Environmental activities in KGHM Polska Miedź S.A.

We develop our operations based on innovative, low-emission technologies, in line with circular economy principles. We pursue this objective by investing in best available environmental techniques (BAT), and running our business with the view to the highest achievable environmental neutrality of production processes.

The extraction of copper ore and its subsequent processing at all production stages is inextricably associated with affecting all components of the natural environment. Compliance with rigorous environmental standards laid down by the law is possible thanks to the consistent modernisation of our existing installations to protect the environment, as well as new investments in this area. Over the year, intensive work was carried out to implement the European Commission Implementing Decision establishing best available techniques (BAT) conclusions for the non-ferrous metals industry. The on-going adaptation of smelter facilities to the BAT conclusions also results in continued lowering of dust and gas emissions. In 2020, the Company spent more than PLN 186 million on investments to protect the natural environment, of which the largest expenditure, in the amount of over PLN 43 million, was incurred on the construction of an arsenic and mercury elimination installation before the desulphurisation plant at “Legnica” Copper Smelter and Refinery.

At KGHM Polska Miedź S.A., care for the natural environment is connected with the business model in which all its segments – from exploration to extraction and smelting of metals – apply the standards ensuring safe and environmentally friendly operations.

The key commitments of KGHM Polska Miedź S.A. in the area of environmental protection:

• We supply metals and related products to achieve environmental goals of the modern society, including climate action and efficient energy use
• We minimize the consumption of limited resources, such as soil, water and energy
• We operate our installations in conformity with our environmental permits
• We monitor the pollution of air, water and soil
• We minimize production of waste and continue to develop waste management techniques to ensure the best possible environmental performance

• We conduct an objective, open and respectful dialogue for the environment with our local community and relevant authorities
• We take active measures to preserve and – where it is not possible – to compensate for lost biodiversity, and to ensure responsible management of our land and forests.
• We observe the principles of responsible chemical substance management introduced by the EU Regulations REACH and CLP
• We reinforce the feeling of responsibility for the environment in our employees

As a socially responsible company, KGHM Polska Miedź S.A. cannot and does not want to ignore its responsibility for the condition of the environment. The extraction of copper ore, followed by its processing at all stages of production, is inextricably linked to its impact on various aspects of the natural environment. Compliance with stringent legal standards is possible due to the consistent modernisation of existing installations and construction of new ones, to reduce and minimize impact on the environment.

Most of KGHM’s divisions have implemented the ISO 14001 environmental management system, which shows that their operations are safe both to the employees as well as the environment. In 2021, the environmental management system is to be implemented in KGHM’s Head Office and mines. This way, the environmental management system will cover the entire company.

In 2020, the Divisions of KGHM Polska Miedź S.A. incurred PLN 14.5 million in charges for the use of the environment. This year, the landfill fee of PLN 5.2 million was the largest part of the charges. The sewage disposal charge, at over PLN 4.5 million, was the second largest item.

KGHM Polska Miedź S.A. operates ten installations whose functioning, in accordance with the Act on Environmental Protection, requires integrated permits.

In addition, the Tailings Division holds a permit for the operation of the disposal of extractive waste facility at Żelazny Most and sector permits required by law. The mines operate on the basis of up-to-date sector permits with respect to airborne emissions and waste management.

Metallurgical installations at the Głogów and Legnica Copper Smelters and Refineries as well as the combined cycle units in Polkowice and Głogów also hold permits to participate in the CO₂ emissions trading system because KGHM Polska Miedź S.A. has been participating in the obligatory European Union Emissions Trading System (EU ETS) since 2013.

In 2020, emissions in the previous year (2019) in the amount of 1.297 million tonnes of CO₂ were settled by freely-acquired rights (around 903 thousand tonnes of CO₂ for 2019 and from reserves) supplemented by purchases of rights (EUAs or European Emission Allowances and CERs – Certified Emission Reduction units).

It is expected that 2020 emissions at the level of around 1.23 million tonnes of CO₂ will be settled in freely-acquired rights for the Głogów and Legnica Copper Smelters and Refineries as well as rights for the Combined Cycle Units in Polkowice and Głogów (in total around 890 thousand tonnes of CO₂) as well as reserves of rights from prior years and purchases of rights (EUA and CER) in the amount of around PLN 6.5 million.

* ETS – European Union Emission Trading Scheme (Europejsi System Handlu Emisjami)

The most important projects related to environmental protection, both current and planned in the near term, include:

• continuation of investments in response to the required adaptation of metallurgical installations to BAT conclusions. Advancement of these investments is also related to further reductions in dust and gas emissions, including emissions of arsenic
• updating the integrated permits for installations in operation
• overseeing the system for CO₂ emissions trading, along with obtaining rights for these emissions
• continuation of the program to promote health and prevent environmental hazards, addressed to communities living in the nearest proximity to our metallurgical facilities
  • construction of the southern quarter of the Żelazny Most Tailings Storage Facility

As one of the leading European non-ferrous metals producers, KGHM Polska Miedź S.A. follows principles of responsible chemical substance management introduced by the EU Regulations REACH and CLP.

The REACH and CLP regulations are designed to:

• commit enterprises which produce or import chemicals to provide transparent clarifications and information on the properties of these substances, as well as to inform about how they are used and to whom they may pose hazard
• control risks to humans and the environment caused by hazardous chemicals, by limiting their use

• ensure that hazardous substances have been classified and feature in the generally available list published on the European Chemicals Agency’s website, and that every product containing such substances is adequately marked and packaged in a manner guaranteeing safe use, as well as to ensure that consumers and workers receive adequate information
• ensure that the most hazardous chemicals are gradually phased out

KGHM Polska Miedź S.A. has successfully implemented the REACH system into its operations to ensure compliance with the regulation of the same name and continuity of KGHM’s product supply to its customers. At present, REACH is bread and butter of our everyday operations.

Under the REACH system, the Company has registered all the substances introduced into trade with the European Chemicals Agency. Pursuing its REACH implementation strategy, KGHM has become a member of a number of REACH consortia which manage the registration process for the substances and semi-finished products introduced by the consortium members.

At present, KGHM is a member of six consortiums:

In 2020, the consortia worked on the revised edition of the registration dossiers for substances and semi-finished products, taking account of the newest research results and the most recent guidelines of the European Chemicals Agency.

The consortia undertook activities in the area of harmonised classification for copper, lead and silver; permit procedures for lead; endocrine properties of copper and permissible concentrations of lead and cooper in the work environment. With the Eurometaux association, the consortia started an analysis of the “EU chemicals strategy for sustainability”, presented by the European Commission in October 2020. The purpose of this document is to increase safety and achieve a zero-level pollution for a toxic-free environment, postulated in the European Green Deal.

In 2020, the Company’s costs of cooperation with the consortia amounted to EUR 79 thousand. The main item was the fee payable to the Copper Consortium in respect of updating the registration dossier.

In view of the changing requirements of the REACH Regulation, the Company has updated its substance properties cards, which are provided to customers.

In 2020, entities of the KGHM INTERNATIONAL LTD. Group also conducted activities related to protection of the environment.

In the case of the Robinson mine (USA), these activities focused on monitoring of air and water quality, waste management and reclamation of mining areas – approx. PLN 18 million was spent on these goals, including almost PLN 3 million in charges under the permits to use the environment. At the Carlota mine in the USA, the activities involved mainly environmental monitoring and preparations for the reclamation process – total expenditures for this purpose amounted to around PLN 6 million. In the Sudbury mines (Canada), the activities focused on environmental monitoring. In total, over PLN 3 million was incurred for this purpose. At the Franke mine (Chile), the activities focused on obtaining the required permits and on environmental monitoring. Total expenditures for this purpose amounted to nearly PLN 5 million.

KGHM’s American mine awarded for management of the natural environment

The Robinson mine in the US, owned by KGHM, has received the Nevada Excellence in Mine Reclamation Award. The award was given in the category “Legacy Waste Rock Remediation” for reclamation of the Lane City Waste Rock Facility (WRF).

The Lane City WRF facility was constructed in the mid-1950s and late 1970s, before the entry into force of environmental regulations in the State of Nevada. The need for WRF reclamation was initiated by both the Robinson Mine and Nevada’s administrative authorities.

As part of the completed Lane City WRF reclamation, slopes of the waste rock were shaped and covered with limestone and plants were planted on the top and slopes of the site. A rainwater drainage system has been put in place to prevent water from the landfill coming into contact with natural waters. This method of reclamation not only protects the site in terms of stability but also protects state waters, which is one of Nevada’s top priorities in the area of environmental protection. The changes are visible to the naked eye – the planting has helped to restore the natural landscape of the area.

The reclamation award demonstrates Robinson Mine’s commitment to protecting the environment and the community in which KGHM operates. The company’s efforts in the area of responsible management of the environment were recognised by the Nevada state administration, with Governor Steve Sisolak congratulating the mine on Twitter, writing that the award was well deserved.

The Robinson open pit mine is located in White Pine County, Nevada, US, at an average elevation of 2,130 metres above sea level. Its main product is a concentrate of copper, molybdenum and gold.

Pursuant to the laws in force in the United States and Canada, the KGHM INTERNATIONAL LTD. Group is obligated to present collateral in the form of frozen cash, or provide bank guarantees/letters of credit in the amount of the estimated provision for decommissioning of mines and technological facilities. As at 31 December 2020, the value of assets (cash) earmarked for liquidation of KGHM INTERNATIONAL LTD. mines amounted to PLN 67 million (as at 31 December 2019: PLN 68 million). Moreover, as at 31 December 2020, KGHM Polska Miedź S.A. issued letters of credit for the amount of PLN 404 million (as at 31 December 2019 – PLN 397 million) to secure liabilities under liquidation and reclamation of mining areas. As at 31 December 2020, the letters of credit issued by KGHM INTERNATIONAL LTD. amounted to PLN 179 million (as at 31 December 2019 – PLN 202 million).

The Polish companies of the Group operate in compliance with environmental laws. The companies that are obliged to do so hold valid permits to use the environment, except for the entities described below.

The company Uzdrowiska Kłodzkie S.A. – PGU Group does not have a water rights permit for discharging bathing waters from the Natural Medicine Centre in Polanica-Zdrój. Because of this the fee paid by the company for the discharge of such waste water is 500% higher. There is also no water rights permit for the discharge of excess mineral water from the “Pieniawa Józefa I” and “Pieniawa Józefa II” intakes. The discharge of that water to the river is not subject to charges. In order to resolve the formal and legal aspects of this situation, in terms of obtaining a water rights permit for the discharge of the aforementioned water to the river, the Company is engaged in discussions with the Polanica-Zdrój Town Hall, which is the owner of the sewage system.

Uzdrowiska Kłodzkie S.A. – the PGU Group awaits granting of a water rights permit to discharge after-bathing water from the Natural Treatment Resort and the discharge excess mineral water from the “Górne” intake in Kudowa-Zdrój. In October 2019, the Company appealed against the Decision received, due to the classification of unutilised mineral water from the “Górne” intake as industrial effluents. In 2020, a decision was handed down by the State Polish Waters Board – the Water Board in Nysa, against which the Company appealed to the Regional Director of the Water Board in Wrocław, through the Director of the Water Board in Nysa. The Company awaits the final decision of the Regional Water Board Director in Wrocław.

The discharge of industrial effluents from the Mineral Water Bottling Plant no. II in Polanica-Zdrój to the municipal sewage system has not been regulated by law. The Miejski Zakład Komunalny (municipal services office) in Polanica-Zdrój did not respond to the company’s request for the clarification of conditions for the discharge of industrial waste to the municipal sewage system due to the lack of a signed agreement. The company is also considering building a waste treatment plant on the grounds of the bottling plant.

Amongst the domestic companies of the Group, the largest environmental impact comes from the activities of “Energetyka” Sp. z o.o. In 2020, this company incurred the highest environmental charges. They amounted to PLN 2.8 million and mainly comprised payments for water intake and wastewater discharge (PLN 2.4 million), and for pollutant emissions into the air (approx. PLN 0.4 million). In 2020, the Company was fined for having exceeded in 2018 the permissible limits of dust emissions into the air from the Polkowice Heat and Power Plant, and for the discharge in 2018 of wastewater from the W-4 Division wastewater treatment plant in Legnica to the Pawłówka (Białynia) stream, which was in breach of the terms and conditions of the relevant integrated permit.

In 2020, the Company pursued investment projects with the aim to:

1. Adapt the existing equipment and installations of the Polkowice heat and power plant to the IED Directive emission requirements and the so-called BAT Conclusions
2. Modernize two steam boilers at the Głogów Division – adaptation to new technological conditions and processes as a result of discontinuation of top gas burning (the modernisation consists in adaptation of the equipment to new fuel for the boiler, from top gas to natural gas enriched with nitrogen) to the extent necessary to ensure supply of steam reserve for the Głogów Copper Smelter and Refinery, heat supply to the city of Głogów and increased electricity supply to the Głogów Copper Smelter and Refinery
3. Modernize the industrial effluent distribution chamber at the Legnica Division – to ensure continuity of production at the Legnica Copper Smelter and Refinery and increase the effectiveness of industrial effluents treatment

Due to the specific nature of its production (explosives, initiation systems, fuel additives), the NITROERG S.A. Company has an impact on the environment. The environmental charges incurred by the company in 2020 amount to PLN 0.3 million. In April 2020, there was an emergency incident in the Krupski Młyn plant, involving a leak of hazardous substance into the environment, i.e. the Mała Panew river. NITROERG S.A. took immediate action and the environmental effects of the incident have been effectively removed, which was verified by an ad hoc inspection of the Voivodeship Inspectorate of Environmental Protection. As a result of the incident, the State Polish Waters Board (PGW Wody Polskie) imposed an increased charge on the Company, of PLN 60 thousand. The charge has been paid.

As part of its environmental investment projects in 2020, KGHM ZANAM S.A. launched a photovoltaic power plant at the Legnica Plant. The project is designed to significantly reduce the contribution of the Plant to air pollution, by switching to environmentally friendly in-house energy production from the existing supply source of the Legnica Copper Smelter and Refinery.