Our competitive advantages

Over the recent decades, KGHM Polska Miedź S.A. has become a global mining and processing entity with presence on four continents. On the one hand, such a large scale of operation substantially curtails the risk of disturbance in the continuity and quality of production, while on the other hand, it facilitates the continuous transfer of knowledge and experience between its various units. Its mobility policy enables it to post the most prominent experts in the KGHM Group wherever their expert knowledge is needed to derive business benefits. The key for success is also a diversified and constantly enlarged product portfolio.

During its nearly 60 years of history, KGHM Polska Miedź S.A. has acquired experience, knowledge and skills that have enabled the Company to transform its business from a local miner into an international group acting as a major player in the global market for non-ferrous metals. The skills developed by our employees are and will be used in the future as one of the fundamental assets for winning a competitive edge in the industry and for building a strong position of Poland as an industrial centre. KGHM is aware of the importance of building and maintaining relations with employees, identifying talents and educating the personnel, which is key for further growth of the KGHM Group. The KGHM Group sets itself apart through its commitment to development, safety, health, satisfaction and well-being of its employees. Another unique distinguishing feature of the KGHM Group is that it has a complete, integrated business chain, from the exploration of deposits, opening and mining of deposits, manufacturing of mining machinery and explosives, processing, recycling and sales.

The sustainability focus, involvement in climate action and corporate social responsibility play an important role in the above processes. As a result of its transparent and comprehensive activities (and commitment to stakeholder relations), KGHM is perceived as a responsible company that considers sustainability issues in its operations. Focus on environmental matters is an important and distinctive aspect of KGHM’s activity. The Company has been involved in prevention of climate change and takes active measures to adapt to the goals of the green transition.

KGHM Polska Miedź S.A. currently holds a geographically diversified portfolio of mining projects. It has production facilities in Europe and North and South America. The global copper ore resources controlled by KGHM – more than 40 million tonnes – make it an important player in the global mining sector. KGHM mines and processes precious natural materials. At KGHM’s heart is Europe’s largest copper ore deposit located in southwestern Poland, which is also rich in associated metals such as silver and gold. The company’s portfolio also includes molybdenum, palladium or nickel, which gives KGHM a strong position among global multi mineral miners. Apart from the rich deposits on which KGHM operates, the Company continues its exploration and assessment work in order to develop and expand its resource base. A broad range of exploration work is conducted, i.e. prospecting and geological appraisal, which may be divided into three main areas:

• greenfield exploration – exploring new deposits,
• brownfield exploration – appraisal of resources which have been partially surveyed and documented,
• in-mine and near-mine exploration – appraisal of areas adjacent to the currently worked assets in order to extend the operational period.

KGHM carries out exploration work, prospecting for metals and minerals in numerous locations in Poland and abroad.

The global mining industry is dominated by open-pit mining; underground mining is much rarer. KGHM mines copper ore in three underground mines: Lubin, Rudna and Polkowice-Sieroszowice. Extraction, processing and production of a finished copper product that can be sold is a difficult and complex process. The Company has many years of unique experience and know-how in this area, which is sought after by experts from around the world.

KGHM has unique knowledge associated with the work carried out at great depths, extracting copper ores and other precious metals from Permium polymetallic deposits that are often located below 1,000 meters underground. KGHM carries out research and development projects and other activities (associated among others with: the mechanization of mining operations through the introduction of remotely controlled machines and employee monitoring and protection systems), which are aimed at increasing the efficiency of processes and work safety. In spite of unfavourable natural conditions, the Company operates successfully thanks to innovative, advanced technologies.

Underground mining, although difficult and complex, has many advantages in terms of environmental footprint and climate action. Since most of the work is carried out underground, there is much less impact on the landscape and natural environment. This form of mining operations is also less burdensome on the surroundings and local communities. The processes of reclamation of post-mining areas and the activities required to restore them for people and nature are easier than in the case of open-pit mines, which is very important for KGHM given its commitment to reduce of its impact in the areas where it operates. The Company also takes care of the land around its operating plants, among other things, by reforesting them.

The KGHM Group is present on four continents. Its strength lies in its geographically-diversified mining assets (copper ore mines and mines of accompanying elements and precious metals) in Poland, USA, Chile and Canada and the fact that it its operations are based on metallurgy and refining at plants located in Poland. KGHM is one of the world’s top producers of copper and silver. The deposit mined by KGHM in Poland is one of the largest copper deposits in the world that will allow the company to continue its activity for many years to come. KGHM also produces gold, molybdenum, nickel, rhenium, lead, platinum metals and rock salt. KGHM is famous for its metal production, however it is also worth noting that other products are also produced in its technological processes – they include raw and refined lead, sulphuric acid, nickel sulphate and selenium. KGHM is also the only European producer of rhenium from its own resources. The quality of the copper, silver and KGHM’s other products has been confirmed by certificates awarded by international commodity exchanges.

KGHM Polska Miedź S.A. has not only an extensive product portfolio, but also considerable potential for extending the value chain, which it is gradually tapping into. KGHM cooperates with its Group companies to implement the concept of intensifying the acquisition of copper-bearing scrap to use it as feedstock in KGHM’s metallurgical furnaces, increasing the production of recycled copper. By diversifying backwards, the Company boosts the utilisation of its production capacity and makes a positive contribution to the environment by recovering valuable metals from waste. In 2021 alone, the Legnica Copper Smelter and Refinery processed a total of 91 thousand tonnes of scrap metal, which was recycled in line with the Circular Economy concept. As the Company increases its production, it simultaneously strives to increase the share of highly processed products in the KGHM Group’s total sales. Diversification allows it to increase the flexibility of finished products offered to customers. In addition to the base product of copper cathodes listed on the London Metal Exchange (LME), processed copper products are manufactured in two different processes (Contirod and Upcast). Copper wire rod, oxygen-free copper wire (Cu-OFE) and Cu-OFE wire containing silver find buyers across the world. KGHM continues to develop and implement innovative products that expand its portfolio. Such activities include, for example, low-loss power cables featuring copper and silver alloys, which have been patented by the Company, and their parameters confirmed during tests in the production environment.

Work on innovative solutions is conducted at various business levels, through cooperation with independent entities and consortia, cience establishments and appreciating the creative potential and ingenuity of our own employees. Ultimately, it contributes to, among others, the increased effectiveness of R&D efforts, higher innovation, reduced production costs, stimulation of implementation activity, improved occupational health and safety, effective environmental protection activities and, in the context of sustainable development, introduction of electromobility in KGHM’s plants or prospecting for new deposits. KGHM Group employees are familiar with our specific needs and are able to identify areas and solutions that translate into better performance and greater safety, improved ergonomics of their work and protection of the environment. The KGHM Polska Miedź S.A. Group’s success hinges on the innovation, commitment and collaboration of many thousands of employees representing diverse knowledge and experience. Therefore, within the framework of our activities, we continue to look for various opportunities to manage knowledge and build synergies on cooperation within the KGHM Polska Miedź S.A. Group. An example of an activity supporting employee innovation is the Inventors Market, which in 2021 was introduced in all of the Company’s Divisions from 25 October to 12 November. Its goal is to popularise activities related to inventing and to create the basis for innovation among the employees of KGHM Polska Miedź S.A., at the same time spreading a culture of protecting the Company’s intellectual property.

In accordance with the Company’s Inventing Bylaws, also sought after are solutions of a technical or technical organisational nature as regards technology, but also in the area of workplace environment, in particular improving occupational health and safety. In 2021 68 projects were submitted as part of the Inventors Market.

The KGHM Polska Miedź S.A. Group is comprised of KGHM Polska Miedź S.A. as the Parent Entity and several dozen subsidiaries located on four continents (Europe, North America, South America and Asia). Its strength lies in the complementarity of its operations, which allows for synergy. Group companies conduct various types of activities: exploration and mining, processing, as well as activities supporting the core production business, such as research, design, construction. The activity of the KGHM Group with respect to the exploration for and extraction of copper and nickel ore and precious metals deposits is based on the concessions held by KGHM Polska Miedź S.A. for extraction of deposits in Poland and the legal titles held by companies belonging to the KGHM INTERNATIONAL LTD. Group for the exploration for and extraction of raw materials in the USA, Canada and Chile.

The KGHM Polska Miedź S.A. Group is internally integrated and, in many aspects, comprehensive in its operations. It is comprised of entities with unique and significant competencies, which is required for the broadly-defined operational assurance of the core production line, but also skills that secure future development prospects, continuity of electricity supply or know-how in technology development. These entities provide services which are indispensable to KGHM, such as underground construction services, the performance of mining work (PeBeKaS.A.), manufacture and maintenance of mining machinery and equipment (KGHM ZANAM S.A.), activities supporting the Circular Economy based on logistics, e.g. the supply of copper scrap, production of road aggregate (KGHM Metraco S.A.) and securing a portion of KGHM’s energy needs (“Energetyka” Sp. z o.o.), or rail transport and rolling stock maintenance services (POL-MIEDŹ TRANS Sp. z o.o.). The Group also comprises entities engaged in supporting and complementary activities, such as: comprehensive research and development services (KGHM CUPRUM Sp. z o.o. – Research and Development Centre), various laboratory tests and analyses (CBJ sp. z o.o.), health care services (Miedziowe Centrum Zdrowia S.A., Polska Grupa Uzdrowisk) and even catering services (PHU “Lubinpex” Sp. z o.o.).

Accordingly, the scope of the Group’s operations is very broad and diverse, but at the same time integrated and adapted to market challenges, which offers significant competitive advantage for the whole Group.

One of the pillars of growth of the KGHM Group is to ensure the Group’s financial stability and implement systemic solutions aimed at increasing the Group’s shareholder value. As part of enhancing its competitive advantage in this respect, KGHM Polska Miedź S.A. strives for basing the Group’s financing structure on long-term instruments, shortening the cash conversion cycle and managing the Group’s market and credit risk effectively. These actions improve the liquidity of the Company and the KGHM Group and affect the availability of funds for the Company’s growth, implementation of strategic tasks and increase profits by reducing costs of financing. This allows the Group to plan and implement a number of significant long-term investment projects.

Production in KGHM Polska Miedź S.A. is a fully integrated process, in which the end product of one technological phase is the starting material (half-finished product) used in the next phase. Mining in KGHM Polska Miedź S.A. is performed by three mining Divisions: Lubin, Rudna and Polkowice-Sieroszowice. In the subsequent phase the Concentrators Division prepares concentrate for the smelters and refineries, while the Tailings Division is responsible for managing the tailings generated by the copper ore enrichment process. The organisational structure of KGHM includes metallurgical facilities: the Legnica Copper Smelter and Refinery and the Głogów Copper Smelter and Refinery, as well as the Cedynia copper wire rod plant. Noteworthy, KGHM Polska Miedź S.A. has been rapidly developing and implementing certain elements of the circular economy concept in its operations. To this end, it has been developing recycling in its production process and striving to further improve the utilisation of post-production waste as the so-called secondary sources of raw materials.

In the KGHM Polska Miedź S.A. Group, production and production-related processes are performed in accordance with the following two models.

Integrated geological, mining and metallurgical activities in KGHM Polska Miedź S.A.

The core business of the KGHM INTERNATIONAL LTD. Group of companies is the mined production of metals, such as copper, molybdenum, nickel, gold, platinum and palladium, from both open-pit and underground mines, as well as advancement of mining and exploration projects.

Simplified flowchart of the core business of the KGHM INTERNATIONAL LTD Group

Consistent implementation of the Strategy drawn up in 2018 allowed the KGHM Group to take advantage of the macroeconomic trends to increase the scale of its business and significantly improve its production performance and financial standing. The year 2022 started with the adoption of the “Strategy of the KGHM Polska Miedź S.A. Group to the year 2030 with an outlook to 2040”. In order to reflect changes in the surrounding environment, the four previous strategic development directions (Flexibility, Effectiveness, Environment and E-industry) were updated by adding a fifth element, Energy. As a result, the Group will be  better positioned in the long term to meet the challenges of the modern world, especially in the context of energy transition. Accordingly, KGHM intends to develop activities related to photovoltaic, wind (including offshore) and nuclear power (“small modular reactors”, SMR). On 14 February 2022, in Washington, KGHM signed a contract with NuScale on starting work on the implementation of SMRs in Poland.

In its long-term Strategy, the Group upholds its commitment to running a responsible business and taking a long-term view on the future of the company.