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By Adrian Krajewski
WARSAW Aug 14 Poland's KGHM, Europe's
second-biggest copper producer, expects to exceed its output
targets for this year and beat analysts' forecast for its full
year earnings thanks to higher global demand for the metal, the
Polish group said.
The state-controlled miner did not provide its own guidance
for 2014, but has previously said it would come close to
analysts' forecasts for its full year net profit of 2.26 billion
zlotys ($724 million).
"Our results in the first half of the year exceeded our
expectations slightly," KGHM deputy head Jaroslaw Romanowski
told a news conference.
"I had said earlier that the market consensus for our net
income could be seen as a good benchmark. I think that at the
end of the year we will be able to pleasantly surprise in this
regard," he added.
According to KGHM, the world's largest silver producer,
lower metals prices have reduced its earnings in the first half
of the year by 905 million zlotys to 1.12 billion zlotys, or
around half of what analyst estimate for the full year.
Copper prices averaged $6,916 a tonne in the first
half of 2014, below the miner's full-year goal of $7,100. KGHM
has, however, got halfway towards its copper output target of
567,500 tonnes for this year.
It now expects to exceed the copper output goal by
4,000-5,000 tonnes, planning also to produce 55 tonnes more
silver this year that the targeted 1,140 tonnes.
"We agree with the IMF, which expects global growth of 4
percent next year. That growth will for sure support demand for
copper," Romanowski said.
"The suspicion that China's economic slowdown would
accelerate also turns out to be overly pessimistic. That is a
good sign for the second half of 2014 and the more so for 2015,"
he added, saying that KGHM wants to maintain its policy of
paying out around a third of its profits as dividends.
SIERRA GORDA MINE
The earnings estimates are for KGHM's unconsolidated
results, generated only by the parent company. They are the
basis for dividend payouts and KGHM's foreign subsidiaries do
not add much to the bottom line.
This will change thanks to the start up last month of
production from the miner's key overseas asset, the Sierra Gorda
mine in Chile.
The target for Sierra Gorda's annual production is 220,000
tonnes of copper, 25 million pounds of molybdenum and 64,000
ounces of gold.
KGHM controls 55 percent of the Chilean project, launched at
a cost of $4.16 billion, while Japan's Sumitomo holds
the rest. The mine's capacity is seen holding a total 1.4
billion tonnes of ore, which is expected to take 23 years to
To finance its investment plans, pegged at a company-wide
total of 4.3 billion zlotys this year alone, KGHM signed a
five-year revolving credit deal worth $2.5 billion with a group
of lenders earlier this month.
The previously almost debt-free company additionally signed
a 2 billion-zloty credit deal with the European Investment Bank
(EIB) earlier this month.
(1 US dollar = 3.1230 Polish zloty)
(Editing by David Evans)