The importance of the new mineral extraction tax formula for KGHM - summary of the press briefing
A press briefing was held at the head office of KGHM Polska Miedź S.A. on 26 May, with the participation of Andrzej Szydło, President of the Management Board of KGHM Polska Miedź S.A., and Robert Kropiwnicki, Secretary of State at the Ministry of State Assets. The main topic of the meeting was the changes to the so-called copper tax announced by the government and their importance for the further development of KGHM and the Copper Belt region.
‘I rarely smile, but today there is an important reason to do so. We have arrived at the point where we wanted to be. This is not the end of the work, but we are in a very good moment that allows us to start working on the implementation of strategic projects that are on the critical path. This primarily involves the construction of three shafts, which are necessary to make the copper deposit accessible. The investment projects concern the so-called KGHM 1.1, i.e. those resources that lie up to the Oder River. Work is then planned to analyse deposits north of the Oder, the so-called KGHM 2.0. This involves the Kulów-Luboszyce deposits, i.e. those areas for which KGHM holds concessions’, said Andrzej Szydło, President of the Management Board of KGHM Polska Miedź S.A. ‘What the changes to the mineral tax mean for KGHM is that new jobs will undoubtedly be created when development projects are carried out, not necessarily in KGHM itself. A great deal of support from external contractors will be needed to implement these investment projects - this also involves the creation of more jobs in the region - stable ones, for many years ahead. One of the elements of our argumentation in the dialogue with the Ministry of Finance was that this theoretical budget shortfall related to the mineral tax relief does not at all imply a long-term budget shortfall. This shortfall will be compensated to a large extent from the CIT, PIT and other taxes, including property tax.
(...) Certain KGHM projects are already underway - admittedly not on a full scale. The tax relief will start as early as 2026, but when it comes to exploration and shaft construction, we are now going to greatly speed up this process. The PLN 10 billion we are talking about over 10 years is not KGHM's CAPEX, but an additional PLN 10 billion - the company's total capital expenditure over the next 10 years is many times more. These additional funds will be allocated entirely to investment projects and development’, added Andrzej Szydło, President of the Management Board of KGHM Polska Miedź S.A.
‘The draft law is included in the work list of the Government Legislative Centre. The government is starting work on this draft. I hope that by the summer holidays the government will complete its work on the draft, so that the Sejm can deal with it after the holidays. This is very important to us. For the region, this means first and foremost investment, extending the life of KGHM by twenty, thirty or perhaps forty years. This shows that the outlook for our region is stable. This is really good news. These billions will be put into investments in Poland’s industry’, said Robert Kropiwnicki, Secretary of State at the Ministry of State Assets.
‘I would like to thank the Management Board as well as the President and the entire company. It is not easy, with such a tight budget (...), for the Minister of Finance to agree to any tax relief. Thanks to the good arguments, showing the critical path for the projects that are needed to keep KGHM viable, these efforts have been successful. The very design, where there is a fixed amount relief for the first three years and then an investment relief, is very good (...) it is an investment incentive. It is a balanced design that emerged during the discussions and dialogue held with the Ministry of Finance’, he added.
