Kghm Polska Miedz Sa Ord

Good afternoon, ladies and gentlemen. Welcome at the conference where we are going to discuss our results for Q1 2024. The presentation will be delivered by the members of the board. President of the board, Andrzej Szydło. the Vice President, Zbigniew Bryja, who's responsible for development, Piotr Krzyzewski, VP, responsible for finance, and Piotr Stryczek, Vice President, responsible for corporate affairs. We have Janusz Krystosiak with us. He's in charge of the investors' relations. After the conference, after the interventions from our management board, we will have Q&A session where analysts and journalists will be welcome to ask questions. And let me remind you that we have the streaming of the conference on our website. And this is also the place where you may ask your questions. We have a special tab for results where we are going to have all the answers delivered. And there is an email address where you can also send your questions. And now over to our president of the board, Andrzej Szydło. Good afternoon, ladies and gentlemen. Let me just explain that Vice President Laskowski is not able to attend. He really wanted to be here because conference covering the first six months is an important event, but for personal reasons, he had to stay back home. Well, just to make things a bit lighter, at the beginning of the conference, I have to say that I see the preview of the upcoming long weekend because we have a decent turnout by No crowds. I have to admit that I have an issue reading the presentation that I have in front of me. Therefore, I'm going to use the hard copy. I'm going to give you the general highlights of our performance during the first six months of 2024. I will also touch upon production, and Mr. Breja will provide more details about production. And finally, financial results, our Vice President, Mr. Krzyzewski, will cover that. I think that it is a neat approach to the presentation to save time for questions and answers. 2024, the first six months. Well, to a large extent, we really want to compare ourselves to the past period. But we are also referring to our budget. However, today, I'm really going to focus on the comparison to the previous period. And I may also offer some additional comments. However, references to the budget is more of the internal business of the company. Let me first look at the macroeconomic environment. Q2 was quite conducive because of the copper prices. However, we had fairly high volatility. Nevertheless, compared to Q1 2024, we've seen a clear increase in prices. In dollar terms, compared to the first half of 2023, the prices were up by 4%. However, given the depreciation of the dollar against Zloty by 7% in Zloty terms, we've seen the negative result of 3%. That will be more visible at the next slide. Now silver. Silver priced 12% up in dollar terms and 4% up in Zloty terms. So in this case, the depreciation of dollar against Lottie was offset since the price in dollar terms of silver went up by 12% compared to the first half of 2023. And now in terms of our overall production and dry matter, no major changes. or in dried weight, it's basically the same. And I think that quarter to quarter and half year to half year, the situation is stable, no major variables. Production of copper in concentrate was slightly higher, below 1%, compared to the first half of previous year. And 4.7 in negative territory is the production of metallic silver. And I've already explained why we've seen this variance. In Q1, we've seen actually over 10% in the negative territory. But this is due to our maintenance cycle. And we need to go back to Q4 2022, when we had actually a standstill because of the maintenance of that particular department of semi-precious metals. And therefore, in Q1 2023, we were actually depleting our inventory. So we had a very high baseline to compare to 2023. And although in Q1, the difference was very substantial. I think that I have a note somewhere about a production 388 tons in Q1 2023 and Q1 2024, it was 322 chance. So it's a major, major variance, 17% after Q1. Q2, when we compare ourselves to 2023, it's 10% in production. And 356, this is where we stand at Q2. Therefore, after six months, the overall result is minus 4.7 for production of metallic silver. Production of gold is 22.4, again negative. but this is also the result of the high baseline and the smaller processing of the imported concentrate containing that metal. Our capex was 1,750,000. This is where we are 50% up compared to the same period of the past year. And finally, 40% give and take is what we see within the scale of the current year. Our revenue was slightly down by 2%, and we landed at 17 billion 480 million. And well, in terms of Zloty, this shows the minus 3% copper price in Polish Zloty. debt to adjusted EBITDA is 0.7. This is a very good result. We were down by 3% because prior to that we were at 1.12. If we move to the next slide, I've already mentioned the revenue, 17 billion 480 million for KGHM group. We are down by 1.5% compared to the same period of the of the 2023 adjusted EBITDA is 4.2 billion ZL. We were up by 35% compared to the first six months of 2023. And with the increased margin EBITDA from 17 to over 20 percent, and the net result 1 billion 74 million Zloty. And this is where we see a major increase over 200 percent from 400 million last year. In terms of KGHM, so local assets, the revenue is 15 billion Zloty, specifically 15 billion 76 million Zloty. Adjusted EBITDA is 2,472,000,000 and 8% increased compared to the first half of 2023. And the net profit is 1,331,000,000 ZL and that means that we were up by 10%. Let me move to the next slide. I'm not going to make a lot of comments because I've already said a lot, copper and concentrate 205.5 thousand tons. Basically, all the products were delivered at the higher level compared to the timeline. We were up by 50%. Electrolytic copper was also a notable result. And at the same time, we actually made the inventory of anodes for the planned standstill of GloGov-1. So the inventory of anodes was over 40,000 tons before the standstill. So that was done like in the shadow of electrolytic copper production. So if not for the anodes, the electrolytic copper output would be higher. But since we had to get prepared for the technological cycle of bath facility, we had to actually prepare the sufficient inventory that will be consumed over the third quarter of this year. In terms of the production and KGHM SA, not much to add. We have to say that in international, we have much better production, but objectively speaking, I have to say that the baseline for the first six months of 2023 was really weak. We had issues with operation, production, and availability of the mining equipment.

In total, production of paid copper in the group for the first quarter was 358 tons, 2% higher than in the first half of 2023. If we break it down into KJJM, Polska Miedzy S.A., 293 tons, just 1% less just because you have to keep in mind the context of building the buffer for the technology downtime. Very good results indeed. Again, the base is 93% up compared to the second quarter. Okay, it went 93% higher in Robinson, which is the main asset of KGHM International, and a slightly worse performance, 10% at Sierra Gorda. If we look at the next slide. You can see here, to a large extent, a repetition of the information that has already been presented. But I would like to highlight that if you look at production at KJGM, Polska Mieć SA, The share of copy production from our own input and input from third parties is basically the same as last year at 66%, 33% and 34% from third parties' input. In total, paid copper production KJGM International accounts less than 20% of paid copper within the group. As regards silver production, I have already talked about that. It continues to be 5% lower for the first half this year than the first half last year. It has already been explained, so I will not repeat this. Precious metals, 10% lower. And molybdenum, unfortunately, lower by 50%. mainly from Sierra Gorda. Here we can say that molybdenum is a difficult product. It is not a side product. However, the production of copper in this mine and at this stage of processing, we focus our attention on copper. Now I would like to hand over to Mr. Bryja to comment on our production results. Ladies and gentlemen, a lot of points that have already been mentioned will recur in my presentation, but let's go through areas. I will start with Poland. The results of KJGM, Polska Miedź SA, all production was slightly better than assumed, but in dry output, we are within the assumed range, that is 15.2 tons. AG content improved and CO content improved. It is not just the result of better work organization, work discipline, it would be too much to attribute the merit entirely to ourselves. On the bars you can see how the output changed in individual quarters since last year. We now enter better parts of the deposit with greater content of silver and copper. As a result we have better quality concentrate. Compared to last year we have an improvement in terms of CU content in concentrate. 205.5 thousand tons was the result for the first half of the year and that is about 3.2 or 3.3 thousand tons more. Regarding electronic copper 223 tonnes, it has already been explained why we are lower 1% than in the first half last year. We simply had to accumulate a certain buffer of anodes and then we had better output, better quality ore and in the future we will recoup this. So this temporary dip will translate into recovery of the assumed levels of production in the future in the following accounting periods. Production results in Sierra Gorda. Here, unfortunately, we cannot boast such good results as we had in KJ Gem. because in KGHM we had about 100% performance of the plan. Unfortunately here, the lower production of paid copper in the first quarter by as much as 11% compared to the same period, 2023, was due mainly to the exploitation of lower content of metal in KGHM. just a fraction of what we had before. So worse quality ore, polymetallic ore with lower content of copper translates into lower parameters and molybdenum as well. The same goes for gold. However, silver maintained good parameters, so we have a slight improvement in silver production as compared to the assumed levels. As regards production results at KJ Gem International, here the situation is opposite to what we had in Sierra Gorda. Last year we experienced a breakthrough at Robinson. This mine was in a very poor geological condition, under worse meteorological conditions, and as a result, the base for calculation of the plan was underrated. Now Robinson is making up for those poor results in the past, so in spite of worse results in Sudbury and Carlott, Robinson's result even improves the entire consolidated result for the holding. Even it improves the result for KGHM because we have about, well I can give you the exact number actually. In KJGM, international copper production was 14,000 tons higher than the assumptions. And again, molybdenum plays a role. Here, molybdenum had a positive contribution. And we might have had a similar result on silver. Unfortunately, Cadbury had poor results. on silver and that offset the best results I talked about previously. That was about collection and now I will discuss my area of expertise because as the person responsible for development, I specialize in this area in the company. The first half of this year meant Capex's 1.57 million. You can see the pie here. The greatest expenditures on mining, 1.2 billion, and metallurgy, 201 million. The other activity, 19 million, and research and development, 1 million and 76 million leasing. If you deduct leasing from the total, you will see the analytical breakdown, how money was allocated to individual products. So recovery, recovery of the performance of machinery, modernization and purchases of new machinery, 33%. 38% maintenance of our production capacity assumed in the production plants. Then we had R&D, including exploration. So matters related to obtaining new areas, new deposits, building shafts and so on. And 1% accounts for adjustment products. So here we are mainly talking about adjustment to changing legal regulations, EU laws, and so on. But that is a relatively small amount. We have 1.369 million and then we have external funding and leasing 76. Altogether we have 1 billion 570 million and that is performance at a level similar to what we had last year on Capex. In Capex, you do not have a proportionate spending to the time lapse. Last year, we had 3,950,000,000. That's our target for this year. Now, if you look at the key investments, Out of the total of 1,494,000,000, we have deposit availability program. Here on the side, you can read the main areas on which we allocated money. 345,000,000, building of three shafts, that is equipment of the shaft that has already been drilled and handed over for use in June last year now we are building the fixed rigid scaffolding that will not be line based but rigid scaffolding increase in the capacity of air conditioning at the central unit and works related to various installations like compressed air supply and so on. This is the type of work that needs to be performed at the final stages of shaft completion. Then we have fixed structures. Previously we had those temporary steel ones and now we are finalising this investment. As for GG2 shaft, we are now in the process of analysing geological drill results that is necessary in order to design the casing of the shaft that is a very significant part of the entire investment, very much dependent on geological conditions. As for the remaining shafts, we are now conducting planning works, buying areas, and next year we would like to start geological studies for Gaworzyca shaft and if funds are available because capex is not enough to carry out all the investment activities we would like to. So if money is available, we will start building this last shaft as soon as possible. The next activity is providing utilities to mining areas. These are not spectacular projects. They do not have nice names like Odra Shaft or else that would be sonorous and glamorous. Now we are extending pipelines, we are building electricity supply installations, dispatching centres, air conditioning and so on. 267 million PLN is the amount we are going to spend on it. The next area is the replacement of our machinery. We're a company that operates about 1,500 vehicles, machinery operating underground. Every year we replace about 250 machines. we are going to spend the same amount roughly as we did in the previous year. So this year we have a slight delay in this project and that was due to the new standard that came into effect for combustion engines and therefore the vendors will supply the machinery till the end of the year with a small delay. So we will complete the plan but with a slight delay in the schedule the next plan is water removal from mines This subject keeps resurfacing. Since 2019, there has been a greater inflow to Sierszawice mine. Now this phenomenon is under control. Nevertheless, significant capex is required both for building the chamber for pumps and for works performed over ground. in order to stop water coming to the mine. So for some time we will see the recurrence of this expenditure. Then international finance show reporting standards and adjustments related to this. That concerns various units, mines and metallurgy centers. We invest in machinery components, renovation, but it's not basically a replacement. That's more taking care of maintaining the machinery in working order. And this is more recovery than development, actually.

Replacement of the mines. and other facilities. And again, we are not speaking about building the new conveyor belts, but actually extending the existing ones. In case of ZWRs, it's about filtration station and mills and crashers. And in terms of mills, we have the tanks for sulphuric acid and modernisation of electro-refinement in Głogów II, but also in Legnica smelter. So this is rather modernisation, upgrade. So this is not a new facility, but rather replacement or recovery of the existing ones. The next thing is exploration. We have seven licenses and on top of it we have seven licenses for production and seven for exploration and seven non-CU licenses. So we are either doing surveying or drilling or designing across all these areas. But this part of CAPEX that is absolutely necessary and actually it could be higher than it currently is. So just imagine that one geological drill that goes down to 1,400 meters, it's over 10 million zlaris. So three drills or three geological openings, it would be over 40 million zlaris. But since we are moving more towards northwest, we have to continue exploration. In addition to that, we have not completed the project where a feasibility study is prepared. We need to answer a number of questions before we actually make a decision about going into the operation of that deposit. We have to be sure that it would be a reasonable investment. Now, we don't have any doubts regarding the financial side. However, we need to answer some questions regarding geological surveillance. development of the Żelazny Most tailing storage facility. We reached a fairly high level today, 195 meters, about like the crown height. We got the permit to go to 205 meters. All three municipalities, Grombocice, Rudna and Polkowice, are interested in this project. Now they have land development plans under development. and anyone can offer comments and raise their objections if any. But hopefully the procedure will be completed and by June 2025 we should be getting the permit. Now, shifts. The shifts need maintenance. We have to maintain them and therefore SW4 is like the shaft that is currently being maintained and this is sort of cross line between OPEX and CAPEX. Since it goes through some layer of salt, we need to keep working on that end because we have to keep the installation operational. So we have to actually remove the salt that is coming into the shaft. And here is ZWR and Guogu for copper smelter. This is a minor thing and more about health and safety. I'm not sure, perhaps we should say something about Gonski. This is a tiny thing. I think that we are getting too much into details. Okay, but these are tiny things regarding overall upgrade and modernization efforts. and other projects is 64 million, so overall 1 billion 494 million. As I said, we cannot really get hooked on certain things because some of these efforts are multi-annual and there are multi-annual contracts and on other tasks we have just the competition procedure for selecting contractors, but we believe that our CAPEX is safe and we should be the same level as last year. And in 2023, the CAPEX was at 98% of the budgeted CAPEX, so fairly good result. So this slide has been shown for the past year at our conferences, because this is where we show the increased efficiency of our output. in deep Głogów, deep industrial Głogów. I think that you know where it is. Unfortunately, I cannot really show it on this screen, but we are speaking north towards Śrośowice and Rudno. Currently, there is one shaft, GG1, over 1,300 meters deep, 1,350 meters deep, the deepest shaft that we have. And we've been interested in this area since 2004. In 2014, we deployed our first production facility, currently there are seven of them. six in Sierowicze and one in Rudna. So why am I saying that we keep showing the slide for the past year and let me say up front that I will be referring to that area during the upcoming presentations but we will not have a separate slide for that because I want to draw your attention to our production efficiency copper and in ore and silver in ore. So if you compare Q one and two, the difference is two or three percent, but if you look at the six months of the past year and six months of this year, it's 18 percent difference or 16 percent difference. How come? Well, because of the ventilation works that were performed last week and therefore all the facilities were working full steam, therefore It is just a routine business to keep the current capacity and production level. So in a half a year, you will not be interested in this slide because you will see the same thing all over. So instead of the slide, we will be showing something else that will be more exciting for the forward-looking aspects of our business. But for the analysts, this is an interesting slide because it really shows how important it is to build the shaft and to ventilate to actually let in air because air, although it is so light, it really contributes to each tone, additional tone produced. That will be all from me. Thank you. Ladies and gentlemen, before we actually move on to the financial performance, let me mention a few words about our production, namely Sierra, Gorda and Robinson. So for Robinson, we had something We had an opportunity to travel to Nevada and spend some time there. We were able to make a review. Currently, we are at Pit West 5. And as you know, the production has been moving as scheduled. Now we need to optimize the processes. We have to improve the logistics. We have to optimize maintenance. So this is something that we are going to focus on over the next quarters. And obviously, we need additional prep work for Liberty and Veteran. These are additional sites where we are going to start production of ore. And a lot of activity has been going on there. For instance, TCF has been fully taken over, TCF in Nevada. has been moved in-house. We decided to let go the third-party contractors. That will obviously take some time, but over time, it will provide a positive boost to our financial performance on that mine. Sierra Gorda, well, this is quite a challenge. We've been doing the same thing in Sierra Gorda as we've done in Robinson. So we are sending our teams from Poland and they work with the local teams to improve operation and efficiency of production. On top of it, the whole model of units and filtering and drilling so that we can actually have long-term believable model and also drills in the further sites so that we can actually extend the LOM on this mine. So this is the main activity that will be taking up our time over the next quarters. But now let me look at the financial performance. Key indicators, EBITDA, 4,208,000,000. And again, we were up by 35% compared to H1 2023. And now, but if we actually build a bridge between H1 2023 and H1 2024, 1.1 billion Zloty is really KIA. This is approximately one billion, and two millions were contributed by KGHM SA, but Sierra Gorda had the negative contribution. Now, let's look at Q2. that was our first quarter in business as a management board. So EBITDA in Q2 2023 compared to Q2 2024, the EBITDA was growing by two folds across all the segments. So KGHM, it was 1.6 billion yearly, and KIA, was over 400 million on the upside and Sierra Gorda 470 million. Other companies have also contributed positively to our EBITDA. The net profit, we were up from 401 million to 1 billion 74 million Zloty. So we more than doubled that. And the main impact was the result on our operational operating activity. Well, the income tax was higher, so it was a negative impact, but nevertheless, at the end of the day, the consolidated net profit was delivered at such a high level. Now, let's take a look at the revenues. As the President of the Board mentioned, the difference between H1 2023 and 2024 was just 2%, and if we look at the bridge on the revenue, then two main drivers that really gave us this picture is on one hand a change in the overall market of metals and copper was up by four and silver by 12 and gold was also on the upside but was not in such a good shape. But all these things were contributing positively to our revenue. over 700 million zlaris. And when we look at the dollar-zloty exchange rate, obviously, this is where we got a hit. Our revenue was down as a result of the dollar depreciation. However, that was, in a sense, offset by our hedging transactions. And we can stop for a minute here. 57 million, the amount that you see is the bridge between the two periods, but the actual results on the hedging was over 284 million Zloty. Now, you need to remember that this is the amount that also has some cost. But on the other hand, there is also accounting issue. But I'm speaking about technicalities of transactions and actually recognizing it according to our accounting policy. But hedging during the H1 2024, If we put it all together, it means that we were almost at zero. So we may say that actually hedging worked and we were able to eliminate the negative impact from our baseline business. Now, when we look at our results from the revenue point of view across segments, KGHM is 15 billion, KAI, so international, it's 1.3 billion, and other segments It's over one billion zlaris.