Embed Size (px)
Citation preview
Results of the KGHM Polska Miedź Group
for the first nine months of 2014
14 November 2014
2
110
75
Target daily oreprocessing - phase 1
Current daily oreprocessing
Third quarter 2014 summary
Production statistics:
Payable copper: 492.7 kt
Metallic silver: 931.5 tonnes
cash cost C1 (USD/lb)
KGHM PM S.A: 1.82
KGHM International: 2.31
Sierra Gorda mine commissioned
Concession received for exploration in the Puck region
Basic information
On-going ramp-up of the Sierra Gorda mine KGHM Group financial results
First shipment of concentrate from Sierra Gorda
ktpd
Q1
2015
80%
Sales: PLN 14.72 billion
EBITDA: PLN 3.91 billion
Profit for the period: PLN 1.78 billion
~6 kt
3
First shipment of concentrate from the Sierra Gorda mine
Sierra Gorda
Average annual
production
220 kt Cu
25 Mlbs Mo
64 koz Au
Ownership 55% KGHM
45% Sumitomo
Mine type Open pit
Progress
On 30 July 2014 the Sierra Gorda mine in Chile
commenced production.
The first shipment of copper concentrate was sent from
Sierra Gorda to the Toyo smelter in Japan. The ship, with
around 6 thousand tonnes of copper concentrate, sailed
from the port of Antofagasta on Saturday, 25 October.
Thanks to an increase in resources, the planned mine life
was extended to 23 years.
Work continues related to phase 2 of the investment. The
technical analyses underway will show the optimal
scenario for developing the plant’s processing
infrastructure, which will enable a substantial increase in
copper production in coming years.
Cu Mo Au
4
The mine was given the honorary name of
Ignacy Domeyko
Over 600 guests participated in the mine’s inauguration. Chile
was represented by President Michelle Bachelet, Ignacio
Moreno, Under Secretary of State in the Ministry of Mining,
and Valentin Volta, Governor of the Antofagasta region.
The Polish government was represented by Zdzisław Gawlik,
the Secretary of State in the Ministry of the State Treasury, as
well as Katarzyna Kacperczyk, Under Secretary of State in
the Ministry of Foreign Affairs.
Attending on behalf of the Japanese government was Norihiko
Ishiguro, Vice Minister for International Affairs, Ministry of
Economy, Trade & Industry.
During the opening ceremony the mine was named in honor
of Ignacy Domeyko, a Polish geologist who spent most of his
life in Chile and contributed to the industrial, social and
cultural development of the country.
1 October 2014 - official opening ceremony for the Sierra Gorda mine
5
Sierra Gorda - progress
Pit
Shovel at work Second stage crushing
6
Victoria – steady progress in mine development
Victoria
Average annual
production
~16 kt Ni
~15 kt Cu
~150 koz TPM*
Ownership 100% KGHM
Mine type Underground
Progress
In the first three quarters of 2014 work was carried out on
levelling land for the construction of mine infrastructure.
Work was completed on sinking of the ventilation adit shaft.
Work began to prepare the terrain for the hoisting
machinery foundations.
Work continues on the Integrated Development Study,
whose elements include a detailed project schedule,
budget and operational plan.
The shaft shield design was confirmed. Engineering work
continues on the shaft tower and infrastructure.
Ni Cu Pt Pd Au
*TPM – total precious metals (gold, platinum and palladium)
7
Deep Głogów – guarantor of stable production by KGHM
Deep Głogów Cu Ag Progress
By the end of Q3 2014 the first mining section to
access the Deep Głogów deposit, opened on
1 April 2014 through the Rudna mine, had excavated
over 209 thousand tonnes of ore.
Work continued on deepening the GG-1 ventilation
(inlet) shaft using tubing technology. At the end of the
third quarter the shaft had reached a depth of 310
meters.
In 2014 25 thousand meters of tunnels have been
excavated together with requisite technical
infrastructure
Design work completed on a modern Surface
Ventilation Station with target capacity of 25 MW at the
R-11 shaft. Work completed included assembly of the
cooling tower and construction of the steel framework
as well as of water plumbing and gas infrastructure.
Average annual
production
~290 Mt @ 2.4% Cu in ore,
79 g/t Ag
Ownership 100% KGHM
Mine type Underground
8
The investment in the gas-steam blocks is aimed at
securing approx. 1/3 of KGHM’s power needs
KGHM is consistently executing its strategy of
gradually gaining independence from energy prices
and supplies
These blocks will enable a reduction in greenhouse
gas emissions by 40% as compared to coal-fired
plants
The investment ensures access to cheaper,
internally-generated energy as compared to
forecasted market prices
These blocks also ensure greater security for the
power systems of the Polkowice-Sieroszowice and
Rudna mines as well as the Głogów smelter/refinery
complex thanks to the possibility of island mode
operation
In the case of interuptions in power supply from the
national grid in Poland, KGHM will be able to rely on
its own power plants for its operations
Total project budget PLN 523 million
Start date 2011
Operator Energetyka Sp. z o.o.
(KGHM Group)
Projected electricity price
in 2015
Lower than offered on the Polish
Power Exchange
Annual production
Block in Polkowice
Block in Głogów
300 k MWh electricity and 1 million
GJ heat
250 k MWh electricity and 0.8
million GJ heat
Gas-Steam Blocks (Polkowice and Głogów)
Key initiative of KGHM in the power generation segment
8
Gas-Steam Blocks
9
Potassium-magnesium salts – developing the option to diversify revenue sources
Puck region
Resources ~600 Mt @ 7.7 – 13.7 %
K2O
Ownership 100% KGHM
Goal Exploration
Progress
In January 2014 an agreement was signed by KGHM with
Gdańskie Zakłady Nawozów Fosforowych FOSFORY Sp. z
o.o. and Grupa Azoty Zakłady Azotowe „Puławy” S.A. on
assumptions for cooperation regarding exploration for,
evaluation and extraction of deposits of potassium salts,
phosphorus, rock salt and nonferrous metals.
In October 2014, KGHM received a concession to explore for
and investigate potassium-magnesium salts in the Puck
region.
Apart from the main goal of investigating and documenting
potassium-magnesium salt resources, there exists the
possibility of documenting resources of copper and silver lying
below the salt deposits.
K2O NaCl Cu
Macroeconomic outlook
11
Price pressure on the metals market
Source: *KGHM, Bloomberg; ** LME – London Metal Exchange, COMEX – Commodities market in Chicago, SHFE – Forward commodities market in Shanghai.
COPPER
In the third quarter of 2014 the copper price in USD was mainly impacted by fears about the sustainability of growth in the
Euro zone and in China, as well as by the EURUSD exchange rate. The appreciation in the American dollar was due to
better than expected economic data as well as to restriction of the quantitative easing program.
Despite the downturn in the copper price, the price of the metal expressed in the Polish zloty and Chilean peso remains at
a high level as a result of the depreciation of these currencies as compared to the USD.
Copper inventories at the end of September on the three markets (LME, COMEX and SHFE**) amounted to over 265
thousand tonnes, or just over half the amount stored at the start of the year. According to estimates by CRU the amount of
material stored in unofficial bonded warehouses in China fell by approx. 30% as compared to their peak at the turn of
March and April last year.
Indexed copper price in USD, PLN, CLP and CNY* [2 January 2014=100] Copper inventories* [in tonnes]
Copper inventories in official LME, COMEX and SHFE warehouses are at their lowest
levels in over 5 years.
Despite the downturn in the copper price in USD, the red metal’s price expressed in
the Polish zloty and Chilean peso rose substantially in the third quarter.
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
1 000 000
2006 2007 2008 2009 2010 2011 2012 2013 2014
Shanghai COMEX LME
85
90
95
100
105
110
USD PLN CLP CNY
12
Macroeconomic conditions worse compared to 2013
7 379 6 943
9M'13 9M'14
7 073 7 153 7 041 6 787 6 994
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-6%
24.80
19.95
9M'13 9M'14
21.32
20.82 20.48
19.62 19.76
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-20%
3.19 3.08
9M'13 9M'14
3.21 3.07 3.06 3.04 3.15
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-3%
Copper price: decrease due to fears about the
sustainability of economic growth in the Euro zone
and China.
Silver price: rangebound between 17–22
USD/troz after last year’s downturn, mainly
caused by the start of restriction of quantitative
easing (QE) and the expected tightening of
monetary policy in the USA in 2015. Political
events which have recently resulted in a high level
of uncertainty, and consequently in positive
sentiment towards basic materials, became of
secondary importance. The major impact came
from the normalisation of interest rates in the USA
and to the dynamic appreciation of the USD
versus a basket of other currencies, which led to a
downturn in precious metals prices.
Following the announcement of good
macroeconomic data in the Polish economy in the
first half of the year, signs of a slowdown
appeared mainly due to the problems in the
Eurozone and to restrictions in trade with Russia.
The anticipated decrease in interest rates by the
Polish Monetary Council and to the relatively
better outlook for the US economy resulted in the
weakening of the Polish złoty versus the USD
in the third quarter of 2014.
Copper price
USD/t
Silver price
USD/troz
Exchange rate
USD/PLN
13
Upturn in the global economy is expected in 2015
WORLD
OECD Composite Leading Indicators
The OECD’s Composite Leading Indicators foresee continued growth in the USA
and a slower rate of growth in China and Europe
While monetary policy in developed nations supports
economic growth, its effectiveness is much more apparent
in the USA than in the Eurozone or Japan. Interest rates in
developed nations remain near zero, though the market
expects them to increase in 2015 in the USA and the United
Kingdom.
The announced variation in directions being taken by central
banks in developed economies and their experimental
character are among the main factors which have caused
volatility in financial markets in recent months.
Most developed economies are currently experiencing
moderate growth, which is expected to accelerate in 2015.
The acceleration in global economic growth forecast by the
IMF assumes that in most countries the level of debt to GDP
will decrease.
Although the rate of growth in the Chinese economy has
visibly slowed in recent years, the government has tools
available to check the slowdown and stabilise the economy
at a solid level.
Although the Eurozone is still facing economic problems,
the European Central Bank is taking a variety of actions
aimed at economic stimulation and a lower-than-expected
level of inflation
Fed = American Federal Reserve, BoE = Bank of England, ECB = European Central Bank, BoJ = Bank of Japan, BoC = Bank of Canada. Source: Thomson Reuters, KGHM Polska Miedź
Lack of uniformity in global monetary policy and its experimental
character were the main causes of volatility on financial markets
90
92
94
96
98
100
102
104
106
01 02 03 04 05 06 07 08 09 10 11 12 13 14
USA Polska Chiny NiemcyPoland China Germany
KGHM Group
economic results
15
Lower production of copper equivalent and a higher C1 cash
cost mainly due to lower silver and gold prices
Production was also impacted by a deterioration of geological
conditions at the Robinson mine
The fall in metals prices caused a decrease in Group results
615 603
9M'13 9M'14
192 209 195 201 208
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-2%
KGHM Polska Miedź S.A.
KGHM International
1.83 1.90
9M'13 9M'14
1.88 1.92 1.90 1.89 1.95
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
+4%
4 608
3 909
9M'13 9M'14
1 243 1 344 1 075
1 361 1 473
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-15%
The drop in Group EBITDA
by 15% compared to the first
9 months of 2013 was mainly
due to worse macroeconomic
conditions.
Copper equivalent production
In thousand tonnes Cu equivalent
C1 cost of producing copper in
concentrate
USD/lb
EBITDA
In million PLN
Economic results
KGHM Polska Miedź S.A.
17
Stable mined production
23.3 23.5
1.58 1.54
9M'13 9M'14
Copper content
in ore (%)
+1%
In the first nine months of
2014 copper content in ore
dropped by 3% 7.8 7.4
8.0 7.8 7.8
1.57 1.56 1.57 1.53 1.51
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
Production of copper in
concentrate for the first nine
months of 2014 was 2% lower
versus the corresponding
period in 2013
325 320
9M'13 9M'14
-2%
108 104 110 106 104
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
Ore extraction
In million tonnes dry weight
Production of Cu in concentrate
In thousand tonnes
18
864 930
9M'13 9M'14
304 312
113 117
417 429
9M'13 9M'14
Higher production of electrolytic copper and metallic silver
1) Together with processing of customer-supplied materials
From own concentrate
From purchased Cu-bearing materials (1
+3%
Higher electrolytic copper
production from both own
concentrates as well as
purchased materials
The 39 day maintenance
shutdown at the Legnica
smelter/refinery ended on 6
October (last year during this
period the Głogów
smelter/refinery underwent
maintenance)
+8%
91 126
106 104 102
40
22 37 36 44
131 148 143 140 146
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
320 297 278
328 325
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
Higher metallic silver production
due to higher processing of both
own and purchased
concentrates
Electrolytic copper production
In thousand tonnes
Metallic silver production
In tonnes
19
Lower revenues as compared to the first nine months of 2013 due to lower prices
426 413
9M'13 9M'14
-3%
916 868
9M'13 9M'14
-5%
10 481 9 418
2 448
1 754
744
671
13 674
11 843
9M'13 9M'14
Copper and copper
products
Silver
Other
The simultaneous drop in achieved copper and silver prices
(respectively by 7% and 24%) and in sales volumes (3% and 5%)
resulted in lower revenues from sales by 13% as compared to the
first 9 months of 2013
The company expects high volumes of copper and silver sales in the
4th quarter of 2014, which will enable sales volumes to reach planned
levels given the level of re-stocking performed in the first quarter of
2014.
-13%
129
168
138 136 138
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
319 335
220
352
296
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
3 086 3 879
3 153 3 021 3 244
744
743
455 690 610
4 171
4 905
3 800 3 927 4 116
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
Revenues from sales
In million PLN Copper and copper
products
In thousand tonnes
Sales volumes
Silver
In tonnes
20
Cost discipline maintained
3 008 2 824
1 463
1 131
5 946 5 859
10 418
9 814
9M'13 9M'14
Minerals extraction
tax
Purchased Cu-
bearing materials
Total expenses by
nature
Expenses by nature
excluding
purchased Cu-
bearing materials
and the minerals
extraction tax
-6%
-1%
Labour costs
External
services
Other materials
and energy
Deprecuiation
Taxation and charges
After excluding the minerals extraction tax and purchased Cu-bearing
materials, expenses by nature were lower by PLN 87 million (1%)
than in the first 9 months of 2013.
Expenses by nature as compared to the first 9 months of 2013 were
impacted by:
a lower cost of heat energy and a drop in the price of electricity
the planned reduction in the scope of preparatory mine
development work
alongside an increase in:
labour costs – a higher allowance for future employee benefits and
higher remuneration by 2.4% alongside a lower annual bonus by 2
percentage points.
taxation, including mining usufruct fees and mining charges
Expenses by nature
In million PLN
1 975 1 980 1 952 1 961 1 946
3 437
2 836
3 300 3 187 3 328
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
Minerals extraction tax
Purchased Cu-bearing
materials
Expenses by nature
excluding purchased
Cu-bearing materials
and the minerals
extraction tax
21
A higher C1 cash cost due to lower valuation of by-products
* Under comparable conditions – assuming the macroeconomic conditions in the first 9 months of 2013
1.07 1.28
1.01
0.67
0.54
0.67
1.74 1.82
1.68
9M'13 9M'14 9M'14*
1.77 1.91
1.77 1.82 1.88
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
+5%
Minerals extraction
tax
The drop in silver and gold prices as
compared to the same period in 2013
caused a lower valuation of by-
products, and in turn to a higher C1
cost
Under the macroeconomic conditions in
2013, the C1 cash cost would have
been 1.68, or 4% lower than in the prior
year
C1 cash cost of producing copper in concentrate
USD/lb
22
Decrease in the pre-precious metals credit1 unit cost of electrolytic copper
production from own concentrate
1) Pre-precious metals credit cost - Total unti cost prior to deduction by the value of associated metals
2) Under comparable conditions – assuming the macroeconomic conditions in the first 9 months of 2013
14 523 14 377 13 772
21 550
20 137 21 148
9M'13 9M'14 9M'14 (2
22 598
19 740 20 018 19 596 20 813
15 290 14 984 13 971 14 502 14 670
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
Value of associated metals
-7%
Total cost of production from own concentrate
-1%
The pre-precious metals credit unit
cost of electrolytic copper
production from own concentrate
was lower by 7% versus the prior
year due to higher production
(+2.5%) and a lower minerals
extraction tax charge
Due to the lower value of anode
slimes (lower silver and gold prices),
the total unit cost of copper
production from own concentrate
was similar to that of the prior year
Under the macroeconomic
conditions of 2013 the total cost of
copper production from own
concentrate would have been lower
by 5%
Minerals extraction tax
Pre-precious metals credit unit cost of electrolytic copper production
from own concentrate
PLN per tonne
23
Position in derivatives on the commodities and currencies markets
The result on derivatives in KGHM Polska Miedź S.A. was PLN 275 million (accrued as at 30 September 2014)
USD/PLN
In million USD
180 180
180
120 120
90
180 180
60
180180
10-12.2014 1H’15 1H’16 2H’16 2H’15
Collar 2.70-4.50
Collar 3.20-4.00
Collar 3.30-4.00
Put 2.85
Put 3.20
Transactions entered into in
the 3rd quarter of 2014
3 000 6 000 6 000
7 500
15 000 15 000
9 750
3 000
6 000
2H’15 1H’15 10-12.2014
Cu
In tonnes
Seagull 4.500-7.700-10.200
Seagull 4.500-7.800-10.300
Seagull 5.000-7.700-9.300
Put 7.200
Transactions entered into in
the 3rd quarter of 2014
24
Positive impact of costs and hedging on the company’s results
* Impact on revenues from sales of copper, silver and gold
** Excluding the minerals extraction tax and consumption of purchased copper-bearing materials
2 245
1 748
+202
+498
+150
+184
+181
-288
-1 001
-420
-3
ProfitJan-Sept
2013
Change in salesvolume
(Cu,Ag,Au)*
Change in prices(Cu,Ag,Au)*
Change in exchange rate
USD/PLN*
Hedging Total cost ofproducts sold**
Mineralsextraction tax
Purchased Cu-bearing materials
Other Income tax ProfitJan-Sept
2014
Change in net profit (in million PLN)
3 742 3 128
9M'13 9M'14
EBITDA (in million PLN) -16%
The lower profit versus the first 9 months of 2013 was due to the deterioration in
macroeconomic conditions and to a lower sales volume
The decrease in profit was partially offset by the lower level of costs, the impact of
hedging and lower income tax
Mainly due to lower expenses by nature and
higher production for re-stocking
-22%
25
Planned economic targets for 2014 remain unchanged
98%
91%
101%
96%
93%
94%
76%
81%
76%
76%
82%
73%
78%
61%
64%
Average annual copper price
Average annual silver price
Exchange rate
Pre-precious metals unit cost of electrolytic
copper production from own concentrate
Total unit cost of electrolytic copper
production from own concentrate
C1 cash cost of producing copper in
concentrate
Production of copper in concentrate
Production of silver in concentrate
Production of electrolytic copper
- of which from own concentrate
Production of metallic silver
Copper products sales volume
Silver products sales volume
Capital expenditures
Equity investments
The lower than expected
metals prices were offset by
lower costs – hence the
current macroeconomic
situation does not justify an
adjustment to planned
targets
Production and sales
volumes at planned levels –
potential for slight exceeding
of volume targets by year’s
end
Investment expenditures
below planned amounts due
to deferment of spending to
2015
100%
75%
KGHM INTERNATIONAL
economic results
27
$2.21 $2.31
9M'13 9M'14
Production results overview
The decrease in production of copper (by
12 thousand tonnes) and in TPMs (by 24
thousand troz) was mainly due to the lower
ore quality encountered at the Robinson
mine at the start of the year (in Q1 the
Robinson mine processed ore from the
Kimbley pit, versus unusually high ore
levels extracted from the Ruth pit in 1H
2013).
Robinson production improved in the
second and third quarters.
76
64
9M'13 9M'14
21 24
19 22 22
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-17%
75
51
9M'13 9M'14
21 24
16 18 17
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-32%
$2.41
$1.97
$2.74
$1.69
$2.25
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
4% Slight increase in C1 cost in comparison to
9M 2013 mainly due to lower production
parameters at the Robinson mine at the
beginning of the year. In 2Q and 3Q 2014
Robinson improved results and decreased
cash cost.
C1 cash cost
USD/lb
TPM (gold, platinum palladium)
Tk troz
Copper In thousand tonnes
28
Financial Results overview
In the second and third quarters of this year there was a steady and
systematic improvement in production results (mainly at the Robinson
mine), which in turn led to better financial results.
KGHM International continues its program of savings
in the following areas: general management and administrative costs,
sustaining Capex and Opex, expenditure on projects, exploration and new
business
The company is taking actions to optimise the production process which
will enable volumes to be maintained in 4Q.
810
533
9M'13 9M'14
224 253
148 179 207
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-34% 190
89
9M'13 9M'14
45
69
2
48
39
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-53%
Main reasons for lower EBITDA:
Lower effective copper sales price, which decreased
revenues by approximately USD 20 million
Lower copper and gold production volume and DMC contract
revenues by approximately USD 254 million
implemented cost initiatives and inventory management,
which resulted in lower cost of sales by approximately USD
186 million 1 Revenues from sales net of treatment and refining charges
2 Profit on mining operations plus depreciation and the Sierra Gorda JV management fee, less general
administrative costs and impairment losses
75.4
59.9
9M'13 9M'14
21.5 25.4
16.1 19.1
24.8
3Q '13 4Q '13 1Q '14 2Q '14 3Q '14
-21%
Cu sales
In thousand tonnes
Sales1
In million USD
EBITDA (adjusted)2
In million USD
29
Morrison Mine: Current Status and Outlook
1 cash cost C1 (US$/lb)
Cu Ni
Improved results in 3Q 2014 :
Improvement in copper metal grade mined by 8% over 2Q 2014
Consistent copper and TPM production in 3Q 2014 compared to 2Q 2014
Stable C1 cost compared to 2Q 2014
Improvement in operating income for the site due to favourable nickel prices and a decrease in deprecation and
amortization
Cu grade (%)
cash cost C11
Operating plans:
Craig pillar stoping area remains on track for 4Q 2014, which is expected to increase copper output compared to 3Q 2014.
Operation continues to focus their efforts towards planning around the geotechnical challenges and becoming proactive in
anticipating problem areas
Diamond drilling in the 5040 drift to quantify the extent of the lower part of the Morrision deposit will continue through to the
end of 1H 2015.
Pt Pd Au
6.2
3.5 3.9 3.9
15.9
9.3 10.5 10.6
4Q'13 1Q'14 2Q'14 3Q'14
Payable Cu (kt)
Payable TPM(koz) 1.08
1.78 1.13 1.15
9.3
6.7
7.7 8.3
4Q'13 1Q'14 2Q'14 3Q'14
30
1.68
3.39
2.5 2.37
0.39 0.36 0.4 0.44
4Q'13 1Q'14 2Q'14 3Q'14
76.9
69.8 74.9 75.7
Robinson Mine: Current Status and Outlook
Cu Mo Au
Improved results in Q3 2014 :
Increase in copper ore grade and recovery compared to 2Q 2014 due to blending
synergies realized from higher grade material mined from the bottom of the Ruth East
pit in September
Improved C1 cost for the quarter compared to Q2 2014 due to increased production
from improved head grade and cost management initiatives
Current plan
Mine Sequence: Ruth pre-stripping to
access higher grade ore was concluded
in Q3 (mining in Kimbley concluded in
October). For the remainder of the year
all ore will come from Ruth 2 East or
the ore stockpile
Cost Management: Continuing
aggressive cost cutting measures. All
non-critical capital expenditures have
been reduced or deferred for the
remainder of 2014.
Mill Operating time: All scheduled
major repairs completed during mill
downtime in early Q3 2014.
Expected results
Ore from the Ruth pit can be blended
or sent directly as mill feed, which
significantly improves processing
results. The mine continues to analyze
blending opportunities and process
modification to improve performance.
As a result production in 4Q will be
slightly higher than in 3Q.
Management of cash flow and C1 cost
for the remainder of the year.
Mill is expected to operate at a rate of
95% or above for the remainder of the
year.
Cu grade (%)
C1 (USD/lb)
Cu recovery (%)
9.9
7.8
11.1 9.9
7.2 5.9 6.2
5.4
4Q'13 1Q'14 2Q'14 3Q'14
Payable Cu (kt)
Payable Au(koz)
31
Reasons to invest in KGHM
Leading copper and silver
producer globally
Experienced management
team committed to
growing shareholder value
Stable production and
greater de-risking in
project development
Production started at
Sierra Gorda mine,
Victoria – another KGHM
project at the
development stage
Located and listed in one
of the European Union’s
most dynamic economies
Diversified assets pipeline
at various stages of
development guarantees
continued growth
Broad product assortment
with distinct and
irreplaceable qualities
Strong sector position
stimulated by growing
demand from emerging
markets
