Revenue on the sale of copper in 2017 totalled PLN 12,213 million and were higher than the level of sale in the previous year by 10% (PLN 11,064 million in 2016). 

Revenue on the sale of metallic silver in 2017 amounted to PLN 2,447 million and were lower by 6% compared to the level of sale in 2016. Revenue on the sale of gold were reported at the same level as in 2016 (PLN 556 million). The decrease in revenue on the sale of silver was mainly caused by the drop in the quotations of this metal expressed in PLN, compared to 2016.

Revenue on sales by KGHM Polska Miedź S.A (PLN million)

2017
2016
Change (%)
IVQ’17
IIIQ’17
IIQ’17
IQ’17
Cathodes
 and parts of cathodes
5,541
4,937
+12.2
1,836
1,259
1,217
1,229
Copper wire rod and OFE
 wire
6,276
5,293
+18.6
1,603
1,545
1,514
1,614
Paid copper
concentrate*
86
574
(85.0)
15
18
11
42
Other copper products
310
260
+19.2
86
78
73
73
Total copper
 and copper products
12,213
11,064
+10.4
3,540
2,900
2,815
2,958
Metallic silver
2,447
2,596
(5.7)
720
507
660
560
Payable silver in
 concentrate**
(6)
202
x
-
(1)
(1)
(4)
Metallic gold
556
556
-
134
134
135
153
Refined lead
273
230
+18.7
71
66
62
74
Other products and
 services
356
316
+12.7
89
86
84
97
Goods and materials
185
148
+25.0
37
40
50
58
Total revenue on sale
16,024
15,112
+6.0
4,591
3,732
3,805
3,896

* Value of payable copper reduced by the value of processing premium (TC), Cu refining premium (RcCu) and other deductions affecting the value of Cu concentrate (except the value of Ag refining premium). 

** Payable silver value reduced by the value of Ag refining premium (RcAg), negative values resulting from the settlement of contracts from the previous year.

Warunki sprzedaży

In 2017, compared to 2016, in KGHM Polska Miedź S.A. we reported a decrease in the volume of sales of copper products by 53.8 thousand tons (10%), which was associated with a reduction in the production of electrolytic copper. The volume of cathode sale dropped by 12.9 thousand tons (5%) and copper wire rod and OFE wire by 5.2 thousand tons (2%). Sale of metallic silver in 2017 amounted to 1,185 thousand tons and was similar to the previous year’s level. The volume of sale of gold in 2017 amounted to 117.1 thousand troy ounces, which was an increase by 4% compared to 2016.

Volume of sale of basic products of KGHM Polska Miedź S.A.
Metallic silver
unit2017
2016
Change (%)Q4 2017Q3 2017
Q2 2017
Q1 2017
Cathodes
and parts of
cathodes
kt233.5
246.4
(5.2)
73.9
53.2
55.4
51.0
Copper wire rod
and OFE wire
kt259.9
265.1
(2.0)
63.2
64.3
66.8
65.6
Paid copper
in concentrate*
kt(0.3)
35.2
x
-
-
-
(0.3)
Other copper
products
kt12.9
13.1
(1.5)
3.4
3.2
3.3
3.0
Total copper
and copper products
kt506.0
559.8
(9.6)
140.5
120.7
125.5
119.3
Metallic silver
tons
1,185
1,189
(0.3)
372
258
308
247
Paid silver
in concentrate
tons
-
91
x
-
-
-
-
Metallic gold
k troy ounces
117.1
112.5
+4.1
29.2
29.2
27.8
30.9
Refined lead
kt29.6
29.7
(0.3)
7.5
7.5
7.0
7.6

* Negative values result from the settlement of contracts from the previous year

26% of sales revenue obtained by KGHM Polska Miedź S.A. in 2017 came from the Polish market. The largest remaining recipients of the products, goods and services offered by the company were China, Germany, the United Kingdom and the Czech Republic.

Revenue on sale of KGHM Polska Miedź S.A by market

BEST PRACTICE

For 20 years KGHM Polska Miedź S.A. has been selling copper cathodes to China, where their main recipient is China Minmetals Corporation. We have already sent to the Middle Kingdom nearly 881 thousand tons of this resource for 5 billion dollars. Cathodes from KGHM is 60% of all Chinese imports from Poland. The current framework contract, signed in 2016, provides for exports from 250,000 up to 600,000 tons of cathodes in 2017-2021, worth (depending on the level of orders) from 1.2 billion to 2.8 billion dollars.

Revenues of the KGHM INTERNATIONAL LTD. segment in 2017 amounted to USD 695 million, and thus increased by USD 56 million (+9%), compared to 2016, mainly due to more favourable macroeconomic conditions whose positive impact was partially limited by a reduction in metal sales volumes. As a result of a decrease in the volume of sale of precious metals by 21.7 thousand troy ounces (-23%) their sales declined by USD 4 million (-4%).

Volume and revenue on the sale of KGHM INTERNATIONAL LTD. (USD million)


unit2017
2016
Change (%)
Revenue on sale, including*
USD million
695
639
+8.8
- Copper
mln USD
454
381
+19.2
- Nickel
mln USD
12
21
(42.9)
-TPM – precious metals
mln USD
99
103
(3.9)
Copper sale volume
kt80.0
90.2
(11.3)
Nickel sale volume
kt1.1
2.1
(47.6)
TPM sale volum
k troz
72.6
94.3
(23.0)

*Including processing premiums

Cost structure by type

At KGHM Group, we manage our financial capital so as to generate returns for shareholders and bring benefits to other stakeholders. We are able to adapt to ongoing changes and continuous investments in people and resources. 

The costs of the Company’s core operations (including production costs of products sold, value of goods and materials sold, selling and general management costs) in 2017 totaled PLN 12,899 million and were up 3% compared to the same period of 2016, mainly due to the higher cost of the mining tax for some minerals and the higher value of used external services. The cost composition by type in 2017 was very similar to 2016.

KGHM Polska Miedź S.A. – costs by type (PLN million)

2017
2016
Change (%)Q4 2017Q3 2017
Q2 2017
Q1 2017
Depreciation of fixed
assets and intangi-
ble assets
1,072
993
+8.0

280
261
262
269
Costs of employee
benef ts
3,210
3,023
+6.2

864
782
813
751
Consumption of
materials and
energy, including:
5,831
5,482
+6.4

1,447
1,596
1,417
1,371
external inputs
3,750
3,469
+8.1

932
1,059
906
853
energy and
energy factors
775
745
+4.0

196
222
190
167
External services
1,531
1,392
+10.0

456
362
360
353
Taxes and charges,
 including:
2,154
1,725
+24.9

535
540
506
573
Minerals extraction tax
1,765
1,338
+31.9

456
438
405
466
Other costs
126
161
(21.7)
37
29
40
20
Total costs by type
13,924
12,776
+9.0

3,619
3,570
3,398
3,337
Cost structure by type in 2017.

The level of operating costs is influenced to a significant extent by production costs of electrolytic copper (before subtracting the value of by-products), whose share is about 94 percent. Production costs of copper in concentrate – C1* was 1.30 USD/pound and 1.52 USD/pound in 2016 and 2017 respectively. The value of the costs was influenced by the strengthening of the Polish zloty against the US dollar, a higher minerals extraction tax and lower production of own minerals.

* Production costs of copper concentrate – C1 is a unit cash production cost of payable copper concentrate, taking into account the costs of extracting and processing the winnings, transport costs, minerals extraction tax, administrative costs of the mining phase and treatment charge and refining charge (TC/RC), decreased by the value of by-products.

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