WARSAW (Reuters) - Poland’s KGHM, one of the world’s biggest copper and silver producers, has no plan to sell its foreign assets but may freeze some in Canada or the United States if they require big investments, its chief executive said.
State-run KGHM, which for many years had focused only on Poland, accessed Chilean, Canadian and U.S. metal deposits through its almost $3 billion purchase of Quadra FNX in 2012, the largest foreign acquisition by any Polish company.
Since then, KGHM’s foreign assets have struggled with rising costs, falling copper prices, technical problems and higher-than-expected capital spending, which raised questions over KGHM’s plans regarding their potential sale.
“We are not currently thinking about selling foreign assets. We’re considering strategies for the next few years,” KGHM Chief Executive Marcin Chludzinski told Reuters.
All of KGHM’s foreign mining projects except those in Chile have been put under review, he said.
“It’s not that we want to or have to sell. It’s more that we are looking at these assets as a strategic reserve. We’re considering actions similar to those we took at the Morrison mine, which is to freeze a project,” Chludzinski said.
“One of the options is a partnership. It doesn’t have to be an international partnership, as there is a lot of capital in Poland too,” he added.
At its flagship Sierra Gorda mine in Chile, KGHM plans increased copper production but does not rule out reducing capital expenditure there.
“We are fighting for Sierra Gorda as this is a big project for us. It looks like we can achieve certain results there even with reduced costs, and some investment may not be necessary. Capex in Sierra Gorda could fall in coming years,” he said.
It is difficult to estimate when Sierra Gorda will become profitable, he said.
In Poland, which accounts for 80 percent of KGHM’s production, the company plans to focus on cutting costs and increasing output.
“We are fighting to raise production and struggling with costs. But the price is good for us so we should be able to improve our financial results this year,” the CEO said.
The miner expects its output of electrolytic copper in Poland to rise to 559,000 tonnes in 2019 from 502,000 last year and to remain stable in the coming years, he also said.
In 2018, KGHM’s net profit rose to 1.66 billion zlotys ($437 million) from 1.57 billion zlotys a year earlier.
KGHM, the biggest electricity consumer in coal-burning Poland, wants green sources to provide half of the energy it consumes in 10 years.
“We go for solar energy, gas and steam turbines and wind, but wind only from existing farms,” Chludzinski said.
The company pulled out of a project to build Poland’s first nuclear power plant, but is looking forward to the expected increase in production of electric vehicles, which would translate into higher demand for copper.
Chludzinski also said KGHM was resistant to the jump in power prices seen in the past few months, as it buys most of its energy via long-term contracts, with prices settled as of the first half of 2018.
Editing by Dale Hudson