Chicago 13/05/2016 - Poland's KGHM will alter its long-term operation plan and is implementing a more robust cost cutting program at the Sierra Gorda mine in Chile, which has not yet met its operating expectations.
"Taking into account actual levels of molybdenum and copper prices and the operational efficiency of the Sierra Gorda mine, it is not possible at the present time to make a decision as to the commencement of Phase 2 of the project," Mirosław Biliński, KGHM VP, said in a statement.
Recently, the Polish government ordered an audit into KGHM's foreign assets as a direct reaction to the financial situation at the Sierra Gorda mine. KGHM had initially forecasted copper output at the mine to reach 110,000-120,000 tonnes this year.
The Polish government holds around a third of copper and silver producer KGHM, which is struggling with copper prices that are mired at their lowest since 2008 financial crisis - LME copper recently traded at $4,622 per tonne but hit six-year lows late last year below $4,500.
This group will also revising its investment program and operation capabilities for all current current mines. KGHM's management board is planning to present its stratetgic review in the first few months of 2017.
"The 20 percent drop in the copper price from the end of March 2015 to the end of March 2016 has substantially limited the investment capabilities of the KGHM Group," the statement concluded.
Meanwhile, in the first quarter, the company's revenues were 3.9 billion zlotys ($999 million) for a profit of 163 million zlotys ($41 million), down substantially year-over-year primarily due to the deterioration in metal prices and problems with production at one of its smelters, the company said.
Europe's second-largest copper miner posted a EBITDA of 987 million zlotys ($253 million), 294 million zlotys ($75 million) lower than the first quarter of 2015.
(Editing by Tom Jennemann)