The Management Board of KGHM Polska Miedź S.A. is pleased to announce that on 01 August 2013 its subsidiaries, KGHM International Ltd. and FNX Mining Company Inc. entered into an agreement with Vale Canada Limited (wholly-owned subsidiary of Vale S.A.) which provides the framework for KGHM International Ltd. to develop the Victoria copper-nickel-PGM project in Sudbury, Canada. KGHM International Ltd. will retain its 100% ownership of Victoria and Vale will receive a 2.25% Net Smelter Return royalty on all future production from the project.
At the same time, KGHM International Ltd., FNX Mining Company Inc. and Vale re-negotiated and signed on 01 August 2013 an off-take agreement for all of KGHM International’s production from its mines in the Sudbury basin in Ontario, Canada. Vale will purchase polymetallic ore from KGHM International Ltd. and process it at Vale’s Clarabelle mill in Sudbury. The contract is valid for the full life of all KGHM International’s Sudbury mines, including future production from Victoria. The estimated value of the agreement for the 5 years following the effective date of the agreement (01 January 2013 to 31 December 2017) is approximately US$1.13B estimated on the basis of official LME evening evaluation prices and precious metals forward curves calculations as of 31 July 2013 (3.61B PLN based on the National Bank of Poland exchange rate from 31 July 2013).
The criteria used for describing the agreement as significant is that the estimated value of the agreement exceeds 10% of the equity of KGHM Polska Miedź S.A.
Legal basis: § 5 sec. 1 point 3 of the Decree of the Minister of Finance dated 19 February 2009 regarding current and periodic information published by issuers of securities and conditions for recognising as equivalent information required by the laws of a non-member state (Journal of Laws from 2009 No. 33, item 259 with subsequent amendments)