Stable production from KGHM in the first half of 2014

In the first half of 2014, KGHM booked net profit of PLN 1 bilion 119 m. The result was in line with market expectations. Systematically maintained cost discipline and stable production allowed the company to deal effectively with challenging macroeconomic conditions.

Wednesday, 13 August, 2014

Copper production in the first half of 2014 stood at 216,000 tonnes and was nearly flat in year-on-year comparison, as higher volume of mined ore offset the 2-percent decline in the copper grade. At the same time, the efficiency of production of concentrate increased, with the contents of copper in concentrate reaching 23.1 per cent. KGHM began mining from the deposit located over 1,200 metres below surface in the mining area “Deep Głogów”. This deposit will be operated by two mines – “Rudna” and “Polkowice-Sieroszowice”. Access to this area and its development will enable the company to extend the mining activities in Poland based on its own resources by another 30 – 40 years.

In the second quarter of 2014 positive production results in Poland were accompanied by an increase of production in the key mines abroad. The Morrison mine in Canada saw a 15-per cent increase of copper content, while compared to the previous quarter. Precious metals production in this period was 13 per cent higher than in the first quarter of 2014. Output rose also in the Robinson mine in the United States, due to the positive effects of blending ores from various excavations. As a result, there was a record mill utilization ratio of 99.5 percent. Works on the Sierra Gorda mine in Chile were continued, which eventually resulted in the start of production on July 30. The projected average annual production during over 20-year lifespan of the mine – accounting for the launch of the second phase of the project – will be about 220,000 tonnes of copper, 25 million pounds of molybdenum and 64,000 ounces of gold. Additional production potential lies in the processing of the oxide ore. As part of the tests, the first cathode copper have already been produced in this technology.

The implementation of strategic investments aimed at development will be possible thanks to sealing of long term financing. KGHM signed a revolving loan agreement for the amount of USD 2.5 billion with the consortium of banks. Additional loan in the amount of PLN 2 billion was granted by the European Investment Bank.

“Investment and pro-development activities of KGHM are strongly linked to the cost discipline, which we maintain for several quarters. Costs in the first half of 2014 fell by PLN 58 million in comparison to the previous year, excluding tax on mineral extraction and impact of purchased concentrate. The efficiency actions are particularly important due to lower prices of copper and silver,” said Jarosław Romanowski, Executive Vice President and CFO of KGHM.

In the first six months of 2014 metal prices were at a much lower levels than in the first half of last year, which strongly affected revenues. Prices of copper and silver have main impact on KGHM’s net profit.
The macroeconomic situation is improving, which is crucial for the company, especially with the ongoing process of reaching full production capacity at its mine in Chile, which should allow for the increase of production by 100,000 tonnes.