For KGHM Polska Miedź S.A. the year 2018 was a time of numerous challenges, but also many successes. We achieved excellent results in the mining and production of copper, silver and other minerals. We made a clear improvment in our sales results. We retained our position as one of the world’s leaders in the copper sector. Thanks to rational investing we are continuously developing. We are also able to advance our non-industrial activities by introducing projects related to the environment or society which could be of service to local communities.

The production results of KGHM in 2018 were exceptionally positive. The electrolytic copper production plan was exceeded by 1.6 percent. In the case of silver, the plan was exceeded to an even larger extent, 2 percent. Sales of the products of KGHM increased by 1.7 percent. Thanks to this the revenues of our Group reached a higher level, by 0.8 percent, giving us PLN 20.5 billion.

Thanks to these excellent results we retain our position as a global sector leader. KGHM is one of the world’s most important producers of copper and non-ferrous metals. Export was and remains the primary source of revenues, with our goods being shipped to dozens of countries on several continents, including Asia, both Americas and Australia. The largest customers for the copper produced by KGHM remain China and Germany, but our products are also sold in countries such as the United Kingdom, Italy, Switzerland, France, South Korea, the USA and Canada.

The many years of fruitful cooperation with our international partners is a source of pride for us. All the more so, that in 2018 in many cases we were able to either establish new relationships or strengthen existing ones. One example of such efforts, and at the same time one of the greatest successes of KGHM in the past year, was the signing of a new contract with China Minmetals for the supply of copper cathodes. Based on this new contract with one of the largest metals companies in  China, over the next 5 years we will supply cathodes to China, the value of which could reach up to
USD 4 billion, depending on the final size of orders.

Speaking of our activities and successes abroad, it would be hard to omit the review of our international assets we conducted in the third quarter of 2018. Thanks to this we were able to  undertake effective actions in the modernisation of our Sierra Gorda mine in Chile. As a result, the production process was improved to a substantial degree, with an increase in daily throughput. This modernisation and efficiency improvement of Sierra Gorda was made possible by successful investments and was based on existing infrastructure.

We place particular emphasis on investments in our domestic assets in Poland, which not only enhance the efficiency of our company and its production potential, but also enable us to stay compliant with the idea of sustainable development. In terms of investments undertaken in 2018, it is worth mentioning the start of construction on expanding the „Żelazny Most” Tailings Storage Facility. This investment is not only of great significance for the region’s natural environment, but also assures us of efficient operations for the next several decades. Also of significance was the broad program of investment in the Legnica Copper Smelter and Refinery, comprising among others the construction of a modern RCR furnace for processing copper scrap.

The actions we took in 2018 arise from the philosophy of our Company. We want to be an efficient company, one continuously striving to be a global leader in the copper sector, but at the same time a socially responsible enterprise, for which the needs of local communities are of particular importance, not to mention caring for the natural environment. These goals have also been enshrined in the new, updated strategy of KGHM Polska Miedź S.A. for the years 2019-2023, which we adopted in December last year. The main pillars of the strategy can be defined as the 4E’s – efficiency, elasticity (i.e. flexibility), E-industry and ecology. These four directions comprise our goals, which include increasing our mining efficiency in Poland and abroad, but also the development of our company through innovation and taking positive steps towards improving the environment and supporting society.

We are endeavouring to become self-sufficient in terms of energy consumption. One of the means to accomplish this goal is to increase the use of renewable energy sources. Under our strategy, 50% of KGHM Polska Miedź S.A.’s demand for electricity is to be satisfied from our own sources of energy generation and renewable energy sources by the end of 2030.

We are implementing solutions which will help the environment and reduce our impact on the global climate. The company is planning to build installations which will make the gases emitted during production at the Głogów Copper Smelter and Refinery cleaner. Among others this work includes dedusting installations for the Dörschel, convertor and electric furnaces. Also planned are the construction of an innovative installation to eliminate arsenic arising from the production process. This solution will enable arsenic to be transformed into a form resembling a naturally-occurring mineral.

We are investing in and promoting modern, environmentally-friendly technologies, including electric vehicles.

We are a socially responsible company, which cares about its local communities. Wherever we operate we strive to engage in dialogue with local authorities and representatives of the local communities. As part of this social dialogue, KGHM for years has worked with local governments in the Copper Basin, among others by participating in developing their strategies for development and through a variety of  social agreements which are aimed at raising living standards for local citizens.

Under its Socially Responsible Business Strategy, KGHM advances CSR-type programs, which assist the people of the communities where we operate in numerous ways. In this regard it is worth mentioning the EKO-Zdrowie program which has been in place for the last 5 years, which comprises sports programs for people of various age groups. These include nordic walking for adults, recreational gymnastics for seniors and swimming lessons for children.

We are especially proud of our employee volunteer program „Miedziane serce” or Copper Hearts, which is carried out at the international scale. Under its auspices KGHM has integrated the social initiatives of those employees who for many years have volunteered their time to help others, sharing their skills, knowledge and professional experience.

The KGHM Polska Miedź Foundation has also been active for years in providing support for numerous initiatives in four areas – Health and safety, Sport and recreation, Culture and traditions and Science and education. In 2018 alone in all of these areas, financial assistance was provided in the amount of several tens of millions PLN.

We wish to further support the Copper Basin and the regions in which we operate. We are hoping that, thanks to the development of our Company, we will be able to do so in the future to an even greater degree.

 In conclusion, I invite you to review the Sustainability Report of KGHM for 2018.

With sincerest regards,

Marcin Chludziński

President of the Management Board
KGHM Polska Miedź S.A.

Lubin, 13.03.2019