8.3 Liquidity management policy

in PLN millions, unless otherwise stated

The Management Board of the Parent Entity is responsible for financial liquidity management in the Group and compliance with adopted policy. The Financial Liquidity Committee is a body supporting the Management Board in this regard.

The management of financial liquidity in the Group is performed in accordance with the Financial Liquidity Management Policy in the KGHM Group. This document comprehensively describes processes of managing financial liquidity in the Group, which are realised by Group companies, while their organisation, coordination and supervision is performed by the Parent Entity by using appropriate procedures and instruments. The basic principles resulting from this document are:

• assuring the stable and effective financing of the Group’s activities,
• continuous monitoring of the Group’s debt level,
• effective management of working capital, and
• coordination, by the Parent Entity, of processes of financial liquidity management in the Group companies.

Under the liquidity management process, the Group utilises instruments which enhance its effectiveness. One of the instruments used by the Group to deal with on-going operating activities is cash pooling – local in PLN, USD and EUR and international – in USD and CAD. The cash pooling service is aimed at optimising the management of cash resources, limiting interest costs, the effective financing of current working capital needs and the support of short-term financial liquidity in the Group.

In 2020, the Group continued actions aimed at ensuring long-term financial stability by basing the financial structure on diversified and long term financing sources. In December 2020, the Parent Entity used the option to extend the term of an unsecured revolving syndicated credit facility agreement by one year, in the amount of USD 1 500 million (PLN 5 638 million) signed in 2019. As a result of Syndicate Members’ decision, the available amount of financing granted in the extension period will amount to USD 1 438 million (PLN 5 405 million).

In 2020, actions were also continued aimed at optimising the financial liquidity management process by concentrating mainly on the effective management of working capital by using reverse factoring and factoring. The effect of implementation of factoring transactions is shortening the receivables turnover cycle and an extension of the turnover cycle of liabilities.