GRI Indexes:
Ladies and Gentlemen,
On behalf of the Management Board, I would like to present the 2016 Integrated Report for the KGHM Polska Miedź S.A. Group. We have proved once again that our knowledge and experience are the foundation for the Company’s stable functioning in difficult macroeconomic conditions.

The situation on the metals market was difficult in the first three quarters of 2016, giving us reason to believe that the Company’s results would be adversely affected. Ultimately, our revenues dropped by only 4%, while copper prices decreased by more than 11%. Thus was due to higher sales of molybdenum and precious metals. The prices of copper did not increase significantly until the last quarter of the past year. Better moods on the market associated with the perceived demand in China and development plans for the American economy allowed us to believe that the positive trend would be maintained.

Despite difficult market conditions, domestic assets remain the main growth driver for Polish Copper and they contribute to building the value of the KGHM Group. In 2016, the biggest fluidized bed furnace installation in the world was launched at the Głogów Copper Smelter thereby securing KGHM’s production for several decades. The Legnica Copper Smelter also entered a new stage of development. We are just about to modernize the electro-refining technology, which will make it possible to increase the electrolytic copper output by 40%, thereby creating excellent perspectives for the Smelter and KGHM as a whole. Work on the Deep Głogów mining project was continued. In the past year, we made a further 36 km of excavations, increasing the share of this area in KGHM Polska Miedź S.A.’s total output to 5%.

In 2016, the Management Board of KGHM commenced intensive work on revising the Group’s development strategy. The outcome of the analyses performed is the Strategy for the years 2017–2021, with an outlook until 2040, which was published in the first half of 2017. It sets ambitious, but realistic development objectives for the KGHM Group, whose achievement will enable us to maintain a stable position among global leaders in the copper and silver mining industry. We will continue our actions aimed at increasing the Company’s value in areas that are important for sustainable development, such as increasing the employees’ safety, ensuring stable production and using state-of-the-art technology, while at the same time respecting the environment and local communities.

Being a global leader, the KGHM Group is obliged to seek innovations that will strengthen our competitive advantage. Therefore, we work closely with the academic world, focusing on research and development activities whose implementation will help us improve the efficiency of our operations. KGHM is one of the initiators of the CuBR program, which is aimed at supporting scientific research and development for the non-ferrous metals industry. This program, which we carry out in collaboration with the National Center for Research and Development, sets forth the directions for enhancing the competitiveness of Polish industry.

Ensuring constructive social dialogue and involvement in the socio-economic development of the Lower Silesia region, which is the center of our operations, are an important part of the KGHM Group’s activities. Thanks to the work of our KGHM Polska Miedź Foundation, future generations will have a chance to become acquainted with all aspects of their cultural heritage—historical, artistic and scientific. We save historic buildings and support culture. We are present in the world of cinema and fine arts. We are involved in cultural and leisure activities. Through the Revimine Foundation, we support projects aimed at the rehabilitation of post-industrial sites in a broad sense.

This year, we will celebrate the 60th anniversary of the discovery of copper ore deposits in Lower Silesia, which marked the beginning of the development of our modern, global Company and the entire region. Thanks to its visionary decision to explore the deposits, KGHM is now one of the largest Polish listed companies and a global mining leader. This year we will also celebrate the 20th anniversary of the Company’s first listing on the Polish Stock Exchange. Twenty years of our presence on the WSE confirmed our stable position among global leaders. We are proud of our achievements, and also of the fact that we are responsible for the further ambitious and sustainable development of the Polish corporation – the KGHM Polska Miedź S.A. Group.

I would like to thank all our Employees and the Supervisory Board for their work on building the value of the KGHM Group over the past year.

I cordially invite you all to read the Integrated Report of the KGHM Polska Miedź S.A. Group.

Yours faithfully,
Radosław Domagalski-Łabędzki
President of the Management Board & CEO