESS OF COMPANY’S TOP MANAGEMENT
You are reading the annual report of JSC Atomredmetzoloto (ARMZ Uranium Holding Co.), a natural uranium mining subsidiary of the State Atomic Energy Corporation Rosatom.
The Russian nuclear industry has been rapidly developing in recent years. Today our country has 32 operating power units with a combined installed capacity of 23,200 MW. 7 more power units are now being constructed in Russia. By 2030 the share of atomic energy of the total balance of energy in Russia is to grow from the current 16 % to 25-30 %. The State Atomic Energy Corporation Rosatom is actively increasing its interna-tional presence. Presently, Rosatom is first in the world by the number of nuclear power plants simultaneously under construction outside of Russia, provides 40 % of the global uranium enrichment services and accounts for 17 % of the world’s nuclear fuel fabrication capacity.
The critical mission of ARMZ Uranium Holding Co. is to satisfy the growing raw material requirements of the Russian nuclear industry. In 2009 JSC Atomredmetzoloto showed once again that it suc-cessfully performs this function.
ARMZ implements the key strategy objectives of the Rosatom State Corporation. Last year ARMZ made critical steps towards transformation into a global company successfully implementing projects worldwide. JSC Atomredmetzoloto was the first Rosatom entity to become a shareholder of an international public company.
In the meantime ARMZ was actively developing the existing enterprises and invested in construction of the associated infrastructure.
Following the principles of sustainable development is critical for successful implementation of the Com-pany’s strategy. In its business ARMZ follows high environmental and industrial safety standards. The Company acts responsibly with respect to the needs of people living in the regions where ARMZ conducts business both in and outside of Russia.
ARMZ’s strategy is supported by the Russian Government, which in 2009 allocated RUR 64.2 bln. in total for the purposes of the Company’s development. These funds will be applied against performance of the investment program in the interests of the Russian nuclear industry as a whole.
Despite the success achieved in 2009 the Company still has a lot to do. In 2010-2011 ARMZ plans to significantly enhance its own resource base and to form a portfolio of high-yield assets with competitive mining costs in Africa, North America and Asia. Purchase of assets abroad will also allow the Company to gain access state of the art uranium mining and processing techno-logies. The Company will also actively develop Russian projects. However, the Company’s development dynamics shows that JSC Atomredmetzoloto is well positioned to achieve the most ambitious goals.
A.M. Lokshin Chairman of the Board of Directors JSC Atomredmetzoloto
Dear readers
Acting in line with the strategy of State Corporation Rosatom, ARMZ Uranium Holding Co. successfully reaches its strategic goal to secure uranium feedstock supply and competitiveness of the nuclear industry.
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2009 was one of the most successful years for ARMZ since the formation of the Company. Last year natural uranium output grew by more than 25 % from 3,687 to 4,624 tons. According to mining output growth the Company became the second biggest worldwide.
Such excellent results are to a great extent due to active international expansion. The current portfolio of ARMZ includes 14 uranium and non-uranium projects worldwide. In 2009, JSC Atomredmetzoloto purchased Effective Energy N.V. and thus consolidated the Russian stake in a uranium mining JV in Kazakhstan. Upon completion of an asset swap transaction with the Canadian Uranium One Inc. JSC Atomredmetzoloto became the owner of 19.95 % of its shares which allowed it to increase and geographically diversify the resource base. Representatives of JSC Atomredmetzoloto received seats on the Board of Directors Uranium One Inc. and became senior executives of the company. In the future Uranium One Inc. will become the platform for global growth of Atomredmetzoloto’s international business.
The Company also actively developed Russian projects. In 2009, the Priargunsky Industrial Mining and Chemical Union, the biggest Russian uranium mining company, finished the construction of a sulfur acid plant. As part of the transportation infrastructure development program JSC Khiagda opened a bridge over the Vitim River. This not only contributed to environmental safety of the production, but also substantially improved trans-port links in the Bauntovsky District of the Republic of Buryatia. In late 2009, the Company started designing the JSC Elkon MMP which includes creation of an
enterprise with a designed capacity of up to 5,000 tons of uranium per year in the south of the Republic of Sakha (Yakutia).
As mining rapidly grows, the Company pays a lot of attention to geological exploration. In 2009, the total scope of drilling amounted to 170,000 running meters, with investments in uranium exploration at RUR 1.05 bln. These are record results for the last twenty years. The reserve estimation shows that when exploration is completed the Company will add 20,000 tons of uranium in Russia and 10,000 tons in Kazakhstan.
In 2009, ARMZ also entered the international nat-ural uranium market. The Company signed contracts with its customers for supply of uranium for the next three years and entered into contracts for storage of materials and servicing the Company’s accounts at two foreign conversion facilities.
The Company’s business is based on sustainable development principles which means, among other things, taking into account social and environmental consequences of business when making any investment decisions. A condition to success is the dialogue with key stakeholders and active participation of the Company in the development of its regions of presence. Our employees play a critical role in practical imple-mentation of the sustainable development principles.
A focused development strategy and business growth dynamics of JSC Atomredmetzoloto allow us to look to the future with confidence.
V.L. Zhivov Director General JSC Atomredmetzoloto
Dear shareholders, partners and colleagues
Domestic project development and active international expansion are the key for implementation of our strategy.
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3. About the Company
3.1. General Information about the CompanyARMZ Uranium Holding Co. is a subsidiary of the State Atomic Energy Corporation Rosatom and is part of the vertically integrated nuclear energy industrial complex.
Today, ARMZ Uranium Holding Co. is one of the leaders in the world uranium mining industry. It is among the top five uranium mining companies and ranks second by uranium resources reserves. The Company’s portfolio includes 14 key projects with deposits at various stages of their life cycle in 5 countries (Russia, Kazakhstan, Ar-menia, Namibia, Mongolia). As the Company develops promising projects it will expand the geography of mining operations.
In 2009, the Company sourced the feedstock to pro-cure the supplies from the operating enterprises in Russia and Kazakhstan and from the existing inventory. The Company’s enterprises conduct mining operations using state of the art ore mining and processing technologies.
The Company’s finished products fully comply with Russian and international standards. The Company supplies uranium on the terms standard for the international market and has open materials accounts with three international conversion facilities, and framework agreements with all international transportation and forwarding companies.
ARMZ, together with its affiliates and subsidiar-ies, employs 9,991 people.
Background Information
1991 – ARMZ Uranium Holding Co. was formed as a State Concern in the system of the Ministry of Atomic Energy and Industry of the USSR.
1995 – State Concern Atomredmetzoloto was transformed to become a joint stock company.
2007 – The decision was taken to consolidate the uranium, rare earth and other minerals mining assets on the basis of JSC Atomredmetzoloto.
2007-2008 – Domestic uranium mining assets and urani-um exploration and mining joint ventures in Kazakhstan were transferred to the Company. JSC Atomredmetzoloto also received licenses for the right to use subsoil of the reserve uranium deposits.
July 2008 – JSC Atomredmetzoloto became the authorized company to procure for the domestic and international feedstock requirements of the Russian nuclear industry.
2009. The Company launched active international operations: acquisition of Effective Energy N.V. allowed it to consolidate the Russian stake in three uranium mining joint ventures in Kaza-khstan, and the Company also became a minority shareholder of a Canadian public uranium company Uranium One Inc.
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ABOUT THE COMPANY
3.2. Structure of the Company, Organization of Production and Marketing ProcessesThe shareholders of JSC Atomredmetzoloto are Rosatom State Corporation (80.345%), JSC TVEL (19.653%) and JSC Atomenergoprom (0.002%).
In the domestic market in 2009 the Company supplied uranium feedstock to two customers – JSC TVEL and JSC Techsnabexport.
In the international market the priority sales channel is direct sales to foreign utilities (Fig. 2, 3) The
Company used its subsidiaries and other intermediaries as alternative marketing channels. The Company actively cooperates with traders, brokers and other market players.
The basic principle of the Company’s pricing policy is a well considered client-oriented approach to priceformation for natural uranium using various pricing mechanisms.
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’’Not long ago only a few people knew what Atomredmetzoloto (ARMZ Uranium Holding Co.) was. Today it is one of the main divisions of Rosatom, the second biggest uranium mining company worldwide, which has assets on three continents. 2009, a year of crisis, became truly successful for ARMZ: the company bought assets abroad and even became the major shareholder of the Canadian uranium mining company Uranium One Inc.’’
Vedomosti, February 09, 2010
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ABOUT THE COMPANY
3.3. Geography of the Company’s OperationsThe target markets for the Company’s products are the USA, Asia and Pacific countries and Europe.
NamibiaCurrently the Company is a party to an operating joint venture SWA Uranium Mines in Namibia which was set up in 2008 by ARMZ, VTB Capital Namibia and Arlan investment company. The JV’s business is to discover and develop uranium deposits of conventional and new commercial types for Namibia. In 2009 the Company had several meetings with companies developing major uranium projects in Namibia and other adjacent
countries.
Material information beyond the reporting
period: On May 20, 2010 in Moscow as part of the visit of the President of the Republic of Namibia Hifikepunye Pohamba to the Russian Federation an inter-governmental Memorandum of Understanding was signed setting forth the key areas of mutually beneficially cooperation between the two countries in geological exploration, mining and processing of uranium ore. Pursuant to the Memorandum ARMZ together with the state Namibian company Epangelo Mining (Pty) Ltd will become a member of the working group that will prepare an action plan to implement joint projects.
UkraineFollowing the decision made by the third meeting of the Sub-Commission for Nuclear Energy and Nuclear Materials, ARMZ and the Ministry of Fuel and Energy of Ukraine, GP VostGOK in 2007-2009 had a number of meetings, determ-ined the objectives for cooperation in uranium mining and developed a work plan. Pursuant to the agreements reached at the fourth meeting of the Sub-Commission for Nuclear Energy and Nuclear Materials which was held on August 26, 2009, the parties drafted a Memorandum on cooperation in mining and processing of uranium between Rosatom and the Ministry of Fuel and Energy of Ukraine.Other Countries
As part of Rosatom’s comprehensive cooperation program in the area of peaceful use of atomic energy in 2009 JSC Atomredmetzoloto had a series of consultations with the governmental authorities of Egypt and Tadjikistan on geological exploration and mining of uranium in those countries.
In 2009, the Company continued negotiations with Ja-panese, Korean and French companies concerning their potential involvement in development of uranium deposits of the Elkon uranium province.
The Company started to consider potential participation in the precious metal development projects in the CIS countries and Africa.
Uranium One Inc.
Figure 4. Map of the Company’s Operations
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The Company conducts business in 5 countries (Russia, Kazakhstan, Armenia, Namibia and Mongolia), and is actively negotiating potential projects in a number of other countries (Ukraine, China, India etc.). The Company’s production facilities are based in Russia and Kazakhstan. The Company’s headquarters are located in Moscow.
Russia The main uranium mining companies of ARMZ, such as JSC PIMCU, JSC Dalur and JSC Khiagda, are located in Russia. In 2009 the uranium output of the three Russian mines amounted to 3,565 tons of uranium. The main production capacity of ARMZ is concentrated in Priargunsky (which accounts for 65 % of the total Company’s output). In Russia the Company is developing potential uranium mining projects (JSC Elkon MMP, JSC UMC Gornoe, JSC OMCC, JSC Lunnoe). For details see section 5.
Kazakhstan The Russian-Kazakh partnership in uranium mining is implemented as part of the Comprehensive Russia-Kazakhstan Cooperation Program in the Peaceful Use of Nuclear Energy adopted on December 7, 2006. In 2009 the total uranium production in Kazakhstan amounted to about 14,000 tons of uranium which allowed the country to become the biggest uranium producers.
In 2009 in Kazakhstan there were three uranium mining Russia-Kazakhstan joint ventures: ZARECHNOYE, JSC JV Akbastau and Karatau.
Armenia Closed joint stock company ARMENIAN-RUSSIAN MINING COMPANY (ARMC) was incorporated on September 9, 2008 on a parity basis with the Republic of Armenia represented by the Ministry of Energy and Natural Resources of the Republic of Armenia. On August 5, 2009 ARMC received a license to perform geological exploration for uranium in Armenia. On September 8, 2009 the joint venture set to field operations in Siunik District of Armenia. The work has identified prom-ising sites which may potentially contain uranium and gold occurrences. Currently the company is developing an exploration program for 2010. JSC Atomredmetzoloto is also considering participation in gold deposit development projects in Armenia.
Mongolia The Russian-Mongolian cooperation in the sphere of exploration and mining of uranium ores is conducted pursuant to the Agreement between the Governments of the Russian Federation and Mongolia on formation of a joint company Dornod Uranium dated August 25, 2009 signed during the visit of the President of the Russian Fed-eration Dmitry Medvedev to Mongolia, and the Cooperation Agreement between Rosatom State Corporation and the Nuclear Energy Office of Mongolia signed on March 17, 2009 in Moscow. These agreements provide for the formation by JSC Atomredmetzoloto and the Mongolian state company Monatom of a joint venture to mine uranium from the deposits of the Dornod uranium province with a capacity of up to 2,000 tons of uranium per year. In 2009 JSC Atomredmetzoloto and Monatom negotiated the key terms of formation of the joint company and its governance structure.
India Representatives of ARMZ and Uranium Corporation of India Ltd. (UCIL) in 2009 had a number of meetings where they discussed the terms of potential participation of the Indian company in the Russian uranium projects. The parties plan to exchange information on uranium assets and identify potential areas of cooperation in joint development of uranium deposits in the Russian Federation and internationally.
China On May 28, 2009 JSC Atomredmetzoloto and China Uranium Corporation Limited signed a Memorandum of Understanding in which they set out their mutual interest in joint development of a number of uranium deposits in Russia and their willingness to expand cooperation outside the Russian Federation.
Dalur
Akbastau
Zarechnoye
Khiagda
UMC Gornoe
PIMCU
OMCC
Lunnoe
Elkon MMP
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ABOUT THE COMPANY
3.4. 2009 Key Operating Results of the Company
Key Achievements in 2009
Item 2009 2008
Sales revenues*, RUR '000 29,233,932 15,197,372
Net profit,* RUR '000 6,727,942 289,200
Uranium output, tons 4,624 3,687
Net asset value,* RUR '000 82,038,896 12,834,049
Uranium mineral base (the sum of reserves and projected resources), tons 632,000** 558,000***
*On the basis of the IFRS consolidated statements. **Including the prognosticated resources of P1 category (reasonably assured resources), geological exploration and scheduled write-off of reserves***As of January 1, 2009
Table 1. Key Performance Indicators
KPI Name Target Value Achievement
Uranium production program implementation, tons 4,511 Completed
Reduction of recurring costs (in comparable prices), % 15 Completed
Labor efficiency increase, % 12.5 Completed
Implementation of reserves base diversification project
Phase I of the project Completed
Safety criteria
No accidences or death rate
growth Completed
Table 2. Key Performance Indicators of the Company (KPIs)
Uranium output grows by 25%
Acquisition of 19.95% of shares of the Canadian uranium mining company Uranium One Inc. as a result of an as-set swap transaction.
ARMZ acquires 100% of shares in Effective Energy N.V. (Netherlands) which holds uranium production assets in Kazakhstan.
The Company adds 74,000 tons to its resource base due to acquisition of new assets (subject to schedule write off of reserves)
Enhancement of environmental safety of JSC PIMCU’s production due to commissioning of a new sulfur acid plant operating on pure sulfur
In 2009, the enterprises of ARMZ in Russia and Kazakhstan produced 4,624 tons of uranium.Company’s mineral base as of January 01, 2010, was 632,000 tons of uranium.
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3.5. Key Events of 2009
January 2009JSC Atomredmetzoloto’s shareholders took the de-cision to increase the charter capital of the company by issuance of additional shares of the Company in favor of Rosatom. The Supervisory Board of Rosatom took the decision to subscribe for ARMZ’s shares.
March 2009The acquisition by JSC Atomredmetzoloto of 100% of shares in Effective Energy N.V. (Netherlands), owning uranium mining assets in Kazakhstan, was approved by the authorized governmental authorities of Kazakhstan and was closed.Prime Minister of the Russian Federation Vladimir Putin signed an Order dated March 10, 2009, No. 302-r and approved the passport of a comprehensive investment project Development of the Project Documentation to Implement the Investment Project Comprehensive Development of South Yakutia.
June 2009As part of the transportation infrastructure development program JSC Khiagda finished construction of a bridge over the Vitim River.JSC PIMCU finished construction of the sulfuric acid plant with a capacity of 180,000 tons per year.
July 2009Prime Minister of the Russian Federation Vladimir Putin July 11, 2009 signed Order No. 909-r on provision to Rosatom of a subsidy from the federal budget in the form of a property contribution of the Russian Federation in the sum of RUR 50 bln to fund the purchase of JSC Atomredmetzoloto's shares.As a result of additional share issuance ARMZ received the first tranche of the funds from Rosatom to the sum of RUR 16,898 bln which was transferred in furtherance of the order of the Government of the Russian Federation on provision of a subsidy. Rosatom became the owner of a controlling stake in JSC Atomredmetzoloto (51.83%).
August 2009ARMZ starts development of the Itmanovskaya place of Lukoyanovskoye deposit of titanum and zirconium sands.
In Stary Olov village in the Chernyshev District in the Trans-Baikal Territory, public hearings on environmental impact assessment (EIA) of the proposed enterprise which will develop the Olovskoye uranium deposit were conducted. The project was approved by the public and the administration of the Chernyshev District of the Trans-Baikal Territory.An inter-governmental agreement between the Russian Federation and Mongolia on formation of a Limited Liability Company Dornod Uranium to mine uranium in Mongolia was signed.
October 2009At the fifth Russian mining forum MINEX 2009 which was held in Moscow on September 30 to October 2 JSC Atomredmetzoloto was recognized as the Investor of the Year for its asset swap transaction with the Canadian Uranium One.ARMZ Uranium Holding Co. published its 2008 consolidated financial statements prepared under the IFRS and the Independent Auditor Report prepared by BDO Unicon.
November 2009The asset swap transaction with the Canadian Uranium One Inc. was approved by the Ministry of Energy and Mineral Resources of the Republic of Kazakhstan.The Lunnoe deposit development project in the Aldan District of the Republic of Sakha (Yakutia) received the support of the local population.
December 2009ARMZ and Uranium One Inc. closed the asset swap transaction whereunder a 50 % stake of ARMZ in Karatau was exchanged for a stake in Uranium One Inc. As a result ARMZ became the owner of a 19.9 % stake in Uranium One Inc.Prime Minister of the Russian Federation Vladimir Putin signed an order on provision to Rosatom of a subsidy from the federal budget to the sum of RUR 14.2 bln to purchase JSC Atomredmetzoloto's shares.Public hearings on development of Berezovoye deposit were held in the Trans-Baikal Territory. The local public provided constructive proposals concerning mitigation of environmental impact of the proposed mine.
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4.1. 2009 Natural Uranium Market. Impact of the Crisis on the Sector’s Development
4. Position of the Company in the Uranium Market and its Development Strategy
According to the IAEA reports* the world recoverable uranium reserves are 6,463,000 tons. The leader for urani-um reserves is Australia, the Russian Federation ranks third (Fig. 5). The corporate leader is BHP Billiton with its world largest combined copper-gold-uranium deposit Olympic Dam in Australia; JSC Atomredmetzoloto ranks second (Fig. 6).
According to the reports of Ux Consulting the world production of natural uranium in 2009 amounted to 50,700 tons, a 15% increase over 2008 figures (see Fig. 7).
Uranium 2007 Resources, Production and Demand OECD, International Atomic Energy Agency.
The 2009 global financial crisis heightened competition between the key market players for highly profitable uranium deposits and bolstered the activity of producers in the M&A area. JSC Atomredmetzoloto used the opportunities presented by the crisis to diversify its mineral base.
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POSITION OF THE COMPANY IN THE URANIUM MARKET AND ITS DEVELOPMENT STRATEGY
Five market leaders accounted for 73 % of all uranium production. The leader by production volume is Kazakh-stan (Fig. 8), and the corporate leader is Kazatomprom (Fig. 9) which develops a number of deposits with low cost of production. The second and third positions in 2009 by production volume (including equity interests of the corporations in the producers) were taken by Cameco (Canada) and Areva (France), correspondingly. In 2009 JSC Atomredmetzoloto preserved its fifth position due to high growth level (25 %).
Despite certain changes in the positions by uranium production volume, the group of leaders, which for a number of years included seven companies, suffered no changes. In addition to the above mentioned Kazatom-prom (Kazakhstan), Cameco (Canada) and Areva (France), this includes Rio Tintо (Great Britain), ARMZ Uranium Holding Co. (Russia), BHP Billiton (Australia and Great Britain) and NGMK (Uzbekistan). During the last 2 years Uranium One Inc. (Canada) and Paladin Energy (Australia) almost joined the group(Fig.9).
Based on expert opinions the natural uranium market in 2009 amounted to US$8.5 bln, including raw stock deliveries for subsequent nuclear fuel cycle (NFC) conversions. This is almost 5% of the global market of nuclear materials and technologies and 2% of the minerals market (excluding oil and gas). Two thirds of all contracts referred to uranium in form of oxide.
Clients are especially attentive to the stability of de-liveries and diversification of procurements in terms of
producers, geography, production technologies, prices, etc.Judging by 2009 results, the market share of uranium
producing companies depends not only on the output volume but the efficiency of marketing and sales system as well. For example, Cameco became an industry leader (second by production volume). ARMZ ranked fifth which correlates with its share of uranium production.
The global financial crisis materially affected the industry situation. As a result, the uranium prices which
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reached their peak in 2007 dropped almost fourfold and settled at $45-50 per pound of uranium oxide by the end of 2009.
The crisis first hit small uranium production and geological exploration companies by extremely limiting their ability to raise financing in the market. Consequently, many companies either suspended or
terminated their projects. Lowering uranium process discouraged investments in geological exploration. Companies started a bitter competition for highly profitable fields and expanded their M&A activity. JSC Atomredmetzoloto used these opportunities to diversify its mineral resource base.
4.2. Uranium Market Development Prospects
The nuclear industry development forecasts and the current uranium demand give the uranium producers ample opportunities to develop by 2030. The global financial crisis had no material effect on the commis-sioning of new reactors which were planned earlier, and such countries as China and India announced a proactive nuclear energy development programs.
From the standpoint of geographical demand Asia is the region with the most dynamic development. Its share of the global demand for reactor capacity will grow from 24 % in 2009 to 37 % by 2020. Europe’s
share will, in turn, noticeably reduce to 27% by 2020 from 37 % in 2009, although in absolute values the demand will increase. The same dynamics will be true for the United States: the share will go down to 25 % by 2020 from 30 % in 2009.
Ultimately global uranium demand will increase significantly by 2030. Different scenarios for nuclear energy development indicate that uranium demand will be in the range of 90,000–150,000 t U by 2030, and the price will range from $250 to $500 for one kilogram of natural uranium oxide.
’’For many people the crisis is danger, a quest for survival... We, however, saw new opportunities not available in the period of stability.We did not set up a defense line, we attacked. Our targets were foreign assets which lost their capitaliz-ation during crisis. We needed them to considerably improve our mineral resource bases. We successfully justified the new strategy and received good financing for it. Please note, that these were not survival investments, but investments for development’’.Tigran Khachaturov, First Deputy Director General, JSC Atomredmetzoloto
Global nuclear energy development trends indicate that global uranium demand will increase significantly by 2030. The leading positions will be occupied by companies which own deposits with relatively low production costs, demonstrate high operational efficiency and have a profound understanding of the clients’ preferences.
Long-term Prospects
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POSITION OF THE COMPANY IN THE URANIUM MARKET AND ITS DEVELOPMENT STRATEGY
Global uranium reserves are sufficient to provide stock for operations of all existing and proposed react-ors to 2075. However, judging by the uranium deposits development pace and the forecasts relating to secondary sources of uranium (recycled uranium from depleted production wastes (’’tailings’’), regenerated uranium from nuclear fuel waste, MOX fuel, highly enriched weapon uranium, federal and private warehouse stock), one may conclude that after 2020 demand may exceed supply.
In the meantime, the expected imbalance of uranium demand and supply opens the door for reallocation of shares of various uranium raw stock producers in the global market. It is expected that in light of the described trends the companies which not only own deposits with relatively low production costs and demonstrate high op-erational efficiency but also have profound understanding of the preferences of clients for uranium products and develop marketing and sales systems, may become the most efficient ones.
JSC Atomredmetzoloto, a reliable partner of JSC TVEL, supplier of primary feedstock for production of nuclear fuel, always fully performs its obligations and complies with all quality requirements, which allows JSC TVEL to maintain its leadership position in the work nuclear fuel market.
V.V. Rozhdestvensky, JSC TVEL Vice-President
In the short term the demand for uranium will reach 66,400 – 70,100 t in 2010 and from 65,300 to 73,000 in 2011 (information provided by WNA).
According to preliminary estimates the world production of natural uranium in 2010 will
increase to 53,890 tons, or 7% over 2009 figures. In 2010 the largest companies will produce at their enter-prises 47,260 tons of natural uranium, or 88% of the global production. ARMZ is expected to keep in 2010 its fifth position in the world by uranium production.
Short-Term Prospects
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4.3. Key Development Areas and Investment Policy
ARMZ is one of the most dynamically developing en-tities in the uranium sector. The ability to maintain a rapid development rate is ensured not only by the nuclear industry development dynamics but the vast potential of the Company itself. The Company guarantees
supply of raw stock for clean energy production ARMZ works globally, is backed up by historic leadership of Russia in nuclear energy, the initiative and professionalism of employees, efficient technologies and reliable raw material base.
MISSIONProvide Raw Feedstock for High Technologies Development.
STRATEGIC GOALTo form a global mining company specializing in production of uranium and other
minerals for hi-tech industries.
In future the company will be a world class efficient and dynamic business generating sustainable revenues in the long-term.
Becoming a leader in the natural uranium market
Implementing a client oriented approach
Providing a long-term sustainability and
competitive ability of the business
Development of efficient resource base
Formation of diversified project portfolio ensuring acceptable cost of mineral production in the long-term perspective and reliability of supplies for clients.
Development and deployment of state-of-the-art technologies in exploration, production and processing of uranium.
Development of long-term relations with clients to deeply understand their needs and the ability to offer a value adding decisions to clients.
Provision of unquestionable reliability of contracts, that is strict observation of timing and volumes of deliveries due to efficient management of the entire sales chain
Development of sales infrastructure and the complete set of tools to work in the global natural uranium market.
Procurement of high production efficiency of each project.
Diversification of production by regions, products, production technologies and life span of the deposits with a view to successfully optimizing country, technology, market and other risks.
Development of raw material production business for the fastest growing industry sections with a view to ensuring financial performance stability and increasing shareholder value.
The main strategic goal of ARMZ is to form a global mining company specializing in production of uranium and other minerals for hi-tech industries. In 2009 the key strategy implementation activities included efficiency enhancement and development of facilities and infrastructure at the existing enterprises or those under construction in Russia and Kazakhstan, and the acquisition of assets with highly efficient raw material base:
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POSITION OF THE COMPANY IN THE URANIUM MARKET AND ITS DEVELOPMENT STRATEGY
Transaction with Effective Energy N.V.In March 2009 as part of uranium assets consolidation program in Kazakhstan JSC Atomredmetzoloto acquired Effective Energy N.V. which held 25 % less 1 share of JSC JV Akbastau, and 50 % in Karatau. The consideration received in this transaction coupled with the assets of UMC, provide JSC Atomredmetzoloto with control over JSC JV Akbastau at equal terms with Kazatomprom, and get 50 % of Karatau which is a uranium producer with an almost closed production cycle. In December 2009 JSC Atomredmetzoloto exchanged its stake in Karatau for 19.95 % shares of Uranium One Inc. which served as diversification of its assets.
As a result of this transaction the Company consolidated its interests in three uranium producing joint ventures to the same level as Kazatomprom, and increased by 200% its production capacity in Kazakhstan. In the meantime, the 2009 uranium production exceeds the level of 2008 by approximately 280 %. Due to this trans-action ARMZ became the second largest among foreign companies by reserves and uranium production in the Republic of Kazakhstan.
Transaction with Uranium One Inc.In 2009 ARMZ and Uranium One Inc. (Canada) closed the asset swap transaction whereunder a 50 % stake of ARMZ in Karatau was exchanged for new 117 million common shares of Uranium One Inc. and US$90 mln in cash. The agreement provided for a further payment of
US$60 mln due to ARMZ subject to actual and financial performance of Karatau over 3 years. As a result ARMZ became the owner of a 19.95 % stake in Uranium One Inc. Material information beyond the reporting period: In March 2010 JSC Atomredmetzoloto announced the acquisition of 18,963,600 common shares of Uranium One Inc, or about 3.2 % of outstanding common shares of Uranium One. Thus, the share of ARMZ in the capital of Uranium One Inc. reached 23.1 %. Development of cooperation with Uranium One to increase its shareholder value is part of ARMZ’s strategy.
Concurrently with the asset swap agreement ARMZ and Uranium One Inc. entered into a framework strategic partnership agreement and the offtake contract relating to acquisition by JSC Atomredmetzoloto of uranium produced by Uranium One Inc. The latter contract allows ARMZ to receive on the industry-standard terms the larger of 50 % of uranium concentrate produced by Karatau (1,000 tons from 2011 onwards) or up to 20 % of all uranium concentrate production of Uranium One Inc. Thus, as the enterprise develops, from 2014 ARMZ will have the right to receive more products than its currently guaranteed stake in Karatau.
This transaction helped Rosatom State Corporation diversify its resource base and get access to new high quality uranium reserves and facilities with high produc-tion potential. All this results in additional competitive strength of Russia including access to new uranium production technologies.
Uranium One Inc. is a public uranium production company incorporated in Canada and SAR. Uranium One holds 70% stake in Akdala and South Inkai mines, 30% in Kharasan-1 mine in Kazakhstan, 100% stake in the enterprises under construction and mineral assets in the United States, 51% stake in Honeymoon mine which is under construction in Australia and 100% stake in Dominion mine in SAR. A substantial volume of easily recoverable resources of the company are in Kazakhstan.Overall uranium production in 2009 was 3.6 mln pounds of U3O8.
http://www.uranium1.com
2009 Key Development Areas
Responding to the global challenges in 2009 JSC Atomredmetzoloto made material contributions towards attainment of strategic priorities of the Rosatom State Corporation associated with improvement of products’ competitive ability in the international market. The implementation plan for Corporation’s
strategy was supplemented by a strategic project of JSC Atomredmetzoloto relating to diversifications of natural uranium resource base. It was due to this project that JSC Atomredmetzoloto became the second largest global company by reserves and remained in the top five by production volume.
Implementation Activities as part of Rosatom State Corporation’s Strategy Plan in 2009 (Diversification of Uranium Mineral Resource Base).
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Investment Program as Strategy Implementation ToolARMZ investment policy is based on the development strategy and the project-based approach to asset man-agement. All investment projects are tools to reach the strategic goals, and they are implemented in the framework of the primary development areas.
The investment policy of ARMZ does not only structure the investments but also sets forth the limits per each structure element which forms a flexible and transparent investment programs management.
In 2009, the main focus of the investment policy was the acquisition of foreign uranium resources with a resource base of better quality than the Russian projects. This was a reaction to the opportunities created by the global financial crisis. Investments in Russian and Kazakh uranium production projects did not lose their dynamics from the preceding period.
In 2009 investments in the development of the mineral base occupied the primary share among the various areas of the investment structure (see Fig. 11).
The 2009 investment program of JSC Atomredmetzoloto (less assets in Kazakhstan) was financed by the shareholders and from Company's equity by 98 %.
Over the next few years ARMZ plans to materially increase the production of uranium through a large-scale investment program which provides for the expansion and upgrade of existing production facilities, development of new promising deposits, and foreign joint venture partnerships. ARMZ's investment program for 2008 – 2015 is about RUR 184 billion. In the longer term the company will identify and use its full potential subject to the advantages and risks posed by a potential products diversification.
’’From our experience of joint operations with ARMZ we concluded that the company is a reliable partner which sticks strictly to its obligations. During years of co-operation we have implemented many projects including at the national level. The company can handle its most ambitions development plans’’.
A.A. Boguslavsky, Gazprombank’s Vice-President
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POSITION OF THE COMPANY IN THE URANIUM MARKET AND ITS DEVELOPMENT STRATEGY
4.4. Competitive Advantages and New Challenges
Long-term work experience in different geological and weather conditions, access to substantial financial resources, existence of diversified portfolio with production projects at various deposit development stages make ARMZ confident that its declared strategic priorities will be reached.
Wide experienceFifty years of experience in developing
uranium deposits in diverse geographical and climatic conditions
Competencies in acquiring major production assets abroad
Financial stabilityAccess to long-term financing, federal
guarantees
Good credit history
Positive financials
Low debt ratio
Diversified Uranium Mining Projects Portfolio
Various development stage project pipeline: exploration to full-scale production including JSC Elkon MMP with its top output being up to 5,000 tons of uranium per year
Geographical diversification: 14 uranium and non-uranium projects in five countries
Technological and technical competencies, innovations
Knowledge and application of all current uranium production methods (open pit, underground, heap leaching, in-situ leaching)
Application of state of the art methods to design and build uranium production enterprises
Development of efficient technologies to produce, treat, refine and process complex ores including methods to intensify and increase the efficiency of ISL
Guaranteed demandStable Russian domestic demands
including demand for natural uranium for the purposes of the export program of Russian low-enriched uranium and fuel assemblies
High demand for uranium products in the international markets due to the growth of nuclear power generation to 2030.
The competitive advantages of ARMZ are supported by its integration in the world’s largest vertically-integrated holding in
the nuclear industry and includes:
Main challenges
High cost of uranium recovery in a number of projects in Russia
High competition and volatility of uranium market
Legal restrictions on export of Russian natural uranium
Inadequate sales infrastructure
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The company is also known for its responsible approach to project implementation, utmost care about safety and environmental protection.
With a view to gaining practical benefits from competitive advantages and providing an adequate response to the sustainable development challenges, ARMZ started a marketing and sales system development program.
As part of the overall foreign economic policy of Ros-atom State Corporation the company will continue to coordinate its marketing and sales policy with other Group entities.
The main goals of Company’s marketing activities are:Development of long-term business relations with existing and potential clients, study of their needs. Increase of company’s share in the overall supplies of natural uranium to the global market. Positioning the company in the international nat-ural uranium market as a major first-tier supplier with a geologically diversified mineral base. Maximisation of the marginal profit of the Company from sales of natural uranium in the domestic and international markets.
’’Involvement in the transformation of a Russian com-pany into a global business is a major challenge and large professional opportunity. Here the financial and market development objectives complement each other. We have not only made fundamental improvements in the investment attractiveness of the group but also find the solutions matching the market conditions, build long-term partnerships with clients, local governments and communities, environmental groups and other stakeholders in various countries. With this in mind we all need to, and we will educate ourselves, develop the innovations potential of the company and new competencies. I am sure that contribution of JSC Atomredmetzoloto in the nation-wide upgrade will not be limited to creation of the fundamentals for high technologies, in other words, the guaranteed mineral supplies. The company has considerable innovations po-tential involving deployment of promising technologies of reserves prospecting, exploration and development, and the rehabilitation and restoration of land after production has finished’’.
Marina Liborakina, Deputy Director General – Chief of Strategy,
JSC Atomredmetzoloto
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5. BusinessARMZ Uranium Holding Co. is a world leader in uranium production and the principal supplier of uranium feedstock for the Russian nuclear industry. ARMZ Uranium Holding Co. is engaged in projects
at various life stages and applies the gradual approach to their management. The structure of the Company’s entities and projects depending on their life stage is in-cluded in Fig.12.
Tables 3 and 4 demonstrate production dynamics of the operating production enterprises of JSC Atomredmetzoloto for 2007-2009 and 2010 forecast. In 2009 the enterprises of JSC Atomredmetzoloto demonstrated a substantial production growth, namely by 25%.
JSC PIMCU is still the primary producer (65 percent); however, in 2009 the combined share of other production enterprises in the overall production increased to 35%.
Enterprises 2007 2008 2009
Share in the overall 2009 production,
%
JSC PIMCU 3037 3050 3005 65%
JSC Dalur 350 410 463 10%
JSC Khiagda 26 61 97 2%
ZARECHNOYE 114 166 245 5%
JSC JV Akbastau 0 0 195 4%
Karatau** 0 0 619 13%
Total production: 3,527 3,687 4,624 100%* Including the equity stake of JSC Atomredmetzoloto in the corresponding enterprise.** Pursuant to the off-take contract with Uranium One Inc.
Table 3. Uranium production by the principal production enterprises of JSC Atomredemetzoloto, 3 year trends, tons*
Enterprises 2010
JSC PIMCU 2,920
JSC Dalur 460
JSC Khiagda 150
ZARECHNOYE 300
JSC JV Akbastau 300
Karatau** 1,000
Total production: 5,130
Table 4. Planned 2010 uranium production by the principal production enterprises of JSC Atomredemetzoloto, tons*
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* Including the equity stake of JSC Atomredmetzoloto in the corresponding enterprise.** Pursuant to the off-take contract with Uranium One Inc.
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2009 Activities and Results
Geological ExplorationTotal Company's investments in geological exploration in Russia amounted to approx. RUR1 bln in 2009. The current reserves assessments indicate that following the exploration phase the Company's reserves in Russia and Kazakhstan will increase by approximately 20,000 tons and 10,000 tons, respectively.
In 2009 the Company filed with the SRC the temporary conditions FS for Khokhlovskoe, Gornoe and Berezovoe.
Prospecting and appraisal operations were conducted by subsidiaries of JSC Atomredmetzoloto in Armenia (ARMC) and Namibia (SWA Uranium Mines (Pty) Ltd).
In 2009 JSC Atomredmetzoloto commenced the re-evaluation of the Russian deposits in light of SRC requirements and the JORC code. RUSBURMASH INC has set up a special team of geologists and mathematicians to carry out the geological and mathematical model of Elkon province deposits (Yuzhnaya Zone) and Olovskoye-Streltsovskoe ore field. Validation operations were performed at Olovskoe deposit
to classify the reserves pursuant to the JORC code and prepare the preliminary analysis.
In 2009 the licenses formerly held in the name of Atomredmetzoloto were issued under the names of its subsidiaries as follows:
JSC Elkon MMP: Elkon, Neprokhodimoe, Kurunge, Elkon Plateau, Druzhnoe, Severnoe, Interesnaya Zone deposits;JSC OMCC: Olovskoe deposit;JSC UMC Gornoe: – Gornoe and Berozovoe deposits.
Plans and TargetsThe 2010 plans include geological exploration at 10 fields, protection at the SRC of the temporary conditions FS for 3 deposits, and the permanent conditions FS for 6 deposits. The Company will prepare a report on Istochnoye deposit with reserves calculation.
The Company has plans to obtain geological exploration and production licenses for Khokhlovskoe (JSC Dalur), Vershinnoe and Tetrakhskoe (JSC Khiagda) deposits.
5.1. Geological Exploration Appraisal of Reserves and Resources. Licensing.In 2009 the Company effectively invested RUR1 bln in geological exploration. Expected growth of uranium reserves is 20,000 tons in Russia and 10,000 tons in Kazakhstan.
Assets Stake Reserves, tons Resources, Р1, tons Mineral base, total, tons
JSC PIMCU 100% 118,341 118,341
JSC Dalur 100% 10,423 11,691 22,114
JSC Khiagda 100% 26,683 14,978 41,661
JSC Elkon MMP 100% 319,186 – 319,186
JSC OMCC 100% 11,726 – 11,726
JSC UMC Gornoe 100% 7,918 – 7,918
JSC Lunnoe 100% 408 – 408
Total for Russia 494,685 26,669 521,354
ZARECHNOYE 50% 9,073 15,051 24,124
JSC JV Akbastau 50% 12,324 27,885 40,209
Total for Kazakhstan 21,397 42,936 64,333
Stake in Uranium One Inc. 30,255 15,932 46,187
ARMZ TOTAL 546,337 85,537 631,874
Table 5. Company’s Reserves and Resources
Appraisal of Reserves and Resources. Licensing.
The Company’s mineral base (the sum of reserves and projected resources) as of January 01, 2010, was 632,000 tons of uranium, including explored reserves of 546,000
tons and 86,000 tons of reasonably assured reserves. In terms of its reserves JSC Atomredmetzoloto ranks second among all international uranium producers.
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5.2. Uranium Mining
The end products of ARMZ are uranium oxide pursuant to TU 95-1981-89 (JSC PIMCU) and ammonium poly-uranate pursuant to TU 952822-2002 (JSC Dalur and JSC Khiagda) and fully comply with the Russian and international standards and regulations. The end products of Kazakhstan’s companies are certified under ASTM standards.
The Company’s quality regulations are based on com-pliance with ISO 9000 standards. These standards are known for establishing requirements towards business management system which shall ensure the stable quality of products, rather than the quality of products as such.
Production Method Enterprises
M/HL (mine)-in-situ/heap leaching JSC PIMCU
ISR in-situ recovery JSC Dalur
ISR in-situ recovery JSC Khiagda
M (mine)-in-situ JSC Elkon MMP
M/HL (mine)-in-situ/heap leaching JSC OMCC
M/HL (mine)-in-situ/heap leaching JSC UMC Gornoe
P/HL(open pit)-open air/heap
leaching JSC Lunnoe
Table 6. Uranium production methods at ARMZ group companies
In 2009, ARMZ group companies demonstrated a substantial growth of uranium production, namely, 25 percent, which was enabled primarily by a significant growth of mining by Kazakhstan enterprises.
Uranium produced: 3,005 tons.
JSC PIMCU Transbaikalia, city of Krasnokamensk
2009 Performance
Plans and Targets
JSC PIMCU produces uranium by underground mining at four operating mines – mine No.1, mine No.2, Gluboky mine and Mine 6R.
Uranium production targets were attained. In 2009, the Company produced 3,005 tons of uranium, or 65% of the combined uranium production by JSC Atomredmetzoloto.
June 17, 2009: an opening ceremony of the largest sulfuric acid plant in the eastern part of Russia (180,000 tons p.a.). The plant will ensure uninterrupted supplies of sulfuric acid to the metal facility which is part of JSC PIMCU. The plant has state of the art equipment and is designed to operate for about 40 years. Its construction and commissioning were car-ried out with the involvement of leading specialized enterprises in Siberia and the Urals, as well as experts from Europe and the United States. A fundamental difference of the new plant's technological cycle is the usage of clean gas sulfur free of arsenic and selenium, as feedstock to produce sulfuric
acid. This allows to materially reduce the hazardous emissions in the air and cut the end product costs. The plant was built to replace the existing sulfuric acid facility of JSC PIMCU which is operational since 1976.
Certain measures were taken to upgrade the production facilities. As part of the technical upgrade of the mining and underground equipment the company purchased 26 new machines for RUR249 mln and set up a service center to provide repair and maintenance to the foreign mining and underground equipment. The company commenced experimental operations involving deployment of upward mining method by horizontal layers. It is active in terms of creating the digital block and wireframe models of all deposits.
Increase production efficiency. One of the development areas of the underground ore production technologies is in-situ block leaching. Experimental production involving this technology is scheduled to commence as early as 2010.
Commence new facilities. If the new facilities are com-menced, the uranium production may be preserved at 3,000 tons level in the short term.
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Uranium produced: 463 tons.
Uranium produced: 97 tons.
JSC Dalur Kurgan Region, Uksianskoye village
JSC Khiagda Republic of Buryatia, Bagdarin settlement
2009 Performance
2009 Performance
Plans and Targets
Plans and Targets
JSC Dalur produces commercial quantities of uranium by in-situ recovery method at Dalmatovskoye deposit and continues experimental production at Khokhlovskoye deposit. The output of the main processing facility which handles the pregnant solutions is 1,000 tons of uranium per year.
JSC Khiagda is engaged in commercial production of uranium at Khiagdinskoye Ore Field using in-situ recovery method. The pregnant solutions are processed at the experimental production unit into natural uranium concentrate (yellow cake) which is the end product.
Uranium production targets were exceeded. The 2009 production was 463 tons of uranium recovered by in-situ leaching (ISL). This exceeds the 2008 production level by 13 percent.
The company commissioned new production facilities. The company drilled 132 exploration wells and commissioned 224 technological wells. It fully complied with the commissioning schedule of the production facilities.
Production increased substantially. Uranium production at Khiagdinskoye ore field experienced material growth from 60 tons in 2008 to 97 tons in 2009.
There was a breakthrough in the development of the required production and transportation infrastructure. JSC Khiagda commissioned a bridge across the Vitim river to lower the risk of spilling sulfuric acid and fuel and lubricants in-to the Vitim river when the vehicles cross it during ice freeze-up and drift.
The company commissioned the sulfuric acid warehouse at the railroad base, rebuilt the rail track, crane runways and installed the portal crane at the railroad base. The company commissioned a vehicle access road from Romanovka-Bag-darin road to JSC Khiagda ISL site. It also installed the shed for bulk items at the plant’s pad, reconstructed the building where the processing unit is installed, and built an acid ware-house at the production pad.
JSC Dalur uranium production plan for 2010 is 460 tons.
Ensure the growth of uranium production in 2010 to 150 tons.
Continue the production complex construction, namely, the construction of the main building at the primary production pad, completion of Phase 1 of the shift camp, the acid plant with 110,000 tons p.a. capacity, development of deposit No. 6 and construction of power and warehouse facilities.
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Uranium produced: 494 tons.
ZARECHNOYE Republic of Kazakhstan
2009 Performance
Plans and Targets
ZARECHNOYE develops Zarechnoye deposit by in situ recovery method and plans to commence development of South Zarechnoye deposit.
Uranium production increased. ZARECHNOYE worked to increase the uranium output. The 2009 uranium production was 494 tons which exceeds the previous year figure by almost three times.
The company expanded the liquid chemicals warehouses, the pregnant solution processing segment and partially replaced the power equipment. The company uses equity financing to carry out the repair and rehabilitation at the deposit which helps to maintain the high yield of the wells.
The environmental risks were reduced due to further
improvements to the transport infrastructure. With a view to minimizing the environmental risks the company built a detour road to bypass Koksarai settlement and uses it to transit sulfuric acid and the finished products.
New technologies deployed. In the reporting year the company completed the transition to a pump-based pregnant solutions lifting technology which led to a shorter block treatment time. Based on the 2009 data the company at-tained the required uranium reserves increase. The utilization ratio is about two years.
Increase uranium production. The company's uranium production plan for 2010 is 772 tons (a 56% increase over 2009 figure). In light of this goal the enterprise will continue to set up the operating fields supervision mechanics, upgrade the power equipment and increase the output of the pregnant solutions processing sector at the mine.
Measures to develop the production facilities. In 2010, the Company will continue with its action plan towards recovery of 1,000 tons of uranium p.a. at ZARECHNOYE. With this in mind, the Company plans to build an additional local sand set-tler, purchase the electric transformers and commission an additional sorption column and a new pressure filter.
’’ZARECHNOYE is working to increase natural uranium production. We are happy to report that we exceeded all the targets set for 2009, primarily due to a consistent technical and financial support by the leading shareholders of the Company, including UMC, a subsidiary of ARMZ.We note the dynamic development and strengthening positions of ARMZ among producers of natural uranium, due to the perfect organisational and high professional level of all personnel of the group, and we are happy that ZARECHNOYE is part of that team’’.
Rustam Medeo, General Director, JV Zarechnoye
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Uranium produced: 390 tons.
Uranium produced: 1415 tons.
JSC JV Akbastau Republic of Kazakhstan
Karatau Republic of Kazakhstan
2009 Performance
2009 Performance
Plans and Targets
Plans and Targets
JSC JV Akbastau develops Sites Nos. 1, 3 and 4 of Budenovskoye deposit by in-situ recovery method. The shareholders of JSC JV Akbastau entered into a Memorandum whereby all uranium recovered at Sites Nos. 1, 3 and 4 of Budenovskoe deposit is to be purchased by JSC Atomredmetzoloto.
The company secured commencement of uranium production and the first delivery of raw stock to clients. Namely, in 2009 JSC JV Akbastau secured production of 390 tons of uranium due to expedited stripping of reserves and commissioning of production blocks, and shipped the first 113 tons of uranium oxide to the clients.
The production pad of the mine was connected to the external electric power networks.
The company implemented a number of HR solutions at the managerial level which proved to be successful, and this favorably influenced the development dynamics of the company and ensures that the objectives set by the shareholders will be attained in due time.
The products sales were secured. The company entered into uranium supply contracts which guarantee the product sales and the financing of the project.
Involvement of JSC Atomredmetzoloto in the management of the company made it possible to start the trial production of the refining facility in the middle of 2009 and receive by the year end over 150 tons of uranium oxide. Uranium production in form of commodity strippings in 2009 amounted to 1,415 tons.
Produce 600 tons of uranium in 2010.
Amend the subsoil use contracts relating to Budenovskoe deposit. If the program of development and consolidated production at Budenovskoe deposit approved by JSC Atomredmetzoloto, is implemented, the company will be
producing 3,000 tons of uranium per year. For purpose of implementing this Program the company and NAK Kazatomprom made a joint decision to amend the subsoil use contract for Budenovskoe deposit in 2010 with a view to intensifying the production and recovery of uranium in 2010.
The present development speed will make Karatau reach the designated uranium production level (2,000 tons) as early as in 2010. The share of JSC Atomredmetzoloto is 1,000 tons of uranium (based on the off-take contract with Uranium One Inc.).
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JSC Elkon MMP Republic of Sakha (Yakutia)
2009 Performance
Plans and Targets
JSC Elkon MMP was established in 2007 to develop the Southern Group of deposits of Elkon uranium province in the Republic of Sakha (Yakutia) and construct Elkon Mining and Metallurgical Plant.
Elkon uranium province located in Aldan district ranks second in the world by reserves (over 340,000 tons of uranium feedstock). Currently JSC Elkon MMP holds licenses to explore and produce uranium at Elkon, Neprokhodimoe, Elkon Plateau, Kurung, Druzhnoe (Yuzhnaya Zone) and Severnoe and In-teresnaya Zone deposits with the combined reserves being 319,000 tons.
Development of Yuzhnaya Zone deposits is the most important objective of Russia’s nuclear industry development. If this objective is successfully completed, these deposits will accommodate 30 percent of Russia’s
natural uranium demand. Development of Yuzhnaya Group deposits will allow to produce up to 5,000 tons of uranium and recover gold, silver and molybdenum as by-products. Further, construction of Elkon Mining and Metallurgical Plant (JSC Elkon MMP) is important for purposes of social and economic development of Southern Yakutia region. This project is included into the investment project of Comprehensive Southern Yakutia Development. The Russian Government by its decree included this project in the list of investment projects financed by the Russian Investment Fund.
Rosatom State Corporation was put in charge of the project as its contractor. The lead time for the JSC Elkon MMP design documents included in the Project Passport are 2009-2010.
JSC EGMK-Project was established pursuant to Decree # 302-r of the Russian Government dated March 10, 2009, as a vehicle to design JSC Elkon MMP; the relevant operations to be financed in 2009 from the budget by the Investment Fund of Russia.
The scheduled Elkon MMP project financing was received in full. As part of SYDP project implementation the Investment Fund of Russia funded in 2009 the design of JSC Elkon MMP to the sum of RUR 2,391.4 mln. and the design of infrastructure to the sum of RUR 2,981 mln, which is 100% of the scheduled amount.
The company started working on the permanent conditions FS and selected the subcontractor to carry out the international audit of reserves on the basis of JORC code.
The geological exploration program was developed for Elkon and Neprokhodimoe deposits.
The company developed the Scientific and Research Council of Rosatom State Corporation (Section No.7, Raw Stock Base of Nuclear Energy) approved at its August 6, 2009, meeting the investment feasibility study of the project.
The processing technologies for the ores of Elkon uranium province were developed on the basis of bulk sampling.
The company entered into a contract with the general design engineer selected through tender which will perform research and provide the design documents for the capital facilities of JSC Elkon MMP, and commenced the contract implementation.
Negotiations were held over potential involvement of foreign investors in the project.
The company will continue the JSC Elkon MMP construction in 2010 and engage in further reserves calculation and approval activities, as well as design of the enterprise in conformity with Russian and international standards. The following activities are planned:
Implement the set of activities aimed at ensuring compliance with the license agreement.
Carry out the geological exploration program at Elkon, Neprokhodimoe and Severnoe deposits.
Complete the permanent conditions FS and the international audit of reserves pursuant to JORC code.
Develop the ore processing procedures and conduct pilot tests.
Complete the engineering surveys in connection with design of Elkon MMP.
Obtain funding from the Investment Fund of Russia for the SYDP project required to finance the design of JSC Elkon MMP.
5.3. Construction of New Production Enterprises in RussiaThe primary goal of expanding the existing and constructing new enterprises in Russia is to ensure independence of the Russian nuclear industry in terms of raw stock from external sources. In this area the Company focuses on the construction of Elkon Mining and Metallurgical Plant and development of such deposits as Gornoe, Olovskoe and JSC Lunnoe.
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JSC UMC Gornoe Krasnochikoysky District, Transbaikalia
JSC OMCC Chernyshevsky District, Transbaikalia
2009 Performance
2009 Performance
Plans and Targets
Plans and Targets
The enterprise was established to develop the deposits of Chikoisky uranium province (Gornoe and Berezovoye).
The proposed mode of development is a combination of block and heap leaching.
The enterprise was established to develop Olovskoye deposit in Chernyshevsky District of Trans-Baikal Territory. The proposed development method involves
underground mining with delivery of ore to the heap leaching pad and subsequent processing of the pregnant solution towards recovery of uranium concentrates.
The Company prepared and submitted to the SRC to review the temporary exploration conditions FS, developed the geolo-gical and mathematical model of Gornoe and Berezovoye deposits, generated individual reserves estimates for different optional cutoff grades and prepared the geological and economic feasibility study of deposits' development.
The company completed Phase I of geological exploration involving the open pit contouring at Berezovoye deposit using internationally-applied methods. The results fully confirmed the reserves of the deposit identified in the 80ies.
The company completed the research associated with heap leaching using a sample from Gornoe deposit and developed the ore processing procedures.
The company held public hearings over the Berezovoye Deposit Development Declaration of Intent.
It prepared the reports on engineering and environmental studies at Gornoe and Berezovoye deposits with a view to preparing the environmental baseline study.
Bulk heap leaching test of ores from the Olovskoe deposit was performed with a view to procuring the underlying data for design of the enterprise.
The geological mathematic model of Olovskoye deposit was developed, and the reserves of the deposit were appraised under the JORС standard together with SRK Consulting.
The Scoping Study was prepared.
The company held public hearings over EIA (the environmental component of the project) and based on the hearings the Olovskoye development project was approved by the public and local administration.
Verification drilling to confirm the mineral resources as required by the JORC code was performed. The reserves were confirmed in full in terms of the quantity and quality, as the same were identified by 1963 exploration.
The company worked on preparation of the Pre-Feasibility Study including geomechanical tests, quantified rock filtration model of the deposit and the water influx projections for the designed well.
Obtain approval by SRC of the temporary conditions FS and include the reserves of Gornoe and Berezovoye in the federal register.
Carry out geological and economic appraisal of smaller back-up uranium deposits in the region.
Complete the geological exploration for purposes of the projected open pit at Berezovoye deposit.
Design the experimental production at Berezovoye deposit.
Hold public hearings over the Declaration of Intent relating to development of Gornoe deposit in Krasnochikoisky District of Trans-Baikal Territory.
The current proposal is to use JSC UMC Gornoe as the foundation for a new technological platform based on movable units, and deploy an efficiently-operating uranium producer by 2017 engaged in development of smaller uranium deposits (design capacity – 400 tons of uranium p.a.). The raw stock base of the neighboring deposits in Trans-Baikal Territory, Republic of Buryatia and Khabarovsk Region are proposed to be used for purposes of the project.
Carry out a set of pre-design and design operations, de-termine the best production and economic indicators which are required to commence design and construction of the uranium producing enterprise.
Carry out studies and prepare the Pre-Feasibility Study and Feasibility Study.
Develop the FS and have it approved.
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JSC Lunnoe Aldansky District, Republic of Sakha (Yakutia)
2009 Performance
Plans and Targets
The enterprise was established in 2006 to develop uranium and gold deposit of Lunnoe in the Aldan District of Republic of Sakha (Yakutia).The proposed development method involves open pit mining with delivery of ore to the heap leaching pad and
subsequent gradual leaching of gold and uranium. The development Lunnoe deposit is financed by a strategic investor, JSC Zoloto Seligdara, which holds 49% shares of JSC Lunnoe.
The land allotment in respect of the license area was formally issued.
The ore processing procedures were developed.
The Company worked out the open pit design and the mine work plan as part of the experiment production unit construction project development.
The Company prepared the geologic mathematic model of the license area.
The Company held public hearings over the Declaration of Originator’s Intent relating to Lunnoe deposit development.
Completed geological exploration: 15,000 linear meters of core drilling.
Complete the development, review by experts and approval of the construction project of the experimental construction unit at Lunnoe deposit, prepare the feasibility study (the project) relating to construction of a production enterprise.
Hold public hearings over the new company’s environmental impact assessment.
Commence the construction of experimental production unit.
Carry out the set of R&D and trial operations in connection with development of the field heap leaching technological procedures.
Build and put into operation an experimental production unit at Lunnoe deposit.
Carry out geological exploration with a view to verifying the scope of reserves and upgrading the reserves categories.
’’ARMZ is a reliable and responsible partner. We have been working together for several years. Our corporation being a subsidiary of ARMZ, is working together with the Holding Company on a global project which is con-struction of Elkon MMP. This is a huge project and the management and employees of ARMZ contribute to it a lot. The plant will create over 30,000 new jobs and lay the tangible basis for social and economic development of the entire region of the Far East.I can see that our joint efforts with ARMZ are fruitful and very efficient. The Holding Company meets all of its obligations in due time, and the contact persons in the company are real professionals.’’
M.L.Brook, General Director, JSC YS Corporation
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5.4. Service and Other CompaniesThe service companies are in charge of ensuring the efficient operations of the main production enterprises. Namely, they perform drilling and appraisal, and provide logistical services for the main production enterprises. The service companies contribute substantially to the operational efficiency growth of ARMZ.
Drilling operations, including:
For JSC PIMCU, all types of operations, linear meters 137,409
For JSC Dalur, Khokhlovskoye deposit, linear meters 78,005
For JSC Dalur (technological and exploration drilling), wells 250
For JSC Khiagda, technological drilling, wells 140
For JSC Khiagda, technological drilling, linear meters 25,779
Table 7. 2009 performance results of RUSBURMASH INCRUSBURMASH INC
LLP JV RBM-Kazakhstan Republic of Kazakhstan
2009 Performance
2009 Performance
Plans and Targets
Plans and Targets
The main goal of RUSBURMASH INC is to carry out drilling operations in Russia. The main objective of LLP JV RBM-Kazakhstan is to provide drilling services to Russian-Kazakhstani uranium producers. The drilling company was established in May 2007.
The status of RUSBURMASH INC was finally settled as a fully fledged geological company capable of performing both drilling services and all of the associated geological services including reserves assessment and protection thereof at the SRC's level.
The scope and types of the offered operations increased substantially.
The company formed its internal units and started operations using its proprietary resources at almost all of the properties of JSC Atomredmetzoloto which are in the development phase.
The geography of core operations expanded substantially from 2008. The company used its own resources and performed in full the projects (technological drilling) for JSC PIMCU and JSC Khiagda. It started the projects at the properties of JSC Dalur, JSC Elcon MMP, JSC UMC Gornoe, JSC OMCC and geological exploration of Khiagda group deposits, all using its equity resources.
It formed a proprietary geological exploration services department which enables the company to handle a wide range of operations.
The company attained a high level of drilling efficiency. Its speed of drilling exploration and technological wells reached the level of JSC Volkovgeologia, one the larges drilling com-panies of Kazakhstan.
Nine drilling rigs and the auxiliary equipment were
commissioned, and the repair facility and a state of the art camp were built.
The company increased the volume of drilling and started working on the technological wells for JSC JV Akbastau.
Ensure timely and good quality drilling operations and geological exploration at the uranium deposits in Russia.
Expand the park of drilling rigs to 15 units and the volume of geological exploration and technological drilling to 312,170 linear meters (450 wells).
Offer a new service, namely repair and rehabilitation of technological wells.
Drilling operations, including: 203,637 linear meters
Geological exploration drilling 151,344 linear meters
Hydrogeological drilling 4,885 linear meters
Technological drilling 47,418 linear meters
Table 8. 2009 performance results of LLP JV RBM-Kazakhstan
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LLC USC ARMZ
USC SY CorporationRepublic of Sakha (Yakutia)
2009 Performance
2009 Performance
Plans and Targets
Plans and Targets
The primary objective of the Company’s operations is to supply raw stock, materials and equipment to
the uranium producing enterprises of ARMZ group which are required for their principal and investment activities.
The main objective of the company is implementation of South Yakutia Comprehensive Development Project, an investment project (the Project). The purpose of the Project is to form a new major industrial district in the Far East on the basis of a public private partnership and involve the water power energy facilities and the cluster of industrial enterprises operating mostly in the area of advanced processing of minerals produced in the region. The state coordinator of the Project is the
Government of the Republic of Sakha (Yakutia). Investors are the Russian Investment Fund, Federal Hydroelectric Generating Company JSC HydroOGK (JSC Southern Yakutia’s GEK), JSC Alrosa Investment Group, JSC Atomredmetzoloto, LLC Kolmar (JSC Yakutia Coals – New Technologies). Entities in charge at federal agencies Rosavtodor and Roszheldor, Rosenergo and Rosatom State Corporation. One of the key projects is construction of Elkon Mining and Metallurgical Plant.
Business processes and the management system were optimised to increase the efficiency of the Company's op-erations. The lead time of procurement requests reduced while the overall number of requests increased.
The Company supplied 545,500 tons of coal from Urtui deposit.
The working capital requirements reduced due to the lowering share of advances paid to suppliers and the cost of borrowing went down as well.
The Company entered into 9 long-term contracts with key stock suppliers thus avoiding the impact of the projected price growth and ensuring uninterrupted deliveries at fixed prices.
The Company demonstrated a general 16.7 % reduction in strategic stock costs against 2008 figures and saved over RUR 370 mln on procurements for JSC PIMCU.
The trading policies were reconciled.
Project passport was approved.
The company drafted the Investment Agreement and arranged its negotiation and execution by all the 14 Project participants.
It coordinated the activities in connection with the new financing (revisions to the overall budget items, adjustments to the limits, tender announcements, etc.)
PR, GR and information support of the Project continued, as well as coordination of the design work and shaping of the Project implementation management system.
In 2009 the Investment Fund of Russia transferred 100% of the scheduled financing, or RUR5,372.4 mln for purposes of the Project.
Create a service center for the foreign equipment.
Reach 1 mln tons level of the annual coal deliveries from Urtui deposit.
Effect direct sales of 285,000 tons of Urtui coal in the international market (in particular, to China).
Continue Project coordination, and, in particular, arrange the tender selection of general design contractors for the project properties to be financed by the Investment Fund of Russia, develop the tender documents and technical terms of
reference for the infrastructure and production properties, draft contracts with the general design contractors, and monitor the preparation of Project design documents.
The centralized procurements in 2009 resulted in 16.7% primary stock price reduction YoY, or RUR370 mln plus in savings.
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5.5. Non-Nuclear Material Related Projects
ARMZ seeks to reach the following strategic goals by implementing its non-nuclear materials related projects:
Meet current and future demands of the Russian nuclear industry for construction materials’ raw stock.New sources of financing of Rosatom’s investment operations.
Diversify primary operations to expand the Company’s product range and enter the new promising markets.Expansion of Company’s activities abroad.
2009 Activities and Results
Plans and Targets
Current projects (Lukoyanovskoyue deposit):
The company completed the acquisition of LLC Agrofirm Itmanovo which owns the land plot with Itmanovskaya placer of titanium and zirconium sands (Lukoyanovskoye deposit in Nizhni Novgorod region), and GEOSTAR Ltd which holds the relevant exploration and development license.The company conducted pilot field HBM (hydraulic borehole mining) and the results con-firmed the general possibility to use HBM as a method for materially reducing capital expenditures and raise the project efficiency.A representative sample of 20 tons was taken by HBM method. It will be used to work out the technological procedures and produce initial volumes of rutile, zircon and ilmenite-chromite-hematite (ICH) concentrates.
The company also started working on the technological rules of ore processing with zircon and rutile concentrates as products, and the separation of ICH concentrate into commodity products.The company appraised the ore sands reserves subject to the selected conditions for purposes of protection of the figures at the SRC and development of the permanent conditions FS.
Promising Deposits The company held a preliminary investment attractiveness review of a number of deposit development projects relating to gold and poly-metallic ores, rare earth, platinum group metals and other minerals. All reviewed deposits in Russia, Central Asia and Africa are major ore properties at a world level by their reserves.
Current projects (Lukoyanovskoe deposit):
Complete all pre-design studies necessary to design the enterprise including engineering studies, and start working in the construction feasibility study (the project).Prepare the permanent exploration conditions FS and protect it in the SRC.Carry out an independent appraisal of the reserves pursuant to the international standards of JORС. The plans include the construction of an ore processing plant at the deposit by 2014 with the design capacity up to 1,500,000 tons of ore per year which will produce the following products:
– zircon concentrate: 35,000 tons p.a. – rutile concentrate: 5,000 tons p.a. – ilmenite concentrate: 35,000 tons p.a. – chromite concentrate: 14,000 tons p.a.
Promising Deposits:Continue looking for the new promising projects involving non-nuclear materials.Determine the investment attractiveness of the most promising projects to enable the decision making by ARMZ on possible participation in the same.Search for and engage the strategic partners from among Russian and foreign companies specializing in production and processing of solid minerals, and the financial and investment institutions.
ARMZ is engaged in a number of non-nuclear materials related projects in Russia, Central Asia and Africa. The largest of such projects is development of Lukoyanovskoye deposit in Nizhni Novgorod region (zircon concentrate). The other promising deposits are located in Central Asia and Africa.
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The cost of uranium production determines the competitive advantages in the market. Thus, measures towards efficiency enhancement of uranium production, energy saving programs and large-scale investments in the R&D and innovation projects focus first on cost reduction and the current technologies’ efficiency improvements.
5.6. Efficiency Management and Innovations
2009 Activities and Results
Fields which are currently being developed in Russia are known for their complex geological and mining and technical specifics, lower uranium content of the ore and higher cost of production as compared to many foreign enterprises. This is true first of all for the deposits developed by mining methods. In this regard one of the top objectives for the operating enterprises is to imple-ment the operational efficiency improvement programs.
The uranium production efficiency improvement program includes initiatives and projects with the following objectives:
Improve the business processes of the enterprises. Create the new production culture and engage the production personnel in the process of improvements.Develop an efficient motivation system.Build up the innovation potential.Deploy information technologies in the management processes.
As early as in 2008 the Company started a comprehensive energy saving and energy efficiency improvement pro-gram. The main goal of the Program’s development and implementation is to reduce the cost of products, ensure
the social and economic development of enterprises through better energy security, optimised usage of energy resources and engagement of unutilised energy sources and resources.
The projected 3-year effect from deployment of energy-saving technologies is RUR430 mln, with the average project pay-off period being 2 years.
Enterprises 2007 2008 2009
JSC PIMCU 3470,04 3598,40844 2920,6044
JSC Dalur 7,6194 9,30024 10,52136
JSC Khiagda 7,77564 12,7386 25,27128
TOTAL 3485,43504 3620,447208 2956,39704
Table 9. Gross electric energy consumption by main production enterprises, TJ (tera joules)
Increased labor efficiency at the ore production level. As a result, with the decreasing uranium con-tent of the ore maintain production at the previous year's level with the same headcount involved.The non-core business divestment process is on the way.
The enterprises undergo technical upgrade whereby the obsolete equipment is substituted with modern and highly-efficient items.The key performance indicators matrix for the top managers has been worked out.
Comprehensive energy saving and energy efficiency improvement program.
Plans and Targets
JSC PIMCU intends to add an automated system to meter electing energy sold to third parties, to the electric energy metering systems of the company. Such a system will allow JSC PIMCU to attain the following objectives:
Become a fully fledged member of the wholesale electric energy market.
Increase the sold capacity of the cogeneration plant by 8 MW.Establish a unified data collection and processing center in the company which would keep records of commercial energy deliveries and transfer data in real time.
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Plans and Targets
Innovation Management
Consistent improvement of technologies and uranium production equipment, reduction of production costs and enhancement of automation level at the operating
facilities constitute one of the major areas of Company’s innovations management policy.
2009 Activities and Results
The engineering centerIn 2009, ARMZ also started an innovation project involving creation of a corporate engineering center. Its purpose is to improve the operational efficiency. This project provides for creation of proprietary expertise and facilities through access to the complete range of research and development and design and exploration operations conducted in connection with mineral deposits development. A proprietary engineering center will allow the Company to improve quality and reduce the timing of various operations undertaken in the course of investment projects. The framework structure of the engineering center will be the specialized research and development and design and exploration assets of Rosatom State Corporation. The innovations potential ratio of ARMZ (ratio between R&D costs and the proceeds from the sale of products, work, services, less taxes and man-datory payments) amounted to 0.126% in 2009.
Geologic mathematical models (GMM) GMMs are used to optimise operations in the course of reserves assessment, design of mine workings and planning of mining footages, and in connection with development of financing and economic models and plans of mine workings. In view of this objective RUS-BURMASH INC, a subsidiary of ARMZ, formed a team to develop 3D block models and provide office assistance for geological exploration. 2009 accomplishments:
Completed wireframe modeling at Antei deposit (Glubinny and Zapadny sites). This is the first stage of building the block model or GMM.Initiated search and collection of information for a database on all deposits of JSC PIMCU. This is the second stage of building GMM.Initiated compilation of the database on Khokhlovskoye deposit and Khiagda group deposits.
Development of the wire frame and block models and the databases on all key deposits.
In 2010 the innovations potential ratio (Ki) will increase to 0.135%.
energy audits of the enterprises;
documentation of buildings and facilities which are owned by the enterprises, and
calculation of their thermal values;
determination of standard fuel and energy consumption per unit
of production;
installation of meters at the fuel and energy inlets and points of their generation,
consumption and transmission to third parties (second-tier
clients or subsidiaries);
restructure the power complex of the company in light of the
federal laws;
replacement of the filament lamps with energy-saving lamps in the internal
and external illumination systems;
conduct the hydraulic and thermal tests of heat and water supply networks, produce piezometric
graphs of the networks and better identify the capacity of main and boost pumps;
installation of frequency-regulated drives and soft start systems at electric motors;
installation of automated process control systems at certain energy-consuming units and facilities and subsequent connection thereof to the global automated process control systems of the enterprises;
other fast-payback activities to save energy and enhance the energy
efficiency which if implemented can reduce energy consumption by at least 5 %
and will be paid back in about three years.
The company
engages in the following activities
towards implementation of the Comprehensive
Energy Saving and Energy Efficiency
Improvement Program
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’’During the 35 years of my life dedicated to the uranium industry I have been a crew member of the geological prospecting team, a research fellow, a geologist at a mine in the Democratic Republic of Germany, an IAEA expert and a manager in various Rosatom’s structures. I learned a lot and I saw a lot. I am happy that this experience is in full demand at ARMZ. Its development dynamics is impressive. This is because our team includes experts of various ages and expertise and qualifications of all kinds. Here we enjoy a proper environment for synergy of experienced staff and the energy of youth, the effective cooperation between niche experts and those with broad experience, and for friendly competition.And what’s more, we welcome the challenges.’’
Alexander Boytsov, Deputy Director General, JSC Atomredmetzoloto
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6. Governance SystemImprovement of the governance system is based on the fact that the integration of ARMZ into the largest world vertically integrated nuclear holding is its key competitive advantage. Introduction by Rosatom State Corporation of the goal-oriented governance system helped to improve ARMZ operational efficiency and personnel motivation system.
The Company’s basic governance principles are the protection of shareholder rights and interests and timely provision of complete and true information. The Company focuses on efficient risk management as a precondition to its sustainability.
2009 was the first year when the goal-oriented governance principle was implemented. The essence of this approach is the determination of the Corporation’s priority goals and the conditions of (limitations to) their achievement, formation of a goal tree which allows to delegate such goals to the level of the Holding’s companies, and encourages the management to achieve the target KPIs subject to compliance with the approved corporate standards. The remuneration system is designed so that achievement of the lower level KPIs ensures the achieve-ment of the higher level KPIs, i.e. the KPI system allows to reflect the strategic priorities and motivate the personnel to achieve them throughout the entire governance system. The Corporation’s KPI concept and
contents was determined by Rosatom Supervisory Board. JSC Atomredmetzoloto Board of Directors worked them out in detail and approved them for the Company. The KPIs determined by JSC Atomredmetzoloto in 2009 provided for implementation of a production program (uranium production volume), achievement of development priorities (implementation of the first stage of the raw materials base diversification project), operational efficiency growth (reduction of fixed costs and labor efficiency improvement), which became the key fields of concern during the crisis. Inclusion of the safety indicators into the KPIs (no increase in the number of serious injuries and fatalities) encouraged integration of the sustainability priorities into the business practices.
6.1. Goal-Oriented Governance
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Plans and Targets
2009 Activities and Results
All 2009 KPIs were fully achieved (Section 3.4). ARMZ Uranium Holding activities promoted
implementation of such Rosatom objectives as ensuring leadership in the world nuclear technologies and services market and efficient supply of power produced at the power plants for the country’s economic needs (Sections 4.1, 4.3, 5.2 etc.). Achievement of the production objectives was ensured subject to compliance with the three conditions set by the Corporation: ensuring ra-diation safety of the companies, personnel, population and the environment (Sections 7.3, 7.4), new technology development (Section 5.7) and operations efficiency improvement, including governance systems development (Sections 5.7, 7.1,7.4, 7.1 etc.).
ARMZ took an active part in Rosatom’s programs targeted at operational efficiency improvement. One of the examples of such involvement is the implementation of the energy efficiency improvement program (Section
5.6). Significant emphasis was put on the programs for transformation of the financial and economical blocks, including formation of a consolidated budget, implementation of a single accounts plan and unified accounting policy, purchasing efficiency and transparency improvement and IT development. For example, Atomredmetzoloto 2010 purchasing program was implemented using electronic trading sites through an industry purchasing site www.zakupki.rosatom.ru. Safety and personnel management was carried out on the basis of the policies and recommendations approved by Rosatom. Primarily, this applies to the nuclear and radiation regulatory documents and the Labor Safety Management System (Section 7.4), Unified Standard Remuneration System and the Social Policy Guidelines (Sections 7.1 and 7.2), Rosatom Environmental Policy Basic Guidelines (Section 7.4), and Local Communities Engagement and Charity Policy (Section 7.5, 7.7).
It is planned to implement ARMZ’s corporate gov-ernance improvement program for further promotion of the Company’s competitiveness and optimisation of the business processes based on the targets and requirements set by the shareholders taking into account corporate governance best practices. Special focus will be on optimisation of the processes which are material to efficiency increase and KPIs achievement, including
strategic planning, management of the mining projects, marketing and sales, organization of purchases etc., as well as development of the sustainability management system. The ultimate indicator of the corporate governance improvement efficiency will be the increased contribution of JSC Atomredmetzoloto into higher competitiveness and expansion of Rosatom on the global market.
ARMZ follows the corporate governance standards set forth in the FCSM Corporate Code of Conduct and OECD Corporate Governance Principles with due consideration of the Company’s shareholders and operations.
The Company’s Charter and the bylaws governing the management and supervision bodies activities are published on the Internet on the ARMZ corporate website.
In 2009 JSC Atomredmetzoloto shareholders changed: Rosatom purchased ARMZ Uranium Holding shares forming part of an additional emission and became its largest shareholder. The shares were issued for the
purpose of financing the Company’s investment program for future development of natural uranium production in Russia and abroad. The total proceeds from the additional emission were RUR64.2 bln.
6.2. Corporate Governance System
№ Shareholder Name
Share in ARMZ charter capital, %
as of 1/1/2009
as of December 31,
2009
1 JSC Atomenergoprom 0.011 0.002
2 JSC TVEL 99.989 19.653
3 Rosatom 0.000 80.345
Table 10. Company Shareholders
DateNo. of outstanding
ordinary shares, pcsIssue
registration No.
01.01.2009 3,956,039,897 1-01-03912-А
31.12.2009
3,956,039,897 1-01-03912-А
16,171,284,635 1-01-03912-А-002D
Table 11. Share Capital
Shareholders
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The General Shareholders Meeting of JSC Atomredmetzoloto is its supreme management body.
In 2009 two General Shareholder Meetings were held. at an extraordinary General Meeting on January 20 the decision was made to increase the charter cap-ital by way of issuance of additional shares of the Company in favor of Rosatom. at the Annual General Meeting on June 30 the 2008 annual report and accounting statements, and profit distribution were approved and the Board and the Audit Commission elected.
JSC Atomredmetzoloto Board of Directors is responsible for the general management of the Com-pany’s operations and plays a key role in the strategic management. The Board of Directors includes five members elected by the General Shareholder
Meeting, predominantly external directors who are not Company employees. All members of the Board of Directors have an extensive industry experience.
In 2009 18 meetings of the Board of Directors were held during which decisions regarding the key Company management issues were adopted.
The General Shareholder Meeting of June 30 elected the following members of the Board of Directors:
Alexander Markovich Lokshin, Vadim Lvovich Zhivov Vladislav Viktorovich Korogodin Yury Alexandrovich Olenin Vladimir Valentinovich Travin. 4 out of 5 Board members are independent Directors
(i.e., they are non-executive Directors of the Company).
Management and Supervision Bodies
Brief Biographies of Members of the Board of Directors
Alexander Markovich LokshinMember of the Board of Directors since June 30, 2009, Elected Chairman of the Board on August 6, 2009.
Born in the city of Chita in 1957. Graduated from the Leningrad Kalinin Institute of Polytechnics. Honored Power Engineer of the Russian Federation.
April 2006 – June 2008
First Deputy Director General, Acting Director General of RosEnergoAtom Concern.
June 2008 – present
Deputy Director General, Deputy Director General – Head of NPC Directorate, Rosatom State Corporation.
Vladislav Viktorovich KorogodinMember of the Board of Directors since September 7, 2007
Born in Moscow, Russia, in 1969. Degree from the Moscow Institute of Physics & Technology.
June 2004 – October 2007
Deputy Chief, Directorate of Nuclear Materials Industry, Rosatom, Deputy Chief, Directorate of Nuclear Power and Nuclear Fuel Cycle, Rosatom
October 2007 – March 2010
Director, Department of Marketing and Markets; Deputy Director, Atomenergoprom.
March 2007 – present
Deputy Director of NPC Directorate, Rosatom State Corporation.
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Yury Alexandrovich OleninMember of the Board of Directors since September 7, 2007
Born in Kirovabad, Azerbaijan, in 1953. Degrees from the Erevan Marx Institute of Polytechnics, Penza National Technical University.
January 2004 – March 2007
Director General, Start Industrial Amalgamation – Zarechny, Penza Region.
March 2007 – present
First Vice President, President JSC, TVEL.
Vladimir Valentinovich TravinMember of the Board of Directors since September 7, 2007, Chairman of the Board from September 7, 2007 through June 3, 2009
Born in the township of Bolshoe Kozino, Balakhna District, Gorky Region, Russia, in 1960. Degrees from the Moscow Institute of Physics & Technology and Arzamas Technical College.
December 2005 – July 2007
Councilor to the Head and Deputy Head of Rosatom State Corporation
July 2007 – May 2010
Director, Atomenergoprom
Vadim Lvovich ZhivovMember of the Board of Directors since September 7, 2007
Born in Moscow, Russia, in 1963. Degree from the Moscow Power Institute.
March 2006 – August 2007
Vice President, Capitel Inc. 2006 – 2007 Councilor to Director General; First Deputy Director General – Resource Management; First Deputy Director General – Feedstock Supply; First Deputy Director General – Director for Feedstock Supply, TENEX
June 2007 – present
First Deputy Director General; Acting Director General; Director General, Atomredmetzoloto — ARMZ Uranium Holding Co.
Director General
The Director General is the sole executive body of JSC Atomredmetzoloto and manages the day-to-day company operations. On November 19, 2007 The General Meeting
elected Vadim Lvovich Zhivov as the Company’s Director General.
Members of JSC Atomredmetzoloto Board of Directors do not own any shares. The members of the Board of Directors did not receive remuneration in 2009. The
Chairman of the Board of Directors is not an executive officer of the Company.
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Tigran Garikovich KhachaturovFirst Deputy Director General
Natalia Viktorovna
SedykhDeputy Director General – Head
of Administration
Yury Anatolievich Tokmachev
Deputy Director General – Safety Director
Ilya Mikhailovich
YampolskyDeputy
Director General
Alexander Vladimirovich BoitsovDeputy Director General
Andrei Vasilievich Kudryavtsev Deputy Director General – Chief Engineer
Marina Ivanovna Liborakina Deputy Director General – Chief of Strategy
Management
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GOVERNANCE SYSTEM
JSC Atomredmetzoloto complies with the Russian law requirements relating to corporate governance and follows the basic principles of the FCSM Corporate Code of Conduct.
Professional Development and Training PolicyThe Company implements a policy of continuous training, professional development and capacity building with regard to its managers, including with regard to economic, environmental and social issues. In particular, in 2009 the members of the Board of Directors and
senior Company managers took part in the meetings of the Corporation’s Management Board and the Industry Managers Council and other industry events devoted to development and implementation of a Code of Ethics, environment, safety, labor and sustainability reporting.
Remuneration PolicyThe Company is implementing the goal-oriented management system based on the KPIs (Section 7.2). In 2009 KPI maps were determined for all JSC Atomredmetzoloto and subsidiaries and affiliates’ managers.
The remuneration system for all managers is linked to the KPI achievement. The Company’s Director General is remunerated pursuant to the labor agreement and the decisions of the Board of Directors. In the beginning of 2009 the remuneration to the Director General and the
senior management was paid based on the results of the 2009 performance. Goals sought by implementation of the KPI system:
increase the transparency of each manager’s activities; add additional incentives to achieve specified tasks supporting the priorities of each division and the entire holding; constantly improve performance, identify and implement the best practices.
FeedbackThe Company’s senior management is open for dialog with and recommendations from employees, including via electronic means of communication. As part of the internal control system development, the
Company is developing a feedback system to collect information regarding compliance with internal policies and procedures and ethical principles.
Audit CommissionTo control JSC Atomredmetzoloto financial and commercial operations the General Meeting of Shareholders elects the Audit Commission of at least three members in accordance with the Charter.
The Audit Commission is responsible for control of the Company’s financial and business operations, including:
auditing financial documents, results of inventory checks, compliance with the regulations, lawfulness of the executed documents, analysing Company’s financial standing, liquidity and financial solvency, analysing the Company’s management bodies decisions for their relevance and conformity with the Charter.
The Annual General Shareholders Meeting of JSC Atomredmetzoloto (Minutes dated June 30, 2009 No. 2)
elected the following persons to the audit commission:Oksana Vladimirovna Burel – chief specialist of the
analytics unit of the Internal Audit Department of JSC Atomenergoprom,
Alexander Ivanovich Sergeev – chief expert of the Department of NFC Markets, Products, Services and Technologies of the NRC and NFC Coordination Department of JSC Atomenergoprom,
Gennady Egorovich Fedichkin – Director of the Internal Control Service of JSC Atomredmetzoloto.
Members of the Audit Commission do not own any Company shares.
The members of the Audit Commission did not receive remuneration in 2009.
Compliance with the Corporate Code of Conduct
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The Board and the Extraordinary General Meeting of Shareholders of JSC Atomredmetzoloto approved the following transactions entered into in 2009 which require approval as major transactions pursuant to the Federal
Law On Joint-Stock Companies. In 2009 the Company did not enter into any related party transactions which require approval pursuant to the Federal Law On Joint-Stock Companies.
Item No.
Decision of the management body
(date/number)
Agreement (date/number)
Subject of the Agreement
CounterpartyAmount of the
transaction
1
Decision of the Company’s Board (minutes No. 21 dated 2/3/2009)
No. 2009-02/0042 dated January 23, 2009
Acquisition of shares
Effective Energy N.V. (Netherlands)
US$470,000,000
2
Decision of the Company’s Board (minutes No. 23 dated March 4, 2009)
No. 42/09В/2009-02/0003 dated March 05, 2009
Provision of facility
Gazprombank (JSC) US$470,000,000
3
Decision of Extraordinary General Meeting of Shareholders (minutes No. 3 dated March 9, 2010)
No. 1552 dated May 19, 2008 (confirmation of the deposit transaction No. 1 dated December 17, 2009)
Depositing funds
Gazprombank (JSC) RUR33,000,000,000
Table 13. Major Transactions
Company's Registrar is the Open Joint Stock Company Registrar R.O.S.T. Registrar’s details: MSRN 1027739216757, TIN 7726030449.Registered address: Moscow, ul. Stromynka, 18, block 13.Tel./fax (495) 771 73 36.
Plans and Targets
Company’s Registrar
Company’s corporate management system improvement, including development and introduction of the Corporate Code of Conduct, Code of Ethics, Information Disclosure Policy and other key policies and procedures relating to corporate governance (management
bodies, committees), and active participation in Rosatom projects and programs for improvement of corporate governance efficiency and development of public reporting.
Major Transactions and Interested Party Transactions
JSC Atomredmetzoloto management bodies define the Company’s dividend policy taking into account the required investments in accordance with the Company’s strategy.
There are no declared and unpaid dividends. According to the net profit distribution plan, no
dividends will be paid in 2009. As of the time of prepar-ation of this report, the Company management bodies have not decided on the use of the 2009 net profit.
Dividends
Dividends accrual period 2006 2007 2008
Dividends amount, rubles 890 400 87 860 720 0
Table 12. Payment of dividends by the Company
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GOVERNANCE SYSTEM
6.3. Board of Directors Report on Key OperationsIn 2009 the JSC Atomredmetzoloto Board of Directors performed the strategic management of, and supervision over, the Company’s key operations.
’’In my opinion, for the last two years, especially in 2009, JSC Atomredmetzoloto has made a breakthrough in corporate governance development. Being a 100% state owned company, we aim to build a governance system, a corporate one in particular, oriented at best business practices. I am sure that in the near future our company can become a good example to be imitated.’’
Margarita Turkova, JSC Atomredmetzoloto Corporate Governance
Department Director.
Strategic management:
Key investment projects and potential projects:
Internal control and risk management:
Senior management remuneration:
The Company's long and mid-term development priorities determined; ARMZ KPIs approved;Company organisational structure approved;
Investment program financing limit approved;Major transaction relating to acquisition of Effective Energy NV (Netherlands)
approved;Company participation in a number of Russian and foreign mining and
exploration companies approved;
Company’s internal control system improvement initiated, in particular, creation of internal control service and improvement of the internal control methods;
A number of major transactions for provision of credit facilities to the Company approved;
Company’s senior management system designed;Amount of senior management remunerations and compensations approved.
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’’ARMZ’ achievements over the last 3 years demonstrate the professionalism of our finance and management sections. Once it was a Company which wouldn’t take risks, ARMZ has become a high-class loan subscriber the leading banks compete to cooperate with, which demonstrates continuous development growth.’’
A.P. Zhelnin, Alfa-Bank Atom Industry Cooperation Manager
6.4. Key Risks and Risk Management Methods
Development of ARMZ risk management system in 2009 was due to the following factors:
the global financial crisis which manifested itself, among other things, in the instability of the Russian financial market;
development of an internal industry management system;
acquisition of foreign assets by the Company.
The Company builds its risk management approach as a continuous process applicable to the strategic and operational management levels and targeted at identification and mitigation of impact from the events which may affect Company’s operations.
The following priority risk management areas were defined: development of internal documents governing JSC Atomredmetzoloto risk management; conducting sampling risk audit in ARMZ Holding companies; analysis of efficiency of applied risk management methods, their adjustment and improvement; standardization and putting into practice ARMZ Uranium Holding exchange and credit risks approach.
The traditional decentralized risk management system was selected; the Company risk map was updated with due consideration for industry experts opinion
(specifically, the regular risk monitoring by UxConsulting).
Sampling valuation of residual risk (risk level after application of the mitigation method) was conducted which allowed to determine the efficiency of a number of applied risk mitigation methods, adjust them, if required, and introduce new identified risks management methods.
To mitigate the consequences of production risks, an insurance policy was adopted and implemented by all ARMZ production companies to govern the procedure and timeline for execution of insurance agreements, the insurance coverage for each company and the insurance reporting.
2009 Activities
ARMZ Uranium Holding Co. activities are subject to both general economic and specific industry risks.
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GOVERNANCE SYSTEM
Geopolitical Risks
Risk of political instability, changes in the policy in the regions of operations which may affect Company's targets fulfillment
Historically, JSC Atomredmetzoloto major assets concentrated in Russia and Kazakhstan. At the beginning of 2009 the Company decided to expand the geography of its raw materials base and start active expansion. In the long run, such approach will ensure decrease in ARMZ exposure to local geopolitical risks.
Regulatory and Legal Risks
1. Risks relating to changes in Russian and foreign laws
JSC Atomredmetzoloto and its subsidiaries and affiliates constantly monitor the current laws of the Russian Federation and the jurisdictions of its operations with respect to the subsoil use and nuclear energy use and follow all recommendations of the international and national supervision and regulatory bodies with respect to the above matters.
2. Risks relating to industry regulations
Industry regulations are a material factor for ARMZ. Given the industry reformation processes, active cooperation with Rosatom significantly decreases such risks.
3. Risks of license termination, withdrawal or invalidation
The Company pays special attention to timely extension, re-registration and obtaining of licenses, compliance with the legal and regulatory requirements and follow-up of the comments.
Risks relating to Resource Base
Risks relating to failure to estimate the quality and quantity of deposits correctly
Use of the most advanced reserve balance recording and resources estimation methods applied in the best Russian and international practices allows ARMZ Holding companies to obtain the most complete and high-quality information regarding the existing deposits during exploration. State-of-the-art geological exploration methods together with the use of geological mathematical models decrease the risk of discrepancy between the geological exploration data and the actual reserves.
Risks relating to deposits territorial limitations
The Company is taking steps to diversify its raw materials base by establishing joint ventures for exploration and development of uranium abroad (Kazakhstan, Namibia etc.).
Operational Risks
1. Risk of failure to fulfill obligations due to discontinuation of production as result of any incidents (loss/damage of property, unavailability/interruption of supplies, etc.)
As part of the production risk management, a strict production performance monitoring system has been implemented to ensure constant monitoring of ARMZ companies’ operations and adoption of timely decisions with account for the actual production program fulfillment.
2. Occupational Health and Safety Risks
Ensuring occupational health and safety is one of the Company’s priorities. Accordingly, each production facility implements an action plan to improve occupational safety and decrease exposure to contingencies and personnel life and health threats.
3. Risks relating to large-scale projects
The complexity and the large scale of projects implemented by JSC Atomredmetzoloto as the managing company require engagement and active use of consultants’ experience (including major foreign companies, such as the ”big four”, SRK and Hatch). Projects are supported during all stages of implementation using the most advanced technologies and the best international practices.
4. Personnel and social risks.
ARMZ actively implements personnel management and motivation policy, including:
program for engagement of experienced mining employees from other regions and highly qualified workers from related sectors;
remuneration incentives, benefits and a welfare system have been introduced to retain qualified personnel;
an integrated training program for all levels of personnel is implemented, including managers talent pool program;
the Holding actively participates in the development of infrastructure, is constructing corporate res-idential facilities (JSC Dalur), a modern shift camp (JSC Khiagda) and reconstructing accommodation (JSC PIMCU).
ARMZ 2009 operations were subject to a number of key risk factors.
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5. Risks relating to dependence on supplier and contractor chain, risk of their default
To decrease dependency of ARMZ on contractors and suppliers specialized companies were created to ensure centralized supplies for the needs of the main production processes. Thus, USC ARMZ LLC ensures uninterrupted supplies of raw materials and equipment to the Holding companies, while RUSBURMASH INC carries out drilling operations. The said companies guarantee continuity of the relevant production processes and cost control allowing to manage a number of financial risks.
6. Technological risks, including radiation safety
Technological risks relating to natural uranium production and processing, including radiation safety risks, are managed by a number of special means, including:
implementation of production equipment program at ARMZ Holding companies;
compliance with the regulations applicable to the production process;
supervision by divisions as well as external organizations;
civil third-party/personnel liability.
7. Environmental risksARMZ mining and processing companies monitor compliance with all statutory requirements of the countries of their operation relating to environmental impact and actively decrease such impact and increase the environmental safety of production.
Market Risks
1. Risk of dependency on a single product
Being a mining holding, the Company is also diversifying the product lineup and searching for new products, for which purpose it takes part in managing gold and non-nuclear materials mining companies.
2. Decrease in product demand
To mitigate market risks and ensure stability and continuity of ARMZ operations the uranium products sales markets being expanded. For this purpose ARMZ markets the Holding’s products centrally.
Financial Risks
1. Credit risks (nonperformance of financial obligations by the counterparties)
The main purchasers of the products produced at ARMZ facilities are Rosatom companies, which significantly decreases the holding’s credit risk. However, given the financial crisis, special emphasis was put on the risks of default by counterparties. To decrease the amount of debt to the Company, additional steps were taken to monitor the financial standing of counterparties and banks with which ARMZ Holding companies' have accounts.
2. Price Risks
To decrease price risks, specialized companies were set up within ARMZ Holding (RUSBURMASH INC and USC ARMZ LLC) to ensure centralized supplies for the needs of the main production processes. Above mentioned companies provide production relevant services and ensure control over the companies expenses affecting the product cost.
3. Exchange and interest risks
In 2009 the exchange and interest risks were managed through centralization of risks at JSC Atomredmetzoloto, RUSBURMASH INC and USC ARMZ LLC, which allowed the Holding operators to focus on the main production areas.
Exchange risks were mitigated in the following two major ways:
managing JSC Atomredmetzoloto open currency position and following up with changes to the credit portfolio structure to level up the head company assets and liabilities;
hedging forward operations using financial instruments.
Thanks to centralisation of financial risk management function and the taken steps the financial performance of ARMZ Holding production companies were virtually independent from currency fluctuations.
4. Liquidity Risk
Liquidity risks had little effect on JSC Atomredmetzoloto operations, because as early as before the crisis the Company already had a consistent policy for managing this risk, including:
setting up limits for ARMZ Holding companies in several banks;
restructuring credit portfolio to increase the long-term portfolio portion;
regular monitoring of the Group companies liquidity.
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7. Sustainable Development ARMZ Uranium Holding Co. understands sustainable development as a system of consistent economic, en-vironmental and social steps to manage the entire life cycle of the mineral resources development. These matters are covered not only in this section, but also when describing the development and production strategy. Here we focus on creation of efficient and safe working places, professional growth and social support of employees, environmental protection, education, culture and sport promotion. All sustainable development actions are implemented based on continuing stakeholders engagement and are targeted at competitiveness increase. In 2010, the Company is planning to sign up to the Russian Social Charter.
7.1. Personnel
Compared to 2008, labor efficiency has grown by 12.5%.
ARMZ personnel policy objective is to form a profes-sional and efficient team able to solve high-level large-scale tasks, which the existing and the projected uranium and other rare earth minerals mining companies face in Russia and abroad.
The personnel policy priorities are: labor efficiency increase, turnover reduction, increase of ARMZ attractiveness as an employer, standardisation of personnel management approach within the Holding’s companies.
The number of employees has been optimised and non-core functions transferred outside JSC PIMCU. During reorganisation over 10 subdivisions providing services in connection with the production activities were transformed into separate companies able to provide high-quality specialised services. Thus, by the end of 2009 the number of employees decreased by over two thousand persons, while labor efficiency growth at JSC PIMCU was 12.5%, as compared to 2008. Almost all released employees were outplaced with the help of the company’s management and the trade union organ-isation. An integrated standard remuneration system has been implemented.
KPI-based performance management system has been introduced.
HR divisions at the subsidiaries have been formed. Steps have been taken to standardise the Company’s
personnel record management.
2008-2009 Number of employees and Staff Composition of JSC Atomredmetzoloto and its Subsidiaries and AffiliatesThe number of employees at the ARMZ Holding’s major Russian companies decreased by 2,731 employees as compared to 2008 and currently amounts to 9,991. All Holding companies employees are fully employed.
2009 Activities and Results
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SUSTAINABLE DEVELOPMENT
Company
No. of full time employees
No. of part time employees
Number of employees Average number of employees
as of 12/31/2008
as of 12/31/2009
as of 12/31/2008
as of 12/31/2009
as of 12/31/2008
as of 12/31/2009
2008 2009
JSC Atomredmetzoloto 217 255 2 3 217 257 197 224
JSC PIMCU 11,619 8,449 0 49 11,619 8,452 11,382 9,890
JSC Khiagda 237 267 0 0 237 267 218 260
JSC Dalur 423 383 2 2 423 383 411 411
UMC 35 14 2 2 35 15 17 26
JSC OMCC 4 3 3 8 4 7 4 4
JSC UMC Gornoe 5 2 3 8 6 6 5 5
JSC Lunnoe 29 6 0 0 29 2 22 10
RUSBURMASH INC 93 509 0 0 93 509 43 321
LLC USC ARMZ 54 71 0 0 54 71 26 50
JSC Elkon MMP 5 16 0 4 5 18 5 14
Total 12,721 9975 12 76 12,722 9991 12,329 11,215
Table 14. Employee number Dynamics at the ARMZ Major Russian Companies
Company
Number of employees as of 12/31/2008 Number of employees as of December 31, 2009
under 35 36-50 over 50 under 35 36-50 over 50
JSC Atomredmetzoloto 116 72 29 143 78 36
JSC PIMCU 4,515 3,918 3,186 3,430 2,779 2,243
JSC Khiagda 92 91 54 115 81 71
JSC Dalur 159 172 92 152 140 91
UMC 19 15 1 11 3 1
JSC OMCC 1 1 2 3 1 3
JSC UMC Gornoe 2 2 2 1 3 2
JSC Lunnoe 17 8 4 2 3 1
RUSBURMASH INC 27 46 20 131 242 136
LLC USC ARMZ 43 7 4 55 10 6
JSC Elkon MMP 1 2 2 5 6 7
Total 4,992 4,334 3,396 4,048 3,346 2,597
Table 15. ARMZ Holding’s Major Russian Companies employee number by Age
In the majority of ARMZ Uranium Holding Co’s companies there is an inflow of young specialists. By the end of 2009 employees under 35 tended to be the largest age group. Men prevail among ARMZ Uranium Holding Co’s personnel (68% of total employees in 2008 and 72% in 2009), the average age was 41.7 in 2008 and changed little in 2009. The average age of woman employees in 2009 was 37.5 years.
At the majority of companies local residents prevail among employees (including managers) (average of 90.6% in 2008 and 87% in 2009).
Implementation of programs for maintaining person-nel stability made it possible to decrease or maintain the employee turnover rate in 2009 in the majority of ARMZ companies. The measures to retain young specialists turned out to be most efficient: in JSC PIMCU and JSC Khiagda the turnover rate for employees under 35 decreased by 6.3%.
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Age of ARMZ Uranium Holding Co.’s companies personnel
2008 2009
under 35 39% 41%
36-50 34% 33%
over 50 27% 26%
Table 16. Main Age Groups Distribution at ARMZ Uranium Holding Co’s Russian Companies
CompanyShare of
employees who are local residents (%)
Share of senior managers who
are local residents (%)
JSC PIMCU 99.6 85
JSC Khiagda 93 66
JSC Dalur 96.1 40
UMC 80 60
JSC OMCC 100 100
JSC UMC Gornoe 100 100
JSC Lunnoe 83 75
RUSBURMASH INC 84 96
LLC USC ARMZ 62 67
JSC Elkon MMP 72.2 100
Table 17. Share of Local Staff and Managers at ARMZ Uranium Holding Co’s Russian Companies
ARMZ company Total
turnover, %
men, % of total
women, % of total
JSC PIMCU 13.7 86.9 13.1
JSC Dalur 4.59 84.3 15.7
JSC Khiagda 37.3 92.8 7.2
Table 18. Personnel Turnover at the ARMZ Uranium Holding Co.’s Main Companies, by Gender
2009 Activities and Results
Professional Development and Training
The Company started to develop the corporate development and training system based on the needs of ARMZ companies' employees. The major system’s objective is to ensure that the employees obtain the knowledge and skills required for achievement of ARMZ business targets. An employee competences model was developed as basis for implementation of employee opportunities management programs.
An annual employee evaluation program was launched to gather information about each employee, his/her strengths and development areas. Based on the evaluation results, personal employee development plan, redeploy-ment and efficient motivation tools may be developed.
Talent pool formation and development program was developed to identify and develop employees who are ready to manage divisions efficiently. The program allows the employees to obtain the knowledge and skills required to take part in solving the Company’s tasks.
In 2009, professional development trainings were held. 5,268 employees involved in the Company's key operation areas took part in the program. The total length of professional development trainings was 25,300 hours per annum, or 4.8 hours per employee. The percentage of women who took part in training (average for all companies) was 41%, the percentage of men was 59%.
Plans and Targets
Launch the remote learning system which will make new knowledge available to each employee.
Launch the Coach Academy to select and prepare future coaches able to conduct on-the-job training of specialists.
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SUSTAINABLE DEVELOPMENT
Employee Search and Adaptation
To standardize and implement the personnel search and adaptation policy in the subsidiaries in 2009, specialists responsible for this function were appointed.
As the Company is committed to complying with the high standards of social responsibility, the personnel search procedure expressly states the responsibility of an HR specialist when selecting the candidates in
pursuance of Article 64 of the Russian Labor Code (no unmotivated refusal or refusal based on discriminatory grounds is allowed). HR specialists are obliged to provide written or verbal feedback to candidates in ac-cordance with the Russian Labor Code. In 2009, there were no cases of discrimination when selecting personnel.
2009 Activities and Results
Plans and Targets
Personnel Motivation and KPIs
Continue USRS implementation within the entire Company to finalize standardization of the compensation package policy.
A standard approach to forming the compensation package has been developed. We have started to apply the Unified Standard Remuneration System (USRS) to all Atomredmetzoloto’s employees, and JSC PIMCU, JSC Khiagda and JSC Dalur managers.
A competitive salary level was ensured. Based on 2009 results, the average salary level at the main mining companies of ARMZ companies was significantly higher than the similar indicator in the relevant regions.
A performance management system was implemented. In 2009 KPIs were set for all JSC Atomredmetzoloto and subsidiaries and affiliates’ managers.
Company KPI targets were achieved. The results of 2009 show that ARMZ KPI targets were achieved and the aggregate KPI achievement index was 110.5%. The 2009 positive results of KPI implementation have formed basis
for further expansion of the KPI system to all ARMZ and its subsidiaries’ employees.
All steps described above ensure transparency and balance of the compensation and benefit system at ARMZ Uranium Holding Co’s companies.
CompanyAverage salary in the company,
RURRegion
Average salary in the region,
RUR
JSC PIMCU 19,412Trans-Baikal
Territory 17,857
JSC Khiagda 26,382
Trans-Baikal Territory/
Republic of Buryatia 16,608
JSC Dalur 18,612Kurgan Region 12,663
Table 19. Standard Salaries in the Significant Regions of Operations
’’Our team has immense drive. Look at the company three years ago and look at it now! It’s like Formula 1. I would like to quote one of the Mercedes managers: ’’We have only two competitors, the speed of sound and the speed of light. ’’Obviously, you feel satisfied that some of the screws in this race have been tightened by you.’’
Maxim Dranov, Director of Financial Department,
JSC Atomredmetzoloto
Strict adherence to the nuclear energy use laws and regulations is the basic principle of the Company’s activities.
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2009 Activities and Results
Plans and Targets
Social allowances breakdown for 2009 is as follows:
7.2. Social Policy
Type of social benefit JSC PIMCU, RUR '000
JSC Khiagda, RUR '000
JSC Dalur, RUR '000
2009 benefits terms & conditions
Voluntary health insurance 35,966 2,500 2,500All staff employeesLife and accident voluntary
insurance 5,224 – 300
Pension benefits 9,340 – 8,711Depending on length of service with the
company, over 300 persons
Sports and cultural public events 3,041 – 202All staff employees taking part in
competitions and celebrations
Material assistance 3,298 203 578 1,839 employees
Traveling to and from recreation and treatment facilities 9,841 50 – 1,139 employees
Retirement extra benefit 39,336 – 2,378 One-time benefit stimulating retirement
Presents for anniversaries and professional holidays 3,748 44 954 All staff employees
Accommodation/dormitory compensation 1,465 1,441 starting 2010
366 critical-skill workers and young specialists
Total 111,259 4,238 15,623
Table 20. Social Benefits Amount and Terms & Conditions
ARMZ focuses on the Holding’s employees non-material incentives and social support system. JSC PIMCU social policy ensures succession and transfer of the industry-relevant knowledge from retiring employees to the young specialists in critical skill areas. There is a practice of industry and corporate awards for specially important labor achievements.
There are trade union organizations at JSC Atomredmetzoloto, JSC PIMCU and JSC Dalur which participate in solving such issues as labor safety, co-ordination of employee vacation schedule and management of cultural and sports events.
JSC PIMCU and JSC Dalur have collective bargaining agreements ensuring well-established employee welfare. Collective bargaining agreements cover all employees, including those working part-time. There is a constant dialogue between the company’s management and the trade union and Labor Council representatives.
At JSC Dalur a Labor Council has been organized which operates in accordance with the regulation on the Council.
The Council's and the trade union's responsibilities regarding labor safety and employee rights protection were determined. The principles and mechanisms of such responsibility were set forth in the relevant sections of collective bargaining agreements with JSC PIMCU and
JSC Dalur. Accordingly, trade union (JSC PIMCU) and Council representatives (JSC Dalur) are members of the internal commissions for labor safety protection and allocation of social allowance funds.
A pension accruals financing program was launched. For JSC Dalur increasing the share of young personnel is important, that is why in 2009 the pilot pension accruals project was launched. The agreement by and between JSC Dalur and Non-Commercial Pension Fund First National Pension Fund provides for extra pension for retiring employees.
A large amount of funds was allocated by JSC PIMCU for additional payments to retiring employees and provision of accommodation to young specialists. A residential house was commissioned and apartments provided for employees moving from other regions and to company’s employees whose length of service exceeds three years.
Implement unified standard social policy at all ARMZ companies. The key social policy targets will be as follows: – provision of accommodation; – veterans support; – young specialists and critical specialists support.
Expand the awards system for labor achievements by implementing unified corporate contests and competitions rules. The results of such events to be announced during industry holidays.
Evaluate social programs cost efficiency and employee loyalty growth.
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SUSTAINABLE DEVELOPMENT
7.3. Occupational Health and SafetyJSC Atomredmetzoloto understands the significant impact of production upon the environment and acknowledges the absolute priority of employees life and health over economic results.
Ensuring Radiation Safety
During 2005-2009 no dose limit, as set out in the NRB-99/2009 Radiation Safety Norms (50 mSv), has been exceeded with regard to any of the ARMZ Holding employees. There were no cases of withdrawal of nuclear energy use licenses.
The Company implemented The Program for Modernization of Radiation Control and Decrease of JSC PIMCU Personnel Radiation Doses for 2009-2010.
At the underground workings 53 isolation concrete and wooden strips were installed.
35 DV-1000 automatic ventilation doors were put into operation.
15 heating elements at air supply shafts were repaired and replaced.
ARMZ implements efficient radiation safety management within the entire Company. The radiation safety services at the companies are governed by the Russian radiation safety laws and regulations.
The radiation safety services aim at managing and supervising the progress and ensuring radiation safety of operations relating to production, processing, storage and transportation of radioactive substances and waste.
At ARMZ companies Group A and B personnel external exposure is controlled using individual thermo-luminescent dosimeters. Individual doses are valuated taking into account internal exposure. The key radiation factors (radon volumetric activity, power of equivalent / exposure dose of X-ray and gamma radiation, radio surface contamination with alpha and beta nuclides) are controlled using advanced certified equipment.
2009 Activities and Results
Occupational Safety
ARMZ key occupational and industrial safety target is to ensure protection of the companies employees from occupational hazards. The underlying principle of the Company’s policy is acknowledging companies’ personnel safety as the key value at all production stages.
To achieve this goal the Company is actively improving technologies, production organization, planning and management systems. Measures to prevent injuries are based on the industry occupational safety management system approved by S.V. Kirienko on September 21, 2009.
Technical improvement in Company’s affiliates and reduction of hazardous operations is being performed in four directions:
Design and construct new operation facilities with regards to up-to-date safety requirements to provide high performance, maximum production automation with reduction of hazardous job positions
Technical upgrade to phase out outdated equipment;
Internal and external audits to identify and eliminate Health and Safety issues
Organizational actions to strengthen discipline, additional training and personnel motivation.
ARMZ companies’ occupational safety and health costs have amounted to RUR 213 mln
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2009 Activities and Results
At JSC PIMCU:
At JSC Khiagda:
The rate of injuries has decreased. The accident rate at ARMZ companies decreased 1.9-fold (19 in 2008, 10 in 2009), and the fatal accidents rate decreased 5-fold (5 in 2008, 1 in 2009). Underground mining operations at JSC PIMCU remain the main source of injuries. Measures to prevent injuries are based on the industry occupational safety management system.
The occupational diseases rate decreased 2.4-fold (58 in 2008, 11 in 2009).
JSC PIMCU JSC Dalur JSC Khiagda
Industrial Injuries Rate 0.129 0 0
Occupational Diseases Rate 0.272 0 0
Lost days rate* 18.855 0 0* Loss of working ability for the period of 1 working day or more (working day as per the schedule).
Table 21. Industrial Injuries Rate
a new sulfuric acid plant and sulfuric acid storage were put into operation. This eliminated dumping of sulfur waste (waste from burnt pyrites) to the sulfur waste dump;
outdated equipment was replaced to eliminate manual labor at the main production processes, decrease radiation and injury rate;
industrial safety was audited at URGU mines;
a competition between UGRY mines’ areas to promote zero-accident environment was held;
a system of personnel medical checks was implemented; discipline promotion communication campaign was
organized; the Youth Council and the Community Council were
involved in the discipline promotion campaign.
a bridge across the Vitim river and the first stage of construction of the sulfur acid storage have been put into operation, which made it possible to decrease the risks of
spillage of sulfur acid, fuel and lubricants into the Vitim when crossing during ice drifting and freezing period.
Site and Information Security
JSC Atomredmetzoloto activities to ensure safety of its facilities in 2009 were in compliance with the Russian law, and Rosatom and JSC Atomenergoprom regulations and plans. Pursuant to the unified policy of Rosatom, Atomredmetzoloto also implements an integrated action plan to comply with the statutory information safety requirements.
JSC Atomredmetzoloto corporate information system set-up conforms to the international safety management standards ISO/IEC 27000 and the ISO/ IEC 27001:2005 key standard entitled ’’Information technology. Security techniques. Information security management systems’’.
In pursuance of Rosatom orders, formation of a civil defense and emergency warning system began at JSC Atomredmetzoloto. An Emergencies Prevention and Elimination and Fire Safety Commission was created and the relevant regulations developed.
License for performance of work using state secret information was obtained.
There have been no cases of loss of secret documents or leakages of state secret information, or claims from the reg-ulatory authorities.
2009 Activities and Results
There have been no cases of loss of secret documents or leakages of state secret information, or claims from the regulatory authorities.
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SUSTAINABLE DEVELOPMENT
7.4. Environmental Protection and Safety
All ARMZ companies have developed and approved regulations regarding the maximum permissible emissions, sewage and emissisons discharge, waste production and disposal limits, they have the necessary emission, discharge and disposal permits, radiation, en-vironmental and industrial safety control systems have been established and there are all necessary licenses for collection and transportation of hazardous waste.
The modern radiation safety and environmental protection labs are equipped with devices ensuring
constant monitoring of emissions and the level of pollutants in the production area and the sanitary protection zones.
The Company has approved the 2009–2015 environmental policy plan to ensure environmental safety and protection at its subsidiaries.
The information in these sections of the annual report is based on 2009 environmental reports prepared by the three Uranium Holding companies – JSC PIMCU, JSC Dalur and JSC Khiagda as the most environmentally important companies.
The situation with formation and disposal of waste at JSC PIMCU, the main production facility, has significantly improved. The volumes of waste disposal on the day surface have significantly decreased as compared to 2008. This became possible due to disposal of hazard class 5 waste – Urtuisky brown-coal strip-mine overburden – inside the pit (see Fig. 15) and discontinuation of storage of hazard class 4 waste – sulfur waste – as a result of the launch of the new sulfur acid shop working on pure sulfur. Hazard class 1-3 waste is within the permitted norms (see Table 22).
There is no overburden at JSC Dalur and JSC Khiagda. JSC Dalur has undergone two environmental audits. In
2009, foreign energy companies held 2 environmental audits at JSC Dalur, during which the companies' reрresentatives noted the high level of company's environmental and radiation safety, records-keeping with regard to JSC Dalur business processes and the specialists' professionalism.
The set water withdrawal limits were complied with. No company exceeded the set water withdrawal norms (see table 23). Compliance with the water withdrawal limits was achieved through increased use of secondary resources for process water supply, decreasing water pressure to the minimum permissible level during the night time, and remedying leakages at emergency pipelines.
The volume of domestic waste at JSC Khiagda increased due to the increased number of people employed at the facilities under construction. Out of the total number of generated waste approximately 4% is processed internally, 0.04% decontaminated and 95.6% located at the company's domestic and industrial waste dump. Meanwhile, hazard class 1-5 waste is within the
Company/ Hazard class, year
JSC PIMCU JSC DalurJSC
Khiagda
Hazard class 1 2008/2009
4 – 0
2 0 0
Hazard class 2 2008/2009
3 – 0
1 0 0
Hazard class 3 2008/2009
490 – 2
475 8 2
Hazard class 4 2008/2009
90,393 – 2,400
28,881 27 3,864
Hazard class 5 2008/2009
24,721,453 – 204
22,725,600 15 178
Total
24,812,343 – 2,606
22,754,959 50 4,043
Waste processed within the company or located at the company's own facilities, % 99 % 40 % 99,6 %
Waste transferred to specialized contractors for processing and decontamination 1 % 60 % 0.04 %
Exceeding the limits No No No
Table 22. All Hazard Classes Waste Generation (t). 2008-2009
2009 Activities and Results
ARMZ’s environmental policy is based on the principles of efficient environmental management and maximum conservation. The key environmental policy targets are:
develop and implement measures to ensure minimum environmental impact; conserve the environment in the production areas, recultivate land; reduce industrial effluents and emissions discharge; efficient use of energy resources; continuous environmental monitoring.
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CompanyProcess water
withdrawal
Domestic and drinking water
withdrawal
Total water withdrawal
Subsurface sources
Surface sourcesExceeding the
limits
JSC PIMCU – – 24,112 19,112 5,000 None
JSC Dalur 35.5 27.2 62.7 62.7 – None
JSC Khiagda 2.9 11.0 13.9 13.9 – None
Table 23. Water Withdrawal by Purpose and Holding’s Companies,’000 cu.m.
Pollutant name Actual emissions in 2009, t
Maximum permissible emissions (MPE), t
SO2 (sulfur dioxide) 6,211 11,319
Nonorganic dust, ash 5,594 7,069
NOx (nitrogen oxide) 2,550 2,925
CO (carbon oxide) 1,121 1,608
Nonorganic dust, 20-70 % SiO2 182 231
Ammonia 95 126
Sulfur acid 42 200
Other 266 96
Total 16,060 23,575*Here and elsewhere – for all companies: the method for calculating permissible emissions is set forth by the Permissible Emissions Project for each facility separately. Each method describes the company in terms of pollution specifying the pollutants discharged, the quality and quantity of used raw materials, and the key characteristics of used equipment. Emissions are calculated for each type of pollutant based on the source materials.
Table 24. JSC PIMCU 2009 Emissions*
Pollutant name Tons
Carbon oxide 76
Sulfur dioxide 24
Nonorganic dust, ash 11
Nitrogen dioxide 11
Ash 10
Other 7
Total 138
Table 25. JSC Khiagda 2009 Emissions
Pollutant name Tons
Carbon oxide 4.3
Manganese oxide 0.3
Ammonia 1.4
Nitrogen dioxide 2.4
Sulfur acid 0.4
Nitrogen oxide 0.06
Hydrogen chloride 0.04
Other 1.56
Total 10.6
Table 26. JSC Dalur 2009 Emissions
Significant resources were allocated to environment protection. The 2009 total costs amounted to RUR135 mln.
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permitted norms.The maximum permissible emissions requirements were
observed. The production activities at the three companies did not result in the volume of emissions exceeding the maximum permissible limits.
Emissions have decreased. As result of JSC Khiagda production activities in 2009, 138.484 tons of emissions were discharged into atmosphere (52% of the permitted emissions volume). The majority of these emissions come from the boiler (82%) (see Table 25). Use of dust arresting equipment resulted in a 46.724 tons emissions reduction during the reporting period.
Total volume of emissions from all JSC Dalur sources in 2009 amounted to 10.648 tons, or 75.6% of the permissible emissions volume.
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Name of activity JSC PIMCU JSC Dalur JSC
Khiagda
Costs to eliminate environmental impact
Air protection 33 1 1
Water protection 46Not
requiredNot
required
Land protection 43 1 2012
Environmental management costs
Environmental monitoring 9.9 0 0
Environmental projects 0.1 – –
Total 131 2 2
Table 27. 2009 Environmental Costs (RUR mln.)
At JSC PIMCU:The sulfur acid shop at the metal plant was put into
operation. As a result, sulfur dioxide emissions decreased by 1,383.83 tons, and generation and storage of hazard class 5 waste was 100% eliminated.
the 1st thermal power station boiler unit with a more advanced and efficient ash collecting system was constructed and put into operation.
Dust trapping devices at all filling complexes were unified, the minimum ensured level of dust trapping efficiency is 85%.
Regular cleaning of 20 kilometers of dirty access roads was arranged. During the year 370.4 tons of ore spillages were moved to the Central Ore Yard.
At JSC Dalur:Report on Dalmatovskoye and Khokhlovskoye and the
nearby areas radiation environmental monitoring was prepared to confirm that the company complies with all environmental protection and safety rules and requirements.
At JSC Khiagda:Net water consumption per technological process has
been decreased (8 cu.m./day, pos. 15) as result of reprocessing solutions.
Floodwater was removed from bore-holes, and outflow from the bore-hole surface was prevented from discharge into the water.
Construction of solid domestic waste disposal site is in progress.
Integrated environmental plan developed with account for results of environmental audits and approved with Rosatom will be implemented. The plan includes:
Organizational arrangements targeted at implementation of ISO 14001:2004 environmental management system at the subsidiaries.
Production and technical arrangements to decrease environmental impact by the subsidiaries during production, including implementation of the Federal
Target Program entitled ’’Ensuring Nuclear and Ra-diation Safety for 2008 and until 2015’’, reconstruction of treatment facilities, reclamation of land, conducting environmental monitoring.
The practice of public hearings and consultations with environmental organizations and local community will be expanded and will cover Armenia and other countries.
Plans and Targets
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7.5. Development of the Regions of Operation
JSC PIMCU is a backbone company for the single-profile city of Krasnokamensk, Trans Baikal Territory. This status determines the significant social responsibility of ARMZ management, as the possible problems of the backbone companies threaten stable single-profile cities’ development and are a strategic challenge to the authorities of various levels.
Pursuant to the Rosatom’s Local Communities En-gagement and Charity Policy, JSC Atomredmetzoloto not only invests into the social infrastructure, but takes into account the social and economic impact and risks for the regions where it operates when choosing the strategic development objectives and takes part in the region of operation’s strategic development planning.
The partnership between JSC PIMCU and the city of Krasnokamensk is a good example. When designing JSC
PIMCU development program, the impact of different Company development scenarios upon the social and economic situation in the city and the region was assessed. Based on the recommendations of the Russian Ministry of Regional Development, the system of indicators of Company’s impact upon the budget, residential facilities and utilities and amenities and other components of the urban facilities was determined. The assessment results are included into JSC PIMCU development program for further review by the Board of the methods approved by the order.
JSC Dalur’s regional development program focuses on sport and local schools support and provides assistance to school graduates when entering the universities.
2009 Activities and Results
The bridge across the Vitim river (JSC Khiagda) was commissioned on May 16, 2009 in Romanovka village (Bauntovsky District, Buryatia). It replaced the ferry service and the winter road previously in operation. The bridge not only satisfies JSC Atomredmetzoloto needs, but is also of significant social and economic importance for Buryatia and Chita. It will materially improve traffic in Bauntovsky district of the Republic of Buryatia and between the two neighboring districts and will partially solve the problem of deliveries of goods to the Northern territories. Construction of a bridge 240 m long and over 7 m wide was financed by Rosatom. Total investments into the project amounted to RUR250 mln.
Charitable and sponsorship support to the amount of RUR3.8 mln was provided to Krasnoz-namensk schools.
During 2009, RUR10.0 mln was provided to support Krasnoznamensk non-working retirees.
RUR5.7 mln was allocated to maintain social and cultural infrastructure facilities (Dauria Cultural Center and Argun Gym).
As part of the program to relocate Oktyabrsky settlement residents, two houses were commissioned for the local residents and 273 families were provided with flats. 480 families remained in the settlement, and two 108-apartment houses are still under construction. There will be five houses in total. Land will be reclaimed after complete relocation of Oktyabrsky residents.
Construction of residential quarter for JSC Dalur employees was financed.
In Dalmatovsky district of the Kurgan Region gasification and road construction were implemented.
We plan to develop the stakeholder engagement policy to summarize the Company's experience of participation in development of the regions of its operation (see also Sections 7.6 and 7.7). The policy will be put into practice by preparation of an integrated JSC PIMCU Krasnoznamensk development plan to implement urban
restructuring and development programs and improve single-profile city sustainability. An integrated plan will allow for attracting state financing and private/public partnership resources to the city's development and modernization projects.
ARMZ focuses on the social and economic and infrastructural development of regions where it operates. Currently the Company’s main production operations are located within Russia. However, the principles and policy of responsible development of the regions of operations apply to all ARMZ Uranium Holding Co’s companies.
Vitim Bridge in Buryatia commissioned (costs – RUR250 mln)
Plans and Targets
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SUSTAINABLE DEVELOPMENT
7.6. Charity and Sponsorship
In 2009 ARMZ took part in financing a number of charitable and sponsorship events.
We plan to develop the stakeholder engagement policy to summarize the Company's experience of participation in development of the regions where it operates (see also
Sections 7.5 and 7.7) and expand the scope and the methods of cooperation with charitable organizations.
2009 Activities and Results
Plans and Targets
Financial support was provided to the Asian Children International Sport Project in the Republic of Sakha (Yakutia). Since 2008 ARMZ has closely cooperated with Bargaryy National Renaissance Foundation under the auspices of the President of the Republic of Sakha (Yakutia), the organizer of the Asian Children Inter-national Sport Project – youth summer and all season competitions. The purpose of the games held once every four years under the auspices of the International Olympic Committee is the promotion of a healthy lifestyle, establishment of new connections in sport and strengthening of friendship among the children of the Asian-Pacific Region. The sponsorship for this project in 2009 amounted to over RUR200 thousand.
The Illustrated Books for Small Blind Children Project received sponsorship support. Since 2000 JSC Atomred-metzoloto has provided sponsorship support to theIllustrated Books for Small Blind Children Charitable Public Fund which specializes in publishing books for visually impaired or blind children. During this time ARMZ has financed the publication of color illustrated embossed books, The Illustration Sensation Atlas, for 146 pre-school children living in the regions of the Company's operations. The books customized to the children's needs from the point of view of perception and psychology give the visually impaired children better possibilities to get to know the surrounding world and improve their social inclusion. The costs for this project in 2009 amounted to over RUR300 thousand.
In its charitable and sponsorship activities JSC Atomredmetzoloto focuses primarily on support of such social areas as culture, sport, education and science.
7.7. Stakeholder Engagement
Based on the Company's development strategy and the stakeholders engagement practice the ’’key stakeholder
map’’ was developed and the following groups identi-fied (see Table 28).
ARMZ is committed to efficient stakeholder engagement based on the following key values: Mutual respect and productive cooperation. Continuous dialog to identify and provide for needs. Fulfillment of undertakings.Provision of timely and complete information regarding the Company's operations to stakeholders. Active engagement of the stakeholders in all regions of operations.
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’’ARMZ management deals with social issues which concern our employees, the management communicate with the employees directly at their work places. We are fully satisfied with ARMZ as a social partner, as it both fulfills obligations according to the collective bargaining agreement and is directly involved in its improvement.’’
P.V. Gnatyuk, JSC PIMCU Primary Trade Union Chairman.
Stakeholders Area of Interest Company's Actions
Shareholders: Rosatom, TVEL, JSC Atomenergoprom
Achievement of KPIs (uranium production, investments, operations efficiency etc.).
Compliance with the safety, occupational safety and environmental protection industry standards.
Fulfillment of disclosure and transparency requirements.
Achievement of KPIs Strict adherence to all industry policies and
requirements Commitment to high corporate governance
standards, including protection of ARMZ Holding minority shareholders rights and interests.
Customers
Stable, reliable and uninterrupted supplies. Disclosure of information regarding the
Company's operations in the Annual Report in accordance with international best practices.
Observation of interests and strict compliance with the obligations to clients.
Ensuring information transparency.
Personnel
Fair remuneration. Guaranteed employment.Social programs (including pension plans). Job satisfaction.
Attractive employer positioning.Continuous professional development and training
(over 5,000 employees in 2009). Establishment of Coach Academy Implementation of best salary practices. Wide range of social programs.
State and local authorities, residents and local communities
Safety and zero environmental impact. Employment protection, responsible employer. Development of the regions of operation
infrastructure.
Regular meetings, public hearings with participation of regional and local authorities, residents of the regions of operation, NGO representatives.
International industry organizations
Transparency of operations.Compliance with strict safety standards.
Strict adherence to all international and Russian radiation safety standards.
Active participation in WNA and IAEA activities.
Table 28. Key Stakeholder Map
Stakeholder Dialogs and Consultations
The company held public hearings over EIA with respect to Olovskoye deposit in Trans-Baikal Territory, during which all key EIA for the future facility were approved. Olovskoye development project was approved by the public and the local administration.
Public hearings were held over the Declaration of Intent relating to development of Lunnoe deposit in Aldansky District of the Republic of Sakha (Yakutia). The district population approved the construction of a production facility at Lunnoe deposit subject to compliance with the set environmental requirements and conducting explanatory work regarding functioning of uranium mining companies.
The company held public hearings over the Declaration of Intent relating to Berezovoye Deposit (Tran Baikal Territory) Development . The local public provided constructive proposals concerning mitigation of environmental impact of the proposed mine.
Consultations with major international energy companies were held. The consultations helped to determine the issues relating to the place and the role of ARMZ within the Rosatom structure, Company’s ramp-up in Kazakhstan, potential projects and methods of interaction with potential clients.
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SUSTAINABLE DEVELOPMENT
When preparing the annual report the Company consul-ted foreign consumers, the investment community, the representatives of regional and local authorities and trade union organizations.
Representatives of the investment community and foreign consumers noted that the Company’s report should comply with the international standards and the best practices applied by the US and European companies and were interested to obtain information on the impact of the world financial crisis upon the Company’s situation, its future development plans and risk management. For the representatives of the regional and local authorities and the trade union organizations
the information regarding the production development plans, new jobs, social programs and development of the regions of operations appeared to be most relevant.
In its 2009 report, the Company tried to cover these issues in more detail. To verify the report, the principles set forth in АА 1000 AS standards were used, specifically, the materiality principle (the report includes sustainability indicators in accordance with the stakeholder demands), completeness principle (the information is provided in accordance with the GRI standards), and responsiveness principle (the Company took into account the specific requirements and needs of the stakeholders when preparing the report).
Consultations with Stakeholders during Annual Report Preparation
The representatives of the shareholder (Rosatom), clients, financial institutions and public organizations took part in the hearings. The event was arranged as a videoconference, which made it possible to bring rep-resentatives of the regional and local authorities and the local communities from the region of operations, as well as the local trade union organizations into the discussions. As for ARMZ, two Deputy Director Generals, ARMC and UMC General Directors and
other managers took part in the hearings. The participants were asked to evaluate the report
project in general, its relevance and completeness with respect to the issues most significant to the stakeholders and to provide recommendations regarding improve-ment of reporting. Moreover, the participants could evaluate their previous interaction with the Company and give more general recommendations regarding responsible business practices.
In general, the report was highly praised by the hearings participants. The audience noted the improved information disclosure, as compared to 2008: all issues relevant for the stakeholders were covered. It is important that the document describing the Company’s activities during the crisis addresses in detail the risk management and sustainability issues. The completeness of information regarding the Company’s key operations also meets the stakeholder demands.
At the same time, suggestions and recommendations were received regarding fuller disclosure of risks relating to technological development and personnel management, and the Company’s participation in Rosatom policy and projects implementation. The comments referred to fuller disclosure of the processes and mechanisms of stakeholder engagement, especially the local communities, and disclosure of Company’s plans regarding environmental policy.
The hearings regarding the Company’s Annual Report which took place on June 16, 2010 were the final step in discussing the report with the stakeholders.
Hearings Follow-Up
About the Event
’’A powerful state company has arrived in the region. I would like to see Russia as a country with a powerful energy industry. With due regard to the important role Berezovoye deposit development project plays in solving energy issues, I think this project has found support from local government and the suggestions aimed at social and economic development of Uletovskiy region mentioned at these hearings should be considered during its implementation.’’
Ye.V. Vishnyakov, Transbaikalia Government Chairman Deputy, at Berezovoye Project public hearing.
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About the Report in General
About Client Relations
’’Comparing this Report with foreign companies’ reports I can assure that it is not inferior in quality and information disclosure completeness; the Report complies with the demands of investment banking professionals.’’
S.S. Yeremina, Vice President, Societe Generale Corporate & Investment Banking.
’’JSC Atomredmetzoloto Annual Report fully discloses the issues related to customer services. JSC TVEL and JSC ARMZ have a long-term, reliable and friendly relationship. We not only receive breeder materials for nuc-lear fuel, but also provide guaranteed supplies of the fuel to our customers as a part of balanced nuclear fuel.’’
A.Yu. Grigoryiev, Market Development and Analytics Executive Director, JSC TVEL
About Social Partnership
About Environmental Safety
’’In 2009 JSC PIMCU started a wide-scale personnel headcount optimization program. The performance increased to 12.5% due to optimization and restructuring of company divisions. At the same time, the management in conjunction with the Trade Union succeeded in avoiding social problems caused by staff reduction as all reduced personnel was hired with the Company’s active parti-cipation. ARMZ Annual Report reflects social partnership principles being actually implemented, though we would like to see social policy priorities set forth more clearly.’’
N.G. Pluzhnikova, Deputy Chairman, Krasnokamensk Trade Union Coordinating Council
’’ARMC has recently started operations in Armenia. Environmental safety is the first concern of the local population, that is why we need a large-scale educational campaign. An annual Report containing information on en-vironmental safety will be a good tool in our discussions with the stakeholders. Thus, we recommend in the next report to add data on public discussions on environmental safety in all company’s operational areas, including Armenia.’’
M.E. Kirakosyan, General Director, СJSC ARMC
’’ARMZ Annual Report pays special attention to envir-onmental safety. A positive point in the 2009 Report is that a significant amount of indicators are explained. What is missing is maybe more details on the Company’s plans for implementation of Environmental Policy in the future.’’
V.A. Grachev, Chairman of the Board, GREENLIGHT International Environmental Organization
About Stakeholders Relations
’’JSC PIMCU is a township-forming enterprise, it cov-ers over 90% of regional income, all inhabitants’ wealth depends on its success. The enterprise is being well developed, and the town is being developed with it. Therefore, it is very important to continue assessment of various scenarios in Priargunsky development, their influence on town-living, to provide tracking of assessment results both in Company’s development programs and town development programs.’’
A.I. Getminskiy, Deputy Head, Krasnokamensk Administration
’’The Annual Report contains information on actions taken to engage with the stakeholders. But we would also like to see information about Company’s policy related to this, what the priorities of this policy is, whether the key decisions are made solely by the Company or if there is a system of preliminary discussions with the stakeholders.’’
E. N. Feoktistova, General Manager, Center of Corporate Social Responsibility and Non-
Financial Reporting.
In a follow-up to the discussion the Report was expanded with additional information regarding Company’s participation in Rosatom policy and projects imple-mentation (Section 6.1), more detailed information regarding engagement of the local communities (Section 7.5 – details of Company’s plans and intentions), clearer definition of the Company’s social policy priorities (Section 7.1), information regarding specific risks
relating to technological risks and personnel management, radiation safety risks (Section 6.4.), additional information regarding optimization of JSC PIMCU headcount in Section 7.1., details of Company’s environmental policy implementation plans (7.4.), additional information on the Company’s plans and intentions regarding stakeholder relations development in Section 7.7.
We plan to develop the stakeholder engagement policy, expand cooperation and improve its consistency (see also Sections 7.5 and 7.6).
Plans and Targets
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8. Financial Performance*
*Information given in this section is derived from the IFRS consolidated statements (www.armz.ru/press/news/?id=225).
In 2009 the Company’s revenues and profit grew substantially. The assets significantly increased as a result of issuance of additional shares of JSC Atomredmetzoloto and sales growth.
Item, '000 RUR 2009 2008 Change %
Sales revenues 29,233,932 15,197,372 14,036,560 92.4%
Primary Cost of Goods Sold –16,595,099 –10,054,453 –6,540,646 –65.1%
Gross revenues 12,638,833 5,142,919 7,495,914 145.8%
Administrative and selling expenses –3,898,666 –2,513,546 –1,385,120 –55.1%
Operating profit 8,740,167 2,629,373 6,110,794 232.4%
Pre-tax profit 10,232,388 294,037 9,938,351 3380.0%
Net profit 6,727,942 289,200 6,438,742 2226.4%
Profit attributable to:
shareholders of the Company 6,742,708 278,181 6,464,527 2323.9%
minority interest –14,766 11,019 –25,785 –234.0%
Table 29. Profit and Loss Statement
The main driver of the revenue and profit growth in 2009 was increased sales to customers: increased sales and higher prices at which the products were sold to the domestic customers, supported by the stock of finished products accumulated in the previous years; launch of sales of natural uranium to foreign customers; a one-off major delivery to a foreign customer in late 2009.
Item, '000 RUR 31.12.2009 31.12.2008 Change %
Current assets 68,187,488 13,846,136 54,341,352 392.5%
cash and cash equivalents 51,685,187 2,434,954 49,250,233 2022.6%
accounts receivable 8,924,684 3,151,201 5,773,483 183.2%
stock 4,265,348 7,352,527 –3,087,179 –42.0%
Fixed assets 38,264,232 16,621,200 21,643,032 130.2%
fixed assets 17,785,904 13,994,233 3,791,671 27.1%
financial investments into affiliates and jointly controlled entities 14,141,031 155,395 13,985,636 9000.1%
TOTAL ASSETS 106,451,720 30,467,336 75,984,384 249.4%
Short-term liabilities 12,971,719 12,532,187 439,532 3.5%
accounts payable 3,512,259 1,811,593 1,700,666 93.9%
short-term borrowings 7,468,899 10,455,303 –2,986,404 –28.6%
Long-term liabilities 11,441,105 5,101,100 6,340,005 124.3%
long-term borrowings 9,413,165 3,012,902 6,400,263 212.4%
Equity 82,038,896 12,834,049 69,204,847 539.2%
TOTAL LIABILITIES 106,451,720 30,467,336 75,984,384 249.4%
Table 30. Balance Sheet
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FINANCIAL PERFORMANCE
The balance sheet total in 2009 increased 3.5 times mainly as a result of issuance of additional shares of JSC Atomredmetzoloto and growth of sales.
In 2009 the Company substantially improved its performance ratios, and as a result they reached 0.77 (equity ratio), 5.3 (current liquidity ratio) and 4.7 (quick liquidity ratio), which one is much higher than the 2008 ratios.
In 2009, the profit margin demonstrated stable growth due to an increase of revenues.
ARMZ Uranium Holding Co. has moderately conservative monetary and borrowing policy designated to satisfy the investment needs of the holding with strict compliance with the acceptable debt burden and risk profile. Such a policy is implemented through achieving an appropriate balance between own funds and borrowings for development of the projects, active participation of the holding's companies in the existing state and industry programs for development and support
to business, attracting private strategic partners in the projects.
In order to implement its key projects, such as development and diversification of its international resource base, the company creates and maintains necessary mobilization financial reserves which allow it to make major investments without worsening its creditworthiness. ARMZ cooperates with major Russian and international financial institutions many of which have a credit risk limit established for the companies of the holding.
The Company's credit portfolio is diversified by maturity dates and borrowers. The holding's credit portfolio is formed with due control over currency and interest rate risks. Such an approach makes it possible to maintain high financial stability of JSC Atomred-metzoloto and its subsidiaries which is demonstrated by invariably high credit ratings of the group companies.
Indicator 2009 2008 Change %
Financial Stability Ratios
Equity ratio 0.77 0.42 0.35 83.0%
Liquidity Ratios, percent
Current liquidity ratio 5.3 1.1 4.2 375.8%
Quick liquidity ratio 4.7 0.4 4.2 948.2%
Return on sales ratio, %
Return on sales 43.2% 33.8% 9.4% 27.8%
Net profit margin 23.0% 1.9% 21.1% 1109.4%
Table 31. Key Financial Indicators
’’One of the key events in 2009 was the acquisition of Uranium One shares. For the accounting department this meant that we have to ensure payment of taxes to the Kazakhstan budget in connection with this transaction. All tax liabilities were per-formed to the full extent and in due time. Another landmark event was the issue of IFRS consolidated financial statements. January 1, 2007 was accepted as the date of transfer to IFRS, therefore, the 2008 statements became the Holding’s first full audited IFRS statements. Due to the scope and the novelty of the project, this work required mobilization of all our accumulated knowledge and skills. But we understood perfectly well that our efforts had not been wasted. Availability of statements prepared under the international standards allows us to actively cooperate with foreign investors, obtain better financing and feel like an equal in the business community.’’
Anna Pozdeeva, JSC Atomredmetzoloto Chief Accountant
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9. Exhibits9.1. Abbreviations and Terms Used in the Report
TP AC – automated control system of the technological process NPP – nuclear power plant SRC – State Reserves Committee HMP – hydrometallurgical plant GMM – geologic mathematical models GE – geological exploration S&A – subsidiaries and affiliates VMI – voluntary medical insurance IT – information technologies ICH concentrate – ilmenite-chromite-hematite concentrate KPI – key performance indicators IAEA – International Atomic Energy Agency MOX fuel – from the English Mixed oxide fuel (MOX): mixed fuel based on 239Pu and 238U oxides.IFRS – International Financial Reporting Standard.R&D – research and development, experimental design and engineering work NPF – non-governmental pension fund EIA – environmental impact assessment EUP – enriched uranium product INF – irradiated nuclear fuel ISL – in-situ leaching NCSP – nuclear materials storage point, RW – radioactive waste RAS – Russian accounting standards
HBM – hydraulic borehole mining AS – average salaryJV – joint venture ISR – in-situ recovery FA – fuel assembly INV – inventory and stock FS – feasibility study FA – feasibility analysis CP – cogeneration plant UGRU – uranium ore mining unit FCSM – Federal Commission for Securities Market FEB – financial and economic block NM – nuclear material NFC – nuclear fuel cycle NU – nuclear unit ASTM – American Society for Testing and Materials – American international voluntary organization that develops and publishes GRI – from the English Global Reporting Initiative – Sustainability Reporting Guidelines UXC – Ux Consulting – one of the leading consulting companies in the nuclear industry WNA – World Nuclear Association JORC – Code for Reporting Exploration Results, Mineral Resources and Ore Reserves
Atom – the smallest particle of a chemical element which retains its properties. It consists of a nucleus with protons and neutrons, and electrons in motion around the nucleus. The number of electrons and protons (in the nucleus) is equal.Becquerel (Bq) – the unit of nuclide radioactivity within the radioactive source, where one nucleus decays per second.NPP Block – part of NP which performs the NP functions to the designed extent.Commissioning – a process whereby the systems and equipment of a nuclear station are put into operation and checked for consistency with the design. This process includes initial testing activities, physical and power start-ups, and ends with the nuclear station being put into commercial operation.
Highly enriched uranium – uranium containing isotope uranium-235 equal to or more than 20% by mass. Leaching – a process using a leaching solution to extract certain components from solid materials, including radioactive elements. It is based on the better dissolution ability of the extracted mineral as compared to other components.Uranium hexafluoride – a chemical composition of uranium and fluorine (UF6). It is the only highly volatile uranium composite (uranium hexafluoride vaporizes directly from solid state when heated up to 53°С) and it is used as material for mass separation of U-238 and U-235 using gas-diffusion or gas centrifuge technologies, and production of enriched uranium.IAEA – International Atomic Energy Agency, established in 1957 and with headquarters in Vienna.
Abbreviations Used in the Report
Terms Used in the Report
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EXHIBITS
9.2. Main Deposits of the Company
№№ Deposit Location
(country, region, district) License Type Minerals Name of Legal Entity
1 IstochnoyeRussia, Republic of Buryatia,
Bauntovsky DistrictExploration and
mining Uranium JSC Atomredmetzoloto
2 KolichikanskoyeRussia, Republic of Buryatia,
Bauntovsky DistrictExploration and
mining Uranium JSC Atomredmetzoloto
3 KoretkondinskoyeRussia, Republic of Buryatia,
Bauntovsky DistrictExploration and
mining Uranium JSC Atomredmetzoloto
4 NamarusskoyeRussia, Republic of Buryatia,
Bauntovsky DistrictExploration and
mining Uranium JSC Atomredmetzoloto
5 DybrynskoyeRussia, Republic of Buryatia,
Bauntovsky DistrictExploration and
mining Uranium JSC Atomredmetzoloto
6 StreltsovskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
7 AnteyRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
8 LuchistoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
9 MartovskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
10 OktyabrskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
11 TulukuevskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
12 YubileinoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
13 NovogodneeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
14 VesenneyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
15 ShirondukuiskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
16 Malo-TulukuevskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
17 ArgunskoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
18 ZherlovoyeRussia, Transbaikalia,
Krasnokamensk District MiningUranium,
molybdenum JSC PIMCU
List of Uranium Deposits in Russia
MOX-fuel (Mixed Oxide Fuel) – see Mixed Oxide Fuel. Enrichment – the process whereby the content of a particular isotope in a mixture of isotopes is increased. Uranium ore processing – a set of initial uranium minerals treatment processes with a view to separating uranium from other minerals in the ore. The composition of the minerals is not changed. They are only separated mechanically and the ore concentrate is produced. Enriched uranium – uranium where U-235 isotope content exceeds the natural uranium level.Nuclear Fuel Cycle (NFC) Enterprises – enterprises the activities of which involve nuclear fuel. Such enterprises require decommissioning after the end of their useful life and include, in addition to NPS, the uranium ore processing plans, uranium hexafluoride processing and fuel elements production plans, and the used fuel processing plants and low active waste disposal units.FA (fuel assembly) – a fuel rod assembly. For purposes of reactor load the rod fuel elements are gathered into
clusters where they are aligned along each other and have a specific distance among them ensured by spacing grids. Depending upon reactor type and the design of the reactor core the fuel element clusters may be put into casings which form the coolant route inside the core reactor zone, or they may be installed into the reactor without casings.Uranium (U) – chemical radioactive element (metal) with atomic number 92 and the atomic mass of the most common and stable isotope 238. Natural uranium is comprised of three isotopes – U-238, U-235 and U-234, of which the first two have commercial value for purposes of nuclear energy.Off Take Contract – a contract for purchase of future production.Pre-Feasibility Study – preliminary analysis of the proposed design solutions.Scoping Study – pre-design study.
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№№ Deposit Location
(country, region, district) License Type Minerals Name of Legal Entity
1 PGS-3Russia, Transbaikalia,
Krasnokamensk District MiningSand and gravel
aggregate JSC PIMCU
2 UrutuiskoeRussia, Transbaikalia,
Krasnokamensk District Mining Coal JSC PIMCU
3 GromovskoeRussia, Transbaikalia,
Priargunsky DistrictGeological survey
and mining Manganese JSC PIMCU
4 ShivyrtuiskoeRussia, Transbaikalia,
Zabaikalsky District Mining Zeolitic sinter JSC PIMCU
5 Ust-BorzinskoeRussia, Transbaikalia,
Mogoituisky District Mining Limestone JSC PIMCU
6
Itmanovskaya placer of Lukoyanovskoe deposit
Russia, Nizhny Novgorod Region, Gaginsky District
Geological survey and mining
Titanium and zirconium sands GEOSTAR Ltd
List of Deposits of Other Mineral Resources in Russia
№№ Deposit Location
(country, region, district) License Type Minerals Name of Legal Entity
1 ZarechnoyeKazakhstan,
South-Kazakhstan RegionExploration and mining Uranium ZARECHNOYE
2 JuzhnoeKazakhstan,
South-Kazakhstan RegionExploration and mining Uranium ZARECHNOYE
3 Budenovskoe (site 1)Kazakhstan,
South-Kazakhstan RegionExploration and mining Uranium JSC JV Akbastau
4 Budenovskoe (site 3)Kazakhstan,
South-Kazakhstan RegionExploration and mining Uranium JSC JV Akbastau
5 Budenovskoe (site 4)Kazakhstan,
South-Kazakhstan RegionExploration and mining Uranium JSC JV Akbastau
List of Uranium Deposits in Kazakhstan
№№ Deposit Location
(country, region, district) License Type Minerals Name of Legal Entity
19Streltsovskoe Ore Field
Russia, Transbaikalia, Krasnokamensk District Geological survey Uranium JSC PIMCU
20 DalmatovskoeRussia, Kurgan Region,
Dalmatovsky District Mining Uranium JSC Dalur
21 KhokhlovskoeRussia, Kurgan Region, Shumikhinsky District Geological survey Uranium JSC Dalur
22 KhiagdinskoeRussia, Republic of Buryatia,
Bauntovsky DistrictExploration and mining
Uranium, Scandium JSC Khiagda
23 ElkonRussia, Republic of Sakha
(Yakutia), Aldansky DistrictExploration and
mining Uranium JSC Elkon MMP
24 Elkon PlateauRussia, Republic of Sakha
(Yakutia), Aldansky District Mining Uranium JSC Elkon MMP
25 KurungRussia, Republic of Sakha
(Yakutia), Aldansky District Mining Uranium JSC Elkon MMP
26 NeprokhodimoeRussia, Republic of Sakha
(Yakutia), Aldansky DistrictExploration and
mining Uranium JSC Elkon MMP
27 DruzhnoeRussia, Republic of Sakha
(Yakutia), Aldansky District Mining Uranium JSC Elkon MMP
28 SevernoeRussia, Republic of Sakha
(Yakutia), Aldansky DistrictExploration and mining Uranium JSC Elkon MMP
29 Interesnaya ZoneRussia, Republic of Sakha
(Yakutia), Aldansky DistrictExploration and mining Uranium JSC Elkon MMP
30 LunnoeRussia, Republic of Sakha
(Yakutia), Aldansky DistrictExploration and mining Uranium JSC Lunnoe
31 GornoeRussia, Transbaikalia,
Krasnochikoysky DistrictExploration and mining Uranium JSC UMC Gornoe
32 BerezovoeRussia, Transbaikalia, Uletovsky
District
Geological survey, exploration and mining Uranium JSC UMC Gornoe
33 OlovskoeRussia, Transbaikalia,
Chernyshevsky District Mining Uranium JSC OMCC
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9.3. Global Reporting Initiative – Sustainability Reporting Guidelines (GRI)
GRI SubsectionRUIE KPI
No.
Reflected in the Report
(fully/partially)
Page in the Report
Report Section/Subsection
1. Strategy and Analysis
1.1 Statement from the most senior decision maker of the organization (e.g., CEO, chair, or equivalent senior position) about the relevance of sustainability to the organization and its strategy Fully Page 8–9 2. Company's management statement
1.2 Description of key impacts, risks, and opportunities. Partially
Page 53
Page 68
6.4 Key Risks and Risk Management Methods
7.7 Stakeholder Engagement
2. Organisation Profile
2.1 Name of the organization Fully
Page 6 Page 92
1. About this Report 9.8 Details of the Company
and Contact Information
2.2 Primary brands, products, and/ or services Fully Page 31 5.2 Uranium Mining
2.3 Operational structure of the organization, including main divisions, operating companies, subsidiaries, and joint ventures Fully
Page 12 3.2 Structure of the Company, Organization of Production and Marketing Processes
2.4 Location of organization’s headquarters Fully Page 929.8 Details of the Company
and Contact Information
2.5 Number of countries where the organization operates, and names of countries with either major operations or that are specifically relevant to the sustainability issues covered in the report.. Fully Page 14–15
3.3. Geography of the Company's Operations
2.6 Nature of ownership and legal form Fully
Page 6 Page 92
1. About this Report 9.8 Details of the Company
and Contact Information
2.7 Markets served (including geographic breakdown, sectors served, and types of customers/beneficiaries). Fully
Page 12–13
Page 14–15
3.2 Structure of the Company, Organization of Production and Marketing
Processes 3.3. Geography of the Company's
Operations
2.8 Scale of the reporting organization Fully
Page 14–15
Page 16
Page 57–58
3.3. Geography of the Company's Operations
3.4 2009 Key Operating Results of the Company
7.1. Personnel
Significant changes during the reporting period regarding size, structure, or ownership Fully
Page 17
Page 46
3.5 Key Events of 2009
6.2 Corporate Governance System
2.10 Awards received in the reporting period Fully Page 17 3.5 Key Achievements in 2009
3. Report Parameters
3.1 Reporting period for information provided Fully Page 6 1. About this Report
3.2 Date of most recent previous report (if any) Fully Page 6 1. About this Report
3.3 Reporting cycle Fully Page 4 1. About this Report
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GRI SubsectionRUIE KPI
No.
Reflected in the Report
(fully/partially)
Page in the Report
Report Section/Subsection
3.4 Contact point for questions regarding the report or its contents Fully Page 92
9.8 Details of the Company and Contact Information
3.5 Process for defining report content Fully Page 6–7 1. About this Report
3.6 Boundary of the report Fully Page 6 1. About this Report
3.7 State any specific limitations on the scope or boundary of the report Fully Page 6 1. About this Report
3.8 Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other entities that can significantly affect comparability from period to period and/or between organizations Fully
Page 12 3.2 Structure of the Company, Organization of Production and Marketing
Processes
3.9 Data measurement techniques and the bases for calculations, including assump-tions and techniques underlying estimations applied to the compilation of the Indicators and other information in the report Fully Page 7 1. About this Report
3.10 Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons for such re-statement (e.g., mergers/ acquisitions, change of base years/periods, nature of business, measurement methods) Fully Page 6 1. About this Report
3.11 Significant changes from previous reporting periods in the scope, boundary, or measurement methods applied in the report Fully Page 6 1. About this Report
3.12 Table identifying the location of the Standard Disclosures in the report Fully Page 80
9.3 GRI (Global Reporting Initiative) Sustainability Reporting Guidelines
Standard Disclosures Table
3.13 Policy and current practice with regard to seeking external assurance for the report Fully Page 85 9.4 Nonfinancial Reporting Assurance
4. Governance, Commitments, and Engagement
4.1 Governance structure of the organization Fully Page 46–51 6.2 Corporate Governance System
4.2 Indicate whether the Chair of the highest governance body is also an executive officer Fully Page 48 6.2 Corporate Governance System
4.3 For organizations that have a unitary board structure, state the number of members of the highest governance body that are independent and/or non-executive members Fully Page 47 6.2 Corporate Governance System
4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body Fully Page 50 6.2 Corporate Governance System
4.5 Linkage between compensation for members of the highest governance body, senior managers, and executives (including departure arrangements), and the organization’s performance (including social and environmental performance) Fully
Page 45 Page 50–51
6.1 Goal-Oriented Governance6.2 Corporate Governance System
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GRI SubsectionRUIE KPI
No.
Reflected in the Report
(fully/partially)
Page in the Report
Report Section/Subsection
4.8 Internally developed statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance and the status of their implementation 1.1 Fully
Page 23Page 50
4.3 Key Company Development Areas6.2 Corporate Governance System
4.9 Procedures of the highest governance body for overseeing the organization’s identification and management of economic, environmental, and social performance Partially
Page 61Page 64
7.2 Social Policy7.4 Environmental Protection and Safety
4.10 Processes for evaluating the highest governance body’s own performance, in particular, with respect to the company's economic, environmental, and social performance Fully Page 52 6.3 Board's Report on Key Operations
4.11 Explanation of whether and how the precautionary approach or principle is addressed by the organization Fully
Page 53Page 62
6.4 Key Risks and Risk Management Methods
7.3 Occupational Health and Safety
4.13 Memberships in associations (such as industry associations) and/or national/international advocacy organizations in which the organization Partially Page 69 7.7 Stakeholder Engagement
4.14 List of stakeholder groups engaged by the organization Fully Page 69 7.7 Stakeholder Engagement
4.15 Basis for identification and selection of stakeholders with whom to engage Fully Page 68 7.7 Stakeholder Engagement
4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group Fully Page 68-69 7.7 Stakeholder Engagement
4.17 Key topics and concerns that have been raised through stakeholder engagement, and how the organization has responded to those key topics and concerns, including through its reporting Fully Page 69 7.7 Stakeholder Engagement
5. Management Methods and KPI Information
5.1 Economic performance indicators
5.1 EC1 (main performance indicators) Created and distributed direct economic value, including revenues, operating costs, employee wages, donations and other community investments, undistributed profit, payments to providers of capital and governments:
sales proceeds
investments in fixed assets during the reporting period , NOPAT
net asset value charitable expenses
wages and other employee benefits
1.2
1.3
1.4
1.5
1.6
1.7 Partially
Page 16
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Page 73
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Page 68
Page 61
3.4 2009 Key Operating Results of the Company
4.3 Key Development Areas and Investment Policy
8. Financial Performance.
3.4 2009 Key Operating Results of the Company
7.6 Charity and Sponsorship
7.2 Social Policy
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No.
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EC3 (main) Coverage of the organization’s defined benefit plan obligations 1.8 Partially Page 61 7.2 Social Policy
EC4 (main) Significant financial assistance received from government Fully
Page 8
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2. Company's management statement
6.2. Corporate Governance System
EC5 (additional) Range of ratios of standard entry level wage compared to local minimum wage at significant locations of operation Partially Page 60 7.1 Personnel
EC7 (main) Procedures for local hiring and proportion of senior management hired from the local community at locations of significant operation Fully Page 59 7.1 Personnel
EC8 (main) Development and impact of infrastructure investments and services provided primarily for public benefit through commercial, in kind, or pro bono engagement Fully Page 67
7.5 Development of the Regions of Operation
EC9 (additional) Understanding and describing significant indirect economic impacts, including the extent of impacts Fully Page 67
7.5 Development of the Regions of Operation
5.2 Environmental Performance
EN3(main) Direct use of energy sources with indication of primary sources 2.2 2.2 Partially Page 41 5.6 Efficiency Management and Innovations
EN8 (main) Total water withdrawal by source Fully Page 64 7.4 Environmental Protection and Safety
EN20 (main) NO, SO, and other significant air emissions by type and weight
2.62.7
2.7.2 Fully Page 65 7.4 Environmental Protection and Safety
EN22 (main) Total weight of waste by type and disposal method 2.8 Fully Page 64 7.4 Environmental Protection and Safety
EN30 (additional) Total environmental protection expenditures and investments by type 2.12 Fully Page 66 7.4 Environmental Protection and Safety
5.3 Labor Practices and Decent Work
LA1 (main) Total workforce by employment type, employment contract, and region 3.1.1 Fully Page 58 7.1 Personnel
LA2 (main) Total number and rate of employee turnover by age group, gender, and region
3.1.23.1.3 Fully Page 59 7.1 Personnel
LA3 (additional) Benefits provided to full-time employees that are not provided to temporary or part-time employees, by major operations Fully Page 61 7.2 Social Policy
LA7 (main) Rates of injury, occupational diseases, lost days, absenteeism and number of job-related fatalities by region
3.1.53.1.63.1.73.1.8 Fully Page 63 7.3 Occupational Health and Safety
LA8 (main) Education, training, counseling, prevention, and risk-control programs in place to assist workforce members, their families, or community members regarding serious diseases Partially Page 62 7.3 Occupational Health and Safety
LA9 (main) Health and safety topics covered in formal agreements with trade unions Fully Page 70 7.2 Social Policy
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GRI SubsectionRUIE KPI
No.
Reflected in the Report
(fully/partially)
Page in the Report
Report Section/Subsection
LA10 (main) Average hours of training per year per employee per category 3.1.10 Fully Page 59 7.1 Personnel
5.4 Social Performance
SO5 (main) Public policy positions and participation in public policy development and lobbying Partially Page 45–46 6.1 Goal-Oriented Governance
5.5 Mining Companies Performance
MM3 Total amounts of overburden, rock, tailings, and sludges and their associated risks Fully Page 64, 66 7.4 Environmental Protection and Safety
MM9 Sites where resettlements took place, the number of households resettled in each, and how their livelihoods were affected in the process Fully Page 67
7.5 Development of the Regions of Operation
Indicator Reflected in the Report
Page in the Report
Report Section/Subsection
Section 3: Social indicators: Subsection 3: Social Performance Aspect: Community
3.3.1 Engagement with the authorities regarding socially important tasks (social and economic development of the area of operations) Fully Page 69 7.7 Stakeholder Engagement
3.3.2 Engagement with NGOs regarding socially important tasks Fully Page 70 7.2 Social Policy
3.3.3 Assessment of the company operations' impact upon the social and economic development of local communities Fully Page 67
7.5 Development of the Regions of Operation
Application Level С С+ B B+ A A+
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9.4. Nonfinancial Reporting AssuranceINDEPENDENT ASSURANCE REPORT
To the Management of JSC Atomredmetzoloto (ARMZ):We have performed assurance procedures to provide independent assurance on the below-mentioned aspects of theARMZ 2009 Annual report.
Subject matterData and figures disclosed in the ARMZ 2009 Annual report on the following aspects:
The 2009 environmental, workforce, safety and socio-economic performance indicators and data contained inthe Table of Standard GRI Disclosures (hereinafter – Data Table) on pages 80-84 in this Annual report.
Our assurance procedures are limited to the 2009 data only.
CriteriaThe defined procedures and internal reporting guidelines, by which the sustainability related information isgathered, processed and aggregated internally by ARMZ; The ’’Sustainability Reporting Guidelines G3’’ (GRI G3) published on October 2006 by the Global ReportingInitiative (GRI).
Responsibility and MethodologyThe accuracy and completeness of sustainability performance indicators are subject to inherent limitations given theirnature and methods for determining, calculating and estimating such data. Our independent assurance report shouldtherefore be read in connection with ARMZ’s internal sustainability reporting guidelines, definitions and procedureson the reporting of its sustainability related performance.
The Management of ARMZ is responsible for both the subject matter and the criteria.Our responsibility is to provide a conclusion on the subject matter based on our assurance procedures in accordance
with the International Standard on Assurance Engagements (ISAE) 3000 ’’Assurance Engagements other thanAudits or Reviews of Historical Financial Information’’, approved in December 2003 by the International Auditingand Assurance Standards Board (IAASB).
Main Assurance ProceduresOur assurance procedures included the following work:Site visits:
Visiting Priargunsky Industrial Mining and Chemical Union (JSC PIMCU), Khiagdinskoe field (JSC Khiagda)and ARMZ head office in Moscow, Russia;Interviewing personnel responsible for internal sustainability reporting and data collection at the sites we visitedand at the Main Office level to determine the understanding and application of ARMZ internal sustainabilityreporting guidelines.
Assessment of the key figures:Performing tests on a sample basis of evidence supporting data in the Data Table on pages 80-84 in the ARMZ2009 Annual report concerning completeness, accuracy, adequacy and consistency.
Review of the documentation and analysis of relevant policies and basic principles:Reviewing the relevant documentation on a sample basis, including ARMZ sustainability internal policies,management and reporting structures.
Review of the ARMZ 2009 Annual report:Review of the ARMZ Annual report against the criteria of the GRI G3 Application level requirements.
ConclusionsBased on our work described in this report and the assessment of the Criteria:
Nothing has come to our attention that causes us to believe that the performance indicators and data mentionedin the subject matter and disclosed in the 2009 Annual report of ARMZ (Data Table on pages 80-84) does notgive a fair picture of ARMZ’s sustainability related performance; and Nothing has come to our attention that causes us to believe that the ARMZ 2009 Annual report does not meetthe requirements of the GRI G3 Application Level of C+.
Moscow, RussiaZAO PricewaterhouseCoopers Audit July 2010 E
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9.5. Audit Report
Nexia Pacioli LLCAudit Report on 2009 Accounting (Financial) Statements of JSC Atomredmetzoloto
Audited entity ..................................... Open Joint-Stock Company Atomredmetzoloto (JSC Atomredmetzoloto)Registered address ...............................109004, Moscow, Bolshoy Drovyanoy per., 22 Mailing address ...................................109004, Moscow, Bolshoy Drovyanoy per., 22
Contact information ............................Tel.(495) 5088808, fax (495) 5088810State registration ..................................| Certificate of state registration series No. 004997 dated February 22, 1995,
issued by the Moscow Registration Chamber; Certificate of State Registration series No. dated August 02, 2002 issued by the Moscow Department of the Ministry of Tax and Excise of Russia for Moscow Entered into the Unified State Register of Legal Entities, main state registration number 1027700043645.
Auditor ................................................ Limited Liability Company Nexia Pacioli (Nexia Pacioli LLC)
Registered address ...............................119180 Moscow, Ul. Malaya Polyanka, 2
Mailing address ...................................119180 Moscow, Ul. Malaya Polyanka, 2
Contact information ............................Tel.: (495) 785 94 76, fax (495) 785 94 61, e-mail: [email protected]
State registration .................................. Certificate of State Registration No. 856.235 dated June 23, 1995, issued by the Moscow Registration Chamber; Certificate of State Registration series 77 No. 005390060 dated October 22, 2002 issued by the Inter-District Inspectorate of the Ministry of Tax and Excise of Russia No. 39 for Moscow; Entered into the Unified State Register of Legal Entities, main state registration number 1027739428716.
Membership with self-regulated organization of auditors ....................... Member of the self-regulated organization of auditors Non-Profit Partnership
Institute of Professional Auditors; Entered into the Register of Auditors and Audit Firms of the above self-regulated organization of auditors on October 30, 2009, main state registration number 10202000073
Audit Quality Certificate ...................... No. 172 issued by Non-Profit Partnership Institute of Professional Auditors, valid from September 16, 2008 to September 16, 2011
We have audited the attached accounting (financial) statements of JSC Atomredmetzoloto for the period from January 1 to December 31, 2009, inclusive. The company’s accounting (financial) statements include:
• accounting balance sheet as of December 31, 2009;• 2009 profit and loss statement;• exhibits to the accounting balance sheet and profit and loss statement;• notes.Pursuant to the Charter the executive body, being the Director General of JSC Atomredmetzoloto, is responsible
for preparation and filing of the accounting (financial) statements.Our duty is to conduct the audit and express an opinion on whether these statements are accurate in all material
respects.
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We have conducted our audit in accordance with:1. Federal Law On Audit Activities;2. Federal Rules (Standards) of Audit Activities;
The audit was planned and conducted in order to obtain a reasonable assurance that the accounting (financial)statements do not contain any material misstatements. The audit was conducted on a selective basis and includedtesting of various evidence supporting the numeric values presented in the accounting (financial) statements anddisclosures regarding financial and business activities, assessment of the accounting principles and rules applied inpreparation of the accounting (financial) statements for compliance, review of key judgments of the management ofthe audited entity, and assessment of presentation of the accounting (financial) statements. We believe that the auditprovides sufficient grounds for us to express our opinion on the accuracy of the accounting (financial) statements.
In our view, the accounting (financial) statements of JSC Atomredmetzoloto fairly represent in all material respectsthe financial position of the company as of December 31, 2009 and the results of financial and business activities forthe period from January 1 to December 31, 2009, inclusive, pursuant to the requirements of the laws of the RussianFederation governing preparation of the financial (accounting) statements.
February 25, 2010
Executive DirectorNexia Pacioli LLC O.V. Goryacheva
Audit Supervisor O.V. Danilova
(General Audit Qualification Certificate No. K 01265 dated January 24, 1995, issued for an indefinite term) Entered into the Register of Auditors and Audit Firms of NP IPAR on October 30, 2009, main registration number 29502000246
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9.6. RAS Accounting Statements (summary)
as of December 31, 2008 Codes Codes
Form No. 1 OKUD Code 0710001
Date (year, month, day) 2009.12.31
Company: Open Joint-Stock Company Atomredmetzoloto OKPO Code 08841779
Taxpayer's Identification Number TIN 7706016076
Type of activity: Wholesale OKVED Code 51.70
Form of legal organization/form of ownership:
47/12Open joint-stock company/private
Measurement unit: RUR '000 OKEI Code 384
Principal place of business (address): 109004, Moscow, B. Drovyanoy per., 22
ACCOUNTING BALANCE SHEET
LIABILITIES Line Code Opening value of the
accounting yearClosing Balance of the
Accounting Period
I. Non-current assets
Intangible assets 110 262 233
Fixed assets 120 48,595 157,038
Construction in progress 130 6,682 847
Income-bearing investments in tangible assets 135 – –
Long-term financial investments 140 28,208,357 54,717,569
Deferred tax assets 145 2,034 55,046
Other fixed assets 150 174,213 560,242
Total, Section I 190 28,440,143 55,490,975
II. Current assets
Inventory 210 5,244,253 1 217,435
including:
stock, materials and other similar assets 211 15,845 2,865
rearers and fatteners 212 – –
work-in-progress costs 213 – 219,053
finished products and goods for resale 214 4,920,590 908,515
shipped goods 215 – –
deferred expenses 216 307,818 86,886
other inventory and costs 217 - 116
Value added tax on acquired assets 220 115,096 522,529
Accounts receivable (due more than 12 months after the accounting date) 230 – –
including:
purchasers and customers. 231 – –
Accounts receivable (due within 12 months after the accounting date) 240 4,247,653 5,147,535
including:
purchasers and customers. 241 1,115,585 4,630,214
Short-term financial investments 250 1,474,198 34,121,965
Cash 260 2,031,693 17,991,179
Other working assets 270 – –
Total, Section II 290 13,112,893 59,000,643
BALANCE (sum of lines 190 + 290) 300 41,553,036 114,491,618
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LIABILITIES Line Code Opening value of
the accounting yearClosing Balance of the
Accounting Period
III. Capital and Reserves
Charter capital 410 3,956,040 3,956,040
Treasury stock redeemed from shareholders 411 – –
Capital surplus 420 24,841,166 24,841,166
Reserve capital 430 90 10,539
including:
statutory reserves 431 90 10,539
reserves formed under foundation documents 432 – –
Retained profit (uncovered loss) 470 611,348 7,939,891
Total, Section III 490 29,408,644 36,747,636
IV. Long-term liabilities
Borrowings 510 2,629,546 9,144,696
Deferred tax liabilities 515 815 1,189
Other long-term liabilities 520 – –
Total, Section IV 590 2,630,361 9,145,885
V. Current Liabilities
Borrowings 610 8,537,463 2,000,863
Accounts Payable 620 976,568 66,597,234
including:
trade liabilities 621 857,930 2,158,289
payables to the company personnel 622 32 –
amounts due to state off-budgetary funds 623 718 1,781
tax arrears 624 536 202,189
other accounts payable 625 117,352 64,234,975
Distributions due to members (founders) 630 – –
Deferred income 640 – –
Provisions for pending expenses 650 – –
Other current liabilities 660 – –
Total, Section V 690 9,514,031 68,598,097
BALANCE (sum of lines 490 + 590 + 690) 700 41,553,036 114,491,618
Statement of assets recorded on off-balance accounts Line Code
Leased fixed assets 910 35,814 239,670
911 35,794 34,387
Commodity stock and supplies in custody 920 269 6,294
Goods accepted for commission 930 – –
Bad debts written off 940 49 49
Security for obligations and payments received 950 – –
Security for obligations and payments provided 960 6,176,421 4,395,476
Housing stock depreciation 970 – –
Depreciation of external development facilities and other similar facilities 980 – –
Intangibles provided for use 990 – –
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NOTES TO CERTAIN PROFIT AND LOSS ITEMS
Indicator Line CodeFor the Accounting Period
Same period of the previous year
profit loss profit loss
Fines, penalties and charges recognized or for which there is a judgment by the court (arbitration tribunal) ordering their recovery 210 976,050 – – –
Profit (loss) of past periods 220 113,566 234,037 34 1 771
Compensation of losses caused by default or improper performance 230 – – – –
Foreign exchange currency differences 240 5,188,637 3,731,574 509,351 2,123,280
Contributions to re-valuation reserves 250 Х 21,059 Х 12,582
Write-off of accounts receivable and payable for which the statute of limitations has expired 260 – – – –
270 – – – –
PROFIT AND LOSS STATEMENTJanuary-December 2009 Codes
Form No. 2 OKUD Code 0710002
Date (year, month, day) 2009.12.31
Company: Open Joint-Stock Company Atomredmetzoloto OKPO Code 08841779
Taxpayer's Identification Number TIN 7706016076
Type of activity: Wholesale OKVED Code 51.70
Form of legal organization/form of ownership:
47/12Open joint-stock company/private
Measurement unit: RUR '000 OKEI Code 384
Principal place of business (address): 109004, Moscow, B. Drovyanoy per., 22
Indicator Line Code For the Accounting
PeriodSame period of the
previous year
Operating revenues and expenses
Net proceeds from sale of goods, products, work, services (net of value added tax, excise and similar mandatory charges) 010 25,186,780 13,250,161
Cost of goods, products, work, services sold 020 (14,532,664) (9,461,946)
Gross revenues 029 10,654,116 3,788,215
Selling expenses 030 (132,344) (171,499)
Administrative expenses 040 (1,019,500) (902,767)
Sales profit (loss) 050 9,502,272 2,713,949
Other revenues and expenses
Interest Receivable 060 693,324 189,193
Interest Payable 070 (2,159,195) (667,636)
Income from participation in other entities 080 – –
Other Revenues 090 2,158,706 2,315,925
Other expenses 100 (998,737) (4,167,390)
Pre-tax profit (loss) 140 9,196,370 384,041
Deferred tax assets 141 53,013 (11,567)
Deferred tax liabilities 142 (375) (794)
Current profit tax 150 (1,908,457) (162,692)
Tax sanctions in follow up of the on-site tax audit 180 (1,559) –
Net profit (loss) of the accounting period 190 7,338,992 208,988
FOR INFORMATION:
Recurrent tax liabilities (assets) 200 16,544 82,984
Base profit (loss) per share 201 – –
Diluted profit (loss) per share 202 – –
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9.7. Report of the Audit Commission
Audit Commission Report on the Results of the Audit of Financial and Business Activities and the 2009 Annual Accounting (Financial) Statements of JSC Atomredmetzoloto
Moscow, April 09, 2010
Pursuant to the Minutes dated June 30, 2009 No. 2 of the annual general shareholders meeting the following persons were elected to the audit commission of JSC Atomredmetzoloto (the Company):
Name Position as of the election date
Alexander Ivanovich Sergueev
Senior Specialist of the Nuclear Materials and Spent Fuel Records Management of the Department of Nuclear Units, Nuclear Materials and Nuclear and Radiation Safety of JSC Atomenergoprom
Oksana Vladimirovna Burel Chief Specialist of the analytic unit of the Internal Audit Department of JSC Atomenergoprom
Gennady Egorovich Fedichkin Director of the Internal Control Service of JSC Atomredmetzoloto
The following members of the Audit Commission of the Company: – chairman of the audit commission – Alexander Ivanovich Sergueev, – member of the audit commission – Oksana Vladimirovna Burel; – secretary of the audit commission – Gennady Egorovich Fedichkin, acting within the powers set forth in the Federal Law On Joint-Stock Companies, the Company’s Charter, the
Audit Commission Regulations of the Company, have conducted an audit of the financial and business activity of the Company for the period from January 01, 2009 to December 31, 2009.
Main Conclusions of the Audit:1. In 2009 the profit margin demonstrated stable growth from 29% to 42% due to an increase of the revenues.2. The net asset value of the Company as of December 31, 2009 was RUR 36,747,636,000, the charter capital of the
Company was RUR 3,956,040,000, which complies with the net asset to charter capital ratio requirements set forth in the Federal Law dated December 26, 1995 No. 208-FZ On Joint Stock Companies, as amended.
3. Property, liabilities and equity of the Company are fairly and fully reflected in the Company’s accounting statements.
4. Pursuant to the auditor report issued by LLC Nexia Pacioli the financial (accounting) statements of the Company fairly reflects in all material respects its financial position as of December 31, 2009 and the results of its financial and business activities for the period from January 01, 2009 to December 31, 2009, inclusive.
5. In the opinion of the audit commission the audit gives sufficient reasons to confirm the accuracy of the annual statements in all material respects and the accuracy of data contained in the annual report of the Company.
Chairman of the Audit Commission
A.I. Sergueev
Members of the Audit Commission:
O.V. Burel
G.E. Fedichkin
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9.8. Details of the Company and Contact Information
Full official company name Open Joint-Stock Company Atomredmetzoloto
Abbreviated name JSC Atomredmetzoloto
Registered address of the headquarters and mailing address 109004, Moscow, Bolshoy Drovyanoy per., 22
Phone/fax: (495) 508-88-08/508-88-10
Registration authority, number and date of registration Moscow Registration Chamber, No. 004.997, February 22, 1995
MSRN 1027700043645
TIN / KPP 7706016076 / 770901001
Core business
Geological exploration and mining of natural resources, including resources containing nuclear materials and radioactive substances, production of natural uranium concentrates
Web-site http://www.armz.ru
Artem GORBACHEVChief, Press Office Department of Information and External Communications ARMZ Uranium Holding Co. (JSC Atomredmetzoloto)Bolshoy Drovyanoy per., 22 109004, Moscow, Russia Telephone: +7-495-508-8808 ext.241 Fax: +7-495-508-8810 E-mail: [email protected]
Margarita TURKOVADirector of the Department for Corporate Governance ARMZ Uranium Holding Co. (JSC Atomredmetzoloto)Bolshoy Drovyanoy per., 22 109004, Moscow, Russia Telephone: +7-495-508-8808 ext.166 Fax: +7-495-508-8810 E-mail: [email protected]
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9.9. Feedback Questionnaire
1. Have you found in the Report any meaningful information that addresses your concerns?
�� Yes�� No�� Just looked through the report
Please identify the most important information and what is missing in this Report.
2. Does the information provided in the Report of JSC Atomredmetzoloto contribute to more efficient interaction with the Company?
�� Yes�� No�� I don’t need it
Please identify information which you found particularly useful, and any missing information.
3. Which sections of the Report have you found particularly interesting?
4. Which sections of the Report were the least interesting to you?
5. Have you found this Report to be accurate and fair?
6. Was your assessment of accuracy influenced by the fact that the Report has been certified by an inde-pendent auditor?
7. Will you be looking forward to the next annual report of JSC Atomredmetzoloto?
�� Yes�� No
8. Please identify your expectations with regard to the next report.
9. We would appreciate your recommendations for improving operations of the Holding and its sub-sidiaries and affiliates
10.Other comments
11.Please identify which group you represent in your assessment (please do not tick more than two points).
�� Shareholder�� Investor�� Contractor/supplier�� Competitor�� Industrial consumer�� Small and medium business�� Representative of federal governmental authorities�� Representative of regional governmental authorities�� Representative of local authorities�� Representative of a non-governmental environmental
organization�� Representative of a business association or another
public association�� Representative of mass media�� Employee of Uranium Holding ARMZ�� Employee of a subsidiary or affiliate of ARMZ�� Other (please specify)
12. If you would like to receive a response to your comments please specify your contact information (name, mailing address with the postal code, telephone number, e-mail address) and we will be in touch with you.
Feedback: Your opinion is very important to usYou have read the 2009 Annual Report of JSC Atomredmetzoloto. Your opinion regarding the Report is critical to us. We would appreciate your answering several simple questions to help us improve the quality of the Company’s reporting.
Thank you.
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ATOMREDMEDZOLOTOURANIUM HOLDING Co.2 2 B . D r o v y a n o i L a n eMoscow, Russ i a 109004Phone : +7-495-508-8808F a x : +7- 4 9 5 - 5 0 8 - 8 8 10E m a i l : I n f o @ a r m z . r u
