Integrated Report
2022
GRI

Advancement of the Strategy in 2022

Table of contents

Policy regarding the development directions of the KGHM Group

In 2022, policy regarding the development directions of the KGHM Group was continued. The actions taken were aimed at adjusting the functioning of the Group’s organization to the developed business model and adapting to the changing market environment.

With regard to domestic companies, the development policy was aimed at deepening cooperation between different entities and eliminating unnecessarily duplicated competencies.

Implementation of the Strategy in the Group’s international companies included a series of reorganization activities aimed at integrating KGHM INTERNATIONAL LTD with the rest of the Group – among other things, an optimization process was initiated involving the transfer of some business functions to Poland. It became necessary to develop consistent internal regulations, procedures and standardized solutions in individual areas of the Company’s operations, as well as to review its assets. On 26 April 2022, the S.C.M. Franke Share Purchase Agreement was signed. As at the date the agreement was signed, Minera Las Cenizas became the owner and operator of the Franke mine.

Intentions regarding equity investments

With regard to domestic companies, development intentions focus on ensuring the continuity and occupational safety of the core production business. Emphasis is placed on integrating the Group around the idea of sustainable development, including the implementation of development initiatives linked to a circular economy. As regards international operations, the Company is focused on maximising the value of the portfolio of assets owned.

  • outfitting the mines along with the construction of conveyor belts,
  • replacement of mining machinery,
  • construction of mine drainage systems,
  • construction of air cooling systems,
  • construction of the Tailings Segregation and Compacting Station at the Żelazny Most Tailings Storage Facility,
  • modernisation and renovation during the maintenance shutdown of the Głogów II Copper Smelter and Refinery.
  • the Deposit Access Program (Deep Głogów along with access and development tunnels),
  • searching for and exploring deposits in areas under exploration concessions,
  • development of the Żelazny Most Tailings Storage Facility above a crown height of 195 m a.s.l.,
  • documentation for the Legnica Hybrid Metallurgy Facility,
  • construction of photovoltaic power plants.

Investment projects directly related to the idea of sustainable development involving, among other things, the adaptation of metallurgical facilities to BAT conclusions for the non-ferrous metals industry with the reduction of arsenic emissions (BATAs) also continued in 2022. During the period covered by this report, another six such installations were put into operation.

In accordance with the KGHM 4.0 Program concept, the Company continued to carry out work on new, intelligent technologies and production management systems, based on online communication and advanced data analysis.

Monitoring the implementation of the Strategy

Due to the dynamic changes in the macroeconomic environment affecting the copper mining, smelting and processing industry, KGHM has been performing comprehensive and regular analyses of its surroundings and identifying megatrends. On their basis, decisions are made to continue or refresh the accepted strategic assumptions. The whole organization is engaged in the process of operationalizing and advancing the Strategy. The Company is careful to maintain a balance between being flexible in its approach to Business Strategy (allowing it to react to market changes) and being consistent in its long-term operations. A dedicated internal procedure makes it possible to monitor and supervise the implementation of the Strategy also through the prism of successively implemented Strategic Programs.

Key achievements in advancing the Strategy of KGHM Polska Miedź S.A.

Based on the adopted Strategy, the Company aimed to:

  • maintain stable production levels, from both domestic and international assets,
  • maintain cost levels that guarantee financial safety,
  • ensure safe working conditions and minimize the burden on the environment and surroundings, in line with the sustainable development concept.

Impact of the Russian aggression against Ukraine on the implementation of the Strategy

In the context of the implementation of the Strategy, the Company has not noted and does not anticipate any significant negative consequences resulting from Russia’s aggression against Ukraine. The risk of disrupting the business continuity of the Group is assessed as low. A potential negative impact could come from rising prices for goods and services, which could translate into an increase in the overall cost of implementing the Strategy. Consequently, KGHM is intensifying mitigating actions, among others: efforts to ensure access to its own, low-emissions energy sources, the introduction of instruments to enhance financial security and the realisation of a broad spectrum of efficiency initiatives.

Key achievements of the KGHM Polska Miedź S.A. Group in advancing the strategic activities in individual strategic directions of development in 2022

Production in Poland and abroad (accrued)
  • Mined production in Poland amounted to 442.7 thousand tonnes of copper in ore with a C1 cost of 5,247 USD/t (2.38 USD/lb) of payable copper
  • Payable copper production abroad:
  • Sierra Gorda: 90.8 thousand tonnes (for the 55% stake),
    • Robinson: 46.8 thousand tonnes,
    • Carlota: 4.1 thousand tonnes,
    • Franke: 2.8 thousand tonnes (production to date of sale of the mine, i.e. 26 April 2022),
    • Sudbury Basin: 2.5 thousand tonnes.
  • Metallurgical production of KGHM Polska Miedź S.A. amounted to 586 thousand tonnes.
  • Production of silver amounted to 1,327 tonnes
Continued advancement of the Deposit Access Program
  • The GG-1 shaft reached a depth of 1,348 m. Construction and installation work is underway to prepare the shaft to serve a ventilation function during the transition period. Work is underway on designing final facilities to ultimately serve in a material and personnel transport function.
  • Work continues on tenders aimed at tasks related to building the GG-2 „Odra” Shaft, involving shaft site drilling and research
  • The task „Area management concept for the Gaworzyce shaft” was completed, finalising the purchase of property for the investment
  • The task „Area management concept for the Retków shaft” was completed
  • 41 kilometres of tunnelling were excavated in the Rudna and Polkowice-Sieroszowice mines. All of the work carried out under the Mine Projects Group enables the successive opening of new mining areas
  • Work continued on building and developing the Surface-based Central Air Conditioning Station at the GG-1 Shaft in terms of the Central Air Conditioning System. The technological start-up of equipment is underway. The process commenced of developing to 40 MW power capacity
  • The technical handover of the first part of the Ice Water Transportation System was completed. Construction continues on building part 2 of the System
Development of the Żelazny Most Tailings Storage Facility
  • Southern Quarter: operational permits were obtained. Total advancement of the physical scope of work for the Southern Quarter together with slurry, water and power infrastructure reached 95%. Tailings are being deposited in the Southern Quarter
  • Tailings Segregation and Compacting Station (TSCS): work was completed on assembling the technological part of the Station. Work continues on developing infrastructure in the vicinity of the station. Total advancement of the physical scope of work on the TSCS is 85%. The process of segregation and compacting is underway for the purpose of deposition of waste in the Southern Quarter as well as a separate process of building up the dam in the Southern Quarter
Maintenance shutdown of the Głogów II Copper Smelter and Refinery
  • The Głogów II Copper Smelter and Refinery was shut down for maintenance after four years of the production line’s operation. On 3 July 2022 concentrate was fed to the flash furnace. The maintenance shutdown was shorter than initially planned by 8 calendar days. In the fourth quarter of 2022, the process of settling investment projects carried out during the maintenance shutdown of the Głogów II Copper Smelter and Refinery was completed
R&D initiatives to enhance the efficiency of the core production business
  • R&D activities were carried out, aimed at seeking innovative solutions mainly for the Core Production Business of KGHM, which have a high potential for implementation and commercialisation. Cooperation was engaged in with academic and research bodies, universities and business partners
  • The second edition of the CuValley Hack Hackathon was held under the Dolina Miedziowa initiative, aimed at seeking innovative, ready-to-implement solutions
  • Information technology to collect and transfer knowledge was developed
Use of external financing for R&D&I projects
  • Advancement of European research projects continued and applications were submitted for the subsidising of initiatives under the Horizon Europe and KIC Raw Materials Programs, and a list of potential subjects of interest to the Company was prepared under efforts to obtain future financing. In 2022, the Company advanced a total of 12 projects using subsidies in the amount of EUR 2.84 million
Intellectual property
  • Proceedings are underway to obtain legal protection for selected trademarks
  • The word-figurative trademark „KGHM” was registered on the territory of China
  • Protection was prolonged for a European patent, validated in 16 European countries, to which KGHM Polska Miedź S.A. is jointly entitled under the CuBR project being advanced. Two inventions were announced to the European Patent Office
  • In the Patent Office of the Republic of Poland protection was prolonged for six patents, and four inventions, a utility model and an industrial model were announced. The Patent Office of the Republic of Poland also granted a patent for two inventions
  • Proceedings are underway in the Patent Office of the Republic of Poland for the granting of patents for five inventions announced for protection
Extension of the value chain
  • Detailed technical and economic analyses continued with respect to the development of copper processing in the Cedynia Wire Rod Plant Division. A concept to build a dedicated installation was prepared. It is assumed that further design work will continue to enable determination of the investment’s target parameters
Legnica Hybrid Metallurgy Facility
  • A preliminary business model for the Legnica Hybrid Metallurgy Facility was developed, assuming flexible work by the facility based on own copper concentrate and purchased copper-bearing materials, including concentrates and scrap. Design documentation is being prepared for the modernisation of the production line at the Legnica Copper Smelter and Refinery as well as construction of the Scrap Turnover Base at the Legnica Copper Smelter and Refinery
Exploration projects with respect to exploring for and evaluating copper ore deposits
  • In the concession areas „Retków-Ścinawa” and „Głogów” geological work continued. At the start of November 2022 the concession-granting body, at the request of KGHM, confirmed geological documentation for another copper ore deposit called „Retków-Grodziszcze”. The „Retków-Grodziszcze” deposit was separated from the exploration concession „Retków-Ścinawa”. In March 2022 the concession for the „Głogów” area was altered
  • Geological work continued within the Synklina Grodziecka and Konrad concession areas
  • Analytical and conceptual work was carried out on synergies in concession work between KGHM’s neighbouring geological concession areas in the „Bytom Odrzański” concession
  • Within the Kulów-Luboszyce concession area exploration work continued using surface-based drillholes
  • In the Radwanice concession area, evaluation work was carried out using underground mine workings, and surface-based geophysical research was performed
Realisation of exploration projects with respect to exploring for and evaluating other deposits
  • On the terrain of the Puck concession, work began on subsequent drillholes. The concession was altered – an addition was approved to the Geological Work Project
  • In terms of the „Nowe Miasteczko” concession, a concept was developed to conduct further geological work. A request to alter the concession was submitted to the concession-granting body
Continuation of development projects in the international assets
  • Sierra Gorda: there were no substantial interruptions in the operations. Maintenance and conservation work was carried out according to plan, and no significant production shutdowns were recorded. In February 2022 a transaction was concluded for sale of all of the shares in the joint venture company Sierra Gorda S.C.M. by Sumitomo Metal Mining Co., Ltd. and Sumitomo Corporation to the Australian mining group South32
  • Sierra Gorda Oxide: design work continued aimed at determining the subsequent direction of development of the project by the owners (Sierra Gorda S.C.M.). At present most of the oxide ore planned for processing has already been excavated and is currently stored near the site of the future copper leaching and recovery (SX-EW) plant
  • Victoria project: engineering work continued along with actions related to preparing selected elements of the infrastructure for further development of the project, as well as actions aimed at maintaining good relations and cooperation with key stakeholders in the project
CuBR venture
  • Under the four editions of the Venture competition, co-financed by the National Centre for Research and Development (NCBR) and KGHM, 25 R&D projects having a total value of over PLN 180 million were launched. 6 projects are currently being advanced while 19 projects have been completed
Implementation Doctorates Program
  • Advancement of the Implementation Doctorates Program for employees of the KGHM Group was continued. At the end of the fourth quarter of 2022, 28 doctoral students from the two editions had participated in the program 
Financial stability
  • Basing the KGHM Group’s financing structure on long-term instruments: in 2022 the KGHM Polska Miedź S.A. Group was fully capable of meeting its financial obligations. The financial needs of KGHM Group companies were met by using intra-group cash transfers. This process is mainly based on managing the KGHM Group’s current liquidity based on cash pooling (the system was modified in 2022 to optimise the process of exchanging currencies by the domestic companies of the KGHM Group), as well as on long-term owner loans and active use of guarantees and letters of credit
  • Shortening the cash conversion cycle: actions were taken aimed at optimising the receivables recovery period and the payables payment period, matching them to current needs and market conditions, reverse factoring and factoring were used for this purpose, as needed
  • Effective management of market and credit risk in the KGHM Group: in terms of advancing the strategic plan of hedging KGHM Polska Miedź S.A. against market risk, in 2022 put options were purchased on the currency market for USD 205 million of planned revenues from sales, with maturities falling from April to December 2022. Actions were also continued aimed at reducing exposure to credit risk by ongoing monitoring of receivables, the evaluation and monitoring of the financial condition of business partners, setting credit limits, securing receivables and non-recourse factoring
Continuation of the Occupational Health and Safety’s Improvement Program in KGHM Polska Miedź S.A.
  • LTIFR ratio for KGHM Polska Miedź S.A.: 5.05 (lower than the 0.59 recorded in the same period last year). Number of workplace accidents: 149 or lower by 16 compared to 2021 TRiR ratio for the international assets (total for the employees of the KGHM INTERNATIONAL LTD. Group and Sierra Gorda S.C.M. as well as contractors for these entities) in 2022: 0.34
  • The Company was awarded the title Gold Card Leader of Workplace Safety for the years 2023-2024 for achievements in improving OHS
  • The Workplace Safety Management System PN ISO 45000:2018 introduced in the Company was positively assessed by external auditors during a periodic review
  • Cooperation with domestic and international academic institutions and opinion makers was engaged in, among others participation in work on new EU regulations regarding hygienic and biological standards, in particular for metals and fumes from diesel engines; in cooperation with the State Labour Inspectorate, the first national Polish conference called „Diesel engine fumes in underground mining based on the experience of KGHM Polska Miedź S.A.” was organised; participation in interdisciplinary work and international problem teams
  • An active model of coordination of the work of OHS units was applied. 15 inspections were performed in the Divisions as well as two behavioural audits. Active forms of education and employee support were prepared
  • Documentation required to commence the investment project Workplace Environment Reports Generator was prepared
  • The „Human Rights Policy in KGHM Polska Miedź S.A.” was adopted
Program to adapt the technological installations of the Company to the requirements of BAT conclusions for the nonferrous metals industry and to restrict emissions of arsenic (BATAs)
  • The Program to adapt the technological installations of the Głogów Copper Smelter and Refinery and Legnica Copper Smelter and Refinery Divisions was continued. In 2022, 6 projects were advanced
  •  The following were brought into operation: a unit to remove arsenic and mercury from gases before the SOLINOX installation at the Legnica Copper Smelter and Refinery; an installation to remove sulphur from gases from the crude lead production furnaces at the Głogów Copper Smelter and Refinery; an installation to remove particulates from gases emitted from the convertor furnaces at the Głogów Copper Smelter and Refinery; an installation to remove arsenic-bearing dust from gases from the installation for the granulation of copper at the Legnica Copper Smelter and Refinery
Environmental policy and pro-environmental activities
  • A decision was received on recognising the acid waste generated by the metallurgical facilities of KGHM Polska Miedź S.A. as a by-product
  • A decarbonisation installation was brought online at the Concentrators Division, where diluted sulphuric acid – a by-product arising in the smelters of KGHM Polska Miedź S.A. – is used
  • Freely-acquired rights for 2022 were distributed to KGHM Polska Miedź S.A.
  • Certification by the Copper Mark for the Głogów Copper Smelter and Refinery and the Legnica Copper Smelter and Refinery was maintained
  • The balance of scope 1, 2 and 3 greenhouse emissions for 2021 by the KGHM Polska Miedź S.A. Group was calculated
  • The environmental footprint and carbon footprint of some of the products of KGHM Polska Miedź S.A. was analysed
  • The Polish Chamber of Commerce “Eco-development” („Ekorozwój”) awarded the „Green Laurels – 2022” (“Zielony Laur – 2022”) prize for an installation to remove arsenic and mercury from gases before the SOLINOX installation
Continued advancement of projects to automate the production lines of the Mining Divisions of KGHM Polska Miedź S.A.
  • Work continued related to the electromobility of mining machinery. Work continued connected with testing electric battery-powered mining machinery. In the Lubin Mine, following the completion of tests, a mobile bolting rig was brought into operation, while tests continue on a mobile drilling rig. Certification procedures are underway for a prototype vehicle for the transportation of people and materials in the underground mines, which are planned to be completed in 2023. In the Rudna Mine, operational tests are underway on an Epiroc ST14B fork loader. Actions are underway aimed at expanding the testing of electric machinery
  • The anti-collision system was integrated as well as the system for locating and identifying machinery and people in the underground mines
  • Robotisation of production and auxiliary processes continued. Work continues on building a CuXRF robot to scan for copper content at the working faces
  • The acquisition was completed of equipment and elements of the dewatering monitoring system, which was built and brought into operation at the Polkowice-Sieroszowice Mine with visualisation in the dispatcher’s office
  • Supplementary workshops were held for internal Auditors of the Energy Management System (ISO 50001) and of the Occupational Health and Safety Management System (ISO 45001)
  • Work continued on managing the risk of a lack of improvement in the energy results of KGHM (risk was analysed in line with the cascade model, including the identification of actions to mitigate this risk)
KGHM 4.0 program Advancement of the KGHM 4.0 Program was continued, divided into two main areas:
  • In the area of ICT (Information and Communication Technology) and Cybersecurity:
    • Work was carried out in terms of ensuring ICT security due to the war in Ukraine, and the Charlie CRP alarm level (involving cyberspace threats) was introduced at a country-wide level. Thanks to this there were no interruptions recorded in the business operations of the KGHM Group, and security processes were supported
  • In the area of Digitalisation of business processes:
    • Implementation work was completed under the project to implement the platform – construction of a Digital Workplace. The implementation of a Digital Workplace supports the development of KGHM in terms of increasing employee efficiency, managing information and building the potential to implement new application solutions and to cooperate with external business partners
    • In terms of the project APO/BDG2.0 – testing was performed in cooperation with all of KGHM’s Mining Divisions and the Head Office, and five tasks were implemented for use
    • In terms of the project „Optimisation of the Production Planning and Settlement Process”, in 2022 work on the implementation of nine tasks was completed
    • The fourth and fifth stages of implementation of the CMMS system (Computerized Maintenance Management System), supporting production and material logistics in the Metallurgical Plants, Concentrator Division and Tailings Division, continued. The project is aimed at increasing the Company’s organisational and cost efficiency in terms of maintaining operational continuity
    • In terms of the project „Improvement and automation of the accounting processes in CUK (accounting services centre)” advancement of over 20 initiatives, aimed at enhancing the efficiency of the Company’s accounting and reporting processes, was completed
Development of solar energy
  • Actions continued involving construction of the HMG I-III photovoltaic power plants complex. Technical conditions were issued for the connection of all three localities of the HMG I-III Photovoltaic Power Plants. In the fourth quarter of 2022, a legally-binding environmental decision was received and work began on developing project documentation. The wording of the connection agreement is being discussed
  • Actions continued involving construction of the Obora I Sandpit photovoltaic power plant – documentation needed to advance the investment was developed. Cartographic and geodesic work was completed, involving an alteration of land use in the Registry of Land and Buildings in the County Office in Lubin
  • In 2022, three new projects at the preparatory stage of building photovoltaic power plants were initiated: „Polkowice”, „Tarnówek” and „Kalinówka” for the Tailings Division. Proceedings commenced aimed at selecting a designer for these three projects
  • A multi-scenario study of the possibilities of connecting new generating sources to the power network of KGHM in the vicinity of the Lubin Mine was received. Preparations are underway aimed at initiating another photovoltaic power plant on the grounds of liquidated shafts of the Lubin Mine
  • A project was initiated to commence preparations to build a photovoltaic power plant on the grounds of the Cedynia Wire Rod Plant
  • Analytical work is underway involving the utilisation of other terrain belonging to KGHM for the development of renewable energy sources. At the same time analyses are being conducted of the market environment in terms of acquiring companies either in possession of projects to build photovoltaic farms or having functioning installations
Development of wind energy, including offshore
  • A Memorandum of Understanding was entered into with Total Energies Renewables SAS. Joint engagement was agreed in proceedings involving the obtaining of location decisions for the construction of Offshore Wind Farms. In the first half of 2022, seven applications were submitted for the issuance of siting permits. By the end of 2022 all proceedings aimed at identifying sites included in the applications of the Company and its Strategic Partner had commenced. Complete documentation was submitted for the purpose of proceedings conducted by the Ministry of Infrastructure. The issuance of siting decisions is expected in the first half of 2023
  • Analyses commenced on the possibilities of building wind farms on Company property and discussions continued with entities in possession of interesting projects for sale
Development of hydrogen technology
  • A „Sector Agreement for the development of hydrogen power in Poland” was signed under the patronage of the Minister of Climate and Environment of the Republic of Poland, and establishment of the Lower Silesia Hydrogen Association was initiated
Development of nuclear energy
  • In February 2022, an agreement with NuScale Power LLC (a supplier of nuclear technology) was signed for preliminary work (Early Works Agreement), constituting the first step in the process of implementing SMR technology in the business activities of the KGHM Group
  • In April 2022, KGHM and TAURON Polska Energia S.A. signed a letter of intent regarding cooperation in the construction of low-carbon energy sources, including with the use of small modular reactors (SMR)
  • In July 2022 the Company submitted an application, being the first time in Poland, for the implementation of small modular reactors (SMR) to the National Atomic Energy Agency. In September 2022, KGHM Polska Miedź S.A. and SN Nuclearelectrica S.A. signed a memorandum of cooperation on the development of SMRs. Work is currently underway on the preliminary selection of a site for the SMRs
Power Purchase Agreements (PPAs)
  • In November 2021 the Company announced an open tender for the Purchase of Electricity generated from Renewable Energy Sources (RES). In the first quarter of 2022, bids for the sale of energy from RES under PPAs were received. In the third quarter of 2022, an Agreement was signed with Solartechnik (Invest PV 7 Spółka z o.o.). The sale of electricity to KGHM, generated by the Żuki Solar Power Farm in the Municipality of Turek, commences from 1 April 2023. The planned volume of sales is 5,300 MWh/year
Self-generation of electricity
  • In 2022, 11.71% of the Parent Entity’s need for electricity was met by its own internal sources, including RES
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