Summary of 2020

The Company’s history began in 1957 with the discovery of one of the world’s largest deposits of polymetallic ores, predominantly copper and silver, located in south-western Poland. The deposit has been effectively and rationally mined to this day. As the years went by, the KGHM Polska Miedź S.A. Group grew its business significantly both in terms of products and the market. Today, KGHM Polska Miedź S.A. is present on four continents: in Europe, South America, North America and Asia. It employs over 34 thousand staff worldwide who believe that what they do on a daily basis is significant for the world. Owing to their knowledge, courage and responsibility, the KGHM Polska Miedź S.A. Group produces valuable products, predominantly metals. Its core business is the production of copper along with other non-ferrous metals. The Group is one of the world’s top producers of copper and silver. It also produces gold, molybdenum, nickel, rhenium, lead and platinum. The high quality of the copper, silver and other products have been confirmed by certificates awarded by various international commodity exchanges. By adopting a responsible approach, the KGHM Polska Miedź S.A. Group sets a good example for others, acting in accordance with its values in a transparent and socially responsible manner.

We operate based on the principles of sustainable development, reflecting in our daily activities obligations tied to such areas as Society, the Environment, the Economy, Safety and Resource efficiency.

*Macroeconomic data – average for the period

**Adjusted EBITDA

¹⁾ 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 halffinished products and work in progress, less the value of anode slimes and divided by the volume of electrolytic copper production from own concentrates​.
²⁾ 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
³⁾ Reflects an adjustment of assumptions pursuant to regulatory filing 9/2020 dated 12 May 2020
⁴⁾ Adjusted EBITDA for 12 months, to the end of the reporting period, excluding EBITDA of the joint venture Sierra Gorda S.C.M
⁵⁾ Level of net debt/EBITDA ≤ 2 related to the Financial Liquidity Policy adopted by the Company and is not part of the budget assumptions of KGHM for 2020

Initiatives & procedures

• COVID-19 unit at the hospital MCZ
•  Two temporary hospitals in Legnica and Wałbrzych
• Help for seniors
•  Home office and restricted contacts
• Protective procedures

Preventative methods

• Thermal cameras
• NITROSEPT disinfectant liquid
• Disinfection and masks in common-use areas and during transport
• Personal safety measures when travelling into/out of the mines

Communication & education

• Numerous communication channels
• Continuous announcements on internal procedures and sanitary services guidelines
• Billboards, educational films, handouts, newspapers and company TV
• Special Infolines for employees

• ISO 45001:2018
  Granting of an Occupational Health and Safety Management System Certificate
• Leader’s Gold Card of Workplace Safety
  A 29% decrease in the number of recognised workplace accidents to 213 at year’s end
• Historically-low accident ratio
  Thanks to the outstanding behaviour and commitment of all employees

* LTIFR (Lost Time Injury Frequency Rate);  TRIR (Total Recordable Incident Rate)

Production

• High production from domestic Stability assets (mined production 442 kt; metallurgical production 560 kt)
• Stable production from international assets (Sierra Gorda 81.8 kt; Robinson 47.4 kt; Carlota 5 kt; Franke 12.5 kt; Zagłębie Sudbury 2.1 kt)
• Continuation of projects aimed at automatisation

Development

• Continuation of the Deposit Access Program (GG-1 shaft reached a depth of 1231 m)
• Continuation of Development of the
  Żelazny Most Tailings Storage Facility
• Continuation of exploration projects in Poland
• 22.42% of the general energy consumption of KGHM was supplied by its own internal sources and by developing RES
• The capacity to base 35% of production on purchased metalbearing materials was achieved

Innovation

• Continuation of the CuBR venture
• Continuation of Implementation Doctorates Program
• Advancement of R&D work
• Start of initiatives related to testing EV mining machinery
• Continuation of projects financed
  under KIC Raw Materials and Horizon
  2020

Efficient
Organisation

• Enhanced Energy efficiency
• Continuation of digital transformation under the KGHM 4.0 Program
• Optimisation of the international assets portfolio
• Work on improving support processes efficiency

People and the
Environment

• Actions to adapt to BAT Conclusions (incl. the BATAs Program dedicated to restricting emissions of arsenic)
• Continuation of the Occupational Health and Safety Program (LTIFR: 7.31, TRIR: 0.52)
• Implementation of the new BHP ISO 45001:2018 standard in the Company’s Divisions
• Intensification of actions to fight COVID-19

Financial Stability

• Greater use of factoring
• Optimisation of the financing structure
• Basing the Group’s financing structure on long-term instruments
• Effective market and credit risk
  management in the KGHM Group

• Consistent management of deposits and extraction
• Optimisation of metallurgical production – RCR furnace at Legnica, the concentrate roaster at Głogów
• New financing structure – from shortterm to long-term
• Increased power generation from internal sources​

• Actions were undertaken to eliminate generational gaps – HR programs
•  Employee skills raised through adaptive and development projects
• Reviews of international assets​

• Domestic mine production remains at the level of 450 kt of copper in ore; average annual metallurgical production at the level of 540 kt
• RCR furnace in Legnica – increased production capacity and the capability to process purchased materials
• Skills raised in energy development, including RES

• Development of the Żelazny Most Tailings Storage Facility by building the Southern Quarter
• External sources to finance R&D projects
• Financial efficiency increased – diversification of sources and adaptation of financing to the KGHM Group’s needs ​

• Improved safety statistics in Poland and abroad
• Intelligent solutions introduced to enhance employee safety
• Numerous actions taken under the „Copper Heart” employee volunteer program
• Corporate income taxes paid by the Group to National and local budgets – around PLN 400 million annually
• Minerals extraction tax paid to the State budget – around PLN 1.5 billion annually

• New installations, in accordance with BAT (Best Available Techniques) conclusions for the nonferrous metals industry
• Investments in renewable energy sources (RES), mainly in developing photovoltaics
• Electromobility – tests of electric personnel and terrain vehicles; a switch from diesel engines to lowemission vehicle engines in the machinery park

• Pilot version of a „System for locating persons and machines in the underground mines”
• Development of „ Broad-band data transmission in the underground mines”
• Development of the „Centre of Advanced Data Analysis (CZAD)”
• Development of the „ Robotisation of production and auxiliary processes” -construction commenced on a CuXRF robot for scanning for copper content at the working faces

• Development of information technology to collect and transfer knowledge within the KGHM Group
• A new company – KGHM Centrum Analityki in Zielona Góra – R&D in the area of BigData to analyses industrial processes
• Projects related with the National Cybersecurity System and strengthening IT security within the Group