Dear shareholders of OJSC Polyus Gold,
In 2009, Polyus Gold made a significant step forward in implementing its strategy aimed at becoming one of the global top five gold mining companies: it has become international in terms of asset location. During the reporting year, we successfully acquired a controlling stake in KazakhGold Group, one of the largest gold producers in Kazakhstan with a significant potential for further growth.
In 2009, the Group achieved the set targets on most of its financial and operational indicators, despite a decrease in production at the flagship production unit – Olimpiada Mine, resulting from the switch to a new type of ore. The large-scale capacity increase program, having been implemented by the Group in recent years, began delivering a return in the reporting year. The total volume of gold production amounted to 1.3 million ounces compared to 1.2 million ounces in 2008. The planned launch of the Blagodatnoye Mine in the second half of 2010 will represent another milestone in the growth in metal production.
In 2009 the Group’s key financial indicators continued to improve: sales showed a 13% growth, earnings per share showed a sixfold increase, EBITDA grew by 26%, gross profit margin and EBITDA margin reached historical heights. The Group demonstrated good results on the cost control front, total cash costs having been decreased, compared to the previous year.
In 2009, the global gold market continued to be favorable for the Company’s activities. Significant growth in investor’s demand for the metal, shares of gold mining companies and derivatives, and gold funds including ETF (Exchange Trading Funds) continued in 2009. In particular, analysts indicated a more than twofold growth in the demand for the metal from ETFs. These factors have contributed to the ever-increasing attention and interest of the international investment community in Polyus Gold shares.
In the reporting year, the Group continued to deliver on its promises in terms of new projects development: the Titimukhta project was launched, the Blagodatnoye Mine is soon to be launched, the construction of the Verninskoye Mine is near completion, and project documentation for the Natalka Mine has been prepared. We are pleased to inform you that the implementation of a long-term program aimed at expanding production facilities, which includes constructing a number of new enterprises and upgrading the existing ones, is going in accordance with the schedule.
In 2009, Polyus continued the expansion of its mineral and raw material base. Total growth in reserves, according to the Russian classification, amounted to 10 million ounces of gold. In 2010, we plan to audit the reserves of a number of our deposits according to the JORC Code.
In the reporting year, Polyus Gold continued to develop its role as a socially responsible company, focusing on environmental and operational safety and supporting local communities in the regions of its activity, and guided by long-term benefits to all participants of the business. In 2010, the Company plans to issue the third report according to Global Reporting Initiative (“GRI”) standards to reflect its achievements in implementing the concept of sustainable development.
Summing up Polyus Gold’s performance in 2009, the Company took advantage of a favorable market situation to enhance its position in the global industry, resulting in the increase of its shareholder value. On behalf of the Board of Directors, I would like to express my gratitude to all Company shareholders for their support and trust, and all employees of OJSC Polyus Gold for their commitment, responsibility and professionalism.
Mikhail Prokhorov