KGHM Polska Miedz SA (KGH), the copper producer with the largest European mine output, said the cost of developing its Sierra Gorda project in Chile will be 34 percent higher than planned.
KGHM, which holds 55 percent in Sierra Gorda, forecast the capital expenditure to start the mine will be $3.9 billion, compared with an earlier estimate of $2.9 billion, the Lubin, Poland-based company said in a regulatory statement today. Sumitomo Metal Mining Co. (5713), Japan’s second-largest copper producer, owns the rest of the project.
KGHM became the majority holder in the mine, which is set to start production in the second quarter of 2014, after buying Canada’s Quadra FNX Mining Ltd. last year. The $3 billion acquisition, which was the biggest foreign takeover by a Polish company, is part of KGHM’s plan to raise annual copper output to 700,000 tons from 427,000 tons produced in Poland in 2012. Sierra Gorda’s goal is to produce 220,000 tons of copper a year.
Higher investment spending comes from higher labor, materials and energy costs as well as the strengthening Chilean peso, KGHM said in an e-mailed statement today.
The state-controlled company said in a separate statement its 2012 net income declined 80 percent to 753 million zloty ($237 million) in the fourth quarter from a year earlier, beating its own forecast of 674 million zloty. Earnings fell after KGHM booked a pretax profit of 2.31 billion zloty from the sale of its stake in mobile-phone operator Polkomtel Sp. z o.o. in 2011 and started paying a copper tax in April.
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