KGHM's Copper Boom: Record H1, Line 4, and the M&A Hunt

Revenue up 40%, EBITDA up 90%, with strategic expansion across Chile, Morocco, and Ukraine.

KGH.WA · Earnings Call · 2026-08-20

Record H1: The Copper Supercycle Meets Operational Discipline

KGHM's first half of 2026 was a banner period. “Revenues up by almost 40%, almost 90% increase of EBITDA compared with the first half of the previous year.” — Remigiusz Paszkiewicz, CEO · 2026-08-20 The company also saw a tenfold increase in net profit, a 20% rise in payable copper production, and an 8% increase in silver production. Operating margin expanded from 25% to 34%. This was not just a price-driven windfall; management highlights a Cost optimization program that is on track to deliver PLN 1 billion in annual savings by 2028 versus a 2024 baseline. "Our ultimate goal is to have the benchmark of 2024 and PLN 1 billion savings are expected by 2028 compared to this benchmark of 2024," said CFO Piotr Krzyzewski in his prepared remarks. The Glogow II smelter overhaul was accelerated significantly, with the furnace restart now scheduled for September 17, nine days earlier than planned—a critical move to sustain copper and silver output while also allowing for higher production of sulfuric acid, which has become a high-margin byproduct amid global geopolitical tensions. Energy costs, a perennial concern, rose only PLN 32 million on a price basis despite PLN 1.2 billion in total energy spend, thanks to aggressive hedging and optimization on the power exchange.

Foreign Assets: Sierra Gorda's Line 4 and the Hunt for New Reserves

The international portfolio is a mix of strong cash flow and operational challenges. Sierra Gorda produced 40,200 tonnes of payable copper in H1, down 5% year-on-year, primarily due to torrential rains in Q1. However, molybdenum output rose 6%, and the joint venture with South32 has approved the construction of a fourth production line. “We expect that in line with the assumptions that construction will last 3 years. And in the fourth year, that is in the second half 2030, it will be fully operational” — Anna Sobieraj-Kozakiewicz, Vice President of the Management Board for Foreign Assets · 2026-08-20 says Anna Sobieraj-Kozakiewicz, VP for Foreign Assets. The $725 million investment is designed to increase metal production by 20% and further reduce C1 costs, albeit accepting a 3-year shortening of the current Life-of-Mine plan. To offset that, exploration is intensifying around Catabela Northeast, where drilling suggests mineralization comparable to the original Sierra Gorda deposit. Meanwhile, Robinson mine saw a 34% production decline due to challenging ore in the Liberty pit, but its EBITDA doubled to over PLN 780 million on high metal prices. KGHM is also actively pursuing M&A, with the CEO confirming interest in South America, North America, and North Africa, particularly Morocco, and even exploring lithium and titanium in Ukraine. Asked about the exclusive acquisition process, the CFO demurred:

We are currently actually during the process of the exclusive acquisition. The process is highly confidential, so I cannot disclose the details.
Piotr Krzyzewski, Executive · 2026-08-20

This marks a decisive shift from prior years when management emphasized operational optimization of existing assets; now the tone is expansionary.

Financial Engineering: Hedges, Inventory Release, and the Dividend Question

The balance sheet is a clear beneficiary of the commodity upcycle. Operating cash flow exceeded PLN 2.5 billion, and net debt declined despite heavy CapEx. A significant portion of working capital was tied up in anode inventory—nearly PLN 2.5 billion at peak—but management expects to release that cash in the second half of 2026 as the anodes are processed and sold. CFO Krzyzewski described the expected inventory drawdown: “But what we are seeing now, and you will be actually watching it over the quarters to come, the value of our inventory would be actually declining.” — Piotr Krzyzewski, Executive · 2026-08-20 On the dividend front, the company remains committed to its policy but gives no near-term guidance. In a prior call, executives reiterated a cautious balance: “we need to search for the proper balance for the investments.” — Andrzej Szydlo, Deputy Board President · 2025-11-18 This is a continuation of the message from March, where the Board stated it would not depart from its dividend policy but wanted to preserve a financial buffer for investment opportunities. With copper prices staying elevated and the global demand outlook strong, KGHM is positioning itself to reward shareholders while funding long-term growth, whether in Chile, Morocco, or the new shafts back in Poland.