Klaus-Dieter Beck

Executive Director of NWR, CEO of OKD, Chairman of the Board of Directors of OKD

Management report

The theme for 2008 was to focus on our core business by reducing costs and improving efficiency. Many actions were taken throughout the year to achieve this goal and we intend to continue to focus on this goal in 2009 and beyond.

One way in which we have reduced costs and improved efficiency is by rationalising our administrative functions. In the past, each individual mine ran its own service functions, leading to duplication and a lack of corporate focus. In 2008, the majority of the Company’s HR, IT, legal, reclamation, marketing and purchasing functions were centralised, producing a greater effectiveness. Maintenance and procurement are also in the process of being centralised.

We are currently finalising the engineering plans for Phase II of our capital investment programme, POP 2010, with start-ups planned from mid 2009 onwards. The entire programme comprising of two phases will complete the major step of replacing ten sets of outdated longwall production equipment sets.

Not only does this support productivity as the newer equipment is more reliable and requires less maintenance and downtime, but it also allows us to mine in more geologically challenging seams. Last but not least, it makes a major contribution to safety – for instance, allowing better control of the roof strata thanks to the higher load bearing capacity as well as improving microclimatic conditions through more efficient dust control.

We believe that POP 2010 is not only essential for the long-term sustainability of our mining operations but also strengthens our competitive advantage. Therefore, we remain committed to finalising the implementation of the programme in 2009 despite current market conditions.

Deep mining is inherently challenging and some of our mining operations take place over 1,000 metres underground. Tragically, during 2008, we had seven fatal accidents among our workforce. We are not complacent about risk and so, the health and safety of our employees is of the highest priority to the Board and management. We continue to invest significantly in order to enhance safety and our record in this regard compares well with the international mining industry.

This focus has contributed to a reduction in our LTIFR. In 2008, LTIFR at OKD improved by 17 per cent and by 39 per cent at OKK compared to 2007. The LTIFR represents the number of reportable injuries after three days of absence divided by total number of hours worked expressed in millions of hours.

I am excited about our new development projects, especially Dębieńsko in southern Poland. The substantial reserves at Dębieńsko make this project an outstanding resource for long-term profitability.

There are extraordinary challenges facing the industry at present that are set to continue in the coming months. Our investments and corporate restructuring programme should ensure that NWR withstands the present economic challenges.

NWR is in business for the long-term. Current reserves allow us to operate for more than 20 years in our Czech business, and we will continue to plan ahead in order to secure our continued operation as a world-class and successful company. We have sound relationships with our customers, many of which have been built up over decades, and our investment and corporate restructuring programme should allow us to stand firm during the current economic storm and emerge in the upturn better placed than many of our peers.

Klaus-Dieter Beck

Executive Director of NWR,
CEO of OKD, Chairman of the
Board of Directors of OKD