INTEGRATED ANNUAL REPORT 2013 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO for 2013

INTEGRATED ANNUAL REPORT 2013 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

APPROVED by the Annual General Meeting of Shareholders of JSC Atomredmetzoloto on June 30, 2014 (Minutes No. 18)

The Report has been preliminarily approved by Decision No. 119 of the Board of Directors of JSC Atomredmetzoloto dated May 28, 2014

INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO FO R 2 0 1 3 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table of Contents Chapter 2. Strategy and Management System 21 Information about the Report 4 2.1. Business Strategy 22 2.1.1. Corporate Mission and Values 22 2013 Key Performance Indicators 7 2.1.2. Natural Uranium Market Overview 2013 Main Events 8 and Outlook 23 Address by the Chairman of the Board of 2.1.3. Marketing and Sales Policy 25 Directors 10 2.1.4. Long-Term Strategy and Current Address by the Director General 11 Status of the Company 25

Chapter 1. About the Company 13 2.2. Management System 27 2.2.1. Corporate Governance 27 1.1. General Information about 2.2.2. Report of the Board of Directors JSC Atomredmetzoloto 14 on Priority Lines of Business 32 1.1.1. General Information 14 2.2.3. Risk Management 32 1.1.2. Historical Background 14 2.2.4. Internal Monitoring System: Asset 1.1.3. Holding Organisation 16 Protection 37 1.1.4. The Company’s Role in Rosatom’s 2.2.5. Procurement Management 38 Production Cycle 17 2.3. Strategic Assets 39 1.2. Presence in Markets 17 2.3.1. CJSC RUSBURMASH Activities 40 1.3. Value Chain and Business Model 18 2.3.2. JSC VNIPIpromtechnologii 1.3.1. Value Chain 18 Activities 45 1.3.2. Business Model 18

Miners on the way to their work site, JSC PIMCU

2 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT 3.7. Natural CapitalManagement 3.6. SocialCapitalManagement 3.5. Intellectual CapitalManagement 3.4. HumanCapitalManagement 3.3. ProductionCapitalManagement 3.2. FinancialCapitalManagement 3.1. TheCompany’s Capital Management Chapter 3.Effective Capital Preservation 3.7.6. ExpensesRelated to Environment 3.7.5. Waste Treatment 3.7.4. AirProtection 3.7.3. Protection ofWater Resources Diversity 3.7.2. Protection ofLandandBiological 3.7.1. Environmental Policy oftheCompany 3.6.2. Developing Regions ofOperation 3.6.1. Stakeholder Engagement 3.5.1. Innovative Activities 3.4.10. Occupational Health andSafety Agreements 3.4.9. Trade UnionsandCollective 3.4.8. Supportfor Veterans andPensioners 3.4.7. Work withStudents andYouth 3.4.6. Training andDevelopment 3.4.5. SocialPolicy oftheCompany 3.4.4. Remuneration System 3.4.3. HumanCapital Features 3.4.2. KPISystem 3.4.1. ManagementSystem Requirements Complying withProduct Quality 3.3.8. Rosatom Production System: 3.3.7. Non-Nuclear Projects 3.3.6. OtherEntities 3.3.5. New Projects of Uranium OneInc. 3.3.4. Uranium Production bytheEntities JSC Atomredmetzoloto Russian Entities 3.3.3. Uranium Production by 3.3.2. Uranium Production Methods 3.3.1. RawMaterial BaseDevelopment 3.2.2. Investment Activities 3.2.1. FinancialManagement 104 102 101 100 51 97 90 88 74 60 52 52 98 97 92 90 88 86 85 84 84 82 80 79 76 74 74 71 69 68 67 65 63 61 60 58 52 4.3. StatementofPublicAssurance Suggestions 4.2. Taking intoAccount Stakeholder Course ofReportPreparation 4.1. DiscussionswithStakeholders inthe of Engagement intheCourse Chapter 4.Stakeholder Contact Information Feedback Questionnaire Appendix 6.Terms andAbbreviations Code ofCorporate Conduct Appendix 5.ReportonCompliance withthe Statements Accuracy Appendix 4.Auditor’s OpiniononFinancial Corporation the ReportingStandard ofRosatom State Appendix 3.Table of Disclosures asper Appendix 2.Table of Standard GRIDisclosures Sustainable Development Data Significance Appendix 1. Matrix of Company’s Activities and Appendices

Report Preparation 105 113 110 107 106 133 131 128 124 123 121 115 114 3

Appendices Stakeholder Engagement Effective Capital Management Strategy and Management System About the Company Address by Chief Executives INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Information about the ■■ environmental performance — JSC PIMCU, JSC Da- lur, and JSC Khiagda; Report ■■ HR and occupational safety performance — JSC Atom- redmetzoloto, JSC PIMCU, JSC Dalur, JSC Khiagda, Information about the Report CJSC RUSBURMASH, and JSC VNIPIpromtechnologii; ■■ financial indicators — based on consolidated state- The 2013 public Annual Report (hereinafter re- ments in compliance with IAS. ferred to as the “Report”) is the sixth report by ARMZ Uranium Holding Co. (hereinafter referred to as “JSC Regulatory Requirements and Atomredmetzoloto”, “ARMZ Uranium Holding Co.”, Standards Used in the Report the “Holding”, or the “Company”) summarising financial, production, and non-financial results that give a The Report was drawn up according to Russian general idea of the Company’s activities in sustainable laws on open joint-stock company statements. Fi- development in particular. nancials are based on consolidated statements pre- Due to the diversified activities of CJSC RUSBUR- pared according to IAS requirements. You can find all MASH and JSC VNIPIpromtechnologii, their activities IAS statements at the JSC Atomredmetzoloto website are described in separate sections of this Annual (www.armz.ru). Report (unlike in the previous one). In each section, stakeholders can find the companies’ key competen- International standards related to public reports: cies and development prospects. ■■ AA1000 Stakeholder Engagement Standards (Insti- For more details see Section 2.3.1. CJSC RUSBUR- tute of Social and Ethical Accountability); MASH Activities and 2.3.2. JSC VNIPIpromtechnologii ■■ Sustainability Reporting Guidelines, Global Report- Activities. ing Initiative (GRI rev. G4.0); and ■■ International Integrated Reporting Framework (IIRC, International Framework). Report Scope

This Report deals with JSC Atomredmetzoloto’s main activities in Russia, Kazakhstan, Canada, and a The Report was prepared number of other countries for the period from January 1, 2013 through December 31, 2013, the Company’s in accordance with the Core plans for 2014, and the Company’s long-term plans. GRI G4.0 application option The Report covers all major subsidiaries and associ- ates (hereinafter referred to as “S&A”) of the Holding. Since Rosatom State Corporation’s uranium mining assets were restructured in 2013, JSC Atomredmetzolo- Rosatom State Corporation regulatory documents: to will further focus on the development of Rosatom’s ■■ Public Reporting Policy of Rosatom State Atomic uranium assets in Russia. A new company, Uranium Energy Corporation; One Holding N.V., was established to manage the foreign ■■ Public Annual Report Template for key (for the pur- uranium assets of Rosatom State Corporation during its pose of public reporting) entities of Rosatom State initial nuclear fuel cycle stages. With this connection, the Atomic Energy Corporation; and production and raw material base data for 2013 in this ■■ Code of Conduct of Rosatom State Atomic Energy Report will be given in total for both Russian and foreign Corporation. assets; however the development strategy and prospects will only cover assets in Russia. In later reports, the data GRI Guidelines Application Option will be consolidated within the scope of ARMZ Uranium Holding Co. management. Performance indicators dis- The Report was prepared in accordance with the closed in the Report are based on the following: Core GRI G4.0 application option. ■■ production performance is based on the assets of JSC PIMCU, JSC Dalur, JSC Khiagda, Uranium One Inc., Report Preparation and Contents JSC EGMK-Project, JSC Gornoye UMC, JSC Olovskaya MCC (Mining and Chemical Company), JSC Lunnoye, Stage 1: Development of the Report concept, including: CJSC RUSBURMASH, JSC VNIPIpromtechnologii, and ■■ analysis of stakeholder suggestions/comments ARMZ Service LLC; provided during the previous reporting campaign;

4 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT including: Stage 2:Selection ofprioritytopics ofthe Report, ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ uranium mineNo.1,JSCPIMCU Eduard Shcherbina,Face Mineratunderground the ReportPreparation andAuditTeam; by selected topics the of significance the checking list ofsignificant topics; 2012 Reportpreparation; and 2013 the over during receivedrecommendations stakeholder activities Company’s of analysis reporting. public to related practices best global of analysis and otherdocumentsregulating theReportand requirementsCorporation State Rosatom and IIRC GRI, on based framework methodological updated topics. priority the approving Company’smanagement the questionnaires) and discussing priority topics with stakeholders (through previous ones. and report annual this preparing while stakeholders account: Stage 3:Development ofReportcontents, taking into ■ ■ ■ ■ ■ ■ ■ Priority topics oftheReport: ■ ■ ■ ■ ■ ■ ■ e lo ok con o rqet rcie from received requests of account took also We key stakeholders’ interests. Rosatom priorities;and JSC Atomredmetzoloto current status; JSC Atomredmetzoloto strategy; JSC Atomredmetzoloto mission; year. the of end the of keyproductionperformanceas Division partlocated inRussia and Mining the of efficiency the enhancing and Division Mining Rosatom the within changes organisational 5

Appendices Stakeholder Engagement Effective Capital Management Strategy and Management System About the Company Address by Chief Executives INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

On March 26, 2014, two dialogues were held dedi- ■■ auditor’s report on financial statements accuracy cated to: (for more details see Appendix 4. Auditor’s Opinion ■■ JSC Atomredmetzoloto 2013 Basic Performance on Financial Statements Accuracy). The auditor of and Efficiency Enhancing Measures and ARMZ Uranium Holding Co. is ZAO KPMG. ■■ Organisational Changes within the Rosatom Mining The final revision of the Report was approved by the Division and JSC Atomredmetzoloto Development. Company’s Director General, the Board of Directors, On May 20, 2014, the Report draft was publicly dis- and the General Meeting of Shareholders. cussed in absentia. The public discussion involved stakeholder representatives. Disclaimer Regarding Forecast For more details see 4.1. Discussions with Stake- The Report includes forecast statements regard- holders in the Course of Report Preparation. ing production, financial, economic, and social per- In the course of the discussions, 16 suggestions formance in order to outline the Company’s future and recommendations were received from stakehold- development. Implementation of our assumptions ers, and 9 of them were implemented in this Report, and intentions directly depends on the political, eco- while the rest are still being reviewed by the Holding’s nomic, social, and regulatory situation. For this rea- management in the course of ongoing operations. son, the actual Company’s performance may be dif- For more details, see 4.2. Taking into Account ferent from the forecast. Stakeholder Suggestions.

The Report includes some forecasted production, financial, economic, and social values to give an idea about further development of the Company

Identifying the Significance of Information In compliance with the International Integrated Reporting Framework and the GRI G4.0 Guidelines that require the disclosure of significant information only, while preparing the Report, the significance of the Company’s activities and sustainable development data were verified by questionnaires filled out by stakeholder representatives. The questionnaires contained a list of topics that could be included in the Report, including topics selected in the GRI Guidelines, the Rosatom Public Report Template, and by the Company. Shareholders were to rate each topic on a 5-point scale and give their own suggestions regarding significant topics to be included in the Report. For more details see Appendix 1. Matrix of Com- pany’s Activities and Sustainable Development Data Significance.

Stage 4: Verifying information: ■■ statement of public assurance (for more details see 4.3. Statement of Public Assurance); ■■ Review Commission’s opinion and

6 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT * includingtheincome tax paidbytheconsolidated group oftaxpayers (hereinafter referred to asthe“CGT”) Table. 1.Key FinancialandEconomic Performance ofJSCAtomredmetzoloto 2013 Key Performance Indicators gional budgets,millionRUB Holding Co.key entitiesto re- Taxes paidbyARMZUranium Social andeconomic area expenses, million RUB Environmental protection Environmental protection rates (LTIFR) Lost-time injuryfrequency (FIFR) Fatal injuryfrequency rate Occupational healthand safety sion), % Personnel engagement(divi- Average monthly salary,RUB Personnel turnover, % Number ofemployees Personnel sand tons of Uranium OneInc.,thou- Uranium raw material base tons (Russian assets), thousand Uranium raw material base companies biggest uranium mining Rating amongtheTOP-3 Uranium production, tons Operational performance 1,055.15 192.90 2.23 0.02 45 39,085 23.00 10,668 120.90 515.80 III 7,091.20 2011 1,037.01 263.20 0.39 0.01 50 48,475 17.00 11,850 155.00 550.50 III 7,572.20 2012 1,804.09* 393.38 0.55 0.02 55 55,019 23.40 11,645 229.45 541.90 III 8,220.50 2013 +53.5 +49.5 +41 +100 +5 +13.5 +37.35 -1,7 +48 -1.6 – +8,6 to 2012,% compared 2013 Regions ofOperation 3.6.2.1. Economic Impactin Environment Preservation 3.7.6. ExpensesRelated to and Safety 3.4.10. Occupational Health and Safety 3.4.10. Occupational Health 3.4.3. HumanCapital Features 3.4.4. Remuneration System 3.4.3. HumanCapital Features 3.4.3. HumanCapital Features Inc. the EntitiesofUranium One 3.3.4. Uranium production by Development 3.3.1. RawMaterial Base 1.2. Presence inMarkets Inc. the EntitiesofUranium One 3.3.4. Uranium production by Russian entities, by JSCAtomredmetzoloto 3.3.3. Uranium production For more details see 7

Appendices Stakeholder Engagement Effective Capital Management Strategy and Management System About the Company Address by Chief Executives INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 2013 Main Events

January March

■■ Registration and licensing for the Khokhlovskoye ■■ The Uranium One Inc. Extraordinary General Meet- field (JSC Dalur) with the Russian Federal Subsoil ing of Shareholders, the Supreme Court of Ontario Resources Management Agency. (Canada), Russian, US, and Australian regulators ap- ■■ An ISO 9001 quality management system and an proved the reverse split of 100% of ARMZ Uranium ISO 14001 environmental management system Holding Co. stock. were introduced at JSC Dalur. ■■ The joint project of JSC Atomredmetzoloto and JSC April PIMCU won the open public competition Develop- ing a Complex Geotechnology-Based Processing ■■ The automatic downtime and failure recording Method for Low-Grade Uranium Ore that had been system was put into commercial operation at mounted by the Russian Ministry of Education and JSC PIMCU. Science and the Company was granted the right to be subsidised to implement relevant complex high- May end production projects. ■■ JSC PIMCU launched the Rosatom production pro- February ject Sinking Operations Enhancement and achieved a sinking rate of 160 m in a single drive ahead of ■■ The book “Uranium in Geology, Mining and Econ- schedule. omy” was published; it was written by Vadim Jivov ■■ Playgrounds and sports grounds for a kindergarten (Chairman of the ARMZ Uranium Holding Co. Board at Uksyanskoye settlement (Kurgan Region, Dal- of Directors and Uranium One Inc. President), Al- matovo Area) were completed within the framework eksandr Boytsov (Uranium One Inc. Vice-President), of the CSR policy and the scheme of developing re- and Mikhail Shumilin (Subsoil Use Adviser at JSC gions of operation. Atomredmetzoloto). ■■ JSC Dalur launched a pilot plant for mining by-prod- June uct rare earth element (REE) bulk concentrate from product solutions obtained in the course of uranium ■■ Rosatom uranium mining assets were restructured mining. to ensure separate management of Russian and foreign uranium assets. ■■ ARMZ Uranium Holding Co. took part in Interna- tional Forum ATOMEXPO 2013. ■■ JSC Atomredmetzoloto took part in the Conference on Nuclear Power in the 21st Century mounted by IAEA and the Russian Government together with the OECD Nuclear Energy Agency and Rosatom State Corporation. ■■ Uranium reserves at the Kolichikanskoye, Namaruskoye, Koretkondinskoye, Dybrynskoye, and Vershinnoye fields (Khiagda ore field) were approved before the Russian State Commission on Mineral Reserves. August ■■ Fortum conducted a witness audit at JSC PIMCU. Delegation headed by V. Verkhovtsev (JSC Atom- ■■ JSC PIMCU’s 45th anniversary was celebrated. redmetzoloto General Director), K. Ilkovsky (Trans- ■■ An international certificate was obtained and an baikal Territory Governor) and S. Shurygin (JSC information security management system build- PIMCU General Director) during a National Miner’s ing was completed in compliance with ISO/IEC Day celebration at JSC PIMCU 27001:2005.

8 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT ■ ■ November ■ ■ October ■ ■ September ■ ■ ■ ■ ■ ■ JSC Khiagda the InSituLeachingShop.Process pipelineinstallation, Specialist attheProduct SolutionProcessing Area of Aleksandr Stremilov, Operator andHydrometallurgy Forum RosPromEco. Environmental and Industrial Russian the at ry tallyfriendly company Transbaikalthe in Territo - environmen - most the as rated was PIMCU JSC tory Commission onMineral Reserves. TerriBuryatia - the beforeapprovedwere field) ore Uranium reserves at the Vershinnoye field (Khiagda tion wasclosed. transac- split reserve 100% Inc. One Uranium The ARMZ of Uranium HoldingCo.anditsentitieswere held. personnel the for competitions Sports Chemical Technology) signedacollaboration agreement. of Institute Research (Scientific VNIIHT Research Institute of Industrial Technology), and JSC Scientific and ProspectingIpromtechnologii (Design of Moscow Engineering Physics Institute), JSC VNIP- NRNU MEPhI (National Research Nuclear University r Yuh dctoa Frm ee awarded were grants andotherprizes. Forum Educational Youth 3rd Winners of Young Talents and the ECOLINE-2013

■ ■ ■ ■ ■ December ■ ■ ■ ■ ■ ■ ■ serves. Re- Mineral on the Commission Territory before Buryatia approved were field) ore (Khiagda Koretkondinskoyefield the at reserves Uranium operation performed byJSCPIMCU). base for the Streltsovskoye ore field (commercial YaT-1-1the projectdevelopgeologicalto dataa - completed successfully Atomredmetzoloto JSC ing technology for low-grade uranium ore. processcomplex- new a introduced PIMCU JSC a collaboration agreement. CJSC RUSBURMASH and JSC Kazgeology signed Urtuysky pit. aimed at increasing brown coal production at the Logistics and Optimisation Pit Coal project the Diversifyingproduction,launchedits PIMCU JSC port Competition. Report Concept and Design” at the 10th FPS Annual Annual Re- “Best category the in won also report The Agency. Rating RA Expert by panies biggest100 the among ity Russian comCIS and - nual report was ranked TOP-10 in terms of qual- an- integrated 2012 Atomredmetzoloto JSC The 9

ment based on our long-term interests in the Rus- sian nuclear industry. At the same time, Uranium One Inc. will preserve best global practices in corporate governance (including the majority of the Board of Directors members being independent) and public reporting. The other key event for the Mining Division was the decision made by the industry management due to the complicated situation on the global uranium market. Foreign assets were moved out of JSC Atom- redmetzoloto to serve as the basis for Uranium One Holding N.V., which is meant to facilitate Rosatom’s global growth at initial nuclear fuel cycle stages. The new company owns entities boasting nearly the lowest production costs; so, in spite of the current market conditions, it will effectively compete with global uranium leaders and completely provide a large-scale Rosatom presence enhancement programme with raw material. Dear readers, Thus, starting from the second half of 2013, the key objective of JSC Atomredmetzoloto was to devel- During 2013 Rosatom State Corporation continued op Russian assets employed in the first place to pro- to actively increase its presence on the global nucle- vide for Rosatom’s needs in Russia. ar technology market. In worldwide terms, one of In 2013, JSC Dalur and JSC Khiagda, which mine our biggest advantages is offering our partners the uranium with the effective and eco-friendly in situ complete package of technology solutions for nucle- leaching method, increased their production volume by ar power production, which, apart from NPP con- 6% and 38%, accordingly. A lot was done to enhance the struction, includes uranium enrichment, nuclear fuel efficiency of PIMCU, the key Russian uranium company. production, building NPP equipment, NPP operation, Enhancement measures will continue to move forward and waste management. with production diversification, financial recovery, and This chain was built due to our access to natural operational efficiency optimisation. uranium, which serves as the key fuel for the nuclear CJSC RUSBURMASH and JSC VNIPIpromtech- industry. Over several years, Rosatom State Corpo- nologii, ARMZ geological survey, and a variety of en- ration closed a number of M&A transactions and de- gineering companies have been facing the challenge veloped its projects in Russia based on JSC Atomred- of increasing the amount of their orders outside the metzoloto, which have resulted in the organisation Russian nuclear industry. In 2013 they realised the of an ore mining division that since 2011 has been first results in this work. among the world’s TOP-3 biggest uranium mining To achieve the set objectives, ARMZ Uranium companies. The key element of this strategy was the Holding Co. should, as previously, follow sustaina- 100% reverse split of Uranium One Inc. (a Canadian ble development principles, actively cooperate with public company). stakeholders, and make managerial decisions while In spite of the ongoing construction of NPPs in a taking into account of stakeholder opinions. number of countries, 2013 saw a decrease in prices I am sure that Rosatom’s work carried out in 2013 on the global uranium market, triggered by the 2011 to ensure the long-term development of its Mining Fukushima Daiichi nuclear disaster. Spot quotations Division will lead to the most effective employment went down by more than 20% to USD 34.5 per pound. of the staff’s unique competencies, thus tapping into Over 2013 uranium assets were consolidated world- the full potential of JSC Atomredmetzoloto. wide, with many uranium mining companies giving up new projects. Chairman of the Board of Directors Being a strategic investor and striving to develop V. Jivov its Mining Division, in 2013 Rosatom State Corpora- tion acquired 100% of Uranium One Inc. We believe that private ownership is better for effective develop-

10 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT rme o JC IC’ poial oeain was operation profitable PIMCU’s JSC pro for- gramme The activities. investment and operational its of self-financing achieved Dalur JSC losses. without pilotstarttoplanta operating managed Khiagda JSC all the entities to fulfil 100% of their production plans. Address bytheDirector General faced abigchallenge. that in the reporting year, ARMZ Uranium Holding Co. cluding JSCPIMCU)to become unprofitable. (in- world the over all mines uranium operating the all of 30% caused This ago. years 8 levelof the to i.e. kilo, per market2,800) (RUB belowquotationswent90 USD anniversary.45th Second, Septemberin uranium 2013, its celebrated Union) Chemical and Mining Industrial (Priargunsky PIMCU JSC company uranium flagship Russian the 2013 August in First, Atomredmetzoloto. protection, andindustrial safety In spite ofthedifficultsituation A lot of work was done. Heavy cost cutting allowedcostcutting Heavy done. was work lotof A The situation on the natural uranium market shows JSC for events major two brought 2013 year The Dear shareholders, partners andcolleagues, social conscience inbusiness with theuranium market, we restructuring, environmental are determined to practice V. Verkhovtsev Director General ARMZ Uranium HoldingCo.can address anychallenge. professionals and patriots. I am sure that with their true help are They others. many and Zemlya, Novaya from workers field Moscow, from designers Transbaikal, and engineers from surveyors underground and cians techni- are These it. within provided example practical every and Report this of page every up employeesback cerns, and includes both challenges and achievements. impact on regions of operation and environmental con economic and social initiatives, strategic metzoloto’s Atomred- JSC of view reasonable and well-balanced environmental protection, andindustrial safety. restructuring, business in conscience social practice to aredeterminedmarket,we uranium the with uation sit difficult the stakeholders.interestsof spiteall In of the balance we if met be only can face we challenges the that out point to like would industry.I mining nium ura Russian the within edge competitive our hancing en- and costs production decreasing as objective key based onJSCPIMCUandKhiagda. activities business new of development the for signed were agreements investment First deposits. zinc and world’sthe leadof biggestNovaya Zemlya, one on field Ore Mining Company started to develop the Pavlovskoye First The projects. EU and EAEC in participation its to due Russia) outside (also market management waste radioactive the on position stronger a achieved nologii VNIPIpromtech- JSC tenfold. than more by increased activities Holding the outside revenue RUSBURMASH in situleaching. downholeemploying fields uranium forsystem elling mod- hydrogeological 3D cost-beneficial and unique plant includedintheHolding. acid sulphuric the and pit Urtuysky the at acid phuric sul and increasedcoalproductionwe connection,of developed and will be implemented by 2016. With this The labour and enthusiasm of thousands of Holding Holding of thousands of enthusiasm and labour The a gives Report Annual 2013 the that believe We our see We 2014. in done be to lot a still is There Business diversification was also implemented. CJSC Further innovations were introduced, including the

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Appendices Stakeholder Engagement Effective Capital Management Strategy and Management System About the Company Address by Chief Executives INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

12 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy Effective Capital Management Capital Effective

ABOUT THE Engagement Stakeholder

COMPANY Appendices

1.1. General Information about JSC Atomredmetzoloto 1.2. Presence in Markets 1.3. Value Chain and Business Model INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 1.1. General Information about JSC Atomredmetzoloto

1.1.1. General Information External Charters, Principles and Other Initiatives The Holding exists in accordance with the Russian Main Activities Business Social Charter. ARMZ Uranium Holding Co. is the mining division of Rosatom and one of the leaders in the global ura- 1.1.2. Historical Background nium market. The company engages in a number of projects related and unrelated to uranium that are State Concern Atomredmetzoloto was founded in currently at various implementation stages, from ge- 1991 to succeed the former First Chief Directorate ological exploration to active commercial operation. of the USSR Ministry of Medium Machine Building JSC Atomredmetzoloto boasts unique competencies and later operated within the structure of the Minis- in the uranium mining sector; it has long-term and try for Atomic Energy of the Russian Federation. The wide experience in developing fields with various geoclimatic conditions.

Regions of Operation JSC Atomredmetzoloto boasts Upon restructuring in 2013, JSC Atomredmetzoloto unique competencies in the is now managing Russian uranium mining assets. The uranium mining sector; biggest ARMZ Uranium Holding Co. entity is JSC PIM- CU (Priargunsky Industrial Mining and Chemical Un- it has long-term and wide ion) located in the Transbaikal Territory. JSC Khiagda experience in developing is registered in Buryatia. JSC Dalur, the first Russian fields with various geoclimatic company to mine uranium with in situ leaching, operates in the Kurgan Region. conditions

Key Laws and Regulations Applicable to the Company’s Activities Concern was an industrial complex of mining and The Company is regulated by its Charter, internal processing enterprises located in six counties within documents, and the following regulatory acts: the Commonwealth of Independent States — Russia, ■■ Federal Law No. 208-ФЗ On Joint Stock Companies Ukraine, Uzbekistan, Kazakhstan, Tajikistan, and dated December 26, 1995; Kyrgyzstan. State Concern Atomredmetzoloto was ■■ Federal Law No. 129-ФЗ On State Registration of involved in the exploring, mining, and processing Legal Entities and Individual Entrepreneurs dated of uranium, gold, and rare and rare earth element August 8, 2001; ores. It was also engaged in the design of mines, ■■ Federal Law No. 13-ФЗ On Management and Dis- ore processing facilities, and machine engineering posal of Property and Shares of Companies Related plants. In 1995, State Concern Atomredmetzoloto to Nuclear Power and on Amending Certain Stat- was reorganized to become a joint stock company utes of the Russian Federation dated February 5, of the open type. 2007; By mid-2008, within the framework of the nuclear ■■ Federal Law No. 135-ФЗ On Protection of Competi- industry restructuring, JSC Atomredmetzoloto re- tion dated July 26, 2006; ceived control over the following domestic uranium ■■ Federal Law No. 39-ФЗ On Securities Market dated mining assets: JSC PIMCU, JSC Dalur, and JSC Kh- April 22, 1996; and iagda, which had been formerly owned by JSC TVEL, ■■ Russian FFMS Decree No. 11-46/пз-н On Approv- a producer of fuel for nuclear power plants. Fur- ing the Regulations on Disclosure by Equity Securi- thermore, TENEX (JSC Techsnabexport), Russia’s ty Issuers dated October 4, 2001. exporter of enrichment services and enriched uranium, transferred to ARMZ its stakes in uranium ex- Membership ploration and mining joint ventures outside of Rus- JSC Atomredmetzoloto is a member of the World sia. Along with that, JSC Atomredmetzoloto received Nuclear Association and the IAEA. from TENEX licenses for the right to use the subsoil

14 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

of the reserve uranium deposits, including those of joined the Board of Directors of Uranium One Inc. the world’s largest Elkon uranium ore province. and took up senior positions in the company’s man- After completion of all re-organisation activities, agement. JSC Atomredmetzoloto assumed full authority over In 2010, JSC Atomredmetzoloto consolidated a procurement for the domestic and international controlling stake in Uranium One Inc. feedstock requirements of Russia’s nuclear indus- In 2011, JSC Atomredmetzoloto acquired 100% of try and became one of the global leaders in uranium the Australian publicly traded company Mantra Re-

production. sources Limited, which owns the Mkuju River pro- by Chief Executives Address In 2008, with a view of rendering the company’s ject in Tanzania. name compliant with its business objectives, as de- In 2012, ARMZ Uranium Holding Co. purchased termined by Rosatom State Corporation, the man- 99.5% of The First Ore Mining Company’s shares. agement of JSC Atomredmetzoloto made a decision In 2013, taking into consideration natural uranium to rebrand the company, changing its name to ARMZ market trends, ARMZ Uranium Holding Co. consolidat-

Uranium Holding Co. ed a controlling stake in Uranium One Inc. Under the About the Company In 2009, JSC Atomredmetzoloto purchased Effec- agreement, all Uranium One Inc. ordinary shares were tive Energy N.V., thereby consolidating the Russian purchased that at that time were not possessed by JSC stake in Kazakhstan-based uranium mining joint Atomredmetzoloto and its affiliated companies. ventures. As a result of an asset swap deal, JSC Rosatom State Corporation authorised Uranium Atomredmetzoloto acquired a 19.95% stake in the One Holding N.V. to manage its foreign assets. Since Canadian uranium mining company Uranium One December 2013, JSC Atomredmetzoloto has been Inc. Representatives of ARMZ Uranium Holding Co. controlling all Russian uranium mining assets. Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

Aleksey Grigoryev, Boring Machine Operator at the Tool Area of the Machine Assembly Shop, Repair and Engineering Works, JSC PIMCU

15 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

1.1.3. Holding Organisation

Figure 1. Diagram of JSC Atomredmetzoloto S&A as of December 31, 2013

JSC Atomredmetzoloto

JSC PIMCU JSC VNIP- Itmanovo Mantra Re- IPROMTECH- Agroindustrial sources Pty Ltd. NOLOGII Company LLC (Australia)

89,85% 100% 100% 86,09%

JSC Dalur JSC Lunnoye United Uranium Uranium One Companies LLC Holding N.V. (Netherlands)

98,89% 50,03% 50% 43%

JSC Khiagda JSC Olovskaya JSC South RUNEX URA- MCC Yakutia Complex NIUM Pty Ltd. Development (Namibia)

100% 100% 25,1% 50%

CJSC RUSBUR- JSC Gornoye JSC Uranium Armenian-Rus- MASH UMC Mining sian Mining Company Company CJSC (Armenia) 100% 100% 100% 50%

JSC EGMK- ARMZ Namibia Project Pty (Namibia)

100% 100%

The First One Vostok Power Mining Resources Company (Great Britain)

99,6% 100%

16 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 2. JSC Atomredmetzoloto’s Role in Rosatom Production Cycle

03 04 05 06 Address by Chief Executives Address

11 About the Company

ARMZ 02 U1H 09 07 Strategy and Management System Strategy

01 10 08

ARZM Rosatom 01 – geological exploration, 04 – conversion, 05 – enrichment, 06 – fuel production,

02 – mining, 07 – NPP, 08 – spent nuclear fuel storage, 09 – spent nuclear Management Capital Effective 03 – ore processing, fuel treatment, 10 – spent nuclear fuel disposal, 11 – МОХ fuel production

1.1.4. The Company’s Role in Rosatom’s position in the uranium market is se- Rosatom’s Production Cycle cured through guaranteed demand from global nucle- ARMZ Uranium Holding Co. controls and unites all ar companies, a geographically diversified production

Russian uranium mining assets. Along with Uranium and raw material base, effective mining costs, and the Engagement Stakeholder One Holding N.V. controlling uranium assets abroad, it implementation of sustainable development meas- is included in the Rosatom Mining Division and ensures ures for operating entities and future projects. natural uranium supplies. JSC Atomredmetzoloto’s development is also stim-

ulated by secondary businesses (coal mining, thermal Appendices and electrical power generation, sulphuric acid produc- 1.2. Presence in Markets tion, building mining equipment at JSC PIMCU, rendering drilling, design, survey, and engineering services, ARMZ Uranium Holding Co. mainly operates on etc.). The above services and products are used by JSC the natural uranium market. In 2013, Rosatom State Atomredmetzoloto’s production entities, other compa- Corporation, controlling JSC Atomredmetzoloto and nies within Rosatom State Corporation, and independ- Uranium One Holding N.V., ranked second among ent Russian and foreign companies. the world’s biggest companies in terms of its con- For more details see 2.1.2. Natural Uranium Mar- trolled raw materials base and third in terms of ura- ket Overview and Outlook and 3.3. Production Capi- nium production. tal Management.

17 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 3. ARMZ Uranium Holding Co. Value Chain

Obtaining subsoil Geological Exploration use rights exploration

R&D and Pre-design Design of innovations engineering facilities

Construction of Operation of facilities: uranium Reclamation and facilities mining and processing decommissioning

1.3. Value Chain and Business Model

1.3.1. Value Chain 1.3.2. Business Model

The ARMZ Uranium Holding Co. value chain is The business model is a short-, medium-, and based on the production cycle model including a range long-term value delivery system that is also used to of interconnected processes. achieve strategic goals. ARMZ Uranium Holding Co. has the whole array of The Holding’s business model is based on its mis- competencies to implement all value chain stages, sion and long-term strategy. from geological exploration and design to reclamation The business model includes: and decommissioning. These competencies are used ■■ available capital (for more details see Chapter 3. Ef- to assess and implement business diversification pro- fective Capital Management); jects. ■■ a management system employed for the most effective use of available capital (for more details see 2.2. Management System); ■■ value delivery based on the transformation of avail- ARMZ Uranium Holding Co. able capital (Holding’s main activity); and has the whole array ■■ value delivery results (the Holding’s main products). The Holding’s business model is specifically fo- of competencies to implement cused on the environment since all value chain stages, ■■ a part of its resources come from nature and a big from geological exploration part of its results also relate to it (e.g. social and natural capital); and and design to reclamation ■■ the environment is the source of the Holding’s main and decommissioning opportunities and risks (for more details see 2.1.1. Corporate Mission and Values and 2.2.3. Risk Man- agement).

18 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

The business model deals with transforming six Effective management of the above types of capital types of capital, with changes described in the rele- is realised through the management system (for more vant parts of the Report: details see 2.2. Management System). ■■ financial capital (for more details see 3.2. Financial Sustainability of the business model is ensured Capital Management); through: ■■ production capital (for more details see 3.3. Pro- ■■ integration into the Rosatom value chain (the big- duction Capital Management); gest vertically integrated company in the global nu-

■■ human capital (for more details see 3.4. Human clear sector); by Chief Executives Address Capital Management); ■■ employment of experience and technologies of the ■■ intellectual capital (for more details see 3.5. Intel- highest Russian and international levels at all value lectual Capital Management); delivery stages; ■■ social capital (for more details see 3.6. Social Capi- ■■ effective implementation of corporate projects (enhanc- tal Management); and ing efficiency, Rosatom Production System, etc.); and

■■ natural capital (for more details see 3.7. Natural ■■ a complex and systematic approach to risk man- About the Company Capital Management). agement.

Nikolay Poponin, General Director, verifies compliance with product solution processing procedures at JSC Dalur Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

19 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 4. JSC Atomredmetzoloto Business Model

Capitals Management system Value chain Capital changes

Natural Natural Natural capital ENVIRONMENT capital capital management

COMPANY COMPANY Main Activities Main Products

Exploration Uranium Financial concentrate Financial Financial capital Obtaining subsoil capital capital management use rights Brown coal (thermal coal)

Geological exploration Electric power

Production Production Production capital R&D and innovations Thermal power capital capital management Pre-design engineering Sulphuric acid

Design of Geological survey facilities support and drilling Human STAKEHOLDERS services STAKEHOLDERS Human Human capital (RUSBURMASH) capital Construction of capital management facilities Design and engineering Operation of facilities: services uranium mining and (VNIPIPROMTECHNOLOGII) processing Intellectual Intellectual Intellectual capital Mining capital capital management Reclamation and equipment decommissioning

Social and social & Social economic Social capital capital SOCIETY capital management

Strategy Risks and Risks and Strategic objectives opportunities Mission opportunities

20 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy Effective Capital Management Capital Effective STRATEGY AND

MANAGEMENT SYSTEM Engagement Stakeholder

2.1. Business Strategy Appendices 2.2. Management System 2.3. Strategic Assets INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 2.1. Business Strategy

2.1.1. Corporate Mission and Values tunities for project developmentin the best ways possible. The Company’s advantages are its high - ARMZ Uranium Holding Co.’s mission is to provide ly qualified team with diverse mining experience raw materials for the development of cutting-edge under various natural and climatic conditions, and technologies. its full range of competencies to manage the com - Its strategy is to maximise business value for share- plete exploration, operation, and waste manage - holders, while at the same time: ment cycle (also for radioactive waste). ■■ ensuring highly efficient uranium production; and For more details see 1.3. Value Chain and Busi- ■■ increasing business volume and diversification by ness Model. developing new mining and smelting business lines. Being the only Russian mining company totally Key Corporate Values controlled by the state, JSC Atomredmetzoloto in - ARMZ Uranium Holding Co. carries out its activities tends to use its public-private partnership oppor - on the basis of its corporate values.

Table 2. ARMZ Uranium Holding Co. Corporate Values and Code of Conduct

Corporate Values Principles of Conduct

Security ■■ Ensure industrial and labour safety for the employees and inhabitants in the regions of operation; ■■ maintain balance of local eco-systems and comply with work method statements for natural uranium extraction and processing, including nuclear and radiation safety norms; and ■■ comply with environmental norms and make production as eco-friendly as possible.

Caring about our customers ■■ Provide Russian and foreign consumers with products complying with Russian and international quality standards under long-term agreements and on market conditions.

Business initiative ■■ Best use of opportunities in regions of operation to:

■■ successfully employ the ARMZ Uranium Holding Co. potential; ■■ ensure sustainable development, also by using Russian and foreign state-of-the-art methods in geological exploration, production, and corporate governance; and ■■ look for new development prospects in the uranium industry.

■■ Implement business diversification projects to ensure increasing volumes and better sustainability.

22 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2.1.2. Natural Uranium Market accounted for 93% of all produced uranium. Kazakhstan Overview and Outlook with 38% is still the first among uranium suppliers. In Canada, which ranks number two (15%), the production Overview of Global Natural Uranium Market volume demonstrated a slight increase, and in Australia In 2013, 59.1 thousand tons of uranium were mined (No. 3 with 11%) a decrease was observed. worldwide, which demonstrates a 3% year-on-year The biggest increase in uranium production (over increase. 15%) was shown by the USA (due to production in-

In 2013, nine of the biggest countries leading in ura- crease at existing plants and the launch of two new by Chief Executives Address nium production (producing over 1,000 tons per year) plants).

Figure 5. Uranium Extraction by Countries, 2011–2013, thousand tons About the Company 25 2011 2012 2013

5 and Management System Strategy

thousand tons U thousand tons 0 Kazakhstan Canada Australia Niger Namibia Russia Uzbekistan USA Malawi

Sources: JSC Atomredmetzoloto assessment based on press releases and corporate reports, US EIA.

The total amount of uranium produced by nine ma- JSC Atomredmetzoloto and Uranium One Inc. (shown jor companies (over 2,000 tons) comprised about 82% separately in Figure 6) ranked third with more than of the global output. 8.2 thousand tons. Management Capital Effective The biggest uranium company is still JSC NAC In 2013, some growth in uranium production was Kazatomprom (National Atomic Company Kazatom- demonstrated by Uranium One (by more than 8%), prom), which extracted 12.6 thousand tons of urani- Cameco (nearly 8%), and JSC NAC Kazatomprom um. Cameco is in second place, with about 9.1 thou- (6%). The biggest decline in production was shown by sand tons. Rosatom State Corporation controlling Rio Tinto (18%) and AREVA (4%).

Figure 6. Uranium Production by Major Companies, thousand tons Engagement Stakeholder

14 2011 2012 2013 Appendices 12 10 8 6 4 2 0

тыс. тонн U тыс. тонн NAC Kaz Cameco AREVA Uranium One BHP Billiton Paladin ARMZ Rio Tinto Navoi NMMC atomprom Energy

Sources: Press releases and corporate reports. Data for Navoi Mining and Metallurgical Combinat (NMMC) assessed by JSC Atomred- metzoloto. Extraction volume calculated as a proportion to the ownership ratio.

23 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

A number of new uranium mills were put into op- ■■ in September 2013 Cameco Corp. postponed the eration in 2013: commissioning of the Cigar Lake mine (Canada) ■■ in May 2013 Cameco (Canada) started downhole for six months due to additional works and the in situ leaching (hereinafter referred to as “DISL”) unavailability of the McClean Lake processing fa- uranium production in North Butte (Wyoming, cility. In March 2014 mining started at Cigar Lake. USA). With the full capacity reached, they will mine In 2014 it is planned to produce 700 to 1,000 tons 269 tons of uranium annually; and of uranium, and full capacity (6,924 tons per year) ■■ in August 2013 Ur-Energy Inc. (USA) put its Lost will supposedly be achieved by 2019. At the same Creek facility in operation (Wyoming, USA). At full time the company announced that it was going to capacity DISL uranium production, they will reach suspend two projects in the USA (Gas Hills and 385 tons per year. Reynolds Ranch); Geological exploration companies carried on their ■■ in autumn 2013, JSC NAC Kazatomprom an- review of projects that may be on demand in the nounced it was going to cut its uranium mining future. Geological exploration is actively being per- plans in Kazakhstan. The company did not mention formed in Canada, the USA, Africa, South America, whether production at Central Moinkum had start- and Australia. Greenland can be recognized a pro- ed (previously it had been planned to mine the first spective region again since in October 2013 the ban 50 tons of uranium by the end of 2013). According on radioactive extraction was lifted. to its assessment, uranium production volume in 2014 would be the same as in 2013; Mergers and Acquisitions in the Uranium Industry ■■ in November 2013 it was decided to temporarily The total M&A transactions volume in the industry shut down Honeymoon operated by Uranium One in 2013 was USD 1.5 billion, which is approximately Inc. due to problems with reaching design capacity at the level of 2011 and more than three times lower and high operational costs; than in 2012 (when it exceeded USD 5 billion). This ■■ in December 2013–January 2014 Talvivaara Min- was caused by unfavourable market trends. ing Company (Finland), which had planned to start In 2013 the only big transaction was the consolida- ancillary uranium mining at Sotkamo, Finland, in tion of 100% of Uranium One Inc. shares by Rosatom 2014 (together with Cameco Corp.), announced State Corporation (about USD 1.3 billion). Other major that its financial position had worsened signifi- players (including Chinese companies that had made cantly due to the fall of nickel prices (their main some major acquisitions in previous years) were not product) so they had to downsize by 50%. The pro- active in the M&A transactions. Most transactions ject was suspended; were closed by junior companies to consolidate po- ■■ in February 2014 Paladin Energy (Australia) decid- tentially efficient assets and raise funds. ed to temporarily shut down its Kayelekera mine in Malawi. The reason was low uranium prices and Developments Outside the Reporting Period lack of funds for further mine optimisation and Over 2013 Paladin Energy Ltd. (Australia) negoti- coverage of losses from its operation; ated on strategic investors acquiring a stake in the ■■ in April 2014 General Atomics launched uranium Langer Heinrich (Namibia) capital. In January 2014 production at Four Mile, Australia (operated by Paladin Energy announced the sale of a 25% stake to Quasar Resources). Uranium will be mined with China Uranium Corporation Ltd. (controlled by CNNC, the DISL method and processed at Beverley, an- China) for USD 190 million. other facility from the same company. Four Mile’s full annual capacity will be 769 tons of uranium; Development of Current and Future Projects ■■ Uranerz Energy started to operate Nichols Ranch Due to unclear prospects of the nuclear power in- (Wyoming, USA). During the first several years the dustry in 2013 and a price fall on the uranium market, facility will produce 230–310 tons of uranium, and in 2013 and early 2014, major companies reconsid- its full capacity is 700 tons per year; ered their plans for current and future projects: ■■ Peninsula Energy is planning to launch mining un- ■■ in August 2013, Navoi NMMC suspended construc- der its Lance Project (Wyoming, USA) in the section of three new mining facilities in Uzbekistan ond half of 2014. Once at full capacity, it will pro- (Meylisay, Aulbek, and North Mayzak) for unprof- duce 577 tons of uranium annually; and itability reasons. The construction of Aulbek was ■■ in 2013 infrastructure construction and personnel continued in October, and nothing is known about recruiting were started and orders for basic equip- whether construction of the two other facilities will ment were placed under the Husab Project at the be resumed; Rossing South field, Namibia, owned by CGNPC

24 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

(China). Preparation for mining operations was compared to the results of the previous audit con- carried out in Q1 2014. The first consignment of ducted 5 years earlier. finished product is planned to be ready in Q4 2015 The Holding labels its products according to Fed- and full capacity (5,770 tons of uranium per year) eral Law No. 170-ФЗ on Nuclear Energy Use dated will be reached in 2018. November 21, 1995. JSC Atomredmetzoloto entities are licensed for the safe handling of nuclear materi- 2014 Outlook als by Rostekhnadzor.

In 2014 an increase in uranium production in Cana- In 2013 a Rosatom committee verified compliance by Chief Executives Address da, the USA, and other countries is expected to com- with nuclear material control requirements at JSC pensate for the anticipated production drop in Aus- PIMCU. The results were satisfying. tralia and Malawi. 2.1.4. Long-Term Strategy and

Current Status of the Company About the Company

In 2014 an increase in uranium The strategic objective is realised with an account production in Canada, the USA, of tasks set by the state and Rosatom’s corporate and other countries is aims. In 2013 shareholders decided to restructure ARMZ Uranium Holding Co. by separating Russian expected to compensate for and foreign assets. International projects are man- the anticipated production drop aged by Uranium One Holding N.V. JSC Atomred- metzoloto is focused on more efficient uranium pro- in Australia and Malawi duction at Russian fields to cover the needs of the

industry in the first place. and Management System Strategy The Holding’s strategy is based on a realistic assessment of the benefits and restrictions in the Rus- 2.1.3. Marketing and Sales Policy sian uranium industry depending on the raw material quality, available competencies of managing the en- According to the Rosatom decision on Holding re- tire deposit life cycle, and potential funds to be raised structuring, the marketing and sales of uranium pro- for development. duced in Russia will now be undertaken by JSC Atomred- National uranium production has strategic signifi- metzoloto, and that of uranium produced abroad — by cance and covers about half of Rosatom’s demand for Uranium One Holding N.V. (U1H). In 2014, joint venture raw materials. At the same time, the entities engaged Management Capital Effective United Uranium Companies LLC was established and in DISL uranium production (JSC Dalur and JSC Kh- served as the single point of contact for consumers to iagda) will have a global competitive edge once they ensure effective sales and maintain the existing sales have reached full production capacity, regardless of infrastructure in compliance with the needs of JSC economic trends. As for the biggest national uranium Atomredmetzoloto and U1H customers. company, JSC PIMCU, it demonstrates high produc- In 2013 all contractual obligations to supply custom- tion costs due to its mining of uranium at low concen-

ers were discharged in full. JSC Atomredmetzoloto en- tration fields and it is therefore prone to market risk. Engagement Stakeholder tered into a number of medium-term agreements with The 2013 global uranium price drop left two-thirds current and new counterparties. of Russian uranium production outside the market. In the short-term prospective, JSC Atomred-

Quality Management metzoloto will focus on cost and production capacity Appendices In 2013 JSC Atomredmetzoloto and its subsidiar- management in order to minimise its losses. It will ies JSC PIMCU and JSC Khiagda started certification increase operational efficiency and take care of fi- of the quality management system to ISO 9001:2008 nancial recovery and the restructuring of JSC PIMCU. as well as certification of the environmental manage- Investment projects will be adjusted to ensure rapid ment system to ISO 14001:2004. ISL production growth. Vattenfall Nuclear Fuel AB (Sweden) performed The medium-term key task is to ensure the prof- an external audit of the quality and environmental itability of all uranium mining companies and the management system of JSC Dalur. In 2013 Fortum Holding in general by 2016. (Finland) performed a witness audit at JSC PIMCU, Long-term financial stability will be achieved pointing out significant improvement measures as through business diversification and increased pro-

25 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 ceeds from non-uranium projects. In 2013 the Hold- ing developed a concept for establishing new mining and smelting and adjacent operations involving external investors on industrial partnership terms. The concept will be implemented in two stages: ■■ Stage 1 (2014–2016): moderate diversification — projects on enhanced efficiency and the processing depth of the Compa- ny’s own raw materials and mining stockpiles with the use of existing competencies and infrastructure; ■■ Stage 2 (2016–2020): large-scale development of new business areas — major projects related to the Transbaikal mining and smelting cluster and high-margin projects outside the uranium sites currently being operated. The core idea of the concept is to establish a JSC PIMCU based industrial park with high production, and technical and workforce potential. Successful implementation of these projects, involving investment partners, will help diversify the business and provide employment in the region.

Figure 7. Strategic Project Roadmap

5 Develop potentially productive uranium projects (JSC PIMCU Mine 6, Kaldera, and ■■ Ensure raw material sup- Elkon) for long-term effective supplies for the construction of plies to Rosatom WWER reactors: an effective raw material base not prone to any geopolitical risks and lasting for over 40 years 4 Establish a mining and smelting cluster in the Transbaikal Territory (Bystryan- skoye and Copper Mills projects at JSC ■■ Additional cash flow and fi- PIMCU site) nancial stability in 2019–2020 ■■ Minimise risks of a single 3 Diversification at JSC PIMCU site product company ■■ Support social and economic development in the regions of presence 2 ISL asset development (JSC Khiagda and ■■ Effectively distribute invest- JSC Dalur) ment resources ■■ Achieve uranium production 1 JSC PIMCU profitability optimisation ■■ Assets are competitive on the global market

2014 2016 2020 2030

26 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2.2. Management System

2.2.1. Corporate Governance internal documents regulating activities of management and supervising bodies, and disclosure of sig- 2.2.1.1. Corporate Governance Approach nificant facts and events related to ARMZ Uranium

JSC Atomredmetzoloto has the following priority Holding Co. by Chief Executives Address corporate governance objectives: ■■ to comply with Russian and international corporate 2.2.1.2. ARMZ Uranium Holding Co. Authorised governance standards; Capital and Shareholders ■■ to enhance the efficiency of governing bodies; and As of December 31, 2013: ■■ to increase transparency for investors, companies ■■ JSC Atomredmetzoloto’s authorised capital was

from the same industry, business partners, em- RUB 23,507,954,710; About the Company ployees, and other stakeholders. ■■ the Company placed 23,507,954,710 registered ordi- The Company ensures strict compliance with the nary shares with the nominal value per share being law. The corporate governance system is improved RUB 1.00 (issue registration numbers: 1-01-03912-А with the use of best Russian and global practices and and 1-01-03912-А-005D); and OECD corporate governance principles. ■■ all three shareholders are registered in the Register On the Company’s website (http://www.disclosure. of Shareholders (Rosatom State Corporation, JSC ru/issuer/7706016076/) you can find the Charter and Atomic Energy Power Corporation, and JSC TVEL).

Figure 8. Shareholding Structure as of December 31, 2013 and Management System Strategy

ROSATOM State Corporation

1.378% 100%

100% Management Capital Effective JSC Atomic Energy Power Corporation

81.370%

17.252% JSC Atomredmetzoloto JSC TVEL Stakeholder Engagement Stakeholder

Table 3. Shareholding Structure Dynamics in 2013, % Appendices No. Shareholder Stake in JSC Atomredmetzoloto’s authorised capital as of December 31, as of December 31, as of December 31, 2011 2012 2013

1 JSC Atomic Energy Power 79.489 80.475 81.370 Corporation

2 JSC TVEL 18.994 18.081 17.252

3 Rosatom State Corporation 1.517 1.444 1.378

27 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Changes to Equity Holding Structure in 2013 Changes to the Company’s Management in 2013 In 2013, the Company privately traded an additional ■■ In October 2013, 50% of the United Uranium Com- issue of shares to raise funds for the investment pro- panies LLC’s authorised capital, owned by JSC gramme; 1,077,586,207 ordinary shares were placed Atomredmetzoloto, was carved out; for the benefit of JSC Atomic Energy Power Corpora- ■■ in October 2013 Uranium One Holding N.V. consoli- tion. The total funds raised through the 2013 additional dated 100% of Uranium One Inc. (Canada), and Ura- issue were RUB 5.0 billion. nium One Inc. shares were delisted from the Toron- to and Johannesburg stock exchanges; and 2.2.1.3. Management System ■■ in December 2013, the controlling stake (57%) in The corporate management system serves as the Uranium One Holding N.V. owned by JSC Atomred- basis for the Holding’s activities and has several layers. metzoloto was carved out.

Figure 9. Structure of ARMZ Uranium Holding Co. Managing and Supervising Bodies

Meeting of Shareholders

Board of Directors Internal Audit Commission Auditor

Director General

2.2.1.4. Management and Supervisory Bodies

General Meeting of Shareholders The General Meeting of Shareholders is the superior governing body of JSC Atomredmetzoloto. In 2013 three General Meetings of Shareholders were convened to discuss managerial issues: ■■ approval of the new version of the Charter; ■■ establishment of management and supervisory bodies of the Company; ■■ approval of the 2012 annual report and annual accounting statements and distribution of profits; and ■■ appointment of the executive body of the Company (Director General).

Board of Directors The Board of Directors is responsible for general management of the Company’s activities and plays a key role in strategic management. The Board of Direc- tors includes five people not employed by the Company. All members of the Board of Directors have extensive experience in the nuclear industry. In 2013 the Board of Directors included: ■■ Vadim Jivov (Chairman); ■■ Kirill Komarov; ■■ Vladislav Korogodin; ■■ Yekaterina Lyakhova; and ■■ Yury Olenin.

28 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Vadim Jivov Member of the Board of Directors since September 7, 2007, Chairman since May 4, 2011 Born in 1963 in Moscow, graduated from the Moscow Power Engineering Institute Address by Chief Executives Address 03.2006 – 08.2007 Advisor to Director General, First Deputy Director General for Raw Material Management, First Deputy Direc- tor General, and First Deputy Director General and Head of the TENEX Raw Material Supply Directorate

06.2007 – 05.2011 First Deputy Director General, Director General of JSC Atomredmetzoloto

04.2011 – to date Advisor to Director General, member of the Management Board, and Deputy of Deputy CEO and Director of Rosatom Development and International Business Block About the Company 10.2012 – to date member of the TENEX Board of Directors

12.2010 – to date President of Uranium One Inc.

05.2013 – to date President of Uranium One Holding N.V. Strategy and Management System Strategy

Kirill Komarov Member of the Board of Directors since June 30, 2011 Born in 1973 in St. Petersburg, graduated from the Urals State Law Academy

04.2007 – 12.2007 Director General of OJSC Atomenergomash

12.2007 – to date Deputy Director, Executive Director, and Director of JSC Atomic Energy Power Corporation Effective Capital Management Capital Effective 03.2010 – to date Executive Director of the NPC Directorate, Deputy CEO and Director of Rosatom Development and International Business Block

05.2011 – to date Member of the Rosatom Management Board Stakeholder Engagement Stakeholder

Vladislav Korogodin Appendices Member of the Board of Directors since September 7, 2007 Born in 1969 in Moscow, graduated from the Moscow Institute of Physics and Technology

06.2004 – 10.2007 Deputy Head of the Nuclear Material Industry Administration, Deputy Head of Nuclear Power and Nuclear Fuel Cycle Administration of the Federal Atomic Energy Agency.

10.2007 – 03.2010 Director of the Marketing and Target Market Department, Deputy Director of JSC Atomic Energy Power Corpo- ration

03.2010 – to date Deputy Director of the NPC Directorate, Director for NFC and NPP Life Cycle Management at Rosatom

29 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Yekaterina Lyakhova Member of the Board of Directors since June 30, 2011 Born in 1975 in Yekaterinburg, graduated from the Urals State Law Academy and the Universiteit Antwerpen Management School

07.2008 – 02.2010 Director General of JSC Koltsovo-Invest

02.2010 – 03.2011 Vice-President of JSC TVEL

04.2011 – to date Deputy Director of JSC Atomic Energy Power Corporation

07.2011 – to date Deputy Director of the NPC Directorate, Director for Investment Management and Operating Efficiency of Rosatom State Corporation

Yury Olenin Member of the Board of Directors since September 7, 2007 Born in 1953 in Kirovabad, Azerbaijan, graduated from the Yerevan Polytechnic Institute and Penza State Technical University

01.2004 – 03.2007 Director General of FSUE FRPC PC Start (Zarechny, Penza Region)

03.2007 – to date First Vice-President, President of JSC TVEL

02.2012 – to date Member of the Rosatom Management Board

The members of the Board of Directors own no ar supplies and nuclear safety of the Russian Armed JSC Atomredmetzoloto shares. Forces. The Chairman of the Board of Directors does not July 2011: appointed Deputy Director General for act as an executive manager of the Company at the Special Projects at JSC Atomredmetzoloto. same time. Since May 28, 2013: Director General of JSC Atom- redmetzoloto. Sole Executive Body V. Verkhovtsev does not own JSC Atomredmetzoloto Daily operations of the Company are managed by shares. the sole executive body, the Director General. The Director General of the Company is Vladimir Remuneration Verkhovtsev. The 2013 remuneration paid to the executive body Vladimir Verkhovtsev was born on January 27, 1955 and members of the Board of Directors was RUB 40.7 in Uzbekistan. million. 1977: graduated from the Felix Dzerzhinsky Military Academy, qualified as Electronic Engineer. Management 1999: graduated from the Military Academy of the As of December 31, 2013, significant information Russian Central Command of Armed Forces. has been updated outside the reporting period. Lieutenant-General, PhD in Technical Sciences, Professor at the Russian Military Science Academy. 1977–2011: held various positions within the USSR and Russian Armed Forces. 2005–2011: ran the 12th Central Administration of the Russian Ministry of Defence responsible for nucle-

30 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Vladimir Verkhovtsev Igor Zhilkin Vladimir Vysotskiy Marina Liborakina Yury Tokmachev Address by Chief Executives Address Director General First Deputy Director Deputy Director General Deputy Director General Deputy Director General General and Executive for Special Projects for Strategy, appointed for Safety Director Deputy Director General for Strategy and Busi- ness Development in April 2014 About the Company

Vera Sorokina Ilya Korolyov Stanislav Anikeev Ilya Yaroshevich Chief Accountant Advisor to Director Gen- Acting Director for Director for Russian

eral, appointed Deputy Personnel, appointed Projects Legal Support, and Management System Strategy Director General for Personnel Director in appointed Director for Administrative Issues in January 2014 Corporate and Legal April 2014 Relations in April 2014

Internal Audit Commission The members of the Internal Audit Commission The Internal Audit Commission acts as a corpo- own no Company shares. rate management body to improve the efficiency and In 2013 no remuneration was paid to the Internal transparency of managerial processes. Audit Commission. Management Capital Effective The Internal Audit Commission is responsible for financial and business monitoring, including: Committees ■■ review of financial documents, inventory results, compliance with standards, and validity of signed Activities of the Investment Committee contracts; In 2013 the Investment Committee of JSC Atom- ■■ analysis of the Company’s financial position, liquidity, redmetzoloto (hereinafter referred to as the “Commit-

and solvency; and tee”), the key investment decision making body of the Engagement Stakeholder ■■ review of decisions made by management bodies for Holding, convened 13 meetings. effectiveness and compliance with the Charter. Three committees were established in the form The following members were elected to the Internal of joint attendance for joint discussion of issues re-

Audit Commission at the Annual General Meeting of lated to the 2013 by-project financing of ARMZ Ura- Appendices JSC Atomredmetzoloto Shareholders (Minutes No. 16 nium Holding Co. and making decisions on further dated June 28, 2013): implementation of the Olovskoye and Elkon invest- ■■ Viktoriya Andriyenko, Chief Accountant at Rosatom ment projects. State Corporation; Ten votes by correspondence were conducted with ■■ Marina Atmazhitova, Chief Specialist of the NFC Pro- regard to the projects. A total of 51 investment deci- duction Planning Unit, NFC Coordination and Devel- sions were made. opment Department, NPC Directorate of Rosatom In July 2013 the new Regulations on the Commit- State Corporation; and tee were brought to effect and the composition of the ■■ Yelena Vlasova, Advisor at the Internal Audit Unit of Committee chaired by V. Verkhovtsev changed. Rosatom State Corporation. For more details see 3.2.2. Investment Activities.

31 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Activities of the Risk Committee 2.2.2. Report of the Board ■■ Draft regulating documents related to reputation of Directors on Priority Lines risk management and interest risk and the Proce- of Business dure for Group-Wide Financing of the Holding were approved; In 2013 the Board of Directors convened 18 meet- ■■ JSC Atomredmetzoloto’s exchange risk was recog- ings and made decisions on some managerial issues nized as being critical; critical to the Company, including: ■■ the Holding Exchange Risk Management Strategy ■■ approval of ARMZ Uranium Holding Co.’s target and the 2013–2015 Hedging Programme were ap- performance (KPI); proved, and it was recommended to close hedging ■■ approval of the Code of Corporate Conduct; transactions in accordance with the approved doc- ■■ coordination of Chief Accountant appointment; uments; ■■ setting remuneration for the top management; and ■■ current S&A lending limits were approved; and ■■ making decisions on the alienation of a 50% stake ■■ the Production Facilities Insurance Programme in United Uranium Companies LLC and a 57% was analysed and adjusted with an account of the stake in Uranium One Holding N.V. risk level changes, etc. For more details see 2.2.3. Risk Management. 2.2.3. Risk Management

2.2.1.5. Dividend Policy 2.2.3.1. Risk Management System The JSC Atomredmetzoloto dividend policy is set by Key results in risk management at JSC Atomred- the management bodies with an account of the required metzoloto in 2013 were as follows: investment in compliance with the Company’s strategy. ■■ the Corporate Risk Management System (here- From 2008 through 2013, according to the Com- inafter referred to as “CRMS”) was integrated, pany’s development strategy, JSC Atomredmetzolo- including key planning and managerial decision to’s management bodies made decisions to abstain processes (“budgeting”, “mid-term planning”, from dividend payments for reinvestment purposes “strategic management”, and “investment activ- in order to finance the investment programme. For ities management”); the risk assessment proce- this reason there were neither declared nor unpaid dure for the planning stage was introduced; dividends. ■■ method development and relevant management of As of the time of the Report preparation the Com- separate financial risks (financial, interest, company’s management bodies had not made any deci- modity risks, etc.); sion about how to use 2013 earnings. ■■ introduction and regulation of business processes for managing certain types of risks (reputation 2.2.1.6. Major Transactions and Related Party risk, compliance risk, etc.); Transactions ■■ the “JSC Atomredmetzoloto risk safety” was de- In order to protect stakeholders’ rights and inter- termined, limits for critical risks were set, and risk ests and to maintain its reputation in investment and management measures were taken; and industrial circles, the Company closes all major trans- ■■ the risk hedging programme was implemented. actions in strict compliance with Russian law. In 2013 the Company closed no major or related party transactions that would require approval from managerial bodies according to the Federal Law on Joint Stock Companies.

2.2.1.7. The Company’s Registrar The Company’s Register of Shareholders is kept by Open Joint Stock Company R.O.S.T. Registrar. Registrar’s details: OGRN (Primary State Registration Number) 1027739216757, INN (Taxpayer Identification Number) 7726030449. Located at: 18 Stromynka Ul., Bldg. 13, Moscow, Russia T/F: (495) 771-73-36.

32 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 10. Risk Management Structure at ARMZ Uranium Holding Co.

ARMZ level Director General Address by Chief Executives Address

ARMZ Risk Register approval preparation and Corporate Roadmap About the Company information about risk Risk summary Management ARMZ ARMZ Risk Officer Risk Owner Committee monitoring

summary monitoring Strategy and Management System Strategy

S&A level information about S&A risk S&A Risk Owner Risk Officer Effective Capital Management Capital Effective

2.2.3.2. Key Risks and Key Risk Management

Table 4. JSC Atomredmetzoloto’s Critical Risks and Critical Risk Minimisation Measures in 2013

Type of risk Risk minimisation method

Operational risk Engagement Stakeholder

Property risk, asset loss/damage ■■ The Holding employs a special system for regular production para risk (risk of incurring property meter checks for monitoring entities’ activities and making proper

damage, property loss resulting decisions based on the current stage of production programme im- Appendices from production emergencies, plementation; and a reduction of the Holding’s ■■ the Holding takes preventive measures to avoid emergency situations proceeds due to disruption of and ensure safety; production) ■■ the Holding insures its property at market value and third-party corporate civil liability with Russian leading insurers according to approved Rosatom provisions and standards; and ■■ in late 2013 the Holding decided to reduce its insurance programme in the course of entity budget review and setting milestones. The Compa- ny’s management ceased insuring management liability risks (that had been maintained by JSC Atomredmetzoloto for several previous years)

33 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Type of risk Risk minimisation method

due to separation of the international block that significantly reduced such risks related to ARMZ Uranium Holding Co. managers. Based on the results of a risk assessment, the insurance programme for a number of property risks was reduced due to significantly lower probabilities.

International political and reg- ■■ JSC Atomredmetzoloto and its S&A continuously monitor changes in ulatory risk (for foreign assets applicable law related to subsoil use, nuclear power use, environmental managed by Uranium One Hold- requirements and tax regulation, and the peculiarities of the Russian ing) corporate law and the jurisdiction of its presence; ■■ they use recommendations of the supervising and regulating bodies in the course of the Holding’s main activities at the international and national levels; and ■■ contracts are signed after coordination with legal services of the Com- pany (in certain cases independent advisers might be involved).

Reputation risk ■■ The Holding has reputation risk monitoring regulations in place outlining basic risk management procedures; ■■ there are guidelines for relations with mass media in place; and ■■ together with Rosatom State Corporation, the Holding analysed compliance risks and introduced relevant regulating documents.

Social risks

Personnel-related risks The Holding actively implements its personnel management policy and employs a motivation scheme: ■■ experienced mining specialists are attracted from other regions and a highly qualified workforce is attracted from adjacent industries; ■■ personnel retention is ensured through a progressive system of remuneration, privileges, and social security; ■■ at all levels employees are offered training (including the future leaders programme); and ■■ the Holding engages in infrastructure development in regions of operation.

Safety and occupational safety In 2013 the state of affairs in the nuclear industry was monitored closely. risks The Holding focused on increasing safety and occupational safety at production facilities and in regions of operation. This includes: ■■ complex measures on increasing the safety of employees and local communities in the regions of operation and maintaining the balance of local eco-systems; and ■■ reducing factors that have an impact on the number of emergencies and that threaten employees’ life and health.

Environmental risks: Nuclear and radiation safety risks

Technological risks, including Technological risk management in the course of uranium extraction and nuclear and radiation safety processing, including nuclear and radiation safety. Ensured through a number of special measures, including: ■■ industrial equipment upgrades at the Holding entities; ■■ compliance with effective standards for the production and technological process;

34 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Type of risk Risk minimisation method

■■ monitoring by Holding subdivisions and external companies; and ■■ insurance of civil liability to third parties and employees.

Environmental risks The Holding entities involved at different stages of uranium production comply with all statutory environmental standards. The Holding makes its

best effort to decrease its environmental footprint and improve production by Chief Executives Address eco-safety.

Financial risks

Exchange risk Exchange risks are traditionally managed through risk concentration at

the parent company of the Holding so that JSC Atomredmetzoloto entities About the Company can focus on production. Exchange risks are reduced through: ■■ management of the Holding’s open foreign exchange position that leads to adjustment of the credit portfolio structure to balance exchange assets and liabilities of the parent company; and ■■ derivatives. Due to hedging transactions for 2013–2015, closed in 2013, JSC Atomredmetzoloto received about RUB 400 million from banks, and 2014–2015 cash flows were balanced.

Tax risks Tax risks related to new transfer pricing provisions introduced in the Rus-

sian Tax Code are managed through the following measures: and Management System Strategy ■■ including major Holding entities into the Rosatom CGT; ■■ group-wide financing, security in the form of warranties/guarantees is provided with an account of the market relations principle (interest rate/ remuneration relevant to prices for similar arm’s-length transactions and to the situation within interest risk management programmes); and ■■ supervising transactions closed on market terms.

Interest risk This type of risk is minimised in the following way: Effective Capital Management Capital Effective ■■ external funds are raised with a fixed interest rate (no floating rates are used due to the high volatility of current market conditions); and ■■ group-wide financing within set (budget-based) financing limits to ensure annual budget performance.

Insolvency (liquidity) risk In 2013 JSC Atomredmetzoloto was not greatly affected by liquidity risk due to the policy regulating this very type of risk and including: ■ ■ setting limits for JSC Atomredmetzoloto’s group of companies with sev- Engagement Stakeholder eral banks; ■■ the introduction of a cash pulling system for effective use of the account balance of the entities included in the group; and

■■ regular monitoring of the Group companies’ liquidity. Appendices

Credit risk (risk of default by ■■ Products manufactured by the Holding entities are mostly purchased by counterparties) Rosatom, which significantly reduces credit risks; ■■ credit risks related to procuring raw and other materials for the Holding entities are minimised through abstaining from advance payments under contracts with counterparties (advance payments are only possible in the amount set in regulatory documents and subject to counterparty’s obligation to pay them back in case of default); and

35 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Type of risk Risk minimisation method

■■ the Holding entities cooperate with leading Russian credit institutions and insurers with requirements to them being set in the regulatory documents of JSC Atomredmetzoloto and Rosatom State Corporation.

Commodity risk This risk is managed and minimised in the following way: ■■ maintaining JSC Atomredmetzoloto’s stable position in the uranium market, as secured by Russian and global demand; ■■ balancing price policy and management of available raw material sources with account of international practice; and ■■ product diversification and search for new products (for this reason the Holding takes part in managing entities involved in the production of gold and non-uranium materials).

Specific risks: Mining production risk

Risk of incorrect assessment of JSC Atomredmetzoloto takes the following measures to obtain the most deposit quality and capacity comprehensive and high-quality information about existing fields and to minimise the risk of geological exploration data differing from actual capacity: ■■ employment of latest reserve balance recording and resource estimation methods, used as part of a best practice in Russia and globally, and latest geological exploration methods, including geologic and math- ematical models.

36 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company

Dmitry Gretsky, Operator and Hydrometal- lurgy Specialist at the Product Solution Pro- cessing Area of the In Situ Leaching Shop, JSC Khiagda Strategy and Management System Strategy The Holding risk management system will be fur- Main monitoring activities: ther developed through practical application of the risk ■■ monitoring of procurement and logistics processes management experience accumulated. Risk manage- at ARMZ Uranium Holding Co.; and ment units mainly focus on risk identification and co- ■■ inspections of construction, production, financial, operation with risk owners to minimise risks with an and business activities and funds application at account of the close connection between relevant busi- ARMZ Uranium Holding Co., internal audit com- ness processes and planning and managerial decisions missions, and internal audits to identify business (“budgeting”, “mid-term planning”, “strategic manage- process risks. ment”, and “investment activities management”). Under the Integrated Monitoring Plan of Special- Management Capital Effective ised Internal Inspection and Audit Bodies of Rosatom 2.2.3.3. 2014 and Mid-Term Plans State Corporation, 25 inspections were conducted in In the future, risk management will be focused 2013, including: on risk identification and optimisation related to ■■ inspections of the Company’s financial and busi- operational efficiency enhancement and uranium ness activities, investment programme implemen- business restructuring. tation, and construction organisation at S&A; ■ Holding business diversification risks will be one ■ 14 internal audits; Engagement Stakeholder of the top priorities due to the high capital-output ■■ 1 internal audit of personnel management process- ratio and mining project ROI. es and 1 inspection of the power-saving and enhanced power efficiency programme for S&A being

implemented; and Appendices 2.2.4. Internal Monitoring System: ■■ 2 centralised inspections. Asset Protection Besides that, specialised internal inspection bodies of JSC Atomredmetzoloto and S&A carried 2.2.4.1. Internal Monitoring System out 66 unscheduled inspections and internal au- The JSC Atomredmetzoloto Internal Monitoring dits. System ensures the more efficient operation and Based on the monitoring results, corrective achievement of basic objectives and detects devia- measures were developed and their implementation from set objectives. tion is being followed up. Internal monitoring covers JSC Atomred- metzoloto and its S&A.

37 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2014 Plans 2.2.4.3. Anti-Larceny Programme The following priority activities were set for 2014: JSC Atomredmetzoloto continued to ensure eco- ■■ planning and carrying out inspections and internal nomic safety and asset protection and to combat audits according to the approved Integrated Mon- corruption and other violations. itoring Plan of Specialised Internal Inspection and Audit Bodies of Rosatom State Corporation. 2013 Results Contracts were checked for signs of corruption and 2.2.4.2. Safety Management System JSC Atomredmetzoloto counterparties’ good faith was verified. 2013 Results ■■ Commercial operation of the integrated physical 2014 Plans security system (IPSS) was launched at the JSC Procurement monitoring to diminish economic PIMCU hydrometallurgical mill; IPSS construc- damage risks related to the establishment of an au- tion, installation, and start-up were completed at thorised procurement body (ARMZ Service LLC). the main JSC Khiagda production site under the Rosatom analytical programme called “Enhance- ment of Physical Protection of Nuclear Materials, 2.2.5. Procurement Management Nuclear Plants and Nuclear Storages up to 2015”. ■■ Compliance was insured with the Regulations for 2.2.5.1. Procurement Physical Protection of Nuclear Materials, Nucle- JSC Atomredmetzoloto and its S&A use the following ar Plants and Nuclear Storages as approved by documents regulating their procurement policies, pro- Russian Government Decree No. 456 dated July curement parties’ functions and authorities, procurement 19, 2007. No faults were found in the course of methods and types, additional elements of procurement verifying the validity of licenses for nuclear equip- procedures, the general procurement procedure, etc.: ment operation on the part of physical protection ■■ Federal Law No. 223-ФЗ on Goods, Work and Ser- carried out by the Federal Service for Environmen- vice Procurement by Certain Types of Legal Enti- tal, Technological, and Nuclear Supervision (Ros- ties dated July 18, 2011 (as amended by Federal tekhnadzor). Laws No. 401-ФЗ dated December 6, 2011, No. ■■ Certification audit at JSC Atomredmetzoloto con- 324-ФЗ dated December 30, 2012, No. 115-ФЗ firmed compliance with ISO/IEC 27001:2005 (infor- dated June 7, 2013, No. 160-ФЗ dated July 2, 2013, mation security); JSC Atomredmetzoloto was the and No. 396-ФЗ dated December 28, 2013); and first one of the Rosatom entities to be granted an ■■ the Integrated Industry Procurement Standard international information safety certificate. (hereinafter referred to as the “Procurement Reg- ■■ The JSC Atomredmetzoloto LAN was prepared to ulations”) developed by Rosatom State Corporation be certified in terms of compliance with informa- and approved by the JSC Atomredmetzoloto Board tion security requirements of the Russian FSTEC; of Directors. You can find the above documents at ■■ Messages coming through the Rosatom hotline the official website www.zakupki.rosatom.ru, de- were checked thoroughly. signed for the purposes of the placement of orders for goods, work and services for Rosatom. 2014 Plans For more details on the Holding’s key procurement ■■ To upgrade and enhance physical protection sys- principles and objectives, see the 2012 JSC Atom- tems at certain facilities of JSC PIMCU, JSC Kh- redmetzoloto Annual Report, p. 89. iagda, and JSC Dalur. To delegate the function of providing security to all Holding facilities to At- 2.2.5.2. Procurement Monitoring om-Okhrana (Federal Budgetary Unitary Enter- The efficiency of JSC Atomredmetzoloto’s procure- prise); ment is ensured through a bilateral procurement ■■ to certify informational support objects of JSC monitoring and control system. Atomredmetzoloto for compliance with informa- On the one hand, the procurement system, price tion security requirements of the Russian FSTEC; relevance, and quality are subject to public control. In- ■■ to train employees in information security; and formation about the Holding’s procurement activities ■■ to improve the system for economic safety, asset is published at official websites www.zakupki.rosatom. protection, and combating corruption, and to provide ru and www.zakupki.gov.ru for public access. better procurement monitoring to reduce the eco- On the other hand, procurement is monitored by nomic damage risks of the Company and its S&A. the Holding’s internal structures and Rosatom’s spe-

38 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

cial units to ensure that procurement complies with ment transparency. Based on the results of the the requirements of regulatory documents and does bids, the cost advantage (the difference between not violate participants’ rights and interests. initial price and the winner’s offer price) was RUB For more details on the internal control system see 1.004 billion. the 2012 JSC Atomredmetzoloto Annual Report, p. 90. 2014 Plans It is anticipated that the Company will hold about

2013 Results 1,500 procurement bids. An authorised procurement by Chief Executives Address Rosatom SAP SRM was completely integrated at body (ARMZ Service LLC) was established on the ba- the Holding entities. sis of ESK ARMZ for more efficient procurement of Based on 2013 results, over 2,000 bids were held goods, work, and services by S&A controlled by JSC to cover the Holding’s needs. Of the bids, 98.94% Atomredmetzoloto. One of its priority activities is to were electronic, which provides for better procure- develop a category management system. About the Company Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder

Anton Shumkin, Operator and Hydrometallurgy Spe- cialist at the Product Solution Processing Area of the

In Situ Leaching Shop. Labelling, JSC Khiagda Appendices

2.3. Strategic Assets

Due to ARMZ Uranium Holding Co.’s business di- Holding’s geological survey and engineering com- versification, in 2013, several projects were imple- panies, faced the strategic challenge of increasing mented to ensure its scale and sustainability. CJSC the amount of their orders outside the Russian nu- RUSBURMASH and JSC VNIPIpromtechnologii, the clear industry.

39 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 2.3.1. CJSC RUSBURMASH Activities

2.3.1.1. History of and started drilling exploration wells at the Kolichi- Other Information about kanskoye field (Khiagda ore field) using its own re- CJSC RUSBURMASH sources. Since 2009 the company has been provid - CJSC RUSBURMASH (CJSC RBM) was founded in ing 14–16 types of drilling services for JSC PIMCU. 1998 and was included in JSC Atomredmetzoloto in In 2012, CJSC RUSBURMASH started participating 2007 to drill process wells at the Holding’s operating in ARMZ Uranium Holding Co.’s international project entities. Since 2009, ARMZ Uranium Holding Co. has in Africa (South Tanzania and Mozambique). In 2012 been the sole shareholder of CJSC RUSBURMASH. a branch of CJSC RUSBURMASH was opened in Ka- In 2009 the Geological Exploration Service was zakhstan to perform geological exploration. established within CJSC RUSBURMASH to car- CJSC RUSBURMASH is a rapidly developing geo- ry out uranium geological exploration (GE) at the logical exploration company that offers drilling and Olovskoye, Beryozovoye, Istochnoye, Kolichikan- exploration services. The company has its branch- skoye, and Elkon fields. Apart from process and es in Russia and Kazakhstan and boasts over 700 technical drilling and construction, CJSC RBM highly qualified employees.

40 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

potable, and process water supply of the Power of Siberia pipeline. Naturally we need to get more mobile and efficient to attract more third-party orders. We have optimised the management system, established a drilling department (in Chita), a mobile drilling office, subdivisions responsible for business develop-

ment, external relations, and marketing and sales. by Chief Executives Address The new subdivisions will analyse the market of drilling, geological exploration, and other services in Russia, Kazakhstan, and other countries and expand our customer database.

– Has your Efficiency Enhancement Programme About the Company yielded any results yet? – In 2013 we launched the Efficiency Enhance- ment Programme (EEP). Under this programme, we introduced 19 measures and projects with the economic effect of RUB 26.9 million confirmed by a third-party expert. And this is only the start.

– Could you expand on your competencies and unique technologies? Strategy and Management System Strategy – CJSC RUSBURMASH is a geological exploration and Management System Strategy company, and we do not depend on any specific facilities. Our employees are highly-qualified geolo- gists and drilling specialists. One of our unique technologies is constructing wells for uranium in situ leaching; this is one of our primary types of work. I would also like to mention the new-generation integrated hardware and methodical logging system for direct uranium identi- Effective Capital Management Capital Effective 2.3.1.2. Interview with CJSC fication in wells with the prompt neutrons method. Management Capital Effective RUSBURMASH Director General This system is currently under pilot operation, but Igor Savelyev there is already demand for it in Russia and Ka- zakhstan. – Mr Savelyev, what do you think about RUS- BURMASH’s performance in 2013? What was spe- – What are your current priority activities and cial about this year? potential projects? Stakeholder Engagement Stakeholder – In general 2013 turned out to be a difficult year – We are now focussed on becoming one of the Engagement Stakeholder for us because of a drop in orders within the Hold- leaders in the Russian geological exploration ser- ing. This challenge gave us an impetus for struc- vice market. To achieve this, we are planning to tural reorganisation and diversification to enter ex- further increase our activities and regions of op- Appendices ternal markets. eration, maintain our work quality at a high level, Appendices It was in 2013 that we first participated in fulfil our obligations to our customers, and further third-party bids, and I must say, we were quite suc- increase our efficiency. cessful. We got the biggest long-term order from the government for lode gold exploration at the Ver- khne-Bryantinskoye ore cluster (Amur Region), an order for drilling geological exploration wells at the Ozyornoye lead and zinc field (Buryatia), an order for hydrogeological and geotechnical survey at the Borguliuansskoye ore field, and an order for subsurface water hydrogeological survey for service,

41 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2.3.1.3. 2013 Key Events (for Mantra Tanzania Limited). Commercial uranium content in product solutions was determined, March–April and the possibility of sulphuric DISL uranium pro- ■■ CJSC RUSBURMASH performed assessment geologic duction confirmed. survey at the Arbinskoye molybdenum and copper and ■■ Pilot testing of the hardware and methodical log- porphyry ore deposits (Amur Region), analysed the hy- ging system was successfully conducted at JV drogeological and geotechnical conditions of the field, KATCO (Kazakhstan, Tortkuduk field). and prepared materials for a reserves estimate and geo- ■■ Under contract with TECHGAZSTROY LLC, CJSC logic and economic assessment (for UK INTERGEO LLC). RUSBURMASH commenced a prospect evaluation survey (continuing through 2014) for service, po- June table, and process water supply of the Power of ■■ CJSC RUSBURMASH successfully completed explo- Siberia pipeline. ration and hydrogeological works in the Arbinskaya ■■ CJSC RUSBURMASH implemented the Soil and area (Amur Region) and attested the final report Environmental Surveying programme within the (for UK INTERGEO LLC). SRO SOYUZATOMGEO advanced training scheme.

August December ■■ Under the R&D project related to the New-Genera- ■■ Under the state contract with the Amur Region tion Integrated Hardware and Methodical Logging Subsoil Use Administration (Amurnedra), CJSC System for Direct Uranium Identification in Wells RUSBURMASH performed lode gold exploration at with the Prompt Neutrons Method, CJSC RUS- the Verkhne-Bryantinskoye ore cluster (Amur Re- BURMASH successfully completed field pilot run gion) and prepared an annual informative report. of the System at Dalmatovskoye (Khokhlovskoye ■■ CJSC RUSBURMASH provided technological sup- field). port for drilling 279 wells (136 exploration and 143 process wells) (for JV RBM-Kazakhstan). CJSC September–November RUSBURMASH developed a programme for the ■■ Technological uranium ore sampling performed in significant enhancement of drilling performance situ with the Push-Pull method at the Nyota field at the Budyonovskoye and Khorasan fields (up to 40%). Figure 11. CJSC RUSBURMASH Project Map

Power South area Khiagda ore field of Siberia Elkon pipeline Severnoye Olovskoye Neprokhodimoye Dalmatovskoye Ozyornoye Beryozovoye Lunnoye Khokhlovskoye Verkhne-Bryantinskoye Pogromnoye Arbinskoye Streltsovskoye ore field Budyonovskoye Zarechnoye Kharasan

Uranium ore, uranium-gold ore, and uranium-vanadium ore deposits

Porphyry copper deposits

Gold and gold-silver ore deposits Mkuju River Nyota Capeca Complex ore deposits

Subsurface water deposits

42 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2.3.1.4. 2013 Key Performance Indicators

In 2013 CJSC RUSBURMASH revenue went up by 8% up to RUB 1,760.21 million. The company ensured effective prime cost management and increased its financial performance.

Table 5. 2012–2013 Key Performance Indicators, million RUB, % Address by Chief Executives Address Actual Actual Deviation KPI (actual in 2013 to actual 2012 2013 in 2012), %

Revenue from goods, work, and services 1,633 1,760 127 8 About the Company Prime cost of goods, work, and services 1,537 1,544 6 0

Gross margin 96 217 121 127

Business expenses 0 0 0 0

Management expenses 183 177 -6 -3

Sales profit/(loss) -87 40 127 -145 Strategy and Management System Strategy Strategy and Management System Strategy

Figure 12. CJSC RUSBURMASH Revenue and Figure 13. Total Metreage Drilled, thousand m Gross Margin 561.14 1,977,563 Effective Capital Management Capital Effective Effective Capital Management Capital Effective 465.12 446.72 1,760,209 1,633,024 Power South area Khiagda ore field of Siberia Elkon pipeline Severnoye Olovskoye Neprokhodimoye Dalmatovskoye Ozyornoye Beryozovoye Lunnoye Khokhlovskoye Verkhne-Bryantinskoye Pogromnoye Arbinskoye Streltsovskoye ore field 270,206

Budyonovskoye 216,790

Zarechnoye Kharasan 95,377 Stakeholder Engagement Stakeholder Stakeholder Engagement Stakeholder 2011 2011 2012 2013 2012 2013 Uranium ore, uranium-gold 2011 2012 2013 Appendices Appendices ore, and uranium-vanadium Revenue, Gross margin, ore deposits thousand RUB thousand RUB

Porphyry copper deposits

Gold and gold-silver ore deposits Mkuju River Nyota 2.3.1.5. 2013 Operational In 2013 the Geological Exploration Service per- Performance formed the following works: Capeca Complex ore deposits ■■ completion of all planned exploration drilling, in- Subsurface water deposits The GE Service performed all works planned in full. cluding: The total scope of drilling by CJSC RUSBURMASH en- ■■ technological and process and exploration drill- tities went up to 561.14 thousand metres. ing for JSC Khiagda ahead of the drilling sched-

43 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

ule and with a 5% drilling performance increase; and projects is verified on a daily basis. Eighty-two ■■ an additional work schedule for operational di- measures and projects were implemented successfully. versification: geophysical operations, monitoring Their total economic effect was RUB 26.9 million. of operating geophysical in situ leaching sites, and backfill and recovery operations at the pro- 2014 Plans: cess wells of JSC Khiagda; Further implementation of the Efficiency Enhance- ■■ prospect and appraisal drilling performed at the ment Programme occurred in the following directions: Bezymyanskaya block and the Pavlovskoye field ■■ enhanced performance and cost reduction (eco- (Novaya Zemlya) and the annual informative re- nomic effect); and port preparation; and ■■ stabilisation of efficiency enhancement processes ■■ completion of customers’ investment pro- (development of the System). grammes for the geologic support of geological exploration. ■■ increased revenue from GE by 9% year-on-year; and 2.3.1.7. 2014 and Future Plans ■■ under the R&D project related to the New-Gener- ation Integrated Hardware and Methodical Logging The Company will focus on the following priority System for Direct Uranium Identification in Wells activities: with the Prompt Neutrons Method, CJSC RUSBUR- ■■ fulfilment of all obligations in drilling and geological MASH successfully completed a field pilot run of the exploration to ARMZ Uranium Holding Co. entities; System at Dalmatovskoye (Khokhlovskoye field) and ■■ continuous improvement of operational efficiency, at JV KATCO (Kazakhstan, Tortkuduk field). work quality, and proper performance. Implementa- tion of the Efficiency Enhancement Programme; and ■■ business diversification: expanding presence, also 2.3.1.6. Efficiency Enhancement on international markets (Kazakhstan and Africa), Programme and increasing goods and service competencies (new activities within the company’s portfolio: en- In 2013 the Efficiency Enhancement Programme gineering survey, environmental monitoring, etc.). was introduced to increase work performance, reduce cost per unit and ensure loss-free operation. The pro- Long-Term Strategic Objectives of the Company: gramme was launched in August 2013. ■■ by 2017, to increase the revenue from projects out- Every three months the management committee of side ARMZ Uranium Holding Co. up to 50% (also the programme reviews a new pool of measures and due to engineering survey/environmental monitor- projects. Implementation of the approved measures ing within Rosatom State Corporation).

44 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 2.3.2. JSC VNIPIpromtechnologii Activities

Visualization of the local sorption unit to produce by Chief Executives Address uranium from solutions which designed by JSC VNIPIpromtechnologii employees About the Company Strategy and Management System Strategy Strategy and Management System Strategy

2.3.2.1. General Information Figure 14. JSC VNIPIPROMTECHNOLOGII Main Effective Capital Management Capital Effective Activities Management Capital Effective JSC VNIPIpromtechnologii (Design Prospecting and Scientific Research Institute of Industrial Technology) Engineering surveys and research is engaged in R&D concerning the integrated design of uranium mining and ore processing facilities and radi- Development of mineral raw materials mining oactive disposal facilities. The company can offer turn- and processing key services due to the wide range of its competencies. Stakeholder Engagement Stakeholder Industrial facility design Engagement Stakeholder

Construction of turn-key mining facilities Appendices Scientific and technical and technological operational support Appendices of facilities

Land reclamation at production sites

Treatment of radioactive and other waste from production facilities

45 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

– What can you say about your company’s prospects? What projects are your top priorities? – In my opinion, we should work on our penetra- tion into new markets. Now NW treatment projects account for a significant share of our portfolio. If we participate in federal target programmes and in EAEC and EU programmes, we will stabilise our- selves on the nuclear waste management market that demonstrates good prospects. Environmental engineering is another progressive type of activity in our sphere. Here we can cooperate with big leaders like Gazprom and Rosneft. We have specialists literate in unique technologies and have broad experience in the disposal of various types of industrial waste. We will deal with uranium and gold and also with rare earth and non-ferrous metals on the main mining market. Now we take an active part in programmes related to the ancillary mining of rare earth metals, and I think we have quite good chances in disposing man-made waste resulting from production activities, such as re-processing sulphur waste and producing ferrous, non-ferrous, and precious metals from them.

Construction Department employees, JSC VNIPIPROMTECHNOLOGII

2.3.2.2. Interview with JSC VNIPIpromtechnologii Director Viktor Svyatetsky

– Mr Svyatetsky, what were the main objectives of VNIPIpromtechnologii in 2013? Have you managed to achieve them? – We are facing quite a big challenge. We are to ensure efficiency and profitability and be on demand with a wide range of customers. To facilitate that, in 2013 we approved a development programme specifying short-term measures to be taken and outlining basic programme directions up to 2030. In terms of our current production programme, It is very important for us that the programme is the projects most important for us are those relat- a product of the joint effort of our employees; the ed to the optimisation of existing uranium produc- personnel engagement level increased by nearly tion (JSC PIMCU, JSC Khiagda, and JSC Dalur). 20% while working on the programme. Apart from traditional design, we now also en- In 2013 our main production objectives were to gage in EPCM contracts. This implies complete design mines for JSC PIMCU and infrastructure fa- project management, including procurement of cilities for JSC Khiagda and JSC Dalur. These will be equipment, construction, and start-up and fol- completed in 2014. We completed our plan for the low-up maintenance. An example of this type of first stage of our contract with National Operator work is the turn-key project Basic Uranium Raw for Nuclear Waste Management and designed the Material Specifications for JSC Dalur. first stage of final nuclear waste isolation facilities.

46 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT hroy NP oe gnrtn ui ad tube and construction options. unit generating power 4th NPP the Chernobyl under plate shielding the of project tion settlements. automated storage facilities; and whole towns and infrastructure, communications utilities; internal and external houses; boiler and stations, power repairestablishmentswith port facilities,thermal trans - motor works; engineering and repair and hydrometallurgicalheavy-duty including facilities, infrastructure many designed Ipromtechnologii slovakia. Czecho- and Germany, China, Mongolia, in cilities fa- designing in part took also Company.It Mining TransbaikalISL), (uraniumGold Muruntau and MC, CompanyMining Bukinay NMMC, Navoi IMCP, ysky Prikaspi- IMCP, Tselinograd (Ukraine), Plant) ing Dress- and Mining (Ore OMDP Eastern Company), (Mining MC Kyrgyzstan IMCP, Priargunye NMMC, IMCP (Integrated Mining and Chemical Plant), Navoi Leninabad as such design, VNIPIpromtechnologii under territory USSR former the in built were ties ties undertheUSSR nuclear programme. facili - production uranium design to ago years 60 2.3.2.3. Historical Background JSC VNIPIPROMTECHNOLOGII Viktor Svyatetsky, Director of NPpotcnlgi eeoe te construc- the developed VNIPIpromtechnologii VNIP- companies, mining to addition In processingfacili- and mining ore major 10 Over over established was VNIPIpromtechnologii JSC

subsidiary ofJSCAtomredmetzoloto. ais and Division Mining and UraniumRosatom the positories. constructionthe nuclearof and waste storages reand - radionuclides with polluted land of lamation September August December November October ■ ■ May 2.3.2.4. 2013Key Events ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ oa JC NPpotcnlgi s nldd in included is VNIPIpromtechnologii JSC Today Lately VNIPIpromtechnologii has focused on rec- Ipromtechnologii upto 2030. ap- management proved Atomredmetzoloto the Step-by-Step Development of JSC VNIP- JSC The pliance issued). to the new GOST ISO 9001-2011 (certificate of com- according certified was VNIPIpromtechnologii JSC among Nuclear SROs. JSC VNIPIpromtechnologii as the Best recognizedDesign Company SROs nuclear of committee The launched underanЕРСМcontract. was Dalur) (JSC project pilot construction dryer A Russian Ministry ofIndustry andTrade. the and Science and Education of MinistryRussian the by mounted was competition The universities. technical leading on based Russia in centres ing engineer- developing and establishing com- for project petition pilot a of winners the among were VNIPIpromtechnologii JSC and MISiS, Technology and Science of University National MEPhI, NRNU VNIP- ment. JSC and agree- collaboration a VNIIHT, signed Ipromtechnologii JSC MEPhI, NRNU tion for 2013–2015. organisa- union shop-floor with agreement tive JSC VNIPIpromtechnologii entered into a collec- Company Engineering Based onJSCVNIPIpromtechnologii. Co. Holding Uranium ARMZ the of Establishment for Plan ap- the proved management Atomredmetzoloto JSC The 47

Appendices Stakeholder Engagement Effective Capital Management Strategy and Management System About the Company Address by Chief Executives INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

JSC VNIPIPROMTECHNOLOGII: Most 2013 losses were caused by writing off accounts 63 years of successful project receivable for 2012. implementation Growing net assets prove the company’s stable financial position. ■■ Integrated services employing innovative technologies Over the next three years the plan is to focus on es- in mining, processing, nuclear waste disposal, etc.; tablishing a knowledge-sharing system and rotate per- ■■ providing services for mining entities regardless of sonnel without attracting a new workforce. the degree of preparation and content of resources; ■■ wide experience in industrial facilities design in the mining and adjacent industries; 2.3.2.6. Main Activities ■■ rich intellectual resources (over 30 ScDs and PhDs); ■■ IAEA certified specialists in uranium site reclama- 2013 Activities in Russia and Abroad (Project tion; and Roadmap) ■■ extensive experience in nuclear waste treatment In 2013 JSC VNIPIpromtechnologii performed an en- and disposal and a unique database on tailing stor- gineering survey and designed production and social and ages of former uranium sites in Russia and abroad. welfare facilities in Russia, Tajikistan, and Kyrgyzstan.

2.3.2.5. 2013 Key Performance 2.3.2.7. Efficiency Enhancement Indicators Programme

VNIPIpromtechnologii demonstrates a gradual reve- In 2013 JSC VNIPIpromtechnologii launched the nue increase and a gradual reduction of subcontracting automation of basic business processes that are in- scope, which means that the company performs more dispensable for a modern design company and better work using its own resources. In 2015–2016, the inten- project quality. By the end of the year the average work- tion is to increase the amount of third-party orders by force productivity had increased by 11% and was RUB transforming the company into a modern engineering 1.8 million per person. centre.

Figure 15. 2013 VNIPIpromtechnologii Project Map

Moscow

Work at operating facilities

Radiation safety operations Spent nuclear fuel disposal

Land reclamation Industrial facility design Liquid waste disposal Social facility design

48 For 2013 JSC ATOMREDMETZOLOTO INTEGRATED ANNUALREPORT sky GOK, JSC Polyus, Lukoil Perm LLC, TYNGD LLC, TYNGD LLC, Perm LukoilPolyus, JSC GOK, sky etc.). Plant, Kovdor- representedwereby customers Third-party Chemical and Mining Integrated JSC Enterprises, Chemical of Group Siberian JSC RAO, Ros- Rosenergoatom, RosRAO, (NO entities its and Corporation State Rosatom and Khiagda), JSC and Dalur JSC PIMCU, (JSC S&A Atomredmetzoloto JSC ■ ■ ■ million, including: 1,010.66 RUB was revenue total its and contracts, 85 Production 2.3.2.8. 2013Results Table 6.2011–2013VNIPIpromtechnologii Key FinancialIndicators, RUBthousand Indicators other statutory payments) (work, services) (excl. VAT, excise taxes, and Revenue (NET)from product sales, total: Corporation) including industry entities(Rosatom State Other counterparties Own resources, including: tion) Industry entities(Rosatom State Corpora- Other counterparties NET REVENUE Net assets Asset value to thebudgetandnon-budgetary funds Total amountoftaxes, duties,andfees paid Average numberofemployees Accrued dividends,total Gross margin ■ ■ ■ JSC VNIPIpromtechnologii’s main customers were million. 164.75 RUB of total the to contracts 36 — R&D 506.50 million;and special operations — 5 contracts to the total of RUB of total RUB 345.41million; the to contracts 44 — survey and design In 2013, JSC VNIPIpromtechnologii performed under 751,222 642,086 109,136 512,327 416,660 385,066 636,588 175,339 116,925 95,667 60,000 2,481 2011 Actual performance 479 911.87 millionwassaved in2013. RUB Section, Urtuysky the at Channel Drainage a of Construction to Related Optimisation Solution sign De- for Development Documentation Project Under VAT.excluding and 2012 Q3 in measured as million, 249.12 RUB to down 1,826.27 RUB from went ment Ash Dump Construction at JSC PIMCU capital invest- TPP the under suggested solutions technical the to dueexample,For customers. its for effect economic of theSredneye Tailing Storage atJSCPIMCU). Reconstruction and PIMCU JSC at Construction Dump tion (Tajikistan andKyrgyzstan). Produc- Uranium to Exposed Countries EEC in tion countries contractinternationalEEC the Reclama- under Land other and Lermontov) (Almaz, Russia in Soda, andJSCTrevozhnoye Zarevo. JSC Kaustic, JSC Salavat, Neftekhim Gazprom JSC 624,190 548,330 540,097 466,236 387,816 947,043 295,866 115,162 S VIIrmehooi cets significant a creates VNIPIpromtechnologii JSC Two projects were certified by state experts (TPP Ash reclaimedwere sites production uranium Former 75,861 73,861 2,750 2012 442 0 1,016,661 951,830 765,899 705,468 296,780 875,463 279,055 122,375 -91,244 64,831 60,431 2013 409 0 970,395 814,936 155,459 820,682 683,006 137,676 551,217 866,021 215,215 282,277 57,382 2014 402 0 BSC indices 882,262 456,117 426,146 826,334 416,226 410,109 577,467 852,704 249,476 262,361 47,783 21,533 2015 405 990,008 655,599 334,409 869,581 589,456 280,125 592,574 853,639 262,404 265,386 52,990 37,882 2016 405 49

Appendices Stakeholder Engagement Effective Capital Management Strategy and Management System About the Company Address by Chief Executives INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Research ■■ Patent No. 2492534 Method for Liquid Industrial Waste In 2013, JSC VNIPIpromtechnologii performed the Subsurface Storage Monitoring. By: Yu. Kultin, Ye. Bay- following research work: dariko, A. Rybalchenko, and P. Vereshchagin. ■■ enhanced mine development at operated uranium fields and ensured mining operations safety; ■■ assessed nuclear subsurface burst sites and devel- 2.3.2.9. 2014 Plans oped reclamation plans; and ■■ assessed and considered further use of liquid waste ■■ To increase the amount of third-party orders; subsurface storages. ■■ to implement the Engineering Centre project, in- VNIPIpromtechnologii has completed a package of cluding: works of establishment for the Integrated State NW ■■ switching over to the modern matrix manage- Treatment System (ordered by Rosatom State Corpo- ment organisation with up-to-date project man- ration). The company also worked on NW treatment agement; introducing a computer-aided design solutions in terms of innovative nuclear power gen- system and management systems; eration trends ensuring the complete closure of the ■■ establishing a competency development system nuclear fuel cycle. (including for competencies related to EPCM pro- VNIPIpromtechnologii was issued four patents in ject management); and Russia: ■■ increasing client focus and service quality; and ■■ Patent No. 2476819 Method for Blasting Ore and For- ■■ in connection with the Rosatom Production Sys- mations in Subsurface Mining. By: S. Rubtsov, A. Se- tem implementation, at the first stage it is planned leznyov, and V. Yershov; to integrate a 3С system covering 80%–100% of ■■ Patent No. 2475874 Method for Subsurface Disposal of employees and a 5С system covering about 30% of Biohazardous Drain Water. By: N. Prikhodko; employees. ■■ Patent No. 2477181 Method for Lode Rock Preconcen- tration in Vein Gold Open Cut Mining. By: N. Lobanov, Ye. Kamnev, V. Kasatkin, and V. Latyshev; and

A surveying team at work at the Yermakovsky field, Buryatia

50 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy

EFFECTIVE CAPITAL Management Capital Effective MANAGEMENT

3.1. The Company’s Capital Engagement Stakeholder

3.2. Financial Capital Management Appendices 3.3. Production Capital Management 3.4. Human Capital Management 3.5. Intellectual Capital Management 3.6. Social Capital Management 3.7. Natural Capital Management INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 3.1. The Company’s Capital

“Capital” implies certain resources (reserves) of The Company acknowledges that a part of its re- tangible and non-tangible assets employed in the sources is co-owned by other stakeholders (e.g. nat- Company’s activities: financial, production, human, ural resources and public infrastructure) and treats intellectual, social, and natural capital. such resources accordingly.

3.2. Financial Capital Management

3.2.1. Financial Management* fective employment of internal financial resources by the Holding entities; Financial capital management involves financial ■■ in order to minimise the diversion of the Holding’s strategy implementation and investment policy. own cash, sureties and bank warranties were used as collateral in case of procurement paid from the Financial Policy Holding’s own and extra-budget funds, which allows JSC Atomredmetzoloto’s financial policy is based reduction of financial risks related to advance pay- on complying with the corporate regulations and fi- ments and the stimulation of proper fulfilment of nancial policy of Rosatom State Corporation. In 2013 contractual obligations by counterparties; the financial policy was further integrated at the Hold- ■■ the Treasury Settlement Centre (Rosatom auto- ing entities for the purpose of later treasury function mated corporate system) was introduced, provid- centralisation. ing for automated recording of financial transac- JSC Atomredmetzoloto pursued the following fi- tions and setting aside the financial performance nancial strategic objectives: part of management statements; ■■ to ensure financial stability of the Holding entities ■■ norms and methods were introduced for interest and at the same time concentrate the majority of risk management while taking into account the temporarily available cash of the companies within transfer pricing legislation; and the cash pulling system run by JSC Atomic Energy ■■ management of the entities’ lending limit was Power Corporation; continued to ensure effective management of the ■■ to ensure effective financing of operational and in- Holding’s operating and investment credit portfo- vestment activities of the Holding’s operated enti- lio; a limit preventive control system was estab - ties and new projects; and lished on the basis of Holding budget planning ■■ to manage financial risks of the Holding. and by-quarter forecast. Due to targeted financial policy and the above 2013 Results measures, ARMZ Uranium Holding Co. liquidity ratio ■■ A number of transactions were closed to raise fell within the target limits and the Holding demon- funds for purchasing a 100% stake of Uranium strated financial stability in spite of operational loss One Inc. and for separating international assets and low activity on the global uranium market after from Atomredmetzoloto and consolidating such the Fukushima Daiichi disaster. under Uranium One Holding N.V. control accord- When IFRS 11 Joint Arrangements came into ef- ing to the shareholder strategic decision to es- fect, ARMZ Uranium Holding Co.’s altered its account- tablish an international mining division; ing policy for the part about disclosing equity interest ■■ the Holding continued its cooperation with Rus- in joint ventures. Since 2013, such equity interest shall sian and foreign banks and its entities signed be disclosed through equity accounting (previously pro- credit and trade finance contracts; portionate consolidation was used). To ensure compa- ■■ the exchange risk hedging programme was im- rability of statements, comparative values for previous plemented with the use of derivatives; reporting periods included in the statements were re- ■■ treasury operations were further centralised and calculated based on the altered accounting policy. group-wide financing was developed on the basis In accordance with Rosatom’s decisions and strat- of products offered by the base bank for more ef - egy related to the development of the international

* The Financial Management section is based on the consolidated IFRS financial statements for the period ending on December 31, 2013.

52 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

mining division run by Uranium One Holding N.V., The 2013 results on the global uranium and urani- on December 5, 2013, JSC Atomredmetzoloto sold um product market prove the stability of negative price a controlling stake (57%) in Uranium One Holding trends. This caused a significant (RUB 22,874 million) N.V., which at that time owned an 89.07% stake in impairment of some mining assets and assets under Uranium One Inc. As a result, JSC Atomredmetzolo- construction that belong to ARMZ Uranium Holding Co. to ceased consolidating its subsidiaries, disposed This, together with the non-profitability of current of and applied the equity accounting method for the production operations (due to diminished yield of the

disclosure purposes. For the purpose of statements field and resulting high mining costs) at JSC PIMCU, by Chief Executives Address preparation, these foreign subsidiaries were classi- ARMZ Uranium Holding Co.’s main entity, caused the fied as ceased business. Comparative values were 2013 net loss equal to RUB 24,165 million, excluding also adjusted to account for ceased business and on- ceased activities, and RUB 13,834 million, including going business separately. the ceased activities. About the Company Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

Valery Skosyrsky and Vyacheslav Stremilov, Underground Mine Repair Operators at the Product Solution Process- ing Area of the In Situ Leaching Shop. Well washing, JSC Khiagda

53 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Financial Performance

Table 7. JSC Atomredmetzoloto Profit and Loss Statement

million RUB 2012* 2013 (recalculated)

Sales proceeds 33,810 31,819

Cost of goods sold (27,705) (26,922)

Gross margin 6,105 4,897

Administrative and selling expenses (4,781) (5,195)

Other expenses (188) (82)

Operating (loss)/profit 1,136 (380)

Fixed asset impairment loss (49) (4,820)

Intangible assets impairment loss – (3 ,403)

Goodwill impairment loss (10,630) (10,713)

Exploration and assessment impairment loss (260) (3,938)

Financial income 378 1,534

Financial loss (715) (2,096)

Share in losses of financial investment assessed by equity accounting (4) (3)

Loss before income tax (10,144) (23,819)

Income tax (938) (346)

Net loss for the period (11,082) (24,165)

Ceased business

Profit from ceased business, less income tax 2,047 10,331

Loss for the year (9,035) (13,834)

For reference only:

EBITDA 2,779 1,753

Net operating profit after tax (NOPAT) 1,031 (374)

* 2011–2012 indices may differ from similar indices provided in the 2012 JSC Atomredmetzoloto Annual Report

54 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

million RUB 2012* 2013 (recalculated)

Loss for the period owed to:

JSC Atomredmetzoloto shareholders (9,071) (11,309)

Non-controlling equity share 36 (2 525) by Chief Executives Address

Total loss for the period (9,035) (13,834)

Loss for the year from ongoing business (11,082) (24,165)

Loss for the year (9,035) (13,834) About the Company

Items not to be later reclassified for profit or loss

Re-evaluation of pension schemes with set payments (211) (55)

Total (211) (55)

Items that have been or may later be reclassified for profit or loss

Exchange rate difference resulting from conversion of foreign companies' (1,818) 1,093 and Management System Strategy indices from other currencies

Hedging reserve 185 (601)

Total (1,633) 492

Other aggregated profit / (loss) from ongoing business (1,844) 437

Other aggregated profit / (loss) from ceased business (7,027) 1,393 Management Capital Effective

Total other comprehensive income / (loss) (8,871) 1,830

Total aggregated loss from ongoing business (12,926) (23,728)

Total aggregated profit/(loss) from ceased business (4,980) 11,724 Stakeholder Engagement Stakeholder Total aggregated loss (17,906) (12,004)

Total aggregated loss for the year owed to: Appendices JSC Atomredmetzoloto shareholders (15,647) (10,776)

Non-controlling equity share (2,259) (1,228)

Total aggregated loss for the year (17,906) (12,004)

55 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table 8. JSC Atomredmetzoloto Balance Sheet

million RUB 2011 2012 2013 (recalculated)* (recalculated)*

ASSETS

Fixed assets 33,759 39,373 35,833

Intangible assets 20,345 19,850 14,869

Goodwill 40,638 28,052 –

Exploration and assessment assets 5,557 8,068 4,931

Investments in associated companies 1,253 1,207 30,127

Investments in joint ventures 61,846 55,922 –

Other non-current assets 2,424 3,171 7,677

TOTAL non-current assets 165,822 155,643 93,437

Reserves 11,479 10,189 6,720

Income tax paid in advance 562 605 196

Accounts receivable and advance payments 4,823 7,641 4,907

Cash and cash equivalents 21,189 16,713 1,166

Other current assets 2,145 1,851 3,364

TOTAL current assets 40,198 36,999 16,353

TOTAL ASSETS 206,020 192,642 109,790

EQUITY

Shareholder equity 20,257 22,430 22,430

Share premium 53,963 56,962 61,962

Reserve related to incorporation 7,201 7,201 7,201

Translation reserve 6,048 (502) 687

Retained profit / (accrued loss) 20,958 7,950 (20,162)

Equity of JSC Atomredmetzoloto shareholders 108,427 94,041 72,118

Non-controlling equity share 39,645 37,686 (2,086)

* 2011–2012 indices may differ from similar indices provided in the 2012 JSC Atomredmetzoloto Annual Report.

56 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

million RUB 2011 2012 2013 (recalculated)* (recalculated)*

TOTAL EQUITY 148,072 131,727 70,032

LIABILITIES

Credits and loans 36,811 30,581 18,583 by Chief Executives Address

Reserves 6,746 8,700 6,218

Deferred tax liability 4,206 5,520 4,943

Other accounts receivable 522 1 427 About the Company

TOTAL Long-term liabilities 48,285 44,802 30,171

Short-term credits and loans and current long-term 2,258 8,170 1,595 credits and loans

Accounts payable and accruals 6,109 7,114 7,175

Current income tax liabilities 470 14 34 Strategy and Management System Strategy Accounts payable (other taxes) 826 815 783

TOTAL short-term liabilities 9,663 16,113 9,587

TOTAL LIABILITIES 57,948 60,915 39,758

TOTAL EQUITY AND LIABILITIES 206,020 192,642 109,790 Effective Capital Management Capital Effective

Table 9. Key Financial Indicators of JSC Atomredmetzoloto

Description 2012 2013 2013/2012 % (recalculated)* change 2013/2012

Financial stability ratio Stakeholder Engagement Stakeholder Share of the owned capital in the assets 0.68 0.64 -0.05 -7%

Liquidity ratio, unit fraction Appendices Current liquidity ratio 2.3 1.7 -0.6 -26%

Quick liquidity ratio 1.5 0.6 -0.9 -58%

Turnover ratio, days 143 115 -28 -20%

Sales profitability ratio, %

Sales profitability 18.1% 15.4% -2.7% -15%

* 2012 indices may differ from similar indices provided in the 2012 JSC Atomredmetzoloto Annual Report.

57 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

JSC Atomredmetzoloto prepares its consolidated In 2013 about RUB 9.1 billion were invested, includ- financial statements in accordance with IFRS. Each ing more than RUB 8 billion invested in operated Rus- Holding entity prepares individual accounting state- sian uranium mining assets for: ments according to Russian accounting standards. ■■ construction and installation at production, infrastructure, and power facilities; ■■ industrial facility design; 3.2.2. Investment Activities ■■ capital and preparation mining; ■■ upgrade and modernisation; Investment priorities of the Company are based on ■■ information and technical support; the long-term development strategy and aimed at im- ■■ design and R&D; plementation of key strategic purposes of ARMZ Ura- ■■ security; and nium Holding Co. and Rosatom State Corporation: ■■ acquisition of industrial and drilling equipment. ■■ developing the raw material base and uranium production in Russia; Figure 17. 2011–2013 Trends of Investing in ■■ gaining leadership in uranium mining and process- Russian Projects, % ing technologies; and ■■ diversifying strategic and innovative materials. In 2013, investments in the raw material base and 9.6 74.2 uranium production development in Russia accounted 3.3 90.2 for the majority of the investment structure, with 90% 0.7 86.6 of funds invested in the main uranium mining assets: JSC PIMCU, JSC Khiagda, and JSC Dalur. Of the investments, 94% of came from shareholders and internal funds of the Company. For more details on the investment decision system see 2.2.4.1. Internal Monitoring System. 3.912.2 10.9 Figure 16. 2013 Investment Structure, % 1.8 1.9 4.6

2011 2012 2013 94% 3% 3% Development Diversification Technology of raw material with strategic leadership other Russian facilities under base and urani- and innovative projects construction um production materials in Russia operated non-uranium facilities projects

In 2013 most funds were invested in the development and maintenance of operating facilities. In 2013 investments in operating facilities increased from 74.5% to 90.2% due to: ■■ construction at JSC Khiagda (main building, sorb- ing agent storage, finished product storage, acidulation unit, and utilities), and capital and preparation mining works on deposits; ■■ replacement of worn-out equipment, upgrade and modernisation, and completion of Mine No. 8 at JSC PIMCU; and ■■ geological exploration, capital and preparation mining at the Khokhlovskoye field, and modernisation of the LSU of the Ust-Uksyanskaya deposit at the Dalmatovskoye field (JSC Dalur). In addition, geological exploration for the Pav- lovskoye project was commenced and is expected to become a profitable production complex based on the

58 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Pavlovsky lead and zinc field, including a mine and an Figure 19. ARMZ Uranium Holding Co. Key enrichment plant. Projects in 2013, %

Figure18. Investment by Projects Groups 3% 6% in 2013, % Pavlovskoye Other projects 39.4% 7.2% JSC PIMCU 6% 2% JSC Dalur

Other projects Infrastructure by Chief Executives Address

2% Facilities under construction About the Company

44.4% JSC Khiagda

Long-Term and Mid-Term Investment Priorities According to the mid-term investment plan, the 90% 2014–2016 JSC Atomredmetzoloto investment pro- Operated facilities gramme is preliminarily evaluated at RUB 20 billion. Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

59 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 3.3. Production Capital Management

3.3.1. Raw Material Base ■■ licensing of new fields, preferably with low produc- Development tion costs (up to USD 80 per kilo); ■■ geological exploration to prepare commercial re- As of January 1, 2014, the uranium raw materi- serves for mining; and al base (RMB) of JSC Atomredmetzoloto is 542,000 ■■ the search for new deposits, with hydrogenous ones tons. With its RMB the Company is the second big- being the priority. gest uranium company in the world. RMB annual growth is ensured through:

Table 10. Reserves and Resources of ARMZ Uranium Holding Co. Entities in Russia as of December 31, 2013, thousand tons

Entity Reserves Р1 resources* Total RMB

JSC PIMCU 108.7 – 108.7

JSC Dalur 9.9 6.5 16.4

JSC Khiagda 39.8 1.4 41.2

JSC EGMK-Project 357.1 – 357.1

JSC Olovskaya MCC 13.5 – 13.5

JSC Gornoye UMC 4.6 – 4.6

JSC Lunnoye 0.4 – 0.4

Total: 534.0 7.9 541.9

* Predicted resources at partially explored ore bodies and ore bodies that have been identified within a field but not explored yet.

Geological Exploration in Russia ■■ Exploration commenced at the Khokhlovskoye In 2013, geological exploration was conducted at the deposit under the exploration and extraction li- deposits of the Khiagda ore field, the Khokhlovskoye cense obtained by JSC Dalur in January 2013. field, and at a subsurface site in the Bezymyannaya Pilot uranium production works were resumed. river area (Novaya Zemlya). The Kaldera project was ■■ Initiation of the Kaldera project on prospect launched in connection with the search for uranium evaluation survey within the Streltsovskoye ore deposits with high-grade ore within the Streltsovskoye field during 2013–2020. Successful completion of ore field. A total of RUB 665.9 million was invested in stage 1 and further work planning. geological exploration, which resulted in the reserve ■■ Commencement of prospect evaluation survey at increment of 8.5 thousand tons. the subsoil site in the Bezymyannaya river area (Novaya Zemlya), including the Pavlovskoye field. Main Measures and Results in 2013 ■■ Confirmation of uranium reserves at the Koli- 2014 Plans chikanskoye, Namaruskoye, Koretkondinskoye, ■■ Further geological exploration and pilot uranium Dybrynskoye, and Vershinnoye deposits (Khiagda mining at the Khokhlovskoye field; ■■ ore field). Increment of С 1+С2 reserves (8.5 thou- approval of the survey conditions FS to estimate sand tons). Lunnoye reserves;

60 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company

Vladimir Koshevoy, Urtuysky brown coal pit, JSC PIMCU

Table 11. Exploratory Drilling and Financing in 2013 and Management System Strategy

Work types Metreage drilled, Investment thousand amount, million metres RUB

JSC PIMCU (Kaldera, stage 1) – 23.5

JSC Dalur (Khokhlovskoye field) 42.8 187.9 Management Capital Effective

JSC Khiagda (deposits of the Khiagda ore field) 9.3 166.3

The First Ore Mining Company (subsoil site in Novaya Zemlya, including 8.5 244.3 the Pavlovskoye field)

Total: 60.6 622.0 Engagement Stakeholder

■■ further development of the electronic database on 3.3.2. Uranium Production Methods

Khiagda ore field deposits; Appendices ■■ further implementation of the Kaldera projects JSC PIMCU uses the subsurface mining method on exploration of uranium deposits within the and is now implementing a new R&D project on in situ Streltsovskoye ore field; leaching in blocks. ■■ obtaining an exploration and production license for the Pavlovskoye complex deposit due to its discovery; ■■ further prospect evaluation survey on Novaya Zemlya at the subsoil site near the Bezymyannaya river; and ■■ commencement of geologic survey at the Pav- lovskoye field to prepare it for commercial ex- ploitation.

61 INTEGRATED ANNUAL REPORT Добыча руды JSC ATOMREDMETZOLOTO For 2013

Figure 20. Structure of Uranium Production at JSC PIMCU*

Ore mining

Ore excavation and Ore haulage and Drilling and blasting Ore check point (OCP) backfill surfacing

Ore storage yard Tailings Uranium oxide concentrate

X-ray separation Heap leaching Sorption and desorption

Hydrometallurgical process

Ore reduction Leaching, sorption, and Rich eluate processing desorption

Tailings

JSC Khiagda and JSC Dalur produce uranium with to produce uranium with a closed production cycle the DISL method, the most eco-friendly and safe way without waste.

Figure 21. Uranium Production Scheme at JSC Khiagda and JSC Dalur*

Loading and Production Solution Ore body unloading Uranium well drilling, processing, acidulation product Sedimentation concentrate construction sorption and and leaching solutions and piping desorption for sorption

Recycled solutions + acid

* You can find a video on these production methods at the JSC Atomredmetzoloto website: http://www.armz.ru/ore-main.php.

62 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.3.3. Uranium Production by JSC ■■ to introduce a mobile integrated crushing unit to Atomredmetzoloto Russian Entities process unpayable ore; ■■ to commence construction of mine water treatment In 2013 the main task of the Holding entities was facilities (MWTF) phase 1; providing for Rosatom needs in raw materials that car- ■■ to increase the capacity of operating tailing storages; ries out its ambitious NPP construction programme in ■■ to complete the entire infrastructure at Mine No. 8; Russia and actively increases its presence abroad. ■■ to further modernise stowing complexes of operat-

ing mines; and by Chief Executives Address 3.3.3.1. JSC PIMCU, Krasnokamensk, Transbaikal ■■ to increase operational efficiency and reduce costs. Territory

2013 Results ■■ 2,133 tons of uranium were produced (+132 tons

compared to 2012 figures); About the Company ■■ JSC PIMCU put into operation 6 new stopes and 3 half-stopes. This increased prepared reserves by 665 thousand tons of ore (1,030 tons of uranium); ■■ a 3D geological survey model of Mine No. 8 was prepared; ■■ Mine No. 8 is at the last development stage with an estimated output of 370 thousand tons of ore per year. The development shall be finished in 2014; ■■ 3,480 tons of coal were mined, which is 416 tons

more than in 2012; and Management System Strategy ■■ dispatch of coal by third parties increased by 60% year-on-year; ■■ the administration building of the Urtuyskoye surface mine office was completed; ■■ live steam piping of the TPP phase 2 was replaced; and ■■ the pilot hydrometallurgical shop was reconstructed and put into operation.

2014 Plans Management Capital Effective ■■ It is planned to produce 1,950 tons of uranium (-183 tons compared to 2013 figures); ■■ further geological exploration according to the Mid- Term Development Programme of JSC PIMCU for 2013–2020; ■■ further implementation of the Kaldera projects

on exploration of uranium deposits within the Engagement Stakeholder Streltsovskoye ore field; ■■ to shrink production volume at Mine No. 2 due to low reserve content and high production costs;

■■ to increase coal mining volumes up to 4,160 thou- Appendices sand tons;

Table 12. Production Volume and Uranium Reserves in 2011–2013, JSC PIMCU

2011 2012 2013

Production volume, tons 2,191 2,001 2,133

Uranium reserves, thousand tons 113.1 111.06 108.7

63 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Mid-Term Plans ■■ further development of the Rosatom Production ■■ Further implementation of the Kaldera projects System occured; on exploration of uranium deposits within the ■■ modernisation of the local sorption unit of the Streltsovskoye ore field; Ust-Uksyanskaya deposit at the Dalmatovskoye ■■ to implement the new method of in situ leaching in field was completed; the unit can process product blocks; solutions at the rate of up to 1,100 cu. m per hour; ■■ to change over to scheduling output on the basis ■■ topographical surveying and environmental en- of 3D mine models; gineering were performed under the FTP Recla- ■■ to increase annual uranium production up to mation of Land Polluted in the Course of Geolog- 2,500 tons; ical Exploration and Pilot Operations at JSC Dalur ■■ to increase coal production volumes and the (Uksyanskoye, Dalmatovo Area, Kurgan Region). share of products sold to third-party companies; ■■ to implement a stationary integrated crushing 2014 Plans unit to produce more uranium by heap (percola- ■■ It is planned to produce 570 tons of uranium (+8 tion) leaching; tons as compared to 2013 figures); ■■ to complete MWTF construction; ■■ products will be delivered in accordance with ob- ■■ to start using additional tailings storage capac- ligations; ities; ■■ further geological exploration and pilot opera- ■■ to finish preparation for in situ leaching in blocks; and tions at the Khokhlovskoye field will take place; ■■ to increase operational efficiency and reduce costs ■■ further transfer to finished products was con- under the Efficiency Enhancement Programme. ducted according to the intermediate “core” ASTM С967-08 standard; and 3.3.3.2. JSC Dalur, Uksyanskoye Settlement, Kurgan ■■ further implementation of the Rosatom Produc- Region tion System (3 projects, standardisation and vis- ualisation of work stations). 2013 Results ■■ 562 tons of uranium were produced (+33 tons Mid-Term Plans compared to 2012 figures); ■■ To continue geological exploration at the ■■ an exploration and production license for the Khokhlovskoye field; Khokhlovskoye deposit was obtained; ■■ to get approval of the permanent survey condi- ■■ geological exploration was commenced at the tions FS and the report on Khokhlovskoye re- Khokhlovskoye deposit; serves estimate; ■■ pilot work was resumed at the Khokhlovskoye ■■ step-by-step production growth achieving 590 deposit and pilot site facilities were put into op- tons of uranium per year by 2016; eration: product and recycled solution settlers, ■■ to develop ancillary REE and scandium concen- acidulation unit, and switchboard room; trate production; and ■■ products were delivered in accordance with ob- ■■ transformation of the Khokhlovskoye pilot plant ligations; into a local sorption unit and commencement of ■■ further transfer to finished products was con- commercial production in 2018. ducted according to the intermediate “core” ASTM С967-08 standard; ■■ pilot research project to explore the possibility of ancillary REE and scandium mining in the form of bulk concentrate from product solutions was launched;

Table 13. Production Volume and Uranium Reserves in 2011–2013, JSC Dalur

2011 2012 2013

Production volume, tons 535 529 562

Uranium reserves, thousand tons 11.2 10.7 9.9

64 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.3.3.3. JSC Khiagda, Bagdarin Settlement, ■■ certification of DSE for the Istochnoye field with the Buryatia State Examination Central Administration (Glav- gosekspertiza); 2013 Results ■■ completion of phase 2 of the sulphuric acid ware- ■■ 440 tons of uranium were produced (+108 tons house and fire extinguishing pump station, con- compared to 2012 figures); struction of a package warehouse with a painting ■■ at the Khiagda field, blocks at deposit No. 7 were shop and a sodium nitrite storage and preparation

put into operation, and deposit No. 3 was tapped site; by Chief Executives Address and hooked up; ■■ pre-commissioning and start-up of the power supply ■■ phase 1 of process complex and infrastructure of package; and the main production site was completed; ■■ to purchase and install three 1.0 MWt back-up diesel ■■ geological exploration was completed and reserves power stations at the electric substation. were confirmed at the Dybrynskoye, Koretkondin-

skoye, Kolichikanskoye, and Vershinnoye fields; and Mid-Term Plans About the Company ■■ follow-up exploration at the Khiagda field was com- ■■ To achieve full load of the pilot plant (450 tons of pleted. uranium per year); ■■ to increase uranium production volumes by put- 2014 Plans ting into operation (after 2017) an industrial plant ■■ It is planned to produce 443 tons of uranium (+3 tons to achieve its full capacity of 1,000 tons of uranium as compared to 2013 figures); per year in 2018; ■■ acidulation of deposit No. 3 at the Khiagda field; ■■ to put into operation well-prepared infrastructure ■■ exploration of the Tetrakhskoye subsurface water facilities; and deposit; ■■ to complete most infrastructure facilities and per-

■■ completion of the basic database for the deposits of form capital and preparation mining to increase and Management System Strategy the Khiagda ore field; production starting from 2017.

Table 14. Production Volume and Uranium Reserves in 2011–2013, JSC Khiagda

2011 2012 2013

Production volume, tons 266 332 440 Effective Capital Management Capital Effective

Uranium reserves, thousand tons 32.4 31.9 39.8

3.3.4. Uranium Production by the Entities of Uranium One Inc. Stakeholder Engagement Stakeholder Key Production Indices

Table 15. Uranium Production by the Entities of Uranium One Inc., tons* Appendices Asset 2011 2012 2013

JV Betpak-Dala LLP (South Inkai) 1,083.8 1,309 1,420.1

Karatau LLP 1,087.3 1,067.6 1,057.5

JV Betpak-Dala LLP (Akdala) 780 766.5 714.0

* With regard to the stake in the relevant entity.

65 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Asset 2011 2012 2013

JV Akbastau LLP 552.7 601.3 749.5

JV ZARECHNOYE LLP 364.6 467.8 462.3

Kyzylkum LLP 128 174.6 225.7

Willow Creek 82.6 239 361.6

Honeymoon* 19.6 84.6 94.8

Total 4,098.6 4,710.4 5,086.3*

* In 2013 the project was preserved for an indefinite time due to the unfavourable market situation. ** The values are rounded, and the total value may be slightly different from the actual sum of separate values.

In 2013 Uranium One Inc. (taking distributed products Uranium One Inc. proved that it was one of the most into account) increased its uranium production volume by effective companies in the industry; average production 8% up to 5,086.3 tons (about 13.2 million pounds of ura- costs in 2013 stayed at the level of USD 16 per pound of nium oxide). uranium oxide.

Table 16. Raw Material Base of Uranium One Inc., as of December 31, 2013

Asset Measured Indicated Inferred Total

JV Betpak-Dala LLP (Akdala) * 1,394 0 4,041 5,435

JV Betpak-Dala LLP (South Inkai) * 7,570 13,341 18,877 39,788

Karatau LLP * 9,677 21,619 31,385 62,681

JV Akbastau LLP * 15,580 7,624 15,426 38,630

JV ZARECHNOYE LLP * 578 3,146 2,235 5,959

Kyzylkum LLP * 525 1,896 5,382 7,803

Honeymoon 0 4,153 0 4,153

Willow Creek* 0 6,461 54 6,515

Mkuju River** 31,579 16,348 10,562 58,489

Total 66,903 74,588 87,962 229,453

* With regard to the stake in the relevant entity. ** Total raw material base of the project.

The significant growth of the uranium raw ma- first place explained through its overestimation at terial base, with its total size as of December 31, mines in Karatau, Akbastau, and South Inkai on the 2013 being 229.453 thousand tons, can be in the basis of 3D models.

66 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table 17. Raw Material Base of Uranium One Inc. Entities in Kazakhstan as of January 1, 2014, tons of uranium*

Category Entity Mine

B+C1 C2 B+C1+C2 P1 Total

JV Betpak-Dala LLP** Akdala 756 4,108 4,864 1,029 5,893 by Chief Executives Address

South Inkai 9,050 24,609 33,659 21,302 54,961

Karatau LLP** Karatau 4,904 22,870 27,774 0 27,774

JV Akbastau LLP** Akbastau 6,056 14,624 20,680 21,501 42,182 About the Company

Kyzylkum LLP** Kharasan 1,266 8,330 9,596 16,258 25,854

JV ZARECHNOYE LLP** Zarechnoye 4,994 2,146 7,139 11,305 18,444

South Zarechnoye 0 709 709 2,285 2,994

Total 27,025 77,396 104,421 73,679 178,100

* Based on the 8GR official report; the values are rounded, and the total value may be slightly different from the actual sum of separate and Management System Strategy values. ** With regard to the stake in the relevant entity.

3.3.5. New Projects leaching plant project at the Beryozovoye deposit; ■■ part of the design documentation was prepared for 3.3.5.1. Beryozovoye-Gornoye, JSC Gornoye UMC the pilot heap leaching plant project at the Beryozo- In 2013 no exploration was carried out at the Beryozo- voye deposit; and Effective Capital Management Capital Effective ■■ voye deposit. Confirmed uranium reserves (С1+С2) were license conditions for the Gornoye field subsoil use 4,613 tons, with an average uranium content of 0.278%. were changed (adjusted according to the beginning The Beryozovoye-Gornoye project is aimed at the of mine development). establishment of a profitable entity for small mine development based on JSC Gornoye UMC, with an annual capacity of up to 500 tons possibly increased up to 1,000 tons by using the raw material base of the

nearby small deposits in the Transbaikal Territory, Engagement Stakeholder Buryatia, and the Khabarovsk Region. The purpose is the industrial development of the Beryozovoye and Gornoye deposits to produce urani-

um concentrate (yellowcake) and the later production Appendices of uranium oxide. The Gornoye project was suspended by the decision of the Company’s Investment Committee: at the current stage the project bears high risks because of the current market situation and possible significant increase of capital and operating expenses.

2013 Results ■■ engineering survey was completed and a report was prepared with all the data required for the pilot heap

67 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2014 Plans 2014 Plans ■■ To finish the project for the pilot heap leaching plant The Balance Committee of JSC Atomredmetzoloto project at the Beryozovoye deposit; and decided to lease the subsoil use license and close JSC ■■ to submit the project for the pilot heap leaching Olovskaya MCC down. plant project at the Beryozovoye deposit for state examination. 3.3.6. Other Entities Mid-Term Plans ■■ To obtain state examination approval for the project 3.3.6.1. Geological Survey Companies for the pilot heap leaching plant project at the Bery- CJSC RUSBURMASH is an integrated geological ozovoye deposit; survey company with an extensive drilling service that ■■ to perform pilot operations (up to 600 tons of ore) at offers design for operation implementation of solid the Beryozovoye deposit according to the Rosnedra minerals geologic survey projects in Russia, Asia, and SCMR decision; Africa. ■■ to prepare and approve of, in conjunction with the For more details see 2.3.1. CJSC RUSBURMASH Rosnedra SCMR, the permanent survey conditions Activities. FS and the reserve estimation report for the Gor- noye and the Beryozovoye fields based on pilot op- 3.3.6.2. Engineering Companies eration outcomes at the Beryozovoye field; JSC VNIPIpromtechnologii is a leader in designing ■■ to develop a facility project on the basis of the per- mineral resources producing facilities, R&D, and ex- manent survey conditions FS and the reserve esti- perimental and pilot work in the uranium industry. mation report; and For more details see 2.3.2. JSC VNIPIpromtech- ■■ to develop the Gornoye and the Beryozovoye fields nologii Activities. on the Beryozovoye industrial site. 3.3.6.3. Service Companies 3.3.5.2. Olovskoye, JSC Olovskaya MCC

Confirmed uranium reserves (С1+С2) were 13,535 ARMZ Service LLC tons, with an average uranium content of 0.076%. Services Rendered by the Company The purpose of the Olovskoye project is to establish Supplies of raw materials, materials, and equip- a uranium mining facility for the development of the ment to ensure continuous production at the Hold- Olovskoye deposit in the Transbaikal Territory. ing’s uranium production entities. At present the Olovskoye project is suspended according to the decision of the Company’s Investment 2013 Key Results Committee. No co-investors were found for this project. ■■ Participation in procurement for Russian entities of the Holding to reduce procurement costs; 2013 Results ■■ increased thermal coal supplies to the Urtuysky License conditions for the Olovskoye field subsoil Section (JSC PIMCU) in Russia; use were changed (adjusted according to the begin- ■■ introduction of tank containers to replace tank ning of mine development). cars for delivering sulphuric acid from JSC PIM-

Table 18. 2013 ARMZ Service LLC Key Performance Indicators

Area of activities Revenue (excluding VAT)

Russian entities 3,958,178

Delivery of goods to Kazakhstan 607

Other goods and services for third parties 25,818

TOTAL 3,984,603

Coal sales (under an agency scheme) 1,058,538

68 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

CU to JSC Khiagda (without pouring the acid from ■■ to terminate supplies through intermediaries and one container to another) to optimise and reduce invite manufacturers to bid; transportation costs; and ■■ to enter into long-term supply contracts with prices ■■ restructuring and rebranding ARMZ Service fixed for 2–3 years and prompt delivery; LLC under the 2013 procurement restructuring ■■ to increase the number of procurement procedures scheme of ARMZ Uranium Holding Co. Under Ro- via OJSC Atomkomplekt due to proper scaling (put- satom’s decree, ARMZ Service LLC was included ting more consignments together and introducing

in the list of authorised procurement companies category management); and by Chief Executives Address of the nuclear industry. In 2014, ARMZ Service LLC ■■ to participate in the diversification of ARMZ Urani- ceased to participate in procurement procedures; um Holding Co.’s production activities. however it renders services of organising and carrying out procurement for the Mining Division. 3.3.7. Non-Nuclear Projects

2014 and Mid-Term Plans About the Company ■■ To render services on organising and carrying out Non-nuclear projects ensure business diversifica- procurement procedures; tion. ■■ to ensure procurement feasibility and efficiency at For more details see 2.1.4. Long-Term Strategy the Mining Division and a competitive environment and Current Status of the Company. in the course of bidding, and to increase procurement economic efficiency; 3.3.7.1. Pavlovskoye ■■ to terminate single supplier procurement and sup- The purpose of the Pavlovskoye project is to es- plies through intermediaries; tablish a profitable industrial complex based on Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

69 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Tamara Balashova, Chemistry Engineer at the Chemical Analysis Laboratory of the In Situ Leach- ing Shop, JSC Khiagda a silver-bearing lead and zinc ore deposit in Pav - appraisal wells were drilled. The data is under lovskoye (Bezymyansky ore cluster, Yuzhny Island, processing. Following the prospect evaluation Novaya Zemlya, Arkhangelsk Region) with an ex- survey, the RMB increased by 15–20%. tensive mineral base of over 37 million tons of ore

(category C1+C2). The holder of the subsoil use li- 2014 Plans cense is The First Ore Mining Company. ■■ To complete the prospect evaluation survey at the licensed site; 2013 Results ■■ to obtain a license for geological survey and natural ■■ The prospect evaluation survey license was al- resources exploration and production at the Pav- tered (prolonged to 2018); and lovskoye deposit; and ■■ a field prospect evaluation survey was carried ■■ to perform geological exploration at the Pavlovskoye out at the Bezymyansky ore cluster (also at the deposit. Pavlovskoye deposit); 8,516 m of prospecting and

70 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.3.7.2. Development of REE Production 3.3.8. Rosatom Production System: Under this project, an REE production complex will Complying with Product Quality be established based on existing industrial infrastruc- Requirements ture, personnel resources, and the technological competencies of the Mining Division. 3.3.8.1. Implementing RPS Projects The introduction of the Rosatom Production Sys- 2013 Results tem at the Holding entities started in October 2011.

■■ The Company identified the prospects of the poten- In 2013 the work on RPS implementation focused on by Chief Executives Address tial establishment of an industrial REE processing the application of the RPS culture and philosophy at complex based on JSC PIMCU in the form of indus- the Holding entities and identification and promotion trial cooperation with third-party investors; and of production system leaders. ■■ at JSC VNIPIpromtechnologii a subdivision was created specialising in the development of 2013 Results

REE production methods (also under Sub-Pro- ■■ 791 employees were involved in the implementation About the Company gramme No. 15 for Development of Rare and of various parts of the RPS; 54 employees were rec- Rare Earth Metal Industry included in the State ognized as RPS leaders; Programme for Industry Development and Com- ■■ under the project Development of Mining Labour petitive Growth). Productivity at Mine No. 8 of JSC PIMCU, horizontal metreage achieved 160 m per month (compared 2014 Plans to the earlier result of 48.7 m/month, this is a more ■■ Together with third-party investors, to develop ba- than a threefold growth); sic conditions for establishing a pilot REE produc- ■■ the number of trips to transport coal was reduced tion based on JSC PIMCU; and by nearly 8,000 due to switching over to BelAZ vehi-

■■ to carry out R&D and experimental development of cles; the load was increased by 8.5 tons; 57.8 more and Management System Strategy REE production methods. thousand tons of coal were transported than initially planned; and the annual economic effect was RUB 3.3.7.3. Ancillary REE Mining 17.3 million (project Optimisation of Coal Production The Ancillary REE Mining project outlines ancillary and Logistics of the JSC PIMCU Coal Mine); production of REE and scandium bulk concentrate from ■■ the Leaders of Changes, the RPS leader identifica- uranium product solutions produced at JSC Dalur and tion and promotion system, was implemented suc- JSC Khiagda. cessfully on the basis of self-promotion (54 leaders as compared to 19 leaders year-on-year); Effective Capital Management Capital Effective 2013 Results ■■ the total economic effect of the measures taken was ■■ A pilot plant was installed and put into operation RUB 108 million; at the JSC Dalur production site that is used for ■■ JSC Dalur unified the procedure of sulphuric acid low-tonnage testing of the ancillary scandium con- acceptance at the railway base and its delivery to on- centrate production method; and site storages at the CPS and the LSU; ■■ the Company signed a letter of intent with a poten- ■■ JSC Khiagda optimised the system of TSC prepara- tial investor for the development of ancillary REE tion and rejection; ■ and scandium mining at JSC Khiagda. ■ CJSC RUSBURMASH took measures to increase Engagement Stakeholder performance and reduce costs, achieving the total 2014 Plans economic effect of RUB 26.9 million. ■■ To complete the pilot production and register the

right to the ancillary scandium concentrate produc- 2014 Plans Appendices tion method tested at JSC Dalur; In 2014, the Holding plans to continue with the RPS ■■ to develop a project for, establishing a pilot scandi- implementation in three basic directions: um concentrate production plant at JSC Dalur; and ■■ production; ■■ to develop a project for and commence building ■■ efficiency of business processes; and of, a pilot ancillary REE and scandium concentrate ■■ administrative efficiency. production plant at JSC Khiagda. 3.3.8.2. Integrated Power Saving and Enhanced Power Efficiency Programme JSC Atomredmetzoloto pays a lot of attention to enhancing production power efficiency and power saving.

71 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

JSC PIMCU is the biggest power consumer within Table 19. Power Consumption by Main Industries Entities of ARMZ Uranium Holding Co. the Holding — 410 MWt of electric power and 1,076 Gcal of thermal power, which accounts for 95% of the fixed power consumption for JSC Dalur and JSC Kh- Coal Fuel oil Natural gas Electric power Car fuel Diesel fuel iagda. Year Entity TJ thousand TJ thousand TJ thousand TJ thousand TJ thousand TJ thousand 2013 Results RUB RUB RUB RUB RUB RUB In 2013 the Company consumed 98,831 litres of AI 95 and AI 92 gasoline to the total amount of RUB 3.26 2011 JSC Atomredmet 0 0 0 0 0 0 11 4,458 0 0 0 0 million. zoloto The Company rents its office premises. Under the office rent agreement, consumed power is included in JSC PIMCU 20,484 529,538 33 8,672 0 0 5,874 669,997 17 11,777 207 123,161 the common list of municipal services and is paid for on a monthly basis under a separate bill among oth- JSC Dalur 0 0 0 0 46 4,432 280 84,739 10 5,954 20 11,241 er services. Within the reporting period, the Company used about 790,000 kWh of electric power to the total JSC Khiagda 20 3,493 0 0 0 0 114 34,342 5 3,334 31 22,905 amount of RUB 2.8 million. In 2011–2013 in general, savings due to reduced Total: 20,504 533,031 33 8,672 46 4,432 6,279 793,536 32 21,065 258 157,307 power consumption by the Holding S&A was RUB 290 million (in monetary terms) under comparable con- 2012 JSC Atomredmet 0 0 0 0 0 0 12 4,069 7 5,539 0 0 sumption conditions. zoloto

JSC PIMCU 20,145 555,760 33 10,833 0 0 6,010 715,132 20 16,231 230 171,272

JSC Dalur 0 0 0 0 46 4,738 292 85,163 7 4,798 16 10,376

JSC Khiagda 24 3,417 0 0 0 0 184 48,106 4 3,978 34 33,234

Total: 20,169 559,177 33 10,833 46 4,738 6,498 852,470 38 30,546 280 214,882

2013 JSC Atomredmet 0 0 0 0 0 0 8 2,800 4 3,255 0 0 zoloto

JSC PIMCU 19,253 485,700 32 11,300 0 0 6,082 811,300 22 17,778 250 186,208

JSC Dalur 0 0 0 0 41 4,753 311 100,482 7 4,923 16 11,744

JSC Khiagda 30 4,978 0 0 0 0 242 70,031 6 4,658 38 35,972

Total: 19,283 490,678 32 11,300 41 4,753 6,643 984,613 39 30,614 304 233,924

Figure 22. Power Saving and Efficiency Indices for 2011–2013, %

Actual for ARMZ S&A, % Plan by year, % 2014 Plans

JSC PIMCU 35.5 ■■ To continue construction and installation of the au-

tomated eclectic power information and metering 18.5 12.9 system (AEPIMS); 11.4 ■■ pre-commissioning and putting into operation of the electric power metering system (automated Dalur PIMCU Khiagda TOTAL technical and commercial eclectic power informa- ARMZ tion and metering systems (ATEPIMS/ACEPIMS)); 2011 plan — 10%

72 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table 19. Power Consumption by Main Industries Entities of ARMZ Uranium Holding Co.

Coal Fuel oil Natural gas Electric power Car fuel Diesel fuel Year Entity TJ thousand TJ thousand TJ thousand TJ thousand TJ thousand TJ thousand RUB RUB RUB RUB RUB RUB Address by Chief Executives Address 2011 JSC Atomredmet 0 0 0 0 0 0 11 4,458 0 0 0 0 zoloto

JSC PIMCU 20,484 529,538 33 8,672 0 0 5,874 669,997 17 11,777 207 123,161

JSC Dalur 0 0 0 0 46 4,432 280 84,739 10 5,954 20 11,241 About the Company

JSC Khiagda 20 3,493 0 0 0 0 114 34,342 5 3,334 31 22,905

Total: 20,504 533,031 33 8,672 46 4,432 6,279 793,536 32 21,065 258 157,307

2012 JSC Atomredmet 0 0 0 0 0 0 12 4,069 7 5,539 0 0 zoloto

JSC PIMCU 20,145 555,760 33 10,833 0 0 6,010 715,132 20 16,231 230 171,272 Strategy and Management System Strategy JSC Dalur 0 0 0 0 46 4,738 292 85,163 7 4,798 16 10,376

JSC Khiagda 24 3,417 0 0 0 0 184 48,106 4 3,978 34 33,234

Total: 20,169 559,177 33 10,833 46 4,738 6,498 852,470 38 30,546 280 214,882

2013 JSC Atomredmet 0 0 0 0 0 0 8 2,800 4 3,255 0 0 zoloto Effective Capital Management Capital Effective

JSC PIMCU 19,253 485,700 32 11,300 0 0 6,082 811,300 22 17,778 250 186,208

JSC Dalur 0 0 0 0 41 4,753 311 100,482 7 4,923 16 11,744

JSC Khiagda 30 4,978 0 0 0 0 242 70,031 6 4,658 38 35,972

Total: 19,283 490,678 32 11,300 41 4,753 6,643 984,613 39 30,614 304 233,924 Engagement Stakeholder

Figure 22. Power Saving and Efficiency Indices for 2011–2013, % Appendices 30.7 19.0 17.5 17.5 13.6 17.3 13.0 14.5

Dalur PIMCU Khiagda TOTAL Dalur PIMCU Khiagda TOTAL ARMZ ARMZ 2012 plan — 14.5% 2013 plan — 20%

73 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

■■ to install and put into operation modernised relay 3.3.8.3. Complying with Product Quality protection and emergency control automatics at the Requirements 110 and 220 AL; and ARMZ Uranium Holding Co. products are consumed ■■ to carry on work on the frequency-regulated drive at by the JSC Chepetsky Mechanical Plant and JSC Sibe- HMPs and TPPs. rian Group of Chemical Enterprises.

JSC Dalur Products manufactured by JSC PIMCU, JSC Khiag- To purchase 11 FCD stations in the first half of the da, and JSC Dalur comply with TU (Technical Specifi- year. cations) 95 1981–2009 for Uranium Oxide Concentrate and TU (Technical Specifications) 95–2002 for Ammo- JSC Khiagda nium Polyuranate (Yellowcake). To calculate economic efficiency and perform the In 2013, all products manufactured were in compli- following design works: ance with technical specifications and there were no ■■ reconstruct the forced draft system of the main in claims from the consumers of otherwise. situ leaching shop; ■■ reconstruct the lighting at the CPB and six deposits (installation of power saving SD-LED40); and ■■ to install four automatic voltage control points (AVCP) type VDT/VR-32.

3.4. Human Capital Management

3.4.1. Management System KPI was one of the factors that resulted in increased labour productivity. It allows measuring performance The personnel management system is based on the as well as establishing performance criteria for the following principles: company in general, for each subdivision, and for each ■■ strict compliance with the Russian Labour Code; employee. ■■ integral and socially oriented personnel policy; Employees’ salaries depend on their productivity ■■ increase of labour productivity; and compliance with KPI. KPI for the head of the ■■ priority and career development of own employees. Holding are established with consideration of strategic objectives and KPI. These indices are further 3.4.2. KPI System decomposed into structural subdivision KPI and separate employee KPI. ARMZ Uranium Holding Co. uses a KPI personnel performance management system. Introduction of

Table 20. Types of KPI

Collective KPI The Rosatom CEO can set a collective KPI for all employees of the Corporation entities. In this case the target KPI, the lower and upper limits of the collective KPI, and the KPI type will be the same for all KPI roadmaps and will be cascad- ed from the roadmap of the CEO’s KPI.

Decomposed KPI KPI from the head’s roadmap. KPI achievement by subordinate managers shall ensure KPI achievement by superior managers (KPI decomposition scheme).

Functional KPI KPI developed by the functional manager of the superior company (Rosatom State Corporation).

74 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 23. Decomposition Principle

KPI of company director Address by Chief Executives Address

KPI of deputy company KPI of deputy company directors directors About the Company

KPI of unit KPI of unit KPI of unit KPI of unit directors directors directors directors

2013 Results In 2013, a collective KPI named Adjusted Free Cash

Flow was introduced for all Holding employees. and Management System Strategy

Results of Director General’s KPI System Application*

Table 21. 2013 JSC Atomredmetzoloto Target KPI

KPI title and unit of measurement Target value Actual value Management Capital Effective

Adjusted Free Cash Flow at Rosatom State Corpora- 157.27 174.5 tion, billion RUB

Involvement, % 55 55

Adjusted Free Cash Flow at JSC Atomredmetzoloto, 4.30 5.9 Engagement Stakeholder billion RUB

Unit cost per ton of uranium, thousand RUB/ton 3,518 3,337 Appendices Reduction of uranium bearing reserves at the NFC IS 10.7 12.2 in general, RUB billion

Labour productivity, million RUB/person 2.69 2.84

Lost-time injury frequency rates (LTIFR) 10% decrease as com- achieved pared to the reference period

* Director General’s KPI are approved by the Board of Directors

75 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2014 Plans Increase the role of KPI in the personnel motivation system. 3.4.3. Human Capital Features

Number of Employees The 2013 average headcount demonstrated a 5.7% year-on-year increase (627 people) and amounted up to 11,588 people. The biggest part of the increase is due to JSC PIMCU (560 people or 6.4%) and JSC Kh- iagda (73 people or 21.7%) and resulted from produc- Paramilitary mine rescue team, tion expansion. JSC PIMCU

Figure 24. Average Headcount Dynamics in 2011–2013, people

2011 2012 2013 11,588 10,961 10,453 9,313 8,753 8,294 723 787 757 479 409 442 433 442 301 409 437 336 223 228 236

JSC Atomred- JSC PIMCU JSC Dalur JSC Khiagda JSC VNIPI CJSC RUSBUR- TOTAL metzoloto promtechnologii MASH

Nikolay Shirokorotov, Deputy Head of the Mining Machinery Equipment Maintenance, underground uranium mine No. 1, JSC PIMCU

76 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 25. Average Headcount Dynamics in Main Regions of Operation, people

2011 2012 2013 9,695 9,070 8,674 Address by Chief Executives Address 770 749 704 567 567 563 499 438 308 134 137 127

Moscow Kurgan Region Irkutsk Region Transbaikal Territory Republic of About the Company Buryatia

Similar dynamics can be seen in the headcount Within the reporting period only 66 employees of all by regions of operation. The number of employees S&A worked part-time, which is less than 1%. increased in the Transbaikal Territory and Buryatia, 340 people (3%) worked under a fixed-term employ- where JSC PIMCU and JSC Khiagda operate. ment contract.

Figure 26. ARMZ Uranium Holding Co. Personnel by Employment Contract and Employment Conditions,

people and Management System Strategy

Employed under an indefinite-term employment contract 405 340 380 11,445 11,305 Employed under a fixed-term 10,288 employment contract Effective Capital Management Capital Effective

10,668 11,850 11,645

2011 2012 2013

Gender and Age In 2013, 8,396 men and 3,249 women worked at ARMZ Uranium Holding Co.

Figure 27. ARMZ Uranium Holding Co. Personnel by Gender in 2011–2013, people Engagement Stakeholder

71% 29% 72% 28% 72% 28% (7,521) (3,147) (8,571) (3,279) (8,396) (3,249) Men Women Men Women Men Women Appendices

2011 2012 2013

77 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Personnel by Age In 2013 the percentage of employees by age showed very little changed.

Figure 28. ARMZ Uranium Holding Co. Personnel by Age in 2011–2013, people

Under 35 36 to 50 Over 50

28% 41% 25% 43% 24% 43% (2,995) (4,401) (2,952) (5,097) (2,797) (5,062)

31% 32% 33% (3,272) (3,801) (3,786) 2011 2012 2013

Personnel Turnover Mining Division). At JSC VNIPIpromtechnologii, the The general turnover within the Holding in 2013 turnover went up from 11% to 20% due to retirement. went up from 17% to 23%. A 13% turnover increase The JSC Khiagda personnel policy in 2012–2013 made at JSC Atomredmetzoloto is related to organisation the company a more attractive employer, which result- changes in the Holding (restructuring of the Rosatom ed in reducing the turnover from 43% down to 26%.

Figure 29. Turnover by Gender in 2011–2013, %

Men 6.1 3.8 5.5

Women 18.9 16.5 17.3

22,7 22 23,4

2011 2012 2013

Figure 30. Number of Dismissed Employees by Regions of Operation, people

2011 2012 2013 2,461 2,308 2,023 214 197 172 92 78 85 67 60 47 31 28 29

Moscow Kurgan Region Irkutsk Region Transbaikal Territory Republic of Buryatia

78 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.4.4. Remuneration System Figure 31. Number of Dismissed Employees by Gender, people The Single Unified Remuneration System (SURS) was introduced at all JSC Atomredmetzoloto entities Men and established a common approach to remuneration payments. Women 2,323 Address by Chief Executives Address Table 22. Expenses and Deductions Related to 1,653 1,781 Remuneration at ARMZ Uranium Holding Co. Entities in 2011–2013, million RUB 880 698 557 2011 2012 2013

Payroll 4,903 6,376 7,346 2011 2012 2013 About the Company

Personal income tax 684 771 917

Insurance contributions 1,476 1,532 1,940 to payroll Strategy and Management System Strategy Effective Capital Management Capital Effective

Figure 32. Remuneration Amount at ARMZ Uranium Holding Co. Entities in 2011–2013, RUB Engagement Stakeholder 96,551 Appendices 73,750 72,800 60,849 58,024 55,347 52,631 50,022 42,658 43,232 36,659 35,086 31,845 29,588 27,966

JSC PIMCU JSC Dalur JSC Khiagda JSC VNIPIpromtech- CJSC RUSBURMASH nologii

79 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 33. Minimum Salary to Entry Salary in Regions of Operation, RUB*

Region minimum

Entity minimum 16,200 13,165 12,200 / 6,782 12,000 11,700 / 4,611 11,000 11,088 10,737 9,719 8,462 8,462 7,289 7,312 7,289 6,782 / 6,693 6,782 6,495 6,207 5,683 5,114 4,611 / 6,693 4,611 4,611 4,611 / 5,338 – – – – – –

2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 JSC PIMCU JSC Dalur JSC Khiagda JSC VNIPIpromtech- CJSC RUSBUR- nologii MASH 14,212 14,212 14,212 14,212 14,212 14,038 14,038 14,038 14,038 14,038 14,038 14,038 14,038 14,038 14 038 12,200 11,700 10,737 6,782 6,693 6,693 6,207 5,683 5,338 5,205 5,114 4,611 4,611 4,611 4,611

2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013 Moscow Kurgan Region Irkutsk Region Transbaikal Territory Republic of Buryatia

* A region of operation is a subject of the Russian Federation where the Holding operates: Moscow, the Transbaikal Territory, the Kurgan Region, the Republic of Buryatia, and the Irkutsk Region.

The average growth of the average salary was 13.5%. The minimum salary at all the entities is higher than the minimal income threshold in the regions of operation.

2014 Plans Further harmonisation of the SURS. 3.4.5. Social Policy of the Company

In 2013 the Integrated Industry Social Policy of Ro- satom and its Entities was introduced for all entities of the Holding. Social payments to employees increased from RUB 177 million in 2012 to RUB 254 million in 2013. The Company offers the following social benefits: Dmitry Dementyev, Head voluntary medical insurance, sickness and accident of Underground Mine Area insurance, health resort treatment and vacations, No. 8, JSC PIMCU housing improvement assistance, retirement bene-

80 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

fits (non-state), social support, support for veterans Figure 34. Social Payments to Employees, % and pensioners, meals, awards, sports and cultural events. 1.8% 6.5% Presents for anniver- Compensation for rented In September 2013, ARMZ Uranium Holding Co. saries, professional accommodation mounted sports competitions at the Serebryany Bor holidays, and the New beach (Moscow) for its employees and personnel of Year 0.2% Compensation of travel its entities: employees of JSC PIMCU, JSC Dalur, ESK vouchers ARMZ (ARMZ Service LLC), CJSC RUSBURMASH, JSC by Chief Executives Address EGMK-Project, and JSC VNIPIpromtechnologii took part in them. The total amount of participants was 196 18.4% 16.1% 2.3% VME employees. It was the first time a corporate sports Additional Voluntary life payment upon and accident competition had been organised. retirement insurance The Holding carries out a non-state pension benefit

programme. About the Company It is carried out in compliance with Russian law. Non-state pension benefits are financed by the employee (0.8% to 3.3% of the salary depending on age) and the employer (1.5% to 10.0% of the employee’s salary). At JSC PIMCU, 1,083 people participate in this programme. In 2013, 17 retired participants of the programme started receiving their non-state pensions. Over RUB 35 million was transferred to employer accounts. JSC Dalur made pension trans-

fers to 225 retired employees, amounting up to RUB 12.7% 21.3% and Management System Strategy Compensa- 2 million. Retirement tion for travel benefits expenses 2014 Plans: 4.8% 15.9% To continue implementation of the Integrated In- Financial Sports and cultural dustry Social Policy. assistance events Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

81 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.4.6. Training and Development

2013 Results:

Table 23. Training and Development of ARMZ Uranium Holding Co. Personnel in 2013

Employee value Sports competitions were mounted for teams from JSC Atomredmetzoloto, JSC PIMCU, JSC Dalur, ESK ARMZ (ARMZ Service LLC), CJSC RUSBURMASH, JSC EGMK-Project, and JSC VNIPIpromtechnologii. A separate sports team was formed including children of the Holding personnel to participate in special sports games for children, including a family competition. The children’s programme included the following games: futsal, volleyball, ping-pong, chess, darts, racing, and kettlebell lifting.

Internal Four Personnel Information Days were organised. Each Information Day covered an communications average of 7,000 people.

Professional Training sessions and modules by functional directions were mounted for JSC development and Atomredmetzoloto and S&A employees. training Best Young Specialists of JSC PIMCU were awarded (shaft men, timber-men, and other professions). The Overmen School programme was developed. A profession-oriented event was mounted to select candidates for universities enrolment in 2013. Target training programmes for employees were organised at universities and colleges. JSC Khiagda continued training for main industrial specialities at integrated advanced training courses for wellfield operators (ISL uranium production) developed by Miass Geologic Survey College. In addition hydrometallurgy instru- mentation workers were trained at Vocational College No. 15. On the basis of its educational centre, JSC PIMCU started a mentor training programme to increase mentors’ professional level, skills, and competencies. Public transport drivers participated in a service culture programme. To ensure mobility of the LF personnel, they were trained in second and adjacent professions. Six specialists of JSC PIMCU participated in short-term trainings at facilities operating in the same field but not run by the Corporation.

Personnel reserve Rosatom personnel reserve programmes were carried out.

82 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 35. Training Hours per Person by ARMZ Uranium Holding Co. Entities, hr/person

2011 2012 2013

Managers 141 134 Address by Chief Executives Address 73 60 58 56 47 30 30 31 27 28 25 20 18 13 About the Company 9 9

JSC Atomred- JSC PIMCU JSC VNIPIpromtech- JSC Dalur CJSC RUSBURMASH JSC Khiagda metzoloto nologii

Subordinates 133 92 66 59 Strategy and Management System Strategy 54 36 16 16 15 14 9 10 2 0 0 0 0 0

JSC Atomred- JSC PIMCU JSC VNIPIpromtech- JSC Dalur CJSC RUSBURMASH JSC Khiagda metzoloto nologii

Nina Smirnova, Remote Control Operator at cat. 8 chemical production, Sulphuric Acid Shop of the Management Capital Effective JSC PIMCU Hydrometallurgical Mill Stakeholder Engagement Stakeholder Appendices

83 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

2014 Plans:

Employee value To continue implementation of the sports initiatives and organise more corporate sporting events

Internal To organise three Information Days in 2014 communications

Professional To develop and implement mentoring programmes development and training

Personnel reserve To carry out the personnel reserve programmes Capita, Personnel Assets and Rosa- tom Talents, and new selection events to form a pool of well-qualified, top of the line, and junior managers to prepare them for work in key positions and projects

3.4.7. Work with Students and Russian State Geological Prospecting University, Youth Ural State Mining University, Siberian Federal Uni- versity, Transbaikal State University, Moscow Pow- One of the priority areas of the ARMZ Uranium er Engineering Institute, and NRNU MEPhI Sever- Holding Co.’s personnel policy is to look for, at- sky Technology Institute. tract, and support talented young people with the required theoretical and practical knowledge. 2014 Plans In 2013 the pool of highly-qualified ARMZ Urani- To continue active interaction with youths (also un- um Holding Co. specialists mainly contained em- der the Young Programmes project). ployees with high-quality professional education. In 2013 the work with youths and students performed by the Holding was also focused on prospective HR for the development of the research and production potential and succession within the Holding. The Holding employs the following methods in its work with youths: ■■ training employees and their family members at universities (target education); ■■ inviting students to undergo their practical and pre-graduation training at the Holding entities; ■■ organisation of mentoring; and ■■ training, advanced training, etc. Young Holding employees participated in the Rosatom Forsazh Youth Innovation Forum, in the organisation of the 3rd Youth Educational Environ- 3.4.8. Support for Veterans and mental Forum Ekoline-2013, and the ARTnova Mu- Pensioners sical Creative Project: sport competitions of various levels; volunteer clean-ups; and other social-relat- Following the traditions of the Ministry of Medium ed events. Machine Building, Ministry for Atomic Energy, and Ro- On October 10–11, 2013, the final stage of the satom State Corporation, since 1992, the trade union Young Talents competition was held (for the 3rd of JSC Atomredmetzoloto has been providing social year in a row organised by ARMZ Uranium Holding benefits to employees and retired atomic scientists. Co.). Students from more than 15 Russian univer- At present the delegate body of the JSC Atomred- sities participated in it. Winners were from NRNU metzoloto personnel is a trade union that participates MEPhI, National Mineral Resources University, in rendering legal and social support to personnel.

84 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices As of December 31, 2013, 7 employees and 17 re- Personnel Advisory Board that participates in the tired veterans were registered with the JSC Atomred- relations between the employer and employees. At metzoloto trade union. CJSC RUSBURMASH there is no collective agreement, and the trade union is only formed by employees of the economically autonomous structural 3.4.9. Trade Unions and Collective subdivision Khiagda Drilling Office (61 people). Agreements Thus, collective agreements exist at three S&A; such agreements are effective for three years and Trade unions are operating at JSC PIMCU and cover important issues regarding the relations be- JSC VNIPIpromtechnologii. At JSC Dalur there is a tween the employer and employees.

85 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table 24. Rate of Employees Covered by Collective Agreements in 2013, people, %

Entity Number of employees Total amount of employ- Rate of employees covered by collective ees, people covered by collective agreements, people agreements, %

JSC PIMCU 9,313 9,313 100

JSC Dalur 442 442 100

JSC VNIPIpromtechnologii 409 409 100

3.4.10. Occupational Health and ■■ the minimisation of occupational disease factors. Safety Radiation Safety Occupational health and safety (OHS) goals of JSC Within the reporting period, the individual effective expo- Atomredmetzoloto are as follows: sure at JSC Atomredmetzoloto S&A was not more than 20 ■■ zero industrial accidents; mSv. The individual exposure of 100 mSv was never exceed- ■■ compliance with safety requirements; ed from 2009 to 2013. ■■ no production emergencies; and

Table 25. Average Effective Exposure in 2013, mSv

Entity Average Effective Exposure

JSC PIMCU 3.30

JSC Dalur 1.37

JSC Khiagda 1.19

JSC VNIPIpromtechnologii 1.32

2013 Results Figure 36. LTIFR at JSC Atomredmetzoloto ■■ LTIFR at JSC Atomredmetzoloto entities went Entities down from 1.07 to 0.55 as compared to the previous three years. The reduction rate was 48%, actual target with the target reduction rate of 10% (0.96) set by JSC Atomredmetzoloto. 2,50 ■■ Casualties occurred at JSC PIMCU and CJSC 2.23 RUSBURMASH. As compared to the 3-year ref- 2,00 erence period, the amount of casualties was re- 1,50 duced nearly twofold, from 19 down to 10 casu- 1 0.96 alties. 1,00 0.55 ■■ In 2013 at JSC Atomredmetzoloto there were no 0.39 casualties subject to investigation in accordance 0,50

with federal norms and regulations. 0,00 2011 2012 2013

86 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Figure 37. Number of Casualties at JSC Figure 38. Total Number of Casualties in 2011–2013 Atomredmetzoloto Entities

19 total minor major 20,00

18,00 fatal group

16,00 15 Address by Chief Executives Address 14,00

12,00 10 10

10,00 7 7

8,00 6 5 About the Company 6,00 4 2 2 2 4,00 2

2,00 1 1

0,00 average for 2010–2012 2013 2011 2012 2013

Figure 26. Fatal Injury Frequency Rate (FIFR) Strategy and Management System Strategy 2011 2012 2013

0.02 0.01 0.02

Figure 27. Lost Work Day Rate (LWDR)

2011 2012 2013 Effective Capital Management Capital Effective

13.23 2.16 0.3

Figure 28. Occupational Diseases Rate (ODR)

2011 2012 2013 Engagement Stakeholder

0.39 0.75 0.05 Appendices

The injury rate was effectively reduced and safe 2014 and Mid-Term Plans working conditions were ensured through: ■■ Ensuring proper personnel rotation based on eval- ■■ the safety culture development project based on uation results; best global practices and created with the assis- ■■ use of radon testing devices at closed work sites; tance of DuPont Science and Technology; and and ■■ evaluation of S&A manager and specialist perfor- ■■ implementation of technical measures for better mance in terms of labour safety and industrial, ra- radiation safety at production facilities of S&A. diation, and environmental safety.

87 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 3.5. Intellectual Capital Management

3.5.1. Innovative Activities Innovation Development Programme JSC Atomredmetzoloto innovative activities pursue Development plans for breakthrough, mandatory the following goals: (environment protection and industrial security), and ■■ To enhance the efficiency of uranium ore mining support technologies have been incorporated into four and processing methods; innovative projects implemented since 2011 under the ■■ to increase the stake of “reasonably priced” mining JSC Atomredmetzoloto Innovation Development Pro- methods within the common framework of urani- gramme for 2011–2020. um concentrate production; and ■■ to introduce modern competitive methods in the Project 1. Establishment of a New Uranium course of business diversification. Geotechnical Production Platform The following directions are considered as priority The purpose of the project is to create innovative, in the Holding: highly economical, and eco-friendly geotechnologies for uranium deposit development at all project stages JSC PIMCU: (from exploration and mining to subsoil and land rec- ■■ To develop a method for removing uranium ore tail- lamation). ings into the goaf at HMPs; ■■ further processing of off-balance ore dumps under 2013 Results the contract with the Russian Ministry of Education ■■ Laboratory tests of heap leaching (HL) and in situ and Science; and leaching in blocks (ISLB) stimulation with the help ■■ pilot testing of non-waste gold-bearing sulphur of surface-active agents (SAA) were completed. The waste processing. SAA that are most effective for HL of picked off-balance ore products and ISLB were identified. Pilot JSC Khiagda: technical works (PTW) were commenced. Within ■■ To increase process wells efficiency. two months of PTW, uranium extraction volume increased by 10% as compared to the currently em- JSC Dalur: ployed scheme. ■■ To test new technologies in the course of pilot works ■■ An expert and analytical system was established at the Khokhlovskoye field. for multi-factor comparative analysis of block In 2013 the general innovation costs, including R&D, processing, geotechnology optimisation, and were RUB 253.5 million, RUB 101.98 million of which planning and design of DISL block processing. was spent on R&D development. Innovative projects of With the help of the system, the ISL process can JSC Atomredmetzoloto were financed by the Holding’s be intensified and JSC Dalur field development own funds and by subsidies granted by the Russian efficiency can be increased. Ministry of Education and Science. ■■ Optimum modes were identified and a process scheme developed for producing leaching agents at the mine. This was the result of experiments on Figure 39. Holding Innovative Development producing sulphurous leaching solutions with ox- Programme Costs, million RUB idising properties that were verified by Urals Sci- ence and Technology Centre in a laboratory and on 300 a pilot plant. 253.5 ■■ Forecast and optimisation calculations were per- 250 226 formed with regard to block processing at the Khiagda field with the use of sulphurous DISL 200

156.6 on the basis of a software package developed by

150 the NRNU MEPhI Seversky Technology Institute. Following the analysis of multi-option forecast 100 calculations, recommendations were given for optimum operation modes, basic geotechnical 50 processing values were determined for a set extraction grade, and a production schedule was 0 2011 2012 2013 drawn up. The recommendations will ensure in-

88 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy Ruslan Urubchev, Pump and Engine Repairman, JSC PIMCU

creased average uranium concentration in block tion level, the aim of this project is to reduce the prime product solutions, a quicker uranium extraction cost of final products through modern, highly efficient rate, and a lower rate of acid consumption. technologies and integrated subsoil development. ■■ Selection of optimum oxidising agents were completed for uranium in situ leaching from 2013 Results Effective Capital Management Capital Effective Khiagda ores. According to the experiments on ■■ Geophysical equipment was developed and intro- leaching uranium from unoxidised ore samples duced for uranium gamma-tests at production in the presence of various oxidising agents, such sites and mines of JSC PIMCU. The equipment re- agents bring about a threefold increase of the placed the outdated and worn out equipment devel- leaching rate and a 1.5-fold reduction of sulphur oped in 1970s–1990s. Following the introduction of acid consumption. Uran-M devices, in 2013, actual uranium losses and ■■ Research was completed and a pilot operation ore dilution were diminished at Mines Nos. 1 and 2

commenced to process off-balance ore dumps and the Gluboky mine. Engagement Stakeholder fromJSC PIMCU. An ore-picking facility was ■■ JSC PIMCU performed pilot testing of the optimised mounted and put into operation to sort dumps method for uranium agitation leaching, which resulted from the Tulukuy quarry. In 2013, over 50 thou- in a significant reduction of oxidising agent consump-

sand tons of uranium ore concentrate were pro- tion as well as the consumption of materials, and Appendices duced from off-balance dumps with the use of agents and power saving, which reduced the aggre- the ore-picking facility. gate costs of hydrometallurgical crude ore processing.

Project 2. Development of a Refractory Ore Project 3. Introduction of Geological Mine Modelling Enrichment and Processing Method for the Elkon and Mining Operations Planning: Development of a and the Streltsovsky Uranium Ore Districts Single Geologic Database The refractory ore fields of the Elkon and the Streltsovsky uranium ore districts account for about 2013 Results 80% of uranium commercial reserves in Russia. Due ■■ The development of producing blocks of Mine No. 8 to a high capital-output ratio and low uranium extrac- demonstrated that modern mining and geological

89 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

CAD technologies (MineFrame) facilitate less ore ■■ in terms of the operational life (200–250 hrs) of dilution and increased uranium content in mined the ING-12-50-100BT neutron generator, the ore as compared to the mining method traditionally equipment is at the level of similar foreign de- used at JSC PIMCU. vices and is unprecedented in terms of its small ■■ Under the project of Streltsovsky Ore Field Geody- logging tool external diameter of 48 mm. Due to namic Grounds creation, a laser strainmeter was reducing the tool diameter from 60 to 48 mm, it developed, a 3D model of rock mass stress-strain can be used for measuring exploration and pro- behaviour completed, and an automated wide- cess wells with a wider structure both in Russia range lithological pressure control system was de- and abroad; veloped and installed at monitored areas of Mines ■■ metrological examination and pilot operation were 1 and 2 and the Gluboky mine. In 2014, the plan is completed to certify the measurement method. to complete the geodynamic grounds project that Method certification will be done in 2014. will increase underground operations safety and In 2012 the project Developing a Complex Ge- reduce the number of mining operations accidents. otechnology-Based Processing Method for Low- ■■ Contingency geomechanical modelling substantiat- Grade Uranium Ore was launched. In 2013–2015 ed decreasing the goaf to be stowed from 80% to the Russian Ministry of Education and Science sub- 67%, thus saving on stowing operations. sidised RUB 150 million for R&D. The 2013 R&D activities by the Transbaikal State University (RUB 30 Project 4. Development of a New-Generation million) were funded using the subsidy. In 2014 the Integrated Hardware and Methodical Logging project will be continued. Further RUB 50 million System for Direct Uranium Identification in Wells from the subsidised funds were allocated to this with Prompt Neutrons Method (IHMS PNM) project. In 2013 project approach to R&D was introduced. It 2013 Results is supposed that treatment of R&D as one of the stag- ■■ Detailed engineering drawings were prepared, es making up the chain of innovation development, and prototypes of the IHMS PNM-M-48 downhole introduction, and commoditisation will make R&D tool were manufactured for direct uranium in situ self-sustaining. identification with the prompt neutrons method;

3.6. Social Capital Management 3.6.1. Stakeholder Engagement

Stakeholders Key issues Engagement mechanisms

Shareholders ■■ building up and diversifying re- ■■ convening General Meetings of source base Shareholders ■■ effective use of investments ■■ disclosure on an external web- ■■ safety priority site ■■ regular reporting

Investors ■■ effective use of investments ■■ regular meetings and good growth quality ■■ disclosure on an external website

Local communities ■■ expectations of local communi- ■■ public opinion polls ties ■■ public hearings related to an- ■■ implementation of sustainable nual report publications development projects ■■ public hearings related to the construction of new facilities ■■ information via mass media

90 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Stakeholders Key issues Engagement mechanisms

State and municipal authorities ■■ tax deductions ■■ cooperation agreements and local communities in regions of ■■ developing regions of operation ■■ regular meetings operation ■■ environmental responsibility ■■ responsible personnel and social policy Address by Chief Executives Address

Business partners ■■ stable cooperation ■■ meetings ■■ protecting and complying with ■■ disclosure on an external web- shareholders’ rights and inter- site ests ■■ modern projects About the Company

Holding’s personnel ■■ fair remuneration ■■ drawing up and signing collec- ■■ training, development, and ca- tive agreements reer prospects ■■ Information Days ■■ competitive social benefits ■■ regular meetings between managers and workers to discuss Holding activities, including the Foremen Council at JSC PIMCU ■■ internal mass media and feedback

■■ public hearings related to annu- and Management System Strategy al report publications

Consumers ■■ stable and reliable supplies ■■ regular meetings ■■ disclosure on an external website

Mass media and research and pro- ■■ operation efficiency ■■ press conferences and media duction associations ■■ development prospects briefings ■■ environmental safety ■■ public hearings related to an- Effective Capital Management Capital Effective ■■ major developments nual report publications ■■ social responsibility ■■ media tours for Russian and foreign mass media ■■ comments on issues related to JSC Atomredmetzoloto activities Stakeholder Engagement Stakeholder Appendices

91 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.6.2. Developing Regions of redistribution of the income tax paid to the Mos- Operation cow and the St. Petersburg regional budgets and the budgets of the regions where Rosatom facilities 3.6.2.1. Economic Impact in Regions of Operation are registered and operated. Each subject of the In 2012 Rosatom State Corporation established Russian Federation receives a part of the consoli- a consolidated group of taxpayers. On the part of dated Rosatom income tax depending on the value JSC Atomredmetzoloto, the programme was joined of fixed assets registered there and the number of by JSC PIMCU (Transbaikal Territory), JSC Khiag- personnel. da (Buryatia), JSC Dalur (Kurgan Region), and CJSC In 2013 tax deductions to regional budgets in the RUSBURMASH. The CGT was established to incor- regions of operation increased. The biggest growth porate the income tax base of interrelated (equity was demonstrated by tax deductions to the Trans- holding) companies and change over to paying the baikal budget due to JSC PIMCU registered there; in income tax based on the income share of each CGT 2013, RUB 565.9 million in tax was paid in addition member. The establishment of CGT brought about to the planned amount.

Table 29. Taxes Paid by ARMZ Uranium Holding Co. Key Entities to Regional Budgets, million RUB

Entity 2011 2012 2013

JSC PIMCU 797 641 1,017

JSC Dalur 158 270 378

JSC Khiagda 100 126 197

92 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

On February 28, 2013 the regional social and eco- 2014 Plans nomic development programme was approved for ■■ Launching a new Krasnokamensk—Chita flight; Krasnokamensk and the Krasnokamensk Region ■■ completion of the sport centre general construction to fund city facilities from the regional budget. The works; 2013–2017 city development plan was drawn up. ■■ reconstruction of two kindergartens; The most important 2013 project was the launch ■■ transfer of the ownership of treatment facilities and of air communication between Krasnokamensk and a water conduit on the JSC PIMCU balance sheet

Chita. The first flight took place on August 5, 2013. to the municipal authorities for reconstruction; and by Chief Executives Address In 2013 in Krasnokamensk a sport centre project ■■ opening Argun and Bogatyr gyms and the Argun was under implementation: a construction site was stadium for visitors. selected, a design was completed, and a contractor was found. RUB 35 million was allocated to renovate 3.6.2.2. 45 Things by the JSC PIMCU 45th the race tracks and the terrace of the Argun stadi- Anniversary Programme

um. RUB 280 million was allocated to ensure more In August 2013, JSC PIMCU celebrated its 45th anni- About the Company places for children in kindergartens. A total of RUB versary. By the anniversary date, ARMZ Uranium Hold- 346 million was allocated for Krasnokamensk social ing Co. and JSC PIMCU had completed the 45 Things development. by the JSC PIMCU 45th Anniversary Programme aimed Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

93 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 at better labour conditions and a more active social life completed in 2012. JSC Atomredmetzoloto and JSC PIM- in Krasnokamensk. A part of the 45 things was already CU allocated over RUB 410 million for the programme.

Table 30. 45 Things by the JSC PIMCU 45th Anniversary Programme

No. Completed in 2012 Execution period Check-off

1 Presenting school backpacks to JSC PIMCU employ- 25.08.2012 ees' children entering the 1st grade

2 Opening a memorial to S. Pokrovsky, the first director, 01.09.2012 in school No. 7 named after him

3 Volunteer clean-up at the Gornyak sanatorium asso- 29.09.2012–01.10.2012 ciated with the International Day for the Elderly and arranging recreation for retired veterans

4 2nd Youth Educational Environmental Forum ECOL- September–October 2012 INE-2012 (winners awarded on 20.10.2012)

5 Launching an additional retirement benefit corporate since 01.10.2012 programme for JSC PIMCU employees

6 Open competitions among Company employees to October–November 2012 develop a Best in Profession sign or logo to be used as one of the JSC PIMCU official awards and a JSC PIMCU anniversary badge

7 45 Working Weeks Marathon for the JSC PIMCU 45th October 2012 – July 2013 Anniversary among Company teams

8 Putting Mine No. 8 into operation November–December 2012

9 Issue of the Gornyak Priargunya (Priargunye Mine- since 20.11.2012 worker) newspaper in A3 colour variant (distributed at newsstands)

10 Opening a skating rink and playgrounds at the Gornyak December 2012 – January sanatorium and New Year recreation for JSC PIMCU 2013 employees' families

Completed in 2013

11 Enactment of the new version of the Regulations of January Vacation Fare Compensation (for JSC PIMCU employees once a year and for employee's family members once in three years)

12 Modernisation of changing rooms and showers at the January–December Uranium Mine Office

94 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

No. Completed in 2013 Execution period Check-off

13 Repair and modernisation of facades and accommoda- January–August tion premises of the Gornyak sanatorium

14 Construction of an administrative building for the Ur- January–November tuyskoye Section Administration Address by Chief Executives Address 15 Reconstructing the DAURIYA recreation centre and January–August equipping a cinema

16 Sports competitions for Company entities including January–August new types of sports About the Company 17 An anniversary competition among amateur artistic January–August groups

18 Completion of de-preservation of Mine No. 6 with February pumping water out of shafts

19 2nd ARTnova Musical Creative Project February–August

20 Good Deed volunteer movement; registering the Kras- March

nokamensk Youth Public Organisation for implementing and Management System Strategy joint social projects

21 Installation of bus stops at production sites and opti- March–August misation of personnel transfers

22 Repair of facilities at the Sputnik and the Argun kids May recreation camps

23 Signing 45 target contracts for university and college May Management Capital Effective education with grant payments

24 The Bridge Between Generations Parade dedicated to May the Victory Day

25 Presenting backpacks to first-grade and school gradu- May 25

ate children of Company employees Engagement Stakeholder

26 A social campaign on planting pine trees at two city June sites (Shakhtyorov Prospect and Pokrovsky park)

(some of them with name plates) Appendices

27 Establishment of a paintball club of the JSC PIMCU June shop-floor trade union

28 Equipping outdoor playgrounds in every part of the city June

29 Constructing an outdoor sporting grounds for youths June

95 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

No. Completed in 2013 Execution period Check-off

30 A city-wide youth volunteer clean-up associated with June the Day of Youth

31 Industry-related graffiti competition June

32 Work of the anniversary-related youth construction June–August team

33 Summer school for children at the Argun camp June–August

34 Taking pictures and organising photo exhibitions In- June–August dustrial Art and Krasnokamensk Today; workshops for beginners conducted by renowned industrial art style Moscow photographers. Pictures of production depart- ments were made.

35 Launch of construction of a sport centre with an inte- August grated gym and a swimming pool

36 Installation of a JSC PIMCU memorial August

37 Installation of the JSC PIMCU Labour Memorial in the June–August Stroiteley Prospect with 45 Steps to the JSC PIMCU 45th Anniversary information boards

38 Meeting in Krasnokamensk of Company veterans from August all over Russia

39 Anniversary-related sports competitions July

40 Anniversary-related Best Young Specialist competition July (by profession) with more professions nominated

41 1st Uranium Racing Inter-Regional Motor Fest July

42 Anniversary-related JSC PIMCU yearbook entitled “45 August Steps to the 45th Anniversary”

43 Issue of commemorative JSC PIMCU 45th anniversary August medals

44 Opening a branch of the Health Academy (city kine- August sitherapy centre)

45 Installation of a monument to the first Company direc- August tor in the Pokrovsky park

96 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company

3.6.2.3. Charity and Sponsorship ■■ arranging a tour to Greece for the winners of the In 2013, ARMZ Uranium Holding Co. continued ARTnova-2013 projects; charity projects mainly focusing on the regions of op- ■■ support of kids and youth sport teams and educa-

eration. tional institutions of the villages of Uksyanskoye and and Management System Strategy Lyubimovka (Dalmatovo Area, Kurgan Region) and 2013 Key Projects the city of Dalmatovo in areal, territoryial, regional, ■■ 2nd ARTnova Musical Creative Project; and national championships; and ■■ 3rd Youth Educational Environmental Forum EKO- ■■ sponsoring of a volunteer movement and the im- LINE-2013; plementation of social and youth projects in Kras- ■■ 3rd Kids and Youth Sport Competitions Break- nokamensk. through-2013; Effective Capital Management Capital Effective 3.7. Natural Capital Management

3.7.1. Environmental Policy of the a minimum environmental footprint and the best pos- Company sible preservation of the natural environment in pro-

duction areas. Engagement Stakeholder Mining facilities invariably cause an ecological foot- The following was completed to implement the En- print. The most important environmental safety direc- vironmental Policy: tion is correct forecasting of environmental impact at ■■ environmental impact was reduced due to compli-

the design and operation stages, minimisation of such ance with Russian law and international agreements; Appendices impact in the course of current operation, and recla- ■■ economic mechanisms were implemented to stim- mation upon shutdown. ulate footprint reduction; The key document in this area is the JSC Atomred- ■■ the Company’s contractors complied with environ- metzoloto Environmental Policy based on rational use mental, industrial, and labour safety norms and of natural resources and maximum environment pres- standards set by JSC Atomredmetzoloto; and ervation. Under Rosatom Decree No. 1/937-П dated ■■ a programme for introducing an integrated quality September 5, 2013, S&A also developed and approved and environmental protection management system their individual Environmental Policies. in compliance with ISO 9001 and ISO 14001 at key The JSC Atomredmetzoloto Environmental Policy management and production subdivisions was im- supports manufacturing competitive products with plemented.

97 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.7.2. Protection of Land and Figure 40. Total Amount of Disturbed Land at JSC Biological Diversity PIMCU in 2011–2013, ha*

The downhole in situ uranium leaching is more ac- 16 ceptable in terms of environment preservation since it hardly disturbs the natural landscape. This method is 14 used at JSC Khiagda and JSC Dalur. 12 In case of underground mining (JSC PIMCU) there is a goaf that is filled with a cement, sand, and gravel 10 mix to ensure safety and minimise radon escape. 8 Upon field development disturbed land is reclaimed. 6

* Due to alteration of the method, the values are calculated under 4 Russian Federal State Statistics Service (Rosstat) Decree No. 676 2 on Approving Statistical Tools for Federal Statistic Monitoring of 0 Land Reclamation and Top Soil Removal and Use by the Federal 2011 2012 2013 Supervisory Natural Resources Management Service dated De- cember 29, 2012. The increase of disturbed land resulted from the development of new deposits.

98 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy

Figure 41. Total Amount of Disturbed Land at JSC Figure 42. Total Amount of Disturbed Land at JSC Dalur in 2011–2013, ha* Khiagda in 2011–2013, ha* Effective Capital Management Capital Effective 300 140

250 120 200 100 150 80 100

50 60 Engagement Stakeholder

0 2011 2012 2013 40

20 Appendices

* Due to alteration of the method, the values are calculated under 0 Russian Federal State Statistics Service (Rosstat) Decree No. 2011 2012 2013 676 on Approving Statistical Tools for Federal Statistic Monitor- ing of Land Reclamation and Top Soil Removal and Use by the * Due to alteration of the method, the values are calculated under Federal Supervisory Natural Resources Management Service Russian Federal State Statistics Service (Rosstat) Decree No. dated December 29, 2012. 676 on Approving Statistical Tools for Federal Statistic Monitor- ing of Land Reclamation and Top Soil Removal and Use by the ARMZ Uranium Holding Co. regularly monitors the Federal Supervisory Natural Resources Management Service environment and performs environmental surveys of dated December 29, 2012. Since 2012 disturbed land area ex- bushes and plants in its territories. cludes mining allotment areas.

99 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.7.3. Protection of Water Resources

Water Consumption

Figure 43. Water Consumption in 2011–2013 by Purpose and Entity, thousand m3

JSC PIMCU JSC Dalur JSC Khiagda 34,279.19 28,960.59 27,280.2 6,998.99 5,318.6 89.84 81.97 0 0 no no no 48.71 17.84 89.84 74.04 41.13 59.2

Water for production Water for drinking Total water con- Underground Surface springs Exceeding set needs needs sumption springs limits

Waste Water Discharge

Figure 44. Waste Water Discharge in 2011–2013, JSC PIMCU, thousand m3

2011 2012 2013

13,291.68 12,553.60 12,470.21

JSC Dalur JSC Dalur applies a closed-type technological cycle, so the company does not discharge water containing hazardous chemical agents and radioactive nuclides. Household waste water from the sewage is taken to a contracted special treatment facility.

JSC Khiagda No waste water is discharged into surface water bodies. Water discharged on the terrain undergoes treatment. This type of discharge is not limited by any norms.

100 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.7.4. Air Protection

Table 31. Discharge of Pollutants into the Air by JSC PIMCU, tons

Pollutant 2011 2012 2013

Carbon monoxide 765.31 870.87 929.23 Address by Chief Executives Address Sulphur dioxide 5,674.68 6,424.87 6,462.71

Nitrogen dioxide 1,493.21 1,499.81 1,604.37

Nitrogen oxide 236.13 238.13 286.49 About the Company Inorganic dust and ash 5,086.34 5,223.29 6,477.00

Inorganic dust 187.10 205.75 179.27

Other 216.41 239.19 480.05

Total 8,572.84 14,701.91 16,419.12 Strategy and Management System Strategy Table 32. Discharge of Pollutants into the Air by JSC Khiagda, tons

Pollutant 2011 2012 2013

Carbon monoxide 80.40 73.82 69.57

Sulphur dioxide 9.65 9.88 9.37

Nitrogen dioxide 16.41 4.60 Management Capital Effective 11.26 Nitrogen oxide

Inorganic dust and ash 12.57 17.93 15.15

Inorganic dust 0.04 0.14 0.35 Stakeholder Engagement Stakeholder Other 3.87 0.35 2.96

Total 122.94 106.73 108.66 Appendices

The discharge figures are given for the following two reconstructed (modernised) with a power increase production sites: CPB (Transbaikal Territory) and the from 2.89 Gcal/hr up to 6.0 Gcal/hr and the addition in situ leaching shop (Buryatia). of a new boiler (now 3 instead of 2), which resulted In 2013 the discharged amount went up due to in increased coal consumption and more pollutants production extension, new facilities construction discharged into the air. and putting into operation, and 27 additional vehi- cles, the use of which started in 2013. Furthermore in 2013 the coal boiler house of the ISL shop was

101 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table 33. Discharge of Pollutants into Air by JSC Dalur, tons

Pollutant 2011 2012 2013

Carbon monoxide 4.56 4.50 3.92

Sulphur dioxide 0 0 0

Nitrogen dioxide 2.01 1.98 1.73

Nitrogen oxide 0.33 0.32 0.28

Inorganic dust and ash 0 0 0

Inorganic dust 0.001 0.001 0.001

Other 3.57 3.59 3.63

Total 10.47 10.40 9.56

3.7.5. Waste Treatment

Table 34. Production of Waste of All Hazard Classes in 2011–2013, tons

Entity Hazard class Year JSC PIMCU JSC Dalur JSC Khiagda

Hazard class 1 2011 2.69 0.01 0.07

2012 3.807 0.007 0.087

2013 3.427 0.01 0.066

Hazard class 2 2011 1.37 0.89 0.32

2012 1.386 0.122 2.018

2013 0.636 0 1.963

Hazard class 3 2011 614.49 0.37 0.99

2012 930.912 0.336 1.385

2013 152.552 0 4.739

Hazard class 4 2011 2,694.6 22.90 4,339.41

2012 2,020.6 22.80 5,131.5

2013 2,650.9 45.0 3,380.7

102 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Entity Hazard class Year JSC PIMCU JSC Dalur JSC Khiagda

Hazard class 5 2011 22,180,541 9.70 7,224.47

2012 21,279,598 7.60 7,082.9 Address by Chief Executives Address 2013 24,467,312.3 6.9 1,893.8

Total 2011 22,183,854 33.87 11,565.26

2012 21,282,555 3.,87 12,217.4 About the Company 2013 24,470,119.8 51.9 5,281.2

Waste stored at operated facilities, tons (%) 2013 24,469,897.37 0 4,950.86 (93.7%) (99.99%)

Waste handed over to special contractors 2013 38,213.632 25.6 (50%) 332.69 (6.3%) for use and treatment, tons (%) (0.001%)

Exceeding set limits 2013 none none none Strategy and Management System Strategy Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

103 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

3.7.6. Expenses Related to Environment Preservation

Table 35. Environmental Protection Expenses in 2013, million RUB

Entities JSC PIMCU JSC Dalur JSC Khiagda

Environmental impact prevention costs

Air protection 206.37 0.10 1.06 *

Protection of water resources 45.46 0.47 80.48 **

Protection of land 18.45 0.28 19.45

Environmental management costs

Environmental monitoring 13.2 1.99 1.50

Environmental projects 107.00 0.05 4.12

Total 390.48 2.89 106.61

* The total air protection costs amount also includes RUB 0.499 million for the installation of gas treatment equipment in the course of reconstruction (modernisation) of the JSC Khiagda coal boiler house as fixed asset overhaul costs for environment purposes. ** The total water body costs include RUB 51.681 million for the construction of a flood water system and surface water collection from operational blocks, hydro insulation of storm water sumps at Deposit 6 to prevent storm water from mining sites from getting into the hydrographic network, and prevent pollution of the phreatic aquifer. Costs of the development, introduction, and certification preparation of the management system complying with ISO 9001:2008 and ISO 14001:2004. Total under the contract: RUB 1.670 million carried over to 2014; in 2013 the costs were RUB 0.23 million.

104 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Address by Chief Executives Address About the Company Strategy and Management System Strategy Effective Capital Management Capital Effective STAKEHOLDER

ENGAGEMENT IN THE Engagement Stakeholder COURSE OF REPORT Appendices PREPARATION

4.1. Discussions with Stakeholders in the Course of Report Preparation 4.2. Taking into Account Stakeholder Suggestions 4.3. Statement of Public Assurance INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

One of the basic principles of public reporting at For more details on cooperation principles, the JSC Atomredmetzoloto is stakeholder engagement in stakeholders’ key interests, and relations mecha- the course of report preparation. nisms, see 3.6.1. Stakeholder Engagement.

4.1. Discussions with Stakeholders in the Course of Report Preparation

Two discussions were held in accordance with Public Discussions of the Draft Annual Report the АА1000SES Stakeholder Engagement Standard On May 20, 2014 an in absentia discussion of the while preparing the Report. The purpose was to get 2013 JSC Atomredmetzoloto public annual report feedback from stakeholders on the quality of priority was held. The public discussion involved stakeholder topic, sustainable development, and capital manage- representatives. Stakeholders expressed their opin- ment disclosure in the Report. All ARMZ Uranium ion about the significance of disclosed information. Holding Co. stakeholders were invited to participate in the discussions.

Discussion 1. JSC Atomredmetzoloto 2013 Basic Performance and Efficiency Enhancing Measures In the course of the On March 26, 2014 from 10:00 to 12:00 in the office discussions, 16 suggestions and building of JSC Atomredmetzoloto (22 Bolshoy Drovy- anoy Per., Moscow) a discussion on JSC Atomred- recommendations were received metzoloto’s 2013 Basic Performance and Efficiency from stakeholders, and 9 of Enhancing Measures was held. them were implemented in this The discussion was related to the main production performance of the Rosatom Mining Division in 2013 Report, while the rest are still and the main performance results of CJSC RUSBUR- being reviewed by the Holding’s MASH and JSC VNIPIpromtechnologii in 2013. management in the course of Discussion 2. Organisational Changes within the ongoing operations Rosatom Mining Division and JSC Atomredmetzolo- to Development On March 26, 2014 from 12:00 to 13:30 in the office building of JSC Atomredmetzoloto (22 Bolshoy Drovyanoy Per., Moscow) a discussion on Organisa- tional Changes within the Rosatom Mining Division and JSC Atomredmetzoloto Development was held. The discussion was related to the evolution of the Rosatom Mining Division under the changing global uranium market conditions and the JSC Atomred- metzoloto development concept. For more details about the discussion see the JSC Atomredmetzoloto website: http://www.armz.ru/ press/news/?id=510.

106 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 4.2. Taking into Account Stakeholder Suggestions

Table 36. Meeting Commitments Undertaken during 2012 Report Preparation

No. Stakeholder suggestions JSC Atomredmetzoloto suggestions

1 To specify what needs of the regions will be See 3.6.2. Developing Regions of Operation. by Chief Executives Address provided for by means of the taxes paid by the Holding entities.

2 To invite more parties to hearings and invite The list of in absentia hearing participants has representatives of public environmental organi- been extended.

sations, including those disapproving of the About the Company nuclear industry, to participate in discussions with stakeholders and public hearings.

3 To conduct an excursion for environmentalists Not done due to budget optimisation. and Rosatom Community Council members to Holding entities, with JSC PIMCU being the first place.

4 To include ARMZ Uranium Holding Co.’s posi- To be included in the 2014 Report.

tion and interests in sustainable development and Management System Strategy in the current Report or mention that they will be developed in 2013. Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

107 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Table 37. Taking Shareholder Suggestions into Account as Made during Discussions in the Course of 2013 Report Preparation

No. Stakeholder suggestions based on JSC Atomredmetzoloto suggestions discussions

1 To introduce a section devoted to environmen- See 3.7. Natural Capital Management. tal protection into the Report (including results of the Environment Year).

2 To extend CJSC RUSBURMASH geographic For future. The suggestion will be reviewed by reach outside the Russian territory, diversify the Holding's management in the course of operations to not to limit them to drilling, in- ongoing operations. The 2013 JSC Atomred- crease quality, reduce prime costs, and develop metzoloto Annual Report does not require the the company as an integrated business that Company to react to this suggestion. also offers geologic exploration services.

3 To recommend JSC VNIPIpromtechnologii to For future. The suggestion will be reviewed by switch over to engineering activities, which the Holding's management in the course of means complete restructuring of its current ongoing operations. The 2013 JSC Atomred- activities with the introduction of global tech- metzoloto Annual Report does not require the nical and technological solutions becoming the Company to react to this suggestion. core activity.

4 The 2013 JSC Atomredmetzoloto Annual See 3.4.10. Occupational Health and Safety. Report should underline the Company's responsible approach to labour and industrial safety and indicate positive trends in these areas.

5 To include the mentioned development pros- See 2.1. Business Strategy. pects of JSC Atomredmetzoloto in the Strategy section of the Annual Report.

6 To mention the effect from the Rosatom Pro- See 3.3.8.1. Implementing RPS Projects. duction System implementation in monetary terms.

7 To disclose main KPIs in the report, together See 3.4.2. KPI System. with injury rates (if the data collection system allows).

8 To include information about new risks, includ- Information about risks related to the Com- ing those related to the Company's operations pany's activities in the US and Canada will be in the US and Canada in view of the latest included in the Uranium One Holding Report, political circumstances. and 2.2.3. Risk Management of the JSC Atom- redmetzoloto Report specifies the risks that JSC Atomredmetzoloto is prone to.

9 To make strategy development the priority top- For future. To be taken into account when de- ic of the annual report in the following report- veloping the 2014 Report concept. ing period.

108 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

No. Stakeholders' suggestions based on discus- JSC Atomredmetzoloto suggestions sions

10 To include the CJSC RUSBURMASH project See 2.3.1. CJSC RUSBURMASH Activities. roadmap in the Report.

11 To describe the KPI system and its perfor- See 3.4.2. KPI System.

mance. by Chief Executives Address

12 To disclose the changes in the marketing and See 2.1.3. Marketing and Sales Policy. sales policy resulting from restructuring.

13 In next reports, to confirm the GRI G4 compli- For future. To be taken into account when de-

ance level with a non-financial audit. veloping the 2014 Report concept. About the Company

14 To include a chapter about Company perfor- For future. To be taken into account when de- mance in the Report. veloping the 2014 Report concept.

15 To include significant developments outside the For future. To be taken into account when de- reporting period in the Major Developments veloping the 2014 Report concept. section.

16 To disclose capital business models, i.e. specify For future. To be included in the 2014 Report.

what capital and in what amount they were and Management System Strategy available at the beginning of the reporting period and what the gains (value delivery) were in the reporting period. Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices

109 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

4.3. Statement of Public Assurance

Background One of the advantages of the Report is that it was JSC Atomredmetzoloto (hereinafter referred to as prepared in compliance with international standards “ARMZ Uranium Holding Co.” or the “Company”) sub- (Global Reporting Initiative (GRI rev. G4.0), АА1000 In- mitted its 2013 Annual Report (hereinafter referred to stitute of Social and Ethical Accountability standards, as the “Report”) for us to review, whereby we also had and IIRC International Integrated Reporting Frame- a chance to verify the comprehensiveness and signif- work). Due to its integrity, the Report discloses in- icance of its contents and Company’s response to our formation about the Company’s main activities and recommendations. For this purpose our representa- sustainability development performance. tives were invited to participate in two discussions with We are not aware of any facts that could under- stakeholders held on March 26, 2014: mine the accuracy of the data included in the Report. ■■ Discussion 1. JSC Atomredmetzoloto 2013 Basic We think that the information disclosed in the Report Performance and Efficiency Enhancing Measures; is sufficient both in terms of compliance with inter- and national public reporting standards and taking into ■■ Discussion 2. Organisational Changes within the account stakeholder comments made at the Report Rosatom Mining Division and JSC Atomredmetzolo- preparation stage. We believe that it is the integrated to Development. Report that should represent the official position of We also took part in the in absentia public discus- the Company’s management with regard to socially sion of the draft Report on May 20, 2014. significant issues and activities of the Company.

Draft Report Evaluation Procedure Significance of Information Our opinion is based on comparative analysis of two We think that in the Report the Holding managed to Report versions (draft Report for public discussion and disclose all topics important for stakeholders. The Report the final version of the Report), materials that were represents the Company’s position on strategic develop- provided to us (minutes and a table with stakehold- ment, financial and economic performance, and social, ers’ comments) upon the discussions, and comments environmental, and economic impact. from the management and employees of the Holding The priority topics considered in the Report are: that were made in the course of public assurance of ■■ organisational changes within the Rosatom Mining the Report. Division and enhancing the efficiency of the Mining In the course of public assurance, we were not Division part located in Russia; and trying to verify the information collection or analysis ■■ key production performance as of the end of the system; neither did we confirm the accuracy of any year. information included in the Report. All participants of All significant information on the above topics was public discussions had a chance to share their opin- disclosed properly. ion. The Company did not remunerate us in any way for taking part in the public assurance procedure. Comprehensiveness We believe that the Report contains comprehen- Evaluation, Comments, and Recommendations sive information about sustainable development and We unanimously evaluated the Report in a pos- JSC Atomredmetzoloto’s sustainability performance itive manner in terms of its form and the scope of and describes nearly all the activities of the Compa- information included in it. We find it very important ny that influence economy, society, and environment that the Report was prepared voluntarily and is a and are of interest for stakeholders. To ensure com- good example of an enhanced transparency on the pliance with the comprehensiveness principle, the part of the Company. In preparing the Report, the Report contains reference to regulating documents Company demonstrated that it intended to ensure and additional open sources, including the corporate public and environmental satisfaction and was pre- website of the Company. pared to engage in open dialogue with stakeholders about various issues concerning its activities. We Company’s Reaction to Stakeholders’ Comments and can see that the Company’s management realises Suggestions the importance and prospects of engaging stake- In our opinion, the Company is stable in terms of holders. stakeholder engagement and public reporting. Three

110 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

events engaging stakeholders were mounted in the ness Strategy, Natural Capital Management, Occupa- course of the Report preparation. tional Health and Safety, Implementing RPS Projects, In fact, stakeholder engagement had started before KPI System, etc. The Company undertook to disclose the preparation of the Report, at the concept develop- information on an array of other matters in future Re- ment stage. Stakeholders had a chance to make their ports or provided a reasonable explanation for not dis- suggestions and recommendations with regard to the closing certain information. information to be disclosed in the Report. Thus, in the course of Report preparation the Com-

The Company reacted to stakeholders’ comments pany demonstrated that it was eager to react to stake- by Chief Executives Address by elaborating the final version of the Report and in- holder suggestions and recommendations and deal troducing additional information. In particular, the with the issues raised. following sections were reviewed and extended: Busi- About the Company Stepan Zhiryakov member of the Russian Council Committee for Agricultural and Food Policy and Use of Natural Re- sources, representative of the legislative (representational) state agency of the Transbaikal Territory

Grigory Mashkovets Ph.D in Geology and Mineralogy, Professor, General Director of All-Russian Scientific Research Institute of Mineral Resources (FSUE VIMS)

Yury Didenko Chairman of the Town of Krasnokamensk Council, Transbaikal Territory and Management System Strategy

Aleksey Zammoyev Chairman of the Town of Krasnokamensk and Kranokamensk Area Council, Transbaikal Territory

Boris Pichkurenko Head of the Town of Krasnokamensk, Transbaikal Territory Effective Capital Management Capital Effective Andrey Anosov Deputy Head of the Dalmatovo Area, Kurgan Region

Gennady Shirokov General Director of Dalspetsstroy LLC, Dalmatovo Area, Kurgan Region

Olga Plyamina Engagement Stakeholder Executive Director of Greenlight International Environmental NCO

Svetlana Dvoryaninova Appendices Deputy General Director and Head of the Information Department at Nuclear.ru Information Agency

111 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

112 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 APPENDICES

Appendix 1. Matrix of Company’s Activities and Sustainable Development Data Significance Address by Chief Executives Address Appendix 2. Table of Standard GRI Disclosures Appendix 3. Table of Disclosures as per the Reporting

Standard of Rosatom State Corporation About the Company Appendix 4. Auditor’s Opinion on Financial Statements Accuracy Appendix 5. Report on Compliance with the Code of Corporate Conduct Strategy and Management System Strategy Appendix 6. Terms and Abbreviations Effective Capital Management Capital Effective Stakeholder Engagement Stakeholder Appendices INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Appendix 1. Matrix of Company’s Activities and Sustainable Development Data Significance

The average score given to each of the aspects was ■■ at least 4.0 as evaluated by external stakeholders determined separately on the basis of evaluation by JSC and at least 3.0 as evaluated by internal stakehold- Atomredmetzoloto representatives and stakeholders’ ers; and representatives. A data significance matrix was devel- ■■ at least 4.0 as evaluated by internal stakeholders oped on the basis of the above analysis (see Figure 45. and at least 3.0 as evaluated by external stakehold- Matrix of Company’s Activities and Sustainable Devel- ers. opment Data Significance). The horizontal axis demonstrates significance for The most significant aspects that must be disclosed the Company and the vertical one demonstrates sig- are those that scored: nificance for external stakeholders. ■■ at least 4.0 as evaluated by both internal and exter- The aspects that scored 3.0 to 4.0 in the average were nal stakeholders; also taken into account during the Report preparation.

Figure 45. Matrix of Company’s Activities and Sustainable Development Data Significance

15 11 16 17 20 8 12 4,5 3 22 18 10 1 2 7 4 21 19 4 5 6 13 914 3,5

2,5

1,5

0,5

0 1 2 3 4 5 6

1 Social impact in regions of operation 8 Global uranium markets 18 Key risk and opportunity management 2 Public policy 9 Training and education (including availability of 19 Environmental impact management 3 Business diversification and development of qualified workforce and talent development) 20 Performance management promising segments 10 General investment in environmental protection 21 Business stability 4 Employment 11 Key production performance 22 Economic performance 5 Health and safety at work (including industrial 12 Occupational health and safety safety and compliance of labour conditions with 13 Safety approaches international occupational and industrial safety 14 Market presence standards) 15 Outlook for the future 6 Investment programme 16 Raw material base development and uranium 7 Innovative activities and technological production development programme 17 Development strategy

114 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Appendix 2. Table of Standard GRI Disclosures

GRI Clause Reflected in the Report Report section/clause Notes

General Standard Disclosures by Chief Executives Address

Strategy and analysis

G 4-1 Statement from Disclosed in full Address by the Chairman the most senior deci- of the Board of Direc-

sion-maker of the organ- tors and Address by the About the Company isation Director General

Organisational Profile

G 4-3 Name of the organ- Disclosed in full 1.1. General Information isation about JSC Atomred- metzoloto

G 4-4 Primary brands, Disclosed in full 1.1. General Information

products, and services about JSC Atomred- and Management System Strategy metzoloto

G 4-5 Location of the Disclosed in full Contact Information organisation’s headquarters

G 4-6 Countries where Disclosed in full 1.1. General Information the organisation operates about JSC Atomred- metzoloto Management Capital Effective

G 4-7 Nature of owner- Disclosed in full 1.1. General Information ship and legal form about JSC Atomred- metzoloto

G 4-8 Markets served Disclosed in full 1.2. Presence in Markets Stakeholder Engagement Stakeholder G 4-9 Scale of the organ- Disclosed in full 2013 Key Performance isation Indicators, 3.4.3. Human Capital Features, 1.1.3.

Holding Organisation, Appendices 6 3.2.1. Financial Manage- ment

115 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

GRI Clause Reflected in the Report Report section/clause Notes

G 4-10 Number of em- Disclosed in full 3.4.3. Human Capital Substantial portion of ployees Features the organisation’s work performed by workers who are legally recognized as self-employed, or by individuals other than employees or supervised workers, including employees and supervised employees of contractors — not registered.

G 4-11 Percentage of Disclosed in full 3.4.3. Human Capital total employees covered Features by collective bargaining agreements

G 4-12 Supply chain Disclosed in full 1.3. Value Chain and Business Model

G 4-13 Changes regard- Disclosed in full 1.1. General Information Changes in the location ing the organisation’s about JSC Atomred- of suppliers, the struc- size, structure, or own- metzoloto ture of the supply chain, ership or in relationships with suppliers — none.

G 4-14 Precautionary Disclosed in full Not applicable approach or principle

G 4-15 Externally devel- Disclosed in full 1.1. General Information oped charters, principles, about JSC Atomred- or other initiatives metzoloto

G 4-16 Memberships of Disclosed in full 1.1. General Information associations about JSC Atomred- metzoloto

Identified Material Aspects and Boundaries

G 4-17 List all entities Disclosed in full Information about the included in the organ- Report isation’s consolidated financial statements

G 4-18 Process for de- Disclosed in full Information about the fining the report content Report and the Aspect Bound- aries

116 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

GRI Clause Reflected in the Report Report section/clause Notes

G 4-19 Material Aspects Disclosed in full Information about the Report

G 4-20 Material Aspect Disclosed in full Information about the Boundary outside the Report

organisation by Chief Executives Address

G 4-21 Material Aspect Disclosed in full Information about the Only material Aspects Boundary outside the Report within the organisation organisation are represented.

G 4-22 Restatements of Disclosed in full No figures were restat- About the Company information provided in ed within the reporting previous reports period. There were no material changes in measurement and calculation procedures.

G 4-23 Significant chang- Disclosed in full Information about the es from previous report- Report

ing periods in the Scope and Management System Strategy and Aspect Boundaries

Stakeholder Engagement

G 4-24 List of stakehold- Disclosed in full 3.6.1. Stakeholder En- er groups gagement

G 4-25 Identification and Disclosed in full 3.6.1. Stakeholder En- selection of stakeholders gagement Management Capital Effective with whom to engage

G 4-26 Organisation’s Disclosed in full 3.6.1. Stakeholder En- approach to stakeholder gagement engagement

G 4-27 Key topics and Disclosed in full 4.2. Taking into Account Engagement Stakeholder concerns that have been Stakeholder Suggestions raised through stakeholder engagement Appendices Report Profile

G 4-28 Reporting period Disclosed in full Information about the Report

117 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

GRI Clause Reflected in the Report Report section/clause Notes

G 4-29 Date of most re- Disclosed in full The 2012 JSC Atomred- cent previous report metzoloto Annual Report was published on the Holding's website: www.armz.ru (Shareholders and Inves- tors > Information disclosure > Annual Reports) on July 1, 2013.

G 4-30 Reporting cycle Disclosed in full Information about the Report

G 4-31 Contact point Disclosed in full Appendix 2. Table of Standard GRI Disclosures

G 4-32 GRI Content Index Disclosed in full Appendix 2. Table of table Standard GRI Disclosures

G 4-33 External assur- Disclosed in full 4.3. Statement of Public ance of the Report Assurance

Governance

G4-34 Governance struc- Disclosed in full 2.2.1. Corporate Govern- ture ance, 2.2.3. Risk Manage- ment, 3.2.2. Investment Activity

Ethics and Integrity

G4-56 Values, principles, Disclosed in full 2.1.1. Corporate Mission standards, and norms of and Values, Appendix 5. behaviour Report on Compliance with the Code of Corpo- rate Conduct Specific Standard Disclosures: Indicators

Category: Economic. Aspect: Economic Performance

EC1 Direct economic Disclosed in full 2013 Key Performance value generated and Indicators, 3.2.1. Finan- distributed cial Management, 3.4.4. Remuneration System, 3.4.5. Social Policy of the Company, 3.6.2. Develop- ing Regions of Operation, 2.2.1. Corporate Govern- ance

118 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

GRI Clause Reflected in the Report Report section/clause Notes

EC3 Coverage of the Disclosed in full 3.4.5. Social Policy of the organisation’s defined Company benefit plan obligations

Category: Economic. Aspect: Market Presence Address by Chief Executives Address EC5 Ratios of stand- Disclosed in full 3.4.4. Remuneration ard entry level wage by System gender compared to local minimum wage at significant locations of

operation About the Company

Category: Environmental. Aspect: Overall

EN31 Total environmental Disclosed in full 3.7.6. Expenses Related protection expenditures to Environment Preser- and investments by type vation

Category: Social. Aspect: Employment

LA1 Total number and Disclosed in part 3.4.3. Human Capital Information on new and Management System Strategy rates of new employ- Features employee hires is not ee hires and employee collected. turnover by age group, gender, and region

LA2 Total number and Disclosed in full 3.4.5. Social Policy of the rates of new employ- Company ee hires and employee turnover by age group, Management Capital Effective gender, and region

Category: Social. Aspect: Occupational Health and Safety

LA6 Type of injury Disclosed in part 3.4.10. Occupational No statistics by gender and rates of injury, health and safety and region are kept.

occupational diseases, Engagement Stakeholder lost days, and absenteeism, and total number of work-related fatalities,

by region and by Appendices gender

119 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

GRI Clause Reflected in the Report Report section/clause Notes

Category: Social. Aspect: Training and Education

LA9 Average hours of Disclosed in part 3.4.6. Training and Devel- Average hours of train- training per year per opment ing per gender are not employee by gender and registered. by employee category

LA10 Programs for skills Disclosed in full 3.4.6. Training and Devel- Support of further management and lifelong opment employment and career learning that support the ending management continued employability through retirement or of employees and assist quitting work is provided them in managing career within the framework of endings the Labour Code.

Category: Society. Aspect: Public Policy

SO6 Total value of po- Disclosed in full No monetary or litical contributions by non-monetary political country and recipient/ contributions were made. beneficiary

120 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Appendix 3. Table of Disclosures as per the Reporting Standard of Rosatom State Corporation

Indicator designation Indicator Report section

2.1 Economic performance 2.1.1 Profit 3.2. Financial Capital Man- by Chief Executives Address agement 2.1.3 Financial stability

2.3 Production capacities 2.3.1 Investment in equity within the report- 3.2.2. Investment Activity development ing period About the Company 9.1 Availability of qualified 9.1.1 Availability of qualified workforce 3.4. Human Capital Manage- and competent workforce ment 9.1.2 Employee training

10.1 Economic performance 10.1.1 Direct economic value generated and 3.2. Financial Capital Man- distributed, including revenues, operating agement, 3.4. Human Capital costs, employee wages and benefits, contri- Management, 3.6.2. Develop- butions and other investment in societies, ing Regions of Operation undistributed profits, payments to providers

of capital, and payments to government ЕС1 and Management System Strategy GRI

10.3 Indirect economic im- 10.3.1 Development and impact of invest- 3.6.2. Developing Regions of pact ments in infrastructure and services sup- Operation ported for the public good in the first place, through commercial, in-kind, or pro bono engagements ЕС7 GRI

11.2 Consumption of materi- 11.3.10 Total weight of waste by type and 3.7.5. Waste Treatment Management Capital Effective als, power, and water disposal method EN23 GRI

12.1 Employment 12.1.1 Total number of employees by employ- 3.4. Human Capital Manage- ment type, employment contract, and region ment 4-10 GRI

12.1.2 Total number and employee turnover 3.4. Human Capital Manage- Engagement Stakeholder by age group, gender, and region LA1 GRI ment

12.1.4 Share of specialists aged under 35 3.4. Human Capital Manage-

ment Appendices

12.1.7 Ratios of standard entry level wage 3.4. Human Capital Manage- compared to local minimum wage at signifi- ment cant locations of operation EC5 GRI

121 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

Indicator designation Indicator Report section

12.3 Employee social benefits 12.3.1 Benefits provided to full-time employ- 3.4. Human Capital Manage- ees that are not provided to temporary or ment part-time employees, by significant locations of operation. LA2 GRI

12.3.5 Total expenses on employee social programmes

12.4.2 Type of injury and rates of injury, occu- 3.4.10. Occupational Health pational diseases, lost days, and absenteeism, and Safety and total number of work-related fatalities, by region and by gender LA6 GRI

12.4.5 Monitoring of personnel radiation expo- 3.4.10. Occupational Health sure and Safety

13.4 Charity 13.4.1 Charity projects and amount of invest- 3.6.2. Developing Regions of ment under such projects Operation

122 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Appendix 4. Auditor’s Opinion on Financial Statements Accuracy

Auditor’s Opinion audit also includes evaluating the appropriateness of accounting policies adopted and the reasonableness

To the Shareholders and Board of the accounting estimates made by management, as by Chief Executives Address of Directors of JSC Atomredmetzoloto well as evaluating the overall presentation of (consolidated) financial statements. We have audited the attached consolidated financial We believe that the audit evidence we have obtained statements of JSC Atomredmetzoloto and its subsidi- in our audit serves as a reasonable basis for express- aries (hereinafter referred to as the “Group”) consist- ing our audit opinion on the accuracy of these consol-

ing of the consolidated financial position report as of idated financial statements. About the Company December 31, 2013 and consolidated profit and loss statement and statements of other aggregate income, Opinion changes in equity and cash flows in 2013, as well as In our opinion, the consolidated financial state- comments offering a summary of the Group’s ac- ments fairly present in all material respects the finan- counting policy and other explanatory information. cial position of the Group as of December 31, 2013, and the results of its operations and its cash flows for Responsibility of the management of the audited 2013 in accordance with International Financial Re- entity for the consolidated financial statements porting Standards. The management of the audited entity is responsi-

ble for the preparation and accurate presentation of and Management System Strategy these consolidated financial statements in accordance with the International Financial Reporting Standards, as well as for such internal control as the management deems necessary to enable the preparation of the consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s responsibility Management Capital Effective Our responsibility is to express our opinion on the accuracy of these consolidated financial statements based on our audit. We conducted our audit in accordance with Russian federal auditing standards and the International Standards on Auditing. These standards require that we comply with ethical norms and plan

and perform the audit so as to obtain reasonable as- Engagement Stakeholder surance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain

audit evidence supporting the amounts and disclosures Appendices in the consolidated financial statements. The procedures selected depend on the professional judgement of the auditor, including an assessment of the risks of material misstatement, whether due to fraud or error. In assessing this risk, the auditor considers the K. Altukhov system of internal controls relevant to the preparation Director (Power of Attorney No. 65/13 and accurate presentation of the consolidated finan- dated October 1, 2013) cial statements in order to draft the appropriate audit ZAO KPMG procedures, but not for the purpose of expressing an May 30, 2014 opinion on the effectiveness of internal controls. An Moscow, Russian Federation

123 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Appendix 5. Report on Compliance with the Code of Corporate Conduct

The Report was prepared according to the form set duct Included in Annual Reports, as approved by Rus- by the Guidelines on the Contents and Form of the Re- sian Federal Securities Market Commission Decree port on Compliance with the Code of Corporate Con- No. 03-849/р dated April 30, 2003.

No. Article of the Code of Compliant or Note Corporate Conduct non-compliant

Observance of Shareholders’ Rights

1 Observance of the rights and lawful Compliant When a general meeting of sharehold- interests of the shareholders in ac- ers is convened, the periods of notice to cordance with the laws of the Russian hold such meetings are observed and Federation and observance of the the shareholders exercise the following fundamental provisions of the Code of rights: to familiarise themselves with the Corporate Conduct shall be ensured list of persons entitled to participate in the general meeting of shareholders; to review the materials (information) on the general meeting of shareholders; and to add issues to the agenda of the general meeting of shareholders

Board of Directors

2 The Charter of the joint stock compa- Compliant In accordance with paragraph 13.2(25) ny shall provide for the power of the of the Charter, the competence of the Board of Directors to annually approve Board of Directors includes approval of the financial and economic plan of the annual plans, budgets, and estimates joint stock company for the Company’s activities and related progress reports, and planned financial and economic performance indicators of the Company

3 The Charter of the joint stock com- Compliant In accordance with paragraph 13.2 (23) of pany shall provide for the right of the the Charter, the competence of the Board Board of Directors to authorise the of Directors includes authorising the for- suspension of the Director General mation of a temporary sole executive body appointed by the General Meeting of of the Company in the event of the Direc- Shareholders tor General’s suspension or inability to discharge his/her duties for any reason, and convening an Extraordinary General Meeting of Shareholders to decide on the early dissolution of the sole executive body of the Company and the formation of a new executive body of the Company

124 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

No. Article of the Code of Compliant or Note Corporate Conduct non-compliant

4 The Board of Directors of a joint Non-compliant Independent directors were not elected stock-company shall include at least to the Board of Directors of the Company three independent directors meeting the requirements of the Code of Cor-

porate Conduct by Chief Executives Address

5 The board of directors of the joint- Compliant The Board of Directors of the Company stock company shall not include does not include such persons persons who were found guilty of economic crimes or crimes against the

government, the interests of public About the Company service, and service in local govern- ments; or who were administratively penalised for violations in the field of business activities or in the field of finance, taxes, and duties, or the securities market

6 The Board of Directors of the joint- Compliant Members of the Board of Directors of stock company shall not include per- the Company do not hold management

sons who are a member, the general positions in the governing bodies of any and Management System Strategy director (manager), a member of the competing company governing body, or an employee of a legal entity competing with the joint stock company

7 The internal documents of the joint- Compliant Section 10 of the Regulations on the stock company shall regulate the Board of Directors of the Company for- conduct of the meetings of the Board malises the basic provisions of the rules of Directors governing the meetings of the Board of Management Capital Effective Directors of the Company

8 The joint-stock company’s internal Compliant In accordance with paragraph 2.2 (12) of documents shall stipulate that the the Regulations on the Board of Direc- Board of Directors must approve joint- tors of the Company, the competence of stock company transactions worth the Board of Directors includes approval

10 or more percent of the company’s of a major transaction or a number of Engagement Stakeholder assets, with the exception of transac- interrelated transactions, the subject of tions effected in the ordinary course of which are assets accounting for 10% to business 50% of the book value of the Company’s

assets Appendices

9 The Board of Directors of the Compa- Non-compliant The Company has not set up any com- ny shall have committees mittees of the Board of Directors

125 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

No. Article of the Code of Compliant or Note Corporate Conduct non-compliant

Executive Bodies (Director General)

10 The executive bodies shall not include Compliant The Company has not set up a collective any person who is a member, the executive body (management board). director general (manager), a member The Director General of the Company of the governing body, or an employee is not a member of the governing body of a legal entity competing with the or an employee of a legal entity com- joint stock company peting with the Company, and was not found guilty of economic crimes, crimes against the government, or other crimes or offences

11 The executive bodies of the joint-stock Partially compliant The Director General submits a report company shall submit annual reports on his/her work to the Board of Directors on their work to the Board of Directors when duly instructed and requested by the Board of Directors

12 Contracts between the joint-stock Compliant The contract with the Director General company and the general director provides for the Director General’s liabil- (management company, manager) ity for the violation of the provisions on and the members of the management the use of confidential and proprietary board shall provide for liability for the information violation of the provisions on the use of confidential and proprietary information

Company Secretary

13 The joint-stock company shall have a Compliant The Company has an elected corporate specially designated officer (company secretary who organises the work of the secretary) whose task is to ensure Company’s governing bodies that the bodies and officers of the joint-stock company comply with procedural requirements protecting the rights and lawful interests of the company’s shareholders

Significant Corporate Actions

14 The charter or the internal docu- Compliant In accordance with Clauses 12.1, 13.2, ments of the joint-stock company and 14.3 of the Charter, the competence shall require a major transaction to be of the governing bodies includes approv- approved prior to its consummation al of transactions in cases stipulated by Chapter 10 Major Transactions of Federal Law No. 208-ФЗ on Joint-Stock Companies dated December 26, 1995

126 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

No. Article of the Code of Compliant or Note Corporate Conduct non-compliant

15 An independent appraiser shall be Compliant Implemented in practice. The Company necessarily engaged to estimate the engages an independent appraiser to market value of the property that is determine the value of the Company’s the subject of a major transaction shares or other assets planned to be

disposed of or acquired by Chief Executives Address

Disclosure

16 The joint-stock company shall have a Compliant The Company discharges its duty to dis- website on which it regularly discloses close relevant information in accordance

information with the current laws of the Russian About the Company Federation at the website (http://www.disclosure.ru/issuer/ 7706016076/)

Control over Financial and Economic Activities

17 A special unit of the joint-stock com- Compliant The Company has set up an internal pany shall operate to ensure compli- control body and elected an audit com- ance with the internal control proce- mission, both of which act in accordance

dures (control and audit department) with the respective approved regulations and Management System Strategy

Dividends

18 Dividend distribution Compliant The Company distributes dividends in accordance with the decisions taken by the General Meeting of Shareholders. Dividend distribution details are published at the website (http://www.disclosure.ru/issuer/ Management Capital Effective 7706016076/) as part of the Company’s annual reports Stakeholder Engagement Stakeholder Appendices

127 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Appendix 6. Terms and Abbreviations

GRI Sustainability Reporting Guidelines, Global Reporting Initiative

M&A Mergers and Acquisitions

U1H Uranium One Holding

SAP SRM Supplier Relationship Management

ACEPIMS Automated commercial eclectic power information and metering system

ATEPIMS Automated technical eclectic power information and metering system

AEPIMS Automated eclectic power information and metering system

AEMS Automated environmental monitoring system

NPP Nuclear power plant

ISLB In situ leaching in blocks

AL Air power lines

RSC CEO Rosatom State Corporation Chief Executive Officer

SCMR State Commission on Mineral Reserves

HMP Hydrometallurgical plant

FP Finished products

GE Geological exploration

S&A subsidiary and associated companies

VME Voluntary medical insurance

CSP Crushing and screening plant

ЕРСМ Engineering, procurement, construction

SURS Single unified remuneration system

UOC Uranium oxide concentrate

IT Information technologies

HL Heap leaching

CGT Consolidated group of taxpayers

128 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

IPSS Integrated physical security system

LWDR Lost work day rate

ODR Occupational diseases rate

KPI Key performance indicators Address by Chief Executives Address CSR Corporate social responsibility

CRMS Corporate risk management system

LSU Local sorption unit About the Company IAEA International Atomic Energy Agency

RMB Raw materials base

IFRS International Financial Reporting Standard

Procurement Financial and logistical procurement

R&D Research and development Strategy and Management System Strategy NRNU MEPhI National Research Nuclear University MEPhI (Moscow Engineering Physics Institute)

NFC IS Initial stage of the nuclear fuel cycle

EIA Environmental impact analysis

PW Pilot work

MWTF Mine water treatment facilities Management Capital Effective

PTW Pilot technical works

OECD Organization for Economic Cooperation and Development

SAA Surface-active agents Stakeholder Engagement Stakeholder AVCP Automatic voltage control point

ISL In situ leaching Appendices NWBS Nuclear waste burial site

DEW Design and exploration work

EEP Efficiency Enhancement Programme

PS Product solution

DISL Downhole in situ leaching

129 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

DSE Design specifications and estimates

RPS Rosatom Production System

NW Nuclear waste

RR Repair and restoration

REE Rare earth metals

Rosnedra Federal Subsoil Resources Management Agency

AS Average salary

SAP Sulphuric acid plant

TDES Technical data exchange system

JV Joint venture

SRO Self-regulating organisations

FPS Fuel and power sector

FS Feasibility study

TPP Thermal power plant

TSC Transport and storage containers

FSTEC Federal Service for Technical and Export Control

FFMS Federal Financial Markets Service

FTP Federal target programme

KhOF Khiagda ore field

CPB Central procurement base

CPS Central production site

FCD Frequency-controlled drive

LF Launch facility

NFC Nuclear fuel cycle

NPC Nuclear power complex

130 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Feedback Questionnaire Feedback: We’d love to know your opinion.

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Please answer several simple questions to help us improve our reporting quality. by Chief Executives Address

1. Did you find significant information about your concerns in the Report?

Yes No I only flicked through the Report. About the Company What was most important personally for you? In your opinion, what does the Report lack?

2. Does the information disclosed in the JSC Atomredmetzoloto Report facilitate better engagement with the Company?

Yes No I am not concerned about it.

What information did you find most useful and what was lacking? and Management System Strategy

3. What sections of the Report were most interesting to you?

4. What sections of the Report were least interesting to you? Effective Capital Management Capital Effective

5. What is your opinion about the accuracy and fairness of the Report?

6. Would you like to read the next JSC Atomredmetzoloto report? Engagement Stakeholder

Yes No Appendices 7. What would you like the next report to be like?

8. What recommendations on the Holding and its S&A performance improvement would you like to give?

131 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013

9. Other comments.

10. Please indicate what group of stakeholders you represent (you can select no more than two options):

Shareholder Investor

Contractor/supplier Company operating in the same industry

Business customer Small and medium business representative

Federal state authority Regional state authority representative representative

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Representative of a business association Mass media representative or another non-governmental organisation

ARMZ Uranium Holding Co. employee Employee of a Holding’s subsidiary or affiliate

Other (please specify)

11. To receive a reply to your comments, please indicate your contact details (full name, post box, zip code, phone number, e-mail), and we will contact you.

Thank you!

132 INTEGRATED ANNUAL REPORT JSC ATOMREDMETZOLOTO For 2013 Contact Information

Full company name Joint Stock Company Atomredmetzoloto

Short company name JSC Atomredmetzoloto

Location of headquarters (principal 22 Bolshoy Drovyanoy Per., Moscow, 109004 Russia

business office) and post address by Chief Executives Address

T/F (495) 508-88-08/508-88-10

E-mail [email protected]

Registering authority, registration Moscow Registration Chamber, No. 004.997 dated 22.02.1995 About the Company number and date

OGRN (Principle State Registration 1027700043645 Number)

INN (Taxpayer Identification 7706016076/774850001 Number)/KPP (Tax Registration Reason Code)

Main type of activities Geologic exploration and production of natural resources, including and Management System Strategy resources containing nuclear and radioactive materials, and uranium concentrate production

Website http://www.armz.ru

Auditor and Registrar Open Joint-Stock Company R.O.S.T. Registrar Registrar’s details: OGRN (Primary State Registration Number) 1027739216757, INN (Taxpayer Identification Number) 7726030449. Management Capital Effective Located at: 18 Stromynka Ul., Bldg. 13, Moscow, Russia T/F: (495) 771-73-36. Stakeholder Engagement Stakeholder Appendices Ivan Krupyanko Victoria Dolina Head of Public and Regional Authorities Relations Annual Report Project Manager Department ARMZ Uranium Holding Co. (JSC Atomredmetzoloto) ARMZ Uranium Holding Co. (JSC Atomredmetzoloto) 22 Bolshoy Drovyanoy Per., Moscow, 109004 Russia 22 Bolshoy Drovyanoy Per., Moscow, 109004 Russia T: +7-495-508-8808, ext. 146 T: +7-495-508-8808, ext. 177 F: +7-495-508-8810 F: +7-495-508-8810 E-mail: [email protected] E-mail: [email protected]

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