Economic results of KGHM INTERNATIONAL LTD.

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71.7
kt
Copper production
51.3
koz t
TPM production
2.01
USD/lb
C1 cost
3,125
PLN mn
Revenues
1,340
PLN mn
Adjusted EBITDA

The presented economic and financial results of KGHM INTERNATIONAL LTD. include the results of the Franke and Carlota mines, assets which are in the process of being sold.

Production

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Production of KGHM INTERNATIONAL LTD.

Unit 2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Payable copper, including: kt 71.7 66.9 +7.2 16.3 19.1 20.1 16.2
Robinson mine (USA) kt 53.6 47.4 +13.1 11.6 14.3 15.8 11.9
Franke mine (Chile) kt 10.7 12.5 (14.4) 2.8 2.9 2.4 2.6
Sudbury Basin mines (Canada)* kt 1.9 2.1 (9.5) 0.5 0.4 0.5 0.5
Payable nickel kt 0.5 0.4 +25.0 0.3 0.0 0.1 0.1
Precious metals (TPM), including: koz t 51.3 66.1 (22.4) 11.4 13.6 14.1 12.2
Robinson mine (USA) koz t 38.1 36.1 +5.5 8.9 10.1 10.4 8.7
Sudbury Basin mines (Canada)1 koz t 13.2 29.9 (55.9) 2.5 3.5 3.7 3.5
*McCreedy West mine in the Sudbury Basin

In 2021, copper production in the segment KGHM INTERNATIONAL LTD. amounted to 71.7 thousand tonnes, or an increase by 4.8 thousand tonnes (+7%) compared to 2020. The increase in copper production was in respect of the Robinson mine (+6.2 thousand tonnes; +13%) and was mainly due to the extraction of higher-quality copper ore and higher recovery during ore processing, which was partially offset by a lower volume of ore processed. The increase in TPM production by this mine by 2 thousand troy ounces (+6%) is due to higher gold recovery.

Lower copper content in extracted ore was the main reason for the decrease in payable copper production by the Franke mine by 1.8 thousand tonnes (-14%), while the lower production of copper by the McCreedy West (Sudbury Basin) mine by 0.2 thousand tonnes (-10%) was due to the lower volume of ore extracted. This factor was partially offset by higher recovery of copper in ore. The decrease in precious metals production by 16.7 thousand troy ounces (-56%) by this mine was due to the lower volume of ore extracted and the mining of areas with lower TPM content in ore compared to 2020.

Revenues

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Volume and sales revenue KGHM INTERNATIONAL LTD. (in USD million)

Unit 2021 2020 Zmiana (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Revenues from contracts with
customers*, including:		 USD mn 806 692 +16.5 206 228 175 197
 copper USD mn 600 412 +45.6 149 179 129 143
nickel USD mn 8 6 +33.3 4 1 1 2
TPM – precious metals USD mn 82 115 (28.7) 20 21 18 23
Copper sales volume kt 66.2 71.9 (7.9) 15.1 20.0 13.7 17.4
Nickel sales volume kt 0.5 0.4 +25.0 0.3 0.0 0.1 0.1
TPM sales volume koz t 46.7 71.3 (34.5) 10.1 14.0 10.6 12.0
*reflects processing premium
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Sales revenue KGHM INTERNATIONAL LTD. (in USD million

Unit 2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Revenues from contracts with
customers*, including:		 PLN mn 3,125 2,703 +15.6 833 885 657 750
 copper PLN mn 2,325 1,610 +44.4 604 693 484 544
nickel PLN mn 31 23 +34.8 16 4 3 8
TPM – precious metals PLN mn 318 449 (29.2) 81 82 67 88
*reflects processing premium

The sales revenue of the segment KGHM INTERNATIONAL LTD. in 2021 amounted to USD 806 million, or an increase by USD 114 million (+17%) mainly due to higher copper prices. This factor was partially offset by a lower volume of metals sold and lower revenues due to the sale of services of companies operating under the brand of DMC Mining Services („DMC”).

Revenues from the sale of copper amounted to USD 600 million and were higher by USD 188 million compared to 2020 due to an increase in the achieved sales price by 52% (9,440 USD/t in 2021 compared to 6,209 USD/t in 2020), with a lower volume of copper sold by 5.7 thousand tonnes (-8%).

Revenues from TPM sales decreased by USD 33 million (-29%) due to a lower sales volume (-24.6 thousand troy ounces; -35%), which was not offset by higher precious metals prices.

Revenues from the sales of services by DMC in 2021 amounted to USD 104 million, or a decrease by USD 40 million (-28%) compared to the level achieved in 2020. The decrease was due to the completion on 28 August 2020 of a contract related to a large project carried out in the United Kingdom. As respects projects advanced in the Sudbury region (Canada) and in Chile, revenues were higher compared to 2020.

Costs

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C1 payable copper production cost of KGHM INTERNATIONAL LTD.

  Unit 2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Payable copper production cost C1* USD/lb 2.01 1.91 +5.2 2.27 1.67 1.83 2.32
*C1 unit production cost of copper - cash cost of payable copper production, reflecting costs of ore extraction and processing, the minerals extraction tax, transport costs, administrative expenses during the mining phase and smelter treatment and refining charges (TC/RC) less by-product value.

The average weighted unit cash cost of copper production for all mines in the segment KGHM INTERNATIONAL LTD. in 2021 amounted to 2.01 USD/lb, or an increase by 5% compared to the corresponding period of the previous year. The increase in C1 was due to a lower copper sales volume and lower revenues from sales of associated metals (-29%), which decrease C1.

Financial results

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Financial results of KGHM INTERNATIONAL LTD. (in USD million)

2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Revenues from contracts with customers 806 692 +16.5 206 228 175 197
Cost of sales, selling costs and administrative expenses,
including:*		 (633) (655) (3.4) (196) (150) (121) (166)
recognition/reversal of impairment losses on non-current assets (40) (2) x20.0 (48) – 7 1
Profit/(loss) on sales 173 37 x4.7 10 78 54 31
Profit/(loss) before taxation, including: 679 (177) x 187 46 452 (6)
-share of losses of Sierra Gorda S.C.M. accounted for using the equity method – – (52) (100.0) – – – –
Income tax 0 0 x 6 (2) (2) (2)
PROFIT/LOSS FOR THE PERIOD 679 (177) x 193 44 451 (9)
Depreciation/amortisation recognised in profit or loss (133) (117) +13.7 (28) (41) (31) (33)
Adjusted EBITDA** 346 156 x2.2 86 119 78 63
*Cost of products, merchandise and materials sold, selling costs and administrative expenses
**Adjusted EBITDA = profit on sales + depreciation/amortisation (recognised in profit or loss) + impairment losses (-reversal of impairment losses) on non-current assets, recognised in cost of sales, selling costs and administrative expenses
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Financial results of KGHM INTERNATIONAL LTD. (in PLN million)

2021 2020 Change (%) IVQ’21 IIIQ’21 IIQ’21 IQ’21
Revenues from contracts with customers 3,125 2,703 +15.6 833 885 657 750
Cost of sales, selling costs and administrative expenses, including:* (2,463) (2,559) (3.8) (794) (583) (452) (634)
recognition/reversal of impairment losses on non-current assets (162) (8) x20.3 (193) 1 26 4
Profit/(loss) on sales 662 144 x4.6 39 302 205 116
Profit/(loss) before taxation, including: 2,631 (690) x 754 189 1 713 (25)
share of losses of Sierra Gorda S.C.M. accounted for using the equity method – (204) (100.0) – – – –
Income tax 1 (1) x 23 (7) (7) (8)
PROFIT/LOSS FOR THE PERIOD 2,632 (691) x 777 182 1 706 (33)
Depreciation/amortisation recognised in profit or loss (516) (456) +13.2 (115) (159) (116) (126)
Adjusted EBITDA** 1,340 608 x2.2 347 460 295 238
*Cost of products, merchandise and materials sold, selling costs and administrative expenses
**Adjusted EBITDA = profit on sales + depreciation/amortisation (recognised in profit or loss) + impairment losses (-reversal of impairment losses) on non-current assets, recognised in cost of sales, selling costs and administrative expenses

Key factors impacting the change in financial result of KGHM INTERNATIONAL LTD.

Item Impact on change
of profit or loss		 Description
Higher revenues
(+USD 114 million) 		+244 Higher revenues due to higher prices of basic products, including copper +USD 232 million
(111) Lower revenues due to lower sales volume, including copper ( USD 53 million) and TPM ( USD
46 million)
(40) Lower revenues realised by companies operating under the DMC brand
+21 Other factors
Lower cost of sales, selling costs and administrative
expenses (+USD 23 million) 		+37 Lower costs of external services mainly of companies operating under the DMC brand
+34 Lower costs of materials and energy and labour costs, mainly due to allocation of capitalised
stripping costs of the Robinson mine
+14 Change in inventories
(38) Recognition/reversal of impairment losses on property, plant and equipment in 2021: +USD
10 million is a reversal of impairment losses on the Robinson mine, impairment losses on noncurrent assets in Sudbury (-USD 41) million, in the Franke mine (-USD 3 million) and Carlota
(-USD 6 million). In 2020 an impairment loss was recognised on the assets of the Franke mine
(-USD 2 million).
(20) Higher depreciation/amortisation
(4) Other factors
Impact of other
operating and
financing activities
(+USD 667 million) 		+595 Reversal of allowance for impairment of loans granted for the construction of the Sierra Gorda
mine in the amount of USD 614 million in 2021 versus USD 19 million in 2020.
+72 Other factors, including +USD 31 million due to higher interest on a loan granted to the Sierra
Gorda mine (as a result of reversal of allowance for impairment)
Share of losses of entities accounted for using the equity
method (USD +52 million) 		+52 Recognition in 2020 of the share of the loss of Sierra Gorda S.C.M. to the amount of the
increase in capital, i.e. in the amount of USD 52 million (in 2021 no increase in capital in Sierra
Gorda S.C.M.)

*Excludes recognition/reversal of impairment losses on property, plant and equipment and recognition/reversal of allowances for
impairment of loans granted for the construction of the Sierra Gorda mine

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Economic results of Sierra Gorda S.C.M.

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