Operations and results in 2018

Production process

Production in the Group is based on the processes illustrated in the following two diagrams:

Integrated mining, processing, smelting and refining processes in KGHM Polska Miedź S.A.

Production in KGHM Polska Miedź S.A. is a fully integrated process, in which the end product of one technological phase is the starting material (half-finished product) used in the next phase. Mining in KGHM Polska Miedź S.A. is performed by three mining Divisions: Lubin, Rudna and Polkowice-Sieroszowice. In the subsequent phase the Concentrators Division prepares concentrate for the smelters and refineries, while the Tailings Division is responsible for storing and managing the tailings generated by the copper ore enrichment process. The organisational structure of KGHM includes two metallurgical facilities: the Legnica Copper Smelter and Refinery and the Głogów Copper Smelter and Refinery, as well as the Cedynia copper wire rod plant.

Mining

The technology of mining the copper ore in all 3 mines is based on the room-and-pillar system with the use of blasting technology for ore extraction. This involves access and preparatory work, comprised of the excavation of a drift network on all sides of the site to be mined, cutting of the unmined rock mass with rooms and drifts separating a number of operating pillars, as well as extraction of the ore followed by the transport of the ore to underground dumping stations, where the large rocks are crushed and sifted through a grate, and then the crushed muck is transported to the storage areas near the shafts, from which it is transported to the surface by skip hoisting shafts.

The work related to mining of the copper ore is fully mechanised, in a 4-shift labour system, with the use of motorised mining rigs, most of which are equipped with air-conditioned cabins and systems supporting the work of the operators. Mining work is conducted in the following cycle: drilling the blasting holes with the support of motorised drilling rigs, loading blasting material into drilled holes by drilling rigs, group blasting in mining divisions, followed by the ventilation of the areas blasted (from 30 minutes to 2 hours; in seismically-sensitive areas this time is longer). The next stage involves the loading of the muck using motorised loaders into haulage vehicles and its transport to dumping stations, along with protection of the exposed face by roof anchor bolts using bolting rigs. The crushed muck is transported by conveyor belts or mine rail trolleys to the storage sites near the shafts, and is then transported to the surface. After the muck is unloaded at the shaft top, it is transported by conveyor belts or railway to the ore concentrators located at each of the three mines.

The operations and processes applied at each of the three ore concentrators are the same. However, due to the varied lithological and mineralogical composition of the ore from individual mines, the production layout of each facility differs. The enrichment technologies applied include the following individual operations: screening and crushing, milling and classification, flotation and drying of the concentrate.

The flotation process results in concentrate with an average copper content of approx. 22-23%, and flotation waste. The Rudna mine concentrator produces concentrate with the highest copper content (approx. 26%), while the lowest is at the Lubin mine concentrator (approx. 13%). The Polkowice mine concentrator produces concentrate of approx. 25% copper content.

The dried concentrate of approx. 8.5% water content is transported by rail to the following smelter/refineries: the Legnica Copper Smelter and Refinery located in Legnica, the Głogów I Copper Smelter and Refinery and the Głogów II Copper Smelter and Refinery, located in Głogów.

The flotation waste, in the form of slimes, are transported through pipelines to the Żelazny Most Tailings Storage Facility, where the sedimentation of the solid particles takes place and the clarified water is collected and redirected to the ore concentrators. The storage site also serves as a retention-dosage reservoir for excess mine water. Excess water is hydrotechnically discharged (periodically) to the Odra River. This method was developed and implemented in partnership with research institutions, and it has been officially approved for use under the provisions of the Water Law. Studies demonstrate that the discharging of mine and process water to the Odra River cannot result in any changes that would make the proper functioning of water ecosystems impossible or prevent conformance with the applicable water quality requirements.

Metallurgy

The copper smelters/refineries produce electrolytic copper from own concentrates as well as from purchased metal-bearing material (copper concentrates, copper scrap, blister copper). The Legnica Copper Smelter and Refinery uses a multi-stage process whose main stages include: preparation of the charge material, its reduction smelting in shaft furnaces to the form of matte copper, conversion to the form of blister copper with approx. 98.5% Cu content; fire refining in anode furnaces to produce anodes of 99.2% Cu content; and electrorefining. The final product is electrolytic copper cathodes with 99.99% Cu content.

The Głogów Copper Smelter and Refinery applies one-stage flash furnace technology based on a license from the Finnish company Outokumpu. The dried concentrate, with a moisture content of 0.3% H2O, is smelted in a flash furnace into blister copper containing around 98.6% Cu, which is subject to fire refining in anode furnaces. The slag, which still contains on approximately 14% copper, is sent to an electric furnace, where the copper is removed while the CuPbFe alloy obtained is sent to the convertors, from which the resulting copper is sent for refining in anode furnaces. The copper anodes produced from fire refining are then sent for electrorefining, and the end product is electrolytic copper in the form of cathodes containing 99.99% Cu.
Approx. 45% of the electrolytic copper produced by KGHM’s smelters and refineries are further processed in the Cedynia Copper Wire Rod Division, where copper wire rod is produced by a continuous smelting, casting and rolling process as well as oxygen-free copper rod and oxygen-free, low-alloy, silver-bearing copper rod based on UPCAST technology are produced.

The anode slime produced during the electrorefining process at KGHM’s smelters and refineries contains precious metals, and is the raw material used by the Precious Metals Plant at the Głogów Copper Smelter and Refinery to produce the following products: refined silver, gold, palladium-platinum concentrate and selenium. The electrolyte in the Tank Hall, once the copper is removed, is used to produce crude nickel sulphate.
The lead-bearing dust and slimes collected as a result of the removal of dust from technological exhaust gases at the smelters and refineries are smelted, together with decopperised convertor slag from the flash furnace production line, in Dörschel furnaces at the Lead Section of the Głogów Copper Smelter and Refinery into crude lead containing 99.3% Pb. This crude lead is then refined at the Legnica Copper Smelter and Refinery to obtain the end product - refined lead containing 99.85 % Pb.

The segment KGHM INTERNATIONAL LTD.

The core business of the KGHM INTERNATIONAL LTD. Group of companies is the mined production of metals, such as copper, nickel, gold, platinum and palladium, from both open-pit and underground mines, as well as advancement of mining and exploration projects. The following drawing shows a simplified flowchart of core business of the KGHM INTERNATIONAL LTD. Group.

Simplified flowchart of core business of the KGHM INTERNATIONAL LTD. Group.

Operations and results in 2018

Primary Group products

Copper cathodes

Copper cathodes made from electrolytic copper with a minimum copper content of 99.99% are the basic product of KGHM Polska Miedź S.A. They meet the highest quality requirements and are registered as Grade „A” on the London Metal Exchange (LME) under three brands: HMG-S, HMG-B and HML and on the Futures Contracts Exchange in Shanghai. Copper cathodes are also the primary product of the Carlota mine in the USA and the Franke mine in Chile, both part of the KGHM INTERNATIONAL LTD. Group. The main customers for the cathodes are producers of wire rod, other rods, flat bars, pipes, sheets and conveyor belts.

Copper wire rod

The second copper product, in terms of volume, produced by KGHM Polska Miedź S.A. is 8 mm copper wire rod manufactured through the Contirod® continuous process of melting, casting and drawing. Depending on the needs of the customer, wire rod is produced in various classes of quality. The main customers for wire rod are the cable, electrical goods and electrotechnical industries.

Silver

Electrolytic silver is produced mainly by KGHM Polska Miedź S.A. in the form of bars (ingots, billets) and grains containing 99.99% silver. Silver bars (weighing approx. 32 kg) hold a certificate registered on NYMEX in New York as well as a Good Delivery certificate issued by the London Bullion Market Association. Granule silver is packed in bags weighing 25 kg or 500 kg. The main customers for silver are financial institutions, the jewellery industry, photographic industry, and the electronics and electrical industries as well as producers of coins and medallions.

Copper concentrate

Produced by the Robinson mine in the USA, part of the KGHM INTERNATIONAL LTD. Group, containing over 20% of copper. This product is also produced by the Sierra Gorda mine in Chile (copper content is above 20%). Both of these concentrates also include gold as an additional product. The copper concentrates are sold for further processing as a commodity product. Occasionally KGHM Polska Miedź S.A. also sells copper concentrate produced by the Lubin, Rudna and Polkowice-Sieroszowice mines (average copper content, depending on the type of concentrate, is from approx. 13% to approx. 25%).

Molybdenum concentrate

Another commercial product (apart from copper concentrate) produced by the Robinson mine in the USA, part of the KGHM INTERNATIONAL LTD. Group. Production of molybdenum concentrate is derivative from the process of copper concentrate production.

Molybdenum oxides

One of the main commercial products of Sierra Gorda is molybdenum oxide, arising from the processing of the molybdenum sulphide concentrate (containing approx. 48% Mo) produced by the Sierra Gorda mine. Molybdenum is used in the aircraft, defense, oil, nuclear and electronics industries.

Gold

Gold in the form of bars weighing approximately 0.5 kg, 1 kg, 4 kg, 6 kg and 12 kg containing 99.99% gold is produced by KGHM Polska Miedź S.A. Gold is used in the jewellery industry, by banks and in the electrical industry.

Ore containing copper, nickel and TPM (precious metals – gold, platinum, palladium)

Produced by the mines in the Sudbury Basin in Canada, part of the KGHM INTERNATIONAL LTD. Group. The ore containing copper, nickel and TPM is sold for further processing to a smelter and refinery in the Sudbury Basin.

Oxygen-free copper rod

Two types of rod are produced: Cu-OFE oxygen-free rod and CuAg(OF) oxygen-free, silver-bearing rod. Rod is produced using UPCAST® technology, in diameters from 8 mm to 25 mm (8 mm, 12.7 mm, 16 mm, 20 mm, 22 mm, 24 mm and 25 mm). Customers for this product are in the cable industry, with application in the form of thin wires, enamelled wires and fire-resistant cables, as well as cables for transmitting audio and video signals. In addition, oxygen-free, silver-bearing rod is used in the manufacture of trolleys and commutators.

Round copper billets

Round copper billets produced from copper cathodes cast in the classification Cu-ETP1 and Cu-ETP, and from oxygen-free phosphorus-containing copper cathodes in the classification Cu-HCP, Cu-PHC, Cu-DLP and Cu-DHP are used in the construction industry (to manufacture pipes) and the electrotechnical industry (to manufacture belts, rods and profiles).

Refined lead

Refined lead in the form of bars (dimensions: 615 x 95 x 80 mm) has been produced by KGHM Polska Miedź S.A. since 2007. It has been registered on the London Metal Exchange since 2014 under the brand „KGHM”. Refined lead is mainly used to produce batteries and lead oxides.

Operations and results in 2018

Main production goals

The main goals set by the Management Board in terms of production and occupational health and safety for 2019 are a continuation of actions taken in 2018, i.e.:

  1. optimal utilisation of the resource base and of the production capacity of the Company, and
  2. optimisation of Cu content in ore and concentrate.

Key tasks in 2019:

in mining
  • access and development work to intersect the ore in the Deep Głogów area, 
  • continuation of work related to exploration of the Retków copper ore deposit in the Grodziszcze area,
  • continuation of work related to prevention of gas-related threats (hydrogen sulphide and methane) and the use of new technical solutions and means of prevention to counteract this threat,
  • continuation of work related to utilising the capacity of the input and output ventilation shafts in the interconnected mine ventilation system,
  • achieving a level of dilution of the extracted ore which is adequate to the deposit’s parameters,
  • continuation of the GG-1 shaft construction project,
  • continued construction of the central air conditioning system at the GG-1 shaft,
  • continuation of Stage 1 of the Project „Construction of the GG-2 shaft” – continuation of planning work, acquisition of legal title to land,
  • realisation of the planned scope of mine development and access work using the commissioning system in 2019 at the level of 59 thousand meters,
in ore
processing
  • modernising the classification systems, 
  • improving the energy performance of the machinery park in the Concentrators Division,
  • optimising the concentration process in terms of decreasing the impact of changes in ore quantity-quality parameters by applying the FloVis system,
  • continued separation of concentrate produced into two products with varied organic carbon content at the Rudna Concentrator Division,
  • optimising control of the milling units based on visual product parameters and a mill’s sound and vibration characteristics at the Concentrators Division (using the MillVis and ConVis systems),
  • modernising the carbonate removal installation in the flotation process of the Polkowice Concentrator Division,
  • optimising the milling, classification and flotation process,
  • maintaining the availability of the machine park and the production capacity of individual Concentrators Division Areas to the amount of ore supplied,
  • maintaining the production of concentrates in an amount and quality necessary for optimal use of the production capacity of the smelters and refineries,
in metallurgy
  • minimising environmental impact by actions directed towards improving the effectiveness of the dedusting and hermetic sealing processes to decrease fugitive emissions,
  • maintaining recovery levels of copper and silver in metallurgical processes and the availability of metallurgical equipment,
  • improving the productivity of the flash furnace complex at the Głogów I Copper Smelter and Refinery as a result of the commissioning of the concentrate roasting installation planned for the second half of 2019,
  • increasing the share of recycling in production thanks to the start-up of the revolving-casting-refining (RCR) furnace for processing copper scrap at the Legnica Copper Smelter and Refinery in April 2019,
  • stage I of renovation of the Tank Hall at the Głogów I Copper Smelter and Refinery, and
  • optimum management of half-finished products between the metallurgical facilities,
in occupational
health and
safety
  • monitoring occupational hazards and achieving organisational, technical and investment goals aimed at limiting occupational risks and workplace accidents,
  • advancing the adopted training program to optimise the knowledge and skills of KGHM Polska Miedź S.A.’s employees,
  • unifying the approach to advancement of the Program to improve workplace safety by applying consistent messaging about safety,
  • searching for new initiatives involving organisational and technical solutions enabling the achievement of a higher level of safety amongst employees in the Company’s Divisions,
  • optimising health care for KGHM Polska Miedź S.A.’s employees, in particular after accidents at work.

Mine production

GRI Indexes:

In 2018 extraction of ore (dry weight) amounted to 30.3 million tonnes, which was 0.9 million tonnes less than in 2017.
Average copper content in extracted ore amounted to 1.49% and was lower than the level achieved in 2017 due to mining in regions with a lower copper ore content. In the case of silver in ore, content was higher and amounted to 48.6 g/t.

As a result the amount of copper in extracted ore was lower than in 2017 by 14.8 thousand tonnes of Cu and amounted to 452.0 thousand tonnes. The volume of silver in ore decreased by 18 tonnes and amounted to 1 471 tonnes.
In 2018, 30.3 million tonnes of ore (dry weight) were processed (or 1 247 thousand tonnes less than in 2017). The lower amount of ore extracted by the mines directly affected the amount of copper in concentrate, which amounted to 401.3 thousand tonnes.
The production of concentrate (dry weight) decreased as compared to 2017 by 72 thousand tonnes (a decrease from
1 833 thousand tonnes to 1 761 thousand tonnes).

The amount of silver in concentrate was lower than the amount produced in 2017 by 2%.


Unit20172018Change (%)
4Q'18
3Q'182Q'181Q'18
Mined ore (wet weight)
mn t
32.8
31.8
(3.0)
7.6
8.1
8.0
8.1
Mined ore (dry weight)
mn t
31.2
30.3
(2.9)
7.3
7.7
7.6
7.7
Copper grade
%
1.50
1.49
(0.7)
1.47
1.49
1.52
1.50
Copper in ore
kt
466.8
452.0
(3.2)
106.6
114.2
114.8
116.4
Silver grade
g/t
47.8
48.6
+1.7
48.4
48.9
48.7
48.5
Silver in ore
t
1 489.7
1 471.4
(1.2)
351.8
375.3
368.8
375.4
Production of concentrate (dry weight)
kt
1 833
1 761
(3,9)
423
442
448
447
Copper in concentrate
kt
419.3
401.3
(4.3)
95.3
101.0
102.3
102.7
Silver in concentrate
t
1 289.9
1 264.3
(2.0)
304.0
320.8
317.7
321.8

Metallurgical production

The production of electrolytic copper as compared to 2017 decreased by 20.2 thousand tonnes, or by 3.9%. The lower production of electrolytic copper was due to the maintenance shutdown of the concentrate smelting installation at the Głogów II Copper Smelter and Refinery, which lasted from 8 April to 25 June. Production re-commenced 8 days sooner than projected by the initial schedules. By supplementing own concentrate with purchased metal-bearing materials in the form of scrap, copper blister and imported concentrate, existing technological capacity was effectively used.

The production of other metallurgical products (silver, wire rod, OFE rod and round billets) derives from the level of electrolytic copper production and depends on the type of raw material used, and above all on market demand.

In comparison to 2017, the production of metallic gold decreased by 1 061 kg, or 29%, and metallic silver production was lower by 29 tonnes, closing the year at 1 189 tonnes.

Metallurgical production of KGHM Polska Miedź S.A.


Unit2017
2018
Change (%)4Q'18
3Q'18
2Q'18
1Q'18
Electrolytic copper, including:
kt
522.0
501.8
(3.9)
135.4
138.9
116.7
110.8
  • from own concentrates
kt
358.9
385.3
+7.4
103.6
110.4
85.3
86.0
  • from purchased metal-bearing materials
kt
148.0
116.5
(21.3)
31.8
28.5
31.4
24.8
  • from third party processing
kt
15.1
-
×
-
-
-
-
Wire rod, OFE and CuAg rod
kt
257.9
266.4
+3.3
62.3
72.0
65.9
66.2
Round billets
kt
13.7
15.8
+15.3
3.7
3.9
4.3
3.9
Metallic silver
t
1 218.0
1 188.8
(2.4)
352.6
357.8
239.1
239.3
Metallic gold
koz t
117.3
83.2
(29.1)
21.1
23.7
20.1
18.3
Refined lead
kt
30.0
30.1
+0.3
8.2
6.9
7.6
7.5

Main production goals

The main goals set by the Management Board in terms of production and occupational health and safety for 2019 are a continuation of actions taken in 2018, i.e.:

  1. optimal utilisation of the resource base and of the production capacity of the Company, and
  2. optimisation of Cu content in ore and concentrate.
in mining
  • access and development work to intersect the ore in the Deep Głogów area, 
  • continuation of work related to exploration of the Retków copper ore deposit in the Grodziszcze area,
  • continuation of work related to prevention of gas-related threats (hydrogen sulphide and methane) and the use of new technical solutions and means of prevention to counteract this threat,
  • continuation of work related to utilising the capacity of the input and output ventilation shafts in the interconnected mine ventilation system,
  • achieving a level of dilution of the extracted ore which is adequate to the deposit’s parameters,
  • continuation of the GG-1 shaft construction project,
  • continued construction of the central air conditioning system at the GG-1 shaft,
  • continuation of Stage 1 of the Project „Construction of the GG-2 shaft” – continuation of planning work, acquisition of legal title to land,
  • realisation of the planned scope of mine development and access work using the commissioning system in 2019 at the level of 59 thousand meters,
in ore processing
  • modernising the classification systems, 
  • improving the energy performance of the machinery park in the Concentrators Division,
  • optimising the concentration process in terms of decreasing the impact of changes in ore quantity-quality parameters by applying the FloVis system,
  • continued separation of concentrate produced into two products with varied organic carbon content at the Rudna Concentrator Division,
  • optimising control of the milling units based on visual product parameters and a mill’s sound and vibration characteristics at the Concentrators Division (using the MillVis and ConVis systems),
  • modernising the carbonate removal installation in the flotation process of the Polkowice Concentrator Division,
  • optimising the milling, classification and flotation process,
  • maintaining the availability of the machine park and the production capacity of individual Concentrators Division Areas to the amount of ore supplied,
  • maintaining the production of concentrates in an amount and quality necessary for optimal use of the production capacity of the smelters and refineries,
in metallurgy
  • minimising environmental impact by actions directed towards improving the effectiveness of the dedusting and hermetic sealing processes to decrease fugitive emissions,
  • maintaining recovery levels of copper and silver in metallurgical processes and the availability of metallurgical equipment,
  • improving the productivity of the flash furnace complex at the Głogów I Copper Smelter and Refinery as a result of the commissioning of the concentrate roasting installation planned for the second half of 2019,
  • increasing the share of recycling in production thanks to the start-up of the revolving-casting-refining (RCR) furnace for processing copper scrap at the Legnica Copper Smelter and Refinery in April 2019,
  • stage I of renovation of the Tank Hall at the Głogów I Copper Smelter and Refinery, and
  • optimum management of half-finished products between the metallurgical facilities,
in occupational health and safety
  • monitoring occupational hazards and achieving organisational, technical and investment goals aimed at limiting occupational risks and workplace accidents,
  • advancing the adopted training program to optimise the knowledge and skills of KGHM Polska Miedź S.A.’s employees,
  • unifying the approach to advancement of the Program to improve workplace safety by applying consistent messaging about safety,
  • searching for new initiatives involving organisational and technical solutions enabling the achievement of a higher level of safety amongst employees in the Company’s Divisions,
  • optimising health care for KGHM Polska Miedź S.A.’s employees, in particular after accidents at work.
Operations and results in 2018

Sales

In 2018, the sales volume of copper and copper products produced by KGHM Polska Miedź S.A. amounted to 514.4 thousand tonnes and was comparable to the sales volume in 2017 (+2%), although in 2018 there were sales of copper concentrate in the amount of 149.5 thousand tonnes dry weight (of which 22.3 thousand tonnes was Cu). There was however a decrease in the volume of cathodes sold by 19.2 thousand tonnes (-8%). Sales of copper wire rod increased by 2.8 thousand tonnes (+1%) and OFE rod by 2.1 thousand tonnes (+16%).

Sales of metallic silver in KGHM Polska Miedź S.A. in 2018 amounted to 1 147 tonnes and were lower than the level of sales in 2017 by 38 tonnes (-3%). In 2018 there also occurred the sale of silver in concentrate (81 tonnes).

The volume of gold sales in 2018 amounted to 83.8 thousand troy ounces, or a decrease by 28% as compared to 2017 (117.1 thousand troy ounces).

Sales volume of basic products of KGHM Polska Miedź S.A.


Unit2017
2018
Change (%)4Q'18
3Q'18
2Q'18
1Q'18
Cathodes and cathode parts
kt
233.5
214.3
(8.2)
74.1
58.4
47.3
34.5
  • Copper wire rod and OFE rod
kt
259.9
264.6
+1.8
66.4
68.3
65.2
64.7
  • Payable copper in concentrate 1
kt
(0.3)
22.3
×
4.2
6.8
11.3
-
  • Other copper products
kt
12.9
13.2
+2.3
3.0
3.6
3.3
3.3
Total copper and copper products
kt
506.0
514.4
+1.7
147.7
137.1
127.1
102.5
Metallic silver
t
1 185.0
1 146.8
(3.2)
344.8
349.9
245.0
207.0
Payable silver in concentrate
t
-
80.6
×
13.5
33.2
33.8
-
Metallic gold
koz t117.1
83.8
(28.4)
21.9
22.7
18.9
20.3
Refined lead
kt
29.6
30.5
+3.0
8.6
7.8
6.7
7.4

1negative values result from settlement of prior-year contracts

Total sales revenue of KGHM Polska Miedź S.A. in 2018 amounted to PLN 15 757 million and was comparable to the revenues achieved in 2017 (a decrease by 2%, in 2017: PLN 16 024 million).

Revenues from copper sales in 2018 amounted to PLN 12 342 million, or a difference of +1% compared to the level of sales revenue in the prior year (PLN 12 213 million).

Revenues from metallic silver sales in 2018 amounted to PLN 2 101 million and were lower by 14% as compared to the level of sales revenue in 2017. Additionally, in 2018 KGHM Polska Miedź S.A. earned revenues from the sale of silver in concentrate in the amount of PLN 141 million.

The decrease in revenues from silver sales in 2018 was mainly due to the decrease in the price of this metal expressed in the Polish zloty as compared to 2017. Revenues from gold sales in 2018 amounted to PLN 381 million, and in 2017 to PLN 556 million. The difference was due to lower production of gold in 2018.

Sales revenue of KGHM Polska Miedź S.A. (PLN million)


2017
2018
Change (%)
4Q'18
3Q'18
2Q'18
1Q'18
Cathodes and cathode parts
5 541
5 097
(8.0)
1 725
1 345
1 191
836
Copper wire rod and OFE rod
6 276
6 525
+4.0
1 630
1 623
1 662
1 610
Payable copper in concentrate1
86
400
×4.7
73
99
228
-
Other copper products
310
320
+3.2
74
82
85
79
Total copper and copper products
12 213
12 342
+1.1
3 502
3 149
3 166
2 525
Metallic silver
2 447
2 101
(14.1)
607
628
474
392
Payable silver in concentrate2
-6
141
×
22
55
64
-
Metallic gold
556
381
(31.5)
101
100
89
91
Refined lead
273
262
(4.0)
68
66
60
68
Other goods and services
356
345
(3.1)
93
87
78
87
Merchandise and materials
185
185
-
47
43
52
43
Total sales revenue
16 024
15 757
(1.7)
4 440
4 128
3 983
3 206

1 value of payable copper less treatment charges (TC), Cu refining charges (RcCu) and other deductions impacting the value of Cu concentrate (apart from the Ag refining premium)
2 value of payable silver less the Ag refining premium (RcAg), negative values result from settlement of prior-year contracts

Geographical breakdown of sales

The largest proportion, i.e. 26%, of KGHM Polska Miedź S.A.’s sales revenue in 2018 was from the Polish market. The largest remaining recipients of the products, merchandise and services offered by the Company were: China, Germany, the United Kingdom and Czechia.

The Company’s revenues from sales to external customers is broken down geographically in the following table. Sales revenue includes the result from the settlement of hedging instruments.

Sales revenue of KGHM Polska Miedź S.A. by market (PLN million)

Operations and results in 2018

Costs

The Company’s cost of sales, selling costs and administrative expenses (cost of products, merchandise and materials sold plus selling costs and administrative expenses) in 2018 amounted to PLN 13 460 million and was 4% higher as compared to 2017. The Company’s cost of sales, selling costs and administrative expenses was substantially affected by the change in inventories of half-finished products, products and work in progress, which in 2018 amounted to -PLN 236 million (in 2017 - PLN 1 097 million) and was mainly due to the decrease in the level of half-finished products inventories. At the end of 2018 there was a slight increase in inventories of work in progress and finished goods.

Total expenses by nature in 2018 as compared to 2017 were lower by 2.1%, mainly due to the lower consumption of purchased metal-bearing materials (a lower amount by 27 thousand tonnes and a lower price by 1.5%) as well as a lower minerals extraction tax (lower production of own concentrate and lower silver prices).

Expenses by nature of KGHM Polska Miedź S.A. (PLN million)


2017
2018
Change (%)
4Q’18
3Q’18
2Q’18
1Q’18
Depreciation of property, plant and equipment and amortisation of intangible assets
1 072
1 173
+9.4
305
288
287
293
Employee benefits expenses
3 210
3 324
+3.6
805
835
902
782
Materials and energy, including:
5 831
5 312
(8.9)
1 471
1 292
1 144
1 405
  • purchased metal-bearing materials
3 750
3 040
(18.9)
862
701
611
866
  • electrical and other energy
775
803
+3.6
203
228
187
185
External services
1 531
1 649
+7.7
455
406
419
369
Taxes and charges, including:
2 154
2 083
(3.3)
471
494
575
543
  • minerals extraction tax
1 765
1 671
(5.3)
374
397
466
434
Other costs
126
92
(27.0)
26
22
15
29
Total expenses by nature
13 924
13 633
(2.1)
3 533
3 337
3 342
3 421


Structure of expenses by nature in 2018

The structure of expenses by nature in 2018 is presented below. As compared to the prior year, they were at a very similar level. The Company’s operating costs are decisively impacted by the costs of electrolytic copper production (prior to decrease by the value of by-products), whose share is about 91%.

Cost of producing copper in concentrate - C1 (unit cash cost of producing payable copper in concentrate, reflecting costs of ore extraction and processing, transport costs, the minerals extraction tax, administrative costs during the mining stage, and smelter treatment and refining charges (TC/RC), less the value of by-products) was as follows: in 2017:  1.52 USD/lb and in 2018: 1.85 USD/lb. The cost was impacted by a strengthening in the PLN as compared to the USD, lower silver prices and lower production of own concentrate.

Cost of producing copper in concentrate – C1 (USD/lb)

* including tax on the extraction of certain minerals


The pre-precious metals credit unit cost of copper production from own concentrate (unit cost prior to decrease by the value of anode slimes containing among others silver and gold) was higher than that recorded in 2017 by 1 275  PLN/t (6%), alongside a lower minerals extraction tax (-56 PLN/t) and higher production from own concentrate by 26 thousand tonnes of Cu (7.3%). The increase in the unit cost was mainly due to higher costs of materials, fuel and energy (excluding purchased metal-bearing materials), labour costs, depreciation/amortisation and external services.

Pre-precious metals credit unit cost of electrolytic copper production – from own concentrate (PLN/t)

1 value of anode slurries
2 total unit cost of copper production from own charges

Operations and results in 2018

Financial results

Statement of profit or loss

The Company recorded a profit for 2018 in the amount of PLN 2 025 million, or PLN 702 million (53%) higher than in the prior year.

Basic items of the statement of profit or loss of KGHM Polska Miedź S.A. (PLN million)


2017
2018
Change (%)
4Q'18
3Q'18
2Q'18
1Q'18
Sales revenue
16 024
15 757
(1.7)
4 440
4 128
3 983
3 206
  • adjustment to revenues due to hedging transactions
16
125
×7.8
15
34
18
57
Cost of sales, selling costs and administrative expenses
(12 899)
(13 460)
+4.3
(3 911)
(3 526)
(3 337)
(2 686)
  • including the minerals extraction tax
(1 488)
(1 705)
+14.6
(477)
(427)
(447)
(354)
Profit on sales (EBIT)
3 125
2 297
(26.5)
529
602
646
520
Other operating income / (costs)
(2 004)
1 149
×
490
(49)
625
83
  • foreign exchange gains/(losses) on assets and liabilities other than borrowings
(1 179)
386
×
162
(103)
451
(124)
  • interest on loans granted and other financial receivables
310
244
(21.3)
56
62
69
57
  • dividend income
4
239
×59.8
-
-
239
-
  • provisions recognised
(23)
(162)
×7.0
(10)
(3)
(148)
(1)
  • measurement and realisation of derivatives
(213)
(136)
(36.2)
(49)
(59)
(6)
(22)
  • fees and charges on re-invoicing of costs of bank guarantees securing the payment of liabilities
51
53
+3.9
4
21
10
18
  • recognition/reversal of impairment losses on shares and investment certificates in subsidiaries
(330)
355
×
355
-
-
-
  • gains/(losses) on changes in fair value of financial assets measured at fair value through profit or loss
N/A1
(63)
×
(115)
11
(72)
113
  • reversal of allowances for impairment of loans measured at amortised cost
N/A1
183
×
(6)
18
136
35
  • allowances for impairment of loans under IFRS 9
N/A1
(4)
×
40
-
(42)
(2)
  • reversal of impairment losses on assets impaired at the moment of initial recognition
N/A1
85
×
85
-
-
-
  • (recognition)/reversal of allowances for impairment of loans due to restructuring of intra-group financing
N/A1
15
×
-
-
-
15
  • allowances for impairment of loans under IAS 39
(606)
N/A1
×
N/A1
N/A1
N/A1
N/A1
  • other
(18)
(46)
×2.6
(32)
4
(12)
(6)
Finance income / (costs)
1 033
(774)
×
(275)
97
(720)
124
  • exchange differences on borrowings
1 247
(592)
×
(206)
145
(681)
150
  • interest on borrowings
(113)
(127)
+12.4
(37)
(32)
(34)
(24)
  • fees and commissions on bank and other loans
(28)
(23)
(17.9)
(5)
(6)
(6)
(6)
  • measurement and realisation of derivatives
(30)
11
×
(17)
2
11
15
  • other
(43)
(43)
-
(10)
(12)
(10)
(11)
Profit / (loss) before income tax
2 154
2 672
+24.0
744
650
551
727
Income tax expense
(831)
(647)
(22.1)
(149)
(207)
(94)
(197)
PROFIT / (LOSS) FOR THE PERIOD
1 323
2 025
+53.1
595
443
457
530
Depreciation/amortisation recognised in profit or loss
1 035
1 119
+8.1
299
286
283
251
EBITDA2 (EBIT + depreciation/amortisation)
4 160
3 416
(17.9)
828
888
929
771
Adjusted EBITDA3
4 160
3 416
(17.9)
828
888
929
771

1„N/A” – not applicable – items which were not measured in accordance with principles arising from the application, from 1 January 2018, of IFRS 9.
EBITDA = EBIT + depreciation/amortisation (recognised in profit or loss)
Adjusted EBITDA = EBIT + depreciation/amortisation (recognised in profit or loss) + impairment loss (-reversal of impairment losses) on non-current assets, recognised in cost of sales, selling costs and administrative expenses

Main reasons for the change in profit/(loss) of KGHM Polska Miedź S.A.

Below are the main values that have an impact on changing the result of the comparison between 2017 and 2018:

ItemImpact on
change in
result
(PLN million)
Description
Decrease in sales revenue by PLN 376 million
(excluding the impact of hedging transactions +PLN 109 million)
(643)
A decrease in revenues from sales of basic products (Cu, Ag, Au) due to a less favourable average annual USD/PLN exchange rate (a change from 3.78 to 3.61 USD/PLN).
(575)
A decrease in revenues due to a lower volume of copper sales (-14.2 kt, -3%), silver (-38 t, -3%) and gold (-33 koz t, -28%).
+461
An increase in revenues due to the sale of copper concentrate from PLN 80 million to PLN 541 million.
+419
An increase in revenues due to higher prices of copper (+357 USD/t, +6%) and gold (+11 USD/koz t, +1%) alongside lower silver prices (‑134 USc/koz t, -8%).
(38)
A decrease in revenues due to the sale of merchandise and other goods and services, including the value of third party processing of concentrate into cathodes (-PLN 58 million) and lower sales of refined lead (-PLN 12 million).
An increase in cost of sales, selling costs and administrative expenses1 by PLN 561 million(861)
A change in inventories of half-finished products, products and work in progress in 2018 (reducing costs) amounting to -PLN 236 million, compared to 2017: -PLN 1 097 million.
+710
Lower consumption of purchased metal-bearing materials by 27 thousand tonnes Cu
(-18%) alongside a lower purchase price by 1.5%.
(410)
Including an increase in other expenses by nature by PLN 419 million, mainly due to a change in costs: other materials and energy (+PLN 191 million), external services (+PLN 118 million), depreciation/amortisation (+PLN 101 million), employee benefits (+PLN 114 million) and the minerals extraction tax (-PLN 94 million).
Impairment losses recognised/reversed on shares and investment certificates in subsidiaries
+685
Change in the balance of impairment losses recognised/ reversed from -PLN 330 million in 2017 to PLN +355 million in 2018
Impact of exchange differences (‑PLN 274 million)
+1 565
A change in the result due to exchange differences from measurement of assets and liabilities other than borrowings – in other operating activities.
(1 839)
A change in the result due to exchange differences on measurement of borrowings (presented in finance costs).
Dividend income
+235
An increase in dividend income from PLN 4 million to PLN 239 million.
Impact of hedging transactions
(+PLN 227 million)
+109
A change in adjustments to sales revenue due to the settlement of hedging transactions from PLN 16 million to PLN 125 million.
+248
A change in the result due to the measurement of derivatives from -PLN 233 million to +PLN 15 million.
(130)
A change in the result due to the realisation of derivatives from -PLN 10 million to -PLN 140 million.
Provisions recognised
(139)
Provisions recognised in 2018 in the amount of PLN 162 million versus PLN 23 million in the prior year. The provisions recognised in 2018 were mainly in respect of disputed issues (PLN 103 million) mainly involving rationalisation and inventions and the property tax on mining divisions (PLN 49 million).
Change in the balance of income and costs due to interest on borrowings, including fees and commissions (-PLN 75 million)
(66)
A decrease in income due to interest on loans granted.
(14)
Higher interest costs on borrowings.
+5
A decrease in costs of fees and commissions on bank loans drawn.
Items which were not measured under the principles applied in accordance with IFRS 9 since 1 January 2018 (+PLN 822 million)
(63)
Fair value gains/(losses) on financial assets measured at fair value through profit or loss (in 2018)
+183
Reversal of allowances for impairment of loans measured at amortised cost (in 2018)
(4)
Allowances for impairment of loans under IFRS 9 (in 2018)
+85
Reversal of impairment losses on assets impaired at the moment of initial recognition
+15
(Recognition)/reversal of allowances for impairment of loans due to restructuring of intra-group financing (in 2018)
+606
Allowances for impairment of loans under IAS 39 (in 2017)
Income tax reduction
+184
The lower tax results from the lower tax base.

Cost of products, merchandise and materials sold plus selling costs and administrative expenses

Change in profit for the period of KGHM Polska Miedź S.A. (PLN million)

1Excluding adjustment for hedging transactions

Cash flows

Statement of cash flows of KGHM Polska Miedź S.A. (PLN million)


2017
2018
Change (%)
4Q'18
3Q'18
2Q'18
1Q'18
Profit / (loss) before income tax
2 154
2 672
+24.0
744
650
551
727
  • Depreciation/amortisation recognised in profit or loss
1 035
1 119
+8.1
299
286
283
251
  • Interest on investment activities
(299)
(219)
(26.8)
(43)
(57)
(65)
(54)
  • Impairment losses and reversals of impairment losses on non-current assets
940
(623)
×
(465)
(19)
(91)
(48)
  • Other adjustments to profit / (loss) before income tax
304
23
(92.4)
275
(111)
88
(229)
Exclusions of income and costs, total
1 980
300
(84.8)
66
99
215
(80)
Income tax paid
(934)
(710)
(24.0)
(189)
(189)
(188)
(144)
Changes in working capital
(1 120)
553
×
1 059
207
(128)
(585)
Net cash generated from operating activities
2 080
2 815
+35.3
1 680
767
450
(82)
Expenditures on mining and metallurgical assets
(1 970)
(1 884)
(4.4)
(523)
(419)
(386)
(556)
Expenditures on other property, plant and equipment
and intangible assets
(21)
(23)
+9.5
3
(7)
(4)
(15)
Loans granted
(490)
(682)
+39.2
(413)
-
(264)
(5)
Other expenses
(83)
(84)
+1.2
(17)
(14)
(15)
(38)
Dividends received
4
239
×59.8
-
138
101
-
Other proceeds
48
35
(27.1)
7
3
19
6
Net cash used in investing activities
(2 512)
(2 399)
(4.5)
(943)
(299)
(549)
(608)
Proceeds from borrowings
2 416
2 257
(6.6)
221
(8)
932
1 112
Repayments of borrowings
(2 030)
(2 073)
+2.1
(692)
(235)
(665)
(481)
Proceeds from cash pooling
160
-
×
-
-
(60)
60
Expenses due to cash pooling
-
(80)
×
(30)
(10)
(40)
-
Dividends paid
(200)
-
×
-
-
-
-
Interest paid and other costs of borrowings
(138)
(152)
+10.1
(45)
(41)
(36)
(30)
Net cash generated from/(used in) financing activities
208
(48)
×
(546)
(294)
131
661
TOTAL NET CASH FLOW
(224)
368
×
191
174
32
(29)
Foreign exchange gains/(losses) on cash and cash equivalents
(24)
25
×
7
6
2
10
Cash and cash equivalents at the beginning of the period
482
234
(51.5)
429
249
215
234
Cash and cash equivalents at the end of the period
234
627
×2.7
627
429
249
215

Net cash generated from operating activities in 2018 amounted to +PLN 2 815 million and mainly comprised profit before income tax in the amount of PLN 2 672 million adjusted by depreciation/amortisation in the amount of +PLN 1 119 million, less income tax paid in the amount of -PLN 710 million and the change in working capital in the amount of +PLN 553 million.

Net cash used in investing activities in 2018 amounted to -PLN 2 399 million and mainly comprised net expenditures on mining and metallurgical property, plant and equipment and intangible assets in the amount of ‑PLN 1 884 million and loans granted of -PLN 682 million alongside dividend income in the amount of PLN 239 million.

Net cash used in financing activities during the same period amounted to -PLN 48 million and mainly comprised proceeds from borrowings in the amount of +PLN 2 257 million as well as repayments of borrowings and the cash pooling in the amounts respectively of: ‑PLN 2 073 million and -PLN 80 million, along with interest paid and other costs of borrowings in the amount of ‑PLN 152 million.

After reflecting exchange gains/losses on cash and cash equivalents, at the end of 2018 cash and cash equivalents increased by PLN 393 million and amounted to PLN 627 million. 

Cash flows of KGHM Polska Miedź S.A. (PLN million)

Assets, equity and liabilities

Assets of KGHM Polska Miedź S.A. (PLN million)


31.12.2018
31.12.2017
Change (%)
30.09.2018
30.06.2018
31.03.2018
Mining and metallurgical property, plant and equipment
16 382
15 355
+6.7
15 674
15 554
15 373
Mining and metallurgical intangible assets
576
507
+13.6
557
550
532
Other property, plant and equipment
92
75
+22.7
71
69
71
Other intangible assets
52
34
+52.9
34
34
32
Investments in subsidiaries
3 510
3 013
+16.5
3 020
3 013
3 013
Financial instruments, including:
7 453
6 031
+23.6
6 742
6 781
5 901
  • Loans granted
6 262
4 972
+25.9
5 559
5 580
4 780
  • Derivatives
319
109
×2.9
398
328
212
  • Other financial instruments measured at fair value
496
613
(19.1)
419
508
534
  • Other financial assets
376
337
+11.6
366
365
375
Deferred tax assets
9
31
(71.0)
94
140
110
Other non-financial assets
24
25
(4.0)
35
22
24
Non-current assets
28 098
25 071
+12.1
26 227
26 163
25 056
Inventories
4 102
3 857
+6.4
4 588
4 627
4 651
Trade receivables
310
1 034
(70.0)
782
683
730
Tax assets
275
214
+28.5
167
166
160
Derivatives
300
195
+53.8
243
158
263
Other assets
538
342
+57.3
569
693
405
Cash and cash equivalents
627
234
×2.7
429
249
215
Current assets
6 152
5 876
+4.7
6 778
6 576
6 424
TOTAL ASSETS
34 250
30 947
+10.7
33 005
32 739
31 480

As at 31 December 2018, total assets amounted to PLN 34 250 million, or an increase as compared to the end of 2017 by PLN 3 303 million, or by 11%, mainly due to increases in the following items:

  • non-current financial instruments by PLN 1 422 million, including mainly loans granted (+PLN 1 290 million) and derivatives (+PLN 210 million),
  • mining and metallurgical property, plant and equipment by PLN 1 027 million, arising from the realisation of investments – expenditures on property, plant and equipment and intangible assets in 2018 amounted to
    PLN 2 132 million,
  • cash and cash equivalents by PLN 393 million and
  • inventories by PLN 245 million, including mainly half-finished products and work in progress (+PLN 144 million) and finished products (+PLN 117 million).

alongside a decrease in trade receivables by PLN 724 million, in connection with the implementation of new receivables financing programs (factoring), a decrease of copper prices in the second half of 2018 and a change in the manner of settling December spot contracts.

Change in assets of KGHM Polska Miedź S.A. in 2018 (PLN million)

The carrying amounts of equity and liabilities as at 31 December 2018 are presented below.

Equity and liabilities of KGHM Polska Miedź S.A. (PLN million)


31.12.2018
31.12.2017
Change (%)
30.09.2018
30.06.2018
31.03.2018
Share capital
2 000
2 000
-
2 000
2 000
2 000
Other reserves from measurement of financial instruments
(307)
142
×
(419)
(518)
(439)
Accumulated other comprehensive income
(593)
(348)
+70.4
(499)
(537)
(495)
Retained earnings
17 945
15 462
+16.1
17 263
16 820
16 363
Equity
19 045
17 256
+10.4
18 345
17 765
17 429
  • Borrowings
6 758
6 085
+11.1

7 012
7 343
5 863
  • Derivatives
68
84
(19.0)
82
97
80
  • Employee benefits liabilities
2 235
1 879
+18.9
2 125
2 139
2 049
  • Provisions for decommissioning costs of mines and other
    technological facilities
980
797
+23.0
791
844
794
  • Other liabilities
199
207
(3.9)
202
196
211
Non-current liabilities
10 240
9 052
+13.1
10 212
10 619
8 997
  • Borrowings
1 035
923
+12.1
1 053
1 112
1 627
  • Cash pooling liabilities
80
160
(50.0)
110
120
220
  • Derivatives
13
74
(82.4)
11
16
36
  • Trade payables
1 920
1 719
+11.7
1 452
1 145
1 321
  • Employee benefits liabilities
611
649
(5.9)
709
614
759
  • Tax liabilities
405
416
(2.6)
377
593
428
  • Other liabilities
901
698
+29.1
736
755
663
Current liabilities
4 965
4 639
+7.0
4 448
4 355
5 054
Non-current and current liabilities
15 205
13 691
+11.1
14 660
14 974
14 051
TOTAL EQUITY AND LIABILITIES
34 250
30 947
+10.7
33 005
32 739
31 480

There was an increase in equity and liabilities, mainly due to increases in the following items:

  • equity by PLN 1 789 million, including with respect to the profit for 2018 in the amount of PLN 2 025 million,
  • borrowings and cash pool liabilities by PLN 705 million, due to exchange rate differences (+PLN 597 million), accrued interest (+PLN 277 million) and cash flows (-PLN 169 million),
  • employee benefits liabilities by PLN 318 million and in trade payables by PLN 200 million, and
  • provisions for decommissioning costs of mines and other technological facilities by PLN 184 million,

alongside a decrease in derivatives by PLN 77 million. 

Change in equity and liabilities of KGHM Polska Miedź S.A. in 2018 (PLN million)

Contingent assets and liabilities

At the end of 2018, contingent assets amounted to PLN 558 million and related mainly to promissory notes receivables (PLN 225 million) and guarantees received by the Company with respect to the proper performance of agreements (PLN 168 million).

At the end of 2018, contingent liabilities amounted to PLN 3 151 million and mainly concerned guarantees and letters of credit in the total amount of PLN 2 828 million and due to promissory notes payable in the amount of PLN 176 million, including:

  • a corporate guarantee securing repayment of a specified part of payment to guarantees set by Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation, securing repayment of a corporate loan drawn by the joint venture Sierra Gorda S.C.M. (PLN 677 million),
  • a letter of credit granted set as security for the proper performance of a long-term contract for the off-take of electricity to the joint venture Sierra Gorda S.C.M. (PLN 517 million),
  • corporate guarantees securing the repayment of short term working capital facilities drawn by the joint venture Sierra Gorda S.C.M. (PLN 496 million),
  • a security for the costs of restoring the areas of the Robinson mine, Podolsky mine and the Victoria project, and obligations related to the proper performance of the agreements signed (PLN 401 million),
  • a security for the proper performance of future environmental obligations of the Company to restore the area, following the conclusion of operations of the Żelazny Most tailings storage facility (PLN 160 million in the form of a bank guarantee and PLN 160 million in the form of an own promissory note),
  • a security for the proper performance by DMC Mining Services (UK) Ltd. and DMC Mining Services Ltd. of a contract for sinking shafts under a project underway in the United Kingdom (PLN 188 million),
  • corporate guarantees securing the proper performance of lease agreements entered into by the joint venture Sierra Gorda S.C.M. (PLN 125 million).

Other liabilities not recognised in the statement of financial position in the amount of PLN 451 million, comprised of:

  • liabilities due to an operating lease in the amount of PLN 338 million,
  • liabilities towards local government entities due to expansion of the tailings storage facility by KGHM Polska Miedź S.A. in the amount of PLN 113 million.

Capital expenditures

In 2018, capital expenditures on property, plant and equipment amounted to PLN 2 127 million and were higher than in the previous year by 4%. Together with expenditures incurred on uncompleted development work, capital expenditures amounted to PLN 2 132 million.

Structure of expenditures on property, plant and equipment and intangible assets of KGHM Polska Miedź S.A. (PLN million)


2017
2018
Change (%)
4Q'18
3Q'18
2Q'18
1Q'18
Mining
1 286
1 483
+15.3
580
352
300
251
Metallurgy
735
573
(22.0)
261
116
118
78
Other activities
32
71
×2.2
55
9
6
1
Development work - uncompleted
4
5
+25.0
4
1
-
-
Total
2 057
2 132
+3.6

900
478
424
330
including borrowing cost
61
133
×2.2
33
33
42
25

Investment activities comprised projects related to the replacement of equipment and maintaining mine production, as well as development projects:

Projects related to the replacement of equipment aimed at maintaining production equipment in an undeteriorated condition, represent 36% of total expenditures incurred.

Projects related to maintaining mine production aimed at maintaining mine production on the level set in approved Production Plan (development of infrastructure to match mine advancement) represent 26% of total expenditures incurred.

Development projects aimed at increasing production volume of the core business, implementation of technical and technological activities optimising use of existing infrastructure, maintaining production costs and adaptation of the company’s operations to changes in standards, laws and regulations (conformatory projects and those related to environmental protection) represent 38% of total expenditures incurred.

Major tasks and facilities advanced by KGHM Polska Miedź S.A. in 2018

Replacement (PLN 768 million)
Mining machinery replacement
With respect to modernisation and replacement of mining machinery, 263 mining machines were purchased. Expenditures incurred in 2018: PLN 266 million.
Infrastructure replacement - other
Investments aimed at the replacement of infrastructure in the Divisions in order to maintain it in an undeteriorated condition. Expenditures incurred in 2018: PLN 502 million.
Mining Development (PLN 508 million)
Deposit Access Program
Work continues under the Program on sinking of the GG-1 ventilation and material-transport shaft with a target depth of 1 350 meters with a diameter of 7.5 meters.  The shaft’s depth has reached 1 070 meters (as at 31 December 2018).

In 2018, construction began on the Surface-based Central Air Conditioning System (PSK) at the GG-1 shaft. A decision was received with respect to environmental conditions to advance the PSK as well as a building permit.

With respect to the project to build an Ice Water Transportation System (IWTS), in 2018 work continued related to advancing the construction project and on obtaining an environmental decision to advance the IWTS.

In 2018 an agreement was signed with the Gmina (municipality) of Żukowice and procedures commenced related to amending planning documentation with respect to the planned construction of the GG-2 „Odra” shaft.

In 2018, 45 kilometers of tunneling were excavated in the Rudna and Polkowice-Sieroszowice mines, representing nearly 80% of the total amount of access and development tunnels in KGHM.

As at 31 December 2018, total expenditures incurred on the Deposit Access Program amounted to PLN 3 010 million, including PLN 413 million in 2018 (development expenditures alone amounted to PLN 365 million).
Change in the L-VI shaft’s function to a material–transport shaft
In 2018, the complete power supply system for the L-VI shaft region was brought online. Final work is underway on: construction of the shaft complex together with buildings and surface infrastructure; construction of the rainwater pipeline and of the sewage pipeline together with telecommunications cables between shafts L-VI and L-I. In addition, in 2018 construction commenced on the following buildings: for the shipment of explosives, the Góra Logistics Center, a waste processing building and the construction of functional chambers together with  the Underground Logistics Center. Work is underway on a mine telecommunications-announcements system: SAT-DOTRA.

As at 31 December 2018, expenditures were incurred in the amount of PLN 235 million, including PLN 120 million in 2018.
Modernisation of classification systems in the Concentrators Division
Polkowice Concentrator: work was completed on two more hydrocyclone batteries. A contractor was selected for the construction of the last 9 classification units.

Lubin Concentrator: work was completed on 8 classification units and they were brought online.

Rudna Concentrator: work was completed on 4 classification units.

As at 31 December 2018, expenditures were incurred in the amount of PLN 126 million, including PLN 30 million in 2018.
Metallurgy Development (PLN 241 million)
Program to adapt the technological installations of KGHM to the requirements of BAT Conclusions for the non-ferrous metals industry together with restricting arsenic emissions (BATAs)
The BATAs Program which began in 2018 comprises 26 new investment projects, including 20 at the Głogów Copper Smelter and Refinery and 6 at the Legnica Copper Smelter and Refinery.

By the end of December 2018 11 projects had commenced, including 9 at the Głogów Copper Smelter and Refinery and 2 at the Legnica Copper Smelter and Refinery. In addition, 7 tenders are underway, while project assumptions are being updated for 8 projects. A decision was made to terminate 2 of the projects underway at the Głogów Copper Smelter and Refinery.

As at 31 December 2018, expenditures were incurred in the amount of PLN 2 million.
Metallurgy Development Program
In 2018 the stage of technological trials for the steam drier was completed. Following the maintenance shutdown of the Głogów II Copper Smelter and Refinery, production is underway with the full use of the newly-built steam drier. Work is underway on the settlements and final handover stage.

The concentrate roasting installation is undergoing start-up trials.

In terms of conformatory projects work continues on settlements with contractors, the completion of post-construction documentation and obtaining operating permits.

As at 31 December 2018, expenditures on the program were incurred in the amount of PLN 1 192 million, including PLN 52 million in 2018.
Increasing cathode production at the Legnica Copper Smelter and Refinery to 160 kt of copper cathode/year (HML160)
In 2018 work on the project comprised continued construction of the Revolving-Casting-Refining Furnace (RCR) at the Legnica Copper Smelter and Refinery. The following equipment was assembled: the RCR furnace, post combustion chamber, full evaporation tower, casting machinery, the installation to provide utilities, electrical installation and the APKiA (“Aparatury Kontrolno-Pomiarowej i Automatyki”, or Control-Measurement and Automation Apparatus).

As at 31 December 2018, expenditures were incurred in the amount of PLN 96 million, including PLN 83 million in 2018.
Pyrometallurgy Modernisation Program (PMP)
Production by the flash furnace of the Głogów I Copper Smelter and Refinery was stabilised in accordance with the current production plan. Settlement procedures and the final handovers of contracts and orders with respect to the Pyrometallurgy Modernisation Program are near completion.
Other Development (PLN 43 million)
KGHM 4.0 Program
The KGHM 4.0 Program which began in 2018 is a venture which addresses the Industry 4.0. concept within the technical-organisational environment of KGHM Polska Miedź S.A. The KGHM 4.0 Program comprises the advancement of projects in 3 areas: INDUSTRY, ICT and SUPPORTING PROJECTS. The Program is aimed at the unified management of production and the utilisation of data in order to improve productivity and efficiency.

In December 2018 an electric vehicle charging station open to the public was created in Lubin. This is a result of an agreement with the company Tauron, which foresees the cooperation between the companies in the area of electromobility, including the construction of vehicle charging station infrastructure for car-sharing services (so-called “auta na minuty”), and mutual pro-ecological activities.

As at 31 December 2018, expenditures were incurred in the amount of PLN 41 million.
Exploration Development (PLN 12 million)
Exploration projects
Synklina Grodziecka, Konrad – Synklina Grodziecka, Konrad – hydrogeological research planned for the years 2018-2020 remains underway. In January 2019 administrative proceedings in the concession-granting body for the Synklina Grodziecka concession were concluded.

Retków-Ścinawa – Based on the results from 3 drillholes sunk in 2017 (S‑761, S-708 and S-745) it was decided to alter the scope of drilling under the concessions a result of which in December 2017 it became necessary to introduce changes in the scope of planned geological and mining work by submitting a request to the Ministry of the Environment for a change in the concession. In the third quarter of 2018 a decision was received altering the concession and work commenced on the sinking of another drillhole under stage 2 of the geological research.

Głogów - In 2018, surface-based geophysical research was conducted under stage 2 of the geological research. At the start of December 2018 a request was submitted to the concession-granting body for a change in the concession involving extension of its life (to March 2020).

Bytom Odrzański, Kulów–Luboszyce – On 30 November 2017 the Supreme Administrative Court dismissed the claims of KGHM against a decision of the Regional Administrative Court dated 10 July 2015. At the start of 2019 the Ministry of the Environment announced a re-opening of the proceedings regarding a re-hearing of concession applications.

Puck region - in 2018 drilling work continued and Amendment no. 1 to the Geological Work Project, in which a proposal was made for an additional drillhole, was submitted to the concession-granting body for its approval. At a hearing on 27 February 2019, the Supreme Administrative Court dismissed the cassation appeals of a competing company which had filed a complaint against the concession granted to KGHM for the same region.
In the years 2010-2018 expenditures were incurred on exploration projects in the amount of PLN 363 million, including PLN 12 million in 2018.

Non-financial results in 2018

GRI Indexes:

GRI indicators of ethical behavior
G205-3 – Confirmed corruption cases and actions taken in response thereto in 2018

Recorded corruption cases ended in:
KGHM Polska Miedź S.A. Group
KGHM Polska Miedź S.A.
disciplinary dismissal or punishment of employees
10
refusal to renew contracts with business partners due to breach of corruption rules
00
legal actions pertaining to corruption practices taken against the reporting organization or its employees in the reporting period
00
Total
10

GRI indicators of ethical behaviour

Selected GRI HR indicators

GRI Indexes:

Total number of employees

Total number of employees (head count)
Number of employees
KGHM Group
KGHM Polska Miedź S.A.
Total34,386
18,331


Number of new hires and employee departures

New hires in 2018:
Total number of employees (head count) broken down to:
Number of employees (head count)
Number of new hires
Percentage of new hires (head count)
KGHM Group
KGHM Polska Miedź S.A.
GK KGHM
KGHM Polska Miedź S.A.
KGHM Group
KGHM Polska Miedź S.A.
Total34,249
18,500
2,723
1,135
7.95 %
6.14 %
Employee departures in 2018:
Total number of employee departures (head count) broken down to:
 
Number of employees (head count)
Number of employee departures (head count)
Percentage of employee departures
KGHM Group
KGHM Polska Miedź S.A.
KGHM Group
KGHM Polska Miedź S.A.
KGHM Group
KGHM Polska Miedź S.A.
Total34,249
18,500
2,254
988
6.58 %
5.34 %


Number of work-related accidents by gender


KGHM Group
KGHM Polska Miedź S.A.
WomenMenWomenMen
Total number of work accidents (incidents)
115
558
2
295
Number of fatal accidents (incidents)
0
3
0
2
Number of severe accidents (incidents)
3
20
0
2
Number of minor accidents (incidents)
106
537
0
293
Total number of people injured in accidents
673
291


Average number of hours of training during the year per employee


Total number of training hours
TOTAL
KGHM Group
KGHM Polska Miedź S.A.
Total number of training hours
662,066.50
501,352.00
Number of employees
34,249
18,500
Average number of training hours
19.33
27.10

Selected GRI standards performance indicators reflecting activities relating to social issues

Selected GRI Standards indicators for 2018 presenting actions in the area of social issues:

List of donations from the KGHM Polska Miedź Foundation for institutions in 2018, by areas

No.
AreasDonations
Amount awarded (gross)
PLN
Number of projects
1.
Health and Safety
3,686,410.00
74
2.
Science and education
2,515,532.33
73
3.
Sports and recreation
4,041,192.10
166
4.
Culture and tradition
8,263,551.65
150
Total18,506,686.08
463


List of donations from the KGHM Polska Miedź Foundation for individuals in 2018, by areas

Purpose of the donation
Donations
Number of donations
Location of donations
Amount awarded (gross, PLN)
%
Copper Basin
Voivodship of Lower Silesia (without the Copper Basin)
Other voivodships (without the Copper Basin and the Voivodship of Lower Silesia)
Health care1,480,963.67
99%
172
131
17
24
Social aid18,917.00
1%
3
0
1
2
Total1,499,880.67
100%
175
131
18
26

A detailed list of donations granted to institutions is presented at http://www.fundacjakghm.pl/

Social aid

Selected GRI Standards with respect to activities involving the natural environment

GRI Indexes:

Selected GRI Standards for 2018 with respect to activities involving the natural environment:

Direct and indirect energy consumption by the organization

1
Total consumption of non-renewable raw materials (own or purchased) in Joules or a multiple thereof, broken down by type of raw material
Values (MWh)
KGHM Group
KGHM Polska Miedź S.A.
Non-renewable
coal
1622525,91
-
natural gas
2276181,32
2156781
heating oil
6315,65
-
diesel fuel
2 505 506,34
-
Total
Total consumption
6410529,21
2156781
2
Total consumption of energy from renewables (own or purchased) in Joules or multiples thereof, by type of renewable
Values (MWh)
KGHM Group
KGHM Polska Miedź S.A.
Renewable
biomasa
-
-
biofuel
-
-
Wind power
-
-
Solar power
302,03
-
Geothermal energy
168
-
Water power
-
-
Other (t)
-
-
Total
Total consumption
470,03
-
3
Total consumption of energy produced or purchased, by electricity, heat in Joules or multiples thereof
Values (MWh)
KGHM Group
KGHM Polska Miedź S.A.

electricity
4237058,47
2852918
Heat (including consumption of steam, consumption of cooling energy)
190336,23
-
Total
Energy consumption
4427394,77
2852918
4
Total energy sales: electricity, heat, cooling and steam, in Joules or multiples thereof
Values (MWh)
KGHM Group
KGHM Polska Miedź S.A.

Total sales of electricity
428394,24
340574
Total sales of heat (net)
1584845,74
-
Total sales of cooling energy
-
-
Total sales of steam
-
-
Total
Sales
2013239,98
340574
5
Total energy consumption within the organization
8825154,03
4669125
GRI Indexes:

G305-2 – Indirect greenhouse gas emissions

Indirect emissions, by source 
Greenhouse gas emissions  (tCO2e)
KGHM Group
KGHM Polska Miedź S.A.
Emissions resulting from electricity purchased for own needs
24680643,96
1847663
Emissions resulting from heat purchased for own needs
520271,10
199981
Emissions resulting from cooling energy or steam purchased for own needs
11697,10
-
Total indirect emissions
25212612,12
2047644
GRI Indexes:

G306-2 - Total weight of waste by type and disposal method

No.Total weight of hazardous and non-hazardous waste, by treatment method
Weight of waste in 2018 [t]
Waste other than hazardous waste
Hazardous waste
KGHM Group
KGHM Polska Miedź S.A.
KGHM Group
KGHM Polska Miedź S.A.
1
Re-use of waste
33 379,42
14 594,01
0
0
2
Recycling (including organic recycling, e.g. composting)
3 367,62
1 816,73
1 049,40
15,28
3
Recovery (including recovery of energy)
19 589 369,92
19 465 505,68
102 066,52
102 039,32
4
Incineration (or use as fuel)
31,39
0
217,67
0
5
Storage in landfills
30 351 832,32
10 310 972,89
77 173,43
73 867,20
6
Discharge to deep wells
0
0
0
0
7
Storage on site
234 949,63
228 400,11
78 543,83
77 466,91
8
Other
1 438,63
211,44
38 979,37
38 826,95
TOTAL50 214 368,92
30 021 500,86
298 030,21
292 215,67
GRI Indexes:

G307-1 – Monetary value of fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

Information on administrative and judicial sanctions imposed on the organization for non-compliance with environmental legislation

Total value of fines for non-compliance with environmental laws and regulations [PLN]
KGHM Group
KGHM Polska Miedź S.A.
0
0

Amongst the evidence confirming the effectiveness of environmental initiatives and of the reduced environmental impact of the Company’s activities is the fact that no non-financial sanctions were imposed within the KGHM Polska Miedź S.A. Group or in the Parent Entity.

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