9. Non-current assets and related liabilities
in PLN millions, unless otherwise stated
Note 9.1 Mining and metallurgical property, plant and equipment and intangible assets
Accounting policies – property, plant and equipment | ||||||||||||||||||
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The most important property, plant and equipment of the Group is property, plant and equipment related to the mining and metallurgical operations, comprised of land, buildings, water and civil engineering structures, such as: primary mine tunnels (including in underground mines: shafts, wells, galleries, drifts, primary chambers), backfilling, drainage and firefighting pipelines, piezometric holes and electricity, signal and optical fiber cables. Stripping costs of surface mines and machines, technical equipment, motor vehicles and other movable fixed assets are also included in mining and metallurgical property, plant and equipment.
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Accounting policies – intangible assets |
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Mining and metallurgical intangible assets are mainly comprised of exploration and evaluation assets, and water rights in Chile.
Due to the specific nature of this asset, i.e. the inexhaustibility of the source, the Group adopted an indefinite period of use for these rights and does not amortise this asset. Pursuant to IAS 36, annual testing for impairment is performed and its results were described in Note 3. |
Significant estimates and assumptions |
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Significant estimates and assumptions relating to impairment of mining and metallurgical property, plant and equipment and intangible assets are presented in Note 3. |
Mining and metallurgical property, plant and equipment and intangible assets
Note | Property, plant and equipment | Intangible assets | Total | |||||
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Buildings and land | Technical equipment, machines, motor vehicles and other fixed assets | Fixed assets under construction | Water rights | Exploration and evaluation assets | Other | |||
| As at 1 January 2016 | |||||||
| Gross carrying amount | 14 590 | 10 674 | 4 648 | 243 | 2 706 | 694 | 33 555 |
| Accumulated depreciation/amortisation | (6 856) | (5 648) | - | - | - | ( 301) | (12 805) |
| Impairment losses | (2 677) | ( 458) | - | - | - | ( 1) | (3 347) |
| Net carrying amount | 5 057 | 4 568 | 4 648 | 243 | 2 495 | 392 | 17 403 |
| Changes in 2015 net | |||||||
| Settlement of fixed assets under construction | 834 | 1 815 | (2 649) | - | - | - | - |
| Purchases | - | - | 1 730 | 1 | 142 | 18 | 1 891 |
| Stripping cost in surface mines | 150 | - | - | - | - | - | 150 |
| Self-constructed | - | - | 775 | - | 1 | 68 | 884 |
9.4 | Change in provisions for decommissioning costs | ( 53) | - | - | - | - | - | ( 53) |
4.1 | Depreciation/Amortisation | ( 623) | ( 802) | - | - | - | ( 19) | (1 444) |
4.4 | Impairment losses | ( 268) | ( 48) | ( 17) | ( 148) | ( 898) | ( 27) | (1 406) |
| Exchange differences from the translation of foreign operations | 67 | 20 | 7 | 17 | 189 | 3 | 303 |
| Other changes | (52) | 112 | ( 54) | ( 1) | 13 | ( 15) | 3 |
| As at 31 December 2016 | |||||||
| Gross carrying amount | 15 669 | 12 422 | 4 447 | 260 | 3 001 | 698 | 36 497 |
| Accumulated depreciation/amortisation | (7 550) | (5 974) | - | - | - | ( 251) | (13 775) |
| Impairment losses | (3 007) | ( 783) | ( 7) | ( 148) | (1 059) | ( 27) | (5 031) |
| Net carrying amount | 5 112 | 5 665 | 4 440 | 112 | 1 942 | 420 | 17 961 |
| Changes in 2017 net | |||||||
| Settlement of fixed assets under construction | 1 106 | 1 576 | (2 679) | ( 1) | - | 1 | - |
| Purchases | - | - | 1 252 | 1 | 70 | 43 | 1 366 |
| Stripping cost in surface mines | 319 | - | - | - | - | - | 319 |
| Self-constructed | - | - | 790 | - | 25 | 4 | 819 |
9.4 | Change in provisions for decommissioning costs | 41 | - | - | - | - | - | 41 |
4.1 | Depreciation/Amortisation | ( 540) | ( 837) | - | - | - | ( 15) | (1 392) |
4.4 | Impairment losses | ( 85) | ( 76) | ( 1) | - | ( 695) | ( 3) | ( 860) |
Reversal of impairment losses | 278 | ( 76) | ( 1) | - | ( 695) | ( 3) | ( 860) | |
| Exchange differences from the translation of foreign operations | ( 102) | ( 46) | ( 15) | ( 14) | (298) | ( 3) | ( 478) |
| Other changes | ( 1) | ( 8) | ( 31) | ( 68) | ( 73) | ( 1) | ( 120) |
| As at 31 December 2017 | |||||||
| Gross carrying amount | 15 711 | 13 014 | 3 824 | 50 | 2 574 | 700 | 35 873 |
| Accumulated depreciation/amortisation | (7 452) | (6 090) | - | - | - | ( 232) | (13 774) |
| Impairment losses | (2 131) | ( 574) | ( 6) | ( 20) | (1 603) | ( 22) | (4 356) |
| Net carrying amount | 6 128 | 6 350 | 3 818 | 30 | 971 | 446 | 17 743 |
Note 9.1.1 Mining and metallurgical property, plant and equipment– major fixed assets under construction
2017 | 2016 | |
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Deep Głogów (Głogów Głęboki – Przemysłowy) | 1 012 | 1 084 |
Metallurgy Development Program | 744 | 753 |
Construction of the SW-4 shaft | 554 | 546 |
Investment activity related to development and operation of Żelazny Most Tailings Storage Facility | 382 | 236 |
Investments related to mining region infrastructural development in mines | 197 | 146 |
Pyrometallurgy Modernisation Program | 194 | 1 240 |
Note 9.1.2 Exploration and evaluation assets
Significant expenditures on exploration and evaluation assets are presented in the table below.
Operating segment | Description | Cumulative as at | |
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2017 | 2016 | ||
KGHM INTERNATIONAL LTD. | Expenditures related to exploratory work, mainly within the Victoria project located in the Sudbury Basin in Canada | 1 476 | 1 590 |
KGHM INTERNATIONAL LTD. | Expenditures related to exploratory work within the Ajax project | 573 | 598 |
Note 9.1.3 Expenses related to mining and metallurgical assets
2017 | 2016 | |
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Purchases | (1 366) | (1 891) |
Self-constructed fixed assets | ( 819) | ( 844) |
Stripping costs of surface mines | ( 319) | ( 150) |
Change in liabilities due to purchases | 19 | ( 135) |
Other | ( 42) | (12) |
Total | (2 527) | (3 032) |
Note 9.2 Other property, plant and equipment and intangible assets
Accounting policies | ||||||||||
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Other property, plant and equipment and intangible assets are recognised at cost less accumulated depreciation/amortisation and accumulated impairment losses (the policy regarding impairment is presented in Part 3). Depreciation is done using the straight-line method. For individual groups of fixed assets, the following useful lives have been adopted:
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Other property, plant and equipment and intangible assets
Note | | Property, plant and equipment | Intangible assets | Total | ||
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Buildings and land | Technical equipment, machines, motor vehicles and other fixed assets | Fixed assets under construction | ||||
| As at 1 January 2016 | |||||
| Gross carrying amount | 1 855 | 2 267 | 23 | 443 | 4 588 |
| Accumulated depreciation/amortisation | ( 475) | ( 879) | - | ( 78) | (1 432) |
| Impairment losses | ( 123) | ( 14) | (1) | (124) | ( 262) |
| Net carrying amount | 1 257 | 1 374 | 22 | 241 | 2 894 |
| Changes in 2016 net | | | | | |
| Settlement of fixed assets under construction | 111 | 179 | ( 290) | - | |
| Purchases | - | - | 160 | 15 | 175 |
| Self-constructed | - | - | 49 | - | 49 |
4.1 | Accumulated depreciation/amortisation | ( 57) | ( 198) | - | ( 19) | ( 274) |
4.4 | (Utworzenie)/odwrócenie odpisów z tytułu utraty wartości | (70) | - | - | - | ( 70) |
| Other changes | 239 | (303) | 118 | (29) | 25 |
| As at 31 December 2016 | |||||
| Gross carrying amount | 2 252 | 2 187 | 60 | 504 | 5 003 |
| Accumulated depreciation/amortisation | ( 559) | ( 1 123) | - | ( 177) | (1 859) |
| (Recognition)/reversal of impairment losses | ( 213) | ( 12) | ( 1) | ( 119) | ( 345) |
| Net carrying amount | 1 480 | 1 052 | 59 | 208 | 2 799 |
| Changes in 2017 net | | | | | |
| Settlement of fixed assets under construction | 131 | 161 | ( 292) | - | - |
| Purchases | - | - | 240 | 16 | 256 |
| Self-constructed | - | - | 46 | - | 46 |
4.1 | Depreciation/amortisation | ( 76) | ( 198) | - | ( 18) | ( 292) |
4.4 | (Recognition)/reversal of impairment losses | 28 | - | - | (5) | ( 23) |
| Other changes | (42) | 1 | 89 | 8 | 56 |
| As at 31 December 2017 | |||||
| Gross carrying amount | 2 292 | 2 287 | 141 | 522 | 5 242 |
| Accumulated depreciation/amortisation | ( 608) | (1 260) | - | ( 189) | (2 057) |
| Impairment losses | ( 163) | ( 11) | 1 | ( 124) | ( 297) |
| Net carrying amount | 1 521 | 1 016 | 142 | 209 | 2 888 |
Note 9.3 Depreciation/amortisation
Note | Property, plant and equipment | Intangible assets | |||
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2017 | 2016 | 2017 | 2016 | ||
4.1 | Total | 1 651 | 1 680 | 33 | 38 |
settled in profit or loss | 1 578 | 1 665 | 31 | 33 | |
cost of manufacturing products | 1 550 | 1 626 | 26 | 26 | |
administrative expenses | 18 | 28 | 5 | 6 | |
selling costs | 10 | 11 | - | 1 | |
being part of the manufacturing cost of assets | 73 | 15 | 2 | 5 |
Note 9.4 Provision for decommissioning costs of mines and other facilities
Accounting policies | Important estimates and assumptions | ||||||||||||
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The provision for future decommissioning costs of mines and other technological facilities is recognised based on the estimated expected costs of decommissioning of such facilities and of restoring the sites to their original condition, which are made on the basis of ore extraction forecasts (for mining facilities), and technical-economic studies prepared either by specialist firms or by the Parent Entity. | These provisions represent the estimated future decommissioning costs of mines and other technological facilities discounted to present value. Revaluation of this provision at the end of the reporting period is affected by the following indicators:
In the KGHM Polska Miedź S.A Group, in order to estimate provisions for the decommissioning costs of mines and other technological facilities located in individual countries, the following discount rates were applied:
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Note | 2017 | 2016 | |
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| Provisions at the beginning of the reporting period | 1 500 | 1 496 |
9.1 | Changes in estimates recognised in fixed assets | 41 | ( 53) |
Other | ( 181) | 57 | |
Provisions at the end of the reporting period including: | 1 360 | 1 500 | |
- non-current provisions | 1 351 | 1 487 | |
- current provisions | 9 | 13 |
Note 9.5 Capitalised costs of external financing
In 2017, the Group recognised PLN 80 million of external financing costs in property, plant and equipment and intangible assets. The capitalisation rate applied with respect to the loan from the Syndicate of Banks and with respect to loans from other banks amounted to 36.58%. In 2016, the Group recognised PLN 90 million of external financing costs in property, plant and equipment and intangible assets and applied the following capitalisation rates: 100% with respect to the loan from the European Investment Bank, and 45.12% with respect to a loan granted by the Syndicate of Banks.