Annual Report 2011
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JSC ATOMREDMETZOLOTO annual report ‘11 APPROVED by JSC Atomredmetzoloto shareholders in a general meeting on 29 June 2012 (protocol No. 11) This report has been preliminarily approved by resolution of JSC Atomredmetzoloto Board of Directors No. 83 dd. 29 May 2012 JSC Atomredmetzoloto Integrated Annual Report for 2011 2 www.armz.ru 2011 Table of Contents 1. Performance highlights 4 1.1. Key figures 6 1.2. Key facts 6 2. About the report 8 3. Addresses by Chief Executives 12 3.1. Address by the Chairman of the Board 14 3.2. Address by the Acting Director General 15 4. About JSC Atomredmetzoloto 16 4.1. Company overview 18 4.2. History and key milestones 18 4.3. The Company in the nuclear fuel cycle of Rosatom State Corporation 19 4.4. Corporate structure 20 4.5. Major developments of 2011 21 4.6. Geographic reach 22 5. The Company’s position in the uranium market 24 5.1. Natural uranium market overview 26 5.2. Marketing and sales policy 31 6. Strategy and investments 34 6.1. Corporate strategy 36 6.2. Investment 40 6.3. Interaction with Uranium One Inc. 44 7. Production 46 7.1. Resource base development 48 7.2. Uranium production 52 7.3. New companies 59 7.4. Service companies 62 7.5. Projects related to non-nuclear materials 66 8. Innovation and performance management 68 8.1. Performance management 70 8.2. Innovation 73 9. Management system 76 9.1. Corporate governance 78 9.2. KPIs 84 9.3. Report of the Board of Directors on priority lines of business 85 9.4. Risk management 85 10. Employees and social policy 90 10.1. Employees 92 10.2. Social policy 97 JSC Atomredmetzoloto Integrated Annual Report 3 11. Health, safety and environment 100 11.1. Safety 102 11.2. Occupational safety, industrial and environmental safety 103 12. Social development in the regions of operations 110 12.1. Social responsibility and development 112 12.2. Charity and sponsorship 117 13. Stakeholders’ engagement 118 14. Financial indicators 128 15. Appendices 134 15.1. Abbreviations and terms used in the report 136 15.2. The Holding Company’s main fields 138 15.3. The Holding Company’s employee backgrounds 141 15.4. Table of stakeholders’ proposals and comments 144 15.5. Table of GRI standard disclosures (GRI Index) 145 15.6. Table of disclosures as per the reporting standard of Rosatom State Corporation 153 15.7. Statement of public assurance 155 15.8. Independent assurance of non-financial reports 158 15.9. IFRS consolidated financial statements 164 15.10. Audit report 169 15.11. Opinion of the Audit Commission 170 15.12. Opinion of Internal Control 172 15.13. Report on compliance with the Code of Corporate Conduct 173 15.14. Details, contact information, feedback form 176 Performance highlights URANIUM. HISTORY 1789Uranium is discovered by Martin Heinrich Klaproth, a German chemist, who, in fact, received uranium dioxide. The new element is named after the Uranus, a planet in the Solar System. 6 Performance highlights www.armz.ru 2011 1.1. Key figures Key performance indicators taBLE 1 INdicator 2009 2010* 2011 ** Uranium production, t 4,624 5,173.4 7,091.2 Proceeds from sales, RUBm*** 29,812 30,222 44,495 Net profit, RUBm*** 5,789 13,104 3,200 Net asset value, RUBm*** 81,298 125,242 147,603 * Results for 2010 may differ from those contained in the annual 2010 report ** Subject to the off-take contract *** As per IFRS consolidated financial statements 1.2. Key facts ■ Uranium production grew by 37.07% to 7,091.2 tons. ■ The deal to acquire 100% of Mantra Resources Limited was finalized. ■ A basic portfolio of long-term contracts with key consumers of JSC Atomredmetzoloto products has been compiled. ■ Corporate social responsibility policy was reviewed to increase the num- ber of activities and programs in the regions where JSC Atomredmet- zoloto operates. ■ Open tender procedures accounted for 95% of all procurement by ARMZ Uranium Holding Co. in 2011, saving the Company a total of RUB 1.7bn. ■ Rosatom State Corporation completed its program to resettle residents of Oktyabrsky in the Trans-BaikalTerritory About the report URANIUM. HISTORY 1841Eugène Péligot, a French chemist, isolates the first sample of uranium metal 10 About the report www.armz.ru 2011 Report overview those described in any plans, objectives, expectations, es- timates and intentions expressed in such forward-looking The Company’s annual report for 2011 is the fourth report statements. to integrate financial and operating highlights with sustain- ability performance data. The key areas of focus include: Report scope ■ ARMZ Uranium Holding Co. as a global company with a This report covers the operations of Joint Stock Company strategic vision for the industry; Atomredmetzoloto (hereinafter referred to as “JSC Atom- redmetzoloto”, “ARMZ Uranium Holding Co.”, “ARMZ”, the ■ the Company’s corporate social responsibility policy. “Company”, the “Holding Company”, and the “Corporation”) within the territories of the Russian Federation, Kazakhstan, The report is based on the priorities of Rosatom State Cor- Canada and other countries in 2011, and long-term plans for poration and the key stakeholders: consumers of uranium 2012 and beyond. All major subsidiaries and affiliates of the products, business partners, regional and local authorities, Company are included in the report. and local communities. The performance results presented in the report cover the A major focus of the report is the Company’s strategy, following perimeters: aimed at expanding and diversifying its natural uranium re- source base through acquisitions of high-performance for- ■ Operating indicators are based on the data for the fol- eign assets. The report also covers health and safety, HR lowing companies: JSC PIMCU, JSC Dalur, JSC Khi- and social policies, environmental aspects of the business, agda, Uranium One Inc. (Including subsidiaries and and stakeholder engagement. affiliates), JSC Elkon MMP, JSC UMC Gornoe, JSC OMCC, JSC Lunnoe, RUSBURMASH INC, JSC VNI- The report looks at the Company’s prospects within the PIPROMTECHNOLOGII, Unified Service Company context of the global natural uranium market, its trends and ARMZ (ESK ARMZ). possible development scenarios, and contains forward- looking statements. Words such as “believes”, “assumes”, ■ Environmental indicators: JSC PIMCU, JSC Dalur, JSC “expects”, “intends”, “plans” and other words of similar Khiagda. meaning are based on existing estimates and opinions of the Company’s management regarding its future perfor- ■ Human resources and occupational safety: ARMZ Ura- mance. None of these preliminary estimates, forecasts, nium Holding Co., JSC PIMCU, JSC Dalur, JSC Khiagda, projections, plans and other forward-looking statements RUSBURMASH INC, JSC VNIPIPROMTECHNOLOGII. are guarantees of future performance. Forward-looking statements are subject to risks, uncertainties and other fac- ■ Financial indicators are based on the scope of consolida- tors that can cause actual results to differ materially from tion as required under IFRS reporting. Regulatory requirements and standards used in the report The report has been prepared in accordance with the Rus- The report is based on sian laws regarding reporting of public companies, as well the priorities of Rosatom State as with the Rosatom State Corporation Public Reporting Policy. The financial information is based on data from the Corporation and the key stake- consolidated financial statements prepared in accordance holders: consumers with the IFRS. JSC Atomredmetzoloto’s full IFRS state- of uranium products, business ments are available on its website (www.armz.ru). partners, regional and local au- As part of the annual report preparation, public dialog thorities, and local communities meetings and public hearings on the report in accordance with the AA 1000 series international standards have been held. The recommendations from the Sustainability Report- ing Guidelines – Global Reporting Initiative (GRI), as well JSC Atomredmetzoloto Integrated Annual Report 11 as basic performance indicators developed by the Rus- of this report. As part of disclosing one of the high-priority sian Union of Industrialists and Entrepreneurs (RUIE) have subjects in this report, Section 5.1 “Overview of the Market been used. The report contains a table showing the extent for Natural Uranium” provides a long-term forecast for the to which the GRI indicators and RUIE basic performance natural uranium market. indicators have been achieved. 2010 Annual Report The reliability of the data contained in the report has been confirmed by the Company’s Audit Commission, Depart- Annual reports are prepared and published annually, as re- ment for Internal Controls and Audit in the form of the quired under current legislation. The 2010 annual report of opinion and the auditor’s report. The Company’s auditor is JSC Atomredmetzoloto was published on the Company’s CJSC KPMG. website on 4 July 2011. The auditor’s report on the level of compliance in the non- financial element of the 2011 annual report with the Sus- tainability Reporting Guidelines GRI G3 and criteria such as materiality, completeness, and responsiveness according to the AA1000AS standard has been received. The audi- tor’s report was prepared by the JSC BUREAU VERITAS CERTIFICATION RUS. Material Changes in the Report Because of the need to comply with the public company disclosure requirements, this report uses an adjusted for- mat for data presentation with respect to the status of the mineral resource base of ARMZ for Uranium One Inc. com- panies. ARMZ Uranium Holding Co., as the