Kghm Polska Miedz S.a. · GPW:KGH
Kghm Polska Miedz — Investor Presentation (September 2022)
55 slides from Kghm Polska Miedz's investor presentation, September 2022
Slide 1: KGHM Group Investor Presentation
KGHM Group Investor Presentation September 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: Intellectual Property Rights
Intellectual Property Rights All rights reserved. All content on this presentation of the KGHM are protected by copyright and other protective laws. The presentation and the trademarks, service marks and logos on the presentation are owned by or licensed to KGHM, and are subject to copyright, tradem
Slide 4: Key information about the KGHM Group and our approach to Sustainability
Key information about the KGHM Group and our approach to Sustainability
Slide 5: 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 6: The Copper Mark
The Copper Mark® The Copper Mark® was created to promote responsible copper production. The prolongation of this certification enables KGHM’s products to continue being registered (copper cathodes and lead products) on the London Metal Exchange. The Copper Smelters and Refineries in Głogów and Legni
Slide 7: Employee safety as a strategic priority for the KGHM Group
Employee safety as a strategic priority for the KGHM Group Safety and development Accident ratios, H1 2022 vs H1 2021 ▪ ISO 45001:2018 Change in LTIFR1) Occupational Health and Safety Management System Certificate -18.5% in KGHM Polska Miedź S.A. ▪ Leader’s Gold Card of Workplace Safety Change in TR
Slide 8: We care, we act, we protect
We care, we act, we protect We effectively protect the health and safety of our employees, actively support our volunteers and are involved in assisting refugees from Ukraine. PANDEMIC ▪ Vaccinations ▪ Educational programs ▪ Combatting depression AID FOR UKRAINE ▪ Transports of medical supplies ▪ Ov
Slide 9: KGHM is a key element in the global energy transformation
KGHM is a key element in the global energy transformation Restrictive climate policy Access to copper and precious metals is a critical component if the plan to achieve climate neutrality by 2050 by the largest western economies is to succeed Rapid development of RES and EV markets Technologies used
Slide 10: KGHM – substantial competitive advantages
KGHM – substantial competitive advantages Largest mined copper producer in Europe, A European leader in implementing efficient, largest silver mine in the world low-emissions energy technologies The highest corporate governance standards, Access to copper resources in Poland and Chile, in a safe jur
Slide 11: 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 12: 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 13: 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 versus the base year 2020 neut
Slide 14: 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. 2020 – base year: 2020 H1 2022: 2.9 Own generation sources covered 12.95% of KGHM’s TWh total power needs in the first half of 2022. Market Own sourc
Slide 15: 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* * data for 2021 Other KGHM Group products: ▪ Molybdenum ▪ Platinum ▪
Slide 16: KGHM among the biggest copper and silver producers
KGHM among the biggest copper and silver producers Copper production 2021 1) Silver production 2021 2) 1.73 50.0 1.41 43.9 1.20 31.5 1.02 31.4 0.95 23.6 0.82 22.2 0.75 20.4 0.49 19.2 0.46 19.0 0.46 [in million metric tonnes] 15.0 [million ounces] 1) Kitco, April 2022 2) World Silver Survey 2022 16
Slide 17: 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 18: 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 approx. 37 years LOM Capacity of ca. 120 kt electrolytic Cu/year 1) ▪ Copper in extracted ore i
Slide 19: 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 2021 production stats: ~ 11 years LOM ▪ Open-pit mine ▪ Cu production ▪ The project aims at processing the
Slide 20: KGHM Group updated strategy
KGHM Group updated strategy to 2030 with an outlook to 2040
Slide 21: Strategy of the KGHM Group to 2030 with an outlook to 2040
Strategy of the KGHM Polska Miedź S.A. Group to the year 2030 with an outlook to 2040 While the Mission and Vision of KGHM remain unchanged, in order to reflect the changes in the general environment, the strategic directions were augmented by a fifth element – Energy. MISSION To always have copper
Slide 22: The KGHM Group's Strategy consists of 5 pillars based on 5 development directions
The KGHM Group’s Strategy consists of 5 pillars based on 5 development directions Strategy of the KGHM Group for the years 2022-2030 with an outlook to 2040 1 Advanced technology and R&D creating an Optimisation of mine production domestically and abroad intelligent production line ensuring long-ter
Slide 23: Performance in H1 2022 - KGHM Group
Performance in H1 2022 - KGHM Group
Slide 24: Metals production in H1 2022
Metals production in H1 2022 KGHM Group Payable copper production Silver production ▪ Higher payable copper production: [t] [kt] +1% H/H – by KGHM Polska Miedź S.A. due to higher availability of purchased copper-bearing -1% H/H 676 683 materials and higher availability of production lines 381 378 H1
Slide 25: Summation of H1 2022 in the KGHM Group
Summation of H1 2022 in the KGHM Group Selected key statistics in H1 20221) EBITDA2) -/- H1/H1 Profit for the period +12% H1/H1 [mn PLN] [mn PLN] 5 313 5 309 4 180 3 723 H1 2021 H1 2022 H1 2021 H1 2022 C1 net Net debt/EBITDA Payable copper production [USD/lb] [ratio] [Polish assets] +16% H1/H1 -29%
Slide 26: Payable copper production by the KGHM Group
Key production indicators H1 2022 378 Payable copper production -1% H1/H1 by the KGHM Group [kt] lower by 1% (H/H) Payable copper production Payable copper production -12% H1/H1 KGHM Polska Miedź [kt] Sierra Gorda1) [kt] 296 51 ▪ KGHM Polska Miedź – +1% H1/H1 28 45 higher availability of purchased 2
Slide 27: 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] +13% H1/H1 [kt] 676 +1% H1/H1 683 2.40 -1% H1/H1 2.12 0.93 minerals extraction 1,02 tax 1.47 1.10 H1 2021 H1 2022 381 378 H1 2021 H1 2022 51 45 TPM production C1 – KGH
Slide 28: Key financial indicators of the KGHM Group
Key financial indicators of the KGHM Group H1 2022 No change in adjusted EBITDA of Group adjusted EBITDA2) Group revenues the KGHM Group vs H1 2021 [mn PLN] [mn PLN] +24% H1/H1 17 926 -/- H1/H1 14 506 5 309 Slightly lower adjusted EBITDA compared to H1 2021 (-PLN 4 mn), of which by segment: 8 933 7
Slide 29: 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] +25% H1/H1 +9% H1/H1 -34% H1/H1 15 211 4 226 966 3 439 12 144 2 332 Other 740 2 808 Silver 1 996 3 157 Copper and 11 913 copper 9 408 products H1 2021 H1
Slide 30: Margins remain robust
Margins remain robust KGHM Polska Miedź S.A. Revenues vs EBITDA (mn PLN) KGHM Polska Miedź S.A. 28000 Copper production cost vs copper price 40% 21000 30% Total unit cost of electrolytic copper production from own concentrate (USD/lb) 26% 14000 22% 20% 23% 22% 23% 20% C1 cost of producing copper in
Slide 31: Net debt of the KGHM Group
Net debt of the KGHM Group As at the end of Q2 2022 Main factors affecting net debt in 2022 Net debt / adjusted EBITDA -29% compared to 30 June 2021 Increases in debt 0.7 0.8 ▪ Cash expenditures on property, plant and equipment (PLN 1 943 mn) 0.6 0.3 0.5 ▪ The minerals extraction tax (PLN 1 653 mn)
Slide 32: Market risk management: copper and silver hedged position
Market risk management Hedged position on the copper and silver markets (as at 30 June 2022) Copper Hedged position – open as at 31 December 2021 At the end of H1 2022 the Parent Entity [kt] Hedged position implemented in H1 2022 recorded a result on derivatives* and hedges in the amount of -PLN 451
Slide 33: Market risk management
Market risk management Hedged positions on the currency market (as at 30 June 2022) In H1 2022 transactions were implemented on the forward currency market: − Put options were bought to hedge USD 205 million USD/PLN Hedged position – open as at 31 December 2021 in planned revenues from sales (incl.:
Slide 34: Capital allocation
Capital allocation Renewal of dividend payout 2022 Dividend Payout (on 2021 profit) Dividend for shareholders (12% of net profit) 600 mn PLN • PLN 600 000 000.00 (PLN 3.00 per share) (3.00 PLN/share - gross) • dividend date 7 July 2022, dividend payment date 14 July 2022 50% % of profit allocated to
Slide 35: A rationale and responsible investment program
A rationale and responsible investment program Capital expenditures by KGHM Polska Miedź S.A. in H1 2022 CAPEX execution in Q1 2022 by area by category Mining Replacement Metallurgy Maintaining mine production Other activities Development (incl. R&D) Leasing IFRS 16 Conformatory Development - uncomp
Slide 36: CAPEX execution in key projects
CAPEX execution in key projects Deposit Access Program Outfitting of the mines Maintenance shutdown of the Głogów II ▪ GG-1 shaft – sunk to 1 317.2 m Mine dewatering Copper Smelter and Refinery after four ▪ GG-2 „Odra” shaft – GG-2 „Odra” shaft – work advanced on the years of operations shaft site d
Slide 37: 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] 3% Q2/Q1 -5% 2 012 1 912 942 971 12.2% 12.8% 13.4%
Slide 38: 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 39: 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 40: Supporting slides
Supporting slides TOE “UTURE |S MAD= OF COPPER
Slide 41: Group production and sales in H1 2022
Group production and sales in H1 2022 Execution of annual targets 2022 Budget Production Copper in concentrate [kt] 198.9 392.0 KGHM Polska Miedź S.A. Silver in concentrate [t] 662 1 280 Electrolytic copper, total [kt] 296.3 585.0 Electrolytic copper from own concentrate [kt] 177.7 393.6 Metallic si
Slide 42: The financial situation of the KGHM Group remains stable and safe
The financial situation of the KGHM Group remains stable and safe 2022 Budget Total unit production cost of electrolytic copper from own concentrate 24.9 26.5 of KGHM Polska Miedź S.A.1) [k PLN/t] 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 110% Investments Capital expenditures 1 010 2 835 Of KGHM P
Slide 43: Cash flow
Cash flow KGHM Group [mn PLN] +5 314 - 994 -1 299 -1 431 + 243 + 373 2 635 + 789 - 141 - 40 1 904 - 115 -1 968 Cash as at 01-01- Profit/loss before Exclusions of Income tax paid Change in working Acquisition of Repayment of loans Proceeds from the Proceeds from the Proceeds Interest paid Other Cash
Slide 44: Expenses by nature
Expenses by nature KGHM Polska Miedź S.A. Expenses by nature higher by PLN 2 272 million Expenses by nature H1/H1 [mn PLN] 12 950 +21% H1/H1 (of which PLN 968 mn due to purchased metal-bearing materials) Minerals 12.8% 1 653 (+1%) extraction tax 10 678 recognised in Minerals expenses 6 743 extractio
Slide 45: Macroeconomic environment in H1 2022
Macroeconomic environment in H1 2022
Slide 46: Macroeconomic environment: commodities and currencies prices
Macroeconomic environment Commodities and currencies prices On 7th March 2022 the copper fixing price on the LME reached Price (USD/t) [PLN/t] its historic record of 10 730 USD/t in H1 2022, with an average [USD/t] Annual av. or YTD (USD/t) 55 000 price for the period of 9 761 USD/t. The main factor
Slide 47: Precious metals prices in the first half of 2022
Precious metals prices in the first half of 2022 In the first half of 2022 precious metals prices were under pressure from rising interest rates Interest rate hikes by the largest central banks forced by In the first half of 2022 investors began to pull back from silver- rising inflation led to decl
Slide 48: The energy commodities index recorded an increase of 170% since the start of the year
The energy commodities index recorded an increase of 170% since the start of the year In the first half of 2022 the price of electricity for 2023 rose by 130%, natural gas by 57% and crude oil by about 40% Inflation in the countries of our region accelerated in H1 2022, The increased in energy commo
Slide 49: Governance
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Slide 50: 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 51: Committed to solid corporate governance
Committed to solid corporate governance Independent directors on the Supervisory Board (9 directors total) KGHM’s Corporate Governance is guided by international standards and follows best practices: Independent Directors Employee Elected ▪ All members of KGHM’s Supervisory Board are appointed by 3
Slide 52: 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 8% Polish State Treasury 63,589,900 31.79% 31.79% 11% Nationale-Nederlanden OFE 10,104,354 5.
Slide 53: Information on the impact of the war in Ukraine on the Company's and Group's operations
Information on the impact of the war in Ukraine on the Company’s and Group’s operations ▪ The geopolitical situation associated with the direct aggression of Russia on Ukraine and the implemented system of sanctions does not have a substantial impact on the operations of the Group, while the risk of
Slide 54: Upcoming events for investors
Upcoming events for investors 2022 Date Upcoming events 4 October Erste - The Finest CEElection Investor Conference 2022 16 November Consolidated report for the 3rd quarter of 2022 54 For the most recent information please visit our Investor calendar at https://kghm.com/en/investors/investor-handboo
Slide 55: 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
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