| WARSAW, July 17
WARSAW, July 17 Polish mining company KGHM
said it expected to start production this month from
its Sierra Gorda mine in Chile, one of the world's largest
copper projects, as its bet to expand globally is soon to boost
KGHM, Europe's second-biggest copper producer, acquired the
then unfinished project two years ago. It became a symbol of the
move by Polish industry to the global stage after years of
struggling with the transition from Communist rule.
Since the acquisition, however, the cost of getting
production underway at Sierra Gorda, exceeding $4 billion, has
been over a third more than KGHM initially expected, while
falling global copper prices have hit its profits.
"Construction is finished. I think that this month we'll see
the first production of copper ore, and maybe we'll also see the
first sales," KGHM Chief Executive Herbert Wirth told a news
conference in the Polish capital on Thursday.
KGHM acquired the project in 2012 as part of a C$3 billion
($2.8 billion) purchase of Canada's Quadra FNX, now named KGHM
International. That deal allowed it to book the
world's fourth-largest copper deposits.
KGHM controls 55 percent of the Chilean project, and
Japanese partner Sumitomo holds the rest.
The plan is for Sierra Gorda to produce 217,000 tonnes of
copper by 2018, which would account for one third of the group's
KGHM sees the mine's 2014 output at 110,000 tonnes of
copper. It will also produce 11,000 tonnes of molybdenum a year,
or 10 percent of the global supply.
Molybdenum provides strength, heat tolerance and corrosion
resistance in a range of specialized steel alloys for industrial
and military use.
Analysts polled by Reuters expect KGHM to book net income of
2.26 billion zlotys this year, its lowest since 2004, but those
forecasts do not factor in the start of production from Sierra
Lower copper prices have already made it miss its profit
target last year of 3.2 billion zlotys. Its 2013 profit was 3.06
The miner has other projects in Germany, Canada and the
United States, but estimates that Polish assets still represent
around 80 percent of its value. Its push for assets abroad was
partly driven by high production costs at home.
Across the company, KGHM wants to scale up copper production
by over 40 percent to 1 million tonnes annually by the end of
the decade as its overseas assets gradually kick in.
To finance its investment plans, pegged at a company-wide
total of 4.3 billion zlotys ($1.4 billion) this year alone, the
miner signed a five-year revolving credit deal worth $2.5
billion with a group of lenders earlier this month.
($1 = 1.0737 Canadian Dollars)
($1 = 3.0604 Polish Zlotys)
(Editing by Christian Lowe and Jane Baird)