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Company Results for
Q1 2014
May 16, 2014
Confidentiality and Disclaimer
These materials have been prepared by KGHM International Ltd. (the “Company”) solely for its own use during its presentation to you
and may not be taken away, reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or
outside your organization/firm) or published, in whole or in part, for any purpose. By attending this presentation, you are agreeing to
be bound by the restrictions set out in this notice and to maintain absolute confidentiality regarding the information disclosed in these
materials.
Neither the Company, nor any of its affiliates, make any representation or warranty express or implied as to, and no reliance should
be placed on, the accuracy, completeness or correctness of the information contained herein. It is not the intention to provide, and
you may not rely on these materials as providing, a complete or comprehensive analysis of the Company’s financial or business
prospects. The information contained in these materials should be considered in the context of the circumstances prevailing at the
time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation.
Neither the Company, nor any of its affiliates, shall have any liability whatsoever (in negligence or otherwise) for any loss or damage
howsoever arising from any use of these materials or their contents or otherwise arising in connection with these materials.
These materials include forward-looking statements. Forward-looking statements include, but are not limited to, the Company’s
estimates for mineral resources, future production, sales, cash flow, business and financial prospects, production growth profile, mine
lives, costs, capital cost expenditures, plans, objectives and expectations, including with respect to future projects, progress in the
development of the projects, demand and market outlook for commodities, future commodity prices, and other statements that are not
historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," "potential,"
"should," and similar expressions are forward-looking statements. Although the Company believes that the expectations reflected in
these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given
that actual results will be consistent with these forward-looking statements.
This document does not constitute an offer or invitation to purchase or subscribe for any securities of the Company or any of its
affiliates and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment decision
in relation thereto.
For more information about the Company and its parent KGHM Polska Miedź S.A., including financial statements and other reports,
go to www.kghminternational.com or www.kghm.pl.
All figures are in US$ unless otherwise stated or unless the context requires otherwise.
1
KGHM International Q1 2014 Results Highlights
• Growth pipeline:
• Sierra Gorda highlights:
• Project overall 95% complete
• Project on time for commissioning in mid-2014
• Victoria:
• Advance project management plan underway
• Primary focus on engineering and site preparation to facilitate
advanced exploration shaft and underground development
• Sierra Gorda Oxides:
• Preparation for Feasibility Study started March 2014
• Financial highlights:
• Adjusted EBITDA:
• Q1 2014 vs. Q1 2013 decreased to $2M from $80M
• Operations:
• Cu production:
• Q1 2014 vs. Q1 2013 decreased to 42Mlbs (19kt) from 65Mlbs (30kt)
• Cu sold:
• Q1 2014 vs. Q1 2013 decreased to 35Mlbs (16kt) from 50Mlbs (23kt)
2
3
Sierra Gorda – project on time for commissioning in mid-2014
Sierra Gorda Cu Mo
 Reserves
~1,463.3 Mt @ 0.4% Cu
0.02% Mo
0.065 g/t Au
 Ownership
55% KGHM
45% Sumitomo
 Mine type Open pit
Au Progress on construction (as at March 31 2014)
 Project to be completed on time with commissioning
mid-2014
 Project’s overall progress is 95%
 Mine operations - successfully completed pre-stripping,
192 million tonnes and 3.3 million man hours without a
lost time accident
 ~7,500 employees working on site
 Construction of 143 km sea water pipeline complete
 TRIR (Total Recordable Incident Rate) at 0.58
(average for sector is 1.75) – Sierra Gorda is the safest
mine built in Chile
4
Sierra Gorda – completion of pre-stripping and seawater pipeline
 Sierra Gorda will operate using seawater
transported through a 143 kilometre pipeline
 Key infrastructure includes also the coastal station
and two inland pump stations, with a total of 24
pumps and pumping rate of 1,500 litres per second
 Sierra Gorda mine will use 250,000 cubic meters of
water daily which equals a capacity of 92 million
cubic meters
 Removal of overburden is a crucial element of the
project, that involves preparing the pit for mine
production and making the deposit accessible
 During pre-stripping, a total of 192 million tonnes of
material was removed, including waste, sulfide ore
and oxide ore
 It resulted in over 710,000 tonnes of sulfide ore in
stockpiles ready for processing and 33 million
tonnes of copper oxide ores for potential use in the
future
5
Victoria – stable progress of mining work
Victoria Ni Cu
 Resources
~14.5 Mt @ 2,5% Cu,
2.5% Ni, 7.6 g/t TPM
 Ownership 100% KGHM International
 Mine type Underground
Pt Status
 Limited early works initiated – including site leveling and
shaft sinking preparation
 Finished work related to adit portal preparation, adit
excavation work started in March 2014
 Mine Closure Plan filed for the Advanced Exploration
required for the construction of the first shaft
 Integrated Development Study underway – this will
describe in detail the mine execution plan
 Steering Committee appointed with representatives
from KGHM S.A., KGHM International, PeBeKa and
DMC to provide guidance to the Project team
 TRIR (Total Recordable Incident Rate) - 0.0
.
 Finished
portal for adit
 Progress of
adit
excavation
works
Pd Au
6
Sierra Gorda Oxide – potential increase in value
 Preparation for the feasibility study started March 2014
 Pilot test heaps started. Tests heaps included ROM (Run of Mine) ore with high (18,000 t),
medium (8,000 t) and low grade (8,000 t)
 Initial results of these tests indicate the significant potential of the project
Sierra Gorda Oxide Project
7
Production Highlights
Copper production
(Mlbs)
 Decrease in total copper production in Q1
2014 due mainly to reduced production at
Robinson (-19 Mlbs) from challenging ore
milled from the Kimbley pit in Q1 2014
compared to more favourable ores milled from
the Ruth pit in Q1 2013. This resulted in a
decrease in recovery rates and milling grade.
65
42
1Q'13 1Q'14
65
56
47 54
42
1Q'13 2Q '13 3Q '13 4Q '13 1Q '14
-35%
Nickel production
(Mlbs)
TPM (gold, platinum, palladium)
(kozs)
• Nickel production slightly decreased
primarily due to cessation of Podolsky mine
in Q1 2013.
• The decrease in TPM (total precious metal)
production was mainly due to decreased
gold production by the Robinson mine
(-9.5Kozs) as a result of grades mined and
lower recovery rates.
28
16
1Q'13 1Q'14
28
25
21 24
16
1Q'13 2Q '13 3Q '13 4Q '13 1Q '14
2.3 2.2
1Q'13 1Q'14
2.3
2.7
2.3
3.0
2.2
1Q'13 2Q '13 3Q '13 4Q '13 1Q '14
-6%
-44%
8
The deterioration in macroeconomic conditions and reduction in sales volume
influenced the financial results
 Management cost saving plans continue to be implemented:
 G&A, Sustaining Capex and Opex
 Project capital, Exploration and New Business
 Forex due to the weaker CAD
 These cash expenditure savings position the company not to require extra funding for operations at current copper prices
 The Company anticipates significant improvement in results in Q2 2014
272
148
1Q'13 1Q'14
Sales1
M USD
272 314
224 253
148
1Q'13 2Q '13 3Q '13 4Q '13 1Q '14
-46%
80
2
1Q'13 1Q'14
EBITDA (adjusted)
M USD
80 65
45
69
2
1Q'13 2Q '13 3Q '13 4Q '13 1Q '14
-98%
1 Sales revenues are presented net of treatment and refining charges
The main causes of a decrease in
EBITDA were:
 Decline in effective metal price
(-USD 35 million), impacting sales,
including $10M negative price
adjustments related to prior quarter
shipments at Robinson
 Decrease in sales volumes
(-USD 52 million), impacting sales
 Other, mainly decrease in operating
costs due to lower production
(+USD 9 million)
Main assets of KGHM in North America
Production assets
9
Robinson Cu MoAu
Morrison Cu TPMsNi
 Copper production in Q1 2014 faced challenges due to lower tonnage, grades and
metal recovery from the new Kimbley pit as a result of permitting delays and
geotechnical issues
 Ore processed in Q1 2014 originated from the upper Kimbley pit yielding lower
grades, higher oxidation and clay content, negatively impacting mill performance
compared to higher quality ore generated from the Ruth pit in Q1 2013
 Total tonnes mined in Q1 2014 increased by 23% but ore tonnes reduced by 50%
compared to Q1 2013 due to development activities at the Kimbley and Ruth Pits in
order to access higher quality ores to improve the ore blend and production for 2014
 $25 million in one off items: stockpile inventory and prior sales price adjustment
 Copper ore sold in Q1 2014 increased by 24% compared to Q1 2013 as the site
experienced improved infrastructure reliability, resulting in increase throughput.
Higher copper ore sold was partially offset by a 21% decrease in copper grade.
 Development of the lower access from Craig, down to the 5,000’ elevation at
Morrison continued during the quarter and is expected to be completed in Q4 2014
Open-pit mine, USA
Underground mine, Canada
Robinson open-pit mine – Kimbley Pit
Nevada, USA
Morrison underground mine
Ontario, Canada
10
Robinson 2014 Outlook
 Efforts will be taken to reduce haulage
distances so that stripping of Ruth North can be
accelerated and costs can be reduced in the
first half of 2015
 Improvement of slope stability and mitigation of
the risks associated with mining Ruth pit ores in
2015 – 2016
 Reduction of both OPEX and CAPEX
Current plan (for remainder of 2014)
 Blending Strategy: In Q2 2014, the Robinson mine will
under take a drop cut into Ruth 3rd West to access 1.4 M
tons of higher grade ores
 Cost Reductions Initiatives: Throughout the year, the
Robinson mine plans to implement aggressive cost cutting
initiatives
 Geotechnical issues: In Q3 2014, the mine will de-water
the Kimbley pit and install a horizontal drainage system to
reduce water pressure in the northern walls
 Permitting: The Company plans to work with the State of
Nevada to accelerate the approval of the Waste Rock
Management plan and Pit Lake permits by the end of June
Expected results
 The ore can be blended or sent directly as mill
feed to improve recoveries and production.
 For the remainder of Q2 2014, the Robinson mine will finalize its long-term mine plan for the Ruth pit and position the mine
for better ore quality and great flexibility for mining in 2015, 2016 and beyond.
 Investment in capital stripping of the Ruth pit, will have a significant positive impact on future production and costs as
soon as the Ruth pit ore is accessed.
KGHM International Q1 2014 Financing Update
• Operating cash flow and cash management
• $200M Line of Credit
– $95M cash drawings at March 31
– Actively working to remove requirement to maintain minimum $100M
cash balance in North America
• Project spending to be funded by parent KGHM SA
– Letter of Credit (“LC”) Support from KGHM SA
• January 2014 $137.5M - New LC from KGHM SA, released $137.5M of capacity
from Line of Credit
• Q2 2014 – KGHM SA will replace LC’s existing at March 31, 2014
– Repayment of note receivable in Q1
• Received $105M in March as repayment of upstream loan
– Other financing mechanisms being prepared
11
KGHM International Q1 2014 Summary
• Growth pipeline:
• Sierra Gorda - 95% complete and on time for commissioning mid-2014
• Victoria developing on schedule with site preparation to facilitate advanced
exploration shaft and underground development
• Sierra Gorda Oxides Feasibility Study started March 2014
• Operations:
• Copper price
• Robinson Operations
• Other Operations
• Cost saving, currency savings and efficiencies
• Financing for 2014:
• Line of credit, operations and KGHM SA support
12
Q1 2014 kghmi results bond call - final

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Q1 2014 kghmi results bond call - final

  • 1. Company Results for Q1 2014 May 16, 2014
  • 2. Confidentiality and Disclaimer These materials have been prepared by KGHM International Ltd. (the “Company”) solely for its own use during its presentation to you and may not be taken away, reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organization/firm) or published, in whole or in part, for any purpose. By attending this presentation, you are agreeing to be bound by the restrictions set out in this notice and to maintain absolute confidentiality regarding the information disclosed in these materials. Neither the Company, nor any of its affiliates, make any representation or warranty express or implied as to, and no reliance should be placed on, the accuracy, completeness or correctness of the information contained herein. It is not the intention to provide, and you may not rely on these materials as providing, a complete or comprehensive analysis of the Company’s financial or business prospects. The information contained in these materials should be considered in the context of the circumstances prevailing at the time and has not been, and will not be, updated to reflect material developments which may occur after the date of the presentation. Neither the Company, nor any of its affiliates, shall have any liability whatsoever (in negligence or otherwise) for any loss or damage howsoever arising from any use of these materials or their contents or otherwise arising in connection with these materials. These materials include forward-looking statements. Forward-looking statements include, but are not limited to, the Company’s estimates for mineral resources, future production, sales, cash flow, business and financial prospects, production growth profile, mine lives, costs, capital cost expenditures, plans, objectives and expectations, including with respect to future projects, progress in the development of the projects, demand and market outlook for commodities, future commodity prices, and other statements that are not historical facts. When used in this document, the words such as "could," "plan," "estimate," "expect," "intend," "may," "potential," "should," and similar expressions are forward-looking statements. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. This document does not constitute an offer or invitation to purchase or subscribe for any securities of the Company or any of its affiliates and no part of it shall form the basis of or be relied upon in connection with any contract, commitment or investment decision in relation thereto. For more information about the Company and its parent KGHM Polska Miedź S.A., including financial statements and other reports, go to www.kghminternational.com or www.kghm.pl. All figures are in US$ unless otherwise stated or unless the context requires otherwise. 1
  • 3. KGHM International Q1 2014 Results Highlights • Growth pipeline: • Sierra Gorda highlights: • Project overall 95% complete • Project on time for commissioning in mid-2014 • Victoria: • Advance project management plan underway • Primary focus on engineering and site preparation to facilitate advanced exploration shaft and underground development • Sierra Gorda Oxides: • Preparation for Feasibility Study started March 2014 • Financial highlights: • Adjusted EBITDA: • Q1 2014 vs. Q1 2013 decreased to $2M from $80M • Operations: • Cu production: • Q1 2014 vs. Q1 2013 decreased to 42Mlbs (19kt) from 65Mlbs (30kt) • Cu sold: • Q1 2014 vs. Q1 2013 decreased to 35Mlbs (16kt) from 50Mlbs (23kt) 2
  • 4. 3 Sierra Gorda – project on time for commissioning in mid-2014 Sierra Gorda Cu Mo  Reserves ~1,463.3 Mt @ 0.4% Cu 0.02% Mo 0.065 g/t Au  Ownership 55% KGHM 45% Sumitomo  Mine type Open pit Au Progress on construction (as at March 31 2014)  Project to be completed on time with commissioning mid-2014  Project’s overall progress is 95%  Mine operations - successfully completed pre-stripping, 192 million tonnes and 3.3 million man hours without a lost time accident  ~7,500 employees working on site  Construction of 143 km sea water pipeline complete  TRIR (Total Recordable Incident Rate) at 0.58 (average for sector is 1.75) – Sierra Gorda is the safest mine built in Chile
  • 5. 4 Sierra Gorda – completion of pre-stripping and seawater pipeline  Sierra Gorda will operate using seawater transported through a 143 kilometre pipeline  Key infrastructure includes also the coastal station and two inland pump stations, with a total of 24 pumps and pumping rate of 1,500 litres per second  Sierra Gorda mine will use 250,000 cubic meters of water daily which equals a capacity of 92 million cubic meters  Removal of overburden is a crucial element of the project, that involves preparing the pit for mine production and making the deposit accessible  During pre-stripping, a total of 192 million tonnes of material was removed, including waste, sulfide ore and oxide ore  It resulted in over 710,000 tonnes of sulfide ore in stockpiles ready for processing and 33 million tonnes of copper oxide ores for potential use in the future
  • 6. 5 Victoria – stable progress of mining work Victoria Ni Cu  Resources ~14.5 Mt @ 2,5% Cu, 2.5% Ni, 7.6 g/t TPM  Ownership 100% KGHM International  Mine type Underground Pt Status  Limited early works initiated – including site leveling and shaft sinking preparation  Finished work related to adit portal preparation, adit excavation work started in March 2014  Mine Closure Plan filed for the Advanced Exploration required for the construction of the first shaft  Integrated Development Study underway – this will describe in detail the mine execution plan  Steering Committee appointed with representatives from KGHM S.A., KGHM International, PeBeKa and DMC to provide guidance to the Project team  TRIR (Total Recordable Incident Rate) - 0.0 .  Finished portal for adit  Progress of adit excavation works Pd Au
  • 7. 6 Sierra Gorda Oxide – potential increase in value  Preparation for the feasibility study started March 2014  Pilot test heaps started. Tests heaps included ROM (Run of Mine) ore with high (18,000 t), medium (8,000 t) and low grade (8,000 t)  Initial results of these tests indicate the significant potential of the project Sierra Gorda Oxide Project
  • 8. 7 Production Highlights Copper production (Mlbs)  Decrease in total copper production in Q1 2014 due mainly to reduced production at Robinson (-19 Mlbs) from challenging ore milled from the Kimbley pit in Q1 2014 compared to more favourable ores milled from the Ruth pit in Q1 2013. This resulted in a decrease in recovery rates and milling grade. 65 42 1Q'13 1Q'14 65 56 47 54 42 1Q'13 2Q '13 3Q '13 4Q '13 1Q '14 -35% Nickel production (Mlbs) TPM (gold, platinum, palladium) (kozs) • Nickel production slightly decreased primarily due to cessation of Podolsky mine in Q1 2013. • The decrease in TPM (total precious metal) production was mainly due to decreased gold production by the Robinson mine (-9.5Kozs) as a result of grades mined and lower recovery rates. 28 16 1Q'13 1Q'14 28 25 21 24 16 1Q'13 2Q '13 3Q '13 4Q '13 1Q '14 2.3 2.2 1Q'13 1Q'14 2.3 2.7 2.3 3.0 2.2 1Q'13 2Q '13 3Q '13 4Q '13 1Q '14 -6% -44%
  • 9. 8 The deterioration in macroeconomic conditions and reduction in sales volume influenced the financial results  Management cost saving plans continue to be implemented:  G&A, Sustaining Capex and Opex  Project capital, Exploration and New Business  Forex due to the weaker CAD  These cash expenditure savings position the company not to require extra funding for operations at current copper prices  The Company anticipates significant improvement in results in Q2 2014 272 148 1Q'13 1Q'14 Sales1 M USD 272 314 224 253 148 1Q'13 2Q '13 3Q '13 4Q '13 1Q '14 -46% 80 2 1Q'13 1Q'14 EBITDA (adjusted) M USD 80 65 45 69 2 1Q'13 2Q '13 3Q '13 4Q '13 1Q '14 -98% 1 Sales revenues are presented net of treatment and refining charges The main causes of a decrease in EBITDA were:  Decline in effective metal price (-USD 35 million), impacting sales, including $10M negative price adjustments related to prior quarter shipments at Robinson  Decrease in sales volumes (-USD 52 million), impacting sales  Other, mainly decrease in operating costs due to lower production (+USD 9 million)
  • 10. Main assets of KGHM in North America Production assets 9 Robinson Cu MoAu Morrison Cu TPMsNi  Copper production in Q1 2014 faced challenges due to lower tonnage, grades and metal recovery from the new Kimbley pit as a result of permitting delays and geotechnical issues  Ore processed in Q1 2014 originated from the upper Kimbley pit yielding lower grades, higher oxidation and clay content, negatively impacting mill performance compared to higher quality ore generated from the Ruth pit in Q1 2013  Total tonnes mined in Q1 2014 increased by 23% but ore tonnes reduced by 50% compared to Q1 2013 due to development activities at the Kimbley and Ruth Pits in order to access higher quality ores to improve the ore blend and production for 2014  $25 million in one off items: stockpile inventory and prior sales price adjustment  Copper ore sold in Q1 2014 increased by 24% compared to Q1 2013 as the site experienced improved infrastructure reliability, resulting in increase throughput. Higher copper ore sold was partially offset by a 21% decrease in copper grade.  Development of the lower access from Craig, down to the 5,000’ elevation at Morrison continued during the quarter and is expected to be completed in Q4 2014 Open-pit mine, USA Underground mine, Canada Robinson open-pit mine – Kimbley Pit Nevada, USA Morrison underground mine Ontario, Canada
  • 11. 10 Robinson 2014 Outlook  Efforts will be taken to reduce haulage distances so that stripping of Ruth North can be accelerated and costs can be reduced in the first half of 2015  Improvement of slope stability and mitigation of the risks associated with mining Ruth pit ores in 2015 – 2016  Reduction of both OPEX and CAPEX Current plan (for remainder of 2014)  Blending Strategy: In Q2 2014, the Robinson mine will under take a drop cut into Ruth 3rd West to access 1.4 M tons of higher grade ores  Cost Reductions Initiatives: Throughout the year, the Robinson mine plans to implement aggressive cost cutting initiatives  Geotechnical issues: In Q3 2014, the mine will de-water the Kimbley pit and install a horizontal drainage system to reduce water pressure in the northern walls  Permitting: The Company plans to work with the State of Nevada to accelerate the approval of the Waste Rock Management plan and Pit Lake permits by the end of June Expected results  The ore can be blended or sent directly as mill feed to improve recoveries and production.  For the remainder of Q2 2014, the Robinson mine will finalize its long-term mine plan for the Ruth pit and position the mine for better ore quality and great flexibility for mining in 2015, 2016 and beyond.  Investment in capital stripping of the Ruth pit, will have a significant positive impact on future production and costs as soon as the Ruth pit ore is accessed.
  • 12. KGHM International Q1 2014 Financing Update • Operating cash flow and cash management • $200M Line of Credit – $95M cash drawings at March 31 – Actively working to remove requirement to maintain minimum $100M cash balance in North America • Project spending to be funded by parent KGHM SA – Letter of Credit (“LC”) Support from KGHM SA • January 2014 $137.5M - New LC from KGHM SA, released $137.5M of capacity from Line of Credit • Q2 2014 – KGHM SA will replace LC’s existing at March 31, 2014 – Repayment of note receivable in Q1 • Received $105M in March as repayment of upstream loan – Other financing mechanisms being prepared 11
  • 13. KGHM International Q1 2014 Summary • Growth pipeline: • Sierra Gorda - 95% complete and on time for commissioning mid-2014 • Victoria developing on schedule with site preparation to facilitate advanced exploration shaft and underground development • Sierra Gorda Oxides Feasibility Study started March 2014 • Operations: • Copper price • Robinson Operations • Other Operations • Cost saving, currency savings and efficiencies • Financing for 2014: • Line of credit, operations and KGHM SA support 12