KGHM delays expansion of flagship mine in Chile, shares jump
Shares in Polish mining giant KGHM (WSE:KGH), Europe’s second-largest copper producer, soared Monday after earnings at overseas units helped it beat analysts estimates for the first-quarter profit.
The stock jumped as much as 4.7%, and was trading 4.41% percent higher at 65.8 zloty at 2:33 p.m., reversing this year’s decline to a 3.5% gain.
The state-controlled copper miner, which posted a slower-than-expected drop in profit on Friday, also said it was delaying the next phase of expansion at its flagship overseas mine in Chile, Sierra Gorda, after a continued rout in metals prices more than halved its net profit in the first quarter.
Earnings before interest, taxes, depreciation and amortization, or Ebitda at Sierra Gorda stood at $39 million with the production cost falling 32% from the previous quarter. The mine has generated a total Ebitda loss of $976 million since it began commercial production in July last year, including $928 million write-offs.
KGHM gained control of Sierra Gorda in 2011 when it bought Canadian rival Quadra FNX for $2.07 billion (Cdn$2.87 billion), the largest-ever foreign acquisition by a Polish company.
In January Sierra Gorda’s co-owner, Japan’s Sumitomo, said it cut its profit forecast due to the investment loss at the mine.
KGHM, also the world’s largest silver miner, said that despite delays and increased costs, it aims to bring the mine to full production by the end of June.
Sierra Gorda produced 84,000 tonnes of copper concentrate in 2015 and 15 million pounds of molybdenum last year, far from over 220,000 tonnes and 25 million pounds, respectively, targeted after the second phase.