KGHM’s mines in Canada face uncertain future

Sudbury Star

Morrison Mine / KGHM INTERNATIONAL LTD.

Poland’s KGHM, which operates mines in Sudbury, may freeze some projects in Canada or the U.S. if they require big investments, its chief executive told Reuters on Wednesday.

“We are not currently thinking about selling foreign assets,” said Marcin Chludzinski told Reuters. “We’re considering strategies for the next few years.”

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,” Chludzinski told the news agency. “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 (north of Sudbury), which is to freeze a project.”

Another option “is a partnership,” he added. “It doesn’t have to be an international partnership, as there is a lot of capital in Poland too.”

In January, KGHM began the process of putting Morrison mine near Levack into care and maintenance mode, throwing more than 100 people out of work. The company blamed a long slump in metals prices for the move.

KGHM also said at the time it would be increasing its operations at McCreedy West Mine where a number of the Morrison employees were to be transferred.

McCreedy West has been a profitable operation and KGHM said it is looking to focus on that and maximize its potential.

Steve Dunlop, general manager for KGHM in Sudbury, said Wednesday he had received no internal direction or information yet regarding a change in operations locally.

Magdalena Szmygin, a corporate communications officer with KGMH in Canada, was also unable to shed any further light on the question Wednesday.

Efforts were made to contact spokespeople in Poland but no reply was available by press time.

Meanwhile, Dunlop said the company is “mining away full-bore” at McCreedy West, where about 120 people are employed.

KGMH also owns the Podolsky Mine in Capreol, although it has been idle since 2013, and has plans to revive the Victoria Mine near Worthington. That project is in a pre-production stage.

When markets improve, KGHM said it has plans to bring Levack production back online.

KGHM is one of the world’s biggest copper and silver producers. The 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, Reuters reported, 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.

At its flagship Sierra Gorda mine in Chile, KGHM plans increased copper production but does not rule out reducing capital expenditure there, the news agency said.

“We are fighting for Sierra Gorda as this is a big project for us,” Chludzinski said. “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.”

It is difficult to estimate when Sierra Gorda will become profitable, the CEO told Reuters.

In Poland, which accounts for 80 per cent 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,” said Chludzinski.

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.

sud.editorial@sunmedia.ca

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