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Annual Report and Accounts 2011 / Strategy / Business model how NWR creates value 

Business model: how NWR creates value

Business model: how NWR creates value 

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Regional GDP CAGR for 2002–2011 5 per cent compared to 1.1 per cent in the Eurozone.1
Car production in the Czech Republic rose by 12 per cent in 2011 and 13 per cent in Slovakia.2
Steel use per capita in Poland reached 253 kg in 2010 which is 14 per cent below EU-27 average.3
Over 90 per cent of electricity in Poland is from coal.4
145 million consumers in the CEE region.
8.9 million vehicles produced in Germany, Czech Republic, Poland, Slovakia and Austria in 2011.5
1 Source: Bloomberg
2 Source: Czech Statistical Office
3 Source: World Steel Association
4 Source: IEA
5 Source: NWR estimate

1. Regional leadership to capitalise on the location of our mines and product demand

We operate in a landlocked region with a strong manufacturing base.

Strong regional dynamics and above-average industrial growth in the region is coupled with a shortage of locally produced coking and thermal coal. (Reference: Strategic context in which NWR operates page 18 onwards).

The proximity to our customers means that we offer low landed costs compared to both Polish and overseas producers.

2. Competitive advantage

Early investment in the latest technology has meant that NWR is now producing coal from areas and at depths that were previously considered very difficult to mine, all whilst maintaining a strong safety record and keeping costs under control. Our decision to pursue POP 2010 differentiates us from other regional producers.

NWR is a trusted supplier to the local steel plants and energy producers, with long-term stable relationships.

Understanding of and support for our commercial aspirations are fundamental to our licence to operate. Therefore, we systematically build and cultivate relationships with municipal authorities, relevant trade unions, regulatory agencies, and other governing bodies in the region.

Our focus on maintaining a strong health and safety record is underpinned by a long-term positive trend in our LTIFR1, setting the standard amongst our regional peers (reference: KPIs page 17; Sustainability page 54 onwards).

NWR currently has 385 million tonnes of JORC2 reserves. We aim to develop our reserve base from our existing footprint by accessing deeper coal seams at our

current mines, and through organic expansion options (reference: Growth pages 22–23; Development projects page 48 onwards, Case Study ‘Access to the Dębieńsko Mine’ page 51).

We are committed to improving efficiency at our operations on an ongoing basis through our Continuous Improvement Programme, which provides employees with the opportunity to volunteer their ideas for increasing safety at work and delivering operational savings in return for financial reward (reference: Coal page 36 onwards).

We see strong corporate governance and transparent communication of financial and operational metrics as essential to our long-term success. As the first publicly owned coal miner in the Upper Silesian Coal Basin NWR aims to set a regional standard (reference: Corporate Governance page 60;Sustainability page 54 onwards).

1 Lost Time Injury Frequency Rate represents the number of reportable injuries causing at least three days of absence per million hours worked. Includes contractors.
2 Full name: Joint Ore Reserves Committee. The Group currently uses the JORC system to report reserves. The Group employs a certified geologist who prepares the reserve numbers and is the designated ‘Competent Person' as defined by the JORC code.

3. A competitively run business

We see the ability to consolidate, modernise and simplify our operations as fundamental to long-term value creation. We have successfully streamlined the business by investing in our core assets, enhancing our capital structure, as well as working practices, and overall corporate culture.

We closely monitor the competitive regional environment in order to ensure our business remains attractive in terms of product specification and pricing throughout the cycle.

We apply a disciplined approach to all growth opportunities both organic and by acquisition. Thorough feasibility studies are conducted for all organic projects.

We identify the principal risks and uncertainties, that could have a financial, operational or reputational impact on NWR, and take necessary steps to mitigate these risks (reference: Risk management at NWR page 24 onwards).

NWR has a strong financial position which enables it to invest in its operations through the economic cycle and align returns with the long-term reward profile of developing new mines (reference: Financial Review page 30 onwards).