CAPEX execution in 2020
A rationale and responsible investment program
Capital expenditures by KGHM Polska Miedź S.A. in 2020
2 480 mn PLN
2 222 mn PLN
CAPEX target for 2020
Selected development projects
CAPEX execution 2020
Development of Żelazny Most TSF – PLN 389 mn
Southern Quarter
88% of physical work completed
Tailings Segregation and Thickening Station
78% of physical work completed
Deposit Access Program – PLN 484
- 40.3 km of tunneling were excavated
- GG-1 shaft reached a depth of 1 231.2m
- GG-2 „Odra” shaft – commercial terms set for the purchase of terrain to build the shaft
- Gaworzyce shaft – based on the spatial plan, the site for the shaft was confirmed
Program to adapt the technological installations to BAT Conclusions - PLN 161 mn
Głogów plant
Construction and start-up of the following completed:
- an installation for the transport of de-leaded slag for processing in the flash furnace
- bypass gases pipelines from the flash furnaces to the sulphuric acid plant,
- a warehouse and storage area for lead-bearing materials to eliminate fugitive dust emissions
Legnica plant HM Legnica
Construction and start-up of the following completed:
- Legnica plant an installation to eliminate arsenic-bearing dusts from concentrate drier gases and from above the anode casting machine
- Purchase of machines, incl. 26 – Lubin mine, 62 – Polkowice-Sieroszowice mine, 73–Rudna mine
- 2020/2019 > 161/220
- Main installations and equipment of the deduster process line built (exchangers, reactors, bag filters, chimneys, ventilators, separators)
- Final assembly of installations and equipment underway
- F-1 press filter renovated in Rudna Concentrator with operational testing commenced
- In H1 2020 final handover completed and operation commenced by the facility for non-hazardous waste and neutral waste and with a separate area for hazardous waste (code 19 08 13*).
- Construction/assembly underway (building roof and sides),
- Outfitting of the pumphouse underway,
- Reinforced concrete parts of the DW04 water filtration unit completed,
- Rainwater catches and effluents elements built
- Assembly of new roof undercarriage, 11 of 16 steps
- Work underway on tankhouse walls (disassembly of old tiles, cleaning/ painting, assembly of new windows and sidewall tiling)
Pro-ecological investments
KGHM Group
186 mn PLN
spent in 2020 by KGHM on proecological investments*
including more than PLN 43 million on construction of an installation to eliminate aresenic and mercury from gases at the Solinox installation in the Legnica Smelter/ Refinery under the BATAs Program
Capital expenditures
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203-1
Capital Expenditures of KGHM Polska Miedź S.A.
In 2020, capital expenditures on property, plant, and equipment amounted to PLN 2,476 million, and was similar to that in the previous year. The total capital expenditures, including the expenditures incurred on uncompleted development work, amounted to PLN 2,480 million.
| 2020 | 2019 | Change (%) | IVQ’20 | IIIQ’20 | IIQ’20 | IQ’20 | |
|---|---|---|---|---|---|---|---|
| Mining | 1,649 | 1,683 | (2.0) | 550 | 412 | 380 | 307 |
| Metallurgy | 732 | 660 | +10.9 | 239 | 218 | 191 | 84 |
| Other activities | 32 | 74 | (56.8) | 18 | 1 | 10 | 3 |
| Development work – uncompleted | 4 | 6 | (33.3) | 3 | – | 1 | – |
| Leases per IFRS 16 | 63 | 58 | +8.6 | 7 | 7 | 42 | 7 |
| Total | 2,480 | 2,481 | (0.0) | 817 | 637 | 624 | 401 |
| including costs of external financing | 116 | 135 | (14.1) | 16 | 32 | 31 | 37 |
Investment activities comprised replacement, maintenance and development projects:
Are aiming to maintain production equipment in an undeteriorated condition, represent 31% of the total expenditures incurred.
Deposit Access Program
Are aiming to maintain mining production at a level defined in the approved Production Plan (expansion of infrastructure according to the progress of mining works) make up 35% of the total expenditures incurred.
Are aiming to increase production volume of the core production line, implement technical and technological activities optimizing utilisation of the existing infrastructure, maintain production costs and adapt the company’s operations to changes in standards, laws and regulations (adaptation and environmental projects) represent 34% of the total expenditures incurred.
Detailed information on the progress of key investment projects may be found in the section on the implementation of the Strategy in 2020.
Capital expenditure of KGHM INTERNATIONAL LTD. (in USD million)
| 2020 | 2019 | Change (%) | IVQ’20 | IIIQ’20 | IIQ’20 | IQ’20 | |
|---|---|---|---|---|---|---|---|
| Victoria Project | 7 | 4 | +75.0 | 3 | 1 | 2 | 1 |
| Sierra Gorda Oxide project | 1 | 2 | (50.0) | 1 | – | – | – |
| Removal of superlayer and other | 145 | 164 | (11.6) | 39 | 35 | 24 | 47 |
| Total | 153 | 170 | (10.0) | 43 | 36 | 26 | 48 |
| Cash flows to Sierra Gorda S.C.M – increase of capital | 52 | 113 | (54.0) | – | – | 52 | – |
Capital expenditure of KGHM INTERNATIONAL LTD. (PLN million)
| 2020 | 2019 | Change (%) | IVQ’20 | IIIQ’20 | IIQ’20 | IQ’20 | |
|---|---|---|---|---|---|---|---|
| Victoria Project | 27 | 15 | +80.0 | 11 | 4 | 8 | 4 |
| Sierra Gorda Oxide project | 4 | 8 | (50.0) | 4 | – | – | – |
| Removal of superlayer and other | 566 | 631 | (10.3) | 151 | 131 | 96 | 188 |
| Total | 597 | 654 | (8.7) | 166 | 135 | 104 | 192 |
| Cash flows to Sierra Gorda S.C.M – increase of capital | 204 | 433 | (52.9) | (2) | (4) | 210 | – |
Capital expenditures of the KGHM INTERNATIONAL LTD. segment in 2020 amounted to USD 153 million, which represents a decrease by USD 17 million (-10%), compared to 2019.
Circa 75% of the expenditure was in the Robinson mine. They covered, among others, works related to removal of the superlayer and replacement of a part of machinery.
Project Victoria received USD 7 million (to, among others, continue exploration works aiming to increase the scope of deposit appraisal and start work connected to the preparation and securing of selected elements of the infrastructure). The Sierra Gorda Oxide project received USD 1 million.
The financing of the Sierra Gorda mine (in the form of a capital increase) in 2020 amounted to USD 52 million (in relation to the 55% share controlled by the KGHM Polska Miedź S.A. Group).
Capital expenditure on Sierra Gorda S.C.M.
In 2020, expenditures on property, plant and equipment, and intangible assets, included in the cash flow statement of Sierra Gorda S.C.M., amounted to USD 253 million, the majority of which, i.e. USD 166 million (66%) was expenditure on removal of the superlayer to access further parts of the deposit, and the remaining amount was incurred on development and replacement of property, plant and equipment.
Capital expenditure on Sierra Gorda S.C.M.
| unit | 2020 | 2019 | Change (%) | IVQ’20 | IIIQ’20 | IIQ’20 | IQ’20 | |
|---|---|---|---|---|---|---|---|---|
| Expenditure on property, plant and equipment | USD million | 253 | 298 | (15.1) | 79 | 58 | 48 | 68 |
| Expenditure on property, plant and equipment – segment (55% share) | PLN million | 544 | 629 | (13.5) | 168 | 120 | 106 | 150 |
A decrease of capital expenditure (denominated in USD) by 15% was related to the capitalised costs of removal of the superlayer, as a result of a smaller scope of the works and lower unit cost. Other capital expenditures grew, primarily as a result of investments to increase ore processing capacities.
In 2020, proceeds from operating activities were almost twice as high as capital expenditure. In view of the uncertainty caused by the spread of the COVID-19 pandemic in the first months of the year, Sierra Gorda received Owners’ financing of USD 95 million (USD 205 million in 2019). In the course of the year, Sierra Gorda also took out loans, including USD 200 million granted by Bank Gospodarstwa Krajowego.
