POLISH FINANCIAL SUPERVISION AUTHORITY

Annual report RR 2023

(in accordance with § 60 sec. 1 point 3 of the Decree regarding current and periodic information)

for issuers of securities involved in production, construction, trade or services activities

for the financial year 2023 comprising the period from 1 January 2023 to 31 December 2023 containing the separate

financial statements according to International Accounting Standards in PLN.

Publication date: 24 April 2024

KGHM Polska Miedź Spółka Akcyjna

(name of the issuer)

KGHM Polska Miedź S.A.

(name of the issuer in brief)

59 – 301

(postal code)

M. Skłodowskiej – Curie

(street)

(+48) 76 7478 200

(telephone)

ir@kghm.com

(e-mail)

6920000013

(NIP)

G30CO71KTT9JDYJESN22

(LEI)

Mining

(issuer branch title per the Warsaw Stock Exchange)

LUBIN

(city)

(number)

(+48) 76 7478 500

(fax)

www.kghm.com

(www)

390021764

(REGON)

23302

(KRS)

PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt Sp.k.

(auditing company)

SELECTED FINANCIAL DATA

in PLN mn

in EUR mn

2023

2022

2023

2022

Revenues from contracts with customers

29 084

28 429

6 423

6 064

II.

(Loss)/Profit on sales

( 920)

3 966

( 203)

846

III.

(Loss)/Profit before income tax

( 1 030)

4 996

( 227)

1 066

IV.

(Loss)/Profit for the period

( 1 153)

3 533

( 255)

754

Other comprehensive income

496

902

110

192

VI.

Total comprehensive income

( 657)

4 435

( 145)

946

VII.

Number of shares issued

200 000 000

VIII.

Earnings per ordinary share

(5.77)

17.67

(1.27)

3.77

IX.

Net cash generated from operating activities

5 639

1 791

1 245

382

Net cash used in investing activities

( 4 332)

( 1 629)

( 957)

( 347)

XI.

Net cash used in financing activities

( 809)

( 506)

( 179)

( 108)

XII.

Total net cash flow

498

( 344)

109

( 73)

XIII.

Non-current assets

36 781

36 707

8 460

7 827

XIV.

Current assets

12 115

11 288

2 786

2 407

XV.

Total assets

48 896

47 995

11 246

10 234

XVI.

Non-current liabilities

9 468

10 311

2 178

2 199

XVII.

Current liabilities

10 610

8 009

2 440

1 708

XVIII.

Equity

28 818

29 675

6 628

6 327

Average EUR/PLN exchange rate announced by the National Bank of Poland

2023

2022

Average exchange rate for the period*

4.5284

4.6883

Exchange rate at the end of the period

4.3480

4.6899

*Exchange rates are the arithmetical average of the current average exchange rates announced by the National Bank of Poland on the last day of each month respectively of

2023 and 2022

Polish Financial Supervision Authority

This report is a direct translation from the original Polish version.

In the event of differences resulting from the translation, reference should be made

to the official Polish version.

SEPARATE

FINANCIAL STATEMENTS

FOR 2023

Lubin, April 2024

in PLN millions, unless otherwise stated 
 
 
                
 
KGHM Polska Miedź S.A. 
Separate financial statements for 2023              Translation from the original Polish version 
   2 
 
 
Table of contents 
SEPARATE STATEMENT OF PROFIT OR LOSS ................................................................................................................................................... 4 
SEPARATE STATEMENT OF COMPREHENSIVE INCOME ................................................................................................................................... 4 
SEPARATE STATEMENT OF CASH FLOWS ......................................................................................................................................................... 5 
SEPARATE STATEMENT OF FINANCIAL POSITION .......................................................................................................................................... 7 
SEPARATE STATEMENT OF CHANGES IN EQUITY ............................................................................................................................................ 8 
PART 1 – General information ......................................................................................................................................................................... 9 
Note 1.1 Corporate information ........................................................................................................................................................................................ 9 
Note 1.2 Going concern ....................................................................................................................................................................................................... 9 
Note 1.3 Declaration by the Management Board on the accuracy of the prepared separate financial statements ....................................... 12 
Note 1.4 Basis of preparation and presentation .......................................................................................................................................................... 12 
Note 1.5 Foreign currency transactions and the measurement of items denominated in foreign currencies ................................................. 13 
Note 1.6 Impact of new and amended standards and interpretations .................................................................................................................... 14 
Note 1.7 Published standards and interpretations, which are not yet in force and were not applied earlier by the Company ................... 16 
PART 2 – Operating segments and information on revenues .................................................................................................................... 17 
PART 3 – Impairment of assets ..................................................................................................................................................................... 25 
Note 3.1 Impairment losses on assets as at 31 December 2023 ............................................................................................................................... 25 
Note 3.2 Impairment losses on assets as at 31 December 2022 ............................................................................................................................... 30 
PART 4 – Explanatory notes to the statement of profit or loss ................................................................................................................. 32 
Note 4.1 Expenses by nature ............................................................................................................................................................................................ 32 
Note 4.2 Other operating income and costs ................................................................................................................................................................. 33 
Note 4.3 Finance income and costs................................................................................................................................................................................. 34 
Note 4.4 Reversal / recognition of impairment losses on assets in the statement of profit or loss ................................................................... 34 
PART 5 – Taxation ........................................................................................................................................................................................... 35 
Note 5.1 Income tax in the statement of profit or loss................................................................................................................................................ 35 
Note 5.2 Other taxes and charges ................................................................................................................................................................................... 39 
Note 5.3 Tax assets and liabilities .................................................................................................................................................................................... 39 
PART 6 – Investments in subsidiaries ........................................................................................................................................................... 41 
Note 6.1 Shares ................................................................................................................................................................................................................... 41 
Note 6.2 Receivables due to loans granted ................................................................................................................................................................... 42 
PART 7 – Financial instruments and financial risk management .............................................................................................................. 45 
Note 7.1 Financial Instruments ........................................................................................................................................................................................ 45 
Note 7.2 Derivatives ........................................................................................................................................................................................................... 53 
Note 7.3 Other financial instruments measured at fair value .................................................................................................................................... 56 
Note 7.4 Other long-term financial instruments measured at amortised cost ....................................................................................................... 57 
Note 7.5 Financial risk management............................................................................................................................................................................... 58 
PART 8 – Borrowings and the management of liquidity and capital ......................................................................................................... 79 
Note 8.1 Capital management policy .............................................................................................................................................................................. 79 
Note 8.2 Equity .................................................................................................................................................................................................................... 80 
Note 8.3 Liquidity management policy ........................................................................................................................................................................... 84 
Note 8.4 Borrowings .......................................................................................................................................................................................................... 87 
Note 8.5 Cash and cash equivalents ............................................................................................................................................................................... 91 
Note 8.6 Liabilities due to guarantees granted ............................................................................................................................................................. 91 
PART 9 – Non-current assets and related liabilities.................................................................................................................................... 93 
Note 9.1 Mining and metallurgical property, plant and equipment and intangible assets .................................................................................. 93 
Note 9.2 Other property, plant and equipment and intangible assets .................................................................................................................... 98 
Note 9.3 Depreciation/amortisation ............................................................................................................................................................................. 100 
Note 9.4 Provision for decommissioning costs of mines and other technological facilities ............................................................................... 100 
Note 9.5 Capitalised borrowing costs ........................................................................................................................................................................... 102 
Note 9.6 Lease disclosures – the Company as a lessee ............................................................................................................................................. 102 
Note 9.7 Greenhouse gas emissions allowances ........................................................................................................................................................ 103 
Note 9.8 Non-current assets held for sale and liabilities associated with them ................................................................................................... 104 
PART 10 – Working capital ........................................................................................................................................................................... 105 
Note 10.1 Inventories ....................................................................................................................................................................................................... 105 
Note 10.2 Trade receivables ........................................................................................................................................................................................... 108 
Note 10.3 Trade and similar payables .......................................................................................................................................................................... 109 
Note 10.4 Changes in working capital........................................................................................................................................................................... 111 
PART 11 – Employee benefits ...................................................................................................................................................................... 113 
Note 11.1 Employee benefits liabilities......................................................................................................................................................................... 114 
Note 11.2  Changes in liabilities related to future employee benefits programs ................................................................................................. 115 
PART 12 – Other notes ................................................................................................................................................................................. 118 
Note 12.1 Related party transactions ........................................................................................................................................................................... 118 
Note 12.2 Dividends paid ................................................................................................................................................................................................ 119 
Note 12.3 Other assets .................................................................................................................................................................................................... 119 
Note 12.4 Other liabilities ............................................................................................................................................................................................... 120 
Note 12.5 Assets and liabilities not recognised in the statement of financial position ....................................................................................... 120 
Note 12.6 Capital commitments related to property, plant and equipment and intangible assets ................................................................. 120 
 
 
 
 

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 12.7 Employment structure .................................................................................................................................................................................. 121

Note 12.8 Remuneration of key managers .................................................................................................................................................................. 122

Note 12.9 Remuneration of the entity entitled to audit the financial statements and of entities related to it (in PLN thousands) .......... 123

Note 12.10 Disclosure of information on the Company’s activities regulated by the Act on Energy ................................................................ 124

Note 12.11 Subsequent events ...................................................................................................................................................................................... 129

PART 13 - Quarterly financial information of KGHM Polska Miedź S.A. .................................................................................................. 132

SEPARATE STATEMENT OF PROFIT OR LOSS................................................................................................................................................................ 132

Explanatory notes to the statement of profit or loss ............................................................................................................................... 133

Note 13.1 Expenses by nature ....................................................................................................................................................................................... 133

Note 13.2 Other operating income and costs ............................................................................................................................................................. 134

Note 13.3 Finance income and costs ............................................................................................................................................................................ 136

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

SEPARATE STATEMENT OF PROFIT OR LOSS

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Part 2

Revenues from contracts with customers

29 084

28 429

Note 4.1

Cost of sales

(28 414)

(23 157)

Gross profit

670

5 272

Note 4.1

Selling costs and administrative expenses

(1 590)

(1 306)

(Loss)/Profit on sales

( 920)

3 966

Note 4.2

Other operating income, including:

2 564

2 172

interest income calculated using the effective

interest rate method

377

346

fair value gains on financial assets measured at

fair value through profit or loss

668

631

gain due to reversal of impairment losses on

financial instruments

213

Note 4.2

Other operating costs, including:

(2 794)

( 873)

impairment losses on financial instruments

( 7)

Note 4.3

Finance income

531

148

Note 4.3

Finance costs

( 411)

( 417)

(Loss)/Profit before income tax

(1 030)

4 996

Note 5.1

Income tax expense

( 123)

(1 463)

(LOSS)/PROFIT FOR THE PERIOD

(1 153)

3 533

Weighted average number of ordinary shares

(million)

200

Basic/diluted earnings per share (in PLN)

( 5.77)

17.67

SEPARATE STATEMENT OF COMPREHENSIVE INCOME

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Note 8.2.2

(Loss)/Profit for the period

(1 153)

3 533

Note 8.2.2

Measurement of hedging instruments

net of the tax effect

451

1 354

Other comprehensive income which will be

reclassified to profit or loss

451

1 354

Note 8.2.2

Measurement of equity financial instruments at fair

value through other comprehensive income, net of

the tax effect

264

( 79)

Note 8.2.2

Actuarial losses net of the tax effect

( 219)

( 373)

Other comprehensive income, which will not be

reclassified to profit or loss

( 452)

Total other comprehensive net income

496

902

TOTAL COMPREHENSIVE INCOME

( 657)

4 435

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

SEPARATE STATEMENT OF CASH FLOWS

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Cash flow from operating activities

Profit before income tax

(1 030)

4 996

Note 9.3

Depreciation/amortisation recognised in profit or loss

1 597

1 434

Interest on investment activities

( 292)

( 268)

Other interest

167

Dividends income

( 29)

(Profit)/loss on the disposal of shares and investment certificates

( 1)

Note 6.2

Fair value (gains)/losses on financial assets measured at fair value

through profit or loss

( 563)

( 600)

Note 4.4

Impairment losses on non-current assets

3 777

Note 4.4

Reversal of impairment losses on non-current assets

( 842)

( 213)

Exchange differences, of which:

310

( 231)

from investment activities and cash

668

( 410)

from financing activities

( 358)

179

Change in provisions for decommissioning of mines, liabilities related

to employee benefits and other provisions

391

( 2)

Change in other receivables and liabilities other than working capital

( 208)

( 165)

Change in assets and liabilities due to derivatives

906

( 351)

Note 7.2

Reclassification of other comprehensive income to profit or loss due

to the realisation of hedging derivatives

( 285)

492

Other adjustments

156

114

Exclusions of income and costs, total

5 115

247

Income tax paid

(1 631)

(1 575)

Note 10.4

Changes in working capital, including:

3 185

(1 877)

change in trade payables transferred to factoring

2 886

( 55)

Net cash generated from operating activities

5 639

1 791

Cash flow from investing activities

Note 9.1.2

Expenditures on mining and metallurgical assets, including:

(3 037)

(2 689)

paid capitalised interest on borrowings

( 254)

( 173)

proceeds on settlement of an instrument hedging interest rate of

bonds

Expenditures on other property, plant and equipment and intangible

assets

( 37)

( 42)

Expenditures due to acquisition of shares

( 224)

( 375)

Expenditures on financial assets designated for decommissioning of mines

( 40)

Loans granted

( 829)

( 23)

Advances granted on property, plant and equipment and intangible assets

( 143)

( 40)

Advances granted for the purchase of financial assets

(141)

(Expenditures on)/proceeds from disposal of shares and redemption of

investment certificates

( 4)

367

Dividends received

Proceeds from financial assets designated for decommissioning of mines

Note 7.5.2.5

Proceeds from repayment of loans granted (principal)

107

1 066

Interest received on loans granted

Other

Net cash used in investing activities

(4 332)

(1 629)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Cash flow from financing activities

Proceeds from borrowings

1 514

605

Proceeds from cash pooling

Proceeds from derivatives related to sources of external financing

130

Note 8.4.2

Repayment of received borrowings

(1 936)

( 352)

Repayment of lease liabilities

( 62)

( 44)

Interest paid, including due to:

( 145)

( 117)

Note 8.4.2

borrowings

( 119)

( 116)

Expenditures due to derivatives related to sources of external financing

( 81)

( 89)

Expenditures due to dividends paid to shareholders of the Company

( 200)

( 600)

Expenditures on cash pooling

( 40)

Other

Net cash used in financing activities

( 809)

( 506)

NET CASH FLOW

498

( 344)

Exchange differences on cash and cash equivalents

( 2)

( 3)

Cash and cash equivalents at beginning of the period

985

1 332

Note 8.5

Cash and cash equivalents at end of the period, including:

1 481

985

restricted cash

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

SEPARATE STATEMENT OF FINANCIAL POSITION

As at

31 December

2023

As at

31 December

2022

ASSETS

Mining and metallurgical property, plant and equipment

19 006

21 091

Mining and metallurgical intangible assets

1 419

1 251

Note 9.1

Mining and metallurgical property, plant and equipment and intangible assets

20 425

22 342

Other property, plant and equipment

111

104

Other intangible assets

Note 9.2

Other property, plant and equipment and intangible assets

165

155

Note 6.1

Investments in subsidiaries – shares

4 807

3 701

Note 6.2

Loans granted, including:

9 638

8 763

measured at fair value through profit or loss

3 766

3 233

measured at amortised cost

5 872

5 530

Note 7.2

Derivatives

233

714

Note 7.3

Other financial instruments measured at fair value through other comprehensive

income

803

483

Note 7.4

Other financial instruments measured at amortised cost

445

432

Financial instruments, total

11 119

10 392

Note 12.3

Other non-financial assets

265

117

Non-current assets

36 781

36 707

Note 10.1

Inventories

7 506

7 523

Note 10.2

Trade receivables, including:

471

620

trade receivables measured at fair value through profit or loss

211

455

Note 5.3

Tax assets

932

312

Note 7.2

Derivatives

760

796

Note 7.1

Cash pooling receivables

424

588

Note 12.3

Other financial assets

327

322

Note 12.3

Other non-financial assets

214

142

Note 8.5

Cash and cash equivalents

1 481

985

Current assets

12 115

11 288

TOTAL ASSETS

48 896

47 995

EQUITY AND LIABILITIES

Note 8.2.1

Share capital

2 000

Note 8.2.2

Other reserves from measurement of financial instruments

320

(395)

Note 8.2.2

Accumulated other comprehensive income

(921)

(702)

Note 8.2.2

Retained earnings

27 419

28 772

Equity

28 818

29 675

Note 8.4.1

Borrowings, leases and debt securities

4 508

5 000

Note 7.2

Derivatives

202

719

Note 11.1

Employee benefits liabilities

2 821

2 394

Note 9.4

Provisions for decommissioning costs of mines and other technological facilities

1 389

1 233

Deferred tax liabilities

328

705

Note 12.4

Other liabilities

220

260

Non-current liabilities

9 468

10 311

Note 8.4.1

Borrowings, leases and debt securities

833

1 124

Note 8.4.1

Cash pooling liabilities

350

321

Note 7.2

Derivatives

499

434

Note 10.3

Trade and similar payables

6 065

2 819

Note 11.1

Employee benefits liabilities

1 315

1 365

Note 5.3

Tax liabilities

405

1 061

Provisions for liabilities and other charges

110

Note 12.4

Other liabilities

1 061

775

Current liabilities

10 610

8 009

Non-current and current liabilities

20 078

18 320

TOTAL EQUITY AND LIABILITIES

48 896

47 995

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

SEPARATE STATEMENT OF CHANGES IN EQUITY

capital

Other

reserves from

measurement

of financial

instruments

Accumulated

other

comprehensive

income

Retained

earnings

Total equity

As at 1 January 2022

2 000

(1 670)

( 329)

25 839

25 840

Transactions with owners – dividend

( 600)

Profit for the period

3 533

Note 8.2.2

Other comprehensive income

1 275

( 373)

902

Total comprehensive income

1 275

( 373)

3 533

4 435

As at 31 December 2022

2 000

( 395)

( 702)

28 772

29 675

Note 12.2

Transactions with owners – dividend

( 200)

Loss for the period

(1 153)

Note 8.2.2

Other comprehensive income

715

( 219)

496

Total comprehensive income

715

( 219)

(1 153)

( 657)

As at 31 December 2023

2 000

320

( 921)

27 419

28 818

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 1 – General information

Note 1.1 Corporate information

KGHM Polska Miedź S.A. (“the Company”) with its registered office in Lubin at 48 M. Skłodowskiej-Curie Street is a joint stock

company registered at the Regional Court for Wrocław Fabryczna, Section IX (Economic) of the National Court Register,

entry no. KRS 23302, on the territory of the Republic of Poland.

KGHM Polska Miedź S.A. has a multi-divisional organisational structure, comprised of a Head Office and 10 Divisions:

3 mines (Lubin Mine Division, Polkowice-Sieroszowice Mine Division, Rudna Mine Division), 3 metallurgical plants (Głogów

Smelter/Refinery, Legnica Smelter/Refinery, Cedynia Wire Rod Division), the Concentrator Division, the Tailings Division, the

Mine-Smelter Emergency Rescue Division and the Data Center Division.

The shares of KGHM Polska Miedź S.A. are listed on the Warsaw Stock Exchange.

The Company’s principal activities include:

– the mining of copper and non-ferrous metals ores; and

– the production of copper, precious and non-ferrous metals.

KGHM Polska Miedź S.A. carries out copper ore mining activities based on concessions given for specific mine deposits, and

also based on mining usufruct agreements and mine operating plans.

KGHM Polska Miedź S.A. is a parent entity of the KGHM Polska Miedź S.A. Group (“Group”).

Note 1.2 Going concern

The separate financial statements were prepared under the assumption of continuing as a going concern during a period

of at least 12 months from the end of the reporting period in a significantly unaltered form and business scope,

and there are no reasons to suspect any intentional or forced discontinuation or significant limitation of its current activities.

As at the date of signing of the financial statements the Management Board is not aware of any facts or circumstances

that may cast doubt about the going concern in the foreseeable future.

Note 1.2.1 Monitored areas – macroeconomic conditions

The following macroeconomic factors have the most significant impact on the activities and financial results of the Company:

copper and silver prices, prices of fuel, electricity and energy carriers as well as market interest rates, USD/PLN exchange

rate, inflation manifested by fluctuations in prices of materials and services, which results in a salary pressure.

Stock prices of copper, silver and gold as well as the USD/PLN exchange rate shape the amount of revenues from sales and

constitute a part of a market risk which is managed by the Company by, among others, derivatives transactions hedging the

price as well as the exchange rate. Moreover, they have a significant impact on some of the Company’s costs, while the

following increases in prices have a direct impact on the level of costs: fuels, energy carriers and electricity, caused by a high

inflation and disruptions in global supply chains. Furthermore, the level of market interest rates was reflected in the level

of discount rates used by the Company in the balance sheet measurement of assets and liabilities recognised in the

statement of financial position.

All of the aforementioned risk factors have an impact on the measurement of recoverable amount of the Company’s assets,

where of significance is not only the current volatility of commodities and exchange rates shaping the amount of revenues

and a significant part of costs, but above all volatility of forecasts on shaping these factors in subsequent periods, since they

have an impact on production and investment plans. Moreover, due to the long-term nature of mining and metallurgical

assets, the applied discount rate, which remains under the influence of market interest rates, is of particular importance.

The impact of macroeconomic factors on individual areas of operations as well as assets and liabilities of the Company was

presented in the following notes:

Impact observation areas

Note

Operating segments and information on revenues – onerous contracts and variable overheads

Part 2

Impairment of assets

Part 3

Receivables due to loans granted

6.2

Financial instruments – fair value

7.1

Market risk – price of commodities, exchange rate, interest rates, prices of energy and energy carriers

7.5.1

Liquidity risk

8.1

Provision for decommissioning costs of mines and other technological facilities

9.4

Future employee benefits liabilities

Part 11

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 1.2.2 Monitored areas – impact of COVID-19

The Company did not record a negative impact due to factors related to the COVID–19 pandemic during the reporting

period, and risk related to their potential future impact is judged to be low.

Note 1.2.3 Monitored areas – impact of war in Ukraine

Key risk categories

The most significant risk categories related to the war in Ukraine which impact the Company’s operations are:

• interruptions in the supply chain and the availability of materials and components, fuels and energy on

international markets,

• the possible recession of global economies as a result of the inflation and energy crisis, as well as the observed

economic slowdown,

• volatility in copper and silver prices on the metals markets,

• volatility in the USD/PLN exchange rate,

• volatility in electrolytic copper production costs, including in particular due to the minerals extraction tax, changes

in the value of consumed, purchased copper-bearing materials and volatility in prices of energy carriers and

electricity,

• the general uncertainty on financial markets,

• continued price rises of fuels and energy carriers.

Evaluation of the key categories of risk which are impacted by the war in Ukraine underwent detailed analysis by the on-

going monitoring of selected information in the areas of production, sales, supply chain, personnel management and

finance, in order to support the process of reviewing the current financial and operating situation of KGHM Polska Miedź

S.A. As a result, some of the aforementioned threats had a negative impact on the Company’s operations and resulted in

among others an increase in costs as compared to 2022. Details regarding the results of the operating segments may be

found in Part 2.

Impact on the metals market and shares price

From the point of view of the Company, the war in Ukraine has an impact on market risk connected with volatility in metals

prices and stock exchange indices during the reporting period. The level of the Company’s market capitalisation continued

to be lower than its net assets and it is one of the factors implying, among others, an occurrence of an indication to conduct

impairment testing of its production assets. The Company’s share price at the end of 2023 rose by 10% compared to prices

at the end of the third quarter of 2023 and fell by 3% compared to the end of 2022, and at the close of trading on 29

December 2023 amounted to PLN 122.70. As a result of changes in share prices, the Company’s capitalisation decreased

from PLN 25 350 million at the end of 2022 to PLN 24 540 million at the end of 2023.

Uncertainty related to the volatility on the metals market, in particular copper, is the main factor influencing the level of

generated revenues and as a result it may have an impact on the financial result. The average price of copper during the

year 2023 amounted to 8 478 USD/t, which was more than assumed in the budget. However, as compared to the average

price of copper during 2022, it fell by 4%. Following the stable first quarter of 2023, the average price of copper in

subsequent quarters was in a downward trend, which was reflected in the decrease in copper price of 9% in the fourth

quarter as compared to the average price of copper in the first quarter of 2023. The average price of copper in the fourth

quarter of 2023 amounted to 8 158 USD/t, which was at the level assumed in the budget.

Impact on the fuels and energy carriers market as well as the availability of raw and other materials

Currently, KGHM Polska Miedź S.A. still does not experience a significantly negative impact of volatility of supply chains on

its business activities. It cannot be ruled out that the continuation of this armed conflict as well as the system of economic

sanctions will have a substantial negative impact in subsequent periods on suppliers and customers of the Company and

may lead to unfavourable deviations in the continuity of materials and services supply chains in the Company as well as in

the receipt of products, caused among others by logistical restrictions and the availability of materials (e.g. steel), fuels and

energy on international markets. Taking into consideration the continuity of supply of energy carriers (natural gas, coal,

coke), at the present time, KGHM Polska Miedź S.A. is not experiencing a negative impact from the suspension of Russian

natural gas, coal and coke deliveries, and is fully capable of maintaining the continued operation of the core production

business and of all production processes.

Impact on the activities of the Company

The geopolitical situation related to the direct aggression of Russia against Ukraine and the implemented system of

sanctions at the present time is not restricting the operations of KGHM Polska Miedź S.A., while the risk of interruptions to

the going concern of the Company in this regard continues to be estimated as low.

Despite the high level of inflation observed in the global economy, leading to a tightening of monetary policy, demand for

the Company’s key products in 2023 remained at a good level.

With respect to the availability of capital and the level of debt, KGHM does not hold bank loans drawn from institutions

threatened with sanctions.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Preventive actions

There were no production stoppages in KGHM Polska Miedź S.A. which could have been directly attributable to the war in

Ukraine.

There have been no significant changes in the payment morality of customers, and therefore the receivables inflow to the

Company takes place without any major disturbances.

The strategy of diversification of suppliers applied by the Company and the use of alternative solutions effectively, at this

point in time, mitigates the risk of interruptions in the supply chains of raw and other materials.

KGHM Polska Miedź S.A. continues to advance its investment projects in accordance with established schedules and

therefore does not identify any increase in risk related to their continuation due to the war in Ukraine.

No significant, negative impact of the aforementioned factors has been recorded on the continued operations of the core

production business, sales or continuity of the supply chain for materials and services yet. The Company continuously

monitors the global economic situation in order to assess its potential negative impact on the Company and to take

preventive actions to mitigate this impact.

Note 1.2.4 Monitored areas – risks and hazards associated with climate change

KGHM Polska Miedź S.A. is a conscious and responsible participant in the energy transition, and adaptation to climate

changes and the management of climate risk are of key importance to it. The Company continuously evaluates the risk

associated with the climate and the impact on its operations under the process of Corporate Risk Management of the KGHM

Polska Miedź S.A. Group, which was described in more detail in the Management Board’s report on the activities of KGHM

Polska Miedź S.A. and of the KGHM Polska Miedź S.A. Group in 2023, section 2.3 Risk management.

The negative impact of climate change on the activities of KGHM Polska Miedź S.A. is analysed using the classification

presented below:

The Company is exposed to physical climate risk, arising from specified events, in particular related to violent and chronic

weather phenomena resulting from changes in the climate, such as rainless days (droughts), strong/violent winds, increases

in average daily temperature as well as permanent changes in weather patterns, which could impact the operations of the

Company by, among others, through disruptions in the supply chain, the continuity of the core production business and an

increase in operating costs directly related to the core business as well as through more difficult working conditions.

The climate risk related to the transition, to Ih the Company is exposed, arises from the need to adapt the economy to

gradual climate change. This risk category comprises questions related to legal requirements, technological progress

towards a low-carbon economy and changes in demand and supply for certain products and services, whose production is

associated with the climate risk as well as the growing expectations of stakeholders regarding the Company as to the

reduction of its impact on the climate. A detailed description of identified, key climate risks associated with the negative

impact of climate changes on the activities of KGHM Polska Miedź S.A., including indicators used in their assessment and

actions undertaken by the Company to mitigate their impact, is presented in the Management Board’s report on the

activities of KGHM Polska Miedź S.A. and the KGHM Polska Miedź S.A. Group in 2023, section 2.3 Risk management and

section 4.2 Climate impact management.

While assessing the impact of identified climate risks on the Company’s financial situation, results and activities, in particular

in the case of volatile costs of CO

emission allowances, the increase in costs of electricity purchase, costs associated with

research and additional expenditures on development of internal energy sources, the following areas were subjected to

detailed assessment:

• adopted periods of economic utility of fixed assets and their residual values,

• existence of indications of the possibility of impairment of property, plant and equipment and intangible assets

and assumptions adopted for impairment testing of these assets,

• assumptions adopted for the measurement of loans granted,

• revaluation of the provision for future decommissioning costs of mines and other technological facilities,

• revaluation of provisions for additional costs of sales, selling costs and administrative expenses,

• liabilities and liabilities due to guarantees associated with potential fines and environmental penalties.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

As a result of the aforementioned work, as at 31 December 2023 no material impact of climate risk on the aforementioned

areas was identified.

Note 1.3 Declaration by the Management Board on the accuracy of the prepared separate financial statements

The Management Board of KGHM Polska Miedź S.A. declares that according to its best judgement, the annual separate

financial statements for 2023 and the comparable data have been prepared in accordance with accounting principles

currently in force, and give a true, fair and clear view of the financial position of KGHM Polska Miedź S.A. and the loss for

the period of the Company.

The Management Board’s report on the activities of KGHM Polska Miedź S.A. and of the KGHM Polska Miedź S.A. Group in

2023 presents a true picture of the development and achievements, as well as the condition, of KGHM Polska Miedź S.A.

and the KGHM Polska Miedź S.A. Group, including a description of the basic exposures and risks.

The separate financial statements were authorised for publication and signed by the Management Board of the Company

on 23 April 2024.

Note 1.4 Basis of preparation and presentation

These separate financial statements have been prepared in accordance with International Financial Reporting Standards

as adopted by the European Union, on the basis of historical cost, except for financial instruments classified as measured

at fair value. These financial statements are the separate financial statements of KGHM Polska Miedź S.A. pursuant to IAS

27.

In order to fully understand the financial position and results of the Company’s activities as the Parent Entity of the Group,

these separate financial statements should be read jointly with the annual consolidated financial statements of the KGHM

Polska Miedź S.A. Group for the year ended on 31 December 2023. These financial statements are available at the

Company’s website www.kghm.com from the dates indicated in the regulatory filing on publication dates for the Company’s

annual report and the Group’s consolidated annual report for 2023.

The accounting policies described in this note and in individual notes were applied by the Company in a continuous manner

for all presented periods.

Note 12.10 of these separate financial statements contains information on the Company’s activities regulated by the Act on

Energy, pursuant to article 44 section 2 of the Act dated 10 April 1997.

As compared to the period ended on 31 December 2022, there were no significant changes to the measurement methods.

Changes in estimates as at 31 December 2023 as compared to the aforementioned period arise from changes in

assumptions as a result of changes in business circumstances and/or other variables.

For a greater understanding of the data recognised in the financial statements, the accounting policy and important

estimates, assumptions and judgments are presented in individual, detailed notes as in the table below.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note

Title

Amount recognised in

the financial statements

Accounting

policy

Important

estimates,

assumptions

and judgements

2023

2022

Revenues from contracts with customers

29 084

28 429

3.1

Impairment losses on non-current assets

(3 777)

(6)

5.1

Income tax in the statement of profit or

loss

(123)

(1 463)

5.1.1

Deferred income tax

377

(415)

5.3

Tax assets

932

312

5.3

Tax liabilities

(405)

(1 061)

6.1

Investments in subsidiaries

4 807

3 701

6.2

Loans granted*

9 711

8 785

7.2

Derivatives

292

357

7.3

Other financial instruments measured at

fair value

803

483

7.4

Other long-term financial instruments

measured at amortised cost

445

432

8.2

Equity

(28 818)

(29 675)

8.4

Borrowings

(5 691)

(6 445)

8.5

Cash and cash equivalents

1 481

985

8.6

Labilities due to guarantees granted

(1 537)

(1 609)

9.1

Mining and metallurgical property, plant

and equipment and intangible assets

20 425

22 342

9.2

Other property, plant and equipment and

intangible assets

165

155

9.4

Provision for decommissioning costs of

mines and other facilities**

(1 401)

(1 261)

9.6

Lease disclosures – the Company as a

lessee

562

681

10.1

Inventories

7 506

7 523

10.2

Trade receivables

471

620

10.3

Trade and similar payables

(6 261)

(3 005)

10.4

Changes in working capital

3 185

(1 877)

11.1

Employee benefits liabilities

(4 136)

(3 759)

12.3

Other assets

806

581

12.4

Other liabilities

(1 281)

(1 035)

* Amounts include data on long-term and short-term loans. In the statement of financial position short-term loans are recognised

in the item “other financial assets”.

** Amounts include data on non-current and current provisions for decommissioning costs of mines and other technological

facilities. In the statement of financial position, current provisions for decommissioning costs of mines and other technological

facilities are recognised in the item “provisions for liabilities and other charges”.

Note 1.5 Foreign currency transactions and the measurement of items denominated in foreign currencies

The financial statements are presented in Polish zloty (PLN), which is both the functional and presentation currency of the

Company.

At the moment of initial recognition, foreign currency transactions are translated into the functional currency:

• at the actual exchange rate applied, i.e. at the buy or sell exchange rate applied by the bank in which the transaction

occurs, in the case of the sale or purchase of currencies and the payment of receivables or liabilities on a bank account

in a currency other than the operation currency,

• at the average exchange rate set for a given currency, prevailing on the date of the transaction for other transactions.

The exchange rate prevailing on the date of the transaction is the average NBP rate announced on the last working

day preceding the transaction date.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

At the end of each reporting period, foreign currency monetary items are translated at the closing rate prevailing on that

date.

Foreign exchange gains or losses on the settlement of foreign currency transactions, and on the measurement of foreign

currency monetary assets and liabilities (other than derivatives), are recognised in profit or loss.

Foreign exchange gains or losses on the measurement of foreign currency derivatives are recognised in profit or loss as a

fair value measurement, provided they do not represent a change in the fair value of the effective cash flow hedge. In such

a case, they are recognised in other comprehensive income in accordance with hedge accounting policies.

Foreign exchange gains or losses on non-monetary items, such as equity instruments classified as financial assets

measured at fair value through other comprehensive income, are recognised in other comprehensive income.

Foreign exchange gains or losses on monetary items measured at fair value through profit or loss (e.g. loans granted

measured at fair value) are recognised as a part of the fair value measurement.

Note 1.6 Impact of new and amended standards and interpretations

Amendments to standards applied for the first time in the separate financial statements for 2023:

• IFRS 17 Insurance contracts and amendments to IFRS 17 published in 2020 and 2021,

• Amendments to IAS 1 and Practice Statement 2 on disclosures of accounting policies,

• Amendments to IAS 8 on the introduction of a definition of accounting estimates,

• Amendments to IAS 12 on deferred tax related to assets and liabilities arising from a single transaction,

• Amendments to IAS 12 on temporary exception to the requirements regarding recognition of deferred tax related

to the implementation of the reform of the international tax system (the so-called Pillar 2 of the BEPS 2.0 (Base Erosion

and Profit Shifting 2.0)).

Up to the date of publication of these separate financial statements, the aforementioned amendments to the standards

were adopted for use by the European Union.

In the Company’s opinion, the amendments to the standards:

• IFRS 17 – do not have an impact on the separate financial statements

• IAS 1 and Practice Statement 2 and amendments to IAS 8 - have an insignificant impact on the separate financial

statements,

• IAS 12 on deferred tax related to assets and liabilities arising from a single transaction – do not have an impact on the

separate financial statements, because the Company applied an approach in line with current guidelines, among

others with respect to leases capitalised by lessees pursuant to IFRS 16 and environmental provisions recognised

pursuant to IFRIC 1,

• IAS 12 regarding recognition of the effects of the international tax system reform, will have an impact on the separate

financial statements and the Company is assessing the scope of impact of regulations on the global minimum tax,

pursuant to the description provided below:

Pillar 2 of the BEPS 2.0 project introduces a general framework of the global minimum tax, adopted during the forum of

the Organisation for Economic Cooperation and Development (OECD, hereafter: OECD Framework). In the case of member

states of the European Union, the first stage of implementation of new rules will be the adoption of the Council Directive

(EU) 2022/2523 of 14 December 2022 on ensuring a global minimum level of taxation for multinational enterprise groups

and large-scale domestic groups in the European Union (hereafter: “the Directive”). The Directive obliges the individual

member states to implement its rules to their domestic legal systems, in accordance with legislative rules in force in

individual states.

Pillar 2 of the BEPS 2.0 project introduces the GloBE rules (Global Anti-Base Erosion Model Rules):

1. The Income Inclusion Rule (IIR), pursuant to which a top-up tax is applied at the level of the ultimate parent entity

or an intermediate parent entity in the case of low-tax constituent entities.

2. The Undertaxed Profits Rule (UTPR). This is a complementary rule to the IIR rule and is applicable only if no IIR

was allocated. The top-up tax is allocated to countries with constituent entities on the basis of property, plant and

equipment/employees of these entities by limiting or denying deductions or requiring a corresponding

adjustment.

3. Qualified Domestic Minimum Top-up Tax (QDMTT). It is applicable prior to IIR and UTPR rules and consists of

calculating the top-up tax by the low-tax jurisdiction itself on the basis of a calculation pursuant to the calculation

for a IIR top-up tax.

The minimum effective tax rate (ETR) for all of the aforementioned rules is 15%.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The main mechanisms of Pillar 2 of the BEPS 2.0 reform will be applied by MNE (multinational enterprises /groups) in the

following manner:

1. In the first step, before the GloBE rules, the Subject to Tax Rule is applicable (STTR), which provides individual

countries with a right to impose a limited taxation at source on taxable payments between related entities, which

are taxable below the agreed-upon minimum nominal rate of 9%. It is applicable to interest, licence fees and

certain other receivables.

2. In the second step, QDMTT rule is applicable, under which the top-up tax may be calculated directly by the low-

tax jurisdiction in which a group’s (multinational enterprise’s) constituent entity operates. It is of significance that

the qualified domestic top-up tax should be calculated in a manner compliant with requirements stipulated for

the calculation of the IIR tax under the Pillar 2.

3. If the two rules mentioned above were not applied or if their application would not lead to full settlement of the

total top-up tax due from a given group, then the total amount of top-up tax, in the amount decreased by the part

of a top up tax charged in previous steps, will be charged at the level of the ultimate or intermediate parent entity,

pursuant to the IIR rule.

4. Finally, if the IIR top-up tax is likewise not imposed, the undertaxed profits rule is applicable (UTPR) by imposing

a top-up tax on constituent entities of the group whose jurisdictions adopted the GloBE rules, regardless whether

the constituent entities have paid the income tax above or below the ETR level of 15% or not.

The application of the aforementioned rules depends on whether a given country has implemented GloBE rules or its own

national top-up tax.

In the case of Poland, appropriate domestic laws implementing the provisions of the Directive have not yet been adopted,

nor has draft legislation been released to the public. Apart from Poland, the KGHM Polska Miedź S.A. Group has constituent

entities in, among others, the following jurisdictions: Canada, USA, Chile, Luxembourg, the United Kingdom.

Currently in Canada, regulations on the implementation of QDMTT and IIR rules are being worked upon, and the first year

in which they are planned to be applicable is the financial year beginning on or after 31 December 2023. In the case of

UTPR, it is planned that it would be the financial year beginning on or after 31 December 2024.

The USA will not implement rules of Pillar 2 due to domestic regulations currently in force, whereas the USA plan to

implement regulations aimed at counteracting the UTPR rule under the Pillar 2 in other jurisdictions.

It is expected that Chile will implement Pillar 2 rules, but no implementation schedule has been announced yet.

In Luxembourg, on 20 December 2023 regulations were adopted which implemented IIR, QDMTT and UTPR rules. QDMTT

and IIR rules will be applicable to the financial year beginning on or after 31 December 2023, with UTPR rules to the financial

year beginning on or after 31 December 2024.

The United Kingdom is one of the leading nations in terms of progress in the implementation of IIR and QDMTT rules –

these regulations have already been implemented and will be in force from 2024, and a draft regulation on the

implementation of UTPR has been published, with implementation planned from 2025.

Due to the above, in the Company’s opinion, from 1 January 2024 he GloBE QDMTT and IIR rules will be implemented at

least in Canada and the United Kingdom.

The analysis of the OECD Framework and the Directive leads to the conclusion that the Company KGHM Polska Miedź S.A.,

as a so-called multinational enterprise, will be obliged to report a specific level of the tax rate of subsidiaries at the level of

individual jurisdictions. Nevertheless, implementation of appropriate regulations at the domestic level is necessary in this

regard.

While the rules of the Directive should encompass the year 2024, the OECD Framework includes a transitional period (a so-

called safe harbour), which enables the postponement of the date of obligatory application of these rules by 3 subsequent

years (no later than to 30 June 2028). Based on analysis of the assumptions stipulated in these transitional rules, in the

Company’s opinion, companies of the Group will be able to use them in the majority of jurisdictions.

Due to the above, since there is no legal framework in force on Pillar 2 of the BEPS 2.0 reform, these separate financial

statements do not yet contain any amounts arising from the reform of the international tax system. The Company will take

actions to estimate the potential impact of the reform on future tax burden of the Company as soon as the regulations are

published.

The Company continuously monitors progress of the legislative work aimed at implementation of the rules of the reform

in question, in Poland as well as in other jurisdictions in which subsidiaries of the Group operate and analyses their impact

on the Group as well as operational processes that will require an adjustment to new disclosure and reporting

requirements.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 1.7 Published standards and interpretations, which are not yet in force and were not applied earlier by the

Company

Published standards and interpretations which are not yet in force, adopted for use by the European Union:

• Amendments to IFRS 16 on lease liabilities in a sale and leaseback, effective on or after 1 January 2024.

• Amendments to IAS 1 on classification of liabilities as current or non-current (including changes due to deferral

of effective date), effective on or after 1 January 2024. The standard introduces changes clarifying conditions

necessary to recognise financial liabilities as non-current. Such recognition will be possible only if the entity has

the unconditional right to defer settlement of a liability for over 12 months after the reporting date and at the

same time the entity’s intent as to the early repayment will not have an impact on this recognition. If the

amendments to IAS 1 were applied by the Company in these separate financial statements, the presentation of

borrowings as at 31 December 2023 would not change.

• Amendments to IAS 1 on non-current liabilities with covenants, effective on or after 1 January 2024. The

amendments aim to clarify that covenants, whose conditions have to be met by an entity after the reporting date,

and which refer to the rights of an entity to defer settlement of a liability by at least twelve months from the end

of the reporting period, do not have an impact on the classification of liabilities as current or non-current at the

end of the reporting period. However, it will be necessary to disclose information on such covenants in notes to

the financial statements in order to allow users of financial statements to understand the risk that a particular

liability may become due in the period of 12 months from the end of the reporting period. In such a situation, the

Standard requires the disclosure of a description of a covenant, the amount of liabilities it is related to and facts

and circumstances, if they occur, indicating the occurrence of risk that an entity may not meet the conditions of

the covenant within the deadline indicated after the end of the reporting period.

Published standards and interpretations which are not yet in force, awaiting the adoption for use by the European

Union:

• IFRS 14 Regulatory deferral accounts, effective on or after 1 January 2016, however the European Commission

has decided not to launch the endorsement process of this interim standard and to wait for the final standard.

• Amendments to IFRS 10 and IAS 28 on the sale or contribution of assets between an Investor and its Associate

or Joint Venture (date of entry into force was not specified).

• Amendments to IAS 7 and IFRS 7 on disclosure requirements regarding supplier finance arrangements, effective

on or after 1 January 2024.

• Amendments to IAS 21 on how to approach the issue of assessment as to whether a given currency is

exchangeable and how to determine a spot exchange rate if it is not exchangeable, effective on or after 1 January

2025.

• IFRS 18 Presentation and disclosure in financial statements, effective on or after 1 January 2027. IFRS 18 will

replace IAS 1 Presentation of financial statements. The aim of the new standard is to improve the usefulness of

the information presented in financial statements by providing investors with more transparent and comparable

information on companies' financial results.

The Company intends to apply all of the amendments at their effective dates. In the Company’s opinion, amendments to

the standards will be applicable to its activities in the scope of future economic operations, transactions or other events,

towards which the amendments to the standards are applicable. Amendments to IAS 7 and IFRS 7 on the disclosure

requirements regarding supplier finance arrangements will be applied by the Company in the scope of reverse factoring

used by the Company, as a supplement to information disclosed currently in these financial statements, but nevertheless,

in the Company’s opinion, this impact will be insignificant. If IFRS 18 is applied, changes in reporting will depend on the

previously used method of presenting information on financial results in the financial statements. The Company intends to

conduct a preliminary assessment of the scope of these changes for the Company's separate financial statements by the

end of 2024.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 2 – Operating segments and information on revenues

Operating segments

Based on an analysis of the Company’s organisational structure, its system of internal reporting and the management

model, it was determined that the Company’s activity constitutes a single operating and reporting segment, which may be

defined as “Production of copper, precious metals and other metallurgical products”.

The core business of the Company is the production of copper and silver. Production is a fully integrated process, in which

the end-product of one stage is the half-finished product used in the next stage. Copper ore extracted in the mines is

transported to concentrators where the enrichment process is carried out. As a result of this process, copper concentrate

is produced, which is then supplied to the metallurgical plants where it is smelted and fire refined into anode copper. Then,

during the process of electrolytic refining, the anode copper is converted into copper cathodes, which are a commercial

product, or a material to produce wire rod.

Anode slimes, which arise from the process of copper electrorefining, is a raw material used to produce precious metals.

Lead-bearing dust which is generated from the smelting processes is used to produce lead. Nickel sulphate and copper

sulphate are recovered from the processing of used electrolyte. Gases generated from the smelting furnaces are used to

produce sulphuric acid. Economic use is also made of smelter slags, which are sold as road-building materials.

Settlements between organisational units are carried out based on measurement of production at cost, and as a result the

internal organisational units (i.e. mines, concentrators, metallurgical plants) in the production cycle do not generate profit

on sales.

The financial data prepared for management accounting purposes is based on the same accounting policies which are used

to prepare the financial statements. The Management Board of the Company, which is responsible for allocating resources

and for the financial results of the Company, regularly reviews financial reports in the process of making major operational

decisions.

The organisational structure of KGHM Polska Miedź S.A. has the Head Office and 10 Divisions, including: mines,

concentrators and metallurgical plants. The Head Office carries out sales of the Company’s basic products, i.e. electrolytic

copper cathodes, wire rod and silver, and support functions, particularly including the management of financial assets,

centralised finance and accounting services, marketing, legal and other services.

The Management Board of the Company assesses a segment’s performance based on Adjusted EBITDA and the profit or

loss for the period. The manner of calculating Adjusted EBITDA is presented in the table “Reconciliation of Adjusted EBITDA”.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Segment assets and liabilities

As at

31 December 2023

As at

31 December 2022

Assets

48 896

47 995

Liabilities

20 078

18 320

Production of main products

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Electrolytic copper (kt), of which:

592.4

586.0

- electrolytic copper from own concentrates (kt)

385.5

381.5

Silver (t)

1 403.3

1 298.4

C1 unit cash cost of production of payable copper in own

concentrate (USD/lb)*

2.98

2.38

C1 unit cash cost of production of payable copper in own

concentrate (PLN/lb)*

12.52

10.62

*C1 cost reflects ore mining and processing costs, transport costs, the minerals extraction tax, administrative expenses during the

mining phase and smelter treatment and refining charges (TC/RC) less by-product value. C1 cost was calculated using the average

exchange rate by the NBP, which is set as arithmetical average of daily quotations per the NBP’s tables.

Segment financial results

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Total revenues from contracts with customers, including:

29 084

28 429

Revenues from sales transactions, for which the sales price is set

after the date of recognition of the sales (M+ principle), of which:

20 681

21 767

settled

20 294

21 045

unsettled

387

722

Cost of sales, selling costs and administrative expenses*

(30 004)

(24 463)

Depreciation/amortisation recognised in expenses by nature**

(1 675)

(1 504)

(Recognition)/reversal of an impairment loss on non-current

assets, recognised in cost of sales, selling costs and administrative

expenses

(2 808)

Adjusted EBITDA

3 563

5 470

(Loss)/Profit for the period, including:

(1 153)

3 533

(recognition)/reversal of impairment losses on non-current

assets

(2 935)

207

* Cost of products, merchandise and materials sold plus selling costs and administrative expenses.

** The Company redefined the adjusted EBITDA during the reporting period, by including depreciation/amortisation recognised in

expenses by nature in the calculation method (until now, the depreciation/amortisation recognised in profit or loss was included).

The applied approach is commonly used by numerous listed companies, including in the mining sector, ensures consistency and

comparability with plans of individual operating segments and parameters applied in credit agreements.

The comparable period was converted pursuant to the presentation in the current reporting period, EBITDA changed as compared

to the one presented in the published Financial statements for 2022, an increase in the amount of PLN 70 million.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Total revenues from contracts with customers, of which:

29 084

28 429

in factoring

8 852

8 677

not in factoring

20 232

19 752

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Revenues from contracts with customers, of which:

29 084

28 429

transferred at a certain moment

28 235

27 986

transferred over time

849

443

Reconciliation of “Adjusted EBITDA” (which is not defined in IFRSs) with “Profit/(loss) for the period” (which is defined in

IFRSs) and “Profit on sales” is presented in the following tables:

Reconciliation of Adjusted EBITDA

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

(Loss)/Profit for the period

(1 153)

3 533

[–] Current and deferred income tax

( 123)

(1 463)

[–] Depreciation/amortisation recognised in expenses by nature

(1 675)

(1 504)

[–] Finance income and (costs)

120

( 269)

[–] Other operating income and (costs)

( 230)

1 299

[–] (Recognition)/reversal of an impairment loss on non-current

assets, recognised in cost of sales, selling costs and administrative

expenses

(2 808)

[=] Adjusted EBITDA*

3 563

5 470

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

(Loss)/Profit on sales

( 920)

3 966

[–] Depreciation/amortisation recognised in expenses by nature

(1 675)

(1 504)

[–] (Recognition)/reversal of an impairment loss on non-current

assets, recognised in cost of sales, selling costs and administrative

expenses

(2 808)

[=] Adjusted EBITDA*

3 563

5 470

* The Company defines adjusted EBITDA as profit/loss for the period pursuant to IFRS, excluding income tax (current and deferred),

finance income and costs, other operating income and costs, depreciation/amortisation and recognition/reversal of impairment

losses on property, plant and equipment included in the cost of sales, selling costs and administrative expenses.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Accounting policies

Revenues arising from ordinary operating activities of the Company, i.e. revenues from sales of products, merchandise

and materials, are recognised in the statement of profit or loss as revenues from contracts with customers.

The Company generates its revenues mainly from the sale of: copper, silver and gold. Other, smaller streams of revenues

arise from the sale of services (including distribution of electricity, other utilities and IT services) and other products,

merchandise and materials (including refined lead, sulphuric acid, heat and electricity as well as other production waste).

The Company recognises revenue from contracts with customers when the Company satisfies a performance obligation

by transferring a promised good or providing a service to a customer, which is when the customer obtains control of that

asset, i.e. the ability to direct the use of, and obtain substantially all of the remaining benefits from, the asset, as well as

the ability to prevent other entities from directing the use of, and obtaining the benefits from, the asset. Since in every

case, following the shipment of the promised good and transferring control over it, the Company has an unconditional

right to consideration from the customer, and the only condition of receiving it is time lapse, the Company recognises the

consideration from contracts with customers as receivables and therefore the Company does not recognise contractual

assets.

The Company recognises as a performance obligation every contractual promise to transfer to a customer a good or

provide a service that is distinct, or a series of distinct goods or services that are substantially the same and that have the

same pattern of transfer to the customer. For each performance obligation, the Company determines (based on

contractual terms), whether the obligation will be performed over time or at a specified moment. In particular, in contracts

for the sale of copper, silver and gold, every measurement unit of a transferred good (e.g. 1 tonne of copper or 1 kg of

silver) is a separate performance obligation. Therefore, for every sale or transfer of goods, constituting a multiplication

of a measurement unit of a transferred product, which is realised at the same time, the Company fulfils its performance

obligation and at the same time recognises revenues.

Apart from contracts for supplying goods with transport services, there are no other contracts including more than one

performance obligation. The attribution of transaction prices to individual performance obligations are made on the basis

of unit sale prices.

In trade contracts in which the performance obligation is met at a specified time, the Company uses various payment

conditions, including prepayments of up to several days before delivery and deferred payments of up to 120 days,

although the deferred payments do not concern sale transactions of silver and gold. Payment dates depend on the

evaluation of the recipient’s credit risk and the possibility of securing receivables. The consideration becomes due

depending on contractual conditions, that is prior to the realisation of the delivery (prepayment) or after the Company

meets its performance obligation. If the Company receives payment from the customer before it meets its performance

obligation, it recognises it as contractual payables. However, in the case of deferred payments terms, the Company

recognises due consideration from the customer as a receivable only after the transfer of promised products to the

customer and the issuance of the invoice.

Revenues from sales of other services, such as distribution of utilities, rentals, leases, sharing IT systems and other are

recognised over time by the Company as it meets its obligations, as the customers simultaneously receive and gain

economic benefits arising from the Company’s performance and the Company has an unconditional right to

consideration.

Revenues from contracts with customers are recognised in the amount of the transaction price, consisting of the amount

of consideration to which – in accordance with the Company’s expectations – it will be given in return for the transfer of

promised goods or services to the customer, excluding consideration collected on behalf of third parties.

The transaction price also reflects the effects of the time value of money if a contract with a customer contains a

significant financing element, which is determined based on the contractual payment terms, regardless of whether the

promise of financing is explicitly stated in the contract. In determining whether a financing component is significant for a

given agreement, all of the facts and circumstances are taken into consideration, including the eventual difference

between the promised consideration and the cash selling price of the promised goods and services, as well as the total

impact of the following two factors: (i) the estimated period from the moment an entity transfers the promised goods or

services to a customer to the moment the customer pays for these goods or services, and (ii) prevailing interest rates on

a given market. The Company did not identify significant financing components in sales transactions to customers

realised in 2023 and 2022.

In the case of copper and silver products sales transaction for which the price is set after the date of recognition of a

given sale, at the moment of initial recognition of a transaction an adjustment of revenues from sales is made, arising

from the difference between the forward price of a metal expressed in USD from the date of recognition of a sale in the

period corresponding to the period of settlement of the transaction, and the price from provisional invoice. This

adjustment brings the amount of the transaction to the expected amount as a transaction price at the moment of initial

recognition. This only concerns cases where the change in transaction price arises from a change in the metal’s price. For

these types of variable revenues, the limitation of IFRS 15 on recognising variable consideration only to the amount in

respect of which it is highly probable that a reversal will not be recognised, is not applicable.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Changes to the accounted amount after the moment of recognition do not impact the revenues from sales but are fair

value gains/losses on measurement of receivables pursuant to the accounting policies presented in Note 10.2. Sales

revenue is adjusted for the gain or loss on the settlement of future cash flow hedging derivatives, in accordance with the

general principle that the portion of gain or loss on a derivative hedging instrument that is determined to be an effective

hedge is recognised in the same position of profit or loss in which the gain or loss on the hedged item is recognised at

the moment when the hedged item affects profit or loss

Important estimates, assumptions and judgments

The Company recognises revenues from the sale of products, merchandise and materials in profit or loss once, when the

performance obligation is satisfied (in particular in accordance with the applied INCOTERMS principles).In the majority of

contracts, control is transferred to the customer after delivery of the goods, which is also understood as delivery of the

goods to the carrier or to a designated place (DAP, FCA and EX WORKS bases). In other contracts, control is transferred

to the customer at the moment it is handed over to the carrier and loaded aboard a ship (CFR, CIF, CPT and CIP bases). In

these contracts, the Company is also obliged to organise a shipping service. In these cases, the obligation to sell goods

and the obligation to provide a shipping service are treated as separate services promised in the contract. With respect

to transport services, the Company acts as a principal, as it has control over the service before its completion.

Revenues from sales of other services, such as distribution of utilities, rentals, leases, sharing IT systems and other are

recognised over time by the Company as it meets its obligations, as the customers simultaneously receive and gain

economic benefits arising from the Company’s performance and the Company has an unconditional right to

consideration.

Onerous contracts and variable consideration

Taking into account the greater volatility of the macroeconomic environment, which has a significant impact on the

Company’s financial results and requirements of IAS 37 with respect to the identification of onerous contracts, the Company

periodically analyses concluded contracts in terms of the potential occurrence of a situation under which the contractual

sales price does not exceed the estimated, unavoidable costs of realisation of such contracts.

For the sales contracts of main products (copper, silver, gold) the Company has limited options of transferring the potential

increase in production costs to the sales price of its final products, since the level of revenues from sales of these products

mainly depends on stock exchange quotations and currency exchange rates.

Stock quotations are the basis used to determine the sales price of copper products in physical contracts (“Cash Settlement”

of the London Metal Exchange are the most commonly used). In the case of silver products, applied prices are based on

quotations of the London Bullion Market Association. Things look similar for other significant products of the Company,

that is gold and lead products, the prices of which depend on stock quotations.

It is possible to negotiate additional premiums to prices arising from stock quotations, however they are limited due to the

influence of current market conditions as well as the negotiation position of the parties.

Some of the Company’s products (among others: sulphuric acid, sulphide copper and refined lead) are by-products of the

copper production process, which, after further processing, may be sold to external clients. While making a decision to

process and sell them, the Company is guided not only by potential, future economic gains arising from such contracts, but

also pays attention to other costs that were avoided by making such a choice, that otherwise would have to be incurred in

order to dispose of these by-products.

Despite the fact that the currently observed, and expected in the near future, prices of sulphuric acid, sulphide copper and

refined lead are not conducive to the achievement of positive profit margins, the results of this activity are more

advantageous than the available alternative solutions (e.g. disposal of these by-products).

Therefore, the Company does not recognise certain contracts as onerous contracts, because in a broader perspective, it

generates profit for the overall copper production process, in which utilisation of by-products is an integral part and fits in

the Company’s actions aimed at protecting the natural environment as well as minimising the negative impact on this

environment as a result of conducted economic activity.

On the basis of conducted analyses, the Company did not identify the occurrence of onerous contracts under IAS 37 as at

31 December 2023.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

As at 1 January 2023, the balance of trade payables due to contracts with customers amounted to PLN 9 million and was

wholly recognised in revenues for 2023. As at 31 December 2023, the balance of trade payables due to contracts with

customers amounted to PLN 2 million.

In 2023, the Company recognised an adjustment to revenues on performance obligations realised in 2022 in the amount

of PLN 71 million, which arose due to the final determination of sales price in 2023.

In 2022, the Company recognised revenues on performance obligations realised in 2021 in the amount of PLN 19 million,

which arose due to the final determination of sales price in 2022.

If the Company has remaining performance obligations as at the end of the reporting period that are unsatisfied, it is

necessary to disclose the transaction price allocated to these obligations (IFRS 15.120). The Company uses a practical

approach and does not disclose performance obligations that are part of contracts with initial period of one year or less.

Moreover, the Company has several long-term contracts, the price of which is based mainly on variable consideration that

the Company does not include in estimating the transaction price.

Revenues from contracts with customers – breakdown by products

from 1

January 2023

to 31

December

2023

from 1 January

2022

to 31 December

2022

Copper

22 290

22 207

Silver

4 389

4 341

Gold

932

649

Lead

264

295

Services

199

174

Merchandise

525

232

Waste and production materials

121

132

Other

364

399

TOTAL, including:

29 084

28 429

impact of hedging transactions on revenues from contracts with customers

635

( 182)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Sales revenue – geographical breakdown reflecting the location of end customers

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Europe

Poland

7 074

7 157

Germany

6 070

5 502

Czechia

2 279

2 250

Italy

2 172

2 319

Hungary

1 439

1 408

Switzerland

1 358

790

The United Kingdom

990

1 676

France

881

896

Austria

401

541

Bulgaria

251

Slovakia

210

178

Romania

155

138

Sweden

146

Slovenia

108

129

Belgium

Estonia

Bosnia and Herzegovina

Spain

Denmark

Finland

The Netherlands

Other countries (dispersed sale)

North America

The United States of America

1 163

997

Canada

South America

Australia

393

787

Asia

China

2 982

2 146

Thailand

327

437

Türkiye

231

282

Saudi Arabia

102

Malesia

Taiwan

South Korea

Vietnam

231

Japan

Hong Kong

Africa

TOTAL

29 084

28 429

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Main customers

In the period from 1 January to 31 December 2023 and in the comparable period, revenues from no single customer

exceeded 10% of the sales revenue of the Company.

Non – current assets – geographical breakdown

The property, plant and equipment of KGHM Polska Miedź S.A. are located in Poland.

Cash expenditures on property, plant and equipment and intangible assets

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Cash expenditures on mining and metallurgical assets

(3 037)

(2 689)

Cash expenditures on other property, plant and equipment

and intangible assets

( 37)

( 42)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 3 – Impairment of assets

Note 3.1 Impairment losses on assets as at 31 December 2023

IMPAIRMENT TESTING OF THE POLISH PRODUCTION ASSETS (MINING AND METALLURGICAL ASSETS) OF KGHM

POLSKA MIEDŹ S.A.

Pursuant to the adopted accounting policy, KGHM Polska Miedź S.A. recognises a significant or prolonged decrease in

market capitalisation of an entity as compared to the carrying amount of its net assets as an indication to perform

impairment testing of the carrying amount of the Company’s assets. The Company’s market capitalisation was below the

carrying amount of net assets during the entire year 2023 year and slightly decreased as compared to 31 December

2022, and at the end of the reporting period it amounted to 79% of this amount. Moreover, other indications of

impairment occurred, which may be found below.

As at 31 December 2023, due to the occurrence of indications of changes in the recoverable amount of the Company’s

assets, the Management Board performed impairment testing of the Polish production assets (mining and metallurgical

assets) of KGHM Polska Miedź S.A. In order to estimate the recoverable amount, these assets constitute a single cash

generating unit (CGU).

The main indications that the recoverable amount of the CGU may be lower than its carrying amount were the following:

● the forecasted increase in operating cost and planned increase in capital expenditures on replacement,

● the update of assumptions on medium-term production volumes,

● strengthening of the PLN exchange rate versus the USD.

Some of the analysed factors have a positive impact on the profitability of the CGU’s activities, and therefore on the value

of the Company’s assets, and these are as follows:

● an increase in the forecasted price paths of copper, silver and gold,

● a decrease in market interest rates,

● rich deposits in the concession areas (current long-term production plans of the Company are up to the horizon

of 2055 and this period does not arise from exhausting the deposit but from the current validity of mining

concessions held).

In order to estimate the recoverable amount of the CGU, in the conducted test the value in use of its non-current assets

was calculated using the DCF method, i.e. the method of discounted cash flows.

Basic macroeconomic assumptions adopted for impairment testing as at 31 December 2023 – metal prices and

the exchange rate

The Company adopted price paths on the basis of internal macroeconomic assumptions prepared based on long-term

forecasts available from financial and analytical institutions. A detailed forecast was prepared for the period 2024-2028,

while for the period 2029-2033 a technical adjustment of prices was applied between the last year of the detailed

forecast and 2034, for which a long-term metal price and exchange rate forecast was used at the following level:

- for copper– 8 250 USD/t;

- for silver – 22 USD/oz;

- for gold – 1 600 USD/oz,

- for the USD/PLN exchange rate – 4.10.

Other assumptions adopted for impairment testing as at 31 December 2023

Assumption

Level adopted in the test

Detailed forecast period

A 5-year detailed forecast period was adopted for the years 2024-2028 on the basis

of assumptions of the Budget of KGHM Polska Miedź S.A. for 2024 and the

Company’s assumptions on production in the years 2024-2028 arising from the

Mine and Copper Concentrate Production Plan for the years 2024-2028.

Mine production level

The total mine production level adopted for testing in the detailed forecast period

(2024-2028) amounted to 1 913 thousand tonnes of copper in concentrate.

Margin level

The average level of EBIT margin adopted for testing in the detailed forecast period

and in the residual period does not differ significantly from the historically

observable level of the Company’s profitability in relatively stable macroeconomic

conditions.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Capital expenditures on

replacement

Total level of expenditures on replacement adopted for testing in the detailed

forecast period (2024-2028) amounted to PLN 12 338 million; in the residual period

capital expenditures on replacement were adopted at a level which allows matching

the Company’s assets to the planned decrease in own mine production.

Rate of increase/decrease

following the forecast period

-1.43%, resulting from the planned decrease in production of copper in ore and in

own concentrates assumed in current long-term plans (up to 2055).

Discount rate*

7.0% - this is the level of the real discount rate after taxation (9.85% at the nominal

rate), since the cash flows adopted in the model were estimated on the basis of the

real rate.

Discount rate prior to taxation amounts to 12.69%.

* The presented data are the amounts after taxation as an approach practically used in the model of value in use. The discount rate before

taxation was calculated for disclosure purposes on the basis of the rate after taxation, which was applied in the test.

Results of the test performed as at 31 December 2023 may be found in the following table:

CGU

Carrying amount

as at 31

December 2023*

Recoverable

amount as at 31

December 2023

Impairment loss

PLN mn

Polish production assets (mining and metallurgical)

of KGHM Polska Miedź S.A.

20 348

16 577

3 771

* The carrying amount of non-current assets adjusted by key non-production assets, decreased by employee benefits liabilities. The CGU’s carrying

amount does not include provisions for the decommissioning costs of mines, just as the calculation of value in use does not include expenditures

on the decommissioning of mines.

As a result of the performed test, as at 31 December 2023 the value in use of mining and metallurgical assets of KGHM

Polska Miedź S.A. was lower than their carrying amount by PLN 3 771 million. The calculated impairment loss was

recognised in the following items: “Cost of sales” in the amount of PLN 2 675 million, “Selling costs and administrative

expenses” in the amount of PLN 131 million and “Other operating costs” in the amount of PLN 965 million. A deferred tax

on impairment losses was recognised in the amount of PLN 710 million , which decreased deferred tax liabilities.

The impairment loss was allocated to the following types of assets: buildings and land (PLN 1 622 million), technical

equipment, machines, motor vehicles and other fixed assets (PLN 1 138 million), fixed assets under construction (PLN 954

million), intangible assets – other (PLN 57 million).

Sensitivity analysis of the recoverable amount of operating assets of KGHM Polska Miedź S.A. determined that the key

assumptions adopted for the impairment testing were the adopted price paths, the exchange rate and the discount rate.

The assumptions regarding the price paths, the exchange rate and the discount rate were adopted while taking into account

the professional judgment of the Management Board as to the performance of these amounts in the future, and was

reflected in the estimated recoverable amount.

Sensitivity analysis of the recoverable amount of the CGU (PLN million)

Recoverable amount

Discount rate 7.5%

15 263

Discount rate 7.0% (test)

16 577

Discount rate 6.5%

18 080

Sensitivity analysis of the recoverable amount of the CGU (PLN million)

Recoverable amount

Copper price -5%

12 700

Copper price (test)

16 577

Copper price +5%

20 118

Sensitivity analysis of the recoverable amount of the CGU (PLN million)

Recoverable amount

USD/PLN exchange rate -5%

11 002

USD/PLN exchange rate (test)

16 577

USD/PLN exchange rate +5%

21 779

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

IMPAIRMENT TESTING OF SHARES IN FUTURE 1 Sp. z o.o.

KGHM Polska Miedź S.A. is involved in Future 1 Sp. z o.o. in the form of:

• loans granted in the amount of PLN 4 691 million, and

• shares measured at cost less impairment losses, which as at 31 December 2023 before the recognition of results

of impairment testing amounted to PLN 2 111 million (comprised of PLN 4 770 million – value at cost,

PLN 2 663 million – the amount of impairment loss and PLN 4 million – the amount of discount on receivables

due to returnable payments to capital).

As at 31 December 2023, due to the occurrence of indications of changes in the recoverable amount of shares in the

company Future 1 Sp. z o.o., the Company conducted a test for impairment of these shares. Future 1 Sp. z o.o. is a holding

company, through which KGHM Polska Miedź S.A. holds shares in KGHM INTERNATIONAL LTD. (whose main assets are the

Victoria project (in the pre-operational phase), the Robinson mine and less important mines of the Sudbury Basin and the

Carlota mine) and in the joint venture Sierra Gorda S.C.M., and provides financing to the KGHM INTERNATIONAL LTD.

Group and Sierra Gorda S.C.M.

The key indications to perform impairment testing were:

• a change in market forecasts of commodities prices,

• a change in the level of market interest rates,

• an update of assumptions and production plans of the Victoria Project (in the pre-operational phase),

• a change in technical and economic parameters of all mining assets in the operational phase in terms of:

production volumes, planned operating costs, capital expenditures and changes of the individual lives of mines.

The main indications that the recoverable amount may be higher than the carrying amount of shares were:

• a higher assumed volume of production from mining assets and an increase in revenues,

• an increase in price paths of metals,

The main indications that the recoverable amount may be lower than the carrying amount of shares were:

• changes in technical and economic parameters of the Victoria project,

• changes in technical and economic parameters of mining assets, among other an increase in operating costs and

planned capital expenditures during mine lives.

In order to estimate the recoverable amount, in the conducted test the fair value of the CGU was calculated using the DCF

method, i.e. the method of discounted cash flows. The same method was used in previous years. Cash flows were

discounted using the weighted average cost of capital at the level of 12.29%.

The fair value measurement was classified to level 3 of the fair value hierarchy.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Basic macroeconomic assumptions adopted for cash flow estimation – metal prices

Price paths were adopted on the basis of long-term forecasts available from financial and analytical institutions. A detailed

forecast was prepared for the period 2024-2028, while for the period 2029-2033 a technical adjustment of prices was

applied between the last year of the detailed forecast and 2034, from which a long-term metal price forecast is used at the

following level:

• for copper – 8 250 USD/t (3.74 USD/lb);

• for gold – 1 600 USD/oz;

• for nickel – 18 739 USD/t (8.50 USD/lb).

Other key assumptions for cash flow estimation

Assumption

Sierra Gorda

Victoria

Sudbury

Robinson

Carlota

Mine life / forecast period

Level of copper production during mine life (kt)

3 732

266

569

Level of nickel production during mine life (kt)

229

Level of gold production during mine life (koz t)

1 043

205

478

Average operating margin during mine life

43%

64%

41%

Capital expenditures to be incurred during mine

life [USD million]

5 809

1 686

1 236

Including capitalised stripping costs [USD million]

4 102

745

Key factors responsible for the modification of technical and economic assumptions

Sudbury

The increase in the production volume of payable metal by the McCreedy West mine. The finance model

was updated on the basis of a change in operational assumptions.

Robinson

An update of the production plan which includes mining from the Ruth West 6 pit and changes in mining

sequence in the Liberty pit, which enabled the extension of LOM to 2036. The finance model was updated

on the basis of a change in operational assumptions.

Carlota

An update of the production plan which includes mining from the Cactus pit – Phase 3, which enabled

the extension of LOM to 2027. The finance model was updated on the basis of a change in operational

assumptions.

Victoria

Update of the mine construction schedule, update of capital expenditures and calculation of operating

costs.

Sierra Gorda

Update of assumptions on production, operating costs and capital expenditures.

Results of the test performed as at 31 December 2023 are presented in the following table:

Test elements

PLN million

Discounted future cash flows of the KGHM INTERNATIONAL LTD. Group less by all

of liabilities (including the repayment of loans towards KGHM Polska Miedź S.A.)

2 643

Recoverable amount of other assets

249

Recoverable amount of investment in KGHM INTERNATIONAL LTD.

(Enterprise value) after the repayment of liabilities towards KGHM Polska

Miedź S.A. due to loans granted

2 892

Less receivables due to return payment to capital of Future 1 Sp. z o.o.

(40)

Carrying amount of shares in Future 1 Sp. z o.o. (before the test for impairment)

2 111

Recoverable amount of shares in Future 1 Sp. z o.o. (test result)

2 852

Reversal of impairment loss on shares in Future 1

741

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The reversal of the impairment loss on the shares in the amount of PLN 741 million was recognised in the statement of

financial position in other operating activities (Note 4.2).

Sensitivity analysis of the recoverable amount of the shares of Future 1 Sp. z o.o. determined that the key assumptions

adopted for the impairment testing were the assumed price paths and the discount rate. The assumptions regarding the

price paths and the discount rate were adopted while taking into account the professional judgement of the Management

Board as to the performance of these amounts in the future, and was reflected in the estimated recoverable amount. For

the purposes of monitoring the risk of impairment of the tested asset in subsequent periods, the following determinations

were made:

• discount rate – the adoption at a level higher by 1 percentage point would result in a reversal of the impairment

loss in the total amount of PLN 445 million, and at a level lower by 1 percentage point would result in a reversal

of the impairment loss in the total amount of PLN 1 080 million,

• price paths for copper – the adoption of prices at a level lower by 0.1 USD/lb would result in a reversal of the

impairment loss in the amount of PLN 453 million, and at a level higher by 0.1 USD/lb would result in a reversal

of the impairment loss in the amount of PLN 1 114 million.

• price paths for nickel – the adoption of prices at a level lower by 0.1 USD/lb would result in a reversal of the

impairment loss in the amount of PLN 713 million, and at a level higher by 0.1 USD/lb would result in a reversal

of the impairment loss in the total amount of PLN 769 million.

IMPAIRMENT TESTING OF SHARES IN KGHM METRACO S.A.

As at 31 December 2023, due to the occurrence of indications of changes in the recoverable amount of investment in

shares in KGHM Metraco S.A., the Company conducted a test for impairment of this asset.

The key indications of a change in the recoverable amount of the asset are:

• better financial results than anticipated in forecasts,

• value of net assets of KGHM Metraco S.A. higher than the value of investment in the statement of financial

position of KGHM Polska Miedź S.A., despite dividends paid out in the past which decreased the company’s

equity,

• identification of indications and conduction of impairment testing of the investment of KGHM Metraco S.A. in

shares of the subsidiary Centrozłom Wrocław S.A.

In order to estimate the recoverable amount, in the conducted test the fair value of shares was calculated using the DCF

method, i.e. the method of discounted cash flows.

Basic assumptions adopted for impairment testing

• continuation of the strategy of KGHM Metraco S.A. and continuation of current business activities, in an

unchanged significantly scope,

• the period of disclosed forecast of cash flows was adopted on the basis of the 5-year financial plan of KGHM

Metraco S.A.,

• cash flows adopted on the basis of the financial plan for the years 2024 – 2028, approved by the Management

Board of KGHM Metraco S.A.

• WACC real discount rate of 6.74%, since the real cash flows were adopted in the model,

• following the period of the disclosed forecast, the growth rate was conservatively adopted at the level of 0.0%,

• average yearly EBITDA in the forecast period at the conservative level of PLN 23 million.

As a result of the conducted impairment testing of shares in KGHM Metraco S.A., the recoverable amount in the investment

was estimated to be PLN 451 million, which is higher than the net carrying amount of the investment (PLN 335 million),

which provided the Company with a justification to reverse the entirety of the previously recognised impairment loss on

the investment in shares in KGHM Metraco S.A. in the amount of PLN 86 million, which was recognised in the statement of

profit or loss in other operating activities (Note 4.2).

The conducted sensitivity analysis indicates that the recoverable amount is moderately vulnerable to the adopted level of

discount rate and the growth rate following the forecast period:

• an increase in the discount rate by 1 percentage point results in a decrease in the estimated recoverable amount

by PLN 16 million, a decrease by 1 percentage point results in an increase in the recoverable amount by PLN 22

million,

• an increase in the growth rate by 1 percentage point results in an increase in the recoverable amount by PLN 18

million, a decrease by 1 percentage point results in a decrease in the recoverable amount by PLN 13 million,

while other parameters remain unchanged.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

IMPAIRMENT TESTING OF SHARES IN ZAGŁĘBIE LUBIN S.A.

As at 31 December 2023, due to the occurrence of indications of changes in the recoverable amount of investment in

shares in Zagłębie Lubin S.A. (with a carrying amount of PLN 113 million), the Company performed a test for impairment

of this asset.

The key indications of a change in the recoverable amount of the asset included:

• financial results worse than anticipated in forecasts,

• value of net assets of Zagłębie Lubin S.A. lower than the value of investment in the statement of financial position

of KGHM Polska Miedź S.A.

In order to estimate the recoverable amount, in the conducted test the fair value of the company Zagłębie Lubin S.A. was

estimated.

Basic assumptions adopted for impairment testing

The fair value of the investment in Zagłębie Lubin was estimated using the asset-based approach, i.e. the adjusted net

assets method (a measurement classified to level 3 of the fair value hierarchy).

The key assumptions adopted for measurement of the fair value of shares in the company were:

• revenues generated by the Zagłębie Lubin company from sponsoring and revenues from the sale of tickets and

passes,

• during the detailed forecast period, there are no planned capital expenditures on the stadium,

• the value of rights to player cards and to the team were set on the basis of market values of football players

published on the transfer website www.transfermarkt.de, which is recognised as one of the best sources of

information on market value of players and is widely used by the European and international clubs as well as

football federations,

• the period of detailed forecast of cash flows was adopted on the basis of the 5-year financial plan of Zagłębie

Lubin S.A., taking into account the residual value,

• the growth rate following the period of detailed forecast was adopted at the conservative level of 0.0%,

• the WACC real discount rate was adopted at the level of 6.65%.

As a result of the conducted impairment testing of shares in Zagłębie Lubin S.A., the recoverable amount in the investment

was estimated to be higher than the carrying amount of the investment (PLN 113 million) and therefore there is no

justification to recognise an impairment loss on shares.

The conducted sensitivity analysis indicates that the recoverable amount is moderately vulnerable to changes in key

parameters influencing the result of the measurement:

• an increase in the discount rate by 1 percentage point results in a decrease in the estimated recoverable amount of

the company to PLN 115 million, while a decrease by 1 percentage point results in an increase in the recoverable

amount to PLN 120 million,

• an increase in the valuations published by the transfer website by 5 percentage points results in an increase in the

estimated recoverable amount of the company to PLN 120 million, while a decrease by 5 percentage points results in

a decrease in the recoverable amount to PLN 115 million,

Other impairment losses on assets

Other impairment losses on assets concern:

• fixed assets and intangible assets, PLN 6 million,

• write-down of inventories, PLN 44 million.

Information on the item in which impairment losses are recognised in the separate statement of profit or loss is presented

in Note 4.4.

Note 3.2 Impairment losses on assets as at 31 December 2022

Pursuant to IAS 36, as at 31 December 2022 the Company assessed the occurrence of indications of impairment of the

Company’s assets. Key non-current assets of the Company were subjected to the analysis, including shares in subsidiaries.

As a result of the performed evaluation, no indications of impairment of these assets were identified. Because of the

Company’s market capitalisation remaining below the level of its net assets for a significant part of 2022, this area was

subjected to a further analysis.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Assessment of the risk of impairment of assets of KGHM Polska Miedź S.A. in the context of the market

capitalisation of KGHM Polska Miedź S.A.

In 2022, a general deterioration in sentiment was seen in stock markets due to the substantial uncertainty as to the

development of the global macroeconomic situation in reaction to the start of the armed conflict in Ukraine and the

tangible consequences of the COVID-19 (coronavirus) epidemic. As a result, stock market indices, amongst others,

suffered greatly. In 2022, the share price of KGHM Polska Miedź S.A. fell by 9% compared to the share price at the end

of 2021, and as at 31 December 2022 it amounted to PLN 126.75. During the same period the WIG and WIG 20 indices

fell respectively by 17% and 21%. As a result, the Company’s market capitalisation fell from PLN 27 880 million to

PLN 25 350 million, which means that as at 31 December 2022 it remained 15% below the level of the Company’s net

assets.

Due to the fact that, during a significant part of the reporting period, the Company’s market capitalisation remained

below the carrying amount of its net assets, in accordance with IAS 36 Impairment of assets, the Management Board of

KGHM Polska Miedź S.A. conducted an analysis to determine whether any area of KGHM Polska Miedź S.A.’s activities

could be impaired.

The analysis of the assets located in Poland indicated that not all of the factors which affect the market capitalisation of

KGHM Polska Miedź S.A. are factors which are related to the conducted economic activities.

The drop in share prices affected companies in the majority of sectors, in different economies, and reflected investor

uncertainty as to the future. In particular, the armed conflict in Ukraine caused a withdrawal of foreign investors from

areas bordering the war zone, which can be seen not only in the situation on the Warsaw stock exchange, but also on

exchanges in the region, such as in Czechia, Slovakia and Hungary, and also had a significant impact on the weakening

of the PLN versus the USD.

From the point of view of the Company’s operations, the key factor influencing the level of market capitalisation is first

and foremost the copper price. In December 2021, the average price of copper amounted to 9 550 USD/t, and following

the initial continuation of the upward trend in the first months of 2022 it recorded a significant decline. The minimum

was recorded in July 2022, when the average copper price was at the level of 7 530 USD/t. But over time, as reassuring

information as to the demand for this metal kept coming, prices returned to the trend observed at the start of the year

and in December 2022 the average price for copper amounted to 8 367 USD/t. The share prices of companies involved

in the mining and processing of copper are strongly correlated with the price of this metal.

It should be pointed out that in the case of the Polish assets, of significance are PLN-expressed metals prices, which are

also affected by the USD/PLN exchange rate. Fluctuations in the price of copper related to the turbulence on the financial

markets, whose origins may often be found not only in macroeconomics but also in broadly understood geopolitics, are

usually to a large extent offset by changes in the USD/PLN exchange rate, which additionally remains under the influence

of the armed conflict in Ukraine.

Despite the continued uncertainty in the economic environment, KGHM Polska Miedź S.A. maintains full operational

capacity and consistently advances planned production and sales targets. The financial results achieved by the Company

significantly exceed the budget targets, which is also a result of conducted optimisation initiatives and cost discipline

applied in response to macroeconomic conditions.

As a result of the assessment, it was judged that there was no relation between the fall in the share price of KGHM Polska

Miedź S.A. both in terms of the activities of KGHM Polska Miedź S.A. in Poland as well as abroad. Consequently, there

were no indications identified suggesting the risk of impairment of the Polish and international production assets,

therefore there were no tests for impairment conducted for these assets as at 31 December 2022.

Due to the uncertainty and the significant volatility of basic economic parameters, including metals prices and currency

exchange rates, and dynamic development of the pandemic situation in Poland and globally, and its impact on the

economic situation, the Company is continuously monitoring the global situation.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 4 – Explanatory notes to the statement of profit or loss

Note 4.1 Expenses by nature

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Note 9.3

Depreciation of property, plant and equipment

and amortisation of intangible assets

1 675

1 504

Note 11.1

Employee benefits expenses

5 475

4 832

Materials and energy, including:

12 955

13 687

purchased metal-bearing materials

7 712

8 859

electrical and other energy

2 224

1 921

External services, including:

2 638

2 238

transport

340

328

repairs, maintenance and servicing

854

699

mine preparatory work

736

617

Note 5.2

Minerals extraction tax

3 496

3 046

Note 5.2

Other taxes and charges

632

487

Advertising costs and representation expenses

Property and personal insurance

Part 3

Impairment losses on property, plant and

equipment and intangible assets

2 808

Reversal of write down of inventories

( 13)

( 52)

Write down of inventories

Other costs

Total expenses by nature

29 859

25 895

Cost of merchandise and materials sold (+)

545

449

Change in inventories of products and work in

progress (+/-)

( 174)

(1 665)

Cost of products for internal use (-)

( 226)

( 216)

Total cost of sales, selling costs and

administrative expenses, including:

30 004

24 463

Cost of sales

28 414

23 157

Selling costs

170

173

Administrative expenses

1 420

1 133

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 4.2 Other operating income and costs

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Gains on derivatives, of which:

366

268

Note 7.1

measurement

202

108

Note 7.1

realisation

164

160

Exchange differences on financial assets and

liabilities other than borrowings

500

Interest on loans granted and other financial

receivables

382

348

Fees and charges on re-invoicing of bank

guarantees costs securing payments of liabilities

Reversal of impairment losses on financial

instruments measured at amortised cost, including:

213

Note 6.2

gain on reversal of allowances for impairment of

loans granted

213

Fair value gains on financial assets measured at fair

value through profit or loss, including:

668

631

Note 6.2

loans

657

601

Part 3

Reversal of impairment losses on shares in

subsidiaries

827

Dividends income

Profit on disposal of shares in subsidiaries

Release of provisions

Refund of excise tax for previous years

Overpayment of property tax

Assistance under the government program “Aid for

energy-intensive sectors related to sudden increases

in natural gas and electricity prices in 2022 and

2023”

178

Other

112

Total other operating income

2 564

2 172

Losses on derivatives, of which:

( 634)

( 490)

Note 7.1

measurement

( 188)

( 116)

Note 7.1

realisation

( 446)

( 374)

Impairment losses on financial instruments

measured at amortised cost

( 7)

Note 7.1

Exchange differences on financial assets and

liabilities other than borrowings

( 770)

Fair value losses on financial assets measured at fair

value through profit or loss, including:

( 223)

( 87)

loans

( 94)

trade receivables

( 129)

( 87)

Financial support granted to municipalities

( 7)

( 100)

Provisions recognised

( 6)

( 16)

Donations granted

( 66)

( 53)

Losses on disposal of property, plant and

equipment (including costs associated with disposal)

( 19)

( 22)

Compensations, fines and penalties paid and costs

of litigation

( 9)

( 28)

Part 3

Impairment losses on fixed assets under

construction and intangible assets not yet available

for use

( 969)

( 6)

Other

( 91)

( 64)

Total other operating costs

(2 794)

( 873)

Other operating income / (costs)

(230)

1 299

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 4.3 Finance income and costs

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Note 7.1

Gains on derivatives - realisation

173

130

Exchange differences on measurement and

realisation of borrowings

358

Result of the settlement of a transaction hedging

against interest rate risk due to the issue of bonds

with a variable interest rate

Total finance income

531

148

Interest on borrowings including:

( 142)

( 48)

leases

( 9)

( 10)

Fees and charges on external financing

( 26)

( 30)

Exchange differences on measurement and

realisation of borrowings

( 179)

Losses on derivatives, of which:

( 183)

( 149)

Note 7.1

realisation

( 183)

( 149)

Unwinding of the discount effect

( 60)

( 11)

Total finance costs

( 411)

( 417)

Finance income /(costs)

120

( 269)

Note 4.4 Reversal / recognition of impairment losses on assets in the statement of profit or loss

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Reversal of impairment losses on assets recognised in:

cost of sales, of which:

reversal of write-down of inventories

other operating income, of which:

844

213

reversal of impairment losses on shares in subsidiaries

827

reversal of allowance for impairment of loans measured at

amortised cost

213

reversal of allowance for impairment of other financial

receivables

Reversal of impairment losses, total

857

265

Impairment losses on assets recognised in:

cost of sales and selling costs, of which:

(2 852)

(13)

impairment losses on property, plant and equipment and

intangible assets

(2 808)

write-down of inventories

(44)

(13)

other operating costs, of which:

(969)

(13)

impairment losses on fixed assets under construction and

intangible assets not yet available for use

(969)

(6)

allowance for impairment of other financial receivables

(7)

Impairment losses, total

(3 821)

(26)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 5 – Taxation

Note 5.1 Income tax in the statement of profit or loss

Accounting policies

Income tax recognised in profit or loss comprises current income tax and deferred income tax.

Current income tax is calculated in accordance with current tax laws.

Income tax

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Current income tax

670

1 228

Note 5.1.1

Deferred income tax

(488)

203

Current tax adjustments for prior periods

( 59)

Income tax

123

1 463

In 2022 as well as in 2023, income tax advances were incurred by the Company using the simplified formula, that is in the

fixed amount calculated on the basis of income achieved in 2021 – for the advances in 2023, and on the basis of income

achieved in 2020 - for the advances in 2022.

The difference between the amount of tax paid by the Company in 2023 and the amount of tax paid in 2022 arises mainly

from the additional income tax paid in 2023 in the amount of PLN 547 million due to the annual settlement of income tax

for 2022, performed as at 30 June 2023.

The table below presents an identification of differences between income tax from profit before tax and the income tax

calculated according to the principles resulting from the Corporate Income Tax Act:

Reconciliation of effective tax rate

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

(Loss)/Profit before tax

(1 030)

4 996

Tax calculated using a rate of 19%

( 196)

949

Tax effect of non-taxable income, including:

( 308)

( 104)

reversal of allowances for impairment of loans granted to

subsidiaries

( 148)

( 94)

Tax effect of expenses not deductible for tax purposes, including:

690

589

minerals extraction tax

664

579

Current tax adjustments for prior periods

( 59)

Current tax from settlement of the Tax Group

( 4)

( 3)

Income tax in profit or loss: (11.94)% for 2023, 29.28% for 2022

123

1 463

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 5.1.1 Deferred income tax

Accounting policies

Important estimates, assumptions and judgments

Deferred tax is determined using tax rates and tax laws that are

expected to be applicable when the asset is realised or the

liability is settled based on tax rates and tax laws that have been

enacted or substantively enacted at the end of the reporting

period.

Deferred tax liabilities and deferred tax assets are recognised for

temporary differences between the tax bases of assets and

liabilities and their carrying amounts in the financial statements,

with the exception of temporary differences arising from initial

recognition of assets or liabilities in transactions other than

business combinations, which do not have an impact either on

profit/(loss) before tax nor on the taxable profit/(tax loss) at the

moment they are concluded, and at the date of the transaction

does not result in the occurrence of equal amounts of taxable

and deductible temporary differences.

Deferred tax assets are recognised if it is probable that taxable

profit will be available against which the temporary differences

and unused tax losses can be utilised.

Deferred tax assets and deferred tax liabilities are offset if the

Company has a legally enforceable right to set off current tax

assets and current tax liabilities, and if the deferred tax assets

and deferred tax liabilities relate to income taxes levied on the

Company by the same taxation authority.

The assessment of probability that deferred tax assets

will be realised with future tax income is based on the

Company’s budget. The Company recognises deferred

tax assets in its books to the extent that it is probable

that taxable profit will be available against which the

deductible temporary differences can be utilised.

Maturities of deferred tax assets/(deferred tax liabilities) were as follows:

As at 31 December 2023

As at 31 December 2022

Maturity over the 12 months from the end of the reporting

period (net value)

( 321)

( 808)

Maturity of up to 12 months from the end of the reporting

period (net value)

( 7)

103

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Deferred tax at the beginning of the period, of which:

( 705)

( 290)

Deferred tax assets

1 280

1 482

Deferred tax liabilities

(1 985)

(1 772)

Deferred tax in the period:

377

( 415)

Recognised in profit or loss

488

( 203)

Recognised in other comprehensive income

( 111)

( 212)

Deferred tax at the end of the period, of which:

( 328)

( 705)

Deferred tax assets

1 558

1 280

Deferred tax liabilities

(1 886)

(1 985)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Deferred tax assets and liabilities

Credited/(Charged)

As at 31

December

2022

Credited/(Charged)

As at

31 December 2023

Deferred tax assets

As at

1 January

2022

profit

or loss

other

comprehensive

income

profit

or loss

other

comprehensive

income

Interest

( 3)

( 1)

Provision for decommissioning of mines and

other technological facilities

172

191

Measurement of forward transactions other than

hedging instruments as understood by hedge

accounting

( 27)

Difference between the depreciation rates of

property, plant and equipment for accounting

and tax purposes

144

209

Future employee benefits

412

499

579

Equity instruments measured at fair value

103

121

( 55)

Allowances for impairment/reversal of

allowances for impairment of loans

( 6)

Re-measurement of hedging instruments

304

( 291)

( 4)

Lease liabilities

Short-term accruals for remuneration

101

111

( 30)

Liability related to the fixed fee due to setting

mining usufruct

Recognition/reversal of other impairment losses

on assets

( 11)

162

168

Other

107

( 3)

104

( 52)

Total

1 482

( 16)

( 186)

1 280

286

( 8)

1 558

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

(Credited)/Charged

As at 31

December

2022

(Credited)/Charged

As at 31

December

2023

Deferred tax liabilities

As at

1 January

2022

profit or loss

other

comprehensive

income

profit or loss

other

comprehensive

income

Measurement of forward transactions other than

hedging instruments as understood by hedge

accounting

( 10)

Re-measurement of hedging instruments

103

129

Difference between the depreciation rates for

accounting and tax purposes, including:

1 234

1 321

( 300)

1 021

difference between the depreciation rates of leases

for accounting and tax purposes

( 18)

Accrued and unpaid interest on loans

248

298

355

Measurement of financial assets at fair value

( 7)

108

Difference between the carrying amount and tax base of

expenditures on fixed assets under construction and

intangible assets not yet available for use

127

178

195

Other

( 13)

Total

1 772

187

1 985

( 202)

103

1 886

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 5.2 Other taxes and charges

The following table presents the minerals extraction tax incurred by the Company.

Presentation in the statement

of profit or loss

from 1

January 2023

31 December

2023

from 1

January 2022

31 December

2022

Basis for

calculating tax

Tax rate

from 1

January 2023

31 December

2023

from 1

January 2022

31 December

2022

Minerals

extraction

tax, of

which:

3 496

3 046

tax rate calculated

for every reporting

period*

3 405

2 951

tax recognised

in cost of sold

products

tax recognised

in inventories

- copper

2 946

2 650

Amount of copper

in produced

concentrate,

expressed in

tonnes

- silver

550

396

Amount of silver in

produced

concentrate,

expressed in

kilograms

* In accordance with conditions specified by the Act dated 2 March 2012 on the minerals extraction tax, the amount of tax depends

on the amount of copper and silver in concentrate as well as the tax rates. Tax rates are set separately for copper (Cu) and silver

(Ag) on the basis of formulas specified in the Act and depend on average prices of these metals (stock quotations from LME/LBMA)

as well as the USD exchange rate. The increase in tax rate in 2023 was mainly caused by the return to the calculation method used

to determine the tax rate prior to the decrease in tax rates introduced by the Act, which temporarily in the period from January to

November 2022, decreased the tax rates by approx. 30%. Currently, the indicator which is used to multiply the tax rate for copper

and silver once again amounts to 0.85 (and in the period from January to November 2022 it amounted to 0.6).

Other taxes and charges:

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Royalties

127

122

Excise tax

Real estate tax

252

231

Other taxes and charges, including:

247

129

costs of redemption of CO

emission allowances

Total

632

487

Note 5.3 Tax assets and liabilities

Accounting policies

Tax assets comprise current income tax assets and the settlement related to VAT.

Assets not representing financial assets are initially recognised at nominal value and are measured at the end of the

reporting period at the amount due.

Tax liabilities comprise the Company’s liabilities towards the Polish Tax Office arising from the corporate income tax,

including due to the withholding tax, personal income tax and liabilities towards Customs Chamber due to the minerals

extraction tax and the excise tax.

Liabilities not representing financial liabilities are measured at the amount due.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Tax assets

As at

31 December 2023

As at

31 December 2022

Current corporate income tax assets

520

VAT receivables

412

312

Tax assets

932

312

Tax liabilities

As at

31 December 2023

As at

31 December 2022

Current corporate income tax liabilities

601

Other tax liabilities

405

460

Tax liabilities

405

1 061

Tax authorities may audit accounting books and tax settlements during the 5 years since the end of the year in which the

tax declarations were submitted and charge the Company with an additional tax together with penalties and interest. In

the Management Board’s opinion, there are no circumstances indicating the possibility that significant tax liabilities may

occur.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 6 – Investments in subsidiaries

Note 6.1 Shares

Accounting policies

Important estimates, assumptions and judgments

In the financial statements of the Company, subsidiaries

are those entities which are directly controlled by the

Company. Investments in subsidiaries are measured at

cost plus any granted non-returnable increases in share

capital, including for the coverage of losses presented in

the financial statements of a subsidiary and as a result of

discounting interest-free returnable payments, less any

impairment losses. Pursuant to IAS 36, impairment is

measured by comparing the carrying amount with the

higher of the following amounts:

− fair value, decreased by costs to sell; and

− value in use.

The Company controls an entity if it simultaneously:

− has power over the entity it invested in;

− is exposed to variable returns or has rights to

them; and

− can use its power over the entity to affect the

amount of its returns.

In the Company’s opinion, power over individual entities

recognised as subsidiaries is exercised through ownership of

the majority of the total number of votes in the governing

bodies of such entities.

Important estimates, assumptions and judgments related to

the assessment of the risk of impairment were presented in

part 3 of these financial statements.

2023

2022

As at 1 January

3 701

3 691

Acquisition of shares, of which:

Invest PV 7 Sp. z o.o.

Increase in share capital, of which:

276

375

Energetyka Sp. z o.o.

159

POL-MIEDŹ TRANS Sp. z o.o.

Zagłębie Lubin S.A.

TFI S.A.

KGHM Centrum Analityki sp. z o.o.

Polska Grupa Uzdrowisk sp. z o.o.

(formerly Cuprum Zdrowie sp. z o.o.)

368

KGHM ZANAM S.A.

PMT Linie Kolejowe Sp. z o.o.

Sale of the shares in TFI S.A.

( 5)

Reversal of impairment losses, of which:

827

KGHM METRACO S.A.

FUTURE 1 Sp. z o.o.

741

Repurchase of investment certificates of KGHM VII FIZAN

( 365)

As at 31 December

4 807

3 701

The balance of impairment losses on the investments as at 31 December 2023 and as at 31 December 2022 by individual

investments in subsidiaries is presented in the following table:

As at

31 December 2023

As at

31 December 2022

Energetyka Sp. z o.o.

388

MCZ S.A.

KGHM METRACO S.A.

Zagłębie Lubin S.A.

FUTURE 1 Sp. z o.o.

1 922

2 663

Total

2 405

3 232

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The most significant investments in subsidiaries (direct share)

Entity

Head

Office

Scope of activities

Carrying amount of

shares/investment certificates

as at

31 December

2023

as at

31 December

2022

FUTURE 1 Sp. z o.o.

Lubin

management and control of

other companies, including the

KGHM INTERNATIONAL LTD.

Group

2 852

2 111

Polska Grupa Uzdrowisk sp. z o.o.

(formerly Cuprum Zdrowie sp. z o.o.)

Wrocław

activities of financial holdings

376

KGHM Metraco S.A.

Legnica

trade, agency and

representative services

421

335

"Energetyka" sp. z o.o.*

Lubin

generation, distribution and

sale of electricity and heat

276

117

KGHM ZANAM S.A.*

Lubin

maintenance and production

of machinery

143

132

* There was an increase in share capital in 2023

As at 31 December 2023 and as at 31 December 2022, the % of share capital held as well as the % of voting power in the

above-mentioned subsidiaries was 100%.

Note 6.2 Receivables due to loans granted

Accounting policies

The Company classifies loans granted to individual categories using the following policies:

Loans measured at amortised cost – to this category, the Company classifies loans that met two conditions: they are in

a business model whose objective is to collect contractual cash flows due to holding assets, and have passed the SPPI

(solely payments of principal and interest) test, that is they are maintained in order to collect the principal amount and

interest. They are initially recognised at fair value adjusted by costs directly associated with the loan and are measured

at the end of the reporting period at amortised cost using the effective interest rate method, including impairment

calculated using the model of expected credit losses on the basis of discounted cash flows.

POCI loans – the Company classifies as POCI, at the moment of initial recognition, financial assets that are credit-impaired

due to high credit risk at the moment they are granted or if the loans were purchased at a significant discount. POCI

loans are measured at the end of the reporting period at amortised cost using the effective interest rate adjusted by the

credit risk, including impairment calculated using the model of expected credit losses (ECL) on the basis of discounted

cash flows in the horizon of the expected repayment of the loan. The loss allowance for ECL is calculated on the basis of

expected credit losses during the whole life of the instrument. Accumulated changes to the expected credit losses are

recognised as an increase or a reversal of an already recognised loss allowance for expected credit losses. Currently

presented POCI loans are loans granted (not acquired). Classification was set due to the implementation of IFRS 9 in 2018

due to the recognised impairment at the moment of initial recognition.

The loans measured at fair value through profit or loss – to this category, the Company classifies loans that did not pass

the SPPI (solely payments of principal and interest) test. The fair value of these loans is set at present value of future cash

flows, including the change of market risk and credit risk factors during the loans’ life.

Financial assets, for which the Company has to calculate the expected credit losses pursuant to IFRS 9, are classified to

one of three degrees of a model of impairment. Classification to individual degrees of impairment model is at the level

of a single financial instrument (a single exposure).

To the degree 2, the Company classifies financial instruments with an identified significant increase in credit risk,

understood as a significant increase in probable default in the remaining time of the instrument as compared to the date

of its initial recognition, but there were no objective indicators of impairment. The expected credit losses for the degree

2 are estimated during the entire life of these instruments.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

If at the end of the reporting period the analysis proves that for a given financial instrument, since the day of its initial

recognition, there was not a significant increase in credit risk and no default status was granted, the instrument is

classified to the degree 1 of a model of impairment. For exposures classified to the degree 1, the expected credit losses

are estimated in a horizon of 12 months.

Balances with an identified, objective indication of impairment are included in the degree 3. At the end of the reporting

period, no financial instrument was defaulted (criteria classifying to the degree 3) and therefore, the Company did not

classify any of the loans granted to the degree 3.

Important estimates, assumptions and judgments

Failed SPPI test - The Company assumes that the solely payments of principal and interest (SPPI) test for loans granted is

not passed if, among others, in the structure of financing the target recipient of funds, debt is changed at the last stage

into an equity investment.

Indications to classify the loan to the degree 2 of impairment model is the occurrence of one of the following:

• for exposition of the borrower’s rating - at the level of Baa3 (per the Moody’s methodology or a corresponding one

for the S&P/Fitch ratings) or better (investment rating) – a drop in the borrower’s rating by at least 5 levels,

• for exposition of the borrower’s rating - at the level of Ba1 (per the Moody’s methodology or a corresponding one

for the S&P/Fitch ratings) or worse (below investment rating) – a drop in the borrower’s rating by at least 3 levels,

• deterioration of operational cash flows forecasts of a borrower – in the time horizon of the exposure, which does

not result in the impossibility of settling the liability arising from a given loan,

• change in conditions of the loan due to the worsening financial position of the borrower, which has an impact of

less than 1% of the value of the loan at the date of change (a change in the conditions of the loan from reasons

other than the worsening financial position of the borrower are not included in the assessment of occurrence of

a given indication),

• delay in the repayment of over 30 days (after the maturity date of interest or capital).

Balances with an identified, objective indication of impairment are included in the degree 3. The Company recognises

occurrence of at least one of the following events as an objective indication of default:

• borrower’s rating at the level of Ca (per the Moody’s methodology or a corresponding one for the S&P/Fitch ratings) or

lower,

• deterioration of operational cash flows forecasts of a borrower – in the time horizon of the exposure, which results

in the impossibility of settling the liability arising from a given loan,

• change in conditions of the loan due to the worsening financial position of the borrower, which has an impact of

more than 1% of the value of the loan at the date of change (a change in the conditions of the loan from reasons

other than the worsening financial position of the borrower are not included in the assessment of occurrence of

a given indication),

• delay in the repayment of over 30 days (after the maturity date of interest or capital) – if at the date of analysis the

loan was at stage 2 of calculating the allowance for impairment,

• delay in the repayment of over 90 days (after the maturity date of interest or capital) – if at the date of analysis the

loan was at stage 1 of calculating the allowance for impairment.

In order to calculate expected credit losses (ECL), the Company uses, among others, the following parameters:

• the borrower’s rating - is granted using internal methodology of the Company based on the Moody’s methodology.

The Company granted loans mainly to subsidiaries, of which over 99% of borrowers were assigned ratings between

A3 – Baa3 (in the comparable period: A2 – Baa2).

• the curve of accumulated parameters of PD (parameter of probability of default, used to calculate the expected

credit losses) for a given borrower is set on the basis of market sector quotations of Credit Default Swap contracts

from the Reuters system, which quantify the market expectations as for the potential probability of default in a

given sector and in a given rating. As at 31 December 2023, PD parameters for the adopted ratings were as follows:

A3 to Baa3 ratings according to Moody’s (31 December 2023)

Up to one year

0.75% - 1.01%

1-3 years

0.75% – 4.63%

More than 3 years (at the date of loans’

maturity)

0.75% – 25.87%

A2 to Baa2 ratings according to Moody’s (31 December 2022)

Up to one year

0.69% - 1.39%

1-3 years

1.84% - 3.22%

More than 3 years (at the date of loans’

maturity)

1.84% - 9.92%

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The level of the LGD parameter (loss given default, expressed as the percentage of the amount outstanding) for the

purposes of estimating expected credit losses for loans classified to the stage 1 and 2 is adopted at the level of 75%

(based on estimations from Moody’s Default and recovery rates for project finance bank loans, 1983-2021).

As at 31 December 2023 no decision was made whether to demand the repayment of loans with a contractual on-demand

payment clause, including in the period of 12 months from the balance sheet date, and no joint decision was made by

the owners of Sierra Gorda S.C.M. in this regard.

The Company classifies loans granted to one of the three following categories:

1. Measured at amortised cost, which were determined to be credit-impaired at the moment of initial recognition (POCI),

2. Measured at amortised cost, which were not determined to be credit-impaired at the moment of initial recognition,

3. Measured at fair value through profit or loss.

Loans that at the last stage of cash flows between companies in the Future 1 Sp. z o.o. holding structure or KGHM

INTERNATIONAL LTD. were transferred as loans to a joint venture Sierra Gorda S.C.M., advanced by the KGHM

INTERNATIONAL LTD. Group, were classified as POCI loans (identified allowance for impairment due to a credit risk at the

moment of granting). These loans, pursuant to contractual terms, are paid on demand, but not later than 15 December

2024, however because the repayment of the loan was not made in the agreed-upon period of 12 months from the end of

the reporting period, the Company presents the balance of the loan as a long-term receivable.

The Company presents, in the category of loans classified as measured at fair value through profit or loss, loans that at the

last stage of cash flows between companies in the Future 1 Sp. z o.o. holding structure or KGHM INTERNATIONAL LTD. were

transferred mainly as increases in share capital of Sierra Gorda S.C.M. The maturity of these loans falls in December 2024.

At the end of the reporting period, the Company performed a measurement of loans classified to level 3 of the fair value

hierarchy (measured at fair value as well as at amortised cost (for disclosure purposes)) designated mainly for financing the

joint venture Sierra Gorda S.C.M. The basis of measuring the level of recoverability of loans at the level of the separate

financial statements of KGHM Polska Miedź S.A. is the estimation of cash flows generated by Sierra Gorda S.C.M and other

significant international production assets, which are subsequently allocated by the Company in individual loans at various

levels of the current financing structure. The estimate of cash flows generated by Sierra Gorda S.C.M. and other mines was

determined on the basis of current forecasts of pricing paths of commodities and current mining plans.

The expected repayments of loans were discounted using:

• the effective interest rate adjusted by the credit risk, determined at the initial recognition of the loan pursuant to

IFRS 9.B5.5.45 at the level of 3.69% - 6.64% - for loans measured at amortised cost,

• the market interest rate at the level of 6.17% - 9.13% - for loans measured at fair value.

In the period from 1 January to 31 December 2023, the following was recognised:

• loss on recognition of an allowance for impairment of loans granted classified as POCI in the amount of

PLN 6 million (USD 2 million translated at exchange rates from the date of recognition of the allowance for

impairment),

• for loans measured at fair value – an increase in fair value in the amount of PLN 563 million was recognised

(USD 230 million).

The increase in the fair value of loans is mainly a result of an increase in expected future cash flows of Sierra Gorda S.C.M.

estimated on the basis of current, at the end of the reporting period, forecasts of price paths of commodities.

In the case of other loans measured at amortised cost, the Company calculated the allowance for impairment on the

basis of the model of expected credit losses.

as at

31 December 2023

as at

31 December 2022

Loans measured at amortised cost –

gross amount

6 016

5 604

Allowances for impairment

( 71)

( 52)

Loans measured at fair value

3 766

3 233

Total, including:

9 711

8 785

- long-term loans

9 638

8 763

- short-term loans

The most significant items are loans granted to companies of the KGHM Polska Miedź S.A. Group, which are connected with

the realisation of mining projects executed by indirect subsidiaries of KGHM Polska Miedź S.A. from the KGHM

INTERNATIONAL LTD. Group. Credit risk related to loans granted was described in Note 7.5.2.5.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 7 – Financial instruments and financial risk management

Note 7.1 Financial Instruments

As at

31 December 2023

As at

31 December 2022

Financial assets:

At fair value

through other

comprehensive

income

At fair

value

through

profit or

loss

amortised

cost

Hedging

instruments

Total

At fair value

through other

comprehensive

income

At fair

value

through

profit

or loss

amortised

cost

Hedging

instruments

Total

Non-current

803

3 804

6 317

195

11 119

483

3 238

5 962

709

10 392

Note 6.2

Loans granted

3 766

5 872

9 638

3 233

5 530

8 763

Note 7.2

Derivatives

195

233

709

714

Note 7.3

Other financial instruments

measured at fair value

803

483

Note 7.4

Other financial instruments

measured at amortised cost

445

432

Current

647

2 492

324

3 463

496

2 060

755

3 311

Note 10.2

Trade receivables

211

260

471

455

165

620

Note 7.2

Derivatives

436

324

760

755

796

Note 8.5

Cash and cash equivalents

1 481

985

Cash pooling receivables*

424

588

Note 12.3

Other financial assets

327

322

Total

803

4 451

8 809

519

14 582

483

3 734

8 022

1 464

13 703

* Receivables from companies within the KGHM Polska Miedź S.A. Group which indebted themselves in the cash pooling system.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

As at 31 December 2023

As at 31 December 2022

Financial liabilities:

At fair

value

through

profit or

loss

At amortised cost

Hedging

instruments

Total

At fair value

through

profit or

loss

At amortised cost

Hedging

instruments

Total

Non-current

4 722

164

4 924

5 223

700

5 942

Note 8.4

Borrowings, leases and debt

securities

4 508

5 000

Note 7.2

Derivatives

164

202

700

719

Other financial liabilities

214

223

Current

473

7 597

8 096

188

4 401

280

4 869

Note 8.4

Borrowings, leases and debt

securities

833

1 124

Note 8.4

Cash pooling liabilities*

350

321

Note 12.4

Other liabilities due to settlement

under cash pooling contracts **

Note 7.2

Derivatives

473

499

154

280

434

Note 10.3

Trade payables

3 044

2 819

Note 10.3

Similar payables – reverse factoring

3 021

Other financial liabilities

315

108

142

Total

511

12 319

190

13 020

207

9 624

980

10 811

* Liabilities of KGHM Polska Miedź S.A. towards the Group companies within the credit limit of the group of accounts participating in the cash pooling system.

** Other current liabilities towards participants in the cash pooling system to return, after the end of the reporting period, cash transferred by them which were not used by KGHM Polska Miedź S.A. for its own needs.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Gains/(losses) on financial instruments

from 1 January 2023 to 31 December 2023

Financial

assets/liabilities

measured at fair

value through profit

or loss

Financial assets

measured at amortised

cost

Financial liabilities

measured at

amortised cost

Hedging instruments

Total

Note 4.2

Note 4.3

Interest income

382

Note 4.3

Interest costs

( 166)

( 142)

Note 4.2

Foreign exchange gains/(losses) on instruments

other than borrowings

( 811)

( 770)

Note 4.3

Foreign exchange gains on borrowings

358

Note 4.2

Fair value gains/(losses) on financial assets

measured at fair value through profit or loss

445

Note 4.4

Reversal/(recognition) of impairment losses

Note 7.2

Revenues from contracts with customers

635

Note 4.2

Note 4.3

Gains on measurement and realisation of

derivatives

539

Note 4.2

Note 4.3

Losses on measurement and realisation of

derivatives

( 467)

( 350)

( 817)

Note 4.3

Fees and charges on bank loans drawn

( 26)

Other

( 12)

Total net gain/(loss)

517

(412)

195

309

609

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

from 1 January 2022 to 31 December 2022

Financial

assets/liabilities

measured at fair

value through profit

or loss

Financial assets

measured at amortised

cost

Financial liabilities

measured at

amortised cost

Hedging instruments

Total

Note 4.2

Interest income

348

Note 4.3

Interest costs

( 90)

( 30)

Note 4.2

Foreign exchange gains/(losses) on instruments

other than borrowings

549

( 49)

500

Note 4.3

Foreign exchange losses

( 179)

Note 4.2

Fair value gains/(losses) on financial assets

measured at fair value through profit or loss

544

Note 4.4

Reversal/(recognition) of impairment losses

206

Note 7.2

Revenues from contracts with customers

( 182)

Note 4.2

Gains on measurement and realisation of

derivatives

398

Note 4.2

Note 4.3

Losses on measurement and realisation of

derivatives

( 329)

( 310)

( 639)

Note 4.3

Fees and charges on bank loans drawn

( 30)

Other

( 11)

Total net gain/(loss)

613

1 103

( 359)

( 432)

925

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Fair value measurement

Accounting policies

Important estimates, assumptions and

judgements

Fair value is the price that would be received from selling an asset

or would be paid for a transfer of a liability in an orderly

transaction between market participants at the measurement

date. For financial reporting purposes, a fair value hierarchy was

established that categorises the inputs into three levels. The fair

value hierarchy levels are as follows:

Level 1 Value is based on inputs from active markets, as they are

seen as the most reliable source of data.

Level 2 Value is based on inputs other than from active markets,

which are nevertheless observable (unbiased,

measurable).

Level 3 Value is based on unobservable inputs, used when it is

not possible to acquire data from the first two

measurement levels. It includes all measurements

based on subjective inputs.

Transfer between levels of the fair value hierarchy takes place if

there is a change of sources of input data used for fair value

measurement, such as:

− active market,

− lack of an active market, but there is observable data on the

market,

− subjective input data.

It is acknowledged that transfers between levels of the fair value

hierarchy take place at the end of the reporting period.

Fair value measurement is not a specific measurement

for a given unit, but should be based on market,

including any assumptions which market participants

would consider in the process of measurement.

Sometimes, given the limited availability of inputs,

carrying out a fair value measurement requires

selecting appropriate measurement techniques,

under which a unit should make maximum use of

observable data. In the case of the Company’s assets,

this involves in particular derivatives. The assumptions

and estimates applied in their measurement are

presented in Note 7.1.

To determine fair value, the adoption of specified

assumptions and judgments is especially required for

assets whose fair value measurement cannot be made

based on inputs arising from an active market or from

the use of other data, regardless of how amenable

they are to objective and measurable observation.

Details on assumptions adopted for fair value

measurement may be found in the further part of the

Note 7.1 Methods and techniques used in determining

fair value.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The fair value hierarchy of financial instruments

As at 31 December 2023

As at 31 December 2022

fair value

carrying

amount

fair value

carrying

amount

Classes of financial instruments

level 1

level 2

level 3

level 1

level 2

level 3

Loans granted measured at fair value

3 766

3 233

Loans granted measured at amortised cost

895

5 050

5 945

143

5 409

5 552

Listed shares

680

386

Unquoted shares

106

Trade receivables

211

455

Other financial assets

Derivatives, of which:

292

357

Assets

993

1 510

Liabilities

(701)

(1 153)

Long-term bank and other loans

(2 306)

(2 387)

Long-term debt securities

(1 627)

(1 600)

(1 952)

(2 000)

Other financial liabilities

(7)

(34)

Discount rate adopted for disclosure of fair value of loans granted measured at amortised cost

Loans per impairment model

As at 31 December 2023

Loans per impairment model

As at 31 December 2022

discount rate

carrying amount

discount rate

carrying amount

level 2

level 3

level 2

level 3

and 2

degree (fixed interest rate)

6.15%

808

and 2

degree (fixed interest rate)

6.92%

degree (variable interest rate)

5.83% (Wibor 1M)

degree (variable interest rate)

6.94% (Wibor 1M)

degree (fixed interest rate)

6.16%

3 342

degree (fixed interest rate)

5.87%

3 572

POCI (fixed interest rate)*

9.13%

1 708

POCI (fixed interest rate)*

9.75%

1 837

Total

5 945

Total

5 552

*Real discount rate

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Methods and measurement techniques used by the Company in determining fair values of each class of financial assets or

financial liabilities.

Level 1

Listed shares

Shares are measured based on quotations from the Warsaw Stock Exchange and the TSX Venture Exchange in Toronto.

Long-term debt securities

Long-term debt securities are measured based on quotations from the Catalyst Market of the Warsaw Stock Exchange.

Level 2

Long-term loans granted

The fair value of loans measured at amortised cost was estimated on the basis of contractual cash flows (per the contract)

using the model of discounted cash flows, including the borrower’s credit risk. IBOR current market interest rare acquired

from the Reuters system is used in the discounting process.

Unquoted shares

Unquoted shares are measured using the adjusted net assets. Observable input data other than the ones from the active

market were used in the measurement (e.g. transaction prices of real estate similar to the one subjected to measurement,

market interest rates of State Treasury bonds and term deposits in financial institutions, and the risk-free discount rate

published by the European Insurance and Occupational Pensions Authority).

Trade receivables

Receivables arising from the realisation of sales under contracts which are finally settled using future prices were measured

using forward prices, depending on the period/month of contractual quoting. Forward prices are from the Reuters system.

For trade receivables transferred to non-recourse factoring, a fair value is assumed at the level of the amount of the trade

receivables transferred to the factor (nominal value from the invoice) less interest, which are the factor’s compensation.

Due to the short term between the transfer of receivables to the factor and their payment, fair value is not adjusted by the

credit risk of the factor and the impact of time lapse.

Other financial assets/liabilities

The fair value of receivables/payables due to the settlement of derivatives, whose date of payment falls two working days

after the end of the reporting period was set per the reference price applied in the settlement of these transactions.

Currency and currency-interest derivatives

To determine the fair value of derivatives on the currency market and currency-interest transactions (CIRS), the forward

prices from the maturity dates of individual transactions were used. The forward price for currency exchange rates was

calculated on the basis of fixing and appropriate interest rates. Interest rates for currencies and the volatility ratios for

exchange rates were taken from the Reuters system. The standard Garman-Kohlhagen model is used to measure options

on currency markets.

Metals derivatives

To determine the fair value of derivatives on the commodity market, forward prices from the maturity dates of individual

transactions were used. In the case of copper, official closing prices from the London Metal Exchange were applied, and

with respect to silver and gold - the fixing price set by the London Bullion Market Association. Volatility ratios and forward

prices for measurement of derivatives at the end of the reporting period were obtained from the Reuters system. Levy

approximation to the Black-Scholes model was used for Asian options pricing on metals markets.

Received long-term bank and other loans

The fair value of bank and other loans is estimated by discounting the cash flows associated with these liabilities in

timeframes and under conditions arising from agreements, and by applying current rates. Fair value differs from the

carrying amount by the amount of the premium paid to acquire the financing.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Level 3

Long-term loans granted

The fair value of loans was estimated using the forecasted cash flows of international assets (Sierra Gorda S.C.M.), which

pursuant to IFRS 13 are unobservable input data, and the fair value of assets determined using the same data is classified

to level 3 of the fair value hierarchy.

Detailed disclosures on the assumptions adopted for the measurement of loans were presented in Note 6.2, while the

sensitivity of the fair value classified to level 3 for loans granted was presented in Note 7.5.2.5.

The Company does not disclose the fair value of financial instruments measured at amortised cost (except for long-term

loans granted, long-term bank and other loans received and long-term debt securities) in the statement of financial position,

because it makes use of the exemption arising from IFRS 7.29.

There was no transfer in the Company of financial instruments between levels of the fair value hierarchy in the reporting

period.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 7.2 Derivatives

Accounting policies

Derivatives are classified as financial assets/liabilities measured at fair value through profit or loss, unless they have not

been designated as hedging instruments.

Purchases or sales of derivatives are recognised at the transaction date.

Derivatives not designated as hedges, defined as trade derivatives, are initially recognised at fair value and at the end of

the reporting period are measured at fair value, with recognition of the gains/losses on measurement in profit or loss.

The Company applies hedge accounting for cash flows. Hedge accounting aims at reducing volatility in the Company’s

net result, arising from periodic changes in the measurement of transactions hedging individual types of market risk to

which the Company is exposed. Hedging instruments may be derivatives as well as bank and other loans in foreign

currencies.

The designated hedges mostly relate to the future sales transactions forecasted as assumed in the Sales Plan for a given

year. These plans are prepared based on the production capacities for a given period. The Company estimates that the

probability that transactions included in the production plan will occur is very high, as from the historical point of view

sales were always realised at the levels assumed in Sales Plans. Future cash flows arising from interest on bonds issued

in PLN also represent a hedged position.

The Company may use natural currency risk hedging through the use of hedge accounting for bank and other loans

denominated in USD, and designates them as positions hedging foreign currency risk, which relates to future revenues

of the Company from sales of copper, silver and other metals, denominated in USD.

Gains and losses arising from changes in the fair value of the cash flow hedging instrument are recognised in other

comprehensive income, to the extent by which the change in fair value represents an effective hedge of the associated

hedged item. In addition, as a cost of hedging, the Company recognises in other reserves from measurement of financial

instruments a part of the change of the hedging instrument arising from changes in the time value of the option, the

forward element and currency margin. The portion which is ineffective is recognised in profit or loss as other operating

income or costs. Gains or losses arising from the cash flow hedging instrument are recognised in profit or loss as a

reclassification adjustment, in the same period or periods in which the hedged item affects profit or loss.

The Company ceases to account for derivatives as hedging instruments when they expire, are sold, terminated or settled,

or when the goal of risk management for a given relation has changed.

The Company may designate a new hedging relationship for a given derivative, change the intended use of the derivative,

or designate it to hedge another type of risk. In such a case, for cash flow hedges, gains or losses which arose in the

periods in which the hedge was effective are retained in accumulated other comprehensive income until the hedged

item affects profit or loss.

If the hedge of a forecasted transaction ceases to function because it is probable that the forecasted transaction will not

occur, then the net gain or loss recognised in other comprehensive income is immediately transferred to profit or loss

as a reclassification adjustment.

If a hybrid contract has an underlying instrument, which is not a financial asset, the derivative is separated from the

underlying instrument and is measured pursuant to rules for derivatives only, if (i) the economic characteristic and risk

of the embedded instrument are not strictly related to the character of the host contract and its risks, (ii) a separate

instrument, whose characteristics reflect the traits of the embedded derivative, would fulfil the conditions of the

derivatives, and (iii) the combined instrument is not classified to financial assets measured at fair value, whose results

of revaluation are recognised in other income or other operating costs in the reporting period. If an embedded derivative

is separated, the underlying instrument is measured pursuant to appropriate accounting principles. The Company

separates embedded derivatives in commodities transactions with settlement periods in the future, after the date of

recognising a purchase invoice in the books up to the date of final settlement of the transaction.

If a hybrid contract has an underlying instrument, which is a financial asset, the criteria for classification of financial

assets are applied to the whole contract.

Important estimates and assumptions

Assumptions and estimates adopted for the measurement of fair value of derivatives were presented in Note 7.1, in the

item „Methods and measurement techniques used by the Company in determining fair values of each class of financial

assets or financial liabilities” and in tables in point 7.2. of this part.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Derivatives – open items as at the end of the reporting period

As at 31 December 2023

As at 31 December 2022

Type of derivative

Financial assets

Financial liabilities

Total

Financial assets

Financial liabilities

Total

Non-

current

Current

Non-

current

Current

Non-

current

Current

Non-

current

Current

Hedging instruments (CFH), of which:

195

323

(164)

(26)

328

709

755

(700)

(280)

484

Derivatives – Metals (price of copper, silver)

Options – seagull* (copper)

440

(36)

(232)

232

Options – seagull* (silver)

(1)

(3)

Derivatives – Currency (USDPLN exchange rate)

Options – collar

328

262

(88)

(11)

491

Options – seagull*

(6)

(34)

(36)

Options – put spread

315

(2)

(7)

334

Derivatives – Currency-interest rate

Cross Currency Interest Rate Swap CIRS

167

(162)

(19)

(6)

315

(569)

(254)

Trade instruments, of which:

(38)

(473)

(510)

(14)

(118)

(86)

Derivatives – Metals (price of copper, silver, gold)

Sold put option (copper)

(13)

(49)

(62)

Purchased put option (copper)

Purchased call option (copper)

QP adjustment swap transactions (copper)

(5)

(10)

Sold put option (silver)

(1)

(2)

QP adjustment swap transactions (gold)

(6)

(5)

(14)

(10)

Derivatives – Currency (USDPLN exchange rate)

Sold put option

(38)

(436)

(474)

(1)

Purchased call option

Embedded derivatives (price of copper, gold)

Purchase contracts for metal-bearing materials

(26)

(43)

Instruments initially designated as hedging instruments

excluded from hedge accounting, of which:

436

474

(5)

(36)

(41)

Derivatives – Currency (USDPLN exchange rate)

Options – seagull

(1)

(4)

(5)

Options - collar

436

474

Derivatives – Metals (price of copper)

Options – seagull (copper)

(4)

(32)

(36)

TOTAL OPEN DERIVATIVES

233

760

(202)

(499)

292

714

796

(719)

(434)

357

* Collar structures, i.e. purchased put options and sold call options were designated as hedging under seagull options structures (CFH – Cash Flow Hedging).

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The table below presents detailed data on derivative transactions designated as hedging, held by the Company as at

31 December 2023.

Open hedging derivatives

Notional

Average weighted

price /exchange

rate/interest rate

Maturity

settlement

period

Period of profit/loss

impact**

currency [USD mn]

CIRS [PLN mn]

[USD/PLN]

[USD/PLN, fixed interest

rate for USD]

Type of derivative

from

Currency – put spread

660.00

3.60 – 4.48

Jan’24

- Dec’24

Jan’24

- Jan’25

Currency – interest rate – CIRS*

400

3.78 and 3.23%

June’24

Currency - interest rate – CIRS*

1 600

3.81 and 3.94%

June’29

June ‘29

- July ‘29

* Settlements of interest payments are made periodically, on a half-year basis, until the moment of the realisation of the transaction.

** Reclassification of profits or losses on a cash flow hedging instrument from other comprehensive income to the statement of profit or loss takes place in the reporting

period in which the hedged position impacts profit or loss (as an adjustment of a hedged position and to other operating income/costs for the settled hedging cost).

However, the recognition of the result on the settlement of the transaction takes place on the date of its settlement.

The table below presents detailed data on derivative transactions designated as hedging, held by the Company as at 31

December 2022.

Open hedging derivatives

Notional

Average weighted

price /exchange

rate/interest rate

Maturity

- settlement

period

Period of profit/loss

impact***

copper [t]

silver [mn ounces]

currency [USD mn]

CIRS [PLN mn]

[USD/t]

[USD/ounce]

[USD/PLN]

[USD/PLN, fixed

interest rate for USD]

Type of derivative

from

Copper – seagulls *

189 000

8 075 - 9 759

Jan’23

- Dec’23

Jan’23

- Jan’24

Silver – seagulls*

4.20

26.00 – 42.00

Jan’23

- Dec’23

Jan’23

- Jan’24

Currency – collars

2 640

4.58 – 5.78

Jan’23

- Dec’24

Jan’23

- Jan’25

Currency – seagulls*

315

3.94 – 4.54

Jan’23

- Dec’23

Jan’23

- Jan’24

Currency – interest rate – CIRS**

400

3.78 and 3.23%

June’24

Currency – interest rate – CIRS**

1 600

3.81 and 3.94%

June’29

June ‘29

- July ‘29

* Collar structures, i.e. purchased put options and sold call options were designated as hedging under seagull options structures (CFH – Cash Flow Hedging).

** Settlements of interest payments are made periodically, on a half-year basis, until the moment of the realisation of the transaction.

*** Reclassification of profits or losses on a cash flow hedging instrument from other comprehensive income to the statement of profit or loss takes place in the reporting

period in which the hedged position impacts profit or loss (as an adjustment of a hedged position and to other operating income/costs for the settled hedging cost).

However, the recognition of the result on the settlement of the transaction in the accounting books takes place on the date of its settlement.

The impact of derivatives and hedging transactions on the items of the statement of profit or loss and on the items of the

statement of other comprehensive income is presented below.

Statement of profit or loss

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Revenues from contracts with customers (reclassification adjustment)

635

(182)

Other operating income / (costs) (including the reclassification

adjustment):

(268)

(222)

realisation of derivatives

(282)

(214)

measurement of derivatives

(8)

Finance income / (costs) (reclassification adjustment):

realisation of derivatives

(11)

(19)

interest on borrowings

Impact of derivatives and hedging instruments

on profit or loss for the period (excluding the tax effect)

380

(363)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Statement of other comprehensive income

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Measurement of hedging transactions (effective portion)

944

1 239

Reclassification to revenues from contracts with customers due to

realisation of a hedged item

(635)

182

Reclassification to finance costs due to realisation of a hedged

item

(24)

(60)

Reclassification to non-current assets due to realisation of a

hedged item*

(78)

Reclassification to other operating costs due to realisation of a

hedged item (settlement of the hedging cost)

350

310

Impact of hedging transactions (excluding the tax effect)**

557

1 671

TOTAL COMPREHENSIVE INCOME

937

1 308

*Reclassification to non-current assets due to capitalisation of borrowing costs under the hedge accounting in the cost of non-current assets.

**Amounts of income tax corresponding to individual items of other comprehensive income are presented in Note 8.2.2.

Statement of financial position – non-current assets

As at

31 December 2023

As at

31 December 2022

Gain on settlement of an instrument hedging interest rate of bonds*

(78)

*Reclassification to non-current assets due to capitalisation of borrowing costs under the hedge accounting in the cost of non-current assets.

Note 7.3 Other financial instruments measured at fair value

Accounting policies

The item “Other financial instruments measured at fair value” includes: shares (listed and unquoted) which were not

acquired for trading purposes, for which the option of measurement at fair value through other comprehensive income

was selected in order to limit the volatility of the result.

These assets are initially recognised at fair value increased by transaction costs, and at the end of the reporting period

they are measured at fair value with recognition of gains/losses from measurement in other comprehensive income.

The amounts recognised in accumulated other comprehensive income are not transferred later to profit or loss, while

accumulated gains/losses on a given equity instrument are transferred within equity to retained earnings at the moment

an equity instrument ceases to be recognised. Dividends from such investments are recognised in profit or loss.

The fair value of listed shares is calculated based on the closing price as at the end of the reporting period.

The translations of shares expressed in a foreign currency is performed according to the accounting policies described

in Note 1.5.

Important estimates, assumptions and judgments

The fair value of unquoted shares is calculated using the adjusted net assets method. The application of this method is

due to the specific nature of the assets of companies whose shares are subject to measurement. Observable Input data

other than ones from the active market were used in the measurement (e.g. transaction prices of real estate similar to

the one subjected to measurement, market interest rates of State Treasury bonds and fixed-term deposits in financial

institutions, and the risk-free discount rate published by the European Insurance and Occupational Pensions Authority).

As at

31 December 2023

As at

31 December 2022

Shares of listed companies (Warsaw Stock Exchange

and TSX Venture Exchange) of which:

680

386

TAURON POLSKA ENERGIA S.A.

680

386

Unquoted shares

123

Other financial instruments measured at fair value

803

483

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The measurement of listed shares is classified to level 1 of the fair value hierarchy (i.e. measurement is based on the prices

of these shares listed on an active market at the measurement date), while the measurement of unquoted shares is

classified to level 2 (i.e. measurement based on observable data, which however is not from an active market).

In 2023 as well as in 2022, there were no dividends from companies in which the Company had shares classified as other

financial instruments measured at fair value.

In 2023 as well as in 2022, there were no transfers of accumulated gain or loss within equity in respect of companies in

which the Company holds shares classified as other financial instruments measured at fair value.

Due to investments in listed companies, the Company is exposed to price risk. Changes in the listed share prices of these

companies resulting from the current macroeconomic situation may have a significant impact on the level of other

comprehensive income and the accumulated amount recognised in equity.

The following table presents the sensitivity analysis of listed companies’ shares to price changes.

As at

31 December

2023

Percentage change of share

price

As at

31 December

2022

Percentage change of share

price

13%

-13%

14%

-14%

Carrying amount

Other

comprehensive

income

Other

comprehensive

income

Carrying amount

Other

comprehensive

income

Other

comprehensive

income

Listed

680

(88)

386

(54)

Sensitivity analysis for significant types of market risk to which the Company is exposed presents the estimated impact of

potential changes in individual risk factors (at the end of reporting period) on profit or loss and other comprehensive

income.

Potential changes in share prices at the end of the reporting period were determined at the level of standard deviations

from the WIG20 index for a period of 3 calendar years ended at the end of the reporting period.

Note 7.4 Other long-term financial instruments measured at amortised cost

Accounting policies

Important estimates, assumptions and judgements

The item other long-term financial instruments measured

at amortised cost includes financial assets designated to

cover the costs of decommissioning mines (accounting

policies with respect to the obligation to decommission

mines are presented in Note 9.4) and other financial assets

not classified to other items.

Assets included, in accordance with IFRS 9, in the category

“measured at amortised cost”, are initially recognised at fair

value adjusted by transaction costs, which can be directly

attributed to the purchase of these assets and measured at

amortised cost at the end of the reporting period using

the effective interest rate method, reflecting impairment.

Sensitivity analysis of the risk of changes in interest rates of

cash accumulated on a bank account of the Mine Closure

Fund is presented in Note 7.5.1.4.

As at

31 December 2023

As at

31 December 2022

Cash held in the Mine Closure Fund

394

356

Increases in share capital

Other financial receivables

Total

445

432

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Details regarding revaluation of the provision for the decommissioning costs of mines and other technological facilities are

described in Note 9.4.

Note 7.5 Financial risk management

In the course of its business activities the Company is exposed to the following main financial risks:

▪ market risks:

o commodity risk,

o risk of changes in foreign exchange rates,

o risk of changes in interest rates,

o risk of changes in other merchandise, including energy and energy carriers,

o price risk related to investments in shares of listed companies (Note 7.3),

• credit risk, and

• liquidity risk (the process of financial liquidity management is described in Note 8).

The Company’s Management Board manages identified financial risk factors in a conscious and responsible manner, using

the Market Risk Management Policy, the Purchase policy of electricity, property rights, guarantees of origin and gaseous

fuels, the Financial Liquidity Management Policy and the Credit Risk Management Policy adopted by the Company.

Understanding the threats arising from the Company's exposure to risk and maintaining an appropriate organisational

structure and procedures enable an effective achievement of tasks. The Company identifies and measures financial risk on

an ongoing basis, and also takes actions aimed at minimising its impact on the financial position of the Company.

The process of financial risk management in the Company is supported by the work of the Market Risk Committee, the

Standing Committee, the Financial Liquidity Committee and the Credit Risk Committee.

Note 7.5.1 Market risk

The market risk to which the Company is exposed to is understood as the possible occurrence of negative impact on the

Company's results arising from changes in the market prices of commodities, exchange rates and interest rates, as well as

the share prices of listed companies.

Note 7.5.1.1 Principles and techniques of market risk management

The Company actively manages the market risk to which it is exposed.

In accordance with the adopted policy, the goals of the market risk management process are as follows:

▪ limit volatility in the financial result;

▪ increase the probability of meeting budget targets;

▪ decrease the probability of losing financial liquidity;

▪ maintain the good financial condition of the Company; and

▪ support the process of strategic decision making related to investing, including financing sources.

The objectives of market risk management should be considered as a whole, and their realisation is determined mainly by

the Company’s internal situation and market conditions. Actions and decisions concerning market risk management in the

Company should be analysed in the context of the KGHM Polska Miedź S.A. Group’s global exposure to market risk.

Taking into account the potential scope of their impact on the Company’s results, market risk factors were divided into the

following groups:

Group

Market risk

Approach to risk management

Note 7.2

Group I – factors with

the greatest impact on

the Company’s total

exposure to market

risk

Copper price

A strategic approach is applied to this group, aimed at

systematically building up a hedging position comprising

planned production, costs and revenues from sales for

subsequent periods while taking into account the long-

term cyclical nature of various markets. A hedging

position may be restructured before it expires.

Note 7.2

Silver price

Note 7.2

USD/PLN exchange rate

Prices of energy and

energy carriers

Note 7.2

Group II – other

exposure to market

risk

Prices of other metals

and merchandise

This group is comprised of less significant risks, therefore

it is tactically managed - on an ad-hoc basis, depending

on the market conditions.

Note 7.2

Other exchange rates

Note 7.2

Interest rates

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The Company manages market risk by applying various approaches to particular, identified exposure groups.

The Company considers the following factors when selecting hedging strategies or restructuring hedging positions: current

and forecasted market conditions, the internal situation of the Company, the effective level and cost of hedging, and the

impact of the minerals extraction tax.

The Company applies an integrated approach to managing the market risk to which it is exposed. This means a

comprehensive approach to market risk, and not to each element individually. An example is the hedging transactions on

the currency market, which are closely related to contracts entered into on the metals market. The hedging of metals sales

prices determines the probability of achieving specified revenues from sales in USD, which represent a hedged position for

the strategy on the currency market.

The Company executes derivative transactions only if it has the ability to assess their value internally, using standard pricing

models appropriate for a particular type of derivative, and which can be traded without significant loss of value with a

counterparty other than the one with whom the transaction was initially entered into. In evaluating the market value of

given instruments, the Company uses information obtained from leading information services, banks, and brokers.

The Company's internal policy, which regulates market risk management principles, permits the use of the following types

of derivatives:

▪ swaps;

▪ forwards and futures;

▪ options; and

▪ structures combining the above instruments.

The instruments applied may be, therefore, either of standardised parameters (publicly traded instruments) or non-

standardised parameters (over-the-counter instruments). Primarily applied are cash flow hedging instruments meeting the

requirements for effectiveness as understood by hedge accounting. The effectiveness of the financial hedging instruments

applied by the Company in the reporting period is continually monitored and assessed (details in Note 7.2 Derivatives –

accounting policies).

The economic relationship between a hedging instrument and a hedged position is based on the sensitivity of the value of

the position to the same market factors (metals prices, exchange rates or interest rates) and on matching appropriate key

parameters of the hedging instrument and the hedged position (volume/notional amount, maturity date).

The hedge ratio of the established hedging relationship is set at the amount ensuring the effectiveness of the relationship

and is consistent with the actual volume of the hedged position and the hedging instrument. Sources of potential

ineffectiveness of the relationship arise from a mismatch of the parameters of the hedging instrument and the hedged

position (e.g. the notional amount, maturity, base instrument, impact of credit risk). When structuring a hedging transaction,

the Company aims to ensure a maximal match between these parameters to minimise the sources of ineffectiveness.

The Company quantifies its market risk exposure using a consistent and comprehensive measure. Market risk management

is supported by simulations (such as scenario analysis, stress-tests, backtests) and calculated risk measures. The risk

measures being used are mainly based on mathematical and statistical modelling, which uses historical and current market

data concerning risk factors and takes into consideration the current exposure of the Company to market risk.

One of the measures used as an auxiliary tool in making decisions in the market risk management process is EaR - Earnings

at Risk. This measure indicates the lowest possible level of profit for the period for a selected level of confidence (for

example, with 95% confidence the profit for a given year will be not lower than…). The EaR methodology enables the

calculation of profit for the period incorporating the impact of changes in market prices of copper, silver and foreign

exchange rates in the context of budget plans.

Due to the risk of production cutbacks (for example because of force majeure) or failure to achieve planned foreign currency

revenues, as well as purchases of metals contained in purchased materials, the Company has set limits with respect to

commitment in derivatives:

▪ up to 85% of planned, monthly sales volumes of copper, silver and gold from own concentrates, while: for copper

and silver - up to 50% with respect to instruments which are obligations of the Company (for financing the hedging

strategy), and up to 85% with respect to instruments representing the rights of the Company.

▪ up to 85% of planned, monthly revenues from the sale of products from own concentrates in USD or of the

monthly, contracted net currency cash flows in case of other currencies. For purposes of setting the limit,

expenses for servicing the debt denominated in USD decrease the nominal amount of exposure to be hedged.

These limits are in respect both of hedging transactions as well as of the instruments financing these transactions. The

maximum time horizon within which the Company decides to limit market risk is set in accordance with the technical and

economic planning process and amounts to 5 years, whereas in terms of interest rate risk, the time horizon reaches up to

the maturity date of the long-term financial liabilities of the Company.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

With respect to the risk of changes in interest rates, the Company has set a limit of commitment in derivatives of up to

100% of the debt’s nominal value in every interest period, as stipulated in the signed agreements.

Note 7.5.1.2. Commodity risk

The Company is exposed to the risk of changes in the prices of the metals it sells: copper, silver, gold and lead. The price

formulas used in physical delivery contracts are mainly based on average monthly quotations from the London Metal

Exchange for copper and lead and from the London Bullion Market Association for silver and gold. The Company’s

commercial policy is to set the price base for physical delivery contracts as the average price of the appropriate future

month.

The permanent and direct link between sales proceeds and metals prices, without similar relationships on the expenditures

side, results in a strategic exposure. In turn, operating exposure is a result of possible mismatches in the pricing of physical

contracts with respect to the Company’s benchmark profile, in particular in terms of the reference prices and the quotation

periods.

On the metals market, the Company has a so-called long position, which means it has higher sales than purchases. The

analysis of the Company’s exposure to market risk should be performed by deducting from the volume of metals sold the

amount of metal in purchased materials.

The Company’s strategic exposure to the risk of changes in the price of copper and silver in the years 2022-2023 is

presented in the table below.

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Net

Sales

Purchase

Net

Sales

Purchase

Copper [t]

379 430

584 749

205 319

344 065

564 969

220 904

Silver [t]

1 319

1 352

1 298

1 338

The notional amount of copper price hedging strategies settled in 2023 represented approx. 32% (25% in 2022) of the total

sales of this metal realised by the Company (it represented approx. 50% of net sales

in 2023 and 42% in 2022).

The notional amount of silver price hedging strategies settled in 2023 represented approx. 10% of the total sales of this

metal realised by the Company (24% in 2022).

In 2023, pursuant to the Market Risk Management Policy, the Company monitored and analysed on an ongoing basis the

macroeconomic environment and the situation on financial markets, and also identified and measured market risk related

to changes in metals prices (testing the impact of market risk factors on the financial result, balance sheet and the statement

of cash flows). In 2023, no hedging transactions were entered into on the copper and silver markets. All derivative

transactions entered into in the previous periods as part of the strategic management of Company against risk of changes

in metals prices were settled.

In 2023 QP adjustment swap transactions were entered into on the copper and gold markets with maturities of up to June

2024, as part of the management of a net trading position

As a result, as at 31 December 2023 the Company held open derivatives positions on metals market entered into solely

under strategic management of a net trading position (for 9.2 thousand tonnes of copper and 18.3 thousand ounces of

gold) with settlement period falling up to June 2024. As at 31 December 2022, the Company held open derivatives positions

on the copper market for 193.5 thousand tonnes (including: 189 thousand tonnes under strategic management of market

risk, while 4.3 thousand tonnes was entered into under management of a net trading position) and for 4.2 million troy

ounces of silver.

Copper sales less copper in purchased metal-bearing materials.

Applied in order to react to changes in contractual arrangements with customers, non-standard pricing terms as regards metals sales and the

purchase of copper-bearing materials.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

An analysis of the Company’s sensitivity to the risk of changes in commodity prices in the years 2022-2023

Financial assets and liabilities

as at 31 December 2023

Value at

risk

Carrying

amount

December

2023

Change in COPPER prices [USD/t]

Change in GOLD prices [USD/

ounce]

10 102 (+21%)

6 579 (-21%)

2 391 (+16%)

1 738 (-16%)

profit or

loss

other

comprehen

sive

income

profit or

loss

other

comprehe

nsive

income

profit or loss

Derivatives (copper)

(5)

(28)

Derivatives (gold)

(5)

(19)

Embedded derivatives (copper, gold)

(26)

(78)

(24)

Impact on profit or loss

(106)

146

(43)

Impact on other comprehensive income

Financial assets and liabilities

as at 31 December 2022

Value at

risk

Carrying

amount

December

2022

Change in COPPER prices [USD/t]

Change in GOLD prices

[USD/ounce]

Change in SILVER prices [USD/ounce]

10 293 (+23%)

6 463 (-23%)

2 107 (+15%)

1 524 (-16%)

31.69 (+32%)

17.06 (-29%)

profit or

loss

other

comprehen

sive

income

profit or

loss

other

comprehe

nsive

income

profit or loss

profit or

loss

other

comprehe

nsive

income

profit or

loss

other

comprehe

nsive

income

Derivatives (copper)

161

(49)

(1 026)

935

Derivatives (silver)

(67)

(17)

106

Derivatives (gold)

(10)

(22)

Embedded derivatives (copper, silver, gold)

(43)

(164)

161

(24)

Impact on profit or loss

(213)

178

(46)

(17)

Impact on other comprehensive income

(1 026)

935

(67)

106

In order to determine the potential changes in metals prices for purposes of sensitivity analysis of commodity risk factors (copper, silver, gold), the mean reverting Schwarz model (the

geometrical Ornstein-Uhlenbeck process) was used.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 7.5.1.3 Risk of changes in foreign exchange rates

Regarding the risk of changes in foreign exchange rates, the following types of exposures were identified:

▪ transaction exposure related to the volatility of cash flows in the base (functional) currency, and

▪ exposure related to the volatility of selected items of the statement of financial position in the base (functional)

currency.

The transaction exposure to currency risk derives from cash flow-generating contracts, the value of which expressed in the

base (functional) currency depend on future levels of exchange rates of the foreign currencies with respect to the base

(functional) currency (for KGHM Polska Miedź S.A. it is the Polish zloty). Cash flows exposed to currency risk may possess

the following characteristics:

▪ denomination in the foreign currency – cash flows are settled in foreign currencies other than the functional

currency, and

▪ indexation in the foreign currency – cash flows may be settled in the base currency, but the price (i.e. of a metal)

is set in a different foreign currency.

The key source of transaction exposure to currency risk in the Company’s business operations are the proceeds from sales

of products (with respect to metals prices, processing and producer margins).

The Company’s exposure to currency risk also derives from items in the statement of financial position denominated in

foreign currencies, which under the existing accounting regulations must be translated, upon settlement or periodic

valuation, by applying the current exchange rate of the foreign currencies versus the base (functional) currency. Changes

in the carrying amounts of such items between valuation dates result in the volatility of profit or loss for the period or of

other comprehensive income.

Items in the statement of financial position which are exposed to currency risk include in particular:

▪ trade receivables and trade payables related to purchases and sales denominated in foreign currencies;

▪ financial receivables due to loans granted in foreign currencies;

▪ financial liabilities due to borrowings in foreign currencies;

▪ cash and cash equivalents in foreign currencies; and

▪ derivatives on metals market.

As for the currency market, the notional amount of settled transactions hedging revenues from metals sales amounted to

approx. 26% (in 2022: 20%) of the total revenues from sales of copper and silver realised by the Company in 2023.

In 2023, as part of the active management of an open hedging position, a position on the currency market was restructured.

Part of the collar options structures hedging revenues from sales in the period from July 2023 to December 2024, in the

total notional amount of USD 990 million (USD 55 million on a monthly basis), was closed, which led to cash inflow due to

option premiums of approx. PLN 533 million in the first half of 2023. The positive hedge result accumulated in equity was

partly recognised in the operating result for the second half of 2023 (total amount of PLN 171 million) and will be

systematically recognised in the operating result for the subsequent months of 2024 (total amount of PLN 345 million).

Moreover, collar options structures hedging revenues from sales in 2024 in the notional amount of USD 660 million

(USD 55 million on a monthly basis) were restructured by transforming them into put spread

structures, which enabled

full participation in potential increases in the USD/PLN exchange rate.

As a result, as at 31 December 2023 the Company held an open position on the currency market for the notional amount

of USD 660 million (USD 2 955 million as at 31 December 2022), and Cross Currency Interest Rate Swap (CIRS) transactions for

the notional amount of PLN 2 billion, hedging revenues from sales in the currency as well as the variable interest of issued

bonds.

The condensed table of open transactions in derivatives on the currency market as at 31 December 2023 is presented

below (the hedged notional in the presented periods is allocated evenly on a monthly basis).

Put spread option structures were designated as hedging sales revenues.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Hedging against USD/PLN currency risk – open derivatives as at 31 December 2023

The condensed table of open transactions in derivatives on the currency market as at 31 December 2022 is presented

below (the hedged notional in the presented periods is allocated evenly on a monthly basis).

Hedging against USD/PLN currency risk – open derivatives as at 31 December 2022

Hedging against currency-interest rate risk connected with the issue of bonds with a variable interest rate in PLN

– open derivatives as at 31 December 2023 and as at 31 December 2022

Instrument/

option

Notional

Average interest rate

Average exchange rate

[PLN mn]

[fixed interest rate for USD]

[USD/PLN]

2024

CIRS

400

3.23%

3.78

2029

CIRS

1 600

3.94%

3.81

TOTAL

2 000

As for managing currency risk, the Company applies natural hedging by borrowing in the currency in which it has revenues.

As at 31 December 2023, following their translation to PLN, the bank loans and the investment loans which were drawn in

USD amounted to PLN 2 648 million (as at 31 December 2022: PLN 3 435 million).

The currency structure of financial instruments exposed to currency risk (changes in the USD/PLN and EUR/PLN exchange

rates) is presented in the table below. An analysis for other currencies is not presented due to the immateriality.

Notional

Average weighted option strike price

Average

weighted

premium

Effective

hedge price

Instrument/

option

sold put option

purchased put

option

sold call

option

hedge

limited to

exchange rate

hedging

participation

limited to

[USD mn]

[USD/PLN]

[PLN per USD 1]

[USD/PLN]

1st

half of

2024

put spread

330.00

3.60

4.48

(0.01)

4.47

2nd

half of

2024

put spread

330.00

3.60

4.48

0.01

4.49

TOTAL 2024

660.00

Notional

Average weighted option strike price

Average

weighted

premium

Effective

hedge price

Instrument/

option

sold put option

purchased put

option

sold call option

hedge

limited to

exchange rate

hedging

participation

limited to

[ USD mn]

[USD/PLN]

[PLN per USD 1]

[USD/PLN]

2023

seagull

135.00

3.30

4.00

4.60

(0.00)

4.00

seagull

180.00

3.30

3.90

4.50

0.03

3.93

collar

660.00

4.48

5.48

(0.03)

4.45

collar

660.00

4.69

6.09

(0.05)

4.64

TOTAL 2023

1 635.00

2024

collar

660.00

4.48

5.48

(0.00)

4.48

collar

660.00

4.69

6.09

(0.01)

4.68

TOTAL 2024

1 320.00

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Financial instruments

Value at risk

as at 31 December 2023

Value at risk

as at 31 December 2022

total

PLN million

USD million

EUR million

total

PLN million

USD million

EUR million

Trade receivables

243

337

Cash and cash equivalents

1 176

268

688

136

Loans granted

9 614

2 443

8 687

1 974

Cash pooling receivables

424

108

588

134

Other financial assets

Derivatives*

292

357

Trade and similar payables

(1 901)

(184)

(270)

(767)

(124)

(48)

Borrowings

(2 665)

(673)

(4)

(3 450)

(780)

(3)

Other financial liabilities

(17)

(1)

(3)

(46)

(8)

(2)

Transactions on the commodities market which are denominated in USD and translated to PLN at the exchange rate as at the end

of the reporting period are presented in the item “derivatives”, in the column “USD million”, while the column “total PLN million” also

includes the fair value of derivatives which are denominated solely in PLN and their value depends on exchange rates.

An analysis of the Company’s sensitivity to the currency risk as at 31 December 2023 and as at 31 December 2022 is

presented in the tables on the next page. In order to determine the potential changes in the USD/PLN and EUR/PLN

exchange rates for sensitivity analysis purposes, the Black-Scholes model (the geometrical Brownian motion) was used.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

An analysis of the Company’s sensitivity to the currency risk in the years 2022-2023

Value at risk

Carrying amount

31 December 2023

Change in USD/PLN exchange rate

Change in EUR/PLN exchange rate

4.46 (+13%)

3.50 (-11%)

4.79 (+10%)

4.13 (-5%)

Financial assets and liabilities

as at 31 December 2023

profit or loss

other

comprehensive

income

profit or loss

other

comprehensive

income

profit or loss

Trade receivables

243

471

(14)

(6)

Cash and cash equivalents

1 176

1 481

142

(116)

(6)

Loans granted

9 614

9 638

1 293

(1 054)

Cash pooling receivables

424

(46)

Other financial assets

1 558

(5)

Derivatives

292

(4)

(500)

413

Trade and similar payables

(1 901)

(6 065)

(97)

(119)

Borrowings

(2 665)

(5 691)

(356)

290

(2)

Other financial liabilities

(17)

(562)

(1)

Impact on profit or loss

1 057

(861)

(98)

Impact on other comprehensive income

(500)

413

Value at risk

Carrying amount

31 December 2022

Change in USD/PLN exchange rate

Change in EUR/PLN exchange rate

5.03 (+14%)

3.91 (-11%)

5.18 (+10%)

4.48 (-5%)

Financial assets and liabilities

as at 31 December 2022

profit or

loss

other comprehensive

income

profit or loss

other

comprehensive

income

profit or loss

Trade receivables

337

620

(26)

(5)

Cash and cash equivalents

688

985

(66)

(4)

Loans granted

8 687

8 763

1 241

(963)

Cash pooling receivables

588

(65)

Other financial assets

1 237

(9)

Derivatives

357

(3)

(1 197)

(6)

1 193

Trade and similar payables

(767)

(2 819)

(78)

(23)

Borrowings

(3 450)

(6 445)

(491)

381

(2)

Other financial liabilities

(46)

(394)

(5)

(1)

Impact on profit or loss

877

(690)

(6)

Impact on other comprehensive income

(1 197)

1 193

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 7.5.1.4 Interest rate risk

In 2023 the Company was exposed to the risk of changes in interest rates due to loans granted, investing free cash,

participating in a cash-pooling service and borrowing.

Positions with variable interest rates expose the Company to the risk of changes in cash flow from a given position as a

result of changes in interest rates (i.e. it has an impact on the interest costs or income recognised in the profit or loss).

Positions with fixed interest rates expose the Company to the risk of fair value changes of a given position, excluding items

measured at amortised cost, for which the change in fair value does not affect their measurement and profit or loss.

The main items which are exposed to interest rate risk are presented below.

As at

31 December 2023

As at

31 December 2022

Cash flow

risk

Fair value

risk

Total

Cash flow

risk

Fair value

risk

Total

Cash and cash equivalents*

1 888

1 356

Note 6.2

Loans granted

3 766

3 833

3 233

3 309

Note 7.1

Borrowings

(2 983)

(2 358)

(5 341)

(2 530)

(3 594)

(6 124)

Cash pooling receivables

424

588

Cash pooling liabilities

(350)

(321)

Similar payables**

(3 021)

*Presented amounts include cash accumulated in special purpose funds: Mine Closure Fund and Social Fund

**The value of trade payables transferred to reverse factoring

As at 31 December 2023 the Company had CIRS transactions (Cross Currency Interest Rate Swap) with maturities falling in

June 2024 and June 2029, in the notional amount of PLN 2 billion, hedging both the sales revenues in the currency, as well

as the variable interest rate of issued bonds. The open hedging position as at 31 December 2023 and as at 31 December

2022 is presented in the table in Note 7.5.1.3.

An analysis of the Company’s sensitivity to interest rate risk, assuming changes in interest rates for the balance sheet items

in PLN, USD and EUR (presented in basis points, bps) is presented in the following table. An expert method including

recommendations of the ARMA model was used to determine the potential volatility of interest rates.

31 December 2023

change in interest rate

31 December 2022

change in interest rate

+50 bps

(PLN, USD, EUR)

-150 bps

(PLN, USD, EUR)

+150 bps

(PLN, USD, EUR)

-100 bps

(PLN, USD, EUR)

profit or

loss

other

comprehensive

income

profit or loss

other

comprehensive

income

profit

or loss

other

comprehensive

income

profit or loss

other

comprehensive

income

Cash and cash equivalents*

(28)

(14)

Borrowings

(15)

(38)

Cash pooling

(1)

(3)

Loans granted measured at

fair value

(132)

384

(299)

237

Derivatives – interest rate

(107)

134

(97)

Similar payables**

(15)

Impact on profit or loss

(153)

445

(313)

245

Impact on other

comprehensive income

(107)

134

(97)

*Presented amounts include cash accumulated in special purpose funds: Mine Closure Fund and Social Fund

**The value of trade payables transferred to reverse factoring

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

In 2023 the LIBOR reference rates in borrowing agreements entered into by the Company were replaced by SOFR or CME

TERM SOFR reference rates. These rates are also applicable to newly-signed agreements with financial institutions

denominated in USD.

In October 2023, the Steering Committee of the National Working Group on the reform of reference rates, which was

appointed in connection with the reform of reference rates in Poland, revised the schedule of the process of replacing the

WIBOR and WIBID reference rates with the new RFR (risk-free-rate) reference rate. During work on this reform, a variety of

challenges specific to the Polish financial sector resulting from the scale and structure of agreements and instruments

based on WIBOR were identified, thereby generating risk to the safe conduct of the conversion. This resulted in the

designation of a new schedule for the introduction of these changes in order to limit risk and the costs of reforming the

reference rates. The Committee set the final date of the conversion as at the end of 2027.

Until 2027, the IBOR reform will not have an impact on the interest rate applied in the Company’s derivatives, because the

CIRS transactions entered into (open cross currency interest rate swaps) and bonds issued by the Company are based on

the WIBOR reference rate. In the case of this benchmark, until 2027 we are in the transitional period, during which

adjustments to transactions entered into before the reform will not be required. After 2027, the IBOR reform may have an

impact on cash flow hedging of variable interest of issued bonds (Tranche B) in the amount of PLN 1.6 billion, based on

WIBOR 6M, that is CIRS transactions (cross currency swap) with maturity falling in 2029. The Company applied temporary

exemptions from application of specific requirements of hedge accounting under IFRS 9 due to the IBOR reform and

adopted an assumption that it may continue the hedge relationships. The notional amounts of hedging instruments to

which these exemptions apply are disclosed in the following table.

As at 31 December 2023, the Company estimated that the impact of IBOR reform on the financial statements will be

immaterial.

As at 31 December 2023, the Company held financial instruments based on variable interest rates, which were not yet

replaced by an alternative rate. The amount of financial instruments that are based on a rate subject to planned reform

are presented in the following table:

Type of instrument

Carrying amount

as at

31 December 2023

Carrying amount

as at

31 December 2022

Loans granted

WIBOR 1M

Bank loans

USD LIBOR 1M

(528)

Debt securities

WIBOR 6M

(2 002)

Similar payables

WIBOR 1M

(1 757)

Derivatives (CIRS for 2029, PLN 1 600 million)

WIBOR 6M

(198)

Total

(3 668)

(2 640)

7.5.1.5 Risk of changes in prices of energy and energy carriers

The risk of changes in prices of electricity and energy commodities is a commodity risk for the Company, the measurement

of which is based on its impact on cash flow.

The Company’s exposure to the risk of volatility in electricity prices, energy commodities and related merchandise involves

the following markets:

• electricity and natural gas, which are required to engage in mining and processing operations, including natural

gas used to generate electricity to meet the Company’s needs in its own generating sources,

• CO

emission allowances, which need to be redeemed due to the level of greenhouse gas emissions by

installations operated by the Company being higher than the level of greenhouse gas emissions for which the

Company received freely-granted rights to emit CO

• property rights to energy resulting from certificates of origin of energy from renewable sources (RES) and energy

efficiency certificates (hereafter: property rights), subject to redemption (required for purposes of redemption

due to the sale of electricity by the Company to end users as well as the consumption of purchased electricity for

own needs).

The management of commodity price risk with respect to planned purchases of electricity and natural gas is based on the

management of exposure to the risk of changes in the prices of electricity and natural gas in a time horizon of up to 36

subsequent months, resulting from electricity and gas purchase plans, less previously-signed purchase contracts with

delivery in future periods.

In the case of changes in electricity prices, the source of exposure are sales prices in bilateral contracts and energy sales

prices on the Polish Power Exchange, where the Company purchases electricity in forward products (RTEE) as well as on

the intra-day and next-day market. Moreover, the Company entered into a contract for the supply of electricity from

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

renewable energy sources under a PPA (Power Purchase Agreement), which was entered into to meet the own needs of

the Company and, in accordance with the exemption provided for under IFRS 9 para. 2.4, is not subject to measurement

and recognition as a financial instrument.

In the case of the risk of changes in gas prices, the source of exposure is a contract entered into with ORLEN S.A., according

to which the price of the purchased gas depends to a large degree on the prices quoted on the Polish Power Exchange for

E-type gas (as regards both forward and SPOT contracts).

Commodity risk related to CO

emission allowances is connected with the exposure to changes in the prices of emission

allowances quoted in EUR on an exchange (e.g. European Energy Exchange) and in the EUR/PLN exchange rate, as well as

differences in the utilization of CO

emission allowances by the Company from planned amounts. In terms of changes in

the prices of CO

emission allowances, the Company has a net short position, resulting from the obligation to redeem rights

due to CO

systemic emissions which occur as a result of the combustion of coal within coal-bearing materials in installations

functioning in the copper smelters, and also as a result of the combustion of gas in the CCGT (Combined Cycle Gas Turbine)

blocks generating electricity to meet the Company’s needs. In 2023, the Company purchased CO

emission allowances in

forward transactions to secure its own needs. Such derivatives, which are acquired and maintained to secure own needs,

are excluded under IFRS 9 Financial Instruments and are not subject to measurement as at the end of the reporting period.

In terms of the risk of changes in property rights, the Company has a net short position resulting from the obligation to

redeem property rights due to the sale of electricity to an end user as well as to the consumption of purchased electricity

for own needs, while the source of exposure are mainly the prices of property rights on the wholesale market, (i.e. on the

Polish Power Exchange). The Company sells electricity mostly to customers which provide services to the Company on

properties belonging to the Company.

Exposure of the Company to a given risk – demand volume of individual merchandise for own needs (purchase)

Merchandise

Unit

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

emission allowances

EUA

282 901

151 900

Property rights, so-called green certificates

GWh

251

406

Property rights, so-called blue certificates

GWh

Property rights, so-called white certificates

TOE

2 403

2 371

Gas

GWh

2 282

1 751

Electricity

GWh

2 614

2 742

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 7.5.1.6 Impact of hedge accounting on the financial statements

The following table contains information on changes in the fair value of hedging instruments, as well as corresponding changes in the fair value of hedged positions during the reporting

period, being the basis for recognising the effective and ineffective portions of changes in the fair value of hedging instruments in the years 2022-2023 (net of the tax effect).

As at 31 December 2023

from 1 January 2023

to 31 December 2023

from 1 January 2023

to 31 December 2023

As at 31 December 2022

from 1 January 2022

to 31 December 2022

from 1 January 2022

to 31 December 2022

Balance of other comprehensive income

due to cash flow hedging for relations

Change in the value of

hedged item

Balance of other comprehensive income

due to cash flow hedging for relations

relation type

risk type

instrument type – hedged item

remaining in hedge

accounting

for which hedge

accounting was

ceased

Change in the value of

hedging instrument

remaining in

hedge accounting

for which hedge

accounting was ceased

Change in the value

of hedged item

Change in the

value of hedging

instrument

Cash flow hedging

Commodity risk (copper)

Options – Sales revenue

(21)

(11)

(327)

255

intrinsic value

152

325

time value

(173)

(11)

(70)

Commodity risk (silver)

Options – Sales revenue

(21)

intrinsic value

(16)

time value

(11)

(5)

Currency risk (USD)

Options – Sales revenue

604

(623)

469

402

(183)

403

intrinsic value

107

545

619

193

182

time value

(30)

(150)

209

221

Loans – Sales revenue

(48)

(64)

intrinsic value

(48)

(64)

Currency-interest rate risk

CIRS – Sales revenue

(180)

(439)

388

(569)

154

(137)

intrinsic value

(180)

388

(569)

(137)

CIRS – Finance income/costs

175

172

(140)

315

(181)

152

intrinsic value

175

(140)

315

152

Total, including:

556

(890)

717

146

(75)

(521)

652

Total intrinsic value

102

497

867

121

506

Total time value

(30)

(150)

(75)

146

The inefficiency of the hedging which was recognised in profit or loss in the reporting periods of 2022 and 2023 was immaterial.

The table below presents information on the impact of hedge accounting on the statement of profit or loss and other comprehensive income (net of the tax effect).

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

from 1 January 2023 to 31 December 2023

from 1 January 2022 to 31 December 2022

relation type

risk type

instrument type

Profits or (losses) due to

hedging recognised in other

comprehensive income

Amount reclassified from other

comprehensive income as a

reclassification adjustment, due to

realisation of a hedged item in the

period

Profit or (loss) due to

hedging recognised in

other comprehensive

income

Amount reclassified from other

comprehensive income to the

statement of profit or loss as a

reclassification adjustment, due to

realisation of a hedged item in the

period

to statement of

profit or loss

to non-current

assets

Cash flow hedging

Commodity risk (copper)

Options*

(128)

(160)

800

(525)

Commodity risk (silver)

Options*

(6)

114

Currency risk (USD)

Options*

738

459

357

(46)

Loans**

(16)

Currency-interest rate risk

CIRS***

340

Total

944

309

1 239

(432)

Item of the statement of profit or loss which includes a reclassification adjustment

* Revenues from contracts with customers, other operating income and (costs)

** Revenues from contracts with customers

*** Revenues from contracts with customers, other finance income and (costs) and non-current assets

The following table contains information on changes in other comprehensive income (excluding the tax effect) in the period in connection with the application of hedge accounting in 2022

and 2023.

2023

2022

Effective value *

Cost of hedging **

Total

Effective value *

Cost of hedging **

Total

Other comprehensive income due to cash flow hedging

– as at 1 January

(1 178)

(422)

(1 600)

Impact of measurement of hedging transactions (effective part)

1 272

(328)

944

1 124

115

1 239

Reclassification to the statement of profit or loss due to

realisation of hedged item

(737)

350

(387)

122

310

432

Other comprehensive income due to cash flow hedging

– as at 31 December

603

628

* Effective portions of changes in the fair value of hedging instruments due to hedged risk - intrinsic value of option

** Time value of option + CCBS (Cross Currency Basis Swap)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 7.5.2 Credit risk

Credit risk is defined as the risk that the Company’s counterparties will not be able to meet their contractual liabilities and

involves three main areas:

▪ the creditworthiness of the customers with whom physical sales transactions are undertaken;

▪ the creditworthiness of the financial institutions (banks/brokers) with whom, or through whom, hedging

transactions are undertaken, as well as those in which free cash and cash equivalents are deposited; and

▪ the financial standing of subsidiaries - borrowers.

In particular, the Company is exposed to credit risk due to:

▪ cash and cash equivalents and deposits;

▪ derivatives;

▪ trade receivables;

▪ loans granted (Note 6.2);

▪ guarantees granted (Note 8.6); and

▪ other financial assets.

Accounting policies

The Company recognises impairment loss on expected credit losses on financial assets measured at amortised cost.

Expected credit losses are credit losses weighed by the default probability. The Company applies the following models

for designating impairment losses:

- the simplified model – for trade receivables,

- the general (basic) model – for other financial assets.

Under the general model the Company monitors changes in the level of credit risk related to a given financial asset and

classifies financial assets to one of three stages of determining impairment losses – based on observations of changes in

the level of credit risk compared to an instrument’s initial recognition. In particular, the following are monitored: the credit

rating and the financial condition of the customer and the payment delay period. Depending on which degree it is

classified to, an impairment loss is estimated for a 12-month period (degree 1) or in the horizon of lifetime (degree 2 and

degree 3). The absolute indicator of default is an overdue period of more than 90 days. The detailed principles of

classification of loans granted to individual degrees of loss allowance for expected credit losses was described in note

6.2.

Under the simplified model the Company does not monitor changes in the level of credit risk during an instrument’s life

and estimates the expected credit loss over the time horizon of maturity of the instrument based on historical data

respecting the repayments of receivables.

Note 7.5.2.1 Credit risk related to cash, cash equivalents and bank deposits

The Company periodically allocates free cash in accordance with the requirements to maintain financial liquidity and limit

risk and in order to protect capital and maximise interest income.

As at 31 December 2023, the total amount of free and restricted cash and cash equivalents of PLN 1 481 million (as at 31

December 2022, PLN 985 million) was held in bank accounts and in short-term deposits. The detailed structure of cash and

cash equivalents is presented in note 8.5.

All entities with which deposit transactions are entered into by the Company operate in the financial sector. These are solely

banks registered in Poland or operating in Poland as branches of foreign banks, which belong to European, American and

Chinese financial institutions with medium-high and medium ratings, an appropriate level of equity and a strong, stable

market position. Credit risk in this regard is continuously monitored through the ongoing review of the financial standing

and by maintaining an appropriately low level of concentration of resources in individual financial institutions.

The following table presents the level of concentration of cash and deposits, with the assessed creditworthiness of the

financial institutions*:

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Rating level

As at

31 December 2023

As at

31 December 2022

Medium-high

from A+ to A- according to S&P and Fitch, and from A1 to A3

according to Moody’s

95%

85%

Medium

from BBB+ to BBB- according to S&P and Fitch, and from

Baa1 to Baa3 according to Moody’s

15%

*Weighed by amount of deposits.

As at 31 December 2023 the maximum single entity share of the amount exposed to credit risk arising from cash and bank

deposits amounted to 41%, or PLN 608 million (as at 31 December 2022: 36%, or PLN 354 million).

As at

31 December 2023

As at

31 December 2022

Counterparty 1

608

354

Counterparty 2

317

335

Counterparty 3

315

Counterparty 4

Other

161

158

Total

1 481

985

Impairment losses on cash and cash equivalents were determined individually for each balance of a given financial

institution. External bank ratings were used to measure credit risk. The analysis determined that these assets have a low

credit risk at the reporting date. The Company used a simplification permitted by the standard and the impairment loss

was determined on the basis of 12-month credit losses. The calculation of impairment determined that the amount of the

impairment loss is insignificant. These assets are classified to Degree 1 of the impairment model.

Note 7.5.2.2 Credit risk related to derivatives transactions

All entities with which derivative transactions are entered into by the Company operate in the financial sector

The Company’s credit exposure related to derivatives by main counterparties is presented in the table below.

As at 31 December 2023

As at 31 December 2022

Exposure to

credit risk

Exposure

to credit

risk

Financial

receivables

Financial

liabilities

Fair value

Financial

receivables

Financial

liabilities

Fair value

Counterparty 1

246

(138)

108

260

(250)

Counterparty 2

241

(172)

226

(172)

Counterparty 3

155

(93)

154

(33)

121

Counterparty 4

130

(180)

(50)

120

(53)

Other

269

(99)

170

787

(636)

151

Total

1 041

(682)

359

1 547

(1 144)

403

Open derivatives*

993

(675)

318

1 510

(1 110)

400

Settled derivatives, net

(7)

(34)

*Excluding embedded derivatives

Excludes embedded derivatives in purchase contracts for metal-bearing materials.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Taking into consideration the receivables due to open derivatives transactions entered into by the Company (excluding

embedded derivatives) as at 31 December 2023 and net receivables

due to settled derivatives, the maximum single entity

share of the amount exposed to credit risk arising from these transactions amounted to 24%, or PLN 246 million (as at 31

December 2022: 17%, or PLN 260 million).

In order to reduce cash flows and at the same time to limit credit risk, the Company carries out net settlements (based on

standard framework agreements entered into with its customers, regulating the trade of financial instruments, meaning

ISDA or based on a template of the Polish Bank Association). Moreover, the resulting credit risk is continuously monitored

by reviewing the credit ratings and is limited by striving to diversify the portfolio while implementing hedging strategies.

Despite the concentration of credit risk associated with derivatives’ transactions, the Company has determined that, due to

its cooperation solely with renowned financial institutions, as well as continuous monitoring of their ratings, it is not

materially exposed to credit risk as a result of transactions concluded with them.

The following table presents the structure of ratings of the financial institutions with whom the Company had derivatives

transactions, representing exposure to credit risk.

Rating level

As at

31 December 2023

As at

31 December 2022

Medium-high

from A+ to A- according to S&P and Fitch, and from A1 to

A3 according to Moody’s

71%

84%

Medium

from BBB+ to BBB- according to S&P and Fitch, and from

Baa1 to Baa3 according to Moody’s

29%

16%

Note 7.5.2.3 Credit risk related to trade receivables

For many years, the Company has been cooperating with a large number of customers, which affects the geographical

diversification of trade receivables. The majority of sales go to EU countries.

Trade receivables (net)

As at

31 December 2023

As at

31 December 2022

Poland

53%

60%

European Union (excluding Poland)

21%

15%

Asia

22%

Other countries

17%

The Company offsets receivables and liabilities due to settled derivatives, for which the future flows are known at the end of the reporting period,

pursuant to the principles of net settlements of cash flows adopted in framework agreements with individual customers.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Accounting policies

The Company applies the simplified model of calculating the allowance for impairment of trade receivables (regardless

of their maturity). The expected credit loss on trade receivables is calculated at the closest ending date of the reporting

period following the recognition of a receivable in the statement of financial position and is updated at every subsequent

reporting period ending date. In order to estimate the expected credit loss on trade receivables, the Company applies a

provision matrix, made on the basis of historical levels of payment of trade receivables, which is periodically recalibrated

in order to update it.

The Company adopted an assumption that the receivable risk is characterised by the number of days of delay and this

parameter determines the estimated PD, i.e. the probability of a delay in payment of trade receivables by at least 90 days.

For the purpose of estimating PD, 5 risk groups have been selected based on the criteria of number of days of delays in

payment, according to ranges presented below as “Important estimates and assumptions”.

The Company defines default as being a failure by a customer to meet its liabilities after a period of 90 days from the due

date. In order to estimate the loss allowance for expected credit losses, the Company takes into account also collaterals

by allocating expected recovery rates to the particular types of collaterals.

Moreover, the Company takes into account forward-looking factor in the applied parameters of the model for estimating

expected losses, by adjusting the base coefficients of default probability. This means that if as a result of analysis of

macroeconomic data, such as for example: current GDP dynamics, inflation, unemployment rate, or WIG index, the

Company recognises any deterioration in them in comparison to the previous period, in the ECL calculation the forward

looking factor, which corrects the risk connected with any decrease in receivables recovery, is taken into account. Despite

the worsening of the GDP dynamics, and taking into consideration the inflation slowdown, favourable performance of

the unemployment rate, and also forecasted significant economy rebound in 2024, the Company did not note any

deterioration of macroeconomic factors to the degree justifying the accounting for forward looking factor as at the end of

the reporting period, that is on 31 December 2023.

* Intra-group receivables were excluded from the calculation of allowance for impairment

The following table presents the change in trade receivables measured at amortised cost.

2023

2022

Gross amount as at 1 January

166

134

Change in the balance of receivables

Note 10.2

Gross amount as at 31 December

260

166

The following table presents the change in the estimation of expected credit losses on trade receivables measured at

amortised cost.

2023

2022

Loss allowance for expected credit losses as at 1 January

Allowance utilised

Note 10.2

Loss allowance for expected credit losses as at 31 December

The Company limits its exposure to credit risk related to trade receivables by evaluating and monitoring the financial

condition of its customers, setting credit limits, requiring collateral and non-recourse factoring. The terms of factoring

agreements entered into meet the criteria of removing receivables from the books at the moment of their purchase by the

factor. As at 31 December 2023, the amount of receivables transferred to factoring, for which payment from factors was

Important estimates and assumptions

31 December 2023

31 December 2022

Time frame

in days

Percent

(allowance for

impairment)

Gross amount of

receivables*

Allowance for

impairment in

individual time

frames

Gross amount of

receivables

Allowance for

impairment in

individual time

frames

Not overdue

0.42

127

(1)

<1-30)

2.28

<30-60)

33.68

<60-90)

68.81

Default

100

Total

131

(1)

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

not received, amounted to PLN 10 million (as at 31 December 2022: PLN 4 million). Information on the amount of revenues

from sales subjected to factoring in the financial period is presented in part 2.

An inseparable element of the credit risk management process performed by the Company is the continuous monitoring

of receivables and the internal reporting system.

Buyer’s credit is only provided to proven customers. In the case of new customers, an effort is made to ensure that sales

are based on prepayments or trade financing instruments which transfer the credit risk to financial institutions.

The Company makes use of the following forms of collateral:

• registered pledges, bank guarantees, promissory notes, notarial enforcement declarations, corporate guarantees,

cessation of receivables, mortgages and documentary collection;

• ownership rights to goods to be transferred to the buyer only after payment is received;

• a receivables insurance contract, which covers receivables from entities with buyer’s credit which have not provided

strong collateral or have provided collateral which does not cover the total amount of the receivables.

Taking into account the aforementioned forms of collateral and the credit limits received from the insurance company, as

at 31 December 2023 the Company had secured 56% of its trade receivables (as at 31 December 2022: 76%).

The total net value of the Company’s trade receivables as at 31 December 2023, excluding the fair value of collaterals,

up to the value of which the Company may be exposed to credit risk, amounts to PLN 471 million (as at 31 December 2022:

PLN 620 million).

The concentration of credit risk in the Company is related to the terms of payment allowed to key clients. Consequently, as

at 31 December 2023 the balance of receivables from the Company’s 7 largest clients, in terms of trade receivables

at the end of the reporting period, represented 49% of the balance of trade receivables (as at 31 December 2022: 64%).

Despite the concentration of this type of risk, the Company believes that due to the available historical data and the many

years of experience in cooperating with its clients, as well as to securities used, the level of credit risk is low.

Note 7.5.2.4 Credit risk related to other financial assets

As at 31 December 2023, the major items in other financial assets were:

• cash accumulated in the special purpose Mine Closure Fund in the amount of PLN 398 million (as at 31 December

2022: PLN 358 million);

• receivables due to cash pooling in the amount of PLN 424 million (as at 31 December 2022: PLN 588 million). Credit

risk in this regard is continuously monitored through the review of the financial standing and assets of the

subsidiaries participating in the cash pooling.

The account of the special purpose fund, used to accumulate cash in order to cover the costs of decommissioning of mines

is managed by a bank with a medium-high rating (principles of credit risk management connected with allocation of cash

in financial institutions are described in Note 7.5.2.1).

Impairment losses on cash accumulated on the bank account of the Mine Closure Fund was determined based on an

external bank rating. The analysis determined that these assets have a low credit risk at the reporting date. The Company

used a simplification permitted by the standard and the impairment loss was determined on the basis of 12-month credit

losses. The calculation of impairment determined that the amount of expected impairment loss is insignificant.

Note 7.5.2.5 Credit risk related to loans granted

Entities which were granted loans do not have ratings assigned to them by independent rating agencies. The following table

presents a structure of ratings of entities which were granted loans by the Company, per the internal methodology of the

Company:

Rating level

As at

31 December 2023

As at

31 December 2022

Medium-high

from A+ to A- according to S&P and Fitch,

and from A1 to A3 according to Moody’s

48%

99%

Medium

from BBB+ to BBB- according to S&P and Fitch,

and from Baa1 to Baa3 according to Moody’s

52%

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Loans granted measured at amortised cost

The Company estimates expected credit losses related to loans granted measured at amortised cost in accordance with

the general approach.

Loans granted do not have collaterals limiting the exposure to credit risk, therefore the maximum amount exposed to loss

due to credit risk is the gross amount of the loans, less expected credit losses recognised pursuant to IFRS 9.

The following tables present the change in the gross amount of loans granted measured at amortised cost.

Total

Degree 1

Medium

rating

Degree 2

Medium-high

rating

POCI

Medium

rating

Gross amount as at 1 January 2023

5 604

145

3 622

1 837

increase in the amount of loan (granting a loan)

829

repayment

(85)

(29)

(17)

(39)

modification of terms to the agreement

exchange differences

(670)

(80)

(390)

(200)

interest accrued using the effective interest rate

299

146

117

reversal of loss allowance recognised at the

moment of initial recognition of a loan

Gross amount as at 31 December 2023

6 016

901

3 361

1 754

Total

Degree 1

Medium

rating

Degree 2

Medium-high

rating

POCI

Medium-high

rating

Gross amount as at 1 January 2022

5 505

213

3 664

1 628

increase in the amount of loan (granting a loan)

repayment*

(776)

(121)

(466)

(189)

modification of terms to the agreement

(21)

exchange differences

417

284

121

interest accrued using the effective interest rate

297

162

115

reversal of loss allowance recognised

at the moment of initial recognition of a loan

162

Other changes

(2)

(1)

Gross amount as at 31 December 2022

5 604

145

3 622

1 837

* Of which: PLN 742 million concerns the repayment of principal amount and PLN 34 million concerns the repayment of interest.

There were no transfers of loans between degrees of impairment in any of the presented reporting periods.

The following tables present the change in the loss allowances for expected credit losses for loans measured at amortised

cost.

Total

Degree 1

Degree 2

POCI

Loss allowance for expected credit losses

as at 1 January 2023

changes in risk parameters

(27)

exchange differences

(5)

(1)

(4)

Loss allowance for expected credit losses

as at 31 December 2023

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Total

Degree 1

Degree 2

POCI

Loss allowance for expected credit losses

as at 1 January 2022

changes in risk parameters

(50)

exchange differences

Loss allowance for expected credit losses

as at 31 December 2022

Loans measured at amortised cost

(Note 6.2)

Carrying amount

Degree 1

Degree 2

POCI

As at 1 January 2022

5 407

211

3 568

1 628

As at 31 December 2022 / 1 January 2023

5 552

143

3 572

1 837

As at 31 December 2023

5 945

893

3 342

1 710

In the years 2023 and 2022 no loans were reclassified to degree 3 of the measurement.

For loans measured at amortised cost (excluding POCI), interest is accrued on the gross value using the IRR rate set at the

moment of initial recognition of the loan.

For POCI loans, interest is accrued on the gross value less any allowance for impairment recognised at the moment of initial

recognition, an IRR rate adjusted by credit risk defined at the moment of the loan’s initial recognition (CEIR, credit-adjusted

effective interest rate).

Loans granted measured at fair value

The carrying amount of loans measured at fair value as at 31 December 2023 amounted to PLN 3 766 million. As at 31

December 2022, the carrying amount was PLN 3 233 million. More disclosures on the fair value measurement were

presented in Note 7.1.

The loans granted do not have collaterals limiting exposure to credit risk, therefore the Company estimates the maximum,

potential losses due to credit risk in the amount of 100% of their current fair value, i.e. USD 957 million (PLN 3 766 million),

of which the amount of USD 813 million is due to the nominal value of loans granted.

The following table presents changes in the carrying amount of loans granted measured at fair value during the period.

2023

2022

Carrying amount as at 1 January

3 233

2 959

Loan repaid

(30)

(324)

Note 4.2

Fair value gains

657

601

Note 4.2

Fair value losses

(94)

Loss on realisation of instruments

(2)

Other changes

(1)

Carrying amount as at 31 December

3 766

3 233

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Sensitivity analysis of the fair value of loans due to the change in forecasted cash flows of Sierra Gorda

As at 31 December 2023 and in the comparable period, the Company classified the measurement to fair value of loans

granted to level 3 of the fair value hierarchy because of the utilisation in the measurement of a significant unmeasurable

parameter, begin the forecasted cash flows of Sierra Gorda S.C.M. More disclosures on the main assumptions (including

unobservable input data) assumed for the calculation of cash flows of Sierra Gorda were presented in the consolidated

financial statements of the KGHM Polska Miedź S.A. Group in Note 7.5.2.4.

Because of the significant sensitivity of the forecasted cash flows of Sierra Gorda S.C.M. to changes in the copper price,

pursuant to IFRS 13 para. 93.f the Company performed a sensitivity analysis of the fair value (level 3) of loans to changes in

copper prices.

Copper price [USD/t]

Scenarios 31 December 2023

2024

2025

2026

2027

2028

Base

8 500

8 700

9 000

9 200

8 250

Base minus 0.1 [USD/lb]

8 280

8 480

8 780

8 980

8 030

Base plus 0.1 [USD/lb]

8 720

8 920

9 220

9 420

8 470

Scenarios 31 December 2022

2023

2024

2025

2026

2027

Base

8 200

8 500

7 700

Base minus 0.1 [USD/lb]

7 980

8 280

7 480

Base plus 0.1 [USD/lb]

8 420

8 720

7 920

Fair value

Carrying

amount

31 December

2023

[PLN million]

Fair value

Carrying

amount

31 December

2022

[PLN million]

Fair value

Classes of

financial

instruments

[PLN million]

Base plus

0.1 [USD/lb]

Base minus

0.1 [USD/lb]

[PLN million]

Base plus 0.1

[USD/lb]

Base minus

0.1 [USD/lb]

Loans granted

measured at

fair value

3 766

3 929

3 435

3 233

3 475

2 912

Loans granted

measured at

amortised

cost

4 822

5 050

4 856

4 783

5 090

5 408

5 140

5 030

Concentration risk

The Company estimates the concentration risk to be at the level of 100%, since receivables due to loans granted are intra-

group loans (Note 12.1), and 91% of the balance are loans granted to subsidiaries Future 1 Sp. z o.o., Quadra FNX FFI s.a.r.l

and Quadra FNX Holding Chile Limitada, and the majority of which was transferred to finance the joint venture Sierra Gorda

S.C.M.; 8% of the balance are loans granted to KGHM INTERNATIONAL LTD., and 1% of the balance are loans granted to

companies in Poland. Detailed information on the loan granting transactions are presented in Note 6.2.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 8 – Borrowings and the management of liquidity and capital

Note 8.1 Capital management policy

Capital management in the Company is aimed at securing funds for business development and maintaining the appropriate

level of liquidity.

The Company monitors the Group’s level of financial security, among others using the Net Debt/Adjusted EBITDA ratio

presented in the table below, which was calculated on the basis of data presented in the Consolidated financial statements

of the KGHM Group.

Ratios

Calculations

31 December 2023

31 December 2022

Net Debt/Adjusted EBITDA

Relation of net debt to adjusted EBITDA

1.06

0.77

Net Debt

Borrowings, debt securities and leases

liabilities less free cash and its

equivalents

4 023

5 264

Adjusted EBITDA*

Profit/(loss) for the period pursuant to

IFRS, excluding taxes (current and

deferred income tax and mining tax),

finance income and costs, other

operating income and costs, profit or

loss on involvement in joint ventures,

depreciation/amortisation recognised

in expenses by nature,

recognition/reversal of impairment

losses on property, plant and

equipment and intangible assets

recognised in the cost of sales, selling

costs and administrative expenses

3 778

6 834

*Adjusted EBITDA for the period of 12 months ending on the last day of the reporting period, excluding adjusted EBITDA of the joint

venture Sierra Gorda S.C.M.

The level of the Net Debt/Adjusted EBITDA ratio achieved in 2023 is consistent with the assumptions adopted by the Group

in the reporting period and confirms its stable financial condition.

The economic situation is one of the most important factors affecting the Company’s financial liquidity.

The Company forecasts the coverage ratio of financial needs by available sources of financing, in order to identify, at a

sufficiently early stage, the possible occurrence of a liquidity gap.

The overriding principle in this process is to ensure the Group’s financial security and stability, while the main tool used to

limit risk is the diversification of financing sources and ensuring they are of long-term maturities.

When making decisions about the use of financial instruments, the Company analyses factors of significance for managing

liquidity, amongst which the basic parameter is the level of interest rates and forecasts regarding their future direction.

The level of interest rates primarily has an impact on the Company’s borrowing potential, understood as the possibility of

obtaining and servicing debt, and consequently its subsequent refinancing. To limit the unfavourable impact of increases

in market interest rates, some of the Company’s borrowings are based on fixed interest rates.

Details regarding the impact of changes in interest rates on the occurrence of liquidity risks are presented in Note 7.5.1.4

of the financial statements.

In the process of managing liquidity and capital, the Company also pays attention to adjusted operating profit, calculated

on the basis of data from the Consolidated financial statements of the KGHM Polska Miedź S.A. Group, which is the basis

for calculating the financial covenant and which is comprised of the following items:

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

(Loss)/Profit on sales

(1 640)

4 344

Interest income on loans granted to a joint venture

597

582

Other operating income and costs

(2 817)

962

Adjusted operating (loss)/profit*

(3 860)

5 888

*Presented amount does not include the gain on reversal of allowances for impairment of loans granted to a joint venture

Financial covenant Net debt/EBITDA is calculated based on consolidated data, pursuant to definitions stipulated in

borrowing agreements. As at the reporting date, in the financial year and after the reporting date, up to the date of

publication of these financial statements, the value of a financial covenant subject to the obligation to report as at 30 June

2023 and 31 December 2023, met the conditions stipulated in the credit agreements.

Note 8.2 Equity

Accounting policies

Other reserves from the measurement of financial instruments arise from the measurement of cash flow hedging

instruments (Note 7.2, Accounting policies) and the measurement of financial assets measured at fair value through other

comprehensive income (Note 7.3, Accounting policies) less any deferred tax effect.

Accumulated other comprehensive income consists of actuarial gains/losses on post-employment benefits less any

deferred tax effect (Part 11, Accounting policies).

Note 8.2.1 Share capital

As at 31 December 2023 and at the date of signing of these financial statements, the Company’s share capital, in accordance

with the entry in the National Court Register, amounted to PLN 2 000 million and was divided into 200 000 000 shares,

series A, fully paid, each having a face value of PLN 10. All of the shares are bearer shares. The Company has not issued

preference shares. Each share grants the right to one vote at the general meeting. The Company does not have treasury

shares.

In the years ended 31 December 2023 and 31 December 2022, there were no changes in either registered share capital or

in the number of issued shares.

In 2023, the following changes in the ownership structure of significant blocks of shares of KGHM Polska Miedź S.A. took

place:

• On 5 January 2023 the Company was informed about the merger of the companies Powszechne Towarzystwo

Emerytalne Allianz Polska Spółka Akcyjna (PTE Allianz Polska S.A.) and Aviva Powszechne Towarzystwo Emerytalne

Aviva Santander Spółka Akcyjna. As a result of the merger, the total number of shares of KGHM Polska Miedź S.A.

held on the accounts of funds managed by PTE Allianz Polska S.A.: Allianz Otwarty Fundusz Emerytalny, Allianz

Polska Dobrowolny Fundusz Emerytalny and Drugi Allianz Polska Otwarty Fundusz Emerytalny (Drugi Allianz OFE)

amounted to 12 241 453 shares, representing 6.12% of the share capital of the Company.

• On 16 May 2023, the Company was informed by PTE Allianz Polska S.A. that as a result of the liquidation of Drugi

Allianz OFE by transferring its assets to Allianz Polska Otwarty Fundusz Emerytalny (Allianz OFE), the share held in

the total number of votes in KGHM Polska Miedź S.A. on the accounts of Allianz OFE amounted to more than 5%,

that is on the accounts of Allianz OFE were 11 961 453 shares representing 5.98% of the share capital of the

Company.

As a result of the above, the Company’s shareholder structure as at 31 December 2023 and at the date these financial

statements were signed, established on the basis of notifications received by the Company pursuant to art. 69 of the Act

on public offerings and conditions governing the introduction of financial instruments to organised trading, and on public

companies, was as follows:

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Shareholder

Number of

shares/votes

Total nominal

value of shares

(PLN)

Percentage held

in share

capital/total

number of votes

State Treasury

63 589 900

635 899 000

31.79%

Allianz Polska Otwarty Fundusz Emerytalny

11 961 453

119 614 530

5.98%

Nationale-Nederlanden Otwarty Fundusz Emerytalny

10 104 354

101 043 540

5.05%

Other shareholders

114 344 293

1 143 442 930

57.18%

Total

200 000 000

2 000 000 000

100.00%

based on a notification received by the Company dated 12 January 2010

based on a notification received by the Company dated 16 May 2023

based on a notification received by the Company dated 18 August 2016

In 2022, there were no changes in the ownership of significant blocks of shares of KGHM Polska Miedź S.A.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 8.2.2 Changes of other equity items in the period

Other reserves from measurement of financial

instruments

Retained earnings

Investments in

equity

instruments

measured at

fair value

through other

comprehensive

income

Other reserves

from

measurement

of cash flow

hedging

financial

instruments

Total other

reserves from

measurement

of financial

instruments

Accumulated

other

comprehensive

income

Reserve capital

created in

accordance with

the Commercial

Partnerships

and Companies

Code, art. 396

Reserve

capital

created

from profit

accordance

with the

Company’s

Statutes

Profit/(loss)

from

years

As at 1 January 2022

( 375)

(1 295)

(1 670)

( 329)

667

19 564

5 608

Dividend paid

( 600)

Transfer of profit for the period to reserve capital

4 569

(4 569)

Total comprehensive income, of which:

( 79)

1 354

1 275

( 373)

3 533

Profit for the period

3 533

Other comprehensive income

( 79)

1 354

1 275

( 373)

Change in fair value of investments in equity instruments

( 97)

Note 7.2

Impact of effective cash flow hedging transactions entered into

1 239

Note 7.2

Amount transferred to profit or loss in connection with realisation

of derivatives

432

Note 11.2

Actuarial losses on post-employment benefits

( 460)

Note 5.1.1

Deferred income tax

( 317)

( 299)

As at 31 December 2022

( 454)

( 395)

( 702)

667

24 133

3 972

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Other reserves from measurement of financial

instruments

Retained earnings

Investments in

equity

instruments

measured at

fair value

through other

comprehensive

income

Other reserves

from

measurement

of cash flow

hedging

financial

instruments

Total other

reserves from

measurement

of financial

instruments

Accumulated

other

comprehensive

income

Reserve capital

created in

accordance with

the Commercial

Partnerships and

Companies Code,

art. 396

Reserve

capital

created

from profit

accordance

with the

Company’s

Statutes

Profit/(loss)

from

years

As at 1 January 2023

( 454)

( 395)

( 702)

667

24 133

3 972

Dividend paid

( 200)

Transfer of profit for the period to reserve capital

3 333

(3 333)

Total comprehensive income, of which:

264

451

715

( 219)

(1 153)

Loss for the period

(1 153)

Other comprehensive income

264

451

715

( 219)

Change in fair value of investments in equity instruments

320

Note 7.2

Impact of effective cash flow hedging transactions entered

into

944

Note 7.2

Amount transferred to profit or loss in connection with

realisation of derivatives

( 387)

Note 11.2

Actuarial losses on post-employment benefits

( 270)

Note 5.1.1

Deferred income tax

( 56)

( 106)

( 162)

As at 31 December 2023

( 190)

510

320

( 921)

667

27 466

( 714)

Based on the Act of 15 September 2000, i.e. the Commercial Partnerships and Companies Code, the Company is required to create reserve capital for any potential (future) or existing losses, to which no less than 8%

of a given year’s profit is transferred until the reserve capital has been built up to no less than one-third of the registered share capital. The reserve capital created in this manner may not be employed otherwise than

in covering the loss reported in the financial statements.

As at 31 December 2023 the statutory reserve capital in the Company amounted to PLN 667 million, and is recognised in retained earnings in the item reserve capital created in accordance with art. 396 of the

Commercial Partnerships and Companies Code.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Information related to dividends paid may be found in Note 12.2.

Note 8.3 Liquidity management policy

The Management Board is responsible for the management of financial liquidity in the Company, and it is performed based

on the approved, appropriate Policy. The Financial Liquidity Committee is a body supporting the Management Board.

The basic principles resulting from the Financial Liquidity Management Policy are:

• assuring the stable and effective financing of the Company’s activities,

• investment of financial surpluses in safe financial instruments,

• limits for individual financial investment categories,

• limits for the concentration of funds in financial institutions,

• a required investment level rating for banks in which the funds are deposited, and

• effective management of working capital.

Under the liquidity management process, the Company utilises instruments which enhance its effectiveness. One of the

instruments used by the Company to deal with ongoing operating activities is cash pooling - locally in PLN, USD and EUR

and internationally in USD and CAD. The Cash Pooling service is aimed at optimising the management of cash resources,

limiting interest costs, the effective financing of current working capital needs and the support of short-term financial

liquidity in the Group.

In order to support current liquidity and to optimise the service of cash management in a group of accounts, the Company

entered into an overdraft facility agreement in the amount of PLN 250 million with availability to 30 June 2024 and the

option of automatic extension by subsequent two years with the bank in which the cash pooling system operates.

Accounting policies

In cash flows from operating activities in the statement of cash flows, the Company presents receivables due to cash

pooling and other liabilities due to settlements within cash pooling agreements in the item “change in other receivables

and liabilities”. Receivables due to cash pooling are receivables from Group companies, which at the end of the reporting

period incurred a debt within the cash pooling agreement. Other liabilities due to settlement within cash pooling

agreements are liabilities of the Company towards participants in the cash pooling system to repay, after the end of the

reporting period, of cash transferred by them, which were not used by the Company for its own needs.

Within cash flows from financing activities, the Company presents proceeds and expenses due to cash pooling and they

represent the Company’s debt towards participants in the cash pooling system, that is cash which the Company uses for

its own needs.

Important estimates, assumptions and judgments

The cash pooling system was implemented in the KGHM Polska Miedź S.A. Group to actively manage the current

shortages and surpluses of cash on bank accounts of companies participating in the system to possibly the most

efficiently manage the cash and limits of debt with high volatility and liquidity. KGHM Polska Miedź S.A., as a participant

in the system as well as a coordinator in the system, does not treat this activity as an investment activity established in

order to invest free cash and generate profits, but solely as supporting Group companies in managing their current

shortages and surpluses.

In 2023, the Company carried out the process of obtaining short-term financing and continued actions connected with

developing the reverse factoring program.

In order to support the process of working capital management, the Company continuously transfers trade payables to

reverse factoring.

The available reverse factoring program is treated by the Company as an efficient tool supporting the process of working

capital management and is aimed at diversification of sources of financing of working capital. Contracts with factors were

entered into for an indefinite period.

Moreover, work connected with prolonging the availability of long-term financing was carried out in the reporting period.

Actions were continued aimed at conducting safe and responsible financial policy by basing the financing on diversified and

long-term instruments.

In 2023, a multipurpose credit facility agreement was entered into in the amount of USD 250 million and an availability

period of 5 years and the option to extend it by a further 2 years. The resources acquired from this agreement serve to

finance the working capital and support the management of current financial liquidity.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 8.3.1 Contractual maturities for financial liabilities

Financial liabilities – as at 31 December 2023

Contractual maturities from the end of the reporting period

Maturity period

Total

(without

discounting)

Carrying

amount

Financial liabilities

up to 3 months

over 3

to 12 months

over 1

to 3 years

over

3 years

Borrowings

112

332

898

1 773

3 115

2 648

Debt securities liabilities

534

240

1 900

2 674

2 002

Lease liabilities

192

1 091

1 383

691

Cash pooling payables**

350

Other liabilities due to settlement under cash pooling contracts***

Trade payables

2 998

338

3 407

3 240

Similar payables – reverse factoring

2 268

753

3 021

Derivatives – currency contracts*

362

484

483

Derivatives – commodity contracts – metals*

Derivatives – interest rates*

181

Embedded derivatives

Other financial liabilities

288

335

333

Total

6 188

2 127

1 416

5 189

14 920

13 020

*Financial liabilities arising from derivatives are calculated at their intrinsic values excluding the discount effect.

** Liabilities of KGHM Polska Miedź S.A. towards the Group companies within the cash pooling’s credit limit.

*** Other current financial liabilities due to the return of cash deposits towards all participants in cash pooling which presented a positive balance at the end of the reporting period.

Overdue financial liabilities as at 31 December 2023

Overdue period

up to 1 month

over 1 month

to 3 months

over 3 months

to 12 months

over

1 year

Total /

Carrying amount

Trade payables

The tables above regarding maturities do not include financial guarantees. Details on financial guarantees and their maturity dates were described in Note 8.6.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Financial liabilities – as at 31 December 2022

Contractual maturities from the end of the reporting period

Maturity period

Total

(without

discounting)

Carrying

amount

Financial liabilities

up to 3 months

over 3

to 12 months

over 1

to 3 years

over

3 years

Borrowings

776

327

840

1 706

3 649

3 435

Debt securities liabilities

174

699

2 093

2 966

2 002

Lease liabilities

156

1 160

1 396

687

Cash pooling payables**

321

Other liabilities due to settlement under cash pooling contracts***

Trade payables

2 801

344

3 175

3 004

Derivatives – currency contracts*

146

Derivatives – commodity contracts – metals*

395

Derivatives – interest rates*

348

376

569

Embedded derivatives

Other financial liabilities

108

184

179

Total

4 113

626

1 786

5 657

12 182

10 810

*Financial liabilities arising from derivatives are calculated at their intrinsic values excluding the discount effect.

** Liabilities of KGHM Polska Miedź S.A. towards the Group companies within the cash pooling’s credit limit.

*** Other current financial liabilities due to the return of cash deposits towards all participants in cash pooling which presented a positive balance at the end of the reporting period.

Overdue financial liabilities – as at 31 December 2022

Overdue period

up to 1 month

over 1 month

to 3 months

over 3 months

to 12 months

over

1 year

Total /

Carrying amount

Trade payables

The tables above on maturities do not include financial guarantees. Details on financial guarantees and their maturities may be found in Note 8.6.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 8.4 Borrowings

Accounting policies

Liabilities arising from borrowings are initially recognised at fair value, less (in the case of payment) or plus (in the case

of accrual) transaction costs which are an integral part of the financing drawn, and are measured at amortised cost at

the reporting date using the effective interest rate method. Accrued interest is recognised in finance costs, unless it is

capitalised through property, plant and equipment or intangible assets.

Note 8.4.1 Net debt

As at

31 December

2023

As at

31 December 2022

Bank loans

590

528

Loans

1 715

1 859

Debt securities

1 600

2 000

Leases

603

613

Total non-current liabilities due to borrowings

4 508

5 000

Bank loans

666

Loans

343

382

Cash pooling liabilities*

350

321

Debt securities

402

Leases

Total current liabilities due to borrowings

1 183

1 445

Total borrowings

5 691

6 445

Free cash and cash equivalents

1 463

971

Net debt

4 228

5 474

* Liabilities of KGHM Polska Miedź S.A. towards the Group companies within the credit limit in the group of accounts participating

in the cash pooling system

Liabilities due to borrowings, debt securities and leases – breakdown by currency (translated into PLN) and by type

of interest rate

As at

31 December 2023

As at

31 December 2022

USD/LIBOR

528

USD/SOFR

982

PLN/WIBOR*

2 351

2 323

USD/fixed

1 667

2 907

EUR/fixed

PLN/fixed

675

672

Total

5 691

6 445

* The amount includes KGHM Polska Miedź S.A.’s liabilities towards Group companies due to cash pooling in the amount of PLN

350 million (PLN 321 million in 2022) within the credit limit.

As at 31 December 2023, the Company’s liabilities due to borrowing, issued debt securities, leases and cash pooling

amounted to PLN 5 691 million, or USD 673 million, PLN 3 027 million and EUR 4 million (as at 31 December 2022 liabilities

amounted to PLN 6 445 million, or USD 780 million, PLN 2 995 million and EUR 3 million).

The structure of debt did not change in comparison to 2022. Pursuant to the adopted strategy, the external financing is

aimed at ensuring long term financial stability whose structure is based on diversified and long-term financing instruments.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 8.4.2 Net debt changes

As at

1 January

2023

Cash flows

Accrued

interest

Exchange

differences

Other

changes

As at

31 December

2023

Liabilities due to borrowing

Bank loans

1 194

( 581)

( 95)

590

Loans

2 241

( 264)

2 058

Debt securities

2 002

( 172)

172

2 002

Leases

687

( 95)

( 1)

67*

691

Cash pooling liabilities

321

350

Total debt

6 445

( 827)

366

( 360)

5 691

Free cash and cash equivalents

971

492

1 463

Net debt

5 474

(1 319)

366

( 360)

4 228

Proceeds from/(expenditures

on) derivatives associated with

external financing

Cash flows associated with

borrowing following the

inclusion of impact of

derivatives

(1 252)

*A conclusion and modification of lease agreements

Liabilities due to borrowing

As at

1 January

2022

Cash flows

Accrued

interest

Exchange

differences

Other

changes

As at

31 December

2022

Bank loans

593

550

( 25)

1 194

Loans

2 387

( 425)

206

2 241

Debt securities

2 001

( 130)

131

2 002

Leases

581

( 71)

149*

687

Cash pooling liabilities

360

( 44)

321

Total debt

5 922

( 120)

300

181

162

6 445

Free cash and cash equivalents

1 318

( 347)

971

Net debt

4 604

227

300

181

162

5 474

Proceeds from/(expenditures

on) derivatives associated with

external financing

Cash flows associated with

borrowing following the

inclusion of impact of

derivatives

268

*A conclusion and modification of lease agreements

Currency risk and interest rate risk are related to borrowings. A description of exposures to financial risks may be found

in Note 7.5.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Reconciliation of cash flows associated with borrowing following the inclusion of impact of derivatives in the

separate statement of cash flows

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

I. Financing activities

( 584)

Proceeds from borrowings

1 514

605

Proceeds from/(Expenditures on) cash pooling

( 40)

Proceeds from derivatives related to sources of external financing

130

Repayment of borrowings

(1 936)

( 352)

Repayment of lease liabilities

( 62)

( 44)

Repayment of interest on borrowings and debt securities

( 111)

( 107)

Repayment of interest on leases

( 8)

( 9)

Expenditures on derivatives related to sources of external financing

( 81)

( 89)

II. Investing activities

( 176)

( 173)

Paid capitalised interest on borrowings

( 254)

( 173)

Proceeds on settlement of an instrument hedging interest rate of

bonds

III. Change in free cash and cash equivalents

492

( 347)

TOTAL

(1 252)

268

Note 8.4.3 Detailed information concerning the main sources of borrowings

As at 31 December 2023, the Company had open credit lines, investment loans and debt securities with a total balance of

available financing in the amount of PLN 14 641 million, out of which PLN 4 650 million had been drawn (as at 31 December

2022 the Company had open credit lines, investment loans and debt securities with a total balance of available financing in

the amount of PLN 15 136 million, out of which PLN 5 437 million had been drawn).

The structure of financing sources is presented below.

Unsecured, revolving syndicated credit facility

A credit facility in the amount of USD 1 500 million (PLN 5 903 million), obtained on the basis of a financing agreement

concluded with a syndicate of banks in 2019 with a maturity of 20 December 2024 and an option to extend it by a further

2 years (5+1+1). In the years 2020-2021 the Company received consent from Syndicate Members to extend the term of

the agreement by 2 years in total, i.e. to 20 December 2026. The limit of available financing during the extension period

will amount to USD 1 438 million (PLN 5 659 million). The funds acquired through this credit facility are used to finance

general corporate purposes. Interest is based on SOFR plus a bank margin, depending on the net debt/EBITDA financial

ratio.

The credit facility agreement obliges the Company to comply with the financial covenant and non-financial covenants.

Financing parameters meet the standard conditions of these types of transactions. Pursuant to contractual terms and

conditions, the Company is obliged to report the level of financial covenant for the reporting periods, i.e. as at 30 June

and as at 31 December. The Company continuously monitors the risk of exceeding the levels of the financial covenant

stipulated in the credit facility agreement. As at the reporting date, during the financial year and after the reporting date,

up to the publication of this Report, the value of the financial covenant resulting in the obligation to report as at 30 June

2023 and as at 31 December 2023, complied with the provisions of the agreement.

As at 31 December 2023

As at 31 December 2022

Amount granted

5 903

6 603

Amount of the liability

528

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Investment loans

Loans granted by the European Investment Bank in the total amount of PLN 3 340 million.

1. Investment loan in the amount of PLN 2 000 million, with three instalments drawn and the payback periods expiring

on 30 October 2026, 30 August 2028 and 23 May 2029 and utilised to the maximum available amount. The funds

acquired through this loan were used to finance the Company’s investment projects related to modernisation of

metallurgy and development of the Żelazny Most tailings storage facility. The loan’s instalments are based on a fixed

interest rate.

2. Investment loan in the amount of PLN 1 340 million granted by the European Investment Bank in December 2017 with

a financing period of 12 years. The Company has drawn four instalments under this loan with maturities on 28 June

2030, 23 April 2031, 11 September 2031 and 6 March 2035. The funds acquired through this loan are used to finance

the Company’s projects related to development and replacement at various stages of the production process. Interest

on the loan’s instalments is based on a fixed interest rate. The last instalment of the loan drawn in 2023 is based on

the SOFR rate plus a bank margin, which is dependent on the net debt/EBITDA financial ratio.

The loan agreements oblige the Company to comply with the financial covenant and non-financial covenants commonly

stipulated in such types of agreements. Pursuant to contractual terms and conditions, the Company is obliged to report

the level of the financial covenant for the reporting periods, i.e. as at 30 June and as at 31 December. The Company

continuously monitors the risk of exceeding the levels of the financial covenant stipulated in the loan agreements. As at

the reporting date, during the financial year, and after the reporting date, up to the publication of this Report, the value

of the financial covenant resulting in the obligation to report as at 30 June 2023 and as at 31 December 2023, complied

with the provisions of the loan agreements.

As at 31 December 2023

As at 31 December 2022

Amount granted

3 340

Amount of the liability

2 058

2 241

Other bank loans

Bank loans in the total amount of PLN 3 398 million are used to finance working capital and support the management of

current financial liquidity. The Company holds lines of credit in the form of credit agreements. These are working capital

facilities and credit accounts with availability of up to 5 years. The funds under open lines of credit are available in USD,

EUR and PLN with interest based on a fixed interest rate or variable SOFR, EURIBOR and WIBOR plus a margin.

As at 31 December 2023

As at 31 December 2022

Amount granted

3 398

3 193

Amount of the liability

590

666

Debt securities

A bond issue program was established on the Polish market by an issue agreement on 27 May 2019.

The issue with a nominal value of PLN 2 000 million, under which bonds were issued with a maturity of 5 years in the

amount of PLN 400 million and a redemption date of 27 June 2024 as well as bonds with a maturity of 10 years in the

amount of PLN 1 600 million and a redemption date of 27 June 2029.

The nominal value of one bond is PLN 1 000, and the issue price is equal to the nominal value. Interest on the bonds is

based on variable WIBOR plus a margin.

The funds from the issue of the bonds are used to finance general corporate purposes.

As at 31 December 2023

As at 31 December 2022

Nominal value of the issue

2 000

Amount of the liability

2 002

Total bank and other loans, debt securities

As at 31 December 2023

As at 31 December 2022

Amount granted / Nominal value of the issue

14 641

15 136

Amount of the liability

4 650

5 437

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

The aforementioned sources ensure the availability of external financing in the amount of PLN 14 641 million. The funds

available for use from these sources cover the liquidity needs of the Company and the Group.

The syndicated credit in the amount of USD 1 500 million (PLN 5 903 million), the investment loans in the amount of PLN

3 340 million, and other bank loans in the amount of PLN 3 398 million, are unsecured.

Note 8.5 Cash and cash equivalents

Accounting policies

Cash and cash equivalents include mainly cash in bank accounts and deposits with maturities of up to three months from

the date of their placement (the same applies to the statement of cash flows). Cash is measured at its nominal amount

plus interest, including a loss allowance for expected credit losses (Note 7.5.2.1).

As at

31 December 2023

As at

31 December 2022

Cash in bank accounts

364

418

Other financial assets with a maturity of up to 3 months from the

date of acquisition – deposits

1 117

567

Total cash and cash equivalents

1 481

985

Restricted cash

Free cash and cash equivalents

1 463

971

As at 31 December 2023, the Company had cash in bank deposits in the amount of PLN 29 million (as at 31 December 2022

PLN 25 million), which are funds in separate VAT accounts, designated for servicing split payments. These funds are

gradually used to pay the VAT payables to suppliers.

Note 8.6 Liabilities due to guarantees granted

Guarantees and letters of credit are an essential financial liquidity management tool of the Group.

Accounting policies

The Company issued guarantees which meet the definition of contingent liabilities pursuant to IAS 37 and recognises

them in contingent liabilities, and guarantees which meet the definition of financial guarantees under IFRS 9, and which

are measured and recognised as financial instruments pursuant to this standard.

The liability due to the financial guarantee granted as at the end of the reporting period is recognised at the higher of two

amounts: the initial value of the issued guarantee less the amount of profits recognised in profit or loss on guarantees,

or the amount of an allowance for expected credit losses – set pursuant to the principles of the general model, described

in accounting policies in Note 7.5.2.

Important estimates and assumptions

For the calculation of expected credit loss, the Company adopts estimates for the rating, PD (probability of default) and

LGD parameters (loss given default) similarly as for the loans granted (Note 6.2). Calculation of the expected credit

losses takes place in the horizon remaining to the end of the guarantee, while the rating of a guarantee’s beneficiary is

adopted as the rating of the entity used for the purposes of calculating the PD parameter.

As at 31 December 2023, the Company held liabilities due to guarantees and letters of credit granted in the total amount

of PLN 1 537 million. The most significant items secure the following obligations:

Sierra Gorda S.C.M. – securing the performance of concluded agreements in the amount of PLN 866 million:

- PLN 866 million (USD 220 million) - a corporate guarantee (financial) securing repayment of a Revolving Credit Facility,

with maturity of the guarantee to September 2024. The carrying amount of the liability due to a financial guarantee

granted was recognised in the amount of PLN 18 million – the initial amount of the issued guarantee decreased by

the amount of revenues recognised in profit or loss due to guarantees (the amount of expected credit losses (Stage

2) is PLN 10 million).

other entities:

- PLN 107 million - securing the proper execution by the Company of future environmental obligations related to the

obligation to restore terrain, following the conclusion of operations of the Żelazny Most tailings storage facility (as at

31 December 2022 in the amount of PLN 126 million), the guarantee is valid for up to 1 year,

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

- PLN 405 million (USD 90 million, CAD 18 million) - securing the restoration costs of the Robinson mine, the Podolsky

mine and the Victoria project (as at 31 December 2022 in the amount of PLN 461 million, or USD 90 million, CAD 18

million), the guarantee is valid for up to 1 year,

- PLN 16 million - securing claims on behalf of Marshal of the Voivodeship of Lower Silesia to cover costs related to

collecting and processing waste, the guarantee is valid to 12 March 2025,

- PLN 2 million - securing obligations related to tax and customs duties, the guarantee is valid indefinitely,

- PLN 35 million (PLN 14 million, EUR 3 million and CAD 2 million) - securing the obligations related to proper execution

of agreements concluded by KGHM Polska Miedź S.A. and Group companies (as at 31 December 2022 in the amount

of PLN 7 million, or PLN 2 million and CAD 2 million), the guarantee is valid for up to 5 years,

- PLN 100 million - securing the obligations incurred by Brokerage House due to settlements of transactions on the

markets run by Towarowa Giełda Energii S.A, the guarantee was valid until 29 February 2024.

- PLN 6 million – financial guarantees, securing the obligations of Group companies, the guarantees are valid for up to

1 year.

As far as the Company is aware, at the end of the reporting period the Company determined the probability of payments

resulting from the contingent liabilities as low.

Guarantees set under the Tailings Storage Facility Restoration Fund

Guarantees securing potential claims against the Company in connection with art. 137 section 2 of the Act of 14 December

2012 on waste, based on which the manager of a tailings storage facility is obliged to create a restoration fund comprised

of cash to execute the obligations related to closure, restoration, and oversight, including monitoring of the tailings storage

facility. The fund may be in the form of a separate bank account, a provision or a bank guarantee. In 2022, the Company

changed the form of the Tailings Storage Facility Restoration Fund from a bank account to a bank guarantee. As at 31

December 2023, the guarantee amounted to PLN 120 million (as at 31 December 2022: PLN 98 million).

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

PART 9 – Non-current assets and related liabilities

Note 9.1 Mining and metallurgical property, plant and equipment and intangible assets

Accounting policies – property, plant and equipment

The most important property, plant and equipment of the Company is property, plant and equipment related to the

mining and metallurgical operations, comprised of land, buildings, water and civil engineering structures, such as:

primary mine tunnels (including shafts, wells, galleries, drifts, primary chambers), backfilling, drainage and firefighting

pipelines, piezometric holes and electricity, signal and optical fibre cables. Machines, technical equipment, motor

vehicles and other movable fixed assets, as well as right-to-use assets recognised in accordance with IFRS 16 Leases,

including perpetual usufruct rights to land, are also included in mining and metallurgical property, plant and equipment.

Property, plant and equipment, excluding usufruct right-to-use assets, are recognised at cost less accumulated

depreciation and accumulated impairment losses. In the initial cost of items of property, plant and equipment the

Company includes discounted decommissioning costs of fixed assets related to mining and other facilities which, in

accordance with binding laws, will be incurred following the conclusion of activities. Principles of recognition and

measurement of decommissioning costs are presented in Note 9.4.

An asset’s carrying amount includes costs of significant components, regular major overhauls and significant periodic

repairs, the performance of which determines further use of the asset.

Costs are increased by borrowing costs (i.e. interest, exchange differences and fees representing an adjustment to

interest cost) that were incurred for the purchase or construction of a qualifying item of property, plant and equipment.

Right-to-use assets are initially measured at cost, which comprises the initial lease liability and all lease payments paid

on the date the lease began and before that date, less any lease incentives received, any initial direct costs incurred by

the lessee and an estimate of costs which will be incurred by the lessee due to the disassembly or removal of a base

asset or renovation of the site in which it was placed.

The perpetual usufruct right to land is measured at the amount of the liability on the perpetual usufruct right to land,

which is measured using the perpetual rent method and all lease payments paid on the date the lease began or before

that date (including payments for acquisition of this right on the market).

After the initial recognition, a right-to-use asset, excluding the perpetual usufruct right to land measured using the

perpetual rent method, is measured at cost decreased by accumulated depreciation/amortisation and accumulated

impairment losses, adjusted by the updated measurement of lease liabilities.

Items of property, plant and equipment (excluding land and perpetual usufruct rights to land) are depreciated by the

Company, pursuant to the model of consuming the economic benefits from the given item of property, plant and

equipment:

− using the straight-line method, for items which are used in production at an equal level throughout the period of

their usage,

− using the units of production method, for items in respect of which the consumption of economic benefits is

directly related to the quantity of units produced, and this production is not spread evenly through the period of

their usage. In particular it relates to machines and mining equipment in gas-steam blocks.

The useful lives, and therefore the depreciation rates of fixed assets used in the production of copper, are adapted to

the plans for the closure of operations, and in the case of right-to-use assets to the earlier of these two dates – either to

the useful life end date or to the lease end date, unless the ownership of an asset is transferred to the Company before

the end of the lease, in which case depreciation rates are adjusted to the estimated useful life end date.

For individual groups of fixed assets, the following useful lives have been adopted, estimated based on the anticipated

useful lives of mines and metallurgical plants:

For own fixed assets:

Group

Fixed assets type

Total useful lives

Buildings and land

Land

Not subject to depreciation

Buildings:

- buildings in mines and metallurgical plants,

- sheds, reservoirs, container switchgears

40-100 years

20-30 years

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Primary mine tunnels

22-90 years

Pipelines:

- backfilling to transfer sand with water,

- technological, drainage, gas and firefighting

6-9 years

22-90 years

Electricity, signal and optical fibre cables

10-70 years

Technical equipment,

machines, motor

vehicles and other fixed

assets

Technical equipment and machines:

- mining vehicles, mining roof support

- conveyor belts, belt weigher

- switchboards, switchgears

4-10 years

10-66 years

4-50 years

Motor vehicles:

- underground electric locomotives,

- mining vehicles, railway vehicles, tankers,

transportation platforms

- trolleys, forklift, battery-electric truck

- cars, trucks, special vehicles

- underground diesel locomotives

20-50 years

7-35 years

7-22 years

5-22 years

10-20 years

Other fixed assets, including tools and equipment

5-25 years

For right-to-use fixed assets:

Group

Type of right-to-use

Total period of use

Buildings and land

Perpetual usufruct right to land measured

using the perpetual rent method

Not subject to depreciation

Transmission easements

6-54 years

(period of depreciation depends on

the period of depreciation of an

asset in respect of which a

transmission easement was

established)

Land

5-30 years

Buildings – warehouses

22 years

Other buildings

3-5 years

Structures

3 years

Computer sets

3 years

Technical equipment,

machines, motor

vehicles and other fixed

asset

Machines and technical equipment

3-4 years

Motor vehicles

3 years

Equipment and other

5 years

The Company performs regular reviews of its property, plant and equipment in terms of the adequacy of applied useful

lives to current operating conditions.

The individual significant parts of a fixed asset (significant components), whose useful lives are different from the useful

life of the given fixed asset as a whole are depreciated separately, applying a depreciation rates which reflects its

anticipated useful life.

Non-financial assets are tested for impairment whenever events or changes in circumstances indicate that their carrying

amount may not be recoverable.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Accounting policies – intangible assets

Mining and metallurgical intangible assets are mainly comprised of exploration and evaluation assets.

Exploration and evaluation assets are measured at cost less accumulated impairment losses.

The following expenditures are recognised in the cost of the asset:

− geological projects;

− obtaining environmental decisions;

− obtaining concessions and mining usufruct for geological exploration;

− work related to drilling (drilling; geophysical and hydrogeological research; geological, analytical and geotechnical

services; etc.);

− the purchase of geological information;

− the preparation of geological documentation and its approval;

− the preparation of economic and technical assessments of resources for the purpose of making decisions regarding

applying for mine operating concessions; and

− equipment usage costs (property, plant and equipment) used in exploratory work.

Expenditures on exploration and evaluation assets are measured at cost less accumulated impairment losses and are

recognised as intangible assets not yet available for use.

The Company is required to test an individual entity (project) for impairment when:

− the technical feasibility and commercial viability of extracting mineral resources is demonstrable; and

− the facts and circumstances indicate that the carrying amount of exploration and evaluation assets may exceed

their recoverable amount.

Any potential impairment losses are recognised prior to reclassification resulting from the demonstration of the

technical and economic feasibility of extracting the mineral resources.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Property, plant and equipment

Intangible assets

Buildings and

land

Technical

equipment,

machines, motor

vehicles and other

fixed assets

Fixed assets under

construction

Exploration

and evaluation

assets

Other

Total

As at 1 January 2022

Gross carrying amount

13 505

14 250

5 194

394

921

34 264

Accumulated depreciation/amortisation

(5 661)

(7 516)

( 104)

(13 281)

Impairment losses

( 1)

( 18)

( 9)

( 118)

( 146)

Net carrying amount

7 843

6 716

5 185

276

817

20 837

Net changes in 2022

Settlement of fixed assets under construction

658

1 419

(2 077)

Purchases

2 416

2 506

Leases – new contracts, modification of contracts

132

150

Self-constructed

Capitalised borrowing costs

179

181

Change in provisions for decommissioning costs of mines and

tailings storage facilities

Depreciation/amortisation, of which:

( 408)

(1 039)

( 14)

(1 461)

own fixed assets

( 405)

(1 016)

( 14)

(1 435)

leased fixed assets

( 3)

( 23)

( 26)

Recognition of impairment losses

( 4)

( 2)

( 6)

Utilisation of impairment losses

Other changes

( 32)

( 13)

As at 31 December 2022

Gross carrying amount

14 278

15 086

5 771

467

1 020

36 622

Accumulated depreciation/amortisation

(6 036)

(7 986)

( 118)

(14 140)

Impairment losses

( 1)

( 14)

( 7)

( 118)

( 140)

Net carrying amount, of which:

8 241

7 086

5 764

349

902

22 342

own fixed assets and intangible assets

7 660

6 987

5 764

349

902

21 662

leased fixed assets

581

680

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Property, plant and equipment

Intangible assets

Buildings and

land

Technical

equipment,

machines, motor

vehicles and other

fixed assets

Fixed assets under

construction

Exploration

and evaluation

assets

Other

Total

As at 1 January 2023

Gross carrying amount

14 278

15 086

5 771

467

1 020

36 622

Accumulated depreciation/amortisation

(6 036)

(7 986)

( 118)

(14 140)

Impairment losses

( 1)

( 14)

( 7)

( 118)

( 140)

Net carrying amount

8 241

7 086

5 764

349

902

22 342

Net changes in 2023

Settlement of fixed assets under construction

1 387

1 663

(3 050)

Purchases

2 848

127

3 069

Liquidation

( 7)

( 16)

( 4)

( 27)

Leases – new contracts, modification of contracts

Self-constructed

Capitalised borrowing costs

172

173

Change in provisions for decommissioning costs of mines and

tailings storage facilities

Depreciation/amortisation, of which:

( 439)

(1 179)

( 13)

(1 631)

own fixed assets

( 394)

(1 151)

( 13)

(1 558)

leased fixed assets

( 45)

( 28)

( 73)

Recognition of impairment losses, of which:

(1 624)

(1 138)

( 957)

( 57)

(3 776)

own fixed assets

(1 530)

(1 117)

( 957)

(3 604)

leased fixed assets

( 94)

( 21)

( 115)

Utilisation of impairment losses

Other changes

( 1)

As at 31 December 2023

Gross carrying amount

15 705

16 222

5 829

596

1 119

39 471

Accumulated depreciation/amortisation

(6 417)

(8 603)

( 121)

(15 141)

Impairment losses

(1 625)

(1 145)

( 960)

( 118)

( 57)

(3 905)

Net carrying amount, of which:

7 663

6 474

4 869

478

941

20 425

own fixed assets and intangible assets

7 206

6 370

4 869

478

941

19 864

leased fixed assets

457

104

561

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Note 9.1.1 Mining and metallurgical property, plant and equipment– fixed assets under construction

As at

31 December 2023

As at

31 December 2022

Deposit Access Program

3 449

3 318

Construction of the SW-4 shaft

625

589

Outfitting the mines

233

163

Investment activity related to the development and operation of

the Żelazny Most Tailings Storage Facility

173

280

Development of pipeline network in mines

Purchase of mining machinery

Construction of conveyors – the Lubin mine

Damówka pumping station with a backwater pipeline in the

Tailings Division

145

BAT As – Installation for arsenic and mercury removal from gases

before Solinox installation

117

Modernisation of the Tankhouse at Głogów I Copper Smelter and

Refinery – reconstruction of the roof and walls of the tankhouse

Note 9.1.2 Expenses related to mining and metallurgical assets

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Purchase

(3 069)

(2 506)

Change in liabilities due to purchase

275

Other

( 243)

( 210)

Total*

(3 037)

(2 689)

* Including expenses related to assets for exploration for and evaluation of mineral resources in the amount of PLN 158 million

(in 2022: PLN 39 million)

Note 9.2 Other property, plant and equipment and intangible assets

Accounting policies

Other property, plant and equipment are recognised at cost less accumulated depreciation and accumulated

impairment losses. The policy regarding impairment is presented in Note 9.1. Depreciation is done using the straight-

line method.

For individual groups of fixed assets, the following useful lives have been adopted:

Group

Total useful lives

Buildings

25-60 years

Technical equipment and machines

4-15 years

Motor vehicles

3-14 years

Other fixed assets

5-10 years

Intangible assets presented as “other intangible assets” include in particular: acquired property rights not related to

mining operations and software as well as CO

emission allowances (the appropriate accounting policies may be found

in Note 9.7). These assets are measured at cost less any accumulated amortisation and impairment losses. Intangible

assets are amortised using the straight-line method over their anticipated useful lives. The useful lives of the main

groups of intangible assets are as follows:

Group

Total useful lives

Acquired property rights

not related to mining activities

5-50 years

Software

2-5 years

Other intangible assets

40-50 years

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

Property, plant and equipment

Intangible

assets

Buildings and

land

Technical

equipment,

machines, motor

vehicles and

other fixed

assets

Fixed assets

under

construction

Other

intangible

assets

Total

As at 1 January 2022

Gross carrying amount

252

209

528

Accumulated depreciation/amortisation

(39)

(182)

(149)

(370)

Net carrying amount as at 1 January 2022

158

As at 31 December 2022

Gross carrying amount

266

216

558

Accumulated depreciation/amortisation

(41)

(197)

(165)

(403)

Net carrying amount as at 31 December 2022

155

own fixed assets and intangible assets

154

leased fixed assets

Net changes in 2023

Settlement of fixed assets under construction

(22)

Purchase

Liquidation

(14)

Other changes

Depreciation/amortisation, of which:

(1)

(8)

(23)

(32)

property, plant and equipment and intangible assets

(1)

(8)

(23)

(32)

As at 31 December 2023

Gross carrying amount

273

242

600

Accumulated depreciation/amortisation

(42)

(205)

(188)

(435)

Net carrying amount, of which:

165

own fixed assets and intangible assets

164

leased fixed assets

As at 31 December 2023 and 31 December 2022 the Company did not have any assets pledged as security for liabilities.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

100

Note 9.3 Depreciation/amortisation

Property, plant and equipment

Intangible assets

from

1 January 2023

31 December 2023

from

1 January 2022

31 December 2022

from

1 January 2023

31 December 2023

from

1 January 2022

31 December 2022

Note 4.1

Depreciation/amortisation

1 645

1 474

recognised in profit or loss

1 569

1 407

cost of manufacturing

products

1 538

1 375

administrative expenses

being part of the

manufacturing costs of assets

Note 9.4 Provision for decommissioning costs of mines and other technological facilities

Accounting policies

Important estimates, assumptions and judgments

The provision for future decommissioning costs of mines and

other technological facilities is recognised based

on the estimated expected costs of decommissioning of such

facilities and of restoring the sites to their original condition

following the end of operations. Estimation of this provision is

based on specially-prepared studies using ore extraction

forecasts (for mining facilities), and technical-economic studies

prepared either by specialist firms or by the Company.

The amount of provision represents the estimated future

decommissioning costs of mines discounted to present value.

Revaluation of this provision is made in two stages:

1) estimation of the costs of decommissioning mines to the

current value in connection with the change in prices using

the price change indices of construction-assembly production

published by the Central Statistical Office.

2) discounting of the decommissioning costs to the current

value using real discount rates calculated based on the

nominal interest rates and the inflation rate (quotient of the

nominal rate and the inflation rate), whereby:

− the nominal interest rate is based on the yield on

treasury bonds at the end of the reporting period, with

maturities nearest to the planned financial outflows

and if there are no treasury bonds with maturities

close to the planned financial outflows - the nominal

interest rate is determined by the professional

judgment of the Company's Management on the basis

of the consistency of the adopted assumptions,

− the inflation rate is based on the forecast of future

inflation used in the calculation of future employee

benefits liabilities.

A change in the discount rate or in the estimated

decommissioning cost adjusts the value of the relevant item of

fixed assets, unless it exceeds the carrying amount of the item

of fixed assets (any surplus above this amount is recognised in

other operating income).

The increase in the provision due to the time lapse is recognised

in finance costs.

The provision for decommissioning costs of mines and other

technological facilities includes the balance of the Mine Closure

Fund and Tailings Storage Facility Restoration Fund, which the

Company creates under separate regulations, i.e. the Act of 9

For the measurement of provision, the Company

adopted, for the years 2024-2025, inflation rates at the

level of the NBP’s forecast from November 2023, that

is 4.6% and 3.7%, respectively, and for subsequent

periods at the level of 2.5%, in line with the long-term

inflation target (in the comparable period, the

Company revised its approach to the discount rates

used to measure environmental provisions. At the end

of 2022, with a bond yield of +/- 6.845% and inflation

of +/- 13.1%, the Company received and applied for

the years 2022-2023 a negative real discount rate of -

5.53% instead of a rate of 0%. For the subsequent two

measurement periods, that is for 2024 and 2025, the

Company adopted inflation rates at the level of the

NBP’s forecast, that is 5.9% and 3.5%, respectively, and

for subsequent periods, following the NBP’s forecast -

at the level of 2.5%, in line with the long-term inflation

target).

Moreover, for the first 10 years of measurement of the

provision (that is to 2033), the Company adopted a

risk-free rate of 5.2% (yield of 10-year treasury bonds)

due to the fact that it is the only publicly available

information on the risk-free rate for the subsequent

10 years, and pursuant to the adopted judgment, this

rate was not modified. The Company will adjust the

risk-free rate to the level of this rate announced at

every subsequent end of the reporting period in order

to measure the provision at those days (in the

comparable period, for the first 10 years of

measurement of the provision (that is to 2032), a risk-

free rate of 6.845% was adopted).

In turn, taking into account the high volatility of the

risk-free rate that took place in the last period, based

on yield of 10-year treasury bonds, the Company

applied a professional judgment to determine this rate

for the estimation of provisions falling after a period

of 10 years from the end of the annual reporting

period based on the historical observation of the ratio

of the risk-free rate to the assumed inflation target. As

a result of the judgement, the Company adopted the

risk-free rate of 3.5% for the estimation of provision

after a period of 10 years from the end of the annual

reporting period, which translated into a real discount

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

101

June 2011 Geological and Mining Law and the Act of 14

December 2012 on waste, respectively. The role of the Funds is

to secure cash for the future realisation by the Company of its

obligations related to the closure, decommissioning and

restoration of mines and tailings storage facilities, by collecting

them in the manner provided for by the laws.

In the case of the Mine Closure Fund, the Company has

separated a bank cash account to which it transfers cash

equivalent to 3% of the depreciation charges on fixed assets of

mines, determined in accordance with the provisions of the

Income Tax Act. Details on the credit risk related to the cash

accumulated on the separate account of Mine Closure Fund are

presented in Note 7.5.2.4.

In the case of Tailings Storage Facility Restoration Fund, in July

2022 the Company changed the form of securing the funds of

this Fund, replacing a separate bank account with financial

guarantees issued by the bank on demand of the Company, of

which the Company is also a beneficiary. As at 31 December

2023, the amount of guarantees was PLN 120 million, and their

value is updated on an annual basis. The Company strives to fully

secure funds for the restoration of individual tailings storage

facilities in the year for which the liquidation and restoration

schedule provides for the closure of a given tailings storage

facility, by systematically increasing the value of these

guarantees.

rate of 0.98% (in the comparable period, the same

assumptions were adopted).

Expenditures on the decommissioning of mines and other technological facilities in the years 2023-2072

2023*-2032

2033-2042

2043-2052

2053-2062

2063-2072

Total

Mines

344

221

921

143

1 709

Smelters

112

214

Total

192

442

223

923

143

1 923

*Expenditures on decommissioning of mines and other technological facilities amounted to PLN 2 million.

As at

31 December

2023

As at

31 December

2022

Provisions at the beginning of the reporting period

1 261

824

Note 9.1

Changes in estimates recognised in fixed assets

Mine Closure Fund and Tailing Storage Facility Restoration Fund –

reclassification*

496

Transfer from the provision to the fund

( 75)

Utilisation

( 2)

Interest

Other

Provisions at the end of the reporting period, including:

1 401

1 261

- non-current provisions, including:

1 389

1 233

Mine Closure Fund and Tailings Storage Facility Restoration Fund

556

496

- current provisions

*Change in the presentation: to the presentation together with the non-current part of the provision for decommissioning costs of mines and other

facilities, which is a result of the change in judgments in 2022 as to the period of expected cash outflows from the fund.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

102

Impact of the change in discount rate on the provision for decommissioning costs of mines

As at

31 December 2023

As at

31 December 2022

increase in discount rate by 1 percentage point

(284)

( 258)

decrease in discount rate by 1 percentage point

397

700

Note 9.5 Capitalised borrowing costs

During the period between 1 January 2023 to 31 December 2023, the Company recognised PLN 173 million of borrowing

costs in property, plant and equipment and intangible assets (during the period from 1 January 2022 to 31 December 2022:

PLN 181million).

The capitalisation rate applied by the Company to determine borrowing costs in 2023 amounted to 3.92% (in 2022: 4.56%).

Note 9.6 Lease disclosures – the Company as a lessee

Accounting policies

As a lessee, the Company identifies leases in usufruct agreements, inter alia, land, perpetual usufruct right to land, and

transmission easements, buildings and constructions as well as technical equipment and machines.

The Company applies a uniform lease accounting model, which assumes that the lessee recognises the right-to-use

assets and lease liabilities related to all lease agreements, including exemptions. The Company does not recognise lease

assets and liabilities in relation to:

• short-term leases - for agreements without the option to purchase an asset, concluded for a period shorter than 12

months from the commencement of the agreement, including agreements concluded for an indefinite period with

a short notice period if there is no reasonable certainty that the Company will not make use of termination,

• leases in respect of which the underlying asset has a low value.

In the case of an agreement that is or includes a lease, the Company recognises each lease component under

the agreement as a lease, separately from non-lease components.

The right-to-use assets and the measurement policy for these assets are presented in Note 9.1.

The Company initially measures the lease liability at the present value of lease payments due to be paid as at the date

of initial recognition, which include: fixed lease payments, variable lease payments which are dependent on an index

or rate, amounts which the lessee is expected to pay under the guaranteed residual value, the strike price call option if

it is reasonably certain that the lessee will exercise the option, and penalties for terminating the lease if the lease period

was set with the assumption that the lessee will terminate the agreement. In fixed lease payments, the Company also

includes payments for the exclusion of land from forestry and agricultural production, if they relate to land used under

lease agreements.

The lease payments exclude variable payments made by the lessee to the lessor for the right to use the underlying asset

during the lease period, which depend on external factors other than payments based on a rate or index. After the date

the lease began, the Company measures the carrying amount of lease liabilities by:

− an increase due to interest on lease liabilities,

− a decrease due to paid lease payments,

− an update due to reassessment or modification of a lease agreement.

Lease liabilities are presented in Note 8.

Lease rate - lease payments are discounted by the Company using the incremental borrowing rate of the lessee because

generally speaking, the interest rate of a lease agreement is difficult to determine.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

103

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Note 9.1

Depreciation/amortisation cost

Note 4.3

Interest cost

Short-term lease cost

Costs recognised in profit or loss, associated with

leases of low-value of underlying assets, which are

not recognised as short-term agreements

Cost associated with variable lease payments not

recognised in the measurement of lease liabilities

Note 8.4.2

Total cash outflows due to leases

( 95)

Note 9.1

Increase in right-to-use assets

As at

31 December 2023

As at

31 December 2022

Note 9.1

Note 9.2

Carrying amount of right-to-use assets (division by

underlying assets in notes, pursuant to references)

562

681

Note 8.4.2

Carrying amount of right-to-use liabilities

691

575

As at 31 December 2023, the Company had lease agreements that contained extension options and termination options,

and the estimated value of future cash outflows, to which the Company is potentially exposed and are not included in the

measurement of lease liabilities amounted to PLN 10 million and PLN 39 million respectively. The Company has lease

agreements containing guaranteed residual values, which have been included in the measurement of lease liabilities.

Moreover, as at the end of the reporting period, the Company did not have any lease agreements that had not commenced

yet, to which it was obliged as a lessee.

Note 9.7 Greenhouse gas emissions allowances

Accounting policies

emission allowances received free of charge and purchased, intended to be used for the entity's own needs, are

recognised as intangible assets.

At the moment of initial recognition:

• CO

emission allowances received free of charge and related non-financial subsidies (recognised as the settlement of

deferred income) are measured at fair value corresponding to the market value of these allowances on the date of

their initial recognition.

• purchased CO

emission allowances are measured at cost.

At the end of the reporting period, emission allowances are measured at initial value less amortisation and impairment

losses. The value of the CO

emission allowances is not subject to depreciation/amortisation, if their end value is equal

to or higher than their carrying amount.

Disposals of the emission allowances recognised as intangible assets are carried out in accordance with the FIFO method.

emission allowances recognised as intangible assets are settled and excluded from the register whenever they are

redeemed* by the Company. The settlement of CO

emission allowances is recognised in the provision which is created

in accordance with the obligation to redeem the allowances.

This provision is recognised when the obligation to provide redemption allowances arises, respectively to the amounts

of the pollutants emitted. The provision is measured in relation to the value of emission allowances held, at the carrying

amount of these rights, and in the case of their deficit, at the market value of the emission allowances as at the date the

provision was created.

The provision is recognised in the production cost.

In the statement of profit or loss, the Company settles the subsidy recognised in deferred income in the period for which

it was granted. The subsidy settled up to the cost of the created provision (respectively to the tonnage of CO

emissions

covered by the provision) is offset in the Statement of profit or loss by the cost of the created provision. The subsidy in

the amount which exceeds the cost of the created provision (both in terms of the amount as well as the value) is

recognised as other operating income.

* Redemption means fulfilling the obligation imposed by the provisions of the Act on greenhouse gas emission trading scheme

on the owner of the Installation, consisting of the redemption of allowances on the allowance account by persons authorised to

operate accounts in the Union Registry, for each Installation separately, in the number covering the actual emissions of

pollutants for the previous year.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

104

Financial statements item

As at 31 December 2023

As at 31 December 2022

amount (t)

value

amount

(t)

value

Intangible assets

1 622 724

656

1 596 860

579

Accruals

1 218 359

501

1 091 203

391

Financial statements item

from

1 January 2023

31 December 2023

from

1 January 2022

31 December 2022

Cost of sold products

Other operating income

Note 9.8 Non-current assets held for sale and liabilities associated with them

As at 31 December 2023, the Company did not have any non-current assets held for sale.

As at 31 December 2022, the Company identified the shares of KGHM TOWARZYSTWO FUNDUSZY INWESTYCYJNYCH S.A.

in the amount of PLN 3 million as assets held for sale, due to the fulfilment of the criteria set in IFRS 5 (i.e. they are available

for immediate sale in their current state, the sale is highly probable, and it is expected that it will take place within 1 year

from the date of classification as held for sale). Due to their insignificant value, these shares were not separated in the

statement of financial position to a separate item "Non-current assets held for sale" and are included in this statement

under the item "Investments in subsidiaries".

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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105

PART 10 – Working capital

Note 10.1 Inventories

Accounting policies

The Company measures inventories at cost, not higher than the sales price less costs of completing production and costs

to sell.

Any differences in the value of finished goods constitutes a write-down and is recognised in the costs of sold products.

Fixed indirect costs of production are allocated on the basis of the normal level of production capacity utilisation.

The valuation of the inventory component disposal is made according to the weighted average purchase price and the

weighted average actual production cost.

The Company also classifies as inventories stand-by spare parts that do not meet the criteria for recognition as property,

plant and equipment in accordance with IAS 16 par. 7 and in accordance with the principles of capitalization of significant

components, adopted in the accounting principles of the Company, where a materiality threshold of at least PLN 300

thousand has been set, for which the spare parts are analysed in terms of meeting the capitalization criteria of IAS 16. In

relation to the above, stand-by spare parts are in particular recognised as inventories, the value of which is insignificant

or are not replaced at regular intervals, or which, after their installation, due to the failure of a spare part in an item of

property, plant and equipment, will not contribute to the obtainment of higher economic benefits from further use of

this component than those assumed at the moment of initial recognition of the component and putting it into use. The

costs of such stand-by spare parts are recognised in profit or loss as they are consumed, as current maintenance costs

of assets.

Important estimates, assumptions and judgments

The Company measures inventories at cost, not higher than the net realisable value. The potential difference in the

amounts represents a write-down of inventories of copper, silver and other products (at various processing stages), up

to the net realisable value is recognised in the cost of manufacturing of sold products in the period, in which the write-

down was recognised.

The Company determines the net sales price of copper at the end of the reporting period on the basis of forward LME

(London Metal Exchange) curve for the metal, set for months in which the sale of metal inventories will be made.

As at

31 December 2023

As at

31 December 2022

Materials

1 367

1 503

Half-finished goods and work in progress

4 300

4 495

Finished goods

1 800

1 444

Merchandise

Total net carrying amount of inventories

7 506

7 523

Write-down of inventories in the financial period

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Write-down recognised in cost of sales

Write-down reversed in cost of sales

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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106

Maturities of inventories

As at

31 December 2023

As at

31 December 2022

Maturity over the 12 months from the end of the reporting

period

Maturity of up to 12 months from the end of the reporting

period

7 414

7 447

As at 31 December 2023 and in the comparable period, the value of inventories with a maturity of over 12 months mainly

includes stand-by inventories of materials and spare parts to maintain production continuity, packages of spare parts under

contractual obligations and the finished rhenium product.

Note 10.1.1 Property rights arising from certificates of origin for electricity generated in renewable energy

sources and from energy efficiency

Accounting policies

Property rights to energy are certificates attesting to the source of electricity which confirm that the electricity is generated

by renewable energy sources (RES). The generation of energy by renewable energy sources is attested to by so-called green,

blue and violet property rights to energy.

Energy efficiency certificates, so-called white certificates, are certificates confirming the claims of market participants

related to declarations of energy savings resulting from their application of measures, or the implementation of actions

aimed at improving the energy efficiency.

Recognition of acquired property rights to energy and of certificates attesting to energy efficiency

Acquired property rights to energy and certificates attesting to energy efficiency are recognised in the statement of financial

position as merchandise, and at the date of acquisition are measured at cost, comprised of:

- the value of certificates of origin (based on the current market price), or

- the amount of the negotiated contractual price, in cases where these rights are purchased in off-trading sessions.

At the end of the reporting period these assets are measured at cost less any impairment losses, though no higher than

the net sale price.

Recognition of freely acquired certificates attesting to energy efficiency

Freely acquired certificates resulting from the act on energy efficiency are recognised as merchandise, while their free

acquirement is treated as a non-financial subsidy and is measured at the moment of initial recognition at fair value. Initial

recognition in the accounting books of property rights arising from certificates of origin resulting from the act on energy

efficiency occurs at the moment of their receipt.

Subsidies resulting from the receipt of freely acquired certificates attesting to energy efficiency are recognised, as a subsidy

to assets, in accruals, and are subsequently settled systematically in the financial result in other operating income, following

the depreciation of fixed assets, whose acquisition/generation resulted in the arising of the energy efficiency for which the

Company received the certificates.

At the end of the reporting period, freely acquired certificates attesting to energy efficiency are measured at initial cost less

any impairment losses, though no higher than the net sale price.

Recognition of income and disposal of property rights to energy and of certificates attesting to energy efficiency

Measurement of the disposal of property rights and of certificates attesting to energy efficiency are made using the FIFO

method. The disposal resulting from their sale is transferred to the financial result and is recognised as the value of

merchandise sold. The income from the sale of property rights to energy and of certificates attesting to energy efficiency is

recognised in the financial result as income from the sale of merchandise.

The deficit of property rights to energy and of certificates attesting to energy efficiency is supplemented by their purchase

or by a payment of a substitute fee. Any failure to carry out an obligatory redemption of property rights arising from

certificates for renewable energy sources or from energy efficiency, or any failure to pay a substitute fee, results in the

incurring a financial penalty by a company. The amount of the penalty incurred is recognised in other operating costs.

Provision for costs of meeting the obligation to redeem property rights to energy and of certificates attesting to

energy efficiency

Due to the obligation to redeem property rights to energy and of certificates attesting to energy efficiency, the Company

creates a provision in accruals.

The Company creates a provision:

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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107

- charged to the costs of merchandise sold to the extent in which the obligation to redeem rights and certificates attesting

to energy efficiency involves electricity purchased and resold to an end-user, and

- charged to the costs of production to the extent in which the obligation to redeem rights involves electricity purchased

and consumed to meet the company’s own needs.

This provision is measured at the carrying amount of the property rights to energy or certificates attesting to energy

efficiency held and, in the case of their deficit, at the market value of the property rights (certificates) at the date the

provision is created or at the amount of the substitute fee corresponding to the amount of the energy sold, depending on

which of these amounts is lower.

Settlement of the amount of the provision and the redemption of property rights occurs at the date of redemption of these

rights by the President of the Energy Regulatory Office.

Recognition of property rights to coloured energy and white certificates

Financial statements item

As at

31 December 2023

As at

31 December 2022

amount

(MWh)/TOE

value

amount

(MWh)/TOE

value

Inventories - merchandise, of which:

green property rights

267 576

393 965

blue property rights

7 789

10 576

white certificates

2 483

2 776

Accruals, of which:

provision for redemption of green property

rights (MWh)

267 132

431 640

provision for redemption of blue property rights

(MWh)

11 131

11 666

provision for redemption of white certificates

(TOE)

3 187

2 944

Item from the statement of profit or loss

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Financial result (excluding the tax effect), of

which:

Cost of products sold

Cost of merchandise sold

Other operating income

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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108

Note 10.2 Trade receivables

Accounting policies

Trade receivables are initially recognised at the transaction price, unless the receivables contains a significant financial

component subject to separation and therefore the receivables are initially recognised at fair value. After initial

recognition, receivables are measured as follows:

- receivables not transferred to non-recourse factoring and not based on the M+ pricing formula*: at amortised cost

while taking into account the loss allowance for expected credit losses (trade receivables with maturity dates of

less than 12 months are not discounted),

- receivables transferred to non-recourse factoring: at fair value through profit or loss, where the fair value is

determined in the amount of their carrying amount less the factor’s compensation, which include, among others,

interest costs and risk assumption costs. Because of the short duration between the transferral of receivables to

the factor and its payment and due to the low credit risk of the counterparty (factor), the fair value of these

receivables does not include an adjustment by the impact of these factors. Receivables transferred to non-recourse

factoring are obligatorily designated to the category of financial assets measured at fair value through profit or

loss, because they were classified to a business model in which cash flows are realised solely by selling financial

assets.

- receivables based on the M+ pricing formula: at fair value through profit or loss, where the fair value is set as the

nominal value (i.e. at the price in the invoice), adjusted by the impact of market and credit risks. Adjustment due

to the market risk is calculated as the difference between the current market price for a given pricing period in the

future (the period in which there will be a final determination of the settlement price) and the receivables’ price

recognised in the accounting books (multiplied by the sales volume). Adjustment due to the credit risk is calculated

analogously to the calculation of expected credit losses for trade receivables measured at amortised cost.

Receivables based on the M+ pricing formula are obligatorily designated to the category of financial assets

measured at fair value through profit or loss, because these assets do not pass the SPPI (solely payments of

principal and interest) test because of the element of variable price after the date of initial recognition of the

receivables.

Receivables measured at fair value may be measured based on the M+ pricing formula as well as due to the transfer to

factoring. The measurements are carried out independently of each other. The result of both measurements is

recognised in the profit or loss in other operating income/(costs).

* The M+ pricing formula means that for individual transactions for the sale of copper and silver products, the final sales price

is determined after the date of recognition of the sale, based on, for example, the average of the stock exchange quotations of a

given metal in the month of sale or in the month following the month of sale.

The Company is exposed to the credit risk and currency risk related to trade receivables. Credit risk management and

assessment of the credit quality of receivables is presented in Note 7.5.2.3. while information on the currency risk is

presented in Note 7.5.1.3.

The following table presents the carrying amounts of trade receivables and the loss allowance for expected credit loss:

as at

31 December 2023

as at

31 December 2022

Trade receivables measured at amortised cost

- gross value

260

166

Loss allowance for expected credit loss

( 1)

Trade receivables measured at amortised cost

- net value

260

165

Trade receivables measured at fair value

211

455

Total

471

620

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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109

Note 10.3 Trade and similar payables

Accounting policies

Trade and similar payables are initially recognised at fair value less transaction cost and are measured at amortised cost

at the end of the reporting period.

Accrued interest due to repayment of payables at a later date, in particular payables transferred to reverse factoring, is

recognised in profit or loss, in the item “finance costs”.

Important estimates, assumptions and judgments

Trade and similar payables presented in the Statement of financial position also contain trade payables transferred to

reverse factoring, which are in the category of “similar”.

At the moment of transfer of the liabilities to reverse factoring, the Company recognises payables towards the factor,

who due to the subrogation of receivables, from the legal point of view, assumes the rights and obligations common for

trade payables. Reverse factoring is not directly regulated by IFRS, and as a result of the ambiguous nature of the

transaction, it was necessary for the Company to make an important judgment on the presentation of balances of

liabilities transferred to factoring in the Statement of financial position and the presentation of transactions in the

Statement of cash flows.

In the Company’s opinion, in presenting the balance of trade payables transferred to reverse factoring as „Trade

and similar payables” (assigned to the category of “similar”) together with other trade payables and not as debt liabilities,

the following aspects had a crucial impact:

• from the legal point of view, at the moment of subrogation of liability by the reverse factoring there is a transfer

of rights and obligations arising from the liabilities, rather than their expiry and the establishment of new rights

and obligations in respect of the factor,

• there is no establishment of new guarantees related to the reverse factoring, nor are there any changes

in commercial terms related to any breach of the contract terms and annulment of a contract,

• the goal of the program is not only to improve the Company’s liquidity, but also to provide support to suppliers

engaged in obtaining favourable financing in order to build long term business relationships,

• the established payment deadlines, as well as payment models (including as regards interest and discounting)

do not change in respect of trade payables towards a given supplier which are not subject to reverse factoring.

In light of the above, as well as taking into account the established interest rates and discounts and extended

repayment periods, cash flows related to the liabilities transferred to reverse factoring do not change by more than

10%,

• costs related to reverse factoring are incurred both by the Company and its suppliers. The Company incurs interest

cost arising from the payment of liabilities over an extended period, while the supplier incurs a discount cost due

to early (that is, before the end of the base term, which is usually 60 days) payment received from the factor,

• the Company, together with individual suppliers, on the basis of signed contracts, will determine which invoices

will be transferred to reverse factoring, and what the deadline for early payment to the supplier through the factor

will be.

Moreover, although the Company identified characteristics which indicate the nature of reverse factoring as liabilities due

to financing (liability due to credit granted by the factor), they were judged by the Company to be insufficient for the

purpose of recognising that, at the moment of transfer of trade payables to reverse factoring, there is a complete change

in the nature of the relationship from that of a trade to a debt one, which would necessitate presentation in the Statement

of financial position as debt financial liabilities and presentation in the Statement of cash flows, in financial activities:

• the factor is a bank, and at the moment of subrogation by the factor there is a change in the debtor,

• in order to obtain more favourable terms, the factoring agreement was negotiated with the factor by the Company

and not directly by the suppliers,

• the actual deadline for the payment of trade payables subject to reverse factoring is longer (and amounts to up

to 180 days) than the deadline for the payment of other trade payables, which are not transferred to factoring

(which usually amounts to 60 days),

• the main costs of reverse factoring are incurred by the Company, and suppliers are charged only if they receive

payment on the date before the date stipulated in the trade contract, which usually amounts to 60 days from the

day of receiving the invoice by the Company (discount for the payment before 60 days or other, stipulated in the

trade contract).

As part of the analysis of IFRS in the context of presenting the balance of trade payables transferred to reverse factoring,

the Company also analysed the statement published in December 2020 by the International Financial Reporting

Interpretations Committee (Committee) on the presentation of reverse factoring transactions in the statement of financial

position and the statement of cash flows. In the Company’s opinion, the aspects indicated by the Committee as well as

the summary of the key requirements related to the analysed issue do not have an impact on the conclusions of the

assessment conducted by the Company. The Committee, recommending the appropriate presentation of liabilities

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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110

subject to reverse factoring, indicated the same issues that were analysed and disclosed by the Company as part of

important estimates, assumptions and judgments above. In particular, in the context of the areas of analysis indicated

by the Committee, the Company confirms that:

• the transfer of liabilities to reverse factoring did not require the establishment of any additional collateral for

the bank-factor, nor there are any additional guarantees related to reverse factoring established. Furthermore,

there is no change in the trade terms and conditions related to non-compliance with the terms of the contract and

the cancellation of the contract,

• taking the above into consideration, and taking into account the agreed interest and discount rates, and the

extended repayment date, the cash flows related to the liability transferred to reverse factoring will not change by

more than 10%; thus, the criteria of ceasing the disclosure of liabilities, i.e. the 10% test and the other criteria for

ceasing the disclosure of liabilities under IFRS 9 have not been met,

• the agreed payment dates as well as the payment pattern (including interest and discount rates) do not change

in relation to trade payables towards a given supplier, which are not covered by reverse factoring,

• liabilities transferred to reverse factoring are part of the working capital used by the unit in the unit’s regular

operating cycle.

The Company indicates that the actual deadline for the payment of trade payables subject to reverse factoring

is longer (up to 180 days) than the deadline for the payment of other trade payables, which are not transferred

to factoring, which usually amounts to 60 days, which may indicate a change in the nature of these liabilities from trade

to debt. However, this characteristic has been judged by the Company to be insufficient to conclude that when the trade

liability was transferred to reverse factoring, the nature of the liability changed completely. Apart from the above criteria,

no other terms of liabilities covered by reverse factoring differ from the terms of other trade payables.

Therefore, the Company's assessment of the nature of trade payables transferred to reverse factoring and their

presentation, means that the trade payables transferred to reverse factoring are presented by the Company in the

statement of financial position under "Trade and similar payables ", including those under the " similar" category.

As at

31 December 2023

As at

31 December 2022

Non-current trade payables

196

186

Current trade payables

3 044

2 819

Similar payables – reverse factoring

3 021

Trade and similar payables

6 261

3 005

In 2023, the factors’ total participation limit amounted to PLN 3 000 million (in 2022: 1 500 million). Currently, the Company

has three concluded agreements for the provision of factoring services, which was implemented in 2019 in order to make

it possible for suppliers to receive repayment of receivables faster, as part of the standard procurement process executed

by the Company, alongside an extension of payment dates of payables by the Company to the factor. In 2023, liabilities in

the amount of PLN 4 247 million were transferred to the factor and the value of trade payables covered by reverse factoring

as at 31 December 2023 amounted to PLN 3 021 million (in 2022 no liabilities were transferred to the factors and therefore

no trade payables were covered by reverse factoring as at 31 December 2022); in the current year, payments made towards

the factors amounted to PLN 1 209 million (in the year ended 31 December 2022 they amounted to PLN 55 million). Interest

costs accrued and paid towards the factor in 2023 amounted to PLN 50 million (in the year ended 31 December 2022 the

interest costs accrued and paid amounted to PLN 0.5 million).

Repayment dates of receivables due to reverse factoring do not exceed 12 months, and consequently all payables

transferred to reverse factoring are presented as short-term.

The item trade and similar payables contains payables due to the purchase and construction of fixed and intangible assets

which, as at 31 December 2023, amounted to PLN 195 million in the non-current part and PLN 1 141 million in the current

part (as at 31 December 2022, respectively PLN 185 million and PLN 975 million).

The Company is exposed to currency risk arising from trade and similar payables and to liquidity risk. Information on

currency risk is presented in Note 7.5.1.3 and on liquidity risk in Note 8.3.

The fair value of trade and similar payables approximates the carrying amount.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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111

Note 10.4 Changes in working capital

Accounting policies

Cash flows arising from interest on reverse factoring transactions are presented in cash flows from financing activities.

The actually repaid principal amounts of receivables transferred to reverse factoring to a factor are presented in cash

flows from operating activities. Moreover, the Company, as regards the changes in working capital in the Statement of

cash flows, presented a separate line “Change in trade payables transferred to factoring” for the purposes of clear and

transparent presentation.

Important estimates, assumptions and judgments

Due to the lack of uniform market practice with respect to the presentation of reverse factoring transactions in the

Statement of cash flows, the Management Board had to apply its own judgment in this regard. In the case of these

transactions, the Company had to make an assessment as to whether expenses related to payments towards the factor

should be classified to cash flows from operating activities or to cash flows from financing activities in the Statement of

cash flows. Pursuant to IAS 7.11, an entity should present cash flows from operating, investing and financing activities in

a manner which is most appropriate to its business, because it provides information that allows users of financial

statements to assess the impact of those activities on the financial position of the entity and the amount of its cash and

cash equivalents.

Due to the above, in the Company’s view:

• presentation of the repayment of the principal amounts of receivables in the reverse factoring in cash flows from

operating activities is compliant with the objective of individual transaction elements and consistent with the

presentation of these transactions in the Statement of financial position. When a legal subrogation of receivables

is made by the factor, from a legal standpoint, the factor assumes the rights and responsibilities characteristic for

trade receivables. Only cash flows from the repayment of principal amounts of receivables from liabilities due to

the purchase and construction of fixed assets and intangible assets are presented under investing activities (more

information may be found in Note 10.3),

• the financial aspect related to the factoring transaction is indicated in the presentation of interest in financing

activities. This is consistent with recognising this interest in financing costs in the Statement of profit or loss

pursuant to the accounting policy adopted by the Company for the presentation of interest cost of reverse factoring

in the financial activities.

Moreover, in terms of judgment regarding the presentation of cash flows resulting from reverse factoring transactions in

the statement of cash flows in operating activities, the Company also relies on the position of the International Financial

Reporting Interpretations Committee (Committee) on the presentation of reverse factoring transactions in the statement

of financial position and the statement of cash flows.

In its position, the Committee emphasized that the main problem requiring a decision, in terms of presenting reverse

factoring transactions in the statement of cash flow under IAS 7, is to determine whether cash flows should be presented

as a part of operating or finance activities. The Committee considers that the decision regarding the classification of cash

flows resulting from reverse factoring transactions may result from the previously determined classification of the

relevant liabilities in the statement of financial position. If an entity concludes that a liability transfer to reverse factoring

is a “Trade and similar payable”, and in this way declares it as part of the working capital which is used in the core business

of an entity that generates the revenues, the entity shall present the outflow from the payment for those liabilities as

arising on operating activities in the statement of cash flows. Otherwise, these cash flows should be recognised in finance

activities.

Taking into account the above, the Company assesses the nature of trade payables transferred to reverse factoring and

presents them in the statement of financial position as "trade and similar payables" (information presented in Note 10.3),

which confirms the Company's judgment as to the method of presentation of these transactions in the statement of cash

flows as presented in the accounting policies in Note 10.4.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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112

Inventories

Trade

receivables

Trade

payables

Similar

payables

Working

capital

As at 1 January 2022

(5 436)

( 600)

2 745

(3 236)

As at 31 December 2022

(7 523)

( 620)

3 004

(5 139)

Change in the statement of financial position

(2 087)

( 20)

259

( 55)

(1 903)

Depreciation/amortisation recognised in

inventories

Liabilities due to purchase of property, plant and

equipment and intangible assets

( 34)

Liabilities due to interest on reverse factoring

Adjustments

( 34)

Change in the statement of cash flows

(2 027)

( 20)

225

( 55)

(1 877)

Inventories

Trade

receivables

Trade

payables

Similar

payables

Working

capital

As at 1 January 2023

(7 523)

( 620)

3 004

(5 139)

As at 31 December 2023

(7 506)

( 471)

3 240

3 021

(1 716)

Change in the statement of financial position

149

236

3 021

3 423

Depreciation/amortisation recognised in

inventories

Liabilities due to purchase of property, plant and

equipment and intangible assets

( 175)

( 110)

( 285)

Liabilities due to interest on reverse factoring

( 25)

Adjustments

( 175)

( 135)

( 238)

Change in the statement of cash flows

149

2 886

3 185

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

113

PART 11 – Employee benefits

Accounting policies

The Company is obliged to pay specified benefits following the period of employment (retirement benefits due to one-

off retirement-disability rights, post-mortem benefits and the coal equivalent) and other long-term benefits (jubilee

bonuses), in accordance with the Collective Labour Agreement.

The amount of the liabilities due to both of these benefits is estimated at the end of the reporting period by an

independent actuary using the projected unit credit method.

The present value of liabilities from these benefits is determined by discounting estimated future cash outflow using the

interest rates on treasury bonds expressed in the currency of the future benefits payments, with maturities similar to

those of the liabilities due to be paid.

Actuarial gains and losses from the measurement of specified benefits following the period of employment are

recognised in other comprehensive income in the period in which they arose. Actuarial gains/losses from the

measurement of other benefits (for example benefits due to jubilee bonuses) are recognised in profit or loss.

Important estimates and assumptions

The carrying amount of the liability due to future employee benefits is equal to the present value of the liabilities due to

defined benefits. The amount of the liability depends on many factors, which are used as assumptions in the actuarial

method. Any changes to the assumptions may impact the carrying amount of the liability. The interest rate is one of the

basic parameters for measuring the liability. At the end of the reporting period, based on the opinion of an independent

actuary, an appropriate discount rate for the Company is used for setting the present value of estimated future cash

outflow due to these benefits. In setting the discount rate for the reporting period, the actuary extrapolates current

interest rates of treasury bonds along the yield curve expressed in the currency of the future benefits payments, to obtain

a discount rate enabling the discounting of payments with maturities which are longer than the maturities of the bonds.

Other macroeconomic assumptions used to measure liabilities due to future employee benefits, such as the inflation rate

or the minimum salary, are based on current market conditions.

In accordance with IAS 19 par. 78, the actuarial assumptions adopted for the purpose of measurement of employee

benefits in the Company are consistent, as they reflect the economic relations between such factors as inflation, the

salary growth rate, the discount rate and the coal price growth rate.

The assumptions used in the measurement as at 31 December 2023 are presented in Note 11.2.

The following sensitivity analysis is based on the same measurement method which was used to measure liabilities

recognised in the financial statements, that is the Projected Unit Credit Method. During the analysis of impact of a given

factor (assumption), its value is changed by +/- 1 percentage point, while leaving all other assumptions and the database

of people entitled to benefits unchanged. Therefore, the analysis shows the impact of change in only one selected factor.

Impact of changes in the assumptions on the balance of liabilities as at 31 December 2023

Discount rate

Planned base increases*

-1 pp

+1 pp

-1 pp

+1 pp

Retirement and disability benefits

(32)

(35)

Coal equivalent

289

(229)

(247)

307

Jubilee awards

(34)

(37)

Other benefits

(3)

Total liabilities

368

(298)

(322)

402

Impact on profit or loss

(34)

(37)

Impact on other comprehensive income

329

(264)

(285)

355

* Changes in the lowest salary were included in the retirement and disability benefits, jubilee awards and other benefits, while the coal equivalent

includes the inflation changes.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

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114

Impact of changes in the assumptions on the balance of liabilities as at 31 December 2022

Discount rate

Planned base increases*

-1 pp

+1 pp

-1 pp

+1 pp

Retirement and disability benefits

(22)

(25)

Coal equivalent

222

(181)

(173)

230

Jubilee awards

(25)

(27)

Other benefits

(2)

Total liabilities

278

(230)

(227)

299

Impact on profit or loss

(24)

(27)

Impact on other comprehensive income

250

(206)

(200)

265

* Changes in the lowest salary were included in the retirement and disability benefits, jubilee awards and other benefits, while the coal equivalent

includes the inflation changes.

As the above analysis indicates, the benefits with the longest maturity horizon, i.e. coal equivalents that will be paid to

current employees following their retirement or disability leave, are most sensitive to changes in assumptions. For these

benefits, the deviation ranges from -17.7% to 25% (in the comparable period: from -15.7% to 20.2%).

The least sensitive to changes in assumptions are benefits with a relatively short maturity period, e.g. jubilee awards

depending on the length of service, for which the deviation ranges from -6.6% to 9.1% (in the comparable period:

from -6.1% to 8.4%).

Note 11.1 Employee benefits liabilities

As at

31 December 2023

As at

31 December 2022

Non-current

2 821

2 394

Current

227

237

Liabilities due to future employee benefits programs

3 048

2 631

Employee remuneration liabilities

591

494

Accruals (unused annual leave, bonuses, other)

497

634

Employee liabilities

1 088

1 128

Total employee benefits liabilities

4 136

3 759

Employee benefits expenses

from 1 January

2023

to 31 December

2023

from 1 January 2022

to 31 December

2022

Remuneration

3 682

3 387

Costs of social security and other benefits

1 428

1 296

Costs of future benefits

365

149

Note 4.1

Employee benefits expenses

5 475

4 832

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

115

Note 11.2 Changes in liabilities related to future employee benefits programs

Total

liabilities

Jubilee

awards

Retirement

and disability

benefits

Coal

equivalent

Other

benefits

As at 1 January 2022

2 170

418

369

1 354

Note 11.1

Total costs recognised in profit or loss

149

Interest costs

Current service costs

Actuarial gains recognised in profit or loss

( 6)

Note 8.2.2

Actuarial (gains)/losses recognised in other comprehensive income

460

( 17)

479

( 2)

Benefits paid

( 148)

( 51)

( 26)

( 70)

( 1)

As at 31 December 2022

2 631

406

361

1 836

Note 11.1

Total costs recognised in profit or loss

365

172

147

Interest costs

178

124

Current service costs

Actuarial losses recognised in profit or loss

117

Note 8.2.2

Actuarial losses recognised in other comprehensive income

270

170

Benefits paid

( 218)

( 60)

( 31)

( 126)

( 1)

As at 31 December 2023

3 048

518

470

2 027

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

116

As at 31 December

2023

2022

2021

2020

2019

Present value of liabilities due to employee

benefits

3 048

2 631

2 170

2 848

2 492

Main actuarial assumptions adopted for measurement as at 31 December 2023:

2024

2025

2026

2027

2028

and

beyond

- discount rate

5.20%

- coal price growth rate

-20.57%

3.60%

2.50%

- rate of growth of the lowest salary

19.44%

5.20%

4.00%

- expected inflation

4.60%

3.70%

2.50%

- future expected increase in salary

9.60%

8.40%

4.00%

Main actuarial assumptions adopted for measurement as at 31 December 2022:

2023

2024

2025

2026

2027

and

beyond

- discount rate

6.75%

- coal price growth rate

87.90%

5.90%

3.50%

2.50%

- rate of growth of the lowest salary

19.60%

5.70%

5.00%

4.00%

- expected inflation

13.10%

5.90%

3.50%

2.50%

- future expected increase in salary

16.00%

9.00%

5.00%

4.00%

The change in actuarial gains/losses was caused by a change in the assumptions in respect of the discount rate, coal prices

and future expected changes of salary.

For purposes of reassessment of the liabilities at the end of the current period, the parameters assumed were based on

available forecasts of inflation, analysis of coal prices rates and of the lowest salary rates, and also based on the anticipated

profitability of long-term treasury bonds.

Actuarial gains/losses adopted for measurement as at 31 December 2023 versus individual assumptions adopted

as at 31 December 2022

Change in financial assumptions

137

Change in demographic assumptions

Other changes

193

Total actuarial losses

387

Actuarial gains/losses adopted for measurement as at 31 December 2022 versus individual assumptions adopted

as at 31 December 2021

Change in financial assumptions

Change in demographic assumptions

( 36)

Other changes

452

Total actuarial losses

454

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

117

Maturity profile of future employee benefits liabilities

Year of maturity:

Total

liabilities

jubilee

awards

retirement

and disability

benefits

coal

equivalent

post-

mortem

benefits

2024

227

111

2025

241

118

2026

181

111

2027

168

105

2028

159

Other years

2 072

293

272

1 484

Total liabilities in the statement of

financial position as at 31 December 2023

3 048

518

470

2 027

Maturity profile of future employee benefits liabilities

Year of maturity:

Total

liabilities

jubilee

awards

retirement

and disability

benefits

coal

equivalent

post-

mortem

benefits

2023

185

2024

228

129

2025

177

123

2026

169

114

2027

155

105

Other years

1 717

217

195

1 287

Total liabilities in the statement of

financial position as at 31 December 2022

2 631

406

361

1 836

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

118

PART 12 – Other notes

Note 12.1 Related party transactions

The accounting policies and important estimates and assumptions presented in Note 10 are applicable to transactions

entered into with related parties.

Operating income from related parties

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

From subsidiaries

1 097

900

From other related parties

Total

1 118

928

In 2023, the Company did not receive dividends from subsidiaries (in the comparable period the Company received PLN

29 million).

As at

31 December 2023

As at

31 December 2022

Trade and other receivables from related parties

10 514

9 724

From subsidiaries, including:

10 496

9 667

loans granted

9 711

8 784

From other related parties

Payables towards related parties

1 798

1 662

Towards subsidiaries

1 780

1 605

Towards other related parties

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

Purchases from related entities

9 832

9 994

Purchase of products, merchandise, materials and other

purchases from subsidiaries

9 832

9 994

In 2023, the Company did not enter into significant transactions with related entities under other than arm’s length

conditions.

The State Treasury is an entity controlling KGHM Polska Miedź S.A. at the highest level. The Company makes use of the

exemption to disclose a detailed scope of information on transactions with the Polish Government and entities controlled

or jointly controlled by the Polish Government, or over which the Polish Government has significant influence (IAS 24.25).

Pursuant to the scope of IAS 24.26, in the period from 1 January to 31 December 2023, the Company concluded the following

transactions with the Polish Government and entities controlled or jointly controlled by the Polish Government, unusual

due to their nature or amount:

• due to an agreement on setting mining usufruct for the extraction of mineral resources and for the exploration for and

assessment of mineral resources – balance of payables as at 31 December 2023 in the amount of PLN 243 million (as

at 31 December 2022: PLN 229 million); including payables due to mining usufruct for the extraction of mineral

resources recognised in costs in the amount of PLN 31 million (as at 31 December 2022: PLN 35 million),

• due to a reverse factoring agreement – as at 31 December 2023, the Company had a payable in the amount of PLN

2 528 million (as at 31 December 2022, the Company had no payables),

• banks related to the State Treasury executed the following transactions and economic operations on the Company’s

behalf: spot currency exchange, depositing cash, cash pooling, granting bank loans, guarantees and letters of credit

(including documentary letters of credit), processing of a documentary collection, running bank accounts, servicing of

business credit cards, servicing of special purpose funds and entering into transactions on the forward currency market.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

119

State Treasury companies may purchase bonds issued by KGHM Polska Miedź S.A.

Other transactions between the Company and the Polish Government and with entities controlled or jointly controlled by

the Polish Government, or over which the government has significant influence, were within the scope of ordinary, daily

economic operations. These transactions concerned the following:

• the purchase of materials, merchandise and services to meet the needs of current operating activities. In the period

from 1 January to 31 December 2023, the turnover from these transactions amounted to PLN 2 911 million (from 1

January to 31 December 2022: PLN 3 050 million), and, as at 31 December 2023, the unsettled balance of liabilities from

these transactions amounted to PLN 294 million (as at 31 December 2022: PLN 254 million),

• sales to Polish State Treasury Companies. In the period from 1 January to 31 December 2023, the turnover from these

sales amounted to PLN 386 million (from 1 January to 31 December 2022: PLN 163 million), and, as at 31 December

2023, the unsettled balance of receivables from these transactions amounted to PLN 173 million (as at 31 December

2022: PLN 193 million).

Note 12.2 Dividends paid

In accordance with Resolution No. 7/2023 of the Ordinary General Meeting of KGHM Polska Miedź S.A. dated 21 June 2023

regarding the appropriation of profit for the year ended 31 December 2022, the profit in the amount of PLN 3 533 million

was appropriated as follows: as a shareholders dividend in the amount of PLN 200 million (PLN 1.00 per share) and transfer

of PLN 3 333 million to the Company’s reserve capital. The Ordinary General Meeting of KGHM Polska Miedź S.A. set the

dividend date for 2022 at 27 July 2023 and the dividend payment date for 2022 at 10 August 2023.

In accordance with Resolution No. 6/2022 of the Ordinary General Meeting of KGHM Polska Miedź S.A. dated 21 June 2022

regarding the appropriation of profit for the year ended 31 December 2021, the profit in the amount of PLN 5 169 million

was appropriated as follows: as a shareholders dividend in the amount of PLN 600 million (PLN 3.00 per share) and transfer

of PLN 4 569 million to the Company’s reserve capital. The Ordinary General Meeting of KGHM Polska Miedź S.A. set the

dividend date for 2021 at 7 July 2022 and the dividend payment date for 2021 at 14 July 2022.

All shares of the Company are ordinary shares.

As at the date of publication, no decision was made on the dividend payout or allocation of profit for 2023.

Note 12.3 Other assets

Accounting policies

Receivables not constituting financial assets are initially recognised at nominal value, and at the end of the reporting

period they are measured in the amount receivable.

Accounting policies concerning financial assets were described in Note 7.

As at

31 December 2023

As at

31 December 2022

Other non-current non-financial assets

265

117

Non-financial advances

186

Receivables due to overpayment of property tax

Prepayments

Other current assets

541

464

Note 7.1

Other current financial assets

327

322

Receivables due to guarantees granted

Receivables due to settled derivatives

Receivables due to compensation for energy-

intensive sector due to allocation the costs of

purchasing CO

emission allowances to the price

of electricity

144

Receivables due to payments for letters of credit

Loans granted

Other

135

Other current non-financial assets

214

142

Non-financial advances

182

111

Prepayments

Other

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

120

Note 12.4 Other liabilities

Accounting policies

Other financial liabilities are initially recognised at fair value less transaction cost, and at the end of the reporting period

they are measured at amortised cost.

As at

31 December 2023

As at

31 December 2022

Trade payables

196

186

Other

Other liabilities – non-current

220

260

Accruals, including:

620

517

provision for purchase of property rights related to

electricity

charge for discharging of gases and dusts to the air

501

391

Liabilities due to the settlement of the Tax Group

197

Deferred income

Other liabilities due to settlements under cash pooling

contracts

Other

187

176

Other liabilities – current

1 061

775

Note 12.5 Assets and liabilities not recognised in the statement of financial position

The value of contingent assets and liabilities and other liabilities not recognised in the statement of financial position were

determined based on estimates.

As at

31 December 2023

As at

31 December 2022

Contingent assets

531

373

Guarantees received

147

115

Promissory note receivables

383

253

Other

Contingent liabilities

696

701

Note 8.6

Guarantees granted

665

641

Real estate tax on mine tunnels

Other

Other liabilities not recognised in the statement of

financial position

Liabilities towards local government entities due to

expansion of the tailings storage facility

Note 12.6 Capital commitments related to property, plant and equipment and intangible assets

Capital commitments incurred in the reporting period, but not yet recognised in the statement of financial position, were

as follows (as at 31 December of a given year):

As at

31 December 2023

As at

31 December 2022

Capital commitments due to the purchase of:

property, plant and equipment

3 269

2 676

intangible assets

126

Total capital commitments

3 320

2 802

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

121

Note 12.7 Employment structure

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

White-collar employees

4 960

4 909

Blue-collar employees

13 915

13 771

Total (full-time)

18 875

18 680

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

122

Note 12.8 Remuneration of key managers

from 1 January 2023 to 31 December 2023

Remuneration of members of

the Management Board

(in PLN thousands)

Period

when

function

served

Remuneration

for the period

of service as a

member of the

Management

Board

Remuneration

after the period

of service as a

member of the

Management

Board

Benefits due to

termination of

employment

Total

earnings

Members of the Management

Board serving in the function

as at 31 December 2023

Tomasz Zdzikot*

01.01-31.12

1 648

Mirosław Kidoń

01.01-31.12

1 181

Marek Pietrzak*

01.01-31.12

2 244

Marek Świder*

01.01-31.12

2 004

Mateusz Wodejko

01.01-31.12

1 207

Members of the Management

Board not serving in the function

as at 31 December 2023

Marcin Chludziński

874

Adam Bugajczuk

697

Paweł Gruza

631

( 163)

468

Andrzej Kensbok

975

TOTAL

8 284

3 177

( 163)

11 298

* The amount includes the variable part of remuneration for 2022 settled in 2023.

from 1 January 2022 to 31 December 2022

Remuneration of members of

the Management Board

(in PLN thousands)

Period

when

function

served

Remuneration

for the period

of service as a

member of the

Management

Board

Remuneration

after the period

of service as a

member of the

Management

Board

Benefits due to

termination of

employment

Total

earnings

Members of the Management

Board serving in the function

as at 31 December 2022

Tomasz Zdzikot

01.09-31.12

373

Mirosław Kidoń

10.12-31.12

Marek Pietrzak

01.01-31.12

1 079

Marek Świder

15.03-31.12

836

Mateusz Wodejko

21.12-31.12

Members of the Management

Board not serving in the function

as at 31 December 2022

Marcin Chludziński

01.01-11.10

1 939

435

2 374

Adam Bugajczuk

01.01-31.08

1 667

Paweł Gruza

01.01-09.08

1 604

163

1 767

Andrzej Kensbok

01.01-06.12

1 679

298

1 977

Katarzyna Kreczmańska-Gigol

277

Jerzy Paluchniak

01.09-11.10

120

Radosław Stach

277

Dariusz Świderski

01.01-21.02

148

600

762

TOTAL

9 541

1 154

910

11 605

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

123

from 1 January 2023 to 31 December 2023

Remuneration of members of the

Supervisory Board

(in PLN thousands)

Period when

function

served

Current employee

benefits

Current benefits

due to serving in

the function

Total

earnings

Members of the Supervisory Board

serving in the function

as at 31 December 2023

Agnieszka Winnik -Kalemba

01.01-31.12

185

Katarzyna Krupa

01.01-31.12

167

Wojciech Zarzycki

01.01-31.12

167

Józef Czyczerski

01.01-31.12

328

168

496

Przemysław Darowski

01.01-31.12

167

Andrzej Kisielewicz

01.01-31.12

167

Bogusław Szarek

01.01-31.12

326

167

493

Marek Wojtków

01.01-31.12

167

Radosław Zimroz

01.01-31.12

167

Piotr Ziubroniewicz

01.01-31.12

167

TOTAL

654

1 689

2 343

from 1 January 2022 to 31 December 2022

Remuneration of members of the Supervisory

Board

(in PLN thousands)

Period when

function served

Current

employee

benefits

Current

benefits due

to serving in

the function

Total earnings

Members of the Supervisory Board

serving in the function

as at 31 December 2022

Agnieszka Winnik -Kalemba

01.01-31.12

164

Katarzyna Krupa

01.01-31.12

149

Wojciech Zarzycki

22.06-31.12

Józef Czyczerski

01.01-31.12

203

150

353

Przemysław Darowski

01.01-31.12

149

Andrzej Kisielewicz

01.01-31.12

149

Bogusław Szarek

01.01-31.12

372

149

521

Marek Wojtków

07.10-31.12

Radosław Zimroz

07.10-31.12

Piotr Ziubroniewicz

24.11-31.12

Members of the Supervisory Board

not serving in the function

as at 31 December 2022

Piotr Dytko

22.06-07.10

Jarosław Janas

01.01-21.06

Robert Kaleta

01.01-07.10

115

Bartosz Piechota

01.01-21.06

TOTAL

575

1 374

1 949

Note 12.9 Remuneration of the entity entitled to audit the financial statements and of entities related to it

(in PLN thousands)

PricewaterhouseCoopers Polska Spółka z ograniczoną odpowiedzialnością Audyt Sp.k. (PwC) performed audits of financial

statements of KGHM Polska Miedź S.A. for 2022 and 2023.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

124

from 1 January 2023

to 31 December 2023

from 1 January 2022

to 31 December 2022

PricewaterhouseCoopers Polska Spółka z ograniczoną

odpowiedzialnością Audyt Sp.k.

1 872

1 580

audit of annual financial statements

1 120

850

assurance services, of which:

752

730

review of financial statements

572

550

other assurance services

180

Other companies of PricewaterhouseCoopers Polska

Note 12.10 Disclosure of information on the Company’s activities regulated by the Act on Energy

Note 12.10.1 Introduction

KGHM Polska Miedź S.A. meets the definition of an “energy enterprise” under the Act on Energy. Pursuant to article 44 of

the Act on Energy, the Company is required to prepare, on the basis of the Company’s accounting records, information

about its regulated activities. The scope of information concerning regulated activities, pursuant to article 44 of the

aforementioned Act, constitute the Company’s business activities in:

• distribution of electricity;

• distribution of gaseous fuels; and

• trade in gaseous fuels.

Note 12.10.2 Description of regulated activities

KGHM Polska Miedź S.A. conducts the following types of energy-related activities:

- Distribution of electricity – an activity which consists of distributing the electricity, used to meet the needs of clients

conducting business activities;

- Trade in gaseous fuels – an activity which consists of trading in nitrogen-enriched natural gas and is conducted to

meet the needs of clients engaged in business activities; and

- Distribution of gaseous fuels – an activity which consists of distributing nitrogen-enriched natural gas by utilising the

distribution grids located in the Legnica and Głogów municipalities in order to meet the needs of clients conducting

business activities.

Note 12.10.3 Basic principles of regulatory accounting

Regulatory accounting is a specific type of accounting, if compared to the accounting carried out in accordance with the

Accounting Act of 29 September 1994, conducted by an entrepreneur for its regulated activities including energy activities.

In addition to the accounting policy which was described in the financial statements and was the basis for the keeping of

the accounting records and for preparation of the Company’s financial statements, KGHM Polska Miedź S.A. applies the

following accounting principles for the purposes of regulatory accounting:

Causality principle

The allocation of particular revenue and costs is made in accordance with a given assets’ intended purpose and utilisation

of assets to meet the needs of a specified type of activity or service, with the causality principle governing the recognition

of items of revenue and costs in specified types of activity and with the principle of consistency between recognition by

types of activity of items of revenue and costs, which stems from the fact that these items reflect different aspects of the

same events.

Objectivity and non-discrimination principle

The allocation of assets, liabilities, equity, revenue and costs is done objectively and is not aimed at making profits or

incurring losses.

Continuation and comparability principle

The methods and principles used in preparing the report on regulatory accounting are applied in a continuous manner.

This report was prepared using the same principles for the current and comparable periods.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

125

Transparency and consistency principle

The methods applied in preparing the report on regulatory accounting are transparent and consistent with the methods

and principles applied in other calculations performed for regulatory purposes and with the methods and principles applied

in preparing the financial statements.

Materiality principle (feasibility principle)

The Company permits certain simplifications in measurement, recognition and allocation of items of assets, liabilities,

equity, revenue and costs as long as it does not significantly distort the true picture of the financial position and assets

presented in the financial statements on regulated activities.

Note 12.10.4 Detailed principles of regulatory policy – methods and principles governing the allocation of assets,

liabilities, equity, costs and revenues

The Company prepares financial information on its regulated activities by overlapping the regulated activities’ structure

with the Company’s organisational structure. The Company applies, in a continuous manner, various methods for the

allocation of revenue, costs, assets and liabilities to specific types of regulated activities. The following methods were used:

− specific (direct) identification method – applied if a direct identification of value is possible, for example the level

of revenue from certain activities,

− direct allocation method (e.g. the purchase cost of production fuel) – this method is applied if there is a direct cause-

and-effect relationship between the consumed resource and the corresponding cost,

− indirect allocation method on the basis of a predetermined allocation key, this method is used among others, to

allocate cost in a situation where no direct cause-and-effect relationship between the utilised resource and the cost

item exists and there is a need to use a cost driver (an allocation key) which enables linkage of items with their

respective cost. The most commonly used allocation keys are:

• revenue key – value of revenue is the allocation key;

• production key – production units are the allocation key;

• power key – the installed power of machines and equipment is used for the allocation of indirect costs;

• cost key – the value of costs is the allocation key;

• mixed keys, which combine elements of several different keys; and

• other keys appropriate for a specific case.

Assets

In the statement of financial position of KGHM Polska Miedź S.A. for the current and comparable periods, the following

items of assets of regulated activities were recognised:

Non-current assets:

1.Fixed assets,

2.Fixed assets under construction,

Current assets:

1. Trade receivables.

Other items of assets in the Company’s statement of financial position were allocated to other activities due to the lack of

a link between these items and regulated activities, or because the share of these items in regulated activities is immaterial.

Fixed assets

The identification and allocation of specific items of fixed assets to regulated activities takes place when these items of fixed

assets are brought into use. Based on the key consumption for energy carriers, being the quantitative share in sales of the

energy carrier in the total volume of the purchased energy carrier less losses, the percentage in the carrying amount of

fixed assets used in the energy activities is established.

Share =

Volume of energy carriers sold externally in the reporting period x 100%

Total volume of purchased energy carrier for the reporting period – losses

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

126

Fixed assets under construction

The allocation of fixed assets under construction to regulated activities is achieved by the detailed identification of

expenditures on fixed assets under construction which are related to regulated activities, based on the analysis of

accounting records. The remaining expenditures on fixed assets under construction are recognised in other activities of the

Company.

The Company recognises the full amount of deferred tax assets due to other deductible temporary differences under other

activities, due to their immaterial share in regulated activities.

Trade receivables

Allocation of receivables in specific types of regulated activities is done on the basis of detailed identification of revenues

from specific types of regulated activities, by analysing the accounting records with respect to unsettled sales invoices. The

remaining amount of trade receivables is recognised in other activities. The Company recognises the full amount of other

receivables (i.e. apart from trade receivables) in other activities due to their immaterial share in regulated activities.

Equity and liabilities

In the statement of financial position, the following items were recognised in equity and liabilities for the current and

comparable periods with respect to regulated activities:

Equity

Liabilities

I. Non-current liabilities:

1. Deferred tax liabilities;

2. Future employee benefits liabilities.

II. Current liabilities:

1. Future employee benefits liabilities.

The full amount of other items of liabilities are recognised by the Company in other activities, due to their immaterial share

in regulated activities.

Equity

The Company allocates equity to regulated activities as an item offsetting the assets and liabilities.

Deferred tax liabilities

With respect to regulated activities, deferred tax liabilities were identified arising from taxable temporary differences

between the depreciation of property, plant and equipment and intangible assets for tax purposes and their carrying

amount.

The allocation of deferred tax liabilities due to the depreciation of property, plant and equipment and the amortisation of

intangible assets, with respect to regulated activities, is performed through the use of indicators set for property, plant and

equipment and intangible assets. The Company allocates all deferred tax liabilities arising from other taxable temporary

differences to other operating activities.

Non-current and current liabilities due to future employee benefits

Liabilities due to future employee benefits are allocated to individual types of regulated activities using a revenue key

through the indirect allocation method.

Revenues from sales

Following an analysis of revenues in terms of their allocation to individual types of regulated activities, the Company

identified groups of operations which met the following conditions:

• revenues from the sale of electricity – distribution;

• revenues from the sale of nitrogen-enriched natural gas – distribution; and

• revenues from the sale of nitrogen-enriched natural gas – trade.

Revenues from sales are allocated to individual types of regulated activities using the individual identification method.

Operating costs

Following an analysis of costs in terms of their allocation to individual types of regulated activities, the following types of

operating costs were identified:

• costs of electricity distribution services and the distribution of natural gas;

• the value of the sold merchandise related to trade in natural gas; and

• administrative expenses associated with electricity sold.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

127

Costs of sales, selling costs and administrative expenses are allocated to separate types of regulated activities based on the

Company's account of the actual costs.

Income tax

The amount of income tax presented in the statement of profit or loss for individual types of regulated activities is set as a

multiple of the financial result and the effective tax rate. The amount of current income tax decreases or increases deferred

income tax, which is calculated from the difference between the carrying amount and the taxable amount of the respective

assets of regulated activities.

Statement of financial position pursuant to article 44 of the Act on Energy

Company in

total

Principal

activities

Energy

activities,

of which:

Electricity

Gas

As at 31 December 2023

Distribution

Trade

Distribution

ASSETS

Property, plant and equipment

19 117

19 035

Intangible assets

1 473

Other non-current assets

16 191

Non-current assets

36 781

36 699

Inventories

7 506

Trade receivables

471

456

Other current assets

4 138

Current assets

12 115

12 100

TOTAL ASSETS

48 896

48 799

EQUITY AND LIABILITIES

Equity

28 818

28 742

Deferred tax liabilities

328

321

Employee benefits liabilities

2 821

2 816

Provisions for decommissioning

costs of mines and other

technological facilities

1 389

Other non-current liabilities

4 930

Non-current liabilities

9 468

9 456

Employee benefits liabilities

1 315

1 313

Other current liabilities

9 295

9 288

Current liabilities

10 610

10 601

TOTAL LIABILITIES

20 078

20 057

TOTAL EQUITY AND LIABILITIES

48 896

48 799

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

128

Company

in total

Principal

activities

Energy

activities,

of which:

Electricity

Gas

As at 31 December 2022

Distribution

Turnover

Distribution

ASSETS

Property, plant and equipment

21 195

21 070

125

121

Intangible assets

1 302

Other non-current assets

14 210

Non-current assets

36 707

36 582

125

121

Inventories

7 523

Trade receivables

620

600

Other current assets

3 145

Current assets

11 288

11 268

TOTAL ASSETS

47 995

47 850

145

128

EQUITY AND LIABILITIES

Equity

29 675

29 543

132

116

Deferred tax liabilities

705

695

Employee benefits liabilities

2 394

2 391

Provisions for decommissioning costs

of mines and other technological

facilities

1 233

Other non-current liabilities

5 979

Non-current liabilities

10 311

10 298

Employee benefits liabilities

1 365

Other current liabilities

6 644

Current liabilities

8 009

TOTAL LIABILITIES

18 320

18 307

TOTAL EQUITY AND LIABILITIES

47 995

47 850

145

129

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

129

Statement of profit or loss pursuant to article 44 of the Act on Energy

Company

in total

Principal

activities

Energy

activities, of

which:

Electricity

Gas

from 1 January 2023

to 31 December 2023

Distribution

Trade

Distribution

Revenues from contracts

with customers

29 084

28 926

158

Cost of sales

(28 414)

(28 305)

( 109)

( 34)

( 73)

( 2)

Gross profit

670

621

Selling costs and administrative

expenses

(1 590)

(Loss)/Profit on sales

( 920)

( 969)

Other operating income and costs

( 230)

Finance income/(costs)

120

(Loss)/Profit before income tax

(1 030)

(1 079)

Income tax expense

( 123)

( 112)

( 11)

( 9)

( 2)

(Loss)/Profit for the period

(1 153)

(1 191)

Company

in total

Principal

activities

Energy

activities,

of which:

Electricity

Gas

from 1 January 2022

to 31 December 2022

Distribution

Trade

Distribution

Revenues from contracts with customers

28 429

28 323

106

Cost of sales

(23 157)

(23 022)

( 135)

( 40)

( 93)

( 2)

Gross profit

5 272

5 301

( 29)

( 5)

( 31)

Selling costs and administrative

expenses

(1 306)

Profit on sales

3 966

3 995

( 29)

( 5)

( 31)

Other operating income and costs

1 299

Finance (costs)/income

( 269)

Profit before income tax

4 996

5 025

( 29)

( 5)

( 31)

Income tax expense

(1 463)

(1 453)

( 10)

( 9)

( 1)

Profit for the period

3 533

3 572

( 39)

( 14)

( 31)

Note 12.11 Subsequent events

Convening of an Extraordinary General Meeting

On 8 January 2024, the Company's Management Board announced the convening of the Extraordinary General Meeting of

KGHM Polska Miedź S.A. on 13 February 2024 at the head office of the Company in Lubin, at the address ul. Marii

Skłodowskiej-Curie 48.

Resignation of a Member of the Management Board of the Company

On 9 January 2024, Marek Świder resigned from the function of Vice President of the Management Board of KGHM Polska

Miedź S.A. (Production), and thus from membership in the Management Board of KGHM Polska Miedź S.A., as of 9 January

2024.

Conclusion of a contract with Prysmian S.p.A. for the sale of copper wire rod

On 11 January 2024, the Company signed a long-term sales contract with one of the largest customers of copper wire rod

– the Prysmian S.p.A. Group. The minimum value of the contract is estimated at USD 1.73 billion (PLN 6.88 billion), while

the maximum value at USD 2.46 billion (PLN 9.77 billion). The contract is a continuation of a long-standing cooperation with

the Prysmian Group.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

130

Conclusion of an agreement and an annex to the guarantee agreement

On 11 January 2024, the Company signed an annex to the agreement for granting guarantee under the available line with

a bank with its registered office in Warsaw, increasing the value of the agreement from PLN 500 million to PLN 700 million,

and on 7 February 2024, it concluded an agreement for granting guarantee under the line up to the amount of USD 50

million (PLN 202 million).

Consent to sign a credit agreement

On 7 February 2024 the Management Board of the Company consented to sign an unsecured, revolving credit agreement

with Bank Gospodarstwa Krajowego in the amount of USD 450 million for a financing period of up to 60 months, with an

option to extend it by a subsequent 24 months. During the credit’s availability period, that is 36 months from the date of

signing the Agreement, the credit is a renewable credit line (every repayment renews the available credit limit) and

beginning from the first day after the period of 36 months from the date of signing the Agreement, the credit will be

transformed into a non-renewable loan to be repaid in four equal, semi-annual principal instalments (unless it is extended

as per the conditions described below). Every repayment of a principal instalment will decrease the amount of credit until

the credit is fully repaid. Moreover, the credit has 2 options to extend its availability period in the form of a renewable credit

line:

− 1st extension option by a subsequent 24 months at the Company’s request after 30 months,

− 2nd extension option by a subsequent 24 months at the Company’s request after 54 months.

Pursuant to the terms of the Agreement, the credit may be drawn in USD. The financial resources acquired from the credit

will be used to finance general corporate purposes. Interest on the credit was set based on SOFR plus a margin, depending

on the level of the financial ratio of net debt/EBITDA. Other credit terms are standard terms for these types of transactions.

The aforementioned Agreement replaces the credit agreement with Bank Gospodarstwa Krajowego from 2019, which was

announced by the Company via regulatory filing no. 7/2019 dated 25 February 2019. Furthermore, the Management Board

of KGHM Polska Miedź S.A. announces that the signing of the Agreement is planned on or before 26 February 2024. The

credit agreement was signed on 23 February 2024.

Granting a loan to KGHM INTERNATIONAL LTD.

On 12 February 2024, the Company granted a loan to KGHM INTERNATIONAL LTD. in the amount of USD 30.6 million

(PLN 122.9 million) for financing the purchase of mining machinery in the Robinson mine.

Conclusion of reverse factoring agreements

On 12 February 2024 and on 1 March 2024, the Company concluded reverse factoring agreements with two financial

institutions, with a total available limit of PLN 600 million. Ultimately, this limit will amount to PLN 1 billion.

Changes in the composition of the Supervisory Board of the Company

On 13 February 2024, the Extraordinary General Meeting of KGHM Polska Miedź S.A. dismissed the following persons from

the composition of the Supervisory Board of the Company:

− Andrzej Kisielewicz,

− Katarzyna Krupa,

− Agnieszka Winnik – Kalemba,

− Marek Wojtków,

− Wojciech Zarzycki,

− Radosław Zimroz,

− Piotr Ziubroniewicz

as well as appointed the following persons to the composition of the Supervisory Board of KGHM Polska Miedź S.A.:

− Zbigniew Bryja,

− Aleksander Cieśliński,

− Zbysław Dobrowolski,

− Dominik Januszewski,

− Tadeusz Kocowski,

− Marian Noga,

− Piotr Prugar.

Changes in the composition of the Management Board of the Company

On 13 February 2024, the Supervisory Board of the Company adopted resolutions on dismissal from the composition of

the 11th term Management Board of KGHM Polska Miedź S.A following persons:

− Tomasz Zdzikot, President of the Management Board of KGHM Polska Miedź S.A.,

− Mateusz Wodejko, Vice President of the Management Board (Finance) of KGHM Polska Miedź S.A.,

− Marek Pietrzak, Vice President of the Management Board (Corporate Affairs).

Moreover, the Supervisory Board of the Company adopted a resolution on delegation of Zbigniew Bryja - a member of the

Supervisory Board, to temporarily carry out the duties of the President of the Management Board of KGHM Polska Miedź

S.A., the Vice President of the Management Board (Finance) of KGHM Polska Miedź S.A., the Vice President of the

Management Board (Corporate Affairs) of KGHM Polska Miedź S.A. and Vice President of the Management Board

(Development) of KGHM Polska Miedź S.A. for the period from 13 February 2024 to the date of results of the qualification

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

131

proceedings for the positions of President of the Management Board of KGHM Polska Miedź S.A. and at least one of the

Vice Presidents of the Management Board of KGHM Polska Miedź S.A., but not longer than for a period of three months.

Acquisition of photovoltaic farms

On 29 February 2024, the Company acquired additional 7 photovoltaic farms on the Renewable Energy Sources market.

The concluded transaction is the first step on the road towards the realisation of the energy transformation strategy. It is a

step towards the diversification of sources and decoupling the Company from volatility of prices on the energy market. The

transaction price amounted to PLN 215 million, paid by a bank transfer in the amount of PLN 141 million in 2023 (an advance

due to acquisition of financial assets) and in the amount of PLN 74 million in 2024.

The acquired assets are located in four voivodeships: Lower Silesia, Pomerania, Greater Poland and Łódź. The company

responsible for their construction is Projekt Solartechnik, a part of the Grenevia (Famur) group and TDJ.

In accordance with the requirements of IFRS 3 Business Combinations, the Group is conducting an analysis whether the

acquired assets and liabilities meet the definition of a business and the transaction should be settled in accordance with

IFRS 3 as a business combination, or whether the acquired assets do not constitute a business and the transaction should

be settled as an acquisition of assets. The results of the concentration test will be recognised in the consolidated financial

statements for the first quarter of 2024.

Resignation of a Member of the Supervisory Board of the Company, temporarily delegated to carry out the duties

of a Member of the Management Board

On 6 March 2024, the Company received a declaration from Zbigniew Bryja announcing his resignation, upon the

submission of the declaration, from the delegation as a Member of the Supervisory Board of KGHM Polska Miedź S.A. to

temporarily carry out the duties of the President of the Management Board of KGHM Polska Miedź S.A., the Vice President

of the Management Board (Finance) of KGHM Polska Miedź S.A., the Vice President of the Management Board (Corporate

Affairs) of KGHM Polska Miedź S.A. and Vice President of the Management Board (Development) of KGHM Polska Miedź

S.A., as well as his resignation from serving in the function of a member of the Supervisory Board of the Company.

Appointment of Members of the Management Board of the Company

On 6 March 2024, the Supervisory Board of the Company adopted resolutions on appointing the following persons to the

Management Board of KGHM Polska Miedź S.A.:

- Andrzej Szydło as a Member of the Management Board of KGHM Polska Miedź S.A., granting him the function of

President of the Management Board of KGHM Polska Miedź S.A.

- Piotr Stryczek as a Member of the Management Board of KGHM Polska Miedź S.A., granting him the function of Vice

President of the Management Board (Corporate Affairs) of KGHM Polska Miedź S.A.

- Mirosław Laskowski as a Member of the Management Board of KGHM Polska Miedź S.A., granting him the function of

Vice President of the Management Board (Production) of KGHM Polska Miedź S.A.

- Zbigniew Bryja as a Member of the Management Board of KGHM Polska Miedź S.A., granting him the function of Vice

President of the Management Board (Development) of KGHM Polska Miedź S.A.

- Piotr Krzyżewski as a Member of the Management Board of KGHM Polska Miedź S.A., granting him the function of Vice

President of the Management Board (Finance) of KGHM Polska Miedź S.A

Resignation of a Member of the Management Board of the Company

On 29 March 2024 Mirosław Kidoń resigned from the function of Vice President of the Management Board (International

Assets) of KGHM Polska Miedź S.A., and thus from membership in the Management Board of KGHM Polska Miedź S.A., as

of 1 April 2024.

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

132

PART 13 - Quarterly financial information of KGHM Polska Miedź S.A.

SEPARATE STATEMENT OF PROFIT OR LOSS

from

1 October 2023

31 December 2023

unaudited

from

1 October 2022

31 December 2022

unaudited

from

1 January 2023

31 December 2023

from

1 January 2022

31 December

2022

Revenues from contracts with

customers

6 614

6 646

29 084

28 429

Cost of sales

(8 819)

(5 628)

(28 414)

(23 157)

Gross (loss)/profit

(2 205)

1 018

670

5 272

Selling costs and administrative

expenses

( 602)

( 425)

(1 590)

(1 306)

Loss/(profit) on sales

(2 807)

593

( 920)

3 966

Other operating income

796

( 5)

2 564

2 172

interest income calculated using

the effective interest rate

method

377

346

fair value gains on financial

assets measured at fair value

through profit or loss

( 225)

( 175)

668

631

gain due to reversal of

impairment losses on financial

instruments

( 76)

213

Other operating costs, including:

(1 904)

( 896)

(2 794)

( 873)

impairment losses on financial

instruments

( 1)

( 7)

Finance income

393

537

531

148

Finance costs

( 148)

( 90)

( 411)

( 417)

(Loss)/profit before income tax

(3 670)

139

(1 030)

4 996

Income tax expense

780

( 144)

( 123)

(1 463)

(LOSS)/PROFIT FOR THE PERIOD

(2 890)

( 5)

(1 153)

3 533

Weighted average number of

ordinary shares (million)

200

Basic/diluted earnings per share

(in PLN)

( 14.45)

( 0.03)

( 5.77)

17.67

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

133

Explanatory notes to the statement of profit or loss

Note 13.1 Expenses by nature

from

1 October 2023

31 December 2023

unaudited

from

1 October 2022

31 December 2022

unaudited

from

1 January 2023

31 December 2023

from

1 January 2022

31 December 2022

Depreciation of property, plant and

equipment and amortisation of

intangible assets

400

387

1 675

1 504

Employee benefits expenses

1 410

1 344

5 475

4 832

Materials and energy including:

3 058

3 446

12 955

13 687

Purchased metal-bearing materials

1 915

2 158

7 712

8 859

Electrical and other energy

365

415

2 224

1 921

External services, including:

754

684

2 638

2 238

Transport

340

328

Repairs, maintenance and servicing

279

217

854

699

Mine preparatory work

188

201

736

617

Minerals extraction tax

699

746

3 496

3 046

Other taxes and charges

179

140

632

487

Advertising costs and representation

expenses

Property and personal insurance

Impairment losses on property, plant

and equipment and intangible assets

2 808

Reversal of write-down of inventories

( 12)

( 13)

( 52)

Write-down of inventories

Other costs

Total expenses by nature

9 368

6 790

29 859

25 895

Cost of merchandise and materials sold

(+)

110

118

545

449

Change in inventories of products

and work in progress (+/-)

( 790)

( 174)

(1 665)

Cost of products for internal use (-)

( 65)

( 226)

( 216)

Total cost of sales, selling costs and

administrative expenses, including:

9 421

6 053

30 004

24 463

Cost of sales

8 819

5 628

28 414

23 157

Selling costs

170

173

Administrative expenses

560

379

1 420

1 133

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

134

Note 13.2 Other operating income and costs

from

1 October 2023

31 December 2023

unaudited

from

1 October 2022

31 December 2022

unaudited

from

1 January 2023

31 December 2023

from

1 January 2022

31 December 2022

Gains on derivatives, of which:

( 32)

( 12)

366

268

measurement

( 127)

( 62)

202

108

realisation

164

160

Exchange differences on assets and

liabilities other than borrowings

500

Interest on loans granted and other

financial receivables

100

382

348

Fees and charges on re-invoicing of

costs of bank guarantees securing

payments of liabilities

Reversal of impairment losses on

financial instruments measured at

amortised cost, including:

( 76)

213

gain due to reversal of an

allowance for impairment of loans

granted

( 78)

213

Fair value gains on financial assets

measured at fair value through profit

or loss, including:

( 225)

( 175)

668

631

loans

( 235)

( 192)

657

601

Reversal of impairment losses on

shares in subsidiaries

827

Dividends income

Profit on the disposal of shares in

subsidiaries

Release of provisions

Refund of excise tax for previous

years

Overpayment of property tax

Government grants received

( 6)

Assistance under the government

program “Aid for energy-intensive

sectors related to sudden increases

in natural gas and electricity prices in

2022 and 2023”

178

Other

(3)

102

Total other operating income

796

( 5)

2 564

2 172

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

135

Losses on derivatives, of which:

( 100)

( 115)

( 634)

( 490)

measurement

( 11)

( 188)

( 116)

realisation

( 140)

( 104)

( 446)

( 374)

Impairment losses on financial

instruments measured at amortised

cost

( 1)

( 7)

Exchange differences on financial

assets and liabilities other than

borrowings

( 676)

( 796)

( 770)

Fair value losses on financial assets

measured at fair value through profit

or loss, including:

( 127)

( 6)

( 223)

( 87)

loans

( 94)

trade receivables

( 33)

( 6)

( 129)

( 87)

Financial support granted to

municipalities

( 1)

( 7)

( 100)

Provisions recognised

( 1)

( 6)

( 16)

Donations granted

( 13)

( 20)

( 66)

( 53)

Compensations, fines and penalties

paid and costs of litigation

( 1)

( 8)

( 9)

( 28)

Losses on disposal of property, plant

and equipment (including costs

associated with disposal)

( 8)

( 19)

( 22)

Impairment losses on fixed assets

under construction and intangible

assets not yet available for use

( 967)

( 3)

( 969)

( 6)

Other

( 19)

( 12)

( 91)

( 64)

Total other operating costs

( 1 904)

( 896)

(2 794)

( 873)

Other operating income and (costs)

( 1 108)

( 901)

(230)

1 299

in PLN millions, unless otherwise stated

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

136

Note 13.3 Finance income and costs

from

1 October 2023

31 December 2023

unaudited

from

1 October 2022

31 December 2022

unaudited

from

1 January 2023

31 December 2023

from

1 January 2022

31 December 2022

Exchange differences on

measurement and realisation of

borrowings

307

436

358

Gains on derivatives - realisation

173

130

Result of the settlement of a

transaction hedging against

interest rate risk due to the issue

of bonds with a variable interest

rate

Total income

393

537

531

148

Interest on borrowings

( 50)

( 142)

( 48)

leases

( 2)

( 3)

( 9)

( 10)

Bank fees and charges on

borrowings

( 6)

( 26)

( 30)

Exchange differences on

measurement and realisation of

borrowings

( 179)

Losses on derivatives - realisation

( 90)

( 98)

( 183)

( 149)

Unwinding of the discount effect

( 2)

( 3)

( 60)

( 11)

Total costs

( 148)

( 90)

( 411)

( 417)

Finance income/(costs)

245

447

120

( 269)

KGHM Polska Miedź S.A.

Separate financial statements for 2023 Translation from the original Polish version

137

SIGNATURES OF ALL MEMBERS OF THE MANAGEMENT BOARD

These financial statements were authorised on 23 April 2024.

President

of the Management Board

Andrzej Szydło

Vice President

of the Management Board

Zbigniew Bryja

Vice President

of the Management Board

Piotr Krzyżewski

Vice President

of the Management Board

Mirosław Laskowski

Vice President

of the Management Board

Piotr Stryczek

SIGNATURE OF PERSON RESPONSIBLE FOR ACCOUNTING

Executive Director

of Accounting Services Centre

Chief Accountant

Agnieszka Sinior