KGHM pressures Gov to cut Poland mining tax

KGHM is struggling to cope with the slump in world metal prices, with copper trading below the $5,000-a-tonne level seen as the break-even point for its domestic output.

Poland’s mining tax, which hits state-run copper miner KGHM, will eventually be scrapped and in the meantime could be reformulated or cut, Polish treasury minister Dawid Jackiewicz said on Thursday.

The mining levy, which was introduced in 2012 and is assessed using a complicated formula based on local production volumes and prices, primarily targets KGHM, Europe’s second-biggest copper producer and the world’s top silver miner.

The group expected to pay 1.3 billion zlotys ($327 million) in the tax this year, equal to its net profit reported for the first nine months of 2015.

“Eventually the tax should be scrapped,” Jackiewicz told radio Wnet. “In the meantime, we will either reduce it or change the calculation formula.”

KGHM is struggling to cope with the slump in world metal prices, with copper trading below the $5,000-a-tonne level seen as the break-even point for its domestic output.

Earlier this month the company also said it would write down the value of its key foreign interests by $1 billion in its final results for 2015.

The main impairment is the Sierra Gorda mine in Chile, which KGHM co-owns with Japan’s Sumitomo . The mine, bought in 2011, started commercial production last year.

“We have to verify this investment,” Jackiewicz said. “We are not crossing it off. Billions of zlotys have been invested. We are working on a rescue plan which will enable KGHM to save this investment.”

eanwhile KGHM faces a postponement in Poland’s plans to construct its first nuclear power plant, in which KGHM was expected to be an investor as one of the country’s largest energy consumers.

“It was to be 2024, we are now talking about 2030,” said Jackiewicz, who is responsible for managing state assets.

Source; Reuters