The 7th Integrated Report of the KGHM Polska Miedź S.A. Group covers non-financial and financial results of KGHM Polska Miedź S.A. and the KGHM Polska Miedź S.A. Group for 2019 (reporting period: 1 January – 31 December 2019) [GRI 102-50].
In line with our commitment to publish an annual integrated report [GRI 102-52], we are presenting the Company’s environmental, economic and social impact. The previous integrated report for 2018 was published in 2019 [GRI 102-51]. No revisions have been made to it [GRI 102-48]. The report has been prepared using selected Global Reporting Initiative (GRI) indicators in the Standards version.
The KGHM Polska Miedź S.A. Group is a global and innovative organisation, which conducts technologically advanced exploration-mining and metallurgical activities. KGHM Polska Miedź S.A. is present on four continents: in Europe, South America, North America and Asia, and employs more than 34 thousand people worldwide.
In 2019, KGHM Polska Miedź S.A. earned most of its revenues from domestic sales, which amounted to 25% of total revenues. Amongst KGHM’s other customers, the largest came from China (14%), Germany (14%), the United Kingdom (12%) and Czechia (8%).
Dear Stakeholders,Increased payable copper production (+11%), record-break- ing production of silver (+18%), Group revenue growth by 11% and EBITDA growth by 5%, combined with the launch of new projects in our divisions – this is how we close the year 2019.
I am presenting our results to you with great satisfaction, which is additionally enhanced by the fact that the last year was not an easy one. Drops in copper prices (even by 5 per cent in December 2019 compared to 2018), the US–China trade war, concerns about Brexit – all this made us work in difficult macroeconomic conditions. However, we perceive difficulties as challenges being a test of our management skills and effectiveness.
Increased payable copper production (+11%), record- breaking production of silver (+18%), Group revenue growth
by 11% and EBITDA growth by 5%, combined with the launch of new projects in our divisions – this is how we close the year 2019.
The consistency with which we pursued the strategy adopt- ed in December 2018 was crucial for the execution of our plans. When preparing this document, we gave consideration to four pillars of our activity: Elasticity (flexibility), Efficiency, E-industry and Ecology. They form the basis of the modern mineral resource industry. Efficient management, appro- priate hierarchy of objectives corresponding to the specific nature of the market and business trends have allowed us to make investments and improve production parameters. We have achieved extremely ambitious assumptions that have a positive effect on the stability and development of the KGHM Group. We are working to gain a strong position of the world leader in the mineral resource industry.
KGHM Polska Miedź is a company of key importance to the Polish economy. Our resources ensure the mainte- nance of our current level of mining in Poland for the next 40 years and the concessions we are applying for will extend the period even further. We perform our mining and ore processing activities in a sustainable and rational manner with consideration given to global trends. Europe strives for climate neutrality and the raw material that is a key one in pursuit of the idea is copper. This metal, produced by KGHM, develops innovative sectors of the economy, including solutions for energy efficiency improvement.
We optimised our financing structure in 2019. We increased the use of factoring to secure financial liquidity and shifted to long-term financing, e.g. by launching a bond issue pro- gramme. The interest in the June issue proved that our assets are an attractive offering.
Copper is a raw material that is necessary for climate tran- sition. We are committed to devising and implementing solutions to mitigate our environmental impact. Last year, we intensified our works on projects related to energy from renewable sources, developed the Circular Economy and engaged in the development of Electromobility.
Efficient management, appropriate hierarchy of objectives corresponding to the specific nature of the market and business trends have allowed us to make
investments and improve production parameters. We have achieved extremely ambitious assumptions that have a positive effect on the stability and development of the KGHM Group.
We are working on a strong position of the world leader in the mineral resource industry.
In terms of investments in the Copper Basin, 2019 was exceptionally intensive. Following the adopted schedule, we executed individual stages of the construction project of the Southern Quarter of the Tailings Storage Facility as well as the tailings segregation and thickening station using our own technologies and materials.
We continued the Programme of Providing Access to Deposit, sinking of the shaft GG1 by which the Surface-based Central Air Conditioning System is being constructed, and we imple- mented mining projects, e.g. by advancing stage 2 of explo- ration and development work in the Retków–Ścinawa region.
In-depth analyses and consistent management focused on rational utilisation of resources, not only mineral but also infrastructural and technological ones, involve specific steps. We had struggled the decreasing efficiency of the Lubin Mine, which is the oldest in KGHM, for many years. The Shaft L-VI, which was opened in October 2019, is a new chapter and a chance for this Division to optimise production processes with the simultaneous maintenance of the highest standards of our employees’ safety.
We invested also in metallurgy. We successfully put a cop- per concentrate roasting installation into operation and included it in the Głogów Copper Smelter and Refinery’s production and, in June 2019, we opened the largest proj- ect in the history of the Legnica Copper Smelter and Refin- ery. The launched revolving casting-refining (RCR) furnace is the only furnace of the kind in Poland dedicated pri- marily to the processing of scrap. The installation with the capacity of 300 tonnes will contribute to enhancing the present efficiency of the Company and increasing copper production. The RCR furnace complies also with the high- est environmental protection standards the observance of which is ensured, among others, by a modern process gas treatment installation.
We have optimised the portfolio of international assets by concentrating on key projects. In the Sierra Gorda project, which used to generate losses, we have con- siderably improved operating results. As a result of increased ore extraction and processing, Sierra Gorda closed 2019 with a 4 per cent higher payable copper pro- duction with respect to the value assumed in the budget and a 12 per cent higher one than that of 2018.
KGHM’s heart beats in Lower Silesia and it goes
to great lengths to develop good neighbourly relations. Last year, we supported local municipalities and their residents not only with tax proceeds but also by establishing health programmes, e.g. in Głogów and Legnica.
KGHM’s heart beats in Lower Silesia and it goes to great lengths to develop good neighbourly relations. Last year, we supported local municipalities and their residents not only with tax proceeds but also by establishing health programmes, e.g. in Głogów and Legnica. We initiated programmes to aid families and sustainable development actions.
KGHM cares particularly for environmental issues and employee safety. We implement a Programme to Improve Occupational Health and Safety, we reach for out-of-the-box solutions and innovative technologies, we continue the dia- logue with representatives of trade unions. I would like to express my appreciation to our employees for their efforts and hard work for the development of the Company and the KGHM Group. The engagement of all our employees moulds us into one team which competes for first prizes in interna- tional competitions.
I would also like to thank our shareholders and clients for the trust you place in us. I assure the local communities of our gratitude for our good neighbourly relations and joint initia- tives for the development of the regions where we operate together.
We expect 2020 to be a difficult year for the industry. The challenges related to customs wars between global play- ers and high rises in energy prices were coupled with the coronavirus epidemic, which is already significantly affecting global markets, not only mineral resource ones. Despite a not always friendly macroeconomic environment, we are not going to slow down. We want to not only remain the industry leader but also grow. This will be facilitated by rational yet bold investments.
On behalf of the Management Board of KGHM Polska Miedź S.A., I am presenting you with the Integrated Report of KGHM Polska Miedź S.A. and the KGHM Polska Miedź S.A. Group for 2019
President of the Management Board
KGHM Polska Miedź S.A.
Lubin, 13 May 2020