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Results of the KGHM Group for the first quarter of 2015

Friday, 08 May, 2015

Copper equivalent production increased by 4 percent as compared to 2014 in both KGHM Polska Miedź S.A. as well as KGHM International

In KGHM International the increase was related to higher production by the Robinson mine in terms both of copper as well as precious metals. This was due to to the mining of ore with higher metals content as well as to an improvement in operating parameters - says Herbert Wirth, President of the Management Board of KGHM Polska Miedź S.A.

The decrease in Group C1 cash cost by 16 percent in the first quarter of 2015 as compared to the same period in 2014 is mainly due to a change in external factors – mainly the exchange rate and metals prices. Applying the metals prices and exchange rates of the first quarter of 2014, the C1 cost would be lower by 4 percent.

The increase in Group EBITDA by 21 percent (PLN 225 million) was due to the contribution by KGHM Polska Miedź S.A., in which the improved operating profit was mainly due to lower costs, as well as by KGHM International, in which the higher EBITDA was due to an increase in sales volume and to improved operating parameters in the Robinson mine which positively impacted costs in KGHM International – says Jarosław Romanowski, First Vice President of the Management Board (Finance).

Net profit achieved by the KGHM Group in the first quarter of 2015 amounted to PLN 398 million and was 5 percent lower than that earned in the first quarter of 2014.

The results of KGHM Polska Miedź S.A. for the first quarter of 2015 may be characterised by the aforementioned improvement in operating profit, a stable level of copper production and higher silver production (by 7 percent), keeping sales revenue at a similar level and maintaining cost discipline. After excluding the minerals extraction tax and purchased Cu-bearing materials, expenses by nature were lower by 1 percent.

Net profit of KGHM Polska Miedź S.A. in the first quarter of 2015 amounted to PLN 497 million and was similar to the result achieved in the comparable period of 2014 (PLN 507 million). The slight difference was mainly due to a change in the measured value of derivatives.

Key investments are underway according to plan. In the first quarter progress was made on increasing the production capacity of the Sierra Gorda mine, while commissioning and technical handover continued at the molybdenum concentrate production installation. At present daily ore processing has reached approx. 80 percent of target phase I capacity. Copper production in the first quarter of 2015 amounted to 17 thousand tonnes.

Preparations continue to begin the sinking of the underground, polymetallic mine Victoria in Canada. The project will have a negative cash cost of copper production, i.e. revenues from the sale of associated metals will be higher than production costs.

At the Ajax project engineering work continues, reflecting the results of technical optimisation implemented to date which are required to complete the Basic Engineering Report in 2015.

Advancement of the Deep Głogów project is a guarantor of stable production by KGHM’s operations in Poland. Copper production from this area began in April 2014. In the first quarter of 2015 project work included the excavation of 5 331 meters of tunnels together with necessary technical infrastructure. Since the start of the project, 50 370 meters of tunnels have been excavated.

Work on the Pyrometallurgy Modernisation Program at the Głogów smelter/refinery is underway according to plan. 90% of the contracts have been signed for construction and assembly work. The goal of the project is to commission a second flash furnace installation, which is planned for the fourth quarter of 2016.

On 29 April 2015 the Ordinary General Meeting of KGHM Polska Miedź S.A. passed a resolution on the allocation of profit for 2014. PLN 800 million was allocated as a shareholder dividend (PLN 4.00 per share), representing 33% of net profit for 2014. The dividend date was set at 27 May 2015. The dividend will be paid in two instalments: 18 June and 19 October 2015. The remainder of the profit in the amount of PLN 1 613.7 million was allocated to Company reserve capital.

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