Capital expenditures of KGHM Polska Miedź S.A.

In 2021, capital expenditures on property, plant and equipment amounted to PLN 2,523 million. Together with expenditures incurred on uncompleted development work, capital expenditures amounted to PLN 2,586 million and were higher than in the prior year by 4%.

Structure of expenditures on property, plant and equipment And intangible assets of KGHM Polska Miedź S.A. (in PLN million)

2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Mining 1,747 1,649 +5.9 642 379 399 327
Metallurgy 664 732 (9.3) 345 102 132 85
Other activities 91 32 ×2.8 44 15 17 15
Development work – uncompleted 7 4 +75.0 6 1
Leases per IFRS 16* 77 63 +22.2 9 8 41 19
Total 2,586 2,480 +4.3 1,046 504 589 447
including costs of external financing 119 116 +2.6 29 28 31 31
* reflects PLN 21 million incurred in 2021 due to leases of property, plant and equipment


Investment activities comprised projects related to the replacement of equipment and maintaining mine production, as well as development projects:

Projects related to the replacement of equipment aimed at maintaining production equipment in an undeteriorated condition, represent 33% of total expenditures incurred.

Projects related to maintaining mine production aimed at maintaining mine production on the level set in approved Production Plan (development of infrastructure to match mine advancement) represent 29% of total expenditures incurred.

Development projects aimed at increasing production volume of the core business, implementation of technical and technological activities optimising use of existing infrastructure, maintaining production costs and adaptation of the company’s operations to changes in standards, laws and regulations (confirmatory projects and those related to environmental protection) represent 38% of total expenditures incurred.

Cash expenditures of KGHM INTERNATIONAL LTD. (in USD million)

2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Victoria projekt 38 7 x5.4 16 11 7 4
Sierra Gorda Oxide project 1 1 1
Stripping and other 223 145 +53.8 74 52 55 42
Total 262 153 +71.2 90 63 64 45
Financing for Sierra Gorda S.C.M. – increase in the share capital 52 (100.0)

Cash expenditures of KGHM International LTD. (in PLN million)

2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Victoria project 147 27 x5.4 63 42 27 15
Sierra Gorda Oxide project 4 4 4
Stripping and other 863 566 +52.5 295 203 207 158
Total 1 014 597 +69.8 358 245 238 173
Financing for Sierra Gorda S.C.M. – increase in the share capital 204 (100.0)

Cash expenditures by the segment KGHM INTERNATIONAL LTD. in 2021 amounted to USD 262 million, and were higher by USD 109 million (+71%) compared to 2020. The increase was mainly in respect of the Robinson mine and was mainly due to a higher scope of stripping work to gain access to further areas of the deposit. In 2021, the share of the Robinson mine in total investments by KGHM INTERNATIONAL LTD. amounted to nearly 80%.

Expenditures on the Victoria project amounted to USD 38 million, mainly constructing surface-based infrastructure (such as preparing the foundations of the shaft’s headframe, the waste rock containment pad, preparing a parking area and building a water treatment plant).

In 2021, there was no financing provided to the Sierra Gorda mine (in 2020: USD 52 million).

In 2021, cash expenditures on property, plant and equipment and intangible assets, reflected in the statement of cash flows of Sierra Gorda S.C.M. amounted to USD 284 million, of which the majority, or USD 169 million (60%) were cash expenditures incurred on stripping to gain access to further areas of the deposit, with the rest related to development work and the replacement of property, plant and equipment.

Cash expenditures of Sierra Gorda S.C.M.

Unit 2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Cash expenditures on property, plant and equipment USD mn 284 253 +12.3 73 66 75 70
Cash expenditures on property, plant and
equipment – segment (55% interest)
PLN mn 605 544 +11.2 163 141 154 147

The increase in cash expenditures by 12% compared to 2020 was mainly due to the tailings storage facility and replacement of the machine park. The funds used for these investments came mainly from operating activities, which in 2021 were severaltimes higher than cash expenditures. The Company did not utilise financing in the form of increases in share capital, however in 2021 a portion of the interest (USD 560 million) on an owner loan granted by the shareholders to build the mine was repaid. Moreover, in June 2021 Sierra Gorda S.C.M. repaid the final instalment on the loan granted by Japanese banks.

Best practice

KGHM consistently pursues the tenets laid down in its strategy on financial stability and continues to take actions for the Group’s financing mix to be based on long-term instruments. The flexibility of its financing mix translates into KGHM’s robust results. We track global trends and on that basis we prepare forecasts for our ongoing development. This enables us to achieve our investment targets, such as optimizing production processes,” says Andrzej Kensbok, CFO of KGHM. – Andrzej Kensbok, Wiceprezes KGHM ds. Finansowych.

In June of 2021, KGHM Polska Miedź S.A. entered into an agreement (annex) with the European Investment Bank (EBI) concerning an option to grant an additional loan of PLN 440 million to underwrite the modernization plan for its mines and production processes. This annex is a supplement to the current loan of PLN 900 million signed at the end of 2017, whereby the potential financing under the concluded contract totals PLN 1.34 billion.

The term of availability of the additional loan amount is 22 months. Financial support may be potentially used in 4 instalments at most, with each one of them being at least the equivalent of PLN 110 million. For each of the loan instalments the Company has the option to select the currency: PLN, USD or EUR and fixed or floating interest rate. The other terms of the Agreement will not undergo substantial change and will be consistent with the standard terms and conditions for these types of transactions.

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