In July 2009, the Polish government announced it was considering selling up to all of its 41% stake in copper mining company KGHM Polska Miedz as part of a privatisation plan to tackle the country’s growing public debt. The shares, worth approximately USD$5.9bn, would provide a much needed financial boost to the country as its debt is level expected to pass the 50% mark in 2009. KGHM’s unions have threatened strikes and other measures to prevent the sale. In August, a two-hour strike was held in protest at revised plans to sell a 10% stake in the company. An estimated 80-90% of workers stopped operations in the first action of its kind at the company in almost 20 years.

The company also came under fire from its unions in March 2009, when it announced – in line with many other mining companies – that it would be imposing a wage freeze in response to the slowing of the global economy. Rather than lose 334 jobs, KGHM wants to freeze the salaries of its 18,500 employees and scrap bonuses for the year. Polish wages have been rising rapidly since the country joined the EU, but this can no longer be supported since the end of the economic boom, A major development within the mining sector in the last quarter was the floatation of the Bogdanka coal mine. In June 2009, it was announced that Polish chemicals group Pulawy would not be buying shares in the coal mine after its offer to invest received no response from Bogdanka. Bogdanka chief executive Miroslaw Taras said in response to the offer that it was looking for ‘private and institutional’ investors of a ‘financial character’. However, the initial public offering (IPO) was a huge success and on June 25 the company saw share prices leap in what was the largest IPO in Poland in 2009. Bogdanka far surpassed the original estimation of how much the company would raise with the floatation, amassing PLN528mn (USD$163.8mn). This news bodes well for the government, with further selloffs of state companies planned for the future.

Environmental concerns continue to affect the mining industry in Poland, which is heavily dependent on the production of coal and has many coal mines and coal-fired plants in need of modernisation. The Belchatów lignite-fired power plant, the EU’s largest polluting entity, will have to purchase 20mn tonnes of CO2 permits by 2013. Despite a slowing economy and weakened demand for power, the plant, owned by Polish utility Polska Grupa Energetyczna (PGE), is expected to run at a deficit of carbon credits in the coming years. As a means of reducing the money spent on carbon credits, a carbon capture and storage (CCS) project, the first of its kind in Poland, is being developed in Belchatów.

Industry Forecast As a result of its mineral wealth, Poland has been disproportionately hit by the recent slump in commodities prices. The report estimates that in 2008 the mining sector contracted by 5.69% in real terms, and we forecast a 1.03% regression for 2009. Although growth is expected to pick up towards the end of the forecast period, it is still expected to be on the low side, with the market reaching a value of just US$9.91bn by 2013, compared with US$8.60bn in 2008 Global overview BMI examines the phenomenon of increased Chinese activity in the global mining sector and what this means for the industry moving forward on pages 9-12 of this report.