Kghm Polska Miedz S.a. · GPW:KGH
Kghm Polska Miedz — Investor Day (November 2023)
73 slides from Kghm Polska Miedz's investor day presentation, November 2023
Slide 1: Capital Markets Day
Capital Markets Day November 2023 1
Slide 2: KGHM among the biggest copper and silver producers
KGHM among the biggest copper and silver producers Mined Copper production 20221) Silver production 20222) 1.55 54 1.53 43 1.13 30 1.06 24 0.90 22 0.86 22 0.78 21 0.54 19 0.52 19 0.47 [mn tonnes] 14 [moz] Source: 1) KITCO, March 2023 2) World Silver Survey, April 2023 6
Slide 3: 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 Eighth Cu Second Ag largest mining largest copper silver producer producer Source: Kitco 2023, World Silver Survey 2023 Other KGHM Group pro
Slide 4: 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. 36 years LOM Capacity of ca. 120 kt electrolytic Cu/year 1) ▪ Copper in extracted ore i
Slide 5: Key assets in the Americas
Key assets in the Americas Existing operations and growth potential from projects Producing assets Potential growth projects Sierra Gorda (55% stake), Chile Sierra Gorda Oxide, Chile 26 years LOM 2022 production stats: ~ 11 years LOM ▪ Open-pit mine ▪ Cu production ▪ The project aims at processing t
Slide 6: Sierra Gorda mine – KGHM's main asset in the Americas
Sierra Gorda mine – KGHM’s main asset in the Americas Location Region II, Chile 55% KGHM INTERNATIONAL LTD, Ownership 45% South32 Type of mine open pit Main ore type copper ore Associated metals molybdenum, gold copper concentrate, molybdenum End product concentrate 165.1 kt of copper in concentrate
Slide 7: Robinson mine
Robinson mine Location Nevada, USA Ownership 100% KGHM INTERNATIONAL LTD. Type of mine open pit Main ore type copper ore Associated metals gold and molybdenum Type of orebody porphyry / skarn copper and gold concentrate, End product molybdenum concentrate Payable 46.8 kt production in 2022 Life of m
Slide 8: Development projects
Development projects Victoria, Ajax and Sierra Gorda Oxide Victoria Ajax Mine type open pit Mine type underground Ownership 80% KGHM, 20% Abacus Ownership 100% KGHM Main product copper concentrate Metals copper, gold Main product copper-nickel ore Metals copper, nickel, gold, Life of mine approx. 19
Slide 9: Sierra Gorda Oxide project
Sierra Gorda Oxide project Current plan heap oxide ore leaching stockpile Oxide ore processing on a permanent heap Facility type and copper production in a SX-EW plant Copper cathodes Main product/ Annual production: 30 kt/year. copper production Total production during LOM estimated at 298 SX-EW th
Slide 10: Victoria project
Victoria project Location Sudbury, Ontario, Canada Ownership 100% KGHM INTERNATIONAL LTD. Type of mine underground Main ore type copper-nickel ore gold, silver, cobalt, platinum Associated metals and palladium End product copper, nickel and precious metals ore This project is located in the Canadian
Slide 11: 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 related pro
Slide 12: 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 Employee Elected ▪ All members of KGHM’s Supervisory Board are appointed by 3
Slide 13: 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 9% Polish State Treasury 63,589,900 31.79% 31.79% 7% Allianz OFE 11,961,453 5.98% 5.98% 7% Na
Slide 14: Other major metals: silver, TPMs, molybdenum
Other major metals: silver, TPMs, molybdenum Payable copper production Silver production [kt] [t] ▪ Copper production by KGHM Polska +8% 9M/9M Miedź S.A. similar to prior year -5% 9M/9M 1 022 1 100 ▪ Copper production lower 9M/9M: 557 527 − in KGHM INTERNATIONAL LTD. 47 due to lower production by th
Slide 15: Key financial indicators of the KGHM Group
Key financial indicators of the KGHM Group 9M 2023 Group adjusted EBITDA2) Group revenues [mn PLN] [mn PLN] -0.2% 9M/9M -40% 9M/9M 25 696 25 648 4 235 Adjusted EBITDA of the KGHM Group Lower adjusted EBITDA 7 770 7 891 compared to the first nine 7 075 months of 2022, mainly due to a less favourable
Slide 16: Net debt of the KGHM Group
Net debt of the KGHM Group As at the end of Q2 2023 Main factors affecting net debt in 2023 Net debt / adjusted EBITDA Increases in debt 1,2 0,8 0,9 0,9 ▪ Cash expenditures on property, plant and equipment 0,7 (PLN 3 200 mn) 30-09-2022 31-12-2022 31-03-2023 30-06-2023 30-09-2023 ▪ The minerals extra
Slide 17: Summation of 9M 2023 in the KGHM Group
Summation of 9M 2023 in the KGHM Group Main macroeconomic factors and aspects of the Group compared to 9M 2022 Macroeconomic environment1) Operating results Indicators -5% -8% +1.3% Copper price Copper price Increase in extraction of ore, dry weight in KGHM Polska Miedź S.A. +19% in USD/t in PLN/t H
Slide 18: Challenges facing the KGHM Group
Challenges facing the KGHM Group Strategy goals - achieving by 2030 the key success measures among the five pillars Decarbonization Program - energy projects - achievement of climate goals Facing new regulatory challenges - including ESG Strengthening the Company's resilience in the face of current
Slide 19: Risk management in KGHM Polska Miedź S.A., macroeconomic environment
Risk management in KGHM Polska Miedź S.A., macroeconomic environment
Slide 20: The global economy is struggling with low growth and high levels of debt
The global economy is struggling with low growth and high levels of debt The average debt level of the G7 countries With record high debt service levels. remains high USA Germany Japan China Poland 10 8 6 4 2 0 -2 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 This i
Slide 21: The period of monetary support has ended, the spectre of recession has not gone away
The period of monetary support has ended, the spectre of recession has not gone away, and the fight against inflation continues According to models tracking economic data, the Since 2022, the reduction of Central Bank balance sheets probability of a recession remains at an elevated level has been un
Slide 22: Managerial sentiment in the industry remained low in Q3 2023
Managerial sentiment in the industry remained low in Q3 2023 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 Jul-23 Aug-23 Sep-23 Oct-23 USA (ISM) 60.0 59.6 60.7 60.4 60.8 58.6 57.
Slide 23: In China, the problems of the construction sector are spilling over
In China, the problems of the construction sector are spilling over into other sectors of the economy China's PMI is slightly below the 3Y average, but it is Macroeconomic data from China has been surprising still better than those of developed countries investors negatively since the middle of the
Slide 24: IMF Economic Growth Forecasts for October
IMF Economic Growth Forecasts for October 2023 On 7 November the IMF published a GDP growth forecast for the eurozone in 2025 of 1.8% y/y On 7 November the IMF raised the forecast for 2023-24 by +0.4 p.p.; giving justification as being the better result of Q3 and planned economic stimulus packets. 2
Slide 25: Metal prices
Metal prices Copper Prices Precious Metals Prices Price (USD/t) Annual av. or YTD (USD/t) Silver (USD/oz) Annual av. silver (USD/oz) Price (PLN/t) Annual av. or YTD (PLN/t) 55 000 35 Gold (USD/oz) Annual av. gold (USD/oz) 10 500 50 000 2 000 9 500 45 000 30 1 800 8 500 40 000 25 35 000 1 600 7 500 3
Slide 26: Copper price in USD and CNY
Copper price in USD and CNY BASE METAL PRECIOUS METAL ENERGY 20% 10% 0% -10% -20% -30% -40% *Market balance for 2023 is a forecast, while the price for 2023 is the YTD average as at 16 November -50% -60% 26 Source: Refinitiv, KGHM Polska Miedź S.A.
Slide 27: Production and use of copper
Production and use of copper 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 World Mine Production 16 687 18 185 18 422 19 153 20 395 20 067 20 597 20 612 20 680 21 113 21 946 World Mine Capacity 20 056 20 839 21 626 22 400 23 530 24 074 24 161 24 265 24 830 26 042 26 922 Mine Capacity Utiliz
Slide 28: Mined and refined copper production
Mined and refined copper production Mined production share by region Refined production share by region 28 Source: International Copper Study Group
Slide 29: Copper production in various countries
Copper production in various countries Copper mine production Refined copper production 29 Source: International Copper Study Group
Slide 30: Production growth burdened with uncertainty
Production growth burdened with uncertainty 30 Source: Wood Mackenzie; BMO Capital Markets
Slide 31: Production disruptions
Production disruptions 31 Source: Wood Mackenzie
Slide 32: Geographical evolution of copper consumption
Geographical evolution of copper consumption Largest consumers of copper European Union Japan India Mexico Taiwan 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 32 Source: International Copper Study Group
Slide 33: Uses of copper
Uses of copper Main copper product groups (2023e) Global consumption by end use (2023e) Tube 12% Flat rolled products Building & Equipment (plate, sheet & strip) Construction 26% 32% 11% Rods, bars & sections; 9% Wire 64% Industrial 12% Foil 4% Infrastructure 17% Transport 13% Source: ICSG, KGHM Pol
Slide 34: China's consumption is growing solidly despite slower economic growth
China's consumption is growing solidly despite slower economic growth China's apparent demand China, copper demand by sector (as of August 23) Apparent demand is copper production in China + (imports – exports to/from China) +/- change in stocks in China 34 Source: BofA, KGHM Polska Miedź S.A.
Slide 35: Energy Transition Drives Cu Demand in China
Energy Transition Drives Cu Demand in China Wind/Solar/EV wzrosły o >100% od 2029 35 Source: Morgan Stanley Research; Bloomberg
Slide 36: Production costs are rising across the industry
Production costs are rising across the industry Commodity Spot Prices vs Marginal Cost of Evolution of the copper cost curve Production *marginal cost (2023), as at end-Q3 2023, C1 cost Copper to Aluminium Price Ratio Cu/Al. Average +1 STDEV -1 STDEV 4,5 3,5 2,5 1,5 0,5 -0,5Jan-96 Jan-99 Jan-02 Jan-
Slide 37: Copper stocks in the global economy
Copper stocks in the global economy 37 Source: International Copper Study Group
Slide 38: Refined copper market balance forecasts
Refined copper market balance forecasts Current Predictions vs October 2022 Forecasts by institutions (thousand tonnes) Median forecast (kt) – last available data Median forecast from 2023 2024 2025 2026 2027 31 Oct 2022 267 411 -122 - - 48 166 104 -48 -140 112 355 -459 - - 173 -54 325 251 -158 -147
Slide 39: Copper price forecasts (USD/t)
Copper price forecasts (USD/t) Lower range Lower range Median 39 Source: KGHM Polska Miedź S.A., market reports
Slide 40: Energy transition
High prices Energy expected transition Demand Destruction Large deficit Recycling / scrap metal Increase in the expected operating costs in 2030 of the metals Substitution industry Technological development Declining copper No new mining content in projects deposits 40
Slide 41: Demand forecasts vs. production forecasts
Demand forecasts vs. production forecasts In order to cover the anticipated demand for copper, it will be necessary to launch new, currently planned projects and to increase the acquisition of scrap metal Mt 35 Probable Projects Mined production max The deficit on the copper 30 forecast market in 20
Slide 42: The lead time and CAPEX overruns make new mines unattractive
The lead time and the fact that the target CAPEX is frequently exceeded make the construction of new mines unattractive Time required to start a mine, in years Average CAPEX and its overruns in USD million Uruchomienie Commisioning Budowa Construction Nabywanie Acquisitioni and pozwolenia permitting
Slide 43: Renewable plans are not a new concept
Renewable plans are not a new concept ▪ In the U.S., there have been ambitious plans to use renewable energy sources for several decades ▪ History shows that their implementation does not always go according to plan ▪ There has been a significant acceleration in recent years, but will there be enoug
Slide 44: Copper market deficit vs. technological potential
Copper market deficit vs. technological potential 44 Source: McKinsey
Slide 45: Silver
Silver Investors' interest in the silver market has declined in USD Silver Price Predictions per Ounce recent years Ilość srebra Silver w (mn in ETFs funduszach typu ETF (mln oz; l.oś) oz; left axis) Cena Silversrebra (USD/troz; price (USD/oz p.oś)axis) t; right 1000 60 50 800 40 600 30 400 20 200 1
Slide 46: Derivatives market
Commodity market – physical and derivatives The commodity market of the top 8 commodities was value at over $3 trillion in 2022. The derivatives market is nearly 17 times larger. Silver has a relatively large derivatives market, nearly 150 times larger than physical silver. Physical market Al Deriva
Slide 47: Silver
Silver Geographical structure of silver production in 2022 72% percent of silver is mined as a by-product Mexico Main product Other 24,0% 25,1% 28% Russia 4,8% Bolivia 4,8% China 13,1% Poland 4,9% Australia By-product 5,2% Peru 72% Chile 12,0% 6,4% Directions of demand for silver Global PV Developme
Slide 48: Silver
Silver Silver Mining Production Forecast vs Execution (Million Silver market balance (million ounces) vs average annual Ounces) price of the metal 950 Market balance Average annual silver price (USD per ounce) Forecast Execution 100 26 50 24 900 0 22 850 -50 20 -100 18 800 -150 16 -200 14 750 -250 1
Slide 49: Silver – in the green revolution
Silver – in the green revolution • At least 30% of industrial silver consumption is related to the energy transition. • PV consumes the most silver, followed by EV, where consumption increases, wind farms, nuclear power plants, catalytic converters and the chemical industry. • EV to ICE contains rou
Slide 50: Market risk management
Market risk management Hedged position on the copper, silver and currency markets (as at 30 September 2023) Copper Silver At the end of Q3 2023 the Parent Entity recorded a [kt] [koz] result on derivatives* and hedges in the amount of PLN 279 million: 47,25 1 050 − +PLN 425 mn adjusted revenues from
Slide 51: Controlling in the core business of KGHM Polska Miedź S.A.
Controlling in the core business of KGHM Polska Miedź S.A. 51
Slide 52: Structure of controlling
Structure of controlling GCT Controlling in the core business of KGHM Polska Miedź S.A. Strategic 1 controlling STRATEGY Strategic Operationalisation planning Core Business Operational 2 controlling Analysis and Operational corrective actions planning Ore Ore Smelting and Exsploration extraction pro
Slide 53: Core business economic model
Core business economic model Controlling in the core business of KGHM Polska Miedź S.A. ▪ KGHM applies an economic model which estimates the long-term effectiveness of the Core Business’ operations up to the exhaustion of the deposits. ▪ The main goal of the Model is to enable the financial quantifi
Slide 54: Core business characteristics
Core business characteristics Controlling in the core business of KGHM Polska Miedź S.A. OPPORTUNITIES THREATS Copper is a critical Extraction Long-term outlook costs EU raw material Ore Global reach and extraction Limited impact on geographic production volumes premiums Recovery and grade Access to
Slide 55: Key areas of the core business for the financial controller
Key areas of the core business for the financial controller Controlling in the core business of KGHM Polska Miedź S.A. Materials Management of Purchased planning inventories materials Subsidiaries supporting the core business Core Business Management of Commerce and the supply logistics chain Ore Or
Slide 56: Core business – geographic context
Core business – geographic context Controlling in the core business of KGHM Polska Miedź S.A. EXTRACTION PYROMETALLURGY Data: Wood Mackenzie REFINING 56
Slide 57: Energy Transformation in KGHM
Energy Transformation in KGHM
Slide 58: Project to build a small modular reactor in KGHM
PROJECT TO BUILD A SMALL MODULAR REACTOR IN KGHM KGHM, as one of the largest industrial One of the main projects to attain this goal is In order to select the optimum site consumers of electricity in Poland, adopted an the construction of a small modular for the power plant, from the point of view o
Slide 59: Selection of an appropriate site
SELECTION OF AN APPROPRIATE SITE 1 The selection of a site for the nuclear power plant is a multi-layered process and involves the detailed analysis of numerous factors, among others: Environmental impact, natural conditions, the way in which terrain will be used and the level of social acceptance;
Slide 60: Investment process – work in progress and planned
INVESTMENT PROCESS – WORK IN PROGRESS AND PLANNED KGHM applied to the President of the State Atomic Agency for the issuance of a so-called General Opinion, which assesses the safety aspects of one of the considered projects – a 6-module NuScale Power plant with total capacity of 462 MWe; KGHM also a
Slide 61: Investment process – planned work
INVESTMENT PROCESS – PLANNED WORK Environmental research Environmental research is aimed at confirming that the siting data will be suitable for the nuclear power plant from the environmental point of view Research into the environmental condition and inventorisation of bio resources will last 6 a m
Slide 62: Small modular reactors
SMALL MODULAR REACTORS SMR projects have a variety of advantages compared to large nuclear reactors: passive safety systems, guaranteeing the safe shutdown and cooling of the reactor in an emergency; the small area occupied by the power plant; the small zone of restricted use (ending at „the fence”)
Slide 63: How does KGHM intend to achieve its strategic energy transformation goals?
How does KGHM intend to achieve its strategic energy transformation goals? 200+ MW ~250 MW in advanced M&A under development Development 47 MW of in-house Portfolio of PV RES projects projects (own terrain) Purchase acquired from of projects PST from the Development market of in-house M&A RES projec
Slide 64: Energy Development Program, including RES | major events in Q3 2023
Energy Development Program, including RES| major events in Q3 2023 Development of solar energy ▪ Administrative proceedings commenced, including for a building permit and an announcement of intent to build a cable network for the HMG I-III1) photovoltaic power plants complex at the Głogów Copper Sme
Slide 65: Energy Development Program, including RES | major events in Q3 2023
Energy Development Program, including RES| major events in Q3 2023 Development of nuclear energy ▪ KGHM continued work on the SMR project. ▪ Jointly with the company Przedsiębiorstwo Energoprojekt-Katowice, work continued on analysing specific sites for the SMR installation under the second stage of
Slide 66: Development of the Resource Base in Poland – KGHM's approach
Development of the Resource Base in Poland – KGHM’s approach
Slide 67: Mine project development stages
Mine project development stages EXSPLORATION • Mining companies that want to expand or at least maintain a stable level of output must continually strive to replace and increase their resource base. MINE CONSTRUCTION • Exploration is one of the basic (most important) stages in mine investment, AND A
Slide 68: Development Units of KGHM
From exploration to mining I. Preparation of geological projects and mining concessions. II. Submission of an application with the appropriate body (Ministry of Climate and the Environment) for the granting of exploration concessions to search for minerals in a given area. Development Units of KGHM
Slide 69: Development of the global resource base
Development of the global resource base Every mining company recognises the need to engage in exploration to ensure a resource base. The world’s largest mining companies, such as Codelco, Glencore, BHP Billiton, Rio Tinto, Freeport McMoran, Anglo American etc., including KGHM, strive to development
Slide 70: Existing concessions held by KGHM
Existing concessions held by KGHM KGHM Polska Miedź S.A. currently holds 9 exploration concessions: • 7 „copper concessions”: Retków –Ścinawa, Głogów, Radwanice, Synklina Grodziecka, Konrad; Bytom Odrzański, Kulów Luboszyce, • 2 „non-copper concessions”: the hydrocarbon concession „Nowe Miasteczko”;
Slide 71: Post-drilling activities
Post-drilling activities Macroscopic profiling of A1d Drilled cores, as the basic and most important evidence of the lower anhydrite geological work conducted, are subjected to rigorous geological cores, „Puck” testing and description. The success of a mine project could concession. depend on the ac
Slide 72: Central Drill Cores Warehouse
Central Drill Cores Warehouse Drill cores are an extremely important source of data for geological research, for the documentation of a deposit, as well as for technical research, related to the development of existing and future mine infrastructure. Because of this, in recent years KGHM has been tr
Slide 73: Investor Relations Department
Investor Relations Department kghm.com/en/investors ir@kghm.com esg@kghm.com T +48 76 74 78 280 F +48 76 74 78 205