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Investor chat - 18 November

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Responses to questions raised at the Results Conference for H1 2023

Investor chat - 21 August

3Q 2023

Production of copper and silver by the KGHM Polska Miedź S.A. Group was at and above the levels set in the budget targets for 2023. The copper giant has published its production, operating and financial results for the first three quarters of 2023.

The operating and financial results of KGHM, as well as of other entities in the mining sector, continue to be impacted by the ongoing uncertainty as to the development of the global macroeconomic situation. This is due in particular to the ongoing armed conflict in Ukraine and its consequences, including above all the continued high levels of inflation in most of the world’s economies.

“In KGHM we continue to operate in compliance with the idea of sustainable development and the efficient management of resources, as well as being focused on innovation and care for the natural environment. I would like to point out that our solid results are a consequence of the hard work of our entire staff, which, as we have demonstrated more than once, is the key to the success of KGHM. Our divisions are working efficiently, which leads to higher production and enhanced effectiveness by the Company. We are not slowing down with our investments, and continue to search for the most economically justifiable solutions,” said Tomasz Zdzikot, President of the Management Board of KGHM Polska Miedź S.A.

PRODUCTION RESULTS

Despite the uncertainty and volatility prevalent in the economic environment, production of the basic metals by the KGHM Polska Miedź S.A. Group, i.e. copper and silver, was achieved at a stable level. Production of copper in Poland was as follows: mined copper in ore, 341 thousand tonnes; refined electrolytic copper, 443.5 thousand tonnes.

KGHM Polska Miedź S.A. recorded an increase in the extraction of ore, dry weight, by 1.3 proc compared to the first 9 months of 2022. Production of copper in concentrate by KGHM Polska Miedź S.A. also rose by around 3 percent. KGHM likewise reported increases in the production of metallic silver (+8%) and gold (nearly 35 percent higher).

It is worth noting that the over 30 percent increase in extraction of ore, in the volumes of copper and silver, in the Deep Głogów area, are the result among others of a decisive improvement in working conditions in mining areas in the vicinity of KGHM’s newly-opened GG-1 shaft.

In turn, production of payable copper by the international assets was as follows: Sierra Gorda 59.7 thousand tonnes (on a 55% basis), Robinson 17.3 thousand tonnes, Carlota 2.9 thousand tonnes, and the Sudbury Basin 3.9 thousand tonnes.

OPERATING AND FINANCIAL RESULTS

KGHM is pleased to report results at a good level, compared to the corresponding period of 2022, which were characterised by a different economic base. These results are mainly due to the efforts undertaken by the Management Board in terms of optimisation and cost discipline. These include extension of the supply chain, optimisation of the management of materials inventories, resulting for example in an improvement in the utilisation of expendables or the maximal use of scrap in the production cycle. In terms of sales, KGHM optimises copper contracts onto the European market due to the better parameters for cathode premiums, and maximises the processing of copper into wire rod, which is also characterised by superior premiums and lower transport costs.

Ensuring cost-effective domestic production was possible thanks to consistency and the continuation of key investments.

Consolidated revenues of the KGHM Group for the first three quarters of 2023 amounted to PLN 25 648 million, meaning at the same level as achieved in the prior year.

Adjusted EBITDA of the Group for the first three quarters of 2023 amounted to PLN 4 235 million and was 40% lower than that recorded in the corresponding period of 2022. The decrease in adjusted EBITDA compared to the first nine months of the prior year was mainly due to a less favourable exchange rate and lower copper prices, alongside cost pressures.

Profit for the three quarters of 2023 amounted to PLN 836 million, or 84% lower than in the corresponding prior-year period. The decrease in profit for the period was due to a lower operating result, a lower result on exchange differences and one-offs recognised in the prior year in the form of the sale of the Oxide project to Sierra Gorda, along with the sale of the Franke mine outside of the Group, as well as a lower reversal of allowances on loans granted to joint ventures.

Net assets of the Group as at 30 September 2023 amounted to PLN 33 108 million.

In the first nine months of 2023 the International Assets transferred USD 46.6 million to KGHM Polska Miedź S.A.

INVESTMENTS IN DEVELOPMENT

KGHM is engaged in opening new areas of the copper ore deposit and in developing the infrastructure needed to mine them.

The Company is advancing its development plans, including the Deposit Access Project, under which the largest mine shaft in Poland – GG-1 – was built. This shaft, located in the village of Kwielice, is one of the most important investments in the history of the copper giant, and the largest underground project in the non-ferrous metals sector in Europe. In June a key milestone for this project was reached when the shaft was connected underground with the corridors of the Rudna mine. Work continues on preparing the shaft to temporarily serve in a ventilation function. Final design work is being carried out to prepare the shaft to serve in its final material and personnel transport function.

Work is also underway on preparations to construct KGHM’s 32^nd shaft, GG-2. The headframe site is located in the village of Słone in the Copper Basin. Work includes preliminary ground construction at the site. These preparations are aimed at constructing the facilities needed to begin sinking the shaft, together with freezing of the rockmass and design work.

ENERGY INVESTMENTS

Thanks to its efforts and its own sources of energy, including from RES, KGHM was able this year to cover nearly 17 percent of its total power consumption from its own sources. In September, KGHM bought a portfolio of eight solar power installations with a combined capacity of nearly 50 MW. The solar power farms acquired by the Company are located in the following voivodeships: Lower Silesia, Łódź, Pomerania and Greater Poland. The acquired installations ensure around 2 percent of KGHM’s total need for electricity.

KGHM Polska Miedź S.A. is also engaged in PV projects situated on its own terrain, at the Głogów Smelter and Refinery, the Cedynia Wire Rod Plant, at the Tailings Division and in the vicinity Obora Sandpit.

The copper giant is also advancing its energy development program, reducing its use of conventional power sources and increasing the company’s energy independence. This also includes investment plans involving among others the area of energy transformation. The Ministry of Climate and the Environment issued KGHM a basic decision with respect to the construction of a small modular nuclear reactor (SMR) in Poland. At the same time, KGHM received government approval for the planned investment, in accordance with the assumptions and concepts presented by the Company.

SUSTAINABLE DEVELOPMENT

KGHM, to meet the increasing expectations of stakeholders in terms of protecting the climate, is enhancing the transparency of its messaging and its periodic non-financial disclosures – both with respect to KGHM’s impact on the climate as well as adaptation of the Company to climate change. KGHM maintains ongoing relationships and dialogue with local communities and governments

EMPLOYEE VOLUNTEERS

Volunteerism is an important element in KGHM’s pro-society actions in the Copper Basin. To date there have been 217 actions with the participation of 1917 KGHM employee volunteers. Of these, 42 projects were carried out by companies within the KGHM Group. Dozens of these involved various activities, whether collections for the needy, social initiatives to promote foster parenting, or projects promoting an active lifestyle. Actions carried out amongst employees include promoting an active lifestyle or the campaign to promote reading „Mie(dź) apetyt na czytanie”. This year’s actions in the company’s divisions included the creation of small apiaries under the title „Copper bees”. The hives are cared for by employee volunteers of KGHM.

Responses to questions raised at the Results Conference for 3Q2023

Investor chat - 17 November

4Q 2023

Despite a difficult macroeconomic environment, volatile commodities prices and high cost pressures, in 2023 projects were advanced by KGHM whose goal is to strengthen the Group’s productvity and efficiency. The copper company can boast of solid operating results and a good financial condition – PLN 33.5 billion in consolidated revenues and nearly PLN 5.4 billion in EBITDA Group KGHM.

„Last year the Company pursued its production plans with control of costs, advanced investments and maintained a safe and adequate level of financing for its activities. KGHM will continue exploratory work under its concessions and engage in other concession-related activities aimed at ensuring an appropriate resource base for its operations and prolonging the lives of its mines, as well as extending the value chain,” said Andrzej Szydło, President of the Management Board of KGHM Polska Miedź S.A.

EFFICIENT PRODUCTION

The KGHM Group executed and even exceeded its production targets for 2023 in all of the main product lines, i.e.:

- Copper in concentrate: 395.4 thousand tonnes compared to 390 thousand tonnes planned;

- Silver in concentrate: 1 319.9 tonnes compared to 1 261 tonnes planned;

- Electrolytic copper: 592.4 thousand tonnes compared to 582 thousand tonnes planned, including from own concentrate (385.5 thousand tonnes vs 385 thousand tonnes planned);

- Metallic silver: 1 403.3 tonnes compared to 1 301 tonnes planned.

Consolidated revenues of the KGHM Group for 2023 amounted to PLN 33.5 billion, adjusted EBITDA nearly PLN 5.4 billion, while equity of the Group reached PLN 26.8 billion.

MORE INVESTMENTS

The past year was marked by the advancement of mining projects and continuation of the Deposit Access Program. In June 2023 the GG-1 shaft was connected to the workings of the Rudna mine. The shaft in Kwielice is the deepest mine object in Poland (1 348 meters). We also commenced preparatory work to build another important facility in the Deep Głogów region – the GG-2 shaft.

Apart from the completion of work on sinking the GG-1 shaft, a Central Air Conditioning System and a Surface-based Air Conditioning Station were brought into operation at the Rudna mine.

In 2023 the copper company continued to develop the Żelazny Most Tailings Storage Facility. The three stages of construction of the Southern Quarter were completed, and the Tailings Compacting Station was built. At the Legnica Copper Smelter and Refinery the Hybrid Smelter program continues, being KGHM’s response to the global needs associated with copper recycling.

KGHM successfully completed the Program to adapt the technological installations to the requirements of BAT Conclusions. Thanks to these investments in the infrastructure of the metallurgical plants in Legnica and Głogów, the installations have been adapted to BAT conclusions in terms of environmental protection and restricting emissions of arsenic. Our production was once again certified as responsible by receipt of a Copper Mark certificate, which in 2023 was granted to the Cedynia Wire Rod Plant. The metallurgical facilities in Głogów and Legnica had previously received this prestigious certificate.

It is worth mentioning that an analysis of the environmental and carbon footprint of our cathodes, wire rod and Cu-OFE rod – carried out by the Mineral and Energy Economy Research Institute of the Polish Academy of Sciences – demonstrated that the copper products of KGHM have a lower footprint than the global average.

FINANCIAL STABILITY

KGHM ended the year 2023 in a good financial condition: PLN 33.5 billion in consolidated revenues and a strong Group operating result of nearly PLN 5.4 billion. Cash and cash equivalents at year’s end amounted to PLN 1.7 billion, meaning an increase by PLN 0.5 billion.

The copper company has a safe level of debt, with net debt/EBITDA at the end of 2023 amounting to 1.1. KGHM is controlling its costs and is fully capable of meeting its obligations in terms of borrowings. The cash resources and borrowings held guarantee continued liquidity and enable the achievement of its investment targets.

TRANSFORMATION AND SUSTAINABLE DEVELOPMENT

KGHM is a reliable producer, a trusted business partner and a company pursuing a policy of sustainable development. In 2023 we enhanced actions related with rational and responsible production. The Company is advancing the Climate Policy along with projects involving the energy transformation. Since January of last year, 100 percent of the electricity consumed by the Sierra Gorda mine has come from renewable energy sources.

By 2030, the increase in the share of RES in KGHM’s energy mix will lead to a substantial drop in CO₂ emissions. Towards this end the copper company is engaged in solar power plant projects at the Głogów Copper Smelter and Refinery, the Cedynia Wire Rod Plant, the Tailings Storage Facility and at the Obora Sandpit.

SAFETY IN THE WORKPLACE AND THE SURROUNDINGS

In conducting its business, KGHM pays particular attention to the safety not only of employees, but also of our local communities. For many years the Company has operated under the „Zero harm” principle. The Divisions of KGHM employ early warning systems and innovative solutions, which improve efficiency and workplace safety.

In terms of our volunteer programs, in the past year more than 300 assistance and charitable actions were carried out. A KGHM Academy was commenced, under whose banner are now carried out all of the preventive programs, workshops and pro-social actions. In 2023 more than eight thousand participants took advantage of them.

TO ALWAYS HAVE COPPER

Copper, silver and other metals with the KGHM brand have for years been synonymous with the highest quality, and have been appreciated and recognised around the world. Know-how and cooperation are amongst the business pillars of the Company, one which for years has maintained its position as a leader in the production of copper and silver.

Based on the adopted Strategy, in 2023 the Company strove to maintain a stable level of production from its Polish and international assets and a level of costs which guarantees financial security, while ensuring safe working conditions and minimising the Company’s impact on the environment and its surroundings. For KGHM, 2024 will be marked by improved production efficiency and investing, which will enable maximal utilisation of the potential of the subsidiaries and operating outlook of the Group.

Responses to questions raised at the Results Conference for 4Q2023

Investor Chat - 26 April

2022

1Q 2022

The highest quarterly EBIDTA in history and outstanding revenues – KGHM summarises its results for the first three months of 2022

The highest quarterly EBIDTA in the Group’s history rose as compared to the first three months of 2021 by 20 percent and amounted to PLN 3 133 million. The Group’s revenues reached PLN 8 993 million, or 33 percent more than in 2021. KGHM presented operating and financial results for the first quarter of 2022 which demonstrate the consistency of the operations and advancement of the Strategy as well as solid stability in turbulent times

The KGHM Group at the same time also published the Integrated Report of KGHM for 2021.

Increase in copper production

Production of payable copper by the KGHM Group was higher by 4 percent (compared to the first quarter of 2021) and amounted to 193 thousand tonnes. The factors involved were higher availability of purchased metal-bearing materials and the higher availability of production lines in KGHM Polska Miedź S.A. as well as higher copper recovery and higher throughput in Sierra Gorda. Higher production was also recorded by the Robinson mine.

Quarter by quarter, the KGHM Group is amongst the leader of the world’s mining companies, with the largest percentage increase in production.

Highest quarterly EBITDA in history

The increase in adjusted EBITDA of the KGHM Group compared to the first quarter of 2021 amounted 20 percent. It is worth noting that in the case of the Sierra Gorda mine this was due among others to higher revenues from the sale of copper due to higher prices and a higher sales volume. The substantial improvement in EBIDTA affected the Group’s net profit, which was higher by 39 percent compared to the first three months of 2021.

Updated strategy

The Company maintained stable production in its domestic and international assets as well as costs. As part of the strategy, updated by a new „e”, i.e. energy, KGHM intends to continue actions aimed at increasing energy generation from its own sources (RES). Projects involving the development of nuclear power, wind energy and hydrogen technology will be critical in this process.

The copper giant signed an agreement with the American company NuScale to implement small modular reactor (SMR) technology in Poland. The first power plant is expected to be brought online by 2029. This clean energy will power the copper company’s production assets. KGHM also joined the company TotalEnergies in a tender of the Polish government to develop offshore wind projects.

We together – aid to Ukraine

KGHM since the start of the war in Ukraine has been involved in aiding refugees. The Company has ensured safe, temporary shelter for 250 families in aid centers throughout Poland. Companies in the Group have provided among others overnight stays in spa facilities, have transported those in need to designated sites and have sent donations of goods collected for the refugees. The Company has also provided hundreds of beds, matresses and other critical equipment to local governments in Lower Silesia and to NGOs.

In Lubin the Company opened an Aid Center for Ukrainians. At the Center, those in need received legal and psychological support as well as aid related to quartering. Ukraine has also received transports of medical supplies for hospitals, financed by KGHM.

Integrated report of KGHM

The copper company presented the Integrated report of KGHM Polska Miedź S.A. and of the KGHM Polska Miedź Group for 2021. This is the ninth such report, presenting the Company’s business and operating activities.

The Integrated report provides stakeholders, and in particular investors, financial institutions and insurers, with a description of the actions undertaken by the copper giant, as well as key ratios showing how the set goals are being advanced. The Company’s strategy has embedded questions related to sustainable development and its impact on the social and natural environments.

Investor kit:

Responses to questions raised at the Results Conference for 1Q 2022

Investor chat - 16 May

2Q 2022

Payable copper production by the KGHM Group in Q2 2022 amounted to 185 kt and was 5% lower compared to the same period of 2021. Silver production during this period was lower by 9% (336 vs 369 tonnes in Q2 2021).

C1 cost for the Group in Q2 2022 amounted to 2.18 USD/lb and was 11% higher than in the corresponding period of 2021. The increase in this cost was mainly due to higher expenses by nature in KGHM Polska Miedź S.A. and a lower valuation of by-products. C1 cost for KGHM INTERNATIONAL LTD. meanwhile was 21% lower in Q2 2022 and amounted to 1.77 USD/lb.

Stable execution of planned production volumes in the main segments in Q2 2022 with lower planned production by Sierra Gorda due to lower grade and recovery, against sharply-lower copper prices partially offset by a more favourable USD/PLN exchange rate.

Consolidated revenues for Q2 2022 amounted to PLN 8 933 mn (+15%), the increase mainly due to a more favourable USD/PLN exchange rate and, given the drop in copper prices, a lower negative adjustment of revenues due to derivatives and consequently higher revenues.

Consolidated adjusted EBITDA in Q2 2022 amounted to PLN 2 176 mn and was lower vs Q2 2021 by -PLN 529 mn (-20%), of which KGHM Polska Miedź S.A. was higher by +PLN 33 mn and Sierra Gorda lower by -PLN 502 mn.

Net profit of the KGHM Group in Q2 2022 amounted to PLN 2 280 mn and was lower by -PLN 77 mn (-3%) compared to Q2 2021, mainly due to lower metals prices despite a more favourable USD/PLN exchange rate.

Investor kit:

Financial report

Results worksheet [xls]

Responses to questions raised at the Results Conference for H1 2022

Investor chat - 19 August

3Q 2022

KGHM after the first 3 quarters of 2022 – stable copper production and higher Group revenues

Production of payable copper comparable to the previous year’s level, higher silver production, higher KGHM Group revenues and strong Group operating results against a volatile macro environment and inflationary cost pressures – the copper giant presents its financial results for the first three quarters of 2022.

Production results

Higher production was recorded by KGHM Polska Miedź S.A., mainly due to the higher availability of purchased metal-bearing material and of elements of the production line. Silver production by KGHM Polska Miedź S.A. rose by 1% to 1 022 tonnes compared to the first 9 months of 2021. Payable copper production by the KGHM Group in the first three quarters of 2022 was slightly lower compared to the corresponding prior-year period and amounted to 557 thousand tonnes.

Financial and operating results

The KGHM Group increased profit for the period by PLN 505 million (+11%) versus the first 9 months of 2021, mainly due to a higher result on exchange differences, alongside a lower result on the involvement in joint ventures and higher CIT.

The continuing good conditions on the metals market led in turn to higher revenues earned by the KGHM Group (+18%) compared to the corresponding prior-year period, to PLN 25 696 million.

Investments and stable development

KGHM maintained stable copper production from its Polish assets (mined production 334.4 kt; metallurgical production 442.5 kt). The Company is continuing its key projects, such as the Deposit Access Program (sinking of the GG-1 shaft was completed). The maintenance shutdown at the Głogów Copper Smelter and Refinery did not affect the Company’s operations. Work continued on advancing development of the Tailings Segregation and Compacting Station at the Żelazny Most Tailings Storage Facility.

KGHM is engaged in numerous R&D initiatives to increase the efficiency of the core production business of KGHM. The copper company is advancing the Strategic Program called Hybrid Legnica Smelter and Refinery as well as exploration projects in Poland, as well as development actions in the international assets.

The copper giant continues its involvement in developing nuclear, solar and wind power. KGHM is consistently advancing projects aimed at reducing CO₂emissions. Starting from 2023, 100% of the electricity purchased and consumed by the Sierra Gorda mine will come from renewable energy sources – a solar farm located in the Atacama desert.

Investor Kit:

Responses to questions raised at the Results Conference for 3Q2022

Investor chat - 28 November

4Q 2022

KGHM – a global resources company and a world leader in copper and silver production – has published its annual report for 2022. Despite a turbulent, unstable macroeconomic situation, the copper company achieved high operating and financial results and maintained its planned levels of production, while at the same time continuing its high-capex projects connected with the green transformation.

„Last year’s solid production and and financial results, earned during tough times, allows us to look to the future with optimism, for this year and subsequent years. We have ambitious investment projects and plans – we plan a record level of spending in 2023. In KGHM w unikalny sposób we combine economic and financial efficiency in a unique way, with respect for the natural environment and a partnership approach to relations with our stakeholders,” said Tomasz Zdzikot, President of the Management Board of KGHM Polska Miedź S.A.

Production and and financial results

In 2022 the KGHM Group recorded stable production of copper from its domestic assets in Poland (mined production 442.7 thousand tonnes in ore, metallurgical production 586 thousand tonnes) as well as from its international assets (Sierra Gorda 90.8 thousand tonnes (55 % interest); Robinson 46.8 thousand tonnes; Carlota 4.1 thousand tonnes; Franke* 2.8 thousand tonnes; Sudbury Basin 2.5 thousand tonnes).

Consolidated revenues of the KGHM Group for 2022 amounted to PLN 33.8 billion, or 13.6 % more than in 2021. Profit for 2022 amounted to PLN 4.8 billion while adjusted EBIDTA reached PLN 8.9 billion.

At the end of 2022 consolidated assets of the KGHM Group rose to PLN 53.4 billion. In turn, equity amounted to PLN 32.2 billion. The Group maintained a safe level of debt – Net debt/EBITDA in 2022 amounted to 0.8.

Climate Policy

KGHM is a European leader in the implementation of effective, low-carbon technologies, with access to the most modern solutions in mining and energy. The Company has an implemented business model ensuring a full value creation chain – from exploration, extraction and processing of natural resources to the sale of finished products. The entire implemented system is compliant with ESG. rules

The copper giant is successfully advancing the Climate Policy of KGHM. Among others, the balance of Scope 1, 2 and 3 greenhouse gas emissions for 2021 has been calculated for the entire Group. Projects are being continued involving adaptaion of the Company’s technological installations to BAT conclusions for the non-ferrous metals industry together with restriction of arsenic emissions (BATAs). In 2022 another 6 installations were brought online in the Divisions of KGHM, which is significantly improving air quality in the Copper Basin.

KGHM’s high-capex investments aimed at protecting the natural environment have a single goal – to minimise impact on the environment and our surroundings. Detailed information in this regard as well as other non-financial information may be found in the Management Board’s report on the activities of KGHM Polska Miedź S.A. and the KGHM Group.

Leader of the energy transformation

The goals of KGHM Polska Miedź S.A. are to reduce greenhouse gas emissions by 30 percent by 2030 and to achieve climate neutrality by 2050. Over the next seven years the Company will strive to satisfy 50 percent of its energy needs from its own sources, including RES. Currently the CCGT natural gas-fired power plants of KGHM Polska Miedź S.A. can provide up to around 20 percent of the Company’s electricity needs.

KGHM is diversifying its sources of power throughout the Group by incliding energy from solar and wind power sources as well as the use of hydrogen. The Company is building solar power plants and is continuing projects involving offshore wind projects and hydrogen sources. Moreover, KGHM is involved in developing nuclear energy in Poland. Last year the copper giant submitted the first application in Poland regarding assessment of small modular reactor (SMR) technology to Poland’s National Nuclear Agency.

The copper company will also obtain energy from the new Żuki solar power plant in the Greater Poland voivodeship, amounting to 5.2 MW from nearly 10 thousand PV panels. In 2022, KGHM also became a signatory to the „Sector Agreement for the development of hydrogen power in Poland”. The Company is also testing innovative technology using copper and silver alloys, which significantly reduces losses in the transmission of electricity.

Investments

In the KGHM Group in 2022 exploratory and operational projects were continued in Poland and in the international assets. Work involving the copper and potassium salts concessions is underway. The Deposit Access Program is being developed, under which the sinking of the GG-1 shaft was completed. KGHM now has the deepest mine shaft in Poland. The process of selecting contractors to build the GG-2 shaft is underway. Another important investment project is the continuing development of the Żelazny Most tailings Storage Facility. The KGHM Group is consistently focused on developing and strengthening the potential of its existing key assets as well as of promising projects in Chile, USA and Canada.

Safety at the highest level

The life and health of our employees has always been the top priority in the hierarchy of values of the KGHM Polska Miedź S.A. Group. For several years the Company has been pursuing its long-term vision of „Zero accidents due to human and technical errors, zero occupational illnesses among our employees and contractors”.

In 2022, the Employee Safety Improvement Program „Think About The Consequences” was continued as well as a Program to mitigate the most common hazards to workplace safety by utilizing innovative technologies, in accordance with the Company’s updated strategy.

Last year, KGHM recorded a significant reduction in the number of accidents at work, calculated on a year-on-year basis, from 165 to 149 people injured (a decrease of 16 accidents). Most of the registered workplace accidents (approx. 98.7%) qualified as light injuries.

The LTIFR (Lost Time Injury Frequency Rate) ratio for KGHM in 2022 (i.e. the total number of workplace accidents in the Company per million hours worked by KGHM Polska Miedź S.A. employees) amounted to 5.05. This was 72.8 percent lower than the 2010 figure and 10.3% less than in 2021. This is the best result in the history of KGHM.

Macroeconomic conditions

The geopolitical situation related to the direct aggression of Russia against Ukraine and the implemented system of sanctions at the present time is not restricting the operations of KGHM Polska Miedź S.A. or other Group companies.

In KGHM in 2022 work continued on ensuring ICT security. Thanks to implemented projects, the Company has maintained operational continuity and is strengthening actions to deal with threats arising in cyberspace.

*The Franke mine was sold in April 2022.

INVESTOR KIT:

Responses to questions raised at the Results Conference for 4Q2022

Investor chat - 24 March

2021

1Q 2021

The best operating and financial results in nearly a decade, a substantial decrease in debt, a recommended dividend payout and a new concession, as well as top-tier silver production in world rankings: KGHM announced a summary of the work of the copper company in the first quarter of 2021. The company also published the Integrated Report of KGHM for 2020.

“We are proud of the results of our work. Especially now, when we are commemorating the 60^th anniversary of KGHM’s founding. The strategic significance of copper, as a raw material needed in electromobility, renewable energy, electronics and medicine, has a long term outlook. This can also be seen in our results for the first quarter. I wish to emphasise that we are achieving these effects under the conditions imposed by the COVID-19 epidemic, when many sectors of the economy have suffered from the impact of lockdowns. KGHM is consistently enhancing its position as a global champion,” said Marcin Chludziński, President of the Management Board of KGHM Polska Miedź S.A.

Record EBITDA

In the first quarter of this year, KGHM recorded its highest consolidated and standalone operating profit since the acquisition of the Group’s international assets in 2012. The company also achieved its highest quarterly consolidated EBITDA margin to date, at 34 percent.

Consolidated adjusted Group EBITDA for the first quarter amounted to PLN 2 608 million, or an increase of 2.3x compared to Q1 2020. Standalone quarterly EBITDA rose by 86 percent compared to Q1 2020 and amounted to PLN 1 675 million.

Worth noting is that EBITDA for the Sierra Gorda mine increased more than six-fold, reaching PLN 643 million as KGHM’s share.

This substantial improvement in EBITDA enabled the KGHM Group to record a profit for the period which was PLN 675 million (+98%) higher than that achieved in Q1 2020 and closed the quarter in the amount of PLN 1 365 million. Such a level of quarterly net profit is the highest since the acquisition of the international assets. The same is the case in terms of profit for the period of KGHM Polska Miedź S.A. (PLN 975 million).

The increase in Group revenues for the quarter by 27 percent compared to the first quarter of 2020, to PLN 6 745 million, was due to the increase in the prices of basic products. This was despite an adjustment in revenues due to derivatives and a less favourable USD/PLN exchange rate.

Invaluable raw materials

The price of copper in the first quarter of 2021 continued to rise, reaching the levels from 2011. Silver prices remained above 25 USD/koz t. As a result of the economic recovery there was improved sentiment towards these commodities, with stabilisation of the gold/silver ratio at historic averages.

The increase in copper production by the KGHM Group by 6.6% versus Q1 2020, with production in the first quarter of 186 thousand tonnes, was due to the greater availability of feed material and improved availability of production lines, as well as higher recoveries and better ore quality. In the Polish operating segment there was improvement in mining parameters in the Deep Głogów area.

The basic operating costs of KGHM Polska Miedź S.A. were higher by 16.6 percent versus the corresponding prior period of 2020, mainly due to higher sales of copper products through the use of a higher amount of purchased metal-bearing materials.

Because of the increase in the amount of the minerals extraction tax paid, there was an increase in C1 cost in KGHM Polska Miedź (C1 excluding this tax was lower by 12.6%, mainly due to the higher valuation of by-products, i.e. silver and gold). In turn, the decrease in C1 recorded by Sierra Gorda of 19 percent compared to the prior year was due to higher revenues from the sale of associated metals, as well as to higher production and sales of copper.

In the first months of 2021 the KGHM Group presented solid operating cash flows and a financing structure based on long-term instruments. During this time the debt indicator, measured as the relation of net debt to EBITDA, fell to 0.8 from 1.7 at the end of the first quarter of 2020 and from 0.9 at the end of 2020.

Equity of KGHM as at 31 March 2021 amounted to PLN 21 491 million, or an increase of PLN 410 million compared to the end of 2020.

Following reviews of the current financial capabilities of the Company (taking into consideration the investment program and the current situation on the metals market), the Management Board of KGHM submitted its proposal to the General Meeting regarding the allocation of profit for 2020. The resolution included the proposal that the amount of PLN 300 million be allocated to a dividend for shareholders, or PLN 1.50 per share.

Effective strategy

President Marcin Chludziński summed up the quarter by saying that by advancing the Strategy the Company was able to maintain production in its domestic and international assets as well as keep costs under control. „This guarantees financial security for the company, while ensuring safe working conditions and minimising our impact on the environment and our surroundings. We act in compliance with the idea of sustainable development,” added Marcin Chludziński.

In the first quarter of 2021 the decision was made to define and create Strategic Programs for KGHM. In 2021 the company will continue to improve its production parameters, stabilise its finances and achieve ambitious investments. Especially given that at the end of April the Minister for Climate and the Environment issued a decision granting KGHM concessions for the Bytom Odrzański and Kulów – Luboszyce deposits.

The copper giant is planning further projects aimed at minimising the Company’s impact on its environment. We are continuing the Program to adapt the technological installations of KGHM to the requirements of BAT conclusions for the non-ferrous metals industry together with the restriction of arsenic emissions (BATAs). 11 projects were advanced at the Głogów Copper Smelter and Refinery and the Legnica Copper Smelter and Refinery, of which in the first quarter of 2021 realisation of the following was completed:

A de-leaded slag transport installation (HM Głogów)
A warehouse and storage area for lead-bearing materials (HM Głogów)

KGHM is continuing its sanitary regimes and other restrictions related to the COVID–19 pandemic. The vaccination of company employees is well underway

INVESTOR KIT:

Responses to questions raised at the Results Conference for 1Q 2021

Investor chat [14 May 2021]

2Q 2021

An impressive first half for KGHM — the copper giant publishes its results for the first six months of 2021

Adjusted EBITDA for the KGHM Group doubled, payable copper production was higher by 8.6% and Group revenues were more than 30-percent higher versus the first half of 2020. KGHM, despite the pandemic, announces the best results in decades.

“We ended the first half with a doubling of EBITDA and a significant jump in revenues, of more than PLN 3.5 billion. We produced a higher volume of payable copper, while at the same time striving to ensure employee safety and engaging in responsible production. This can be seen in the high safety ratios as well as by the granting to our metallurgical plants of international certification under the Copper Mark,” says Marcin Chludziński, President of the Management Board of KGHM Polska Miedź S.A.

BETTER PRODUCTION RESULTS

The KGHM Group in the first half of 2021 recorded an increase in key production ratios.

Payable copper production by the KGHM Group was 8.6% higher than in the corresponding period of 2020 and amounted to 381 thousand tonnes. In turn, payable copper production by KGHM Polska Miedź S.A. rose by 4.4% compared to the corresponding period of 2020 and amounted to 293 thousand tonnes.

HIGHER REVENUES AND PROFITS

The Group recorded a doubling of adjusted EBITDA versus H1 2020 (+PLN 2 662 million). In KGHM Polska Miedź the increase by PLN 1 226 million was due to higher copper prices, while in Sierra Gorda (+PLN 1 050 million) the improvement was mainly the result of higher revenues from copper sales related to higher prices and a higher sales volume, and in KGHM INTERNATIONAL (+PLN 371 million) an additional benefit came from a drop in basic operating costs excluding depreciation/amortisation.

The improvement in EBITDA and the reversal of impairment on loans granted enabled the achievement of a profit for the period of PLN 3 723 million, or PLN 3 024 million (5.3-times) higher than in the first half of 2020.

SIERRA GORDA IN POSITIVE TERRITORY

Higher recovery and higher copper content in ore resulted in a 30 percent increase in payable copper production by Sierra Gorda (51 thousand tonnes). In the first half of 2021 this mine also recorded a 25 percent increase in silver production (15.6 tonnes), compared to the corresponding period of 2020.

Marcin Chludziński, President of KGHM Polska Miedź S.A., stressed that we are at a watershed moment for the development of the Sierra Gorda mine. “The mine has achieved full financial independence. For the first time we have positive cash flow to Poland. In the first half this amounted to nearly PLN 500 million. This was achieved thanks to the changes in management methods instituted in recent years and consistency in the implementation of corrective actions,” added Marcin Chludziński.

GUARANTEE OF QUALITY

The Copper Mark is an international certificate of quality, a guarantee system which promotes responsible copper production. At the moment two of KGHM’s metallurgical plants – in Głogów and in Legnica – have been thus distinguished, and have consequently joined a small, elite group of companies from around the world who have earned the right to use the Copper Mark brand.

These are not the only actions being taken by the Company aimed at responsible production. The Company is expanding the scope of its environmental communications and the reporting of data through the CDP questionnaire, showing the Company’s impact on the environment. We are also engaged in preparing a comprehensive document which will set forth the Company’s Climate Policy. Among others it will announce GHG reduction goals. For years we have also been a constituent company in the FTSE4Good index series.

SAFETY FIRST – ZERO HARM

The historically-low accident ratios show a 19% decrease in the number of workplace accidents. We succeeded in maintaining a high level of employee safety throughout the ongoing COVID-19 threat. The Company also initiated a program of voluntary vaccinations for employees and their families by organising among others mobile vaccination points at KGHM’s production facilities.

INVESTOR KIT:

Responses to questions raised at the Results Conference for 2Q 2021

Investor chat [19 August 2021]

3Q 2021

KGHM after the first 3 quarters of 2021: growing production, excellent financial results, an ambitious climate policy

Higher EBITDA and a higher net profit by the Company, higher revenues and higher extraction of copper ore – KGHM presents its financial results for the third quarter of 2021. The Company also published its Climate Policy, which calls for a reduction in greenhouse gas emissions and climate neutrality by 2050.

Production results

Payable copper production by the KGHM Group in the first 3 quarters of 2021 was higher by 10.1% (9M/9M) and amounted to 574 thousand tonnes.

Mined production in Poland in the first three quarters of 2021 amounted to 335.8 thousand tonnes of copper in ore. Ore extraction (dry weight) was also higher compared to the first 9 months of 2020. In comparision to the corresponding prior-year period, electrolytic copper production was also higher by 28.2 thousand tonnes.

Financial and operating results

The KGHM Group recorded an increase in adjusted EBITDA of PLN 3 312 million compared to the first 9 months of 2020. This was mainly due to KGHM Polska Miedź S.A. (+PLN 1 220 million) and Sierra Gorda (+PLN 1 458 million, nearly 3x higher). Amongst the factors contributing to this result were more favourable metals prices and a lower cost of goods sold.

The KGHM Group increased its net profit compared to the first 9 months of 2020 by PLN 3 590 million (4.1x) mainly due to a better net result on sales by PLN 1 765 million and a higher result on involvement in joint ventures by PLN 1 899 million, with higher CIT by PLN 636 million.

The continuing good conditions on the metals market led to an increase in revenues recorded by the KGHM Group compared to the corresponding prior-year period by more than PLN 5 billion. During the year copper and silver prices rose (respectively by 57% and 34%). Gold prices were also higher (by +4%).

Climate Policy

The main assumptions of this document prepared by the Management Board of KGHM involve a reduction in greenhouse gas emissions and the achievement of climate neutrality by 2050. The Climate Policy will be followed by a Decarbonisation Program, which will encompass the entire KGHM Polska Miedź S.A. Group.

The primary goal of the Climate Policy of KGHM is to achieve climate neutrality by 2050 with respect to Scope 1 emissions (direct emissions primarily related to the Company’s production activities) and Scope 2 emissions (indirect emissions associated with the use of electricity and heat acquired from the market), with their maximum possible reduction.

The primary methods of reducing the Company’s carbon footprint will include using hydrogen technologies, the development of electromobility, the implementation of advanced technologies on the production line, the gradual replacement of conventional electricity and heat generation energy sources with our own, zero-emission ones, the continuous improvement of energy efficiency by the production divisions and improvement of production processes, as well as the use of CCS/CCU technologies to manage the remaining CO₂ emissions from metallurgical processes.

The intermediate target is to reduce total Scope 1 and Scope 2 emissions by 30% by 2030, compared to the emission levels of 2020. Reduction goals for the entire KGHM Group will be published no later than in the first half of 2023.

In turn, total capital expenditures on the realisation of activities aimed at reducing the emission of greenhouse gases will be outlined in the Decarbonisation Program of the KGHM Group.

KGHM Polska Miedź S.A. emits approximately 3.3 million tonnes of CO₂ equivalent annually, approximately 40% of which consists of Scope 1 emissions and 60% of which are Scope 2 emissions according to the GHG Protocol.

Advancement of the Company’s strategy

KGHM is consistently advancing the Company’s strategy, whose goals include increasing energy generation from internal sources, including renewable sources. The Company is planning additional wind farms with total installed capacity of approx. 50 MW.

This year KGHM joined an agreement aimed at developing offshore wind farms. The Company is also one of the signatories of a letter of intent regarding the establishment of a „Lower Silesia Hydrogen Valley”. Apart from these actions, the Company signed an agreement with NuScale involving preparations for the construction of nuclear energy sources.

All of the actions taken by the Management Board of KGHM are leading not only to a good financial condition, but also to how the Company is perceived and judged by external institutions. During the year KGHM was awarded multiple times by market experts, sector organisations and the media.

Health and safety first and foremost

KGHM is a Leader of Workplace Safety. We are the sole representative of underground mining and metals processing amongst the 27 leading companies in Poland, in terms of OHS standards – so-called Golden Leaders. In 2020 the number of workplace accidents throughout the Company’s Polish assets decreased by nearly 29 percent. This is the first time in history that such a low number of accidents has been recorded in KGHM Polska Miedź S.A. Over the last 10 years the number of accidents has declined in the Company by more than 60 percent.

Concern for the safety of its people led to KGHM making the decision to cancel this year’s Barbórka celebrations except for the organisation of divisional awards ceremonies whilst maintaining a strict sanitary regime. Due to the renewed rise in coronavirus cases in Poland, the copper giant has suspended domestic and international travel. Within the Company, wherever possible, home office work has been re-introduced.

Climate Policy of KGHM Polska Miedź S.A. - document

Climate Policy of KGHM Polska Miedź S.A. - leaflet

Responses to questions raised at the Results Conference for 3Q 2021

Transcript

Investor chat - 18 November 2021

4Q 2021

Record annual results of the KGHM Group for 2021

Higher production, higher revenues, record operating profit and solid net profit – the KGHM Group summarises the year 2021, which it closed among others with its largest adjusted EBITDA in history, exceeding PLN 10.3 billion. The copper giant also marked a 6 percent increase in copper production by the Group.

Excellent financial and operating results

In 2021 the KGHM Group recorded an increase in copper production of 6.3 percent, or by 44.6 thousand tonnes more than in 2020. There were increases recorded by all of the Group’s segments, in particular Sierra Gorda SCM (+22.6 thousand tonnes on a 55% basis) and the Parent Entity KGHM Polska Miedź S.A. (+17.2 thousand tonnes). The increase in production and sales volumes, combined with a good copper price, led to a more-than 26% increase in Group revenues, which amounted to PLN 29.8 billion.

The KGHM Group closed 2021 with high adjusted EBITDA of PLN 10.3 billion. Net assets rose compared to 2020 by PLN 6.1 billion, reaching at the end of 2021 the level of PLN 27.1 billion. This was due among others to higher revenues resulting from more favourable metals prices and lower costs of goods sold, as well as effective management.

The KGHM Group ended the past year with a very high consolidated net profit – the second-highest in history – which rose by 242.5% versus 2020 and amounted to PLN 6.2 billion. The separate profit for the period of KGHM rose by 190.6% and amounted to PLN 5.2 billion.

International projects with positive results

In Sierra Gorda both payable copper production was higher (+28 proc.), as well as operating profit in the amount of PLN 3.2 billion (an increase of nearly 2.5-times for the 55% interest held by KGHM Polska Miedź). The financial condition of KGHM’s Chilean investment provided the opportunity, for the first time in history, to return cash flow to the Parent Entity.

Safety at the highest level

Despite the threat posed by the pandemic, the number of workplace accidents in KGHM fell from 213 in 2020 to 165 at the end of 2021. The largest decrease was in the number of accidents caused by a lack of caution.

KGHM in 2021 recorded a record-low LTIFR_KGHM (Lost Time Injury Frequency Rate KGHM) ratio. The ratio was recorded at 5.63, or a decrease by 23% compared to 2020 and 70% lower compared to the level recorded in 2010.

Strategy and Climate Policy

In 2021 the Management Board of KGHM adopted a Climate Policy, followed by an update to the Company’s strategy, adding to the existing 4Es (Elasticity/flexibility, Efficiency, Ecology and e-Industry), another one, Energy. This is an element of the Company’s investment plans connected with the green transformation. The Climate Policy involves the reduction of greenhouse gases and achieving climate neutrality by 2050.

KGHM’s ambition is to effectively increase the share of renewable energy sources and to generate our own to cover our energy needs. The Company possesses its own low-emissions generating sources fired by natural gas. RES projects are also being developed, including photovoltaic power plants on land belonging to KGHM.

One of the key projects of KGHM will be the implementation of Small Modular Reactor (SMR) technology. The Company signed an agreement in this regards with an American supplier of this technology, the company NuScale Power. KGHM also joined a sector agreement to develop off-shore wind power. The Company is likewise committed to building the Lower Silesia Hydrogen Valley, seeing the potential to utilise hydrogen, among others in our metallurgical plants.

A good neighbour

In 2021 KGHM continued actions connected with counteracting the coronavirus pandemic. Mobile vaccination points were organised at the divisions not only for employees but also their families, friends and the people of the Copper Basin. Several thousand people took advantage of this opportunity.

Due to the situation in Ukraine, KGHM is currently supporting assistance campaigns, both through its own volunteers as well as through the KGHM Foundation. The Company’s employees are taking refugees into their homes, organising collections of donated supplies as well as blood collection drives. The Company has sent transports of medicines and medical supplies to Ukraine.

Investor kit:

- Financial Statements for 2021

Auxilliary materials do the 2021 annual report in PDF format (also in the Results Center, Investor Kit)

- Consolidated Financial Statements for 2021

- MBs report on activities in 2021

- Non-Financial Report of KGHM Polska Miedź S.A. and the KGHM Polska Miedz S.A. Group for 2021

Responses to questions raised at the Results Conference for 4Q 2021

KGHM_4Q2021_transcript

KGHM investor chat_25 March 2022

2020

1Q 2020

Higher payable copper production by the KGHM Polska Miedź S.A. Group (+1%, 174 thousand tonnes), higher silver production (+3%, 335 tonnes) and 25% higher profit by the KGHM Group in the first quarter of 2020 compared to Q1 2019

The consolidated net profit of KGHM of PLN 690 million is one of the highest in recent quarters. The KGHM Group recorded lower revenues (-3%, PLN 5 299 million) and EBITDA (-22%, PLN 1 129 million) with a higher profit for the period (+25%, PLN 690 million).

The revenues of the KGHM Group in the first quarter of 2020 amounted to PLN 5 299 million and were lower by PLN 189 million (-22%) than in the corresponding prior year period. The lower revenues recorded by all segments were mainly due to less favourable macroeconomic conditions. The sales revenues of KGHM Polska Miedź S.A. amounted to PLN 4 225 million and were lower by PLN 91 million (-2%) than in the corresponding prior year period. The decrease in the revenues of the parent Entity were due to lower copper prices alongside a more favourable USD/PLN exchange rate and a higher volume of silver and gold sales. The fall in the copper price by more than 9%, was slightly offset by a higher silver price (+8.5%). The average copper price in the first quarter amounted to 5 637 USD/tonne, silver 16.91 USD/koz t. The strengthening of the USD versus the PLN was not as strong as in the prior year.

Adjusted EBITDA for the KGHM Group was lower in the following segments: KGHM Polska Miedź S.A. (-PLN 99 million, -10%), KGHM International (-PLN 118 million, -69%) and Sierra Gorda (-PLN 114 million, -52%).

INVESTOR KIT:

2Q 2020

High EBITDA, record results by Sierra Gorda and production maintained despite the crisis caused by the COVID-19 pandemic – these are the main achievements of the KGHM Polska Miedź S.A. Group in the second quarter of 2020

Adjusted Group EBITDA in the second quarter of 2020 was a record PLN 1 522 million (higher by PLN 244 million, +19% q/q). The last time such a high result was achieved was in the first quarter of 2017, after a rapid rise in the copper price. The Group’s results were mainly supported by those of KGHM Polska Miedź S.A., which earned EBITDA of PLN 1 031 million. Sierra Gorda also recorded a high EBITDA (of PLN 324 million), nearly 150% that recorded in Q2 2019, the highest such result in the history of this mine. The only exception was KGHM International, which showed a 34% weaker EBITDA (PLN 110 million), though it was nearly twice as high as compared to the first quarter of 2020.

Consolidated net profit of the KGHM Group in Q2 2020 amounted to PLN 9 million, or a decrease by PLN 409 million compared to the second quarter of 2019. The change was mainly due to exchange differences (-PLN 237 million) and to a higher loss on the measurement of joint ventures accounted for using the equity method (-PLN 147 million).

Production by the KGHM Group, against the backdrop of the COVID-19 pandemic, remained at similar levels. Copper production amounted to 177 thousand tonnes, (or -1% vs Q2 2019), while 373 tonnes of silver was produced (-4% vs Q2 2019, higher by 11% after a weak first quarter of the current year).

The C1 cost of concentrate production in the Group was 1.58 USD/lb, or lower by 12% compared to the second quarter of the prior year, in the case of KGHM Polska Miedź S.A. mainly thanks to a weaker PLN vs the USD and a lower minerals extraction tax, and in the case of Sierra Gorda due to lower operating costs, alongside an increase in the copper sales volume.

Sales revenues earned by the KGHM Group in the second quarter of 2020 amounted to PLN 5 649 million and were lower by PLN 91 million (-2%) compared to the corresponding prior-year period. The decrease in revenues in all segments was mainly the result of less favourable macroeconomic conditions. Sales revenues earned by KGHM Polska Miedź S.A. in the second quarter of 2020 amounted to PLN 4 672 million and were higher by PLN 157 million (+3%) than in the corresponding period of 2019. The higher revenues earned by the Parent Entity were due to a more favourable USD/PLN exchange rate (+6%) and to higher prices of silver (+9%) and gold (+26%). The decrease in the copper price in the second quarter of 2020 by more than 12% compared to the corresponding prior-year period was slightly offset by the increase in the price of silver (+10%). The average price of copper in the second quarter of 2020 amounted to 5 356 USD/tonne and of silver, 16.38 USD/koz t. In the second quarter of 2020 the average USD exchange rate was stronger than in the prior year (4.0966 USD/PLN vs 3.8119 USD/PLN).

Adjusted EBITDA for the KGHM Group was higher in the segments KGHM Polska Miedź S.A. (+PLN 111 million, +12%), and Sierra Gorda (+PLN 193 million, +147%), while EBITDA recorded by KGHM International was lower (-PLN 56 million, -34%).

INVESTOR KIT:

Responses to questions raised at the Results Conference for 1H 2020

Investor chat

3Q 2020

A third quarter with good effects – KGHM presents its financial results for the first nine months of 2020

KGHM Polska Miedź S.A. has presented its financial results for the third quarter of 2020. Thanks to the Management Board’s adopted strategy, consistent decisions and flexibility, the KGHM Group achieved a record level of EBITDA and maintained the full capacity to operate its assets despite the pandemic. KGHM has reported stable production while maintaining the maximum level of safety and cost discipline.

“We are reporting the effects of 9 months of strenuous work. A rather tough period for the company and connected of course with the coronavirus pandemic, something the entire world is dealing with. But there is good information: we have made it through this time quite well, considering the demanding circumstances. We ended the quarter with a record EBITDA, at both the Group level, the international assets and in Poland. The results speak for themselves. Ahead of us are more months of operating under a pandemic threat, but KGHM is doing a great job. Mainly thanks to the commitment of our staff and our deep feeling of responsibility for the Company,” says Marcin Chludziński, President of the Management Board of KGHM Polska Miedź S.A.

Solid financial results

The increase in Group EBITDA by PLN 306 million to the record level of PLN 4 418 million was mainly in respect of KGHM Polska Miedź S.A. (+PLN 184 million; +6%) and Sierra Gorda (+PLN 257 million; +49%). The increase was due among others to the following factors: higher revenues by KGHM Polska Miedź S.A. due to an increase of PLN 160 million resulting from the adjustment by hedging transactions, a more favourable USD/PLN exchange rate (+3%) and higher prices of silver (+22%) and gold (+27%) while maintaining cost discipline.

KGHM Polska Miedź S.A. achieved revenues in the first three quarters of 2020 of PLN 13 360 million, meaning a 2% increase versus the period prior to the epidemic (the first three quarters of 2019). Also higher was EBITDA, rising from PLN 2 868 million to PLN 3 052 million after the first nine months of 2020. What is important is that both the level of revenues as well as EBITDA achieved exceeded the amounts set forth in the budget for this period.

The Group’s main source of operating income was the results of KGHM Polska Miedź S.A., which increased EBITDA Q3/Q3 by 18%. Sierra Gorda’s EBITDA doubled compared to the third quarter of 2019, the highest result yet achieved by this mine. Likewise KGHM INTERNATIONAL recorded a 30% higher EBITDA compared to the third quarter of 2019.

The decrease in consolidated profit by PLN 494 million (-30%) was mainly due to a decrease in the operating result by PLN 122 million, a decrease in the result on exchange differences by PLN 218 million and a lower result on the realisation and measurement of derivatives by PLN 137 million.

The KGHM Group reports another quarter in which its financial situation is stable and safe. Net debt of the Group fell in the first 9 months of 2020 from PLN 478 million to PLN 6 413 million.

Stable production

Payable copper production by the Group was slightly lower than in the first three quarters of 2019 and amounted to 521 thousand tonnes. The lower production of copper by KGHM Polska Miedź S.A. was due to the restricted supply of copper scrap in the first half of the year and to the maintenance shutdown at the Głogów I Copper Smelter and Refinery. The decrease in copper production by KGHM INTERNATIONAL was due to lower production in the Sudbury Basin, mainly due to the suspension of operations by the Morrison mine after the first quarter of 2019, and to lower production by the Robinson and Franke mines due to the processing of lower quality ore (a transition zone in Robinson, higher carbonates content in Franke).

On the other hand, copper production by the Sierra Gorda mine increased by 35% due to extracting ore with higher copper content as well as higher extraction. It is worth mentioning that in comparison to the first three quarters of 2019 there was an increase in the efficiency of utilisation of production machinery at Sierra Gorda, the result of preventative actions undertaken to minimise the number of breakdowns, and as a result unplanned maintenance shutdowns.

Other metals (including silver) also recorded lower volumes, mainly due to the maintenance shutdown at the Głogów I Copper Smelter and Refinery: silver lower by -3% (from 1031 t to 997 t in the first 9M of 2020), TPM lower by -8% (from 157 koz t to 145 koz t in the first three quarters of 2020) and molybdenum by -17% (from 8.8 mn lbs to 7.3 mn lbs in the first three quarters of 2020, mainly due to lower production by Sierra Gorda (the mining of ore with lower molybdenum content, lower recovery).

Since the start of the pandemic at the turn of February and March 2020, there have been no production shutdowns directly related to the pandemic in either KGHM Polska Miedź S.A. or in the Group’s international mines.

Since the start of the second quarter of 2020, copper prices have risen and as a result, the average price for the first three quarters of 2020 amounted to 22 931 PLN/t, or a level slightly lower than that recorded in the corresponding period of 2019 (23 115 PLN/t). Silver and gold prices were also favourable, which given the uncertain economic situation increased compared to the prior year period respectively by 24% and 31% (in PLN).

The impact of the fall in metals prices in the initial months of 2020 was to a large degree offset by the weakening in the PLN and to a consistently implemented hedging policy. The Company is consistently advancing its strategy, which foresees the continuation of stable production by the domestic and international assets and a level of costs guaranteeing financial security and safe workplace conditions.

The copper giant in the age of COVID-19

KGHM is continuously taking actions aimed at ensuring the safety of its employees. The discipline exercised by the staff and the consistent monitoring of threats along with the implementation of procedures to prevent infections has enabled KGHM to maintain the full capacity to continue its operations. The Company has instituted numerous educational and informational campaigns, has provided employees with access to special infolines as well as psychological support for persons in isolation, with the cooperation of medical staff from the hospital MCZ.

The Company is supporting the fight against COVID-19 in cooperation with state institutions. KGHM has joined the government program Solidarnościowy Korpus Pomocy Seniorom (Senior Citizens Solidarity Corps). The Company, with the support of volunteers, regional Social Welfare Centers, Caritas and local NGOs, has prepared action plans to enhance the safety of senior citizens. KGHM among others is providing packages with safety materials, including disinfectants, to persons in need.

Additionally, KGHM is also assisting in the organisation of additional beds in temporary hospitals for patients ill with the coronavirus in Lower Silesia. The regional base is increasing by more than 200 beds in Lubin, Legnica and Wałbrzych.

Consistent investments

We are advancing our capital expenditures pursuant with our targets. By the end of the third quarter of 2020 we had achieved 71% of planned expenditures. The largest share in the structure of expenditures incurred was held by the Deposit Access Program and by the development of the Southern Quarter of the Żelazny Most Tailings Storage Facility. Other investment goals comprise among others the outfitting of the mines, adapting production and related installations to the requirements of BAT Conclusions, exploration of the orebody in Poland and the modernisation of IT systems in the Company as part of the KGHM 4.0 Program.

Of increasing importance for the Company’s operations are investments related to renewable energy sources (RES). Our efforts to reduce CO2 emissions and to increase the predictability of energy costs mean that investments such as our projects related to solar energy will be of crucial importance for the Company and are consistent with our Strategy for the years 2019-2023.

KGHM in the near future is facing the consistent advancement of its optimisation and savings programs throughout the Group. KGHM will conduct a rational and responsible investment program, will advance its deposit access program in the Company’s concessioned areas and also its Energy Development Program.

INVESTOR KIT:

Responses to questions raised at the Results Conference for 3Q2020

Investor chat

4Q 2020

Record operating result and solid financial results – KGHM Polska Miedź S.A. announces the highlights of 2020

KGHM Polska Miedź S.A. announced the financial results of the Company and Group for 2020. The copper giant proudly announced the highest Group operating profit since the acquisition of the international assets. EBITDA of more than PLN 6.6 billion, or 27 percent higher than in the prior year. The Company maintained the full operational ability of its assets.

KGHM recorded very good sales results for the Group. They amounted to a 4 percent rise in revenues year-on-year, to PLN 23.6 billion. The affect of last year’s managerial actions can also be seen in the safety and continued employment of thousands of staff, optimised costs and a substantial decrease in debt.

“Despite the unprecedented scale of volatility in the environment, the Group’s operations were not threatened at any stage. This makes us extremely proud. It required the hard work and commitment of our entire workforce. We successfully advanced the Company’s Strategy, which calls for a stable level of production both domestically and abroad. Of importance were decisions guaranteeing safe financing and assuring appropriate working conditions. And all this in accordance with the idea of sustainable development,” said Marcin Chludziński, President of the Management Board of KGHM Polska Miedź S.A.

Stable production in KGHM

From the outbreak of the pandemic, there were no production stoppages either in KGHM Polska Miedź S.A. or in any of the Group’s international mines. In the segments KGHM INTERNATIONAL LTD. and KGHM Polska Miedź S.A. payable copper production was slightly lower, respectively by 9.6 thousand tonnes and 5.2 thousand tonnes.

The lower production recorded by KGHM Polska Miedź S.A. was due to the lower quality and thickness of the mined deposit, as well as to the restricted supply of copper scrap in the first half of 2020 and the planned maintenance shutdown at the Głogów I Copper Smelter and Refinery.

Production of payable copper by KGHM INTERNATIONAL LTD. was lower than planned by 4.8 thousand tonnes (-7%) due to lower production by the Franke mine and the Sudbury Basin mines. Precious metals production was however higher than planned by 3.3 thousand tonnes (+5%) as a result of higher production of these metals by the Robinson mine and by the Sudbury Basin mines.

Sierra Gorda ended 2020 with payable copper production of 3.0 thousand tonnes (+4%) higher than assumed in the budget, as a result of higher ore throughput and higher copper recovery.

Solid financial results by KGHM

In 2020 the KGHM Group recorded an increase in copper production to 709 thousand tonnes. This was achieved with a C1 cost of 1.59 USD/lb. The increase was driven by the 37 percent higher result of the segment Sierra Gorda S.C.M. (+22.3 thousand tonnes for the 55% interest), mainly the result of higher ore throuput and higher copper content.

In 2020, work continued at Sierra Gorda on enhancing asset utilisation efficiencies as well as on increasing production capacity.

In accordance with the obligation arising from the Strategy involving the optimisation of costs in the Group, to a large extent we succeeded in offsetting cost inflation. The basic operating costs of KGHM’s Divisions in Poland were substantially impacted by the utilisation of inventories. This led to a higher sales volume. Total expenses by nature in 2020 compared to 2019 were higher by 3 percent, mainly due to the higher utilisation of purchased metal-bearing materials and to a higher minerals extraction tax charge.

In 2020 the KGHM Polska Miedź S.A. Group was fully capable of meeting its borrowing obligations. Cash and cash equivalents in 2020 increased by PLN 1 506 million and as at 31 December 2020 amounted to PLN 2 522 million.

At the end of 2020 the debt ratio, measured as the relationship of net debt to EBITDA, decreased to 0.9 from 1.5 at the end of the prior year. Assets in the consolidated statement of financial position amounted to PLN 42 780 million and were higher compared to the amount as at 31 December 2019 by PLN 3 371 million.

Equity of KGHM as at 31 December 2020 amounted to PLN 21 081 million and was higher by PLN 879 million than at the end of 2019. In turn the net profit of PLN 1 797 million was higher by 26.5 percent than a year ago.

Safety in KGHM

In 2020 the KGHM Group recorded a record low level of the LTIRF_KGHM (Lost Time Injury Frequency Rate KGHM) ratio. It amounted to 7.3, meaning a drop by 29 percent compared to 2019 and as much as 61 percent compared to 2010. So too, KGHM INTERNATIONAL LTD. in 2020, despite the exceptionally tough conditions imposed by the pandemic, recorded its best result in history in terms of occupational health and safety.

KGHM is not slowing down

The copper company is continuing the Deposit Access Program, including work on the sinking of the GG-1 Deep Głogów shaft. The strategic investment in the Southern Quarter of the Żelazny Most Tailings Storage Facility is well on track. In metallurgy the company is advancing investment projects involving the modernisation and optimisation of the Głogów I Copper Smelter and Refinery.

Projects involving protecting the natural environment and reducing the Company’s impact thereon occupy an extremely important place in KGHM. At the Legnica and Głogów metallurgical plants actions were advanced to adapt the facilities to BAT conclusions. The new Gases Treatment Installation at the Legnica Copper Smelter and Refinery, construction of which commenced in 2020, is aimed at reducing total residual emissions by 99 percent.

Last year, KGHM also advanced projects related to energy generation, including renewables (RES). At the end of 2020, 22.42 percent of total energy consumption by KGHM came from our own generation sources, including generation from our gas-steam blocks.

As part of the Energy Generation Development Program a spatial management plan was adopted which foresees an increase in installed capacity in two photovoltaic power plant projects. These power plants are arising on the terrain of KGHM. In December of 2020 KGHM ZANAM brought on-line the first photovoltaic power plant in Poland using 4.0. technology.

Our investment and development plans for 2021 are compliant with the current and consistently-advanced Company Strategy. The projects were included in the ambitious published budget of KGHM. In 2021 KGHM expects to maintain stable economic and financial results and a safe level of debt.

KGHM in the fight with the pandemic

KGHM is continuously taking actions to ensure the safety of our employees. The Company introduced rigorous procedures related to the sanitary regime, and is working under the assumption of a gradual return to normalcy in line with progress in the vaccination program. KGHM is engaged in numerous educational and informational campaigns for employees, and complies with the guidance of the Ministry of Health.

The Company supports the fight against COVID–19 in cooperation with governmental institutions. KGHM has joined among others the Senior Solidarity Corps program. The copper giant is providing organisational assistance in the creation of additional places in the temporary hospitals for patients suffering from the coronavirus in Lower Silesia. Special units were set up in Wałbrzych and Legnica. In the MCZ health center in Lubin there is also a COVID–19 unit.

INVESTOR KIT:

Responses to questions raised at the Results Conference for 4Q2020

Investor chat

Auxilliary materials to the 2020 annual report in PDF format:

Consolidated Financial Statements for 2020

The Management Board’s Report on the activities of KGHM Polska Miedź S.A. and of the KGHM Polska Miedź S.A. Group in 2020

2019

1Q 2019

Record quarterly production of copper and the highest EBITDA

142 thousand tonnes of payable copper were produced by KGHM Polska Miedź S.A. in the first quarter of 2019. This is the best quarterly result in the last 3 years, while production increased by 28 percent as compared to the first quarter of 2018. In turn, PLN 1 454 million is the highest quarterly EBITDA earned by the Group since the start of 2018. The Group exceeded its production plans for the most important commodities.

In the first quarter of 2019 electrolytic copper production by the KGHM Group increased by 21 percent to 173 thousand tonnes. The Group also achieved excellent results in terms of the production of metallic silver and of other precious metals. It also recorded a substantial increase in sales revenues. The increase in revenues by PLN 1.2 billion from all of the Group’s segments was mainly due to a higher volume of sales of copper and silver as well as a more favourable exchange rate.

The greatest impact on the Group’s net profit was mainly due to an improvement in the operating result and exchange differences by PLN 113 million.

“The best EBITDA by the Group in a year, the best production results by KGHM Polska Miedź S.A. in 3 years, and finally the higher net profit are the result of the consistent implementation of the Strategy of KGHM which was adopted last year. We have now seen another quarter in which the positive effects of stabilised production and improved profitability were evident,” says Marcin Chludziński, President of the Management Board of KGHM Polska Miedź S.A. “We are happy with the drop in the C1 cost. New projects, including the introduction of the procurement policy, allow us to reduce our costs.”

The higher electrolytic copper production by KGHM Polska Miedź S.A. was due to the higher availability of equipment. In 2018 the Company had been preparing for a maintenance shutdown by the Głogów II smelter and had to build up anode copper inventories to ensure the ability to produce electrolytic copper during the planned break.

Production of electrolytic copper and metallic silver was higher than in the comparable prior-year period, thanks to the start-up of the copper concentrate roasting installation as well as to the processing of stored, own concentrate inventories. This new investment increased the availability of our metallurgical installations. The lower extraction of ore meanwhile was the result of the tremor which occurred on 29 January in the Rudna mine. Production of copper in concentrate was slightly lower than in the first 3 months of 2018.

Sierra Gorda

In the first quarter of 2019, Sierra Gorda S.C.M. produced 26.8 thousand tonnes of copper and 5.5 million pounds of molybdenum, which compared to the same period in 2018 means higher copper production by 23 percent and lower molybdenum production by 24 percent. The higher production of payable copper production by Sierra Gorda was due to higher extraction and ore processing.

„Sierra Gorda exceeded its production targets. Our efforts at optimising the operation, mainly management-related changes, are achieving results: C1 cost has come down and production is up. We have excellent relations with our Japanese partners and with the Chilean authorities. All of this allows us to look with optimism on our investment in Sierra Gorda,” says Paweł Gruza, Vice President of the Management Board of KGHM for International Assets.

The decrease in molybdenum production by 1.7 million pounds was due to the nature of the deposit and to the planned extraction sequence. This assumes the mining of a zone with a lower molybdenum grade compared to the ore extracted in prior years. Consequently, despite the increase in the amount of ore processed and the increase in molybdenum recovery, production of payable molybdenum was lower. The Company also decreased the unit cost of copper production (C1). The drop in C1 was achieved despite the limitations in extracting molybdenum, and at the same time lower revenues from the sale of associated metals.

Advancement of strategic projects

In the first quarter of 2019 implementation commenced on the Strategy of KGHM Polska Miedź S.A. for the years 2019-2023. The Company is advancing its target programs and strategic projects in individual areas of the Strategy.

In terms of improving the efficiency of the core production lines in the Polish divisions of KGHM, work continues on advancing projects aimed at automating production in the mining divisions. The Company is advancing tasks aimed at reducing energy use, in accordance with the Energy Management system in place in the Company. Work was also completed on basic tasks under projects related to adapting technical infrastructure to the changes in metallurgical technology at the Głogów I Copper Smelter and Refinery.

At the Legnica Copper Smelter and Refinery, work is approaching completion on the RCR (copper scrap processing) furnace, casting machinery and the dedusting installation. Functionality tests were carried out on individual elements of the RCR furnace, which are planned for completion in May 2019, followed by the start-up of the RCR furnace in the second quarter of 2019. Moreover, in both of these metallurgical facilities a program is being advanced to adapt the technological installations of KGHM to the requirements of BAT Conclusions for the nonferrous metals industry and to restrict emissions of arsenic (BATAs).

Work continues on building the Southern Quarter of the of the Żelazny Most Tailings Storage Facility as well as the GG-1 shaft. As respects the Deposit Access Program, preparatory work continues to build the GG-2 shaft.

At Sierra Gorda, work continues aimed at optimising and increasing the processing of the sulphide ore.

In terms of finance, in the first quarter of 2019 the financial condition of domestic subsidiaries was subjected to detailed analysis as well as the effectiveness of the trade finance tools. KGHM is endeavouring to improve the Company’s current liquidity and to hedge against transactional risks. A model was prepared which describes the impact of factoring of receivables and factoring of payables on the cash conversion cycle ratio and debt ratios. The receivables factoring program is being expanded in the Company and debt factoring has been introduced. KGHM has also announced the intention to issue corporate bonds of up to PLN 2 billion in 2019.

INVESTOR KIT:

Condensed consolidated financial statements

2Q 2019

KGHM: solid growth despite a challenging macroeconomic environment

The KGHM Polska Miedź S.A. Group enjoyed another set of record copper production and financial results. In the first half of 2019 the Group earned a profit of PLN 970 million, or 59 percent more than in the corresponding period of 2018. One of the observable trends is the consistent rise in production by the Group, including in the Chilean asset Sierra Gorda. In the second quarter of 2019 alone, production of payable copper by KGHM Polska Miedź S.A. was nearly 145 thousand tonnes. This was the best quarterly result since the third quarter of 2015. As compared to the second quarter of 2018 production rose by 24%.

Financial records

The high net profit earned by the KGHM Group accompanies record revenues of PLN 11.2 billion and outstanding EBITDA, which reached PLN 2.7 billion. During the same period of 2018, revenues amounted to PLN 9.4 billion with EBITDA of PLN 2.6 billion. This means an increase year-over-year in EBITDA of 7 percent and higher revenues by 19 percent.

The substantially better production and financial results compared to the corresponding period of 2018 were achieved despite the challenging macroeconomic environment.

“We are consistently advancing our strategy, based on excellent management and efficient operations. This leads to excellent results. The published data clearly show that we have done a good job of assessing trends and, quarter by quarter, we are building a stronger position for our company, not only for the present but for years to come,” says Marcin Chludziński, President of the Management Board of KGHM Polska Miedź S.A.

In the first six months of this year the Group earned a net profit higher by PLN 359 million than in the first half of 2018, while its revenues increased by PLN 1.8 billion. Such a positive dynamic was achieved despite a drop of around 11 percent in the average annual copper price.

In the first half of 2019 KGHM also issued corporate bonds, successfully placing PLN 2 billion on the market.

“The achievement of an impressive consolidated net profit, in the amount of PLN 970 million and a substantial increase in revenues and EBITDA by the Group, are related to the higher copper and silver sales and to a favourable exchange rate for these metals, which was strong enough to minimise the lower metals prices over the last six months,” says Katarzyna Kreczmańska-Gigol, Vice President of the Management Board and CFO of KGHM Polska Miedź S.A.

More copper and silver and cheaper concentrates

The good financial results are related to better production than in 2018. The company produced more electrolytic copper in its assets in Poland and more payable copper in its Chilean mine Sierra Gorda. The Group also recorded a drop in the C1 cash cost of producing copper concentrate.

In the first half of 2019 the Group produced a total of 352 thousand tonnes of payable copper, or 19 percent more than in the corresponding period of last year. The plan for electrolytic copper production was exceeded by producing 287 thousand tonnes, due to improved availability of production equipment.

“The high metals production was achieved despite the ambitious investments program carried out at the same time, which partially slowed work by our metallurgical plants processing copper concentrate. At the Legnica Smelter and Refinery the long-anticipated RCR furnace was commissioned, while the Głogów II Smelter and Refinery underwent an extensive 3-month maintenance shutdown,” explains Radosław Stach, Vice President of the Management Board (Production).

Amongst the data for the first half of this year, note should be made of the 47 percent rise in silver production (713 tonnes), versus the corresponding period of the prior year (485 tonnes).

The Chilean mine Sierra Gorda in the past half year recorded a stable increase in payable copper production. This is the result of efforts at reorganising the mine’s operations, which enabled a systematic increase in ore extraction and processing. The increase in mining by Sierra Gorda was also a cause of the increase in the production of precious metals, including silver and gold. The drop in molybdenum production was due to mining in areas with lower molybdenum content as compared to ore extracted in prior years. Production of copper in concentrate by Sierra Gorda in the first half of this year amounted to 53.2 thousand tonnes and molybdenum over 10 million pounds.

“Optimalisation of the operation of Sierra Gorda’s processing plant enables the gradual increase in ore processing and a more efficient production process. Our efforts are aimed at maximising the value of the existing mine infrastructure," says Paweł Gruza, Vice President of the Management Board (International Assets).

In the first half of this year the company recorded a drop in production by KGHM INTERNATIONAL, caused by lower production from the Morrison mine, and temporarily from the Robinson mine, which was not offset by higher production by the Carlota and Franke mines. Good information included substantially higher silver production by the Sudbury Basin versus the same period of 2018, due to mining in a different area of higher mineralisation in the McCreedy mine.

Consistent advancement of strategic investments

The uncertain macroeconomic environment has required the company to adhere to strict discipline as regards the advancement of its adopted strategy under the 4.0. Program. Among others it calls for the rational management of the resources of the Polish copper basin (a.k.a. LGOM), optimisation of metallurgical production, the gradual automisation of production lines and the implementation of programs to cut energy consumption. The company is also continuing programs such as BATAs, improving organisational health and safety and a closed-circuit management project.

During the first 6 months of 2019 the Group spent over PLN 1.6 billion on investments. Among others, KGHM commissioned the largest investment in the history of the Legnica Copper Smelter and Refinery – the RCR copper scrap processing furnace. All of our development projects are proceeding on plan.

In terms of implementation of the strategy, in the first half of 2019, the company concentrated on the process of decomposing its strategic assumptions, representing the basis for operationalisation of the strategy. Simultaneously to this operationalisation process, the company engaged in activities which are critical for its functioning and development. Projects of a strategic nature were continued, the completion of which are a priority for the company. Advancement of the strategic directions of development of the KGHM Group proceeded smoothly, ensuring the continued advancement of strategic goals.

INVESTOR KIT:

MB's report on activities

3Q 2019

KGHM with higher production, rising EBITDA and net profit

KGHM in the first 9 months of 2019 recorded higher copper production of 530 thousand tonnes, or 14 percent higher than in the first 9 months of 2018. Sierra Gorda in Chile also recorded higher production, by 16 percent. KGHM Polska Miedź S.A. earned a net profit 71 percent higher than in the corresponding period of 2018 despite unfavourable macroeconomic conditions! Net profit in the first three quarters rose to PLN 1 666 million.

In the third quarter alone the KGHM Group earned PLN 696 million, or 91 percent higher than in the corresponding period of 2018. Revenues were higher in each of the Group’s segments – the most important being those of KGHM Polska Miedź S.A. – 15 percent. EBITDA for the KGHM Group for the first 9 months amounted to PLN 4 112 million and was higher by 8%.

These good results are connected with an improvement in production. Production of payable copper in the third quarter of 2019 amounted to 178 thousand tonnes (higher by 4%). Silver likewise provided support, with a percentage increase even higher – 22 percent. Production of silver amounted to 1 031 tonnes versus 848 tonnes in the first nine months of 2018. The production plan for all of the main metals – copper, silver, precious metals, molybdenum – was exceeded by several percent.

Such good results were achieved despite unfavourable macroeconomic conditions during the first 9 months of 2019. The price of copper fell by 9 percent, silver by 1.7% compared to the corresponding period of 2018. During this same period support came from a strengthening of the USD versus the Polish zloty by 7.6 percent.

The greatest impact on the production and financial results of the KGHM Group came mainly from the results of the Parent Entity – KGHM Polska Miedź S.A. The situation in the largest company in the Group decidedly improved compared to the corresponding period of 2018 due to the completion and optimisation of significant investments, such as the flash furnace at the Głogów I smelter and the auxilliary installation for the roasting of concentrate. The proper functioning of these investments, important for the production line, had a large impact on the results achieved.

The results of the Sierra Gorda mine in Chile are also constantly improving. Copper production increased by 11.3 thousand tonnes. The main reason for the increase in production was the higher extraction and processing of ore and higher copper recovery during processing. Extraction took place in mining areas with higher ore quality, which was reflected in the higher copper content in processed ore. Higher ore processing and gold content were also responsible for the increase in gold production by 44 percent. Production of molybdenum decreased by 23 percent due to the lower content of this metal in processed ore, which was expected due to the nature of the orebody.

The improved parameters on all fronts, financial as well as in production, is the result of advancement of the firm grip of KGHM’s strategy, which calls for optimisation in the following areas: adaptation of the model of functioning of the KGHM Group to the market environment, higher efficiency in the utilisation of resources and production processes, integration of the KGHM Group around the concept of sustainable development and technological transformation under the 4.0. Program.

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Consolidated financial statements

4Q 2019

Record production and higher revenues of KGHM despite unfavorable conditions

Higher payable copper production (+11 percent to 702 thousand tonnes), record silver production (+18 percent, 1 417 tonnes), higher Group revenues by 11 percent, 5 percent higher EBITDA and the initiation of new investments in the Divisions, with consistent advancement of the strategy.

Sales revenues of the KGHM Group in 2019 were higher by PLN 2 197 million (+11 percent) than in the corresponding prior-year period, including higher revenues by KGHM Polska Miedź S.A. of +PLN 1 926 million. The increase was mainly due to a higher volume of sales of copper (+8 percent) and silver (+13 percent), but also to a more favourable exchange rate alongside lower copper prices. Group EBITDA was due to increases in KGHM Polska Miedź S.A. (+PLN 203 million, +6 percent), Group companies in Poland (+PLN 40 million, +20 percent) and to Sierra Gorda (+PLN 27 million, +4 percent).

The Group earned a consolidated profit for the period of PLN 1 421 million.

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MB's report on activities

Consolidated financial statements

2018

1Q 2018

Financial results of the KGHM Polska Miedź Group in the first quarter of 2018 restricted by the build-up of half-finished products

- The main priority for KGHM Polska Miedź S.A. in the first quarter of 2018 was to secure resources for the production of electrolytic copper from own concentrate during the furnace downtime of the Głogów II Copper Smelter and Refinery in the April-June timeframe. This is also the reason for the increase in anode production, the inventory of which rose in the first quarter by nearly 30 thousand tonnes of copper, and which is currently being used in the electrorefining process. Following this period of maintenance work our production of copper from own concentrate will visibly accelerate, so that by the end of the year it will be several percent higher than last year’s result. – said Rafał Pawełczak, President of the Management Board of KGHM Polska Miedź S.A.

The drop in consolidated revenue by 13% yoy in the first quarter of 2018 is mainly the result of lower yoy sales volumes of payable copper (by 14%) and silver (by 16%) in KGHM Polska Miedź S.A. with a stable PLN-denominated copper price, but with a silver price lower in PLN by 19% due to depreciation of the USD by 16%.

Production of payable copper by the KGHM Polska Miedź Group in the first quarter was lower yoy by 15%, and silver by 18%, mainly due to the stockpiling of inventories of anode copper, which is being used for the electrorefining of electrolytic copper during the three-month furnace maintenance shutdown at the Głogów II Copper Smelter and Refinery.

The 17% higher yoy production of payable copper and the 9% higher production of precious metals by KGHM International is mainly the result of significantly higher metals content in ore as well as higher recovery by the Robinson mine.

The Sierra Gorda mine for a subsequent quarter continued mining a part of the deposit with lower content of copper and molybdenum, which affected production of these metals and amounted respectively to 12 thousand tonnes and 4 million pounds (on a 55% basis), representing a decrease yoy by 15% and 18%.

Adjusted consolidated EBITDA in the first quarter of 2018 was lower by 26% compared to the same period of the prior year (from PLN 1 581 million to PLN 1 174 million), mainly due to a decrease of EBITDA in KGHM Polska Miedź S.A. by PLN 533 million due to lower sales of copper and silver. In turn, EBITDA in KGHM International and Sierra Gorda (55%) increased respectively by PLN 93 million (x2.2 yoy) and PLN 41 million (+34% yoy) mainly due to an increase in revenue with stable costs of goods sold.

Consolidated profit as at 31 March 2018 amounted to PLN 439 million and was lower yoy by 38%, reflecting the drop in EBITDA, which was partially offset by positive exchange rate differences and by lower income tax.

Net debt as of March 31st amounted to PLN 7 142 million (USD 2 092 million), and its relation to adjusted EBITDA rose to 1.5 from the level of 1.3 at the end of 2017.

INVESTOR KIT:

2Q 2018

The highest PLN-expressed copper prices since the start of 2013 ensured higher revenues and EBITDA for the KGHM Polska Miedź Group in the second quarter

The highest PLN-expressed copper prices since the start of 2013 ensured higher revenues and EBITDA for the KGHM Polska Miedź Group in the second quarter, despite the negative impact of the planned maintenance at the Głogów II Copper Smelter and Refinery on the achieved levels of production and sales.

The increase in consolidated revenue by 7 percent yoy to the level of PLN 5 157 million in the second quarter of 2018 is mainly the result of an increase in the price of copper by more than 1 200 USD/t (+21 percent yoy) alongside the partial offsetting of this effect by the 7 percent lower volume of copper sales yoy and the weakening of the USD/PLN exchange rate by 7 percent yoy. The average PLN-expressed price of copper in the second quarter was at the highest level since the first quarter of 2013.

Payable copper production by the Group was 10 percent lower than in the second quarter of 2017 (152 kt versus 168 kt), mainly due to the maintenance shutdown of the flash furnace at the Głogów II Copper Smelter and Refinery. Production by the international assets remained stable. The maintenance of the flash furnace also had negative impact on production of associated metals, mainly metallic silver (-20 proc. yoy). Production of molybdenum fell by 55 percent to the level of 3.8 million pounds, mainly due to the lower content of this metal in the ore extracted by the Sierra Gorda mine.

Adjusted consolidated EBITDA[i] in the second quarter of 2018 was higher by 9 percent compared to the corresponding period of 2017 (from PLN 1 282 million to PLN 1 391 million). Impact came from the higher EBITDA of the Sierra Gorda mine (by PLN 97 million) alongside changes in the revenue and costs of other segments, resulting in a net positive effect of PLN 12 million.

Consolidated profit in the second quarter amounted to PLN 172 million and was half of that achieved in the prior year. The difference was mainly due to an increase in depreciation/amortisation, the recognition of provisions (mainly due to litigation) and to a lower result on the involvement in joint ventures.

Net debt at the end of the second quarter amounted to PLN 8 019 million (USD 2 142 million), while the ratio of net debt to adjusted EBITDA amounted to 1.7.

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Consolidated financial statements

Investor chat [PL]

3Q 2018

Stable production and sales results

“The production and sales results are in line with our budget targets, and we continued initiatives aimed at the growth of the KGHM Group’s domestic and international companies. It’s worth pointing out that the key investments in Poland are on schedule,” said Radosław Stach, Vice President of the Management Board for Production.

Production of payable copper by the Group was at a similar level to that achieved in the third quarter of 2017 (171 thousand tonnes versus 170 thousand tonnes), mainly thanks to higher production of electrolytic copper by KGHM Polska Miedź S.A. after the maintenance shutdown at the Głogów II Copper Smelter and Refinery. The slightly lower production of payable copper in the third quarter by the assets of KGHM International was mainly due to a decrease in ore quality and to a decrease in ore extraction by the Robinson mine. After the first three quarters, production of payable copper by the Robinson mine as well as by all of KGHM International was at a similar level to that of the prior year. The furnace maintenance also had a negative impact on the production of associated metals, mainly metallic silver (-20% yoy). The drop in copper and molybdenum production by the Sierra Gorda mine in the first three quarters was due to the lower metals content in extracted ore.

The KGHM Group increased its revenues by PLN 590 million. (+12%), compared to the third quarter of 2017, mainly due to higher revenues earned by KGHM Polska Miedź S.A. (+PLN 396 million) and KGHM International (+PLN 137 million).

„The results of the Group are satisfactory. In Poland the increase in revenues was due to higher sales of copper. Our international assets meanwhile had higher revenues mainly due to an increase in revenue by DMC, related to a contract being advanced in the United Kingdom,” noted Katarzyna Kreczmańska-Gigol, Vice President of the Management Board for Finance,

Consolidated adjusted EBITDA in the third quarter of 2018 was lower by 13 % compared to the corresponding prior year period (from PLN 1 414 million to PLN 1 225 million). The main reason was the increase in costs of operating activities after the first 9 months, including a higher minerals extraction tax due to higher metals prices (Cu, Ag).

Consolidated net profit in the third quarter amounted to PLN 365 million and was 40% lower than in the prior year. The difference was mainly due to the lower operating results of KGHM Polska Miedź S.A. and to higher income tax.

Net debt at the end of the third quarter amounted to PLN 7 439 million (USD 2 024 million), with net debt to adjusted EBITDA of 1.6.

In the third quarter of 2018 the KGHM Group pushed forward numerous development projects in its domestic Polish companies. In line with adopted targets, a number of solutions were implemented aimed at enhancing the value of the KGHM Polska Miedź S.A. Group. These comprised the coordination of key entities, their cooperation and the elimination of overlapping activities. The Group strengthened oversight of its portfolio of investment projects in key companies to maintain and support the core production business of KGHM Polska Miedź S.A. In terms of advancing the existing Strategy, emphasis was placed on improving and unifying the functioning of the organisational processes and management standards in force in the KGHM Polska Miedź S.A. Group.

In the third quarter of 2018 a review commenced of the international assets. Completion is planned at the end of 2018. With respect to implementation of the Strategy being advanced by KGHM Polska Miedź S.A. in the Group’s international companies, KGHM is working to develop coherent reporting principles and consistent internal regulations, as well as standardised solutions in individual functional areas of the international assets.

INVESTOR KIT:

4Q 2018

Satisfactory results of the KGHM Group for 2018

Stabilised production, review of the assets in Poland and abroad, substantial improvement in the operating parameters of Sierra Gorda, start of the debt reduction process and the commencement of new development initiatives – these are the main elements describing the activities and results of the KGHM Polska Miedź S.A. Group in 2018. Profit earned by KGHM Polska Miedź S.A. amounted to PLN 2 billion, despite the negative impact of the macroeconomic situation.

“The revenues of the KGHM Group were higher compared to the prior year by 0.8%, at PLN 20.5 billion. The ratios adopted – EBITDA of the KGHM Group as well as EBITDA of KGHM Polska Miedź S.A. – exceeded the budget targets for 2018,” said Marcin Chludziński, CEO and President of the Management Board of KGHM Polska Miedź S.A. „Recent months have been a time of intensive work: we have maintained cost discipline, stabilised production, conducted a review of our assets in Poland and abroad, signed new, long-term contracts with our business partners, commenced the process of reducing our debt and launched a variety of new development initiatives,” added Marcin Chludziński.

Production results

In 2018 production of payable copper amounted to 634 thousand tonnes, 3 percent lower than in 2017, but higher than the target for 2018. Silver production in 2018 amounted to 1200 tonnes. Molybdenum production by Sierra Gorda decreased to 15.3 million pounds compared to 2017. „Payable copper production achieved compared to the prior year was due to the planned maintenance shutdown by the Głogów II smelter in 2018. Production was also affected by the breakdown in the Głogów I copper smelter in 2017. Molybdenum production was the result of the lower grade in extracted ore,” says Radosław Stach, Vice Pesident of the Management Board (Production). „We are consistently striving to achieve the targets related to optimal utilisation of the resource base and the Company’s production capacity, as well as optimisation of copper content in extracted ore and concentrate.”

Stable economic results

Revenues in 2018 were higher than in the comparable prior period. The main increase was in KGHM International. In terms of EBIDTA higher operating results were recorded by Sierra Gorda and KGHM International. Due to the breakdown at Głogów I in 2017 and the increase in inventories resulting from the planned maintenance shutdown at Głogów II, EBIDTA for the KGHM Group was nearly PLN 5 billion. Other operating income was slightly over a billion PLN, an increase of PLN 472 million.

„The increase in other operating income was due to exchange differences, a decrease in the impairment loss on fixed assets under construction and intangible assets not yet available for use as well as a decrease in the loss due to the measurement and realisation of financial assets,” said prof. Katarzyna Kreczmańska – Gigol, CFO and Vice Pesident of the Management Board (Finance) of KGHM Polska Miedź S.A. “Moreover, thanks to the use of factoring we accelerated the turnover of receivables, which led to higher cash held at the end of 2018.”

Continuation of strategic projects

Work continues under the Deposit Access Program. Planning work began on the siting of the GG-2 shaft. Thanks to the conclusion of discussions with local authorities, the Gmina (municipality) of Żukowice requested a change in the Study of Conditions and Directions of Land Management and in the Municipal Land Management Plan.

Under the Metallurgy Development Program another stage in the ramp-up of the Głogów I smelter was accomplished. The Company is pursuing a program of adaptation of its installations to the requirements of BAT Conclusions for the nonferrous metals industry and to restrict emissions of arsenic. The BATAs Program involves 32 investment projects at the Głogów metallurgical plant, including 20 new projects, as well as 14 projects at the Legnica plant, including 8 new ones.

Work also accelerated on the Copper Scrap Plant program being advanced at the Legnica Copper Smelter and Refinery. This division is undergoing a broad investment program comprising among others the construction of a new RCR (Revolving Casting-Refining) furnace.

In 2018 we commenced the expansion of the Żelazny Most Tailings Storage Facility. This key investment for KGHM guarantees safe operations by the Company in the copper belt in the coming years.

In 2018 we advanced numerous development projects for the domestic companies of the KGHM Group. We implemented a variety of solutions, such as enhanced coordination of key entities. We eliminated overlapping activities, which will help to increase the value of the Group. We developed the concept of the KGHM Group Council, a body which is aimed at providing comprehensive support to the companies of the Group during the process of setting directional targets and the integration of these entities’ businesses as well as enhancing corporate governance.

KGHM conducted a review of its international assets. As a result the strategy was rationalised with respect to production by KGHM International and Sierra Gorda. This Chilean company is concentrating on the Debottlenecking Program, which is aimed at increasing average annual daily ore throughput to 130, and then 140 thousand tonnes based on existing infrastructure and necessary investments. The Owners of Sierra Gorda have approved among others the purchase of additional vertimills and a third flotation waste thickener, which are key elements of the Program.

In turn the revenues of the DMC Group were twice as high as in the prior year, amounting to over USD 200 million. The Company is working on further development of this part of our activities.

Plans for 2019

In 2019 the Company will implement its new strategy for the years 2019 – 2023. The goals set by the Management Board are related to continuous improvement in profitability, financial parameters and reducing costs.

INVESTOR KIT:

MB's report on activities