The KGHM Group is conducting advanced work on a new strategy, and to adopt it, clarity is still needed regarding the regulations on mineral tax – said Andrzej Szydło, president of the Group, in an interview for PAP Biznes. The most important point of the new document will be investments.
“KGHM, as a mining and metallurgical company, has in its DNA primarily minerals, resources and their exploitation. Everything else is just an optimization addition to the exploitation of the deposit and metal production,” Andrzej Szydło, the president of KGHM, who has been in charge of the management board since March 2024, told PAP Biznes.
“After joining the management board, we noticed that while mining production plans were being created, the strategy and its possible translation into investment plans did not look far into the future. The KGHM Group's strategy, which was still in force, did not emphasize the need to secure the technological chain in a 10-15-year perspective. We put core business first, with metals at the center. Only around this can we build the rest, work on the energy transformation, etc. KGHM is not a concern. multi-energy company. It is a raw material, mining and metal producing company,” added the president.
As he pointed out, KGHM has a technological chain and value chain much longer than the average mining company that extracts metal ore.
“KGHM not only mines copper, but also produces concentrate, and then cathodes and wire rod. This value chain should be extended even further,” Szydło said.
The president of KGHM announced that work on the group's new strategy is ongoing. The company still needs clarity on the regulations on minerals tax.
“The new strategy of the KGHM Group is at a very advanced stage and has already been initially presented to the supervisory board. The strategy is ambitious, with a significant investment and cost challenge. Work on the strategy is ongoing and we are constantly improving it until there is clarity regarding the regulations regarding the tax on the extraction of certain minerals. We do not make any decisions that would be inconsistent with our strategic intentions,” said President Andrzej Szydło.
“When the regulations on tax changes are adopted and all doubts of the supervisory board regarding the strategy are dispelled, and the document itself is approved, we will announce a new strategy,” added the president.
A draft amendment to the Act on tax on the extraction of certain minerals was adopted by the Council of Ministers on Tuesday.
The project provides for changes in the rules for calculating tax on copper mining, and currently the only payer is KGHM. The copper company has been paying over PLN 3 billion in tax annually in recent years, and over PLN 30 billion since its introduction in 2012.
The government plans to reduce the copper tax from 2026 by changing the formula for its calculation, and the cost of this reduction for the budget is PLN 500 million in 2026, PLN 750 million in 2027 and PLN 750 million in 2028. The changes also assume the introduction of a mechanism for tax deduction of part of investment expenditure from 2029.
“From the point of view of shareholders and KGHM, it would be best to abolish the copper tax, but we also understand that the state budget needs revenues at a time of huge expenditure, e.g. on defense. That is why a compromise is so important,” said the president of KGHM.
“The proposed changes in the minerals tax are clearly a step in the right direction. They allow us to implement our intentions to a very large extent, although not fully,” added Szydło.
The President of KGHM is sure that the dialogue initiated with the Ministry of Finance will continue in the future, even if the act comes into force.
“When we started serious talks about the need to update the regulations on the extraction tax for certain minerals, I knew that it would not be easy and that we could not expect the tax to be abolished or a deep reduction. We also knew that we had our own real schedule for the implementation of the investment. To implement a large project, we had to go through the concept phase, the administrative path, permitting and the implementation period. In the case of mining projects, e.g. the construction of new shafts, we are talking about a period of about 10 to 15 years,” said the president.
As he said, in terms of investment implementation, the demand for capital in KGHM will peak after 2027.
“Many projects are still in development, and we do not need relatively much money for the conceptual and documentation phase. Therefore, the degressive mineral tax rate is not bad for us, and we need regulatory stability to make investment decisions,” Szydło said.
“Perhaps the curve with this degression could look different, but there are never solutions that are good forever. It was a mistake that the tax was unchanged for years, perhaps the necessary investment decisions could have been made much earlier,” added the president of KGHM.
INVESTMENTS – THE MAIN POINT OF THE STRATEGY
President Andrzej Szydło assessed that in recent years KGHM had not placed sufficient emphasis on mining activities, including the provision of new deposits. There was a lack of development projects.
“Over the last 13 years, KGHM has paid over PLN 30 billion to the state budget as tax on the extraction of certain minerals. In recent years, KGHM also paid a dividend. Meanwhile, the only large investment projects of the group in the last 15 years are the GG1 shaft and the modernization of technology at the Głogów Copper Smelter. The rest are much smaller projects, and many of them only replacement investments. All this must be modeled responsibly,” he said. president.
In the new strategy, investments are to be a priority.
“The most important thing in KGHM's new strategy will be investments, including in the main technological line, which must be effective,” said the president.
He said that KGHM must intensify the exploration of future resources in its concession areas.
“In the current macroeconomic and fiscal environment, the construction of the so-called KGHM 2.0 or the development of prospective deposits north of the Oder could be considered unprofitable, which does not mean that these resources should not be explored. We cannot waste time,” Szydło said.
“Every mining company must conduct exploration, taking the risk that the resources will turn out to have, for example, lower metal content. In recent years, there has been too little of this exploration, the company has moved away from its roots, emphasizing on topics unrelated to mining activities,” he added.
The President pointed out that copper is a critical metal, there will be a deficit on the market and it is important to guarantee the security of raw materials for both Poland and the European Union.
The president is optimistic about copper prices.
“Natural resources are running out, the whole world is reaching deeper and deeper for metal resources that are increasingly difficult to exploit. The supply of so-called primary metals will decrease, the share of recycling will increase. The demand for metals will significantly exceed their supply, and the growth rate of the supply of recycled metals will not be that high and we will face a deficit on the copper market. Meanwhile, without copper, the energy transformation will not be possible,” said Szydło.
KGHM wants to build three mining shafts in the Copper Basin. Work has already started on geological and hydrogeological reconnaissance for the following projects: GG-2 “Odra”, Retków and Gaworzyce. The estimated investment cost is at least PLN 9 billion.
“It would be ideal if we could increase production, but for now we are trying to maintain a stable supply. Three new shafts, which will be built over the next 10 years, will allow us to maintain a certain level of production. They are absolutely necessary and should have been built earlier. We are starting construction now,” said the president.
According to Szydło, the group is also thinking about investing in extending the value chain.
“Last year was a record year for us in terms of wire rod production. We are thinking about further development in this area so as not to end with the cathode. Ideally, we would process almost 100% of copper at KGHM. However, the priority will always be to make the deposits available,” said Szydło.
The group also plans to improve the technological process and is considering cost optimization.
“In 2024, for the first time in many years, we managed to stop the rising trend in costs and we will fight to reverse the trend. We need to think about many aspects of the efficiency of working time use, about certain modifications in the metallurgy area, about preparing the Legnica Copper Smelter so that it becomes fully hybrid in the first stage, and then perhaps fully scrap-based,” said Andrzej Szydło.
“At the Głogów Copper Smelter, we are thinking about the possibilities of automating certain processes, also using AI,” he added.
Szydło assessed that the energy strategy of the KGHM group must be tailored to the needs of the main technological line.
“We need to consider how to develop an optimal mix so that the energy sector is not a burden to meet basic production needs, but rather supports and is cost-optimal,” said the president.
“Investments in energy at KGHM plants, adapted to the location and energy consumption profile, seem to be better than a large renewable energy source somewhere in the north of the country or shares in a large nuclear project,” he added.
For example, in the area of the Głogów Copper Smelter, President Szydło would imagine PV, CCGT or SMR sources in appropriate proportions.
“I think that small nuclear reactors, with their scalability, could be successfully used in KGHM's locations, because in addition to electricity, we need very large amounts of both heat and cold. We will look closely at this technology, but we will not make any decisions for now and incur costs in an ill-considered way,” said the president of KGHM.
When asked about the prospect of sharing profits with investors, the president replied: “The current management board of KGHM is focused on developing the company and increasing its value through investment, development and efficiency projects. Isn't this a good proposition for long-term investors?”
“KGHM's dividend policy does not change. I do not know what the management board's recommendations regarding dividends will be in the future, decisions are made every year. However, if you look at the scale of investments in mining and the fact that over the years these investments, especially in the area of development, have been insufficient, you should realize how difficult decisions are regarding the method of profit distribution, capital allocation in these two areas, i.e. the area of investment needs and the expectations of KGHM owners,” said Szydło, adding that the task of the management board is looking for and proposing the best compromise.
“Perhaps the moment has come when we need to catch up on investments and focus on ensuring that KGHM remains a very valuable company, with high value for all its stakeholders,” said Andrzej Szydło.
The KGHM Polska Miedź Group is among the ten largest producers of mining copper in the world and is the second largest producer of silver. It has mining assets (mines of copper ore and associated elements such as silver, molybdenum, nickel, gold and other metals) located in Poland, the USA, Chile and Canada, as well as copper smelters in Poland.
In the first half of 2025, the KGHM group had PLN 17.556 billion in revenues, which means an increase of 0.4%. rdr. Adjusted EBITDA increased by 15.6%. y/y to PLN 4.863 billion. Net profit attributable to shareholders of the parent company amounted to PLN 579 million compared to PLN 1,073 million a year earlier.
Anna Pełka (PAP Business)
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