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WARSAW, May 13 (Reuters) - Poland's KGHM KGH.WA , Europe's
No.2 copper producer, said on Friday it was delaying the next
phase of expansion at its key overseas mine in Chile, after
stubbornly low metals prices more than halved its net profit in
the first quarter.
The Chilean Sierra Gorda mine, which KGHM co-owns with
Japan's Sumitomo 5713.T 8053.T , started commercial
production last year and has largely completed its first-stage
ramp-up.
The mine, in which state-run KGHM holds 55 percent, produced
84,000 tonnes of copper concentrate and 15 million pounds of
molybdenum last year, a far cry from over 220,000 tonnes and 25
million pounds, respectively, targeted after the second phase.
"Taking into account the current prices of molybdenum and
copper as well as the current level of operating efficiency at
Sierra Gorda, it is not possible now to decide on launching the
project's phase two," KGHM said in a statement.
KGHM, also the world's largest silver miner, had planned to
almost double its copper output to more than 1 million tonnes a
year by 2020, but signalled a change to its plans after worries
about Chinese demand battered metals prices.
It wants to announce new targets in February or March 2017.
KGHM, worth 12.8 billion zlotys ($3.3 billion) on the Warsaw
bourse, expects copper prices CMCU3 to average $5,000 a tonne
in 2016 compared with $5,495 last year, and expects its
full-year output to fall 9 percent to 525,400 tonnes.
As with many of its rivals, the slump in metal prices has
led KGHM to book writedowns, mainly at Sierra Gorda. It reported
a record net loss of 5.01 billion zlotys in 2015.
Net profit more than halved in the first quarter of 2016 to
161 million zlotys, with sales 17 percent down to 3.91 billion.
The company's Polish business, on which KGHM's dividends are
based, saw a 26-percent fall in first-quarter net profit to 370
million zlotys, on sales down 21 percent at 2.98 billion.
KGHM shares have edged up 0.6 percent this year, after
plunging 42 percent in 2015.
($1 = 3.9060 zlotys)