142 thousand tonnes of payable copper were produced by KGHM Polska Mied S.A. in the first quarter. This is the best quarterly result in the last 3 years, while production increased by 28 percent as compared to the first quarter of 2018. In turn, PLN 1 454 million is the highest quarterly EBITDA earned by the Group since the start of 2018. The Group exceeded its production plans for the most important commodities.
In the first quarter of 2019 electrolytic copper production by the KGHM Group increased by 21 percent to 173 thousand tonnes. The Group also achieved excellent results in terms of the production of metallic silver and of other precious metals. It also recorded a substantial increase in sales revenues. The increase in revenues by PLN 1.2 billion from all of the Group’s segments was mainly due to a higher volume of sales of copper and silver as well as a more favourable exchange rate.
The greatest impact on the Group’s net profit was mainly due to an improvement in the operating result and exchange differences by PLN 113 million.
“The best EBITDA by the Group in a year, the best production results by KGHM Polska Mied? S.A. in 3 years, and finally the higher net profit are the result of the consistent implementation of the Strategy of KGHM which was adopted last year. We have now seen another quarter in which the positive effects of stabilised production and improved profitability were evident,” says Marcin Chludzi?ski, President of the Management Board of KGHM Polska Mied? S.A. “We are happy with the drop in the C1 cost. New projects, including the introduction of the procurement policy, allow us to reduce our costs.”
The higher electrolytic copper production by KGHM Polska Mied? S.A. was due to the higher availability of equipment. In 2018 the Company had been preparing for a maintenance shutdown by the G?ogów II smelter and had to build up anode copper inventories to ensure the ability to produce electrolytic copper during the planned break.
Production of electrolytic copper and metallic silver was higher than in the comparable prior-year period, thanks to the start-up of the copper concentrate roasting installation as well as to the processing of stored, own concentrate inventories. This new investment increased the availability of our metallurgical installations. The lower extraction of ore meanwhile was the result of the tremor which occurred on 29 January in the Rudna mine. Production of copper in concentrate was slightly lower than in the first 3 months of 2018.
In the first quarter of 2019, Sierra Gorda S.C.M. produced 26.8 thousand tonnes of copper and 5.5 million pounds of molybdenum, which compared to the same period in 2018 means higher copper production by 23 percent and lower molybdenum production by 24 percent. The higher production of payable copper production by Sierra Gorda was due to higher extraction and ore processing.
„Sierra Gorda exceeded its production targets. Our efforts at optimising the operation, mainly management-related changes, are achieving results: C1 cost has come down and production is up. We have excellent relations with our Japanese partners and with the Chilean authorities. All of this allows us to look with optimism on our investment in Sierra Gorda,” says Pawe? Gruza, Vice President of the Management Board of KGHM for International Assets.
The decrease in molybdenum production by 1.7 million pounds was due to the nature of the deposit and to the planned extraction sequence. This assumes the mining of a zone with a lower molybdenum grade compared to the ore extracted in prior years. Consequently, despite the increase in the amount of ore processed and the increase in molybdenum recovery, production of payable molybdenum was lower. The Company also decreased the unit cost of copper production (C1). The drop in C1 was achieved despite the limitations in extracting molybdenum, and at the same time lower revenues from the sale of associated metals.
ADVANCEMENT OF STRATEGIC PROJECTS
In the first quarter of 2019 implemention commenced on the Strategy of KGHM Polska Mied? S.A. for the years 2019-2023. The Company is advancing its target programs and strategic projects in individual areas of the Strategy.
In terms of improving the efficiency of the core production lines in the Polish divisions of KGHM, work continues on advancing projects aimed at automating production in the mining divisions. The Company is advancing tasks aimed at reducing energy use, in accordance with the Energy Management system in place in the Company. Work was also completed on basic tasks under projects related to adapting technical infrastructure to the changes in metallurgical technology at the G?ogów I Copper Smelter and Refinery.
At the Legnica Copper Smelter and Refinery, work is approaching completion on the RCR (copper scrap processing) furnace, casting machinery and the dedusting installation. Functionality tests were carried out on individual elements of the RCR furnace, which are planned for completion in May 2019, followed by the start-up of the RCR furnace in the second quarter of 2019. Moreover, in both of these metallurgical facilities a program is being advanced to adapt the technological installations of KGHM to the requirements of BAT Conclusions for the nonferrous metals industry and to restrict emissions of arsenic (BATAs).
Work continues on building the Southern Quarter of the of the ?elazny Most Tailings Storage Facility as well as the GG-1 shaft. As respects the Deposit Access Program, preparatory work continues to build the GG-2 shaft.
At Sierra Gorda, work continues aimed at optimising and increasing the processing of the sulphide ore.
In terms of finance, in the first quarter of 2019 the financial condition of domestic subsidiaries was subjected to detailed analysis as well as the effectiveness of the trade finance tools. KGHM is endeavouring to improve the Company’s current liquidity and to hedge against transactional risks. A model was prepared which describes the impact of factoring of receivables and factoring of payables on the cash conversion cycle ratio and debt ratios. The receivables factoring program is being expanded in the Company and debt factoring has been introduced. KGHM has also announced the intention to issue corporate bonds of up to PLN 2 billion in 2019.