Kghm Polska Miedz S.a. · GPW:KGH
Kghm Polska Miedz — ERSTE Group Conviction Equity Investors Conference 2022
62 slides from Kghm Polska Miedz's conference presentation, Jan 27, 2022
Slide 1: KGHM Group Investor Presentation
KGHM Group Investor Presentation ERSTE Group Conviction Equity Investors Conference 27 January 2022
Slide 2: Cautionary Statement
Cautionary Statement This presentation was prepared by KGHM Polska Miedź S.A. (KGHM). The presentation is strictly of an informational nature and should not be construed as containing investment advice. The users of this presentation are solely responsible for their own analysis and assessment of th
Slide 3: Key information about the KGHM Group
Key information about the KGHM Group
Slide 4: KGHM Group in brief
KGHM Group in brief One of the world’s largest producers of copper and 709 thousand tonnes A diversified portfolio of silver with 60 years of of payable copper production assets at various stages of experience in mining and by the KGHM Group in 2020, development located in mining- metallurgy (1.1% h
Slide 5: The KGHM Group's strategy
The KGHM Group’s strategy 2030 with an outlook to 2040 - highlights
Slide 6: KGHM's mission and vision remain up-to-date
KGHM’S MISSION AND VISION REMAIN UP-TO-DATE, however to reflect the changes in the environment, strategic directions have been extended with an additional element – Energy MISSION To always have copper VISION To use our resources efficiently to become a leader in sustainable development Ecology, Ela
Slide 7: KGHM's strategy consists of 5 pillars based on 5 development directions
KGHM’S STRATEGY CONSISTS OF 5 PILLARS BASED ON 5 DEVELOPMENT DIRECTIONS Strategy of the KGHM Group for the years 2022-2030 Development directions Flexibilty Efficiency Ecology E-industry Energy Leader in the Optimization of mining Development of 1. Advanced technologies development of low- productio
Slide 8: Objectives of the strategy consistent with KGHM's climate policy
THE OBJECTIVES OF THE STRATEGY ARE CONSISTENT WITH KGHM’S CLIMATE POLICY and the climate goals set out therein for 2030 and 2050 Emission reduction targets of KGHM Polska Miedź S.A. and the main directions of decarbonization MAIN DIRECTIONS OF DECARBONIZATION: MAIN DIRECTIONS OF DECARBONIZATION: Red
Slide 9: Main assumptions of the Budget for 2022
Main assumptions of the Budget for 2022 Production of KGHM Polska Miedź S.A. Copper in concentrate (kt) 392 1 280 Unit cost of copper production from own Silver in concentrate (t) Electrolytic copper (kt) 585 concentrate -including from own concentrate 394 The expected total unit cost of copper prod
Slide 10: KGHM: a top ten copper producer and a leading Polish exporter
KGHM: a top ten copper producer and a leading Polish exporter The Group has a global reach and plays a significant role on the global copper and silver markets Seventh Cu Second Ag largest largest copper silver producer producer Other KGHM Group products: Molybdenum Platinum Copper Lead Rh
Slide 11: KGHM among the biggest copper and silver producers
KGHM among the biggest copper and silver producers1) Mined Copper production 2020 2) Silver production 2020 3) 1.73 50.3 1.26 43.5 1.18 32.8 1.11 27.8 1.00 24.6 0.78 21.6 0.71 21.5 0.53 18.8 0.47 17.3 0.46 [in million metric tonnes] 13.5 [million ounces] 1) KGHM results as reported in its consolidat
Slide 12: A proud history of mining and metallurgy
A proud history of mining and metallurgy Discovery of the copper deposit brought about a fundamental change in the region’s economy thanks to the growth of KGHM Polska Miedź S.A. As a result of M&A activities, capped by the acquisition of Quadra FNX, KGHM became a truly global copper producer aimed
Slide 13: Core production assets in Poland – stable output and earnings
Core production assets in Poland – stable output and earnings Underground copper mines, fully integrated production Legnica Smelter and Refinery Polkowice-Sieroszowice Mine LME grade A-registered cathodes 36 years LOM Capacity of ca. 120 kt electrolytic Cu/year 1) Copper in extracted ore in 2020:
Slide 14: Key international assets
Key international assets Existing operations and growth potential from projects Producing assets Potential growth projects Sierra Gorda (55% stake), Chile Sierra Gorda Oxide, Chile 23 years LOM 2020 production stats: 11 years LOM Open-pit mine Cu production The project aims at processing the o
Slide 15: Sierra Gorda
Sierra Gorda Sierra Gorda is an open pit copper and molybdenum mine located in Chile’s Antofagasta region in the Atacama desert. Sierra Gorda is a Joint Venture of: KGHM Polska Miedź S.A. – 55% share Sumitomo Metal Mining – 31.5% share Sumitomo Corporation – 13.5% share Schedule of Sierra Gord
Slide 16: Q3 and first 9M of 2021 - KGHM Group
Q3 and first 9M of 2021 - KGHM Group
Slide 17: Payable copper production by the KGHM Group
Copper – our key product 9M 2021 574 Payable copper production +10.1% 9M/9M by the KGHM Group [kt] higher by 10.1% (9M/9M) Payable copper production Payable copper production +31% 9M/9M KGHM Polska Miedź: KGHM Polska Miedź [kt] Sierra Gorda1) [kt] higher production from +6.8% 9M/9M 78 440 60 purch
Slide 18: Other major metals and costs
Other major metals and costs Production C1 cost Silver production C1 – KGHM Polska Miedź S.A. Payable copper production [USD/lb] [t] [kt] +1% 9M/9M +40% 9M/9M 2.24 997 1 008 1.60 minerals 1.04 extraction 0.43 tax +10.1% 9M/9M 9M 2020 9M 2021 1.16 1.20 574 9M 2020 9M 2021 521 TPM production 78 [koz t
Slide 19: Expenses by nature
Expenses by nature KGHM Polska Miedź S.A. (of which PLN 3 908 mn Expenses by nature Expenses by nature higher due to purchased metal- bearing materials and the [mn PLN] 16 233 +46% 9M/9M by PLN 5 143 million, 9M/9M minerals extraction tax) Minerals extraction 15.6% 2 539 (+127%) tax recognised in ex
Slide 20: Financial results – KGHM Group
Financial results – KGHM Group 9M 2021 Adjusted EBITDA nearly doubled Group adjusted EBITDA2) Group revenues [mn PLN] +31% 9M/9M [mn PLN] for the KGHM Group +75% 9M/9M 21 735 compared to 9M 2020 7 730 16 580 Higher adjusted EBITDA compared to 9M 2020 7 229 (+3 312 mn PLN; +75%), of which by segment:
Slide 21: Financial results – KGHM Polska Miedź S.A.
Financial results – KGHM Polska Miedź S.A. Revenues from contracts with customers Adjusted EBITDA Profit for the period [mn PLN] [mn PLN] [mn PLN] +35% 9M/9M +40% 9M/9M +320% 9M/9M 17 970 1 111 4 852 4 272 13 360 3 048 1 137 3 052 Other Silver 2 326 13 811 1 156 Copper and copper 9 897 products 9M 2
Slide 22: Margins remain robust
Margins remain robust KGHM Polska Miedź S.A. KGHM Polska Miedź S.A. Revenues vs EBITDA (mn PLN) Copper production cost vs copper price 25000 30% Total unit cost of electrolytic copper production from own concentrate (USD/lb) 20000 26% 23% 23% 24% 22% 20% 20% C1 cost of producing copper in concentrat
Slide 23: Net debt of the KGHM Group
Net debt of the KGHM Group As at the end of Q3 2021 Net debt / adjusted EBITDA -57% compared to 30 September 2020 Main factors affecting net debt in 9M 2021 1.4 0.9 0.8 Increases in debt 0.7 0.8 Cash expenditures on property, plant and equipment 30-09-2020 31-12-2020 31-03-2021 30-06-2021 30-09-20
Slide 24: Capital allocation
Capital allocation Renewal of dividend payout 2020 Dividend Payout Dividend policy (17% of net profit) 300 mn PLN The Dividend Policy of KGHM Polska Miedź S.A. is part of its on-going (1.50 PLN/share - gross) efforts to ensure a balance between dividends paid out to 65% shareholders and opportunitie
Slide 25: A rationale and responsible investment program
A rationale and responsible investment program Capital expenditures by KGHM Polska Miedź S.A. in 9M 2021 CAPEX execution in 9M 2021 by area by category Mining Replacement Metallurgy Maintaining mine production Other activities Development Leasing IFRS 16 Development - uncompleted 1 540 29% 1 105 *ex
Slide 26: Market risk management
Market risk management Hedged position on the copper and silver markets (as at 30 September 2021) Copper Hedged position – open as at 30 Sept 2021 At the end of the third quarter of 2021 the [kt] Parent Entity recorded a result on derivatives* 69 54 and hedges in the amount of -PLN 1 506 million: 46
Slide 27: Market risk management
Market risk management Hedged positions on the currency and interest rate markets (as at 30 September 2021) USD/PLN Hedged position implemented in Q3 2021 In the third quarter of 2021 transactions [mn USD] Hedged position – open as at 30 Sept 2021 were implemented on the forward currency market: − P
Slide 28: Sustainable development – commitments of KGHM Polska Miedź S.A.
Sustainable development – commitments of KGHM Polska Miedź S.A. CLIMATE POLICY ENVIRONMENTAL POLICY ANTI-CORRUPTION POLICY 28
Slide 29: We produce copper responsibly
We produce copper responsibly Achievements in 2021: The Głogów and Legnica smelter/refineries were certified by The Copper Mark – an international program providing a credible The granting of The Copper assurance framework to promote Mark, participation in the responsible production practices CDP
Slide 30: Strengthening corporate governance
Strengthening corporate governance New Policies in KGHM Polska Miedź S.A. ISO 14001 ISO 37001 Environmental Policy Anti-Corruption Policy Based on continual improvement under the PN-EN ISO 14001 The senior leadership of the KGHM Group hereby declares its Environmental Management System, the Company’
Slide 31: Climate Policy of KGHM Polska Miedź S.A.
Climate Policy of KGHM Polska Miedź S.A. Testifying to KGHM’s ambitions of reducing its environmental footprint „To use our resources efficiently to become a leader KGHM’s Vision in sustainable development” Strategy of the Climate Policy of KGHM Polska Miedź S.A.1) KGHM Group A directional document
Slide 32: Climate Policy of KGHM Polska Miedź S.A.
Climate Policy of KGHM Polska Miedź S.A. The Policy will serve as direct support in advancing the the UN’s Sustainable Development goals. Moreover, its implementation ensures the achievement of measurable benefits for the Company and its stakeholders. The Climate Policy of KGHM Polska Miedź S.A. wil
Slide 33: Identifying opportunities in the transformation to a low-emissions economy
Identifying opportunities in the transformation to a low-emissions economy The Climate Policy is a major step in seizing opportunities, and consequently in building long-term value Supports the transformation into Lower emissions is a competitive advantage a low-emissions economy KGHM, as one of t
Slide 34: Inventorisation of key sources of greenhouse gas emissions
Inventorisation of key sources of greenhouse gas emissions At the Parent Entity level, to be followed in turn at the Group level Scope 1 and 2 greenhouse emissions of KGHM Polska Miedź S.A. [mn t CO2e] Annual CO2-equivalent emissions by KGHM Polska Miedź S.A. are around 3.3 mn tonnes, of which aroun
Slide 35: Climate neutrality by 2050
Climate neutrality by 2050 Achieving climate neutrality by 2050 is the overriding goal of the Climate Policy of KGHM Polska Miedź S.A. Intermediate goal – the reduction of total Scope 1 and Scope 2 emissions by 2030 by 30%1) emissions climate 2030 reduction by 30% 2050 neutrality versus the base yea
Slide 36: By 2030 the increase in share of RES will lead to a substantial reduction in CO2 emissions
By 2030 the increase in share of RES will lead to a substantial reduction in CO2 emissions Share of power source in supplies to KGHM Polska Miedź S.A. 2019: 2020: 2019 Own generation sources covered 22.42% of KGHM’s 3 TWh total power needs in 2020 Natural Market Own source Gas (almost 1.5% more than
Slide 37: Implementation of the Climate Policy of KGHM Polska Miedź S.A.
Implementation of the Climate Policy of KGHM Polska Miedź S.A. Adapting the Company’s operating principles to achieve its GHG emissions reduction targets and reflecting climate risk in its internal processes Organisational and process changes in KGHM Polska Miedź S.A. KGHM wants to be a major partic
Slide 38: Employee safety as a strategic priority for the KGHM Group
Employee safety as a strategic priority for the KGHM Group Safety and development Accident ratios1) ISO 45001:2018 Granting of an Occupational Health and Safety -29% Change2) in LTIFR in KGHM Polska Miedź S.A. Management System Certificate Leader’s Gold Card of Workplace 18.6 -44% Change2) in TR
Slide 39: Sustainable value chain in the KGHM Group
Sustainable value chain in the KGHM Group Raw materials Extraction Production Logistics Stakeholders Commerce Tailings Rational deposits Commerce based Product life cycles based Responsible use of Reduction of the Reduction of Customers, management - on Fair Trade on the Circular Economy raw materia
Slide 40: Ethical standards
Pokłady możliwości Ethical standards KGHM Polska Miedź S.A. We follow We avoid the principle of We take responsibility conflicts “Zero tolerance for the quality of our We care about the of interests for corruption” products and services We care about security of information our Company’s property an
Slide 41: Reasons to invest in KGHM
Reasons to invest in KGHM A leading player on the copper A reliable producer, A diversified portfolio of and silver market in terms of mine a trusted business partner assets at various stages of output and size of documented and a company committed to development to guarantee resources, in mining-fr
Slide 42: Investor Relations Department
Investor Relations Department https://kghm.com/en/investors ir@kghm.com | esg@kghm.com T +48 76 74 78 280 | F +48 76 74 78 205
Slide 43: Supporting slides
Supporting slides TOE “UTURE |S MAD= OF COPPER
Slide 44: The financial situation of the KGHM Group remains stable and safe
The financial situation of the KGHM Group remains stable and safe 2021 Budget Total unit production cost of electrolytic copper from own concentrate 20.9 20.2 KGHM Polska Miedź S.A.1) [k PLN/t] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% Investments Capital expenditures 1 401 2 853 of KGHM Pols
Slide 45: Group production and sales in 9M 2021
Group production and sales in 9M 2021 Execution of annual targets 2021 Budget Production Copper in concentrate [kt] 296.1 390.0 KGHM Polska Miedź S.A. Silver in concentrate [t] 977 1 200 Electrolytic copper, total [kt] 440.1 573.0 Electrolytic copper from own concentrate [kt] 286.0 385.0 Metallic si
Slide 46: Cash flow
Cash flow KGHM Group [mn PLN] +6 105 - 569 -2 869 2 522 -2 603 568 -1 600 - 80 - 300 - 38 Cash as at Profit/loss before Income tax paid Change in working Acquisition of Proceeds Interest paid Dividend payout Other Cash as at 01-01-2021 income tax capital property, plant from/repayments 30-09-2021 an
Slide 47: Role of Deep Głogów (GGP) in maintaining output in Poland
Role of Deep Głogów (GGP) in maintaining output in Poland Deposit access program in KGHM’s concessioned areas Share of production from GGP in total production Active concessions and in Poland future potential Ore extraction dry weight from GGP [kt] +35% 2 982 -6% Q3/Q2 2 211 1 030 970 13.7% 12.4% 9.
Slide 48: The KGHM Group vs the sector
The KGHM Group vs the sector Macroeconomic environment – Q3 2021
Slide 49: Macroeconomic environment
Macroeconomic environment Commodities and currencies prices Copper prices in Q3 2021 stabilised above 9 000 USD/t, with an Cena Price(USD/t) (USD/t) Avg. Śr. ann.(USD/t) roczna (USD/t) [PLN/t] average price of 9 371 USD/t. The Chinese economy remained [USD/t] Cena Price(PLN/t) (PLN/t) Avg. Śr. ann.(
Slide 50: Precious metals prices in Q3 2021
Precious metals prices in Q3 2021 The third quarter of 2021 saw a bearish trend in silver and consolidation of gold prices below 1 800 USD/oz The silver price fell in Q3 2021, approaching 23 USD/oz The drop in investor interest in silver was confirmed by the check on inflows of cash to ETFs Silver(U
Slide 51: Lower inventories in official copper warehouses in Shanghai
Lower inventories in official copper warehouses in Shaghai in Q3 2021 compared to previous years The energy commodities index has risen by nearly 80% since the start of 2021 Inventory movements on the Shanghai market are showing The energy commodities index just in Q3 2021 rose by more marked diverg
Slide 52: Governance
Governance To UTURE |S MADE OF COPPER
Slide 53: Transparent Group structure
Transparent Group structure General Shareholders Meeting Supervisory Board Management Board KGHM Polska Miedź S.A. (Lubin, Poland) (Listed on Warsaw Stock Exchange since 1997) KGHM International Ltd. Production Development Group of subsidiaries (Vancouver, Canada) Development divisions projects Oper
Slide 54: Committed to solid corporate governance
Committed to solid corporate governance Independent directors on the Supervisory Board (10 directors total) KGHM’s Corporate Governance is guided by international standards and follows best practices: Independent Directors 2 Employee Elected All members of KGHM’s Supervisory Board are appointed by
Slide 55: Shareholder structure of KGHM Polska Miedź S.A.
Shareholder structure of KGHM Polska Miedź S.A. Ownership structure Geographical ownership structure [% of shares] No. of Percentage Share in Shareholder shares/ of share total number votes capital of votes 6% 7% Polish State Treasury 63,589,900 31.79% 31.79% 2% Nationale-Nederlanden OFE 10,104,354
Slide 56: Sustainable development – supporting slides
Sustainable development – supporting slides 56
Slide 57: Environmental protection
Environmental protection Primary obligations of KGHM Polska Miedź S.A. We supply metals and related products We keep abreast of new technologies in order to achieve the environmental to reduce industrial impact on the goals of contemporary society, environment and introduce them including actions on
Slide 58: SO2 and dust emissions
Emissions by the divisions of KGHM Polska Miedź S.A. SO2 and dust emissions1) SO2 emissions by KGHM Polska Miedź S.A. Dust emissions by KGHM Polska Miedź S.A. [tonnes] [tonnes] 80 000 –78% Reduction of SO emissions over the last 10 years 2 12 000 –75% Reduction of dust emissions over the last 10 yea
Slide 59: Lead and copper emissions
Emissions by the divisions of KGHM Polska Miedź S.A. Lead and copper emissions Lead emissions by KGHM Polska Miedź S.A. Copper emissions by KGHM Polska Miedź S.A. [tonnes] [tonnes] 400 350 350 –77% Reduction of lead emissions over the last 20 years 300 –70% Reduction of copper emissions over the las
Slide 60: CO2 emissions by KGHM Polska Miedź S.A. Scope 1
CO2 emissions by KGHM Polska Miedź S.A.1) ETS2) direct emissions + non-ETS equivalent [kt CO2] 2 000 1 800 1 714 1 600 1 678 average 1 539 1 532 1 521 1 519 1 508 1 400 1 492 1 489 1 482 1 481 1 476 1 470 1 466 1 430 1 407 1 200 1 000 800 Scope 1 -16% yoy 600 Direct emissions by KGHM Polska Miedź S.
Slide 61: Events for investors
Events for investors 2022 Date Upcoming events 25 January Trigon Top Picks 27 January Erste Conviction Equity Investors Conference 9 February Wood ESG Symposium 23 March Annual Report for 2021 20 April Raiffeisen Institutional Investor Conference 12 May Q1 report 17 May Bank of America Global Metals
Slide 62: Investor Relations Department
Investor Relations Department https://kghm.com/en/investors ir@kghm.com | esg@kghm.com T +48 76 74 78 280 | F +48 76 74 78 205
KGHM Polska Miedź — ERSTE Group Conviction Equity Investors Conference 2022 on 6ix