In 2012, the Polish mining company KGHM acquired 55% of the Sierra Gorda mine in Chile, after it bought out Canadian rival Quadra FNX in what was the largest ever foreign acquisition by a Polish company. Krzysztof Skora, KGHM’s CEO has now come out expressing regret, saying “In my opinion, the purchase of Quadra FNX at a time when commodity prices were so high was a mistake”. Which is understandable, when at the time of the purchase, LME three-month copper prices were nearing $10,000 per tonne, today, LME copper is around $4,700 per tonne
Now, the Polish government whom own a third of the company, have woken up to the woes of the purchase and are not happy about it at all. The government has demanded that an audit into the foreign assets of the company is undertaken as a reaction to the atrocious financial state of the mine. Adding to KGHM’s troubles, Poland’s Internal Security Agency (ABW) is investigating the miner over the company’s losses and its purchase of Quadra FNX. In Poland, if the management inflicts a large loss upon a company it can be punishable by prison time of up to 10 years.
However, the management are standing firm and have stated they have no intention of a rapid fire sale. “For now we don’t have any plans to sell. Getting rid of assets when commodity prices are low would be another unfavorable decision as prices are currently stabilizing and, in the future, should go up again,” Skora added.
“KGHM is changing for the better with the new management although not as fast as I would have wished,” Skora said. “We are trying to keep costs in check, we ensure everything works per the schedule and we focus on projects that are crucial for the company. We have our feet firmly on the ground we don’t want to ‘fly to space’ to extract raw materials like our predecessors did,” he added.
As for copper demand, the picture is less clear, he said.
“Economic and political uncertainties including US presidential elections, central banks’ monetary policies, Brexit and conflicts in the Middle East will continue to weigh on investors’ and consumers’ sentiment,” Skora said. “This doesn’t help when you need to estimate supply and demand trends for metals in the coming quarters.”
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