PARTNERSHIP TEXT

KGHM, a global raw materials concern and a leading producer of copper and silver worldwide, has presented its annual report for 2022. Despite a volatile and unstable macroeconomic situation, the copper company achieved high operational and financial results, maintained planned production levels, and continued with high-value projects related to the energy transition.

– Last year's solid production and financial results, achieved during a challenging period, allow us to look optimistically towards this year and the years to come. We have ambitious projects and investment plans – we have set a record level of investment expenditure for 2023. At KGHM, we uniquely combine economic and financial efficiency with respect for the natural environment and partnership relations with stakeholders – said Tomasz Zdzikot, President of the Management Board of KGHM Polska Miedź S.A.

Production and Financial Results

In 2022, the KGHM Capital Group recorded stable copper production from domestic assets (mining output 442.7 thousand tons, smelting output 586 thousand tons) and from foreign assets (Sierra Gorda 90.8 thousand tons (55%); Robinson 46.8 thousand tons; Carlota 4.1 thousand tons; Franke 2.8 thousand tons*; Sudbury Basin 2.5 thousand tons).

Consolidated revenues of the KGHM Capital Group for 2022 amounted to PLN 33.8 billion, an increase of 13.6 percent compared to 2021. Net profit for the past year was PLN 4.8 billion, and adjusted EBITDA reached PLN 8.9 billion.

At the end of 2022, the value of consolidated assets of the KGHM Capital Group increased to PLN 53.4 billion. In turn, equity amounted to PLN 32.2 billion. The Group maintained a safe level of debt – the net debt/EBITDA ratio last year was 0.8.

Climate Policy

KGHM is a European leader in implementing effective low-emission technologies with access to the latest mining and energy solutions. The company has implemented a business model ensuring a full value chain – from exploration, extraction, and processing of natural resources to the sale of finished products. The entire system is implemented with respect for ESG rules.

The copper giant is successfully implementing the assumptions of KGHM's Climate Policy. This includes, among other things, the completion of the greenhouse gas emissions balance for Scope 1, 2, and 3 for 2021 for the entire Capital Group. Projects to adapt the company's technological installations to the requirements of the BAT conclusions for the non-ferrous metals industry, along with the reduction of arsenic emissions (BATAs), are continuing. In 2022, an additional 6 installations were commissioned in KGHM divisions, significantly improving air quality in the Copper Belt.

The high-value pro-ecological investments undertaken by KGHM have one goal – minimizing the negative impact on the environment and surroundings. Detailed data from this area and other non-financial information are included in the Management Board's Report on the activities of KGHM Polska Miedź S.A. and the KGHM Capital Group.

Leader of the Energy Transition

The goals of KGHM Polska Miedź S.A. are to reduce greenhouse gas emissions by 30 percent by 2030 and to achieve full climate neutrality by 2050. Over the next 7 years, the company will strive to meet its energy needs from its own sources – including RES – by 50 percent. Currently, the operation of KGHM Polska Miedź S.A.'s steam-gas units can cover up to 20 percent of electricity demand.

By diversifying electricity sources across the entire Capital Group, KGHM is also focusing on energy from the sun, wind, and hydrogen. The company is building photovoltaic power plants and continuing projects in offshore wind energy and hydrogen sources. Furthermore, KGHM is involved in the development of atomic energy in Poland. Last year, the copper giant submitted the first application in Poland for the assessment of small modular reactor (SMR) technology to the National Atomic Energy Agency.

The copper company will also be a recipient of energy from the new Żuki solar power plant in the Wielkopolska Voivodeship, generating over 5.2 MW from nearly 10,000 photovoltaic modules. In 2022, KGHM also became a signatory to the "Sectoral Agreement for the Development of the Hydrogen Economy in Poland." The company is testing an innovative technology using copper and silver alloys, which will significantly reduce electricity transmission losses.

Investments in the Black

In the KGHM Group, exploration and exploitation projects in Poland and in foreign assets continued in 2022. Concession work is being carried out on copper and potash salt deposits. The Deposit Access Program is being developed, within which the deepening of the GG-1 shaft has been completed. KGHM currently has the deepest mining excavation in Poland. The procedure for selecting a contractor for the GG-2 shaft construction project is underway. Another important investment project is the continuation of the expansion of the "Żelazny Most" Mining Waste Disposal Facility. The KGHM Group consistently focuses on developing and strengthening the potential of its key operating assets and prospective projects in Chile, the USA, and Canada.

Top-Level Safety

Employee life and health have always held the highest position in the hierarchy of values of KGHM Polska Miedź S.A. Capital Group. For several years, the company has been pursuing a long-term vision of "Zero accidents due to personal or technical reasons, zero occupational diseases among our employees and contractors."

In 2022, the implementation of the Employee Safety Improvement Program – "Think About Consequences" and the Program for eliminating the most common workplace safety hazards through the use of innovative technologies, as part of the company's updated strategy, continued.

Last year, KGHM recorded a significant reduction in the number of workplace accidents, from 165 to 149 injured persons year-on-year (a decrease of 16 accidents). The majority of registered workplace accidents (approximately 98.7%) were minor.

The KGHM LTIFR (Lost Time Injury Frequency Rate KGHM) in 2022 (i.e., the total number of workplace accidents in the company standardized to 1 million hours worked by KGHM employees) stood at 5.05. This is 72.8 percent lower than the value recorded in 2010 and 10.3 percent lower than the value recorded in 2021. This is KGHM's best result to date.

Macroeconomic Situation

The geopolitical situation related to Russia's direct aggression against Ukraine and the implemented sanctions system does not currently limit the operational activities of KGHM Polska Miedź S.A. and other companies in the Capital Group.

In 2022, KGHM continued its work on ensuring information and communication security. Thanks to the implemented projects, the company maintains production continuity and strengthens its efforts regarding cyberspace threats.