KGHM to book $1.4bn impairment on international assets

VANCOUVER (miningweekly.com) – Polish base metals producer KGHM expects to book a noncash writedown of $1.4-billion on its international assets for the 2016 financial year.

This followed the completion of major impairment tests on its foreign assets. The total impairment in the consolidated financial statements, after taking into account tax, is $1.24-billion.

“Last year, the company announced that it would review the production assumptions for its international assets. This was a months-long process of testing and analysing individual projects based on updated metals prices assumptions. With respect to Sierra Gorda, this process was of particular importance, as the project commenced commercial production in mid-2015 and only the collection of more precise data during the initial phase of the mine’s operation enabled the entire operating model to be reviewed,” KGHM president Radosław Domagalski-Łabędzki said.

KGHM said its long-term copper price assumption had dropped from $3.21/lb in 2015, to $3/lb in 2016.

Last week, KGHM's partners in the Sierra Gorda project, in Chile – Sumitomo Metal Mining and Sumitomo Corp – also booked impairment losses for the mine of ¥79.9-billion and ¥33.6-billion, respectively.

KGHM gained control over Sierra Gorda in 2011 when it bought Canada's Quadra FNX Mining, for C$2.87-billion in the biggest-ever foreign acquisition by a Polish company.

KGHM will release its full-year results on March 16.