Strategy execution in 2017
In 2017, we successfully implemented strategic projects relating to the exploration, the Main Process Line, the development of assets and production.
|Radwanice-Gaworzyce||In February 2017, we received a concession for the extraction of copper ore from the “Radwanice-Gaworzyce” deposit in the Gaworzyce area and we signed an agreement for the establishment of mining usufruct. At the Company’s request to terminate the exploration concession for the “Radwanice-Gaworzyce” copper ore deposit in the “Dankowice” area. The Minister of Environment terminated the concession in a decision of 19 July 2017.|
|Synklina Grodziecka and Konrad||Technical and economic analyses showed that there was no business case for the investment. Because an important role in the economic assessment of the project is played by the costs associated with, among others, the drainage of the contemplated mine, a decision was made to carry out additional hydrogeological tests. We have obtained a decision extending the term of the Konrad concession for three years. The administrative procedure regarding the extension of the Synklina Grodziecka concession is still underway|
|Retków-Ścinawa and Głogów||We have obtained a decision allowing us to perform, among others, surface drill holes and underground mine workings significantly supplementing the exploration of the geological and mining conditions. The Minister of the Environment also issued a decision amending the terms of the concession for exploration and appraisal of copper ore deposits in the “Głogów” area, which will make it possible to launch the next stage of geological work.|
Exploration projects at the preparation stage:
|Bytom Odrzański Kulów-Luboszyce||In 2017, the Supreme Court of Administration dismissed the cassation complaints regarding the “Bytom Odrzański” and “Kulowa-Luboszyce” concession decisions. Dismissal of the complaints by the Court means that in 2018 the concession applications for these areas may be once again reviewed by the Ministry of the Environment.|
|Puck region||In 2017, the geological structure was reinterpreted and economic and technical assessment for possible development of the potassium and magnesium salt deposits was launched, taking into account the mining model and processing technology. The study confirmed the viability of further geological work. In Q4 2017, the second Parszkowo IG-2 hole was drilled and preparations for drilling of the third hole Mieroszyno IG-11 were started.|
|KEY DEVELOPMENT PROJECTS AS PART OF THE MAIN TECHNOLOGICAL LINE IN POLAND|
|Głogów Głęboki-Przemysłowy Deposit Opening Program||In 2017, the GG-1 shaft was deepened (the target depth of the shaft is 1,350 m, with the diameter of 7.5 m). As at the end of the year, 1070 running meters of the shaft was drilled. As for Construction of the Central Air Conditioning System (CACS) in Shaft GG-1, contracts have been signed with the contractor for construction of a tri-generation Surface Air Conditioning Station and for construction of an Ice Water Transmission System for the CACS. In addition, in 2017, preparatory work was continued to obtain a permit for construction of facilities required to dig the GG-2 Shaft (“Odra”).|
In 2017, as part of the project based on the MW technology (using explosives), the total of 46.5 running km of opening and preparatory workings were constructed (in 2016, 32.8 running km of workings were built), up by 42%.
|Pyrometallurgy Modernization Program at the Głogów Smelter||In 2017, as-built documentation was verified and approved, along with the documents required for obtaining occupancy permits. Completion of work was reported to competent authorities (among others, State Sanitary Inspection, State Fire Brigade, Voivodship Inspectorate of Construction Oversight, County Inspectorate of Construction Oversight). The settlements and final acceptance of the contracts and orders were at the final stage.|
|Metallurgy Development Program (PRH)||In 2017, construction and assembly works were continued within the key technological hubs as part of the investment tasks of the program, i.e. the construction of the Głogów II Smelter Steam Dryer and the Installation for roasting copper concentrate. Due to the failure to launch the roasting installation by the contractual deadline, i.e. Q4 2017, for technological reasons attributable to the Contractor, the installation delivery deadline currently declared by the Contractor is Q3 2018. In addition, as part of the PRH, projects associated with adaptation of the technical infrastructure to the change of the metallurgical technology in the Głogów I Smelter are continued. Execution of the basic works was completed and the works associated with the rectification of the effects of the failure of the heat recovery steam generator at the Głogów I Smelter and supplementary works were continued. The works are pending completion with relevant authorities and occupancy permits are pending issuance|
|Expansion of the Tailings Storage Facility (OUOW) “Żelazny Most”||Pursuant to the permit obtained in 2016 to expand the Main Facility to the ordinate of 195 m above sea level and the permit to continue operating the Tailings Storage Facility; the extension of the dams is steadily underway within the scope of the parent company’s operating activity. The formal activities to continue the expansion of the “Żelazny Most” (Iron Bridge) tank are in progress to procure the ability to deposit flotation tailings in subsequent years – construction of the Southern Quarter. In 2017 KGHM Polska Miedź S.A. secured an environmental decision for the investment involving the construction of the Southern Quarter making it possible to deposit additionally waste in a quantity of 170 million m3.|
Our operating strategy
|Sierra Gorda Mine in Chile – Phase 1 KGHM INTERNATIONAL LTD. Group 55 percent Sumitomo Metal Mining and Sumitomo Corporation 45%||In 2017, sulfide ore processing was optimized. The activities were designed to stabilize the ore processing volume and technological parameters and focused on stabilizing the work of the processing plant and increasing the level of metal yields. We are also working on the development of the mine based on the first investment phase along with actions aimed at optimizing the technological line as a result of which the production capacities are to be increased|
|Maintenance of production using its own concentrate||In 2017, preparatory work was continued on the launch of operation works in the new deposit areas opened as part of the Deposit Opening Program (previously Program GG-P), concessions were obtained for mining copper from the “Radwanice-Gaworzyce” deposit in the Gaworzyce mining area.|
• As part of the execution of the Deposit Opening Program, the drilling of the ventilation shaft GG-1 (mine cage and skip compartments) was continued down to 1070 meters. Preparatory work was continued to obtain permits for construction of facilities required to dig Shaft GG-2 (“Odra”).
• The construction of the Air Conditioning Station was started at the GG-1 shaft with the cooling capacity of 30 MW and heat recovery for social and technical purposes. Mining pits in the Rudna Mine and Polkowice-Sieroszowice Mine Mining Areas were executed, combined with the development of the required technical infrastructure. Their main purpose is to open and prepare new operation fields and the inclusion of the GG-1 shaft into the ventilation network, which will significantly improve the conditions for the operations on level 1200 m and below.
• As part of opening works, below level 1200 m, a field for the G-28 section at Rudna Mine was prepared; the section launched operations in January 2018.
|Improvement of the efficiency of the main technological line in Poland||The initiatives to improve the efficiency of resource management in mining and metallurgical plants of KGHM Polska Miedź S.A. were continued, thus allowing for limiting cost increase through:|
• increasing the efficiency of resource utilization (3D deposit modelling),
• increasing the extraction and production of copper concentrate,
• optimization of mining machinery management,
• implementation of the energy-saving program,
• headcount level optimization. The initiatives are executed in accordance with the adopted assumptions, except for optimization of mining machinery management, which was disrupted by reduction of expenditures for the purchase of the SMG in 2016 by as much as 40 per cent and extension of the machinery useful lives. As a result, the costs of overhaul and maintenance of the mining machinery increased by approx. PLN 20 million.
|Improving occupational safety||In 2017, we recorded a decrease in the total number of accidents at work from 370 to 300 injured persons. The significant drop in the accident rate concerned in particular mining plants. In 2017 the number of accidents associated with a high level of rock formation hazard which is associated with copper ore mining in the KGHM Polska Miedź S.A. mines significantly decreased.|
Compared to 2016, the number of the injured for the above reason declined by 60 per cent. The implementation of the long-term “Occupational Safety and Health Improvement Program at KGHM Polska Miedź S.A. until 2020” was continued.
|DEVELOPMENT OF FOREIGN ASSETS|
|Victoria Project (Sudbury Basin, Canada) KGHM Polska Miedź S.A. Group 100 percent||In 2017, we continued the work related to securing the existing infrastructure and developing the optimal project implementation path.|
|Sierra Gorda Oxide (Chile) KGHM INTERNATIONAL LTD. Group 100 percent Sumitomo Metal Mining and Sumitomo Corporation holding an option to take up, in total, a 45 percent interest in the project.||In 2017, works relating to the evaluation of alternative project development scenarios, allowing for the reduction of the required capital expenditures, were continued.|
|Ajax Project (British Columbia, Canada) KGHM Polska Miedź S.A. Group 80 percent, Abacus Mining and Exploration Corp. 20 percent||In December 2017, the Ministers of Environment and the Ministers of Energy, Mining and Petroleum Resources of the Province of British Columbia (provincial authorities) made a decision to refuse to issue the environmental assessment certificate (EA Certif cate) for the Ajax project. The Federal Minister of Environment and Climate Change expressed the view that the project would have considerable adverse effects and sent it back to the Department of Fisheries and Oceans Canada and to the Natural Resources Canada. KGHM Ajax Mining Ltd. will consider further steps once it reviews the reasoning in the decision issued by the Province’s authorities. These steps may involve a legal remedy in the form of judicial review.|