9.8 Assets held for sale (disposal group) and liabilities associated with them

in PLN millions, unless otherwise stated

In accordance with the ongoing process of selling international mining assets of the KGHM INTERNATIONAL LTD. Group – the companies S.C.M. Franke and Carlota Copper Company and meeting the criteria set forth in IFRS 5 (i.e. they are available for immediate sale in the current condition, sale is highly probable, and it is expected that it will be concluded in the period of 1 year since the date of classification as held for sale), as at 30 June 2021 the Management Board of the Parent Entity reclassified the assets and liabilities of these companies as held for sale.

Pursuant to IFRS 5. 15, directly before the reclassification, the fair value of assets and liabilities of S.C.M. Franke and Carlota Copper Company were determined and at these amounts they were recognised as held for sale, since they were lower than their carrying amounts. As a result, an impairment loss was recognised on property, plant and equipment in the amount of PLN 18 million in the items: “Cost of sales” in the amount of PLN 14 million and “Other operating costs” in the amount of PLN 4 million. As at 31 December 2021, due to indications of changes in fair value of assets, they were re-measured and an additional impairment loss was recognised in the amount of PLN 28 million, in the items: “Cost of sales” in the amount of PLN 27 million and “Other operating costs” in the amount of PLN 1 million.

With respect to the assets of the companies S.C.M. Franke and Carlota Copper Company, due to the difference between the carrying amount of the assets and their tax base, there arose deductible temporary differences. Because of these differences the Group did not recognise a deferred tax asset, as the criteria set forth in IAS 12.44b were not met.

No significant costs were identified that would necessitate the recognition of provisions as a result of the planned sale of the Franke and Carlota assets.

Activities of the companies S.C.M. Franke and Carlota Copper Company were presented in the segment KGHM INTERNATIONAL LTD.

The financial data of companies classified as held for sale were presented together with continued operations in the consolidated financial statement of profit or loss, in the consolidated statement of cash flows and explanatory notes to these statements because they do not represent a separate major line of business and they are not a part of a bigger plan to dispose of a major line of business (IFRS 5.32 a and b).

On 17 November 2021, the conditional investment agreement for the sale of shares of Interferie S.A. and shares of Interferie Medical SPA Spółka z o.o. was concluded between Fundusz Hotele 01 Sp. z o.o. and Fundusz Hotele 01 Sp. z o.o. S.K.A. and Polski Holding Hotelowy spółka z ograniczoną odpowiedzialnością.

The closing of the transaction depends on the fulfilment of the conditions precedent agreed between the parties of the above-mentioned agreements, i.e. obtaining corporate approvals, obtaining financing by Polski Holding Hotelowy Sp.z o.o. and obtaining approvals from the Polish Development Fund and Pekao S.A. on the change of the ownership structure of Interferie S.A.

In light of the aforementioned fact, in the opinion of the Management Board of the Parent Entity. the criteria set forth in IFRS 5 were met and as at 31 December 2021 the  assets and liabilities of the companies Interferie S.A. and Interferie Medical SPA Spółka z o.o. were reclassified as held for sale. In accordance with IFRS 5.15, immediately prior to reclassification, the carrying amount of the assets and liabilities of these companies were determined, and those amounts were recognised in assets held for sale and related liabilities, as they were lower than their fair value decreased by costs to sell.

With respect to the assets of the companies Interferie S.A. and Interferie Medical SPA Spółka z o.o., due to the difference between the carrying amount of the assets and their tax base, there arose taxable (in case of Interferie S.A.) and deductible (in case of Interferie Medical SPA Spółka z o.o.) temporary differences. Because of these differences the Group did not recognise a deferred tax asset, due to their immateriality.

No significant costs were identified that would necessitate the recognition of provisions in connection with the planned sale.

Activities of the companies Interferie S.A. and Interferie Medical SPA Spółka z o.o. were presented in the segment – Other segments.

The financial data of companies classified as held for sale were presented together with continued operations in the consolidated financial statement of profit or loss, in the consolidated statement of cash flows and explanatory notes to these statements because they do not represent a major line of business and they are not a part of a bigger plan to dispose of a major line of business (IFRS 5.32 a and b).

The shares of these companies were sold on 21 and 28 February 2022. Detailed information on these transactions may be found in Note 12.13 Subsequent events.

In the fourth quarter of 2021, the agreement on sale of the SG Oxide project to Sierra Gorda S.C.M. was concluded between KGHM Polska Miedź S.A. and the other partner in the joint venture Sierra Gorda S.C.M. – Sumitomo (Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation). On 15 December 2021 the sales agreement was signed, with the sale date set at 1 January 2022.  The payment took place at the beginning of March 2022.

Due to the above, the Management Board of the Parent Entity assessed that in accordance with IFRS 5, the criteria of reclassification of the SG Oxide project from the intangible assets not yet available for use (assets related to exploration and evaluation of mineral resources) to non-current assets held for sale were met. The asset was recognised at its carrying amount, i.e. PLN 176 million, which was lower than its fair value decreased by costs to sell.