Body of the report:

The Management Board of Jastrzębska Spółka Węglowa S.A. (“Company”, “JSW”) hereby reports that on 19 December 2017 the Company’s Supervisory Board approved the Strategy for JSW and the Subsidiaries of the JSW Group for 2018-2030 (“Strategy”).

The Strategy’s focus is on long-term, stable and sustainable development ensuring the Company’s value growth, taking into consideration the expectations of its shareholders. This objective will be pursued through increases in the volume of coal mined and sold.

 JSW GROUP’S OPERATIONAL ASSUMPTIONS FOR 2018-2030

 ·     Average EBITDA margin generated by the Group at 30% in 2018-2030, 

·    Total investment and capital expenditures in the Group of approx. PLN 18.9 billion throughout the term of the Strategy, 

·    Stable coal output from 15.6 MT in 2018 to 18.2 MT in 2030 with a level of costs guaranteeing EBITDA profitability,

·      Sales of coal at a level similar to coal production figures,

·      Sustainable volume of coke production and sales in excess of 3.4 MT,

·   Improved production performance through investments and the implementation of new technologies, 

·      Application of innovative technical and technological solutions,

·     Day-to-day operations based on the concept of sustainable development to ensure well-balanced cooperation with stakeholders, including the local community, while adhering to the economic, social and environmental assumptions,

·      Financial stability to reach the objectives of the investment program – through the establishment of a stabilizing closed-end mutual fund.

BUSINESS ASSUMPTIONS

Efficiency and growth of production

The JSW Group’s investment program assumes the execution of investment projects in 2018-2030 with the total planned expenditures of PLN 18.9 billion, assigning the highest priority to projects in the following areas:

·      development of mining operations,

·      modernization and optimization of the operation of the coke segment,

·    ensuring energy self-sufficiency through the development of production capacities based on the Group’s own base of raw materials: methane and coke gas,

·      improved profitability of the Group and integration of its distinct business segments,

·     implementation of innovative technologies throughout the production chain – from coal mining to coke production,

·      improved operating efficiency in the core and auxiliary business.

The fundamental business assumptions in the coal production area are as follows:

·     securing access to coking coal deposits through development-oriented investments enabling the Group to reach new deposits and new mining levels,

·      extension of the resource base, in particular in respect of type 35 (hard) coking coal,

·      increase in coal output to a level exceeding 18 MT by 2030,

·      increase in the share of coking coal in total output to above 85% starting in 2020,

·      efficient tapping into the potential of methane and coke gas for energy generation,

·      continued cost optimization.

Major investments in the coke area will include:

·    Przyjaźń Coking Plant – construction of new coke oven batteries to produce high-quality blast furnace coke using the lowest possible conversion rate,

·   Radlin Coking Plant – continued capital expenditures on the development of infrastructure to produce very high-quality blast furnace coke.

In addition to the investments in the coke area, capital expenditure projects will also be executed in the hydrocarbons segment aimed at the maximum recovery of hydrocarbons and coke gas and ensuring optimal technologies while observing the applicable environmental regulations and technological safety requirements.

Securing the Group’s financial stability

·      Full repayment of bond debt by 2019,

·      Establishment of a stabilizing closed-end mutual fund,

·   Implementation of uniform financial processes throughout the Group, including credit, foreign exchange and market risk management processes,

·      Maintenance of the Net Debt/Consolidated EBITDA ratio below 2.5x.

Company open to innovations

·      Initiating, preparing and executing R&D&I projects for the Group using EU assistance funds,

·      Application of innovative technical and technological solutions,

·      Creation of innovative solutions in cooperation with scientific and business communities.

Corporate social responsibility

·    Solidifying the Group’s image as an entity committed to protecting the natural environment and public health

·      Maintaining the Group’s status of a socially responsible business operator

·      Strengthening the Group’s position of a responsible employer and business partner 

Legal basis: Article 17 Section 1 of Regulation (EU) No. 596/2014 of the European Parliament and of the Council of 16 April 2014 on Market Abuse and Repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC.