- +51% Copper price
- -1,0% Weaker USD vs the PLN
- +22% Silver price
Business summary
- +6,3% Copper production
- +1% Silver production
- +23% C1 cost
- +26% increase in revenues to PLN 29 803 mn
- +56% increase in EBITDA** to PLN 10 327 mn
* Macroeconomic data – average for the period
**Adjusted EBITDA
Macroeconomic environment
Commodities and currencies prices
Copper prices in 2021 recorded a historic record of 10 724 USD/t, with an average price of 9 317 USD/t in 2021. Remaining at the center of attention were the pandemic, the condition of the Chinese economy and the green transformation.
- The average price of copper in 2021 was 51% higher than in the corresponding period of 2020, while the average silver price in 2021 rose by 22% in the same corresponding period.
- The average annual price of molybdenum in 2021 was 82% higher compared to the average recorded in the prior year.
-
The average price of copper in PLN was the highest in history and amounted to over PLN 36 thousand, or 50% higher than in 2020, with a slight strengthening of the PLN to the USD (by approx. 1%).
Source: Thomson Reuters, KGHM Polska Miedź S.A.
Precious metals prices in 2021
In 2021 after an unsuccessful attempt on the level of 30 USD/oz, the price of silver fell and remained below 25 USD/oz
In 2021 the average silver price exceeded 25 usd/oz, while gold remained around 1800USD/oz
Source: Bloomberg, KGHM Polska Miedź
The gold-to-silver ratio returned to its multi-year average of 79
Source: Bloomberg, KGHM Polska Miedź
- The average gold price amounted to1 799 USD/oz and was more than 1.6% higher than the average price in the prior year.
- Following a turbulent 2020, the relationship between gold and silver prices returned to a long-term balance.
- Contrary to historic relationships, the price of silver (and gold as well) did not react significantly to the increase in expectations and to the global inflationary dynamics. Instead, the impact of fears about the sustainability of growth and a change in the monetary policy regme was evident. The continuation or record-low real interest rates globally and strengthening of the USD reduced investor interest in precious metals.
In 2021 the Energy commodities index rose by 53%, and industrial metals by 28%
In 2021 movements on the shanghai exchanges varied considerably from seasonal models of prior years
Source: Bloomberg, KGHM Polska Miedź
-
Low copper inventories on the Chinese market indicate stronger demand for physical metal than the model of the last 5 years would suggest.
-
The Chinese State Reserve Bureau (SRB) decided to intervene to keep prices from rising by releasing stored material, which had previously only occurred very infrequently.
-
In Chile and Peru there were political changes which could be consequential for copper mining (taxes) and the investment climate
2021 broght a significant increase in the prices of most commodities, with the upward trend broken only by precious metals
Source: Bloomberg, KGHM Polska Miedź
-
The Bloomberg commodities index reached its highest level in 6 years.
-
The rise in commodities prices was driven by the post-pandemic economic recovery.
-
In Q4 2021 a crisis emerged involving energy commodities. The increase in their prices indicates further price rises in the economy and increases in the Consumer Price Index (CPI) and the Producer Price Index.
Key production indicators of the KGHM Group
- KGHM Polska Miedź: higher production from purchased copper-bearing materials
- Sierra Gorda: higher recovery, higher copper content in ore and higher ore throughput
- KGHM INTERNATIONAL: higher production by the Robinson mine
754
kt
Payable copper production by the KGHM Group higher by
6.3% (y/y)
6.3% (y/y)
* On a 55% basis
Key financial indicators of the KGHM Group
Substantially higher adjusted EBITDA for the KGHM Groupcompared to 2020
Higher adjusted EBITDA compared to 2020 (+PLN 3 704 mn; +56%), of which by segment:
- KGHM Polska Miedź +PLN 1 016 mn – higher copper prices
- Sierra Gorda1 +1 821 mn PLN – mainly higher revenues from copper sales due to higher prices and a higher sales volume
- KGHM INTERNATIONAL +PLN 732 mn – higher copper prices
Higher Group revenues
- Impact of higher metals prices
Higher Group profit for the period
- Improvement in EBITDA and reversal of impairment on loans aided in achieving a profit higher by PLN 4 358 mn(a more than 3.4-times increase) than in 2020.
10,327
mn PLN
Group adjusted EBITDA**
+56% y/y
+56% y/y
*On a 55% basis
** Sum of segments; adjusted EBITDA = profit/loss on sales + depreciation/amortisation adjusted by impairment losses/reversals of impairment losses on non-current assets
The financial situation of the KGHM Group remains stable and safe
of electrolytic copper from own concentrate KGHM Polska Miedź S.A.* [k PLN/t]
* Sum of costs of extraction,floatation and metallurgical processing per cathode, together with support functions and cathode selling costs, adjusted by the value of inventories of half finished products and work in progress, less the value of anode slimes and divided by the volume of electrolytic copper production from own concentrates
of KGHM Polska Miedź S.A. [mn PLN]
** Capital expenditures – excluding costs of borrowing, leasing per IFRS 16 unrelated with an investment project and development work – uncompleted; Other expenditures – acquisition of shares and investment certificates of subsidiaries and associates and loans granted
[net debt / adjusted EBITDA] ***
*** Adjusted EBITDA for 12 months, to the end of the reporting period, excluding EBITDA of the joint venture Sierra Gorda S.C.M
Metals production
KGHM Group
- Higher payable copper production:
- by KGHM Polska Miedź due to higher production from purchased copper-bearing materials
- by KGHM INTERNATIONAL due mainly to higher production by the Robinson mine
- by the Sierra Gorda mine due to higher recovery, higher copper content in ore and higher ore throughput
- Lower production of TPM by KGHM Polska Miedź, the Sudbury Basin and Sierra Gorda
- Lower molybdenum production – by Sierra Gorda and Robinson
- In the International Assets, TPM was lower by 2% compared to the target for 2021.
6.3%
y/y
Payable copper production
* TPM – z ang. Total Precious Metals, suma metali szlachetnych: złota, platyny i palladu
Production results KGHM Polska Miedź S.A.
Ore extraction results from areas selected for mining
Higher production of electrolytic copper due to higher availability of production lines
Production of copper in concentrate resulting from volume of production and copper content
Higher production due to the higher ore quality
Production results Sierra Gorda*
Higher copper production in 2021 compared to 2020 due to a higher volume of ore processed, higher recovery and higher copper content in mined ore
The volume of precious metals production derived from the content of these metals in mined ore
The decrease in molybdenum production was due to extraction from areas with lower molybdenum content compared to ore mined in the prior year, partially offset by higher metal recovery and the higher volume of ore processed
* On a 55% basis
Production results - KGHM INTERNATIONAL LTD.
Higher production due to an increase by the Robinson mine (mining of higher-grade ore and higher recovery)
Higher silver production by the Sudbury Basin due to higher silver content in ore
Higher gold production by the Robinson mine (higher recovery) did not offset lower TPM production by the Sudbury Basin (lower extraction, lower TPM content in ore
Lower molybdenum production by the Robinson mine due to lower metal content and consequently lower recover
Group sales revenue
Higher revenues by PLN 6 171 million (+26%) versus 2020 due to higher prices for basic products, partially offset by an adjustment of revenues due to derivatives and a less favourable USD/PLN exchange rate
+26%
y/y
Increase in revenues
C1 Unit cost* [USD/lb]
C1 – Group
incl. the minerals extraction tax
The increase in C1 cost in KGHM Polska Miedź by 40% versus 2020 was mainly due to an increase in the minerals extraction tax charge (C1 excluding this tax was higher by only 3%).
The increase in C1 by 5% in KGHM INTERNATIONAL versus 2020 was due to a lower copper sales volume and lower revenues from sales of associated metals.
The decrease in C1 cost in Sierra Gorda by 35% compared to the prior year was due to a higher copper sales volume and higher revenues from sales of associated metals.
*C1 cost – cash cost of concentrate production reflecting the minerals extraction tax, plus administrative expenses and smelter treatment and refining charges (TC/RC), less depreciation/amortisation and the value of by-product premiums, calculated for payable copper in concentrate.
Expenses by nature - KGHM Miedź S.A.
Expenses by nature [mn PLN]
Expenses by nature higher by PLN 6 515 million versus 2020 (of which PLN 5 081 mn due to purchased metal-bearing materials and the minerals extraction tax)
Operating results
KGHM Group
Higher adjusted EBITDA versus 2020 by PLN 3,704 million mainly due to higher metals prices and a higher copper sales volume by Sierra Gorda.
*Sum of segments; adjusted EBITDA = EBITDA (profit/ (loss) on sales + depreciation/amortisation) adjusted by impairment losses on non-current assets
Financial results
KGHM Group
Profit for the period [mn PLN]
Higher KGHM Group profit by PLN 4 358 million (3.4-times) mainly due to a higher net result on sales as well as a higher result on the involvement in joint ventures and in the result on exchange differences, with a higher CIT.
4,358
mn PLN
Net profit
×3.4 y/y
×3.4 y/y
Change in profit/loss for 2021 (in PLN million)
* Excluding adjustments to revenues due to derivatives