POLISH FINANCIAL SUPERVISION AUTHORITY

Consolidated quarterly report QSr 3 / 2021

(in accordance with § 60 section 2 and § 62 section 1 of the Decree regarding current and periodic information)

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

For the third quarter of the financial year 2021 from 1 July 2021 to 30 September 2021 containing the condensed consolidated financial statements prepared under International Accounting Standard 34 in PLN, and condensed financial statements prepared under IAS 34 in PLN.

publication date: 16 November 2021

	(name of the issuer)
KGHM Polska Miedź S.A.	Mining
(name of the issuer in brief)	(issuer branch title per the Warsaw Stock
59 – 301	Exchange)
(postal code)	LUBIN
M. Skłodowskiej – Curie	(city)
(street)	48
(48 76) 74 78 200	(number)
(telephone)	(48 76) 74 78 500
[email protected]	(fax)
(e-mail)	www.kghm.com
692–000–00-13	(website address)
(NIP)	390021764
	(REGON)

SELECTED FINANCIAL DATA

data concerning the condensed consolidated financial statements of the KGHM Polska Miedź S.A. Group

	in PLN mn		in EUR mn
	from 1 January 2021 to 30 September 2021	from 1 January 2020 to 30 September 2020	from 1 January 2021 to 30 September 2021	from 1 January 2020 to 30 September 2020
I. Revenues from contracts with customers	21 735	16 580	4 768	3 733
II. Profit on sales	3 871	2 106	849	474
III. Profit before income tax	6 105	1 879	1 339	423
IV. Profit for the period	4 762	1 172	1 045	264
V. Profit for the period attributable to shareholders of the Parent Entity	4 762	1 174	1 045	264
VI. Profit for the period attributable to non-controlling interest	-	( 2)	-	-
VII. Other comprehensive income	68	( 345)	15	( 78)
VIII. Total comprehensive income	4 830	827	1 060	186
IX. Total comprehensive income attributable to shareholders of the Parent Entity	4 829	829	1 060	186
X. Total comprehensive income attributable to non controlling interest	1	( 2)	-	-
XI. Number of shares issued (million)	200	200	200	200
XII. Earnings per ordinary share (PLN/EUR) attributable to shareholders of the Parent Entity	23.81	5.87	5.23	1.32
XIII. Net cash generated from operating activities	2 666	3 254	585	733
XIV. Net cash used in investing activities	( 2 506)	( 2 675)	( 550)	( 602)
XV. Net cash used in financing activities	( 2 046)	( 482)	( 449)	( 109)
XVI. Total net cash flow	( 1 886)	97	( 414)	22

	As at 30 September 2021	As at 31 December 2020	As at 30 September 2021	As at 31 December 2020
XVII. Non-current assets	37 063	34 047	8 000	7 378
XVIII. Current assets	9 083	8 733	1 961	1 892
XIX. Total assets	46 146	42 780	9 961	9 270
XX. Non-current liabilities	12 244	13 792	2 643	2 989
XXI. Current liabilities	8 309	7 907	1 794	1 713
XXII. Equity	25 593	21 081	5 524	4 568
XXIII. Equity attributable to shareholders of the Parent Entity	25 503	20 992	5 505	4 549
XXIV. Equity attributable to non-controlling interest	90	89	19	19

data concerning the quarterly financial information of KGHM Polska Miedź S.A.

	in PLN mn		in EUR mn
	from 1 January 2021 to 30 September 2021	from 1 January 2020 to 30 September 2020	from 1 January 2021 to 30 September 2021	from 1 January 2020 to 30 September 2020
I. Revenues from contracts with customers	17 970	13 360	3 942	3 008
II. Profit on sales	3 250	2 156	713	485
III. Profit before income tax	6 070	1 827	1 332	411
IV. Profit for the period	4 852	1 156	1 064	260
V. Other comprehensive net income	133	( 310)	29	( 70)
VI. Total comprehensive income	4 985	846	1 093	190
VII. Number of shares issued (million)	200	200	200	200
VIII. Earnings per ordinary share (PLN/EUR)	24.26	5.78	5.32	1.30
IX. Net cash generated from operating activities	1 401	2 860	307	644
X. Net cash used in investing activities	( 1 159)	( 2 160)	( 254)	( 486)
XI. Net cash used in financing activities	( 1 920)	( 452)	( 421)	( 102)
XII. Total net cash flow	( 1 678)	248	( 368)	56
	As at	As at	As at	As at

	As at	As at	As at	As at
	30 September 2021	31 December 2020	30 September 2021	31 December 2020
XIII. Non-current assets	35 452	32 367	7 652	7 014
XIV. Current assets	7 150	6 975	1 543	1 511
XV. Total assets	42 602	39 342	9 195	8 525
XVI. Non-current liabilities	10 310	11 687	2 225	2 533
XVII. Current liabilities	6 899	6 929	1 489	1 501
XVIII. Equity	25 393	20 726	5 481	4 491

Part 1 – Condensed consolidated financial statements	3
CONSOLIDATED STATEMENT OF PROFIT OR LOSS	3
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME	4
CONSOLIDATED STATEMENT OF CASH FLOWS	5
CONSOLIDATED STATEMENT OF FINANCIAL POSITION	6
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY	7
1 – General information	8
Note 1.1 Corporate information	8
Note 1.2 Structure of the KGHM Polska Miedź S.A. Group	9
Note 1.3 Exchange rates applied	11
Note 1.4 Accounting policies and the impact of new and amended standards and interpretations Note 1.5 Impairment of assets	11 12
2 – Realisation of strategy	15
3 –Information on operating segments and revenues	24
Note 3.1 Operating segments	24
Note 3.2 Financial results of reporting segments	27
Note 3.3 Revenues from contracts with customers of the Group – breakdown by products	30
Note 3.4 Revenues from contracts with customers of the Group – breakdown by type of contract	32
Note 3.5 Revenues from contracts with customers of the Group – geographical breakdown reflecting the location of
end clients	34
Note 3.6 Main customers	35
Note 3.7 Non-current assets – geographical breakdown Note 3.8 Information on segments' results	35 36
4 – Selected additional explanatory notes	47

Note 4.1 Expenses by nature Note 4.2 Other operating income and (costs)	47 48
Note 4.3 Finance income and costs	49
Note 4.4 Information on property, plant and equipment and intangible assets	49
Note 4.5 Involvement in a joint venture	50
Note 4.6 Financial instruments	52
Note 4.7 Commodity, currency and interest rate risk management in the Group	59
Note 4.8 Liquidity risk and capital management in the Group	64
Note 4.9 Related party transactions Note 4.10 Assets and liabilities not recognised in the statement of financial position	66 67
Note 4.11 Changes in working capital	68
Note 4.12 Other adjustments in the statement of cash flows	68
Note 4.13 Assets held for sale and liabilities associated with them	69
5 – Additional information to the consolidated quarterly report	71
Note 5.1 Effect of changes in the organisational structure of the Group	71
Note 5.2 Seasonal or cyclical activities	71
Note 5.3 Information on the issuance, redemption and repayment of debt and equity securities	71
Note 5.4 Information related to dividend, total and per share	71
Note 5.5 Other information to the consolidated quarterly report Note 5.6 Impact of the COVID – 19 on the operations of the Company and the Group	71 73
Note 5.7 Subsequent events	75
Part 2 Quarterly financial information of KGHM Polska Miedź S.A.	76
STATEMENT OF PROFIT OR LOSS	76
STATEMENT OF COMPREHENSIVE INCOME	76
STATEMENT OF CASH FLOWS	77
STATEMENT OF FINANCIAL POSITION	78
STATEMENT OF CHANGES IN EQUITY	79
Explanatory notes	80
Note 1 Revenues from contracts with customers – geographical breakdown reflecting the location of end customers80
Note 2 Expenses by nature	81
Note 3 Other operating income and (costs)	82
Note 4 Finance income and (costs) Note 5 Changes in working capital	83 83
Note 6 Other adjustments in the statement of cash flows	84

Part 1 – Condensed consolidated financial statements

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

		from 1 July 2021 to 30 September 2021	from 1 January 2021 to 30 September 2021	from 1 July 2020 to 30 September 2020	from 1 January 2020 to 30 September 2020
Note 3.3	Revenues from contracts with customers	7 229	21 735	5 632	16 580
Note 4.1	Cost of sales	(5 760)	(16 784)	(4 296)	(13 430)
	Gross profit	1 469	4 951	1 336	3 150
Note 4.1	Selling costs and administrative expenses	( 404)	(1 080)	( 370)	(1 044)
	Profit on sales	1 065	3 871	966	2 106
Note 4.5	Share of losses of a joint venture accounted for using the equity method	-	-	4	( 206)
	Gains due to the reversal of allowances for impairment of loans granted to a joint venture	-	1 655	-	-
Note 4.5	Interest income on loans granted to a joint venture calculated using the effective interest rate method	128	322	91	284
Note 4.5	Profit or loss on involvement in a joint venture	128	1 977	95	78
Note 4.2	Other operating income, including:	670	1 409	167	494
	other interest calculated using the effective interest rate method	-	1	-	4
	reversal of impairment losses on financial instruments	-	18	5	9
Note 4.2	Other operating costs, including:	( 222)	( 778)	( 556)	( 723)
	impairment losses on financial instruments	-	( 3)	1	( 5)
Note 4.3	Finance income	-	35	117	115
Note 4.3	Finance costs	( 165)	( 409)	( 17)	( 191)
	Profit before income tax	1 476	6 105	772	1 879
	Income tax expense	( 437)	(1 343)	( 299)	( 707)
	PROFIT FOR THE PERIOD	1 039	4 762	473	1 172
	Profit for the period attributable to:
	Shareholders of the Parent Entity	1 037	4 762	472	1 174
	Non-controlling interest	2	-	1	( 2)
	Weighted average number of ordinary shares (million) Basic/diluted earnings per share (in	200	200	200	200
	PLN)	5.19	23.81	2.36	5.87

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	from 1 July 2021 to 30 September 2021	from 1 January 2021 to 30 September 2021	from 1 July 2020 to 30 September 2020	from 1 January 2020 to 30 September 2020
Profit for the period	1 039	4 762	473	1 172
Measurement of hedging instruments net of the tax effect	629	( 134)	140	( 128)
Exchange differences from the translation of statements of operations with a functional currency other than PLN	( 36)	( 65)	75	( 36)
Other comprehensive income which will be reclassified to profit or loss	593	( 199)	215	( 164)
Measurement of equity financial instruments at fair value through other comprehensive income, net of the tax effect	( 5)	112	( 29)	80
Actuarial gains/(losses) net of the tax effect	99	155	( 34)	( 261)
Other comprehensive income, which will not be reclassified to profit or loss	94	267	( 63)	( 181)
Total other comprehensive net income	687	68	152	( 345)
TOTAL COMPREHENSIVE INCOME	1 726	4 830	625	827
Total comprehensive income attributable to:
Shareholders of the Parent Entity	1 723	4 829	624	829
Non-controlling interest	3	1	1	( 2)

CONSOLIDATED STATEMENT OF CASH FLOWS

	from 1 January 2021 to 30 September 2021	from 1 January 2020 to 30 September 2020
Cash flow from operating activities
Profit before income tax	6 105	1 879
Depreciation/amortisation recognised in profit or loss	1 598	1 391
Share of losses of a joint venture accounted for using the equity method	-	206
Interest on loans granted to a joint venture	( 322)	( 284)
Other interest	85	120
Impairment losses on non-current assets	32	95
Gains due to the reversal of allowances for impairment of loans granted to a joint venture	(1 655)	-
Other gains due to the reversal of impairment losses on non-current assets	( 47)	( 1)
(Gains)/losses on the sale of property, plant and equipment and intangible assets	( 50)	3
Exchange differences, of which:	( 363)	( 255)
from investing activities and on cash	( 617)	( 175)
from financing activities	254	( 80)
Change in provisions for decommissioning of mines, employee benefits liabilities and other provisions	65	29
Change in other receivables and liabilities other than working capital	622	59
Change in assets and liabilities due to derivatives	(1 418)	48
Reclassification of other comprehensive income to profit or loss due to the realisation of hedging derivatives	1 454	( 122)
Other adjustments	( 2)	11
Exclusions of income and costs, total	( 1)	1 300
Income tax paid	( 569)	( 444)
Changes in working capital, including:	(2 869)	519
change in trade payables transferred to factoring	(1 014)	460
Net cash generated from operating activities	2 666	3 254
Cash flow from investing activities
Expenditures on mining and metallurgical assets, including:	(2 244)	(2 199)
paid capitalised interest on borrowings	( 79)	( 96)
Expenditures on other property, plant and equipment and intangible assets	( 359)	( 288)
Expenditures on financial assets designated for decommissioning of mines and other technological facilities	( 24)	( 22)
Acquisition of newly-issued shares of a joint venture	-	( 207)
Proceeds from disposal of property, plant and equipment and intangible assets	80	-
Proceeds from disposal of equity instruments measured at fair value through other comprehensive income	53	-
Advances granted on property, plant and equipment and intangible assets	( 12)	( 12)
Other	-	53
Net cash used in investing activities	(2 506)	(2 675)
Cash flow from financing activities
Proceeds from borrowings	74	4 181
Proceeds from derivatives related to sources of external financing	18	34
Repayment of borrowings	(1 674)	(4 429)
Repayment of lease liabilities	( 58)	( 85)
Expenditures due to derivatives related to sources of external financing	( 38)	( 40)
Interest paid, including:	( 80)	( 149)
borrowings	( 72)	( 140)
Expenditures due to dividends paid to shareholders of the Parent Entity	( 300)	-
Other	12	6
Net cash used in financing activities	(2 046)	( 482)
NET CASH FLOW	(1 886)	97
Exchange gains/(losses)	( 68)	6
Cash and cash equivalents at beginning of the period	2 522	1 016
Cash and cash equivalents at end of the period, including:	568	1 119
restricted cash	27	35

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		As at 30 September 2021	As at 31 December 2020
	ASSETS
	Mining and metallurgical property, plant and equipment	21 296	20 576
	Mining and metallurgical intangible assets	1 989	2 024
	Mining and metallurgical property, plant and equipment and intangible assets	23 285	22 600
	Other property, plant and equipment	2 896	2 857
	Other intangible assets	141	141
	Other property, plant and equipment and intangible assets	3 037	2 998
Note 4.5	Involvement in joint ventures – loans granted	8 521	6 069
	Derivatives	580	789
	Other financial instruments measured at fair value	750	636
	Other financial instruments measured at amortised cost	505	601

Note 4.6	Financial instruments, total	1 835	2 026
	Deferred tax assets	218	193
	Other non-financial assets	167	161
	Non-current assets	37 063	34 047
	Inventories	6 106	4 459
Note 4.6	Trade receivables, including:	1 115	834
	trade receivables measured at fair value through profit or loss	747	478
	Tax assets	254	295
Note 4.6	Derivatives	333	210
	Other financial assets	148	210
	Other non-financial assets	227	142
Note 4.6	Cash and cash equivalents	457	2 522
Note 4.13	Assets held for sale	443	61
	Current assets	9 083	8 733
	TOTAL ASSETS	46 146	42 780
	EQUITY AND LIABILITIES
	Share capital	2 000	2 000
	Other reserves from measurement of financial instruments	(1 452)	(1 430)

	Accumulated other comprehensive income, other than from measurement of financial instruments	1 817	1 728
	Retained earnings	23 138	18 694
	Equity attributable to shareholders of the Parent Entity	25 503	20 992
	Equity attributable to non-controlling interest	90	89
	Equity	25 593	21 081
Note 4.6	Borrowings, lease and debt securities	5 554	6 928
Note 4.6	Derivatives	975	1 006
	Employee benefits liabilities	2 884	3 016
	Provisions for decommissioning costs of mines and other
	technological facilities	1 601	1 849
	Deferred tax liabilities	595	442
	Other liabilities	635	551
	Non-current liabilities	12 244	13 792
Note 4.6	Borrowings, lease and debt securities	462	407
Note 4.6	Derivatives	787	688
Note 4.6	Trade and similar payables	2 414	3 593
	Employee benefits liabilities	1 303	1 313
	Tax liabilities	1 285	537

	Provisions for liabilities and other charges	189	162
	Other liabilities	1 445	1 202
Note 4.13	Liabilities associated with assets held for sale	424	5
	Current liabilities	8 309	7 907
	Non-current and current liabilities	20 553	21 699
	TOTAL EQUITY AND LIABILITIES	46 146	42 780

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

	Equity attributable to shareholders of the Parent Entity
	Share capital	Other reserves from measurement of financial instruments	Accumulated other comprehensive income	Retained earnings	Total	Equity attributable to non-controlling interest	Total equity
As at 1 January 2020	2 000	( 738)	1 954	16 894	20 110	92	20 202
Profit for the period	-	-	-	1 174	1 174	( 2)	1 172
Other comprehensive income	-	( 48)	( 297)	-	( 345)	-	( 345)
Total comprehensive income	-	( 48)	( 297)	1 174	829	( 2)	827
As at 30 September 2020, including:	2 000	( 786)	1 657	18 068	20 939	90	21 029
accumulated costs associated with assets held for sale	-	( 14)	-	-	( 14)	-	( 14)
As at 1 January 2021	2 000	(1 430)	1 728	18 694	20 992	89	21 081
Transactions with owners	-	-	-	( 300)	( 300)	-	( 300)
Profit for the period	-	-	-	4 762	4 762	-	4 762
Other comprehensive income	-	( 22)	89	-	67	1	68
Total comprehensive income	-	( 22)	89	4 762	4 829	1	4 830
Reclassification of the result of disposal of equity instruments measured at fair value through other comprehensive income	-	-	-	( 18)	( 18)	-	( 18)
As at 30 September 2021	2 000	(1 452)	1 817	23 138	25 503	90	25 593

1 – General information

Note 1.1 Corporate information

KGHM Polska Miedź S.A. ("the Parent Entity", "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 Centre Division.

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

The Parent Entity's principal activities include:

the mining of copper and non-ferrous metals ores; and
the production of copper, precious and non-ferrous metals.

The business activities of the Group include:

the mining of copper and non-ferrous metals ores;
the mined production of metals, including copper, nickel, silver, gold, platinum, palladium;
the production of goods from copper and precious metals;
underground construction services;
the production of machinery and mining equipment;
transport services;
services in the areas of research, analysis and design;
the production of road-building materials; and
the recovery of associated metals from copper ore.

The KGHM Polska Miedź S.A. Group ("the KGHM Group", "the Group") carries out exploration for and mining of copper, nickel and precious metals based on concessions for Polish deposits held by KGHM Polska Miedź S.A., and also based on legal titles held by companies of the KGHM INTERNATIONAL LTD. Group for the exploration for and mining of these resources in the USA, Canada, and Chile.

Note 1.2 Structure of the KGHM Polska Miedź S.A. Group

As at 30 September 2021, KGHM Polska Miedź S.A. consolidated 67 subsidiaries and used the equity method to account for the shares of two joint ventures (Sierra Gorda S.C.M. and NANO CARBON Sp. z o.o. in liquidation).

The percentage share represents the total share of the Group.

* An entity excluded from consolidation due to immaterial impact on the consolidated financial statements

Note 1.3 Exchange rates applied

The following exchange rates were applied in the conversion to EUR of selected financial data:

for the conversion of turnover, profit or loss and cash flow for the current period, the rate of 4.5585 EURPLN*,
for the conversion of turnover, profit or loss and cash flow for the comparable period, the rate of 4.4420 EURPLN*,
for the conversion of assets, equity and liabilities at 30 September 2021, the current average exchange rate announced by the National Bank of Poland (NBP) as at 30 September 2021, of 4.6329 EURPLN,
for the conversion of assets, equity and liabilities at 31 December 2020, the current average exchange rate announced by the NBP as at 31 December 2020, of 4.6148 EURPLN.

*the rates represent the arithmetic average of current average exchange rates announced by the NBP on the last day of each month during the period from January to September respectively of 2021 and 2020.

Note 1.4 Accounting policies and the impact of new and amended standards and interpretations

The following quarterly report includes:

1. the condensed consolidated financial statements of the KGHM Polska Miedź S.A. Group for the period from 1 January to 30 September 2021 and the comparable period from 1 January to 30 September 2020, together with selected explanatory information (Part 1),
1. the quarterly financial information of KGHM Polska Miedź S.A. for the period from 1 January to 30 September 2021 and the comparable period from 1 January to 30 September 2020 (Part 2).

Neither the condensed consolidated financial statements for the period from 1 January to 30 September 2021 and as at 30 September 2021 nor the quarterly financial information of KGHM Polska Miedź S.A. for the period from 1 January to 30 September 2021 and as at 30 September 2021 were subject to audit by a certified auditor.

The consolidated quarterly report for the period from 1 January to 30 September 2021 was prepared in accordance with IAS 34 Interim Financial Reporting as approved by the European Union and for a full understanding of the financial position and operating results of KGHM Polska Miedź S.A. and the KGHM Polska Miedź S.A. Group, should be read jointly with the Annual Report RR 2020 and the Consolidated annual report SRR 2020.

This quarterly report's financial statements were prepared using the same accounting policies and valuation methods for the current and comparable periods and principles applied in annual financial statements (consolidated and separate), prepared as at 31 December 2020.

Note 1.4.1 Impact of new and amended standards and interpretations

From 1 January 2021, the Group is bound by amendments to standards resulting from Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 on the interest rate benchmark reform – Phase 2.

The aforementioned amendments to standards were adopted for use by the European Union. The Group analysed the impact of the IBOR reform on its consolidated financial statements. Pursuant to current decisions of entities designated to implement the reform, only the LIBOR rate will be replaced, and it will be replaced by a risk-free rate based on the overnight rate. The Group identified agreements with clauses based on the LIBOR rate and which will be amended following the replacement of the reference rate. These are mainly borrowing agreements (bank loans and loans), deposit agreements, guarantee agreements, letters of credit and factoring agreements as well as trade agreements. Replacement of the LIBOR rate by an alternative ratio will result in introducing appendices to the current agreements, analysing the potential change of interest rates from variable to fixed, introducing changes to internal methodologies and procedures and adapting IT tools to new valuation methods.

Moreover, the Group uses the LIBOR rate to estimate the lessee's incremental borrowing rate in lease agreements based on USD, for which it is not possible to otherwise determine the interest rate implicit in the lease, and to measure at fair value the loans granted by applying in the discounting process the current LIBOR market interest rate from the Reuters system. In the Group's opinion, the impact of this amendment on the measurement of loans and lease agreements will be immaterial due to the fact that despite the new calculation method, the new reference rate will differ from the LIBOR rate by only 1-2 basis points, depending on the date and currency. The KGHM Polska Miedź S.A. Group continuously monitors the recommendations of entities leading the IBOR reform. Due to the fact that many issues have not yet been formally regulated, the scale of changes to the aforementioned financial instruments and their impact on the Group's consolidated financial statements cannot currently be determined. Moreover, the IBOR reform will not have an impact on the interest rate of derivatives, because CIRS (open Cross Currency Interest Rate Swap transactions) transactions entered into and bonds issued by the Group are based on WIBOR reference rate, which will not be replaced by an alternative ratio.

Exposure of selected items of the consolidated financial statements based on LIBOR rates to the interest rate benchmark reform

Type of financial instrument	Current reference rate	Carrying amount as at 30 September 2021
	LIBOR 3M	(2)
Long-term bank loans	LIBOR 1M	(12)
	LIBOR 3M	-
Short-term bank loans	LIBOR 1M	(3)
	LIBOR 6M	5
Reverse factoring	LIBOR 1M	1
Total		(11)

Moreover, the Group decided for an earlier application of the amendment to IFRS 16 Leases regarding COVID-19-related rent concessions, which is effective for annual periods beginning on or after 1 April 2021. These amendments extend by one year, that is to 30 June 2022, the optional and related to the coronavirus pandemic (COVID-19) relief of operational requirements for lessees making use of the option to temporarily suspend lease payments. Pursuant to the so-called practical expedient, when a lessee obtains a lease relief due to COVID-19, the lessee does not have to assess whether this relief is a modification of a lease, and instead recognises this change in the accounting books as if this change was not a modification. The impact of these amendments on the consolidated financial statements is immaterial.

Note 1.5 Impairment of assets

EVALUATION OF RISK OF IMPAIRMENT OF ASSETS OF THE COMPANY INTERFERIE S.A. – Segment – Other segments

The market capitalisation of the subsidiary Interferie S.A. in the first nine months of 2021 was below the carrying amount of the company's net assets, which in accordance with the adopted accounting policy was recognised by the company to be an indication to perform impairment testing of the company's assets. As at 30 September 2021, the carrying amount of the tested assets was PLN 153 million.

In order to assess the impairment, the company Interferie S.A. identified the following cash generating units (CGUs): INTERFERIE in Ustronie Morskie – Leisure and Sanatorium Cechsztyn, INTERFERIE in Kołobrzeg Leisure and Sanatorium Chalkozyn, INTERFERIE in Dąbki Sanatorium Argentyt, INTERFERIE in Świeradów Zdrój – Hotel Malachit, INTERFERIE Hotel in Głogów and INTERFERIE Hotel Bornit in Szklarska Poręba.

As at 30 September 2021, INTERFERIE Hotel in Głogów was classified to non-current assets held for sale and recognised, pursuant to IFRS 5, at its carrying amount which was lower than its fair value less costs to sell.

For the purpose of evaluation of impairment – pursuant to IAS 36.6, the recoverable amount of assets is determined at the amount corresponding to the fair value less costs to sell or to the value in use (which is a current, estimated value of future cash flows, expected to be obtained from the continued use of a cash generating unit) – depending on which one is higher.

In the facilities of INTERFERIE in Ustronie Morskie – Leisure and Sanatorium Cechsztyn, INTERFERIE in Kołobrzeg Leisure and Sanatorium Chalkozyn and INTERFERIE in Dąbki Sanatorium Argentyt, the recoverable amount was determined on the basis of the sum of future cash flows of individual CGUs discounted by the rate estimated on the basis of ratios used by the hotel industry.

In the facilities of INTERFERIE Hotel in Głogów, INTERFERIE Hotel Bornit in Szklarska Poręba and INTERFERIE Hotel Malachit in Świeradów Zdrój, the recoverable amount was determined based on the fair value less costs to sell (on the basis of valuation reports prepared by real estate surveyors).

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

Basic assumptions adopted for impairment testing
Assumption	Level adopted in testing
Forecast period* INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn INTERFERIE in Kołobrzeg - Leisure and Sanatorium Chalkozyn INTERFERIE in Dąbki - Sanatorium Argentyt	4th quarter of 2021 – 3rd quarter of 2026 4th quarter of 2021 - 3rd quarter of 2033 4th quarter of 2021 - 3rd quarter of 2032
Notional discount rate for tests based on the DCF method during the detailed forecast period and in the residual period**	9.12%
Notional growth rate following the detailed forecast period	2.00%
Average operating profit margin
- during the detailed forecast period: INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn INTERFERIE in Kołobrzeg - Leisure and Sanatorium Chalkozyn INTERFERIE in Dąbki - Sanatorium Argentyt	26% 29% 36%
- during the residual period: INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn INTERFERIE in Kołobrzeg - Leisure and Sanatorium Chalkozyn INTERFERIE in Dąbki - Sanatorium Argentyt	28% 40% 37%

*The difference in the forecast periods arises from the realisation of investment projects in the Argentyt and Chalkozyn facilities.

** The presented data is post-taxation, despite the model of measuring the value in use. The use of pre-taxation data does not have an impact on the recoverable amount.

As a result of the impairment testing of the company's assets, the estimated fair value of the assets was determined to be higher than their carrying amount, which did not provide a basis, pursuant to IAS 36.8, to recognise an impairment loss, which is presented in the table below.

The measurement indicated a significant sensitivity of fair value to adopted discount rates, growth rates following the forecast period and volatility of operating profit in the forecasted period of the following CGUs. The sensitivity to changes in the level of revenues, arising from the lockdown period, is reflected in the sensitivity to changes in the operating profit.

Sensitivity analysis of fair value
		Recoverable amount	Discount rate		Operating profit
CGU	Carrying amount		higher by 6%	lower by 6%	higher by 6%	lower by 6%
INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn	9	16	15	17	17	15
INTERFERIE in Kołobrzeg - Leisure and Sanatorium Chalkozyn	19	33	27	40	38	29
INTERFERIE in Dąbki - Sanatorium Argentyt	77	115	107	123	121	109
CGU	Carrying Recoverable amount amount		Notional growth rate following the detailed forecast period
		1%		3%
INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn	9	16	14		18
INTERFERIE in Kołobrzeg - Leisure and Sanatorium Chalkozyn	19	33	28		41
INTERFERIE in Dąbki - Sanatorium Argentyt	77	115	109		123

The discount rate and a change in the operating profit, alongside which the value of assets would be equal to the carrying amount is as follows:

Level of change in assumptions implicating an impairment loss
	Increase in discount	Percentage decrease in
CGU	rate (by pp.)	operating profit
INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn	4.63	41
INTERFERIE in Kołobrzeg - Leisure and Sanatorium Chalkozyn	1.56	20
INTERFERIE in Dąbki - Sanatorium Argentyt	3.98	37

Costs to sell were adopted in the total amount of 3% (including: cost of legal services, real estate agency and other charges related to the sales transaction).

The company has a current valuation report of the property of INTERFERIE in Głogów, estimating the fair value of the subject of measurement at PLN 2.53 million (PLN 2.45 million after including the 3% of costs to sell). The valuation was prepared using the comparative approach, the pairs comparison method and the average price adjustment method for a part of the land. As at 30 September 2021, the carrying amount of the hotel (value of fixed assets, intangible assets and fixed assets under construction) is PLN 2.3 million.

The company has a current valuation report of the property of INTERFERIE Hotel Bornit in Szklarska Poręba, estimating the fair value of the subject of measurement to amount to PLN 25.9 million (PLN 25.1 million after including the 3% of costs to sell). The valuation was prepared using the comparative approach, the average price adjustment method and the pairs comparison method. As at 30 September 2021, the carrying amount of the hotel (value of fixed assets, intangible assets and fixed assets under construction) is PLN 23.2 million.

The company has a current valuation report of the property of INTERFERIE Hotel Malachit in Świeradów Zdrój, estimating the fair value of the subject of measurement to amount to PLN 23.2 million (PLN 22.5 million after including the 3% costs to sell). The valuation was prepared using the comparative approach, and the pairs comparison method. As at 30 September 2021, the carrying amount of the hotel (value of fixed assets, intangible assets and fixed assets under construction) is PLN 21.8 million.

The results of the impairment testing of assets of the KGHM Polska Miedź S.A. Group as at 31 December 2020 were presented in the part 3 of the Consolidated annual report SRR 2020.

2 – Realisation of strategy

Basic elements of the Strategy of KGHM Polska Miedź S.A.

In the reporting period, the Parent Entity advanced the "Strategy of KGHM Polska Miedź S.A. for the years 2019-2023" which was approved on 19 December 2018. The Strategy is based on four development directions (elasticity/flexibility, efficiency, ecology and e-industry), arising from global market trends. The aforementioned directions are reflected in six identified strategic areas, with individualised and measurable main goals:

Strategic area	Main goal
PRODUCTION	Maintain cost-effective Polish and international production
DEVELOPMENT	Increase the KGHM Group's efficiency and flexibility in terms of its Polish and international
	assets
INNOVATION	Increase the KGHM Group's efficiency through innovation

FINANCIAL STABILITY	Ensure long-term financial stability and the development of mechanisms supporting further development
EFFICIENT	Implement systemic solutions aimed at increasing the KGHM Group's value
ORGANISATION
PEOPLE AND THE	Growth based on the idea of sustainable development and safety as well as enhancing the
ENVIRONMENT	KGHM Group's image of social responsibility

Policy regarding the development directions of the KGHM Polska Miedź S.A. Group

During the reporting period, policy regarding the development directions of the KGHM Polska Miedź S.A. Group was continued. Further actions were also taken aimed at adapting the Group's organisational functioning model to the business model of KGHM Polska Miedź S.A. and the market environment. In terms of the domestic companies, development policy was also aimed at cooperation between the KGHM Group's entities and at eliminating overlapping areas of competence in terms of individual entities. With respect to implementation of the Strategy of the Company for the years 2019-2023, in the case of the international companies of the Group, the Company aims at developing unified reporting principles, coherent internal regulations and standardised solutions with respect to individual functional areas of the international entities.

Directions regarding equity investments

In the case of the domestic companies, the main development goal is to ensure continuity and safe working conditions in the Core Business of KGHM Polska Miedź S.A. and at integrating the KGHM Group around the idea of sustainable development, including the implementation of development initiatives related to the Circular Economy, aimed at limiting the environmental footprint.

In terms of implementation of the Strategy of KGHM Polska Miedź S.A. for the years 2019-2023, in the case of the international companies of the Group, a variety of actions of a reorganisation nature were aimed at integrating KGHM INTERNATIONAL LTD. in Canada with the Company's activities in Poland by transferring some of the business processes of KGHM INTERNATIONAL LTD. to Poland. In the third quarter of 2021 these actions were continued, mainly with respect to developing coherent internal regulations and procedures as well as the standardisation of solutions in individual areas of the company's operations. In addition, internal actions were carried out aimed at advancing development scenarios for individual international assets in the Parent Entity's portfolio.

Investment goals

Investment projects planned and approved for advancement in 2021 support the achievement of strategic goals in all areas of the Strategy. Maintaining cost-effective domestic production will be possible by continuing and bringing into operation key investments, including:

− development of the Żelazny Most Tailings Storage Facility the Southern Quarter and the Tailings Segregation and Thickening Station;
− replacement of mining machinery;
− outfitting the mines along with the construction of conveyor belts;
− construction of mine de-watering systems;
− construction of air cooling systems; and
− modernisation of the electrorefining sections in the metallurgical plants.

Taking into consideration the development of the Parent Entity, by enhancing the efficiency and flexibility of the KGHM Group in terms of its Polish assets, investments which will be advanced include:

− the Deposit Access program (Deep Głogów along with access and development tunnels);
− development of the Żelazny Most Tailings Storage Facility above a crown height of 195 m a.s.l.;
− documentation for the Hybrid Legnica Smelter and Refinery;
− construction of photovoltaic power plants;
− searching for and exploring deposits under areas of exploration concessions.

Moreover, following the idea of sustainable development, investment projects will be continued such as those adapting the metallurgical installations to BAT conclusions for the non-ferrous metals industry and to restrict emissions of arsenic (BATAs).

In addition, the Company will continue to carry out work on new, intelligent technologies and production management systems, based on online communication between elements of the production process and advanced data analysis, in accordance with the KGHM 4.0 Program concept.

Advancement of the Strategy in the third quarter of 2021

In advancing the Strategy, in the third quarter of 2021 the Company endeavoured to maintain stable production in its domestic and international assets, and a level of costs guaranteeing financial security while ensuring safe working conditions and minimising its impact on the environment and surroundings, pursuant to the idea of sustainable development. To enhance the effectiveness of the actions taken, the decision was made to define and establish Strategic Programs. In the third quarter of 2021, a portion of the Strategic Programs planned to be created in the current year were established.

Key actions taken in the third quarter of 2021 in the area of Production:

Mined production in Poland in the first three quarters of 2021 amounted to 335.8 thousand tonnes of copper in ore with a C1 cost of 4 940 USD/t (2.24 USD/lb) of payable copper.
Payable copper production abroad:
- − Sierra Gorda S.C.M.: 78.4 thousand tonnes (on a 55% basis); EBITDA and payable copper production exceeded planned amounts;
- − Robinson: 42 thousand tonnes;
- − Carlota: 4.1 thousand tonnes;
- − Franke: 7.9 thousand tonnes;
- − Sudbury Basin: 1.4 thousand tonnes.
Production of electrolytic copper in the first three quarters of 2021 amounted to 440.1 thousand tonnes.
Advancement continued on projects aimed at the automatisation of production in KGHM Polska Miedź S.A.'s Mining Divisions, under the KGHM 4.0 Strategic Program in the area Industry:
- − Equipment and elements of the dewatering monitoring system were outfitted, installed and brought into operation at the Polkowice-Sieroszowice Mine Division, with visualisation in the dispatcher control room.
- − In terms of work on the "Centre of Advanced Data Analysis (Centrum Zaawansowanych Danych Analitycznych CZAD)": users positively verified the algorithms, involving analysis of the loads borne by the conveyor belts in the mines, developed by KGHM Cuprum. Work on implementing the algorithms in a production environment using the EKSPERT system platform is underway.
Work was advanced on increasing the generation of power from internal sources, including renewable energy sources (RES):
- − Dialogue is underway involving the acquisition of additional wind farms. In the third quarter two preliminary offers were submitted involving the acquisition of wind farms with total installed capacity of approx. 50MW, while subsequent preliminary offers were prepared.
- − On 15 September 2021 the Company entered into a sector agreement for the development of off-shore wind farms. Dialogue is underway with potential partners in the development of off-shore wind farms.
- − Preliminary work is underway to bring into operation three photovoltaic farm projects on the grounds of the Company.
− In September a letter of intent was signed regarding the establishment of a "Lower Silesia Hydrogen Valley", in respect of which one of the initiators is KGHM Polska Miedź S.A.
− In September an agreement was signed by the Company involving preparations for the advancement of an investment comprising the construction of nuclear power sources with the company NuScale Power LLC – a producer of nuclear reactors utilising SMR (small modular reactor) technology.

Key actions taken in the third quarter of 2021 in the area of Development:

Continued advancement of the Strategic Deposit Access Program:
- − The depth of the GG-1 shaft increased to the level of 1 259.6 m. Work continues on Stage VII of the shaft sinking (sinking in the interval 1 226 – 1 299.6 m). Ventilation ducts are being inserted into the concrete elements.
- − A notary act was signed for the purchase of land for the GG-2 "Odra" shaft. The process of selecting a contractor for the investment commenced.
- − Talks are underway with the owners of property at the site of the prospective Gaworzyce shaft. The municipality (Gmina) adopted the requisite resolutions for the purpose of commencing construction of the shaft.
- − 33.6 km of tunneling were excavated in the Rudna and Polkowice-Sieroszowice mining areas. All of the work performed under the Mine Projects Group enables the successive opening of new mining fields.
- − In terms of the Central Air Conditioning System, work continued on building the Surface-based Air Conditioning Station at the GG-1 shaft (handover of Phase I of the investment is planned for November 2021).
- − Start-up and operating instructions were developed for the Ice Water Transportation System, and technological start-up of the installation was carried out (handover of part I – October 2021).
Continued advancement of Development of the Żelazny Most Tailings Storage Facility:
- − Southern Quarter: Stages 1 and 2 were completed along with acquisition of an operational permit. The advancement of the physical scope of Phase 3 of construction of the Southern Quarter amounted to 87%. Total advancement of the physical scope of work on the Southern Quarter together with slurry, water and power infrastructure reached 97%. Following the completion of operational testing of the tailings segregation and thickening installation, the deposition of large-grain tailings in the Southern Quarter commenced. The investment was handed over for operations after the end of the reporting period.
Tailings Segregation and Thickening Station (TSTS): work is underway involving the architecture and internal installations of the hall, internal, water-sewage and ventilation installations, as well as the power building. 99% of the physical scope of Stage 1 and 45% of Stage 2 was completed. Total advancement of the physical scope of work on the TSTS reached 75%. Technological start-up of the large-grain tailings segregation and thickening installation was completed.
Exploration projects with respect to exploring for and evaluating copper ore deposits were carried out pursuant to the concessions:
- − Exploratory drill holes were sunk in the Retków-Ścinawa and Głogów concessions.
- − Geological work continued within the Synklina Grodziecka and Konrad concessions.
- − As a result of the acquisition by the Company of geological exploratory concessions for "Bytom Odrzański" and "Kulów-Luboszyce" preparatory work was performed aimed at commencing advancement of the concessions. At the end of the quarter, work commenced on the advancement of geological work in the Bytom Odrzański concession area.
- − At the end of the quarter geological work commenced on the advancement of geological work in the Radwanice-Gaworzyce concession area.
Exploration projects were advanced with respect to exploring for and evaluating of other deposits pursuant to the concessions:
− In the Puck concession area, preparatory work was carried out aimed at the sinking of subsequent drill holes (deposits of potassium-magnesium salts).
− In the Nowe Miasteczko concession area, analysis was performed on the results of geophysical research (deposits of crude oil and natural gas).
Projects involving development of the international assets were continued:
- − Victoria project based on exploratory work carried out, approx. 6 million tonnes of project resources were reclassified to a higher recognition category (from the category Inferred to Indicated). Work also focused on preparing the foundations of the shaft's headframe, the waste rock containment pad and the site's permanent parking lot, as well as a water treatment plant. Moreover, in August 2021 the electrical infrastructure located on the grounds of the project was connected to the external power network. Work also continued aimed at maintaining good relations with key stakeholders in the project along with work related to preparing selected elements of the infrastructure, as the preparatory phase for further development of the project.
- − Ajax project work involved monitoring and securing the project's terrain, in accordance with law in force. Actions continued aimed at dialogue with stakeholders in the project.
- − Sierra Gorda Oxide supplementary work continued aimed at preparing for the next stage of engineering work and further project development.
Under the Strategic Program called Hybrid Legnica Smelter and Refinery design work is underway involving the preparation of documentation. By the end of 2021 the plan foresees the execution and handover of the updated Indicative Statement of Costs and Spatial Program Concept for the Scrap Turnover Base and the Hybrid Legnica Smelter and Refinery.
In the third quarter of 2021, 15.62% of KGHM Polska Miedź S.A.'s need for electricity was supplied by its own generating sources and RES.

Key actions taken in the third quarter of 2021 in the area of Innovation:

Under the CuBR venture, co-financed by the National Centre for Research and Development (NCRD), R&D projects having a total value of over PLN 180 million are underway. Altogether, 25 projects have been implemented under the four editions of the competition:
- − 12 projects have been completed.
- − 9 projects are being advanced.
- − 4 projects were suspended due to the inability to implement the results of the research.
- − Work continues on announcing the fifth CuBR competition, the subject of research is being assessed.
Advancement of the Implementation Doctorates Program continued for the Company's employees. At the end of the third quarter of 2021, 36 Doctoral Students participated from the two editions. In September an academic Implementation Doctorates panel was organised during the Underground Mining School 2021 in Cracow.
Actions were initiated involving the pilot testing of flotation machinery in the Concentrators Division.
Work continues involving the testing of electric, battery-powered mining machinery. Currently a bolting rig is undergoing testing in the Lubin Mine Division, while in the third quarter of 2021 a self-propelled drilling rig was provided for testing. In the Polkowice-Sieroszowice Mine Division testing is underway on a transport vehicle adapted to work underground. Preparations are underway to begin testing a loader, which should commence in the second quarter of 2022.
Following the conclusion of the "CuValley Hack" Hackathon, under the Dolina Miedziowa (Copper Valley) program, actions are currently underway to continue cooperation with the participants of the event.
Work continued on subsidised research projects and preparing subsidy applications to the following Programs: Horizon Europe, KIC Raw Materials (Knowledge and Innovation Community), the National Environmental Protection Fund and

under the European Funds for Modern Economy (successor to the Smart Growth Operational Programme). In the third quarter, work commenced on advancing the project "Zastosowanie Technologii Reflux Flotation Cell (RFC)" (The application of Reflux Flotation Cell (RFC) Technology).

In the area of intellectual property:
- − Proceedings are underway to obtain legal protection for the word trademark "KGHM" in China, submitted in an international procedure.
- − Applications in respect of four trademarks: the word-figurative trademark "KGHM GROUP", the word trademark "KGHM GROUP", the word-figurative trademark "GRUPA KGHM", and the word-figurative trademark "KGHM" were submitted to the European Union Intellectual Property Office (EUIPO) in Alicante. Application proceedings are underway.
- − By decisions dated 30 September 2021, the Patent Office of the Republic of Poland granted legal protection to two word trademarks: "KGHM" and "GRUPA KGHM".
- − The word trademark and the word-figurative trademark "KGHM" are being monitored in world trademark bases in order to verify the applications for legal protection for similar trademarks.
- − Seven proceedings are underway in the Patent Office of the Republic of Poland for the granting of patent protection for the submitted inventions.

MAIN GOAL Ensure long-term financial stability and the development of mechanisms supporting further development

Basing of the KGHM Group's financing on long-term instruments

Shorter cash conversion cycle

Efficient management of market and credit risk by the Group

Key actions taken in the third quarter of 2021 in the area of Financial stability:

In the third quarter of 2021 the KGHM Group was fully capable of meeting its financial obligations. The financial resources held by the Group and available external financing guarantee its continued liquidity and enables the achievement of investment goals. In this period the Company concentrated on developing solutions aimed at enhancing the efficiency of liquidity management by assisting selected Group companies to obtain access to financial instruments of a guarantee nature.
The Company took actions aimed at optimising the receivables recovery period and the payables payment period, matching them to current needs and market conditions. At the end of the third quarter of 2021 the balance of trade payables transferred to reverse factoring amounted to PLN 188 million, while the level of receivables transferred to factoring amounted to PLN 2 247 million.
In terms of advancing the strategic plan of hedging the Company against market risk, in the third quarter of 2021 transactions were entered into on the forward currency market. Put options were purchased to cover USD 180 million of planned revenues from sales, with maturities falling from January to June 2022. In addition, collar strategies were implemented in the notional amount of USD 120 million with maturities falling from July 2022 to December 2022.

Key actions taken in the third quarter of 2021 in the area of Efficient organisation:

Advancement of the KGHM 4.0 Program continued, divided into two main areas:

• INDUSTRY (industrial production):

value

− In terms of implementation of the CMMS system, supporting production and material logistics in the Metallurgical Plants, Concentrators Division and in the Tailings Division, in the third quarter of 2021 work continued on efficiency of the process between operational continuity services and external companies.
− In accordance with the schedule for the project called "CUXRF Robot Robotisation of production and auxiliary processes": Stage 1 of the realisation of the agreement was completed and handed over involving the building of an optimised operating head for measuring copper content at the working faces, which will be built onto the CuXRF robotic arm. Work is underway related to building an electric, battery-powered mobile platform, onto which the arm of the aforementioned robot will be set.
ICT (Information and Communication Technology):
- − In the third quarter of 2021, in terms of implementation of the FIORI eRaport system services, aimed at improving quality in terms of working time planning in the Divisions of the Company, a parallel production plan of the Company for 2021 was prepared in the SAP BPC system as well as the quantitative calculation of production (balance) in terms of the Mines and Concentrators as well as in the Głogów Copper Smelter and Refinery and the Cedynia Wire Rod Plant. The system to document and evaluate the quality of the scrap from KGHM Metraco S.A. is currently undergoing testing.
- − As part of the advancement of the project called Modernisation of the Central Balancing and Electricity Settlement System, work was carried out involving the analysis of settlement, reporting and balancing data from the electricity and natural gas measurement systems.
- − There were no interruptions recorded in the business operations of the KGHM Group and safety processes were supported as a result of work related to ensuring the continuity of the Core Business and administrative services due to the pandemic situation.

Key actions taken in the third quarter of 2021 in the area of People and the environment:

An investment project supporting workplace safety called "Dostawa, montaż i uruchomienie systemu wspierania pracy operatora w zakresie antykolizji" (Supply, assembly and start-up of an anti-collision operator support system) was completed: the system is installed in 1 292 mining machines. Under this project testing equipment, synchronisation gates, units to load data from the machines and 20 081 tags in miners lamps were installed. 100% of the work on the entire project was completed in all of the mining divisions.
The Occupational Health and Safety Program was continued in KGHM Polska Miedź S.A.:
- − The LTIFR KGHM1 ratio amounted to 5.20. The TRiR2 ratio for the international assets amounted to 0.66.
- − With respect to cooperation with domestic and international academic institutions and opinion makers, Company proposals were prepared as respects projected changes in hygienic and biological standards for heavy metals, and the Company's position was presented in terms of its recommendations regarding verification of the approach to standards for exposure to exhaust from diesel engines in underground mines.
- − In terms of the digitisation of analytical data and OHS reporting stage 2 of this work was completed a review was made of the IT solutions applied by other companies in this regard as well as the applications currently utilised by the Company.
- − Active forms of education and employee support were prepared in the form of interactive instructional films, reconstructions and handouts.
- − The OHS services conducted a joint audit at the Cedynia Wire Rod Plant and coordinated their approach as regards the measurement of selected chemical factors in the work environment.
- − A campaign aimed at prevention was launched regarding the use of psychoactive substances.
The Program to adapt the technological installations of the Company to the requirements of BAT conclusions for the nonferrous metals industry and to restrict emissions of arsenic (BATAs) was continued. 12 projects were advanced at the Głogów and Legnica Copper Smelters and Refineries, of which by the end of the third quarter of 2021 the following were settled and completed:
- − A de-leaded slag transport installation (Głogów Copper Smelter and Refinery).
- − A warehouse and storage area for lead-bearing materials (Głogów Copper Smelter and Refinery).
- − An installation to remove sulphur from gases from the Kaldo furnace (Głogów Copper Smelter and Refinery).
Key effects of the EU's tightening climate policy
- − The EU's tightening climate policy, in particular the European Green Deal and the Fit for 55 package, has a decisive impact on Polish industry's operating conditions. The radical rise in wholesale electricity prices which has been observed over the last several months affects the competitive position of Polish producers at the international level, not only in relation to producers outside of Europe who are not limited by restrictive environmental protection regulations, but also those from other EU countries where – in principle – a more balanced energy mix enables them to acquire energy at a substantially lower cost.
- − The revision of the EU's ETS system resulting from introduction of the Fit for 55 package means that as a result of an increase in the emissions reduction goal to -61% by 2030 (from the current level of -43%), the Company is experiencing a significant increase in costs connected with the purchase of greenhouse gas emission rights.
- − According to estimates by KGHM Polska Miedź S.A., additional costs connected with emission rights under the EU ETS system in the years 2021-2030 amount to approx. PLN 1.04 billion.
- − The Company also expects that the introduced changes will result in additional costs connected with the purchase of electricity due to higher unit market prices. If it is assumed that the current volume of electricity purchased from the market remains unchanged (approx. 2.24 TWh in 2020), these additional costs will amount to approx. PLN 2.96 billion in the years 2021-2030.
- − KGHM Polska Miedź S.A. anticipates that the costs associated with implementation of the EU's ambitious climate goals would amount in total to PLN 4 billion in the years 2021-2030. Because of this, the Company will intensify its existing decarbonisation efforts (the Energy Development Program) and will commence new projects in this regard. The Company will shape these actions based on the adopted Climate Policy.
Adoption of the Climate Policy of KGHM Polska Miedź S.A.
- − On 16 November 2021 the Management Board of KGHM Polska Miedź S.A. adopted a resolution on the adoption for implementation of the Climate Policy of KGHM Polska Miedź S.A. – a document setting forth the Company's

¹ In 2021 the LTIFRKGHM (Lost Time Injury Frequency Rate KGHM), or the total number of workplace accidents* in the Company KGHM Polska Miedź S.A. per million hours worked by the employees of KGHM Polska Miedź S.A.

^*workplace accident as defined by the Act dated 30 October 2002 on social insurance due to workplace accidents and occupational illnesses (Journal of Laws 2002 No. 199 item 1673 with subsequent amendments).

² TRIR (Total Recordable Incident Rate) calculated using accepted methodology as the number of accidents at work meeting the conditions of registration as defined in the ICMM (International Council on Mining & Metals) standard, in total for the employees of KGHM INTERNATIONAL LTD., KGHM Chile SpA and Sierra Gorda S.C.M. and sub-contractors for these entities, per 200 000 worked hours.

goals as regards the reduction of greenhouse gas emissions over the timeframe of 2030 and 2050 as well as the scope and extent of changes required for its achievement.

− The scope and impact of the Climate Policy encompasses KGHM Polska Miedź S.A., which will subsequently transfer its principles to its subsidiaries.
− The primary goal of the Climate Policy of KGHM is for the Parent Entity of the KGHM Polska Miedź S.A. Group to achieve climate neutrality by 2050 with respect to Scope 1 emissions - direct emissions primarily related to the Company's production activities and Scope 2 emissions - indirect emissions associated with the use of electricity and heat acquired from the market, with their maximum possible reduction.
− The intermediate target is to reduce total Scope 1 and Scope 2 emissions by 30% by 2030, compared to the emission levels of 2020. The reduction targets for the entire KGHM Group will be published no later than in the first half of 2023.

Emissions reduction targets of KGHM Polska Miedź S.A. and main decarbonisation directions

emissions reduction by 30%	climate neutrality
2030	2050
Main goals of decarbonisation:	Main goals of decarbonisation :
Reduce indirect emissions (Scope 2):	Total reduction of indirect emissions (Scope 2):
Develop internal zero-emission and low-emission	Power and heat solely from zero-emission sources (mainly
sources	conversion to internal zero-emission sources)
> Improve energy efficiency in the production divisions and enhance the efficiency of technological processes Purchase RES energy under PPA contracts A	Maximum reduction of direct emissions (Scope 1): Hydrogen technology Electromobility
2 Gradually reduce direct emissions (Scope 1): Admixture of hydrogen in technological processes 4 Initial implementation of electromobility projects ﻔ	> Implementation of advanced production technology Utilisation of CCU and CCS technology ﻔ Potential offset of other emissions

The Climate Policy will be followed by the Decarbonisation Program of the KGHM Group, which will provide details on how the Climate Policy's goals will be attained, as well as total capital expenditures on the realisation of activities aimed at reducing the emission of greenhouse gases.
KGHM Polska Miedź S.A. emits approximately 3.3 million tonnes of CO² equivalent annually, approximately 40% of which consists of Scope 1 emissions and 60% of which are Scope 2 emissions.
Scope 1 emissions are direct emissions related above all to the Company's production activity, i.e. in particular emissions from metallurgical processes, emissions related to the use of engine fuels by mining vehicles and machines in the mines, and emissions related to the generation of energy from own sources with the use of natural gas.
Scope 2 emissions, in turn, are indirect emissions related to the use of the electricity and heat purchased on the market.
Scope 3 emissions are indirect emissions in the supply chain of equipment, machines, parts, production materials etc., but also services and business travel.

Greenhouse gas emissions at production divisions of KGHM Polska Miedź S.A. in 2020 according to the emission sources [%]

*Excluding emissions related to biomass and blast furnace gas used by Energetyka Sp. z o.o.

In 2022, the Company will conduct a full survey of Scope 1 and Scope 2 emissions at its subsidiaries, so that, no later than in the first half of 2023, it will be able to announce the total Scope 1 and Scope 2 emissions for the entire organisation. The Company will publish data concerning Scope 3 emissions for the Group no later than in the first half of 2024.
For the purpose of ensuring compliance of activities with the best market practices, the Company will strive to implement a climate reporting system based on the Recommendations of the Task Force on Climate-Related Financial Disclosures of 2017 (TCFD).
The first step towards this end will be the implementation of changes in key management and business processes. The scope of changes will encompass all four areas of the TCFD Recommendations.

3 –Information on operating segments and revenues

Note 3.1 Operating segments

The operating segments identified in the KGHM Polska Miedź S.A. Group reflect the structure of the Group, the manner in which the Group and its individual entities are managed and the regular reporting to the Parent Entity's Management Board.

As a result of the aggregation of operating segments and taking into account the criteria stipulated in IFRS 8, the following reporting segments are currently identified within the KGHM Polska Miedź S.A. Group:

Reporting segment	Operating segments aggregated in a given reporting segment	Indications of similarity of economic characteristics of segments, taken into account in aggregations
KGHM Polska Miedź S.A.	KGHM Polska Miedź S.A.	Not applicable (it is a single operating and reporting segment)
KGHM INTERNATIONAL LTD.	Companies of the KGHM INTERNATIONAL LTD. Group, in which the following mines, deposits or mining areas constitute operating segments: Victoria, Sudbury Basin, Robinson, Carlota, Franke, DMC and Ajax.	Operating segments within the KGHM INTERNATIONAL LTD. Group are located in North and South America. The Management Board analyses the results of the following operating segments: Victoria, Sudbury Basin, Robinson, Carlota, Franke, Ajax and other. Moreover, it receives and analyses reports of the whole KGHM INTERNATIONAL LTD. Group. Operating segments are engaged in the exploration and mining of copper, molybdenum, silver, gold and nickel deposits. The operating segments were aggregated based on the similarity of long term margins achieved by individual segments, and the similarity of products, processes and production methods.
Sierra Gorda S.C.M.	Sierra Gorda S.C.M. (joint venture)	Not applicable (it is a single operating and reporting segment)
Other segments	This item includes other Group companies (every individual company is a separate operating segment).	Aggregation was carried out as a result of not meeting the criteria necessitating the identification of a separate additional reporting segment.

The following companies were not included in any of the aforementioned segments:

Future 1 Sp. z o.o., which acts as a holding company with respect to the KGHM INTERNATIONAL LTD. Group,
Future 3 Sp. z o.o., Future 4 Sp. z o.o. and Future 5 Sp. z o.o., which operate in the structure related to the establishment of a Tax Group,
KGHM Centrum Analityki Sp. z o.o.

These companies do not conduct operating activities which could impact the results achieved by individual segments, and as a result their inclusion could distort the data presented in this part of the consolidated financial statements due to significant settlements with other Group companies.

Each of the segments KGHM Polska Miedź S.A., KGHM INTERNATIONAL LTD. and Sierra Gorda S.C.M. have their own Management Boards, which report the results of their business activities to the President of the Management Board of the Parent Entity.

The segment KGHM Polska Miedź S.A. is composed only of the Parent Entity, and the segment Sierra Gorda S.C.M. is composed only of the joint venture Sierra Gorda S.C.M. Other companies of the KGHM Polska Miedź S.A. Group are presented below by segment: KGHM INTERNATIONAL LTD. and Other segments.

THE SEGMENT KGHM INTERNATIONAL LTD.
Location	Company
The United States of America	Carlota Copper Company, Carlota Holdings Company, DMC Mining Services Corporation, FNX Mining Company USA Inc., Robinson Holdings (USA) Ltd., Robinson Nevada Mining Company, Wendover Bulk Transhipment Company
Chile	Aguas de la Sierra Limitada, Minera Carrizalillo SpA, KGHM Chile SpA, Quadra FNX Holdings Chile Limitada, Sociedad Contractual Minera Franke, DMC Mining Services Chile SpA
Canada	KGHM INTERNATIONAL LTD., 0899196 B.C. Ltd., Centenario Holdings Ltd., DMC Mining Services Ltd., FNX Mining Company Inc., Franke Holdings Ltd., KGHM AJAX MINING INC., KGHMI HOLDINGS LTD., Quadra FNX Holdings Partnership, Sugarloaf Ranches Ltd.
Mexico	Raise Boring Mining Services S.A. de C.V.
Colombia	DMC Mining Services Colombia SAS
The United Kingdom	DMC Mining Services (UK) Ltd.
Luxembourg	Quadra FNX FFI S.à r.l.

OTHER SEGMENTS
Type of activity	Company
Support of the core business	BIPROMET S.A., CBJ sp. z o.o., Energetyka sp. z o.o., INOVA Spółka z o.o., KGHM CUPRUM sp. z o.o. – CBR, KGHM ZANAM S.A., KGHM Metraco S.A., PeBeKa S.A., POL-MIEDŹ TRANS Sp. z o.o., WPEC w Legnicy S.A.
Sanatorium-healing and hotel services	Interferie Medical SPA Sp. z o.o., INTERFERIE S.A., Uzdrowiska Kłodzkie S.A. - Grupa PGU, Uzdrowisko Cieplice Sp. z o.o. - Grupa PGU, Uzdrowisko Połczyn Grupa PGU S.A., Uzdrowisko Świeradów - Czerniawa Sp. z o.o. – Grupa PGU
Investment funds, financing activities	Fundusz Hotele 01 Sp. z o.o., Fundusz Hotele 01 Sp. z o.o. S.K.A., KGHM TFI S.A., KGHM VII FIZAN, Polska Grupa Uzdrowisk Sp. z o.o.
Other activities	CENTROZŁOM WROCŁAW S.A., CUPRUM Development sp. z o.o., CUPRUM Nieruchomości sp. z o.o., KGHM (SHANGHAI) COPPER TRADING CO., LTD., KGHM Kupfer AG, MERCUS Logistyka sp. z o.o., MIEDZIOWE CENTRUM ZDROWIA S.A., NITROERG S.A., NITROERG SERWIS Sp. z o.o., PHU "Lubinpex" Sp. z o.o., PMT Linie Kolejowe Sp. z o.o., WMN "ŁABĘDY" S.A., Zagłębie Lubin S.A., OOO ZANAM VOSTOK

The Parent Entity and the KGHM INTERNATIONAL LTD. Group (a subgroup) have a fundamental impact on the assets and the generation of revenues in the KGHM Polska Miedź S.A. Group. The activities of KGHM Polska Miedź S.A. are concentrated on the mining industry in Poland, while those of the KGHM INTERNATIONAL LTD. Group are concentrated on the mining industry in the countries of North and South America. The profile of activities of the majority of the remaining subsidiaries of the KGHM Polska Miedź S.A. Group differs from the main profile of the Parent Entity's activities.

The Parent Entity's Management Board monitors the operating results of individual segments in order to make decisions on allocating the Group's resources and assess the financial results achieved.

Financial data prepared for management reporting purposes is based on the same accounting policies as those applied when preparing the consolidated financial statements of the Group, while the financial data of individual reporting segments constitutes the amounts presented in appropriate financial statements prior to consolidation adjustments at the level of the KGHM Polska Miedź S.A. Group, i.e.:

The segment KGHM Polska Miedź S.A. comprises data from the separate financial statements of the Parent Entity prepared in accordance with IFRSs. In the separate financial statements, investments in subsidiaries (including investment in KGHM INTERNATIONAL LTD.) are measured at cost, including the impairment losses,
The segment KGHM INTERNATIONAL LTD. comprises consolidated data of the KGHM INTERNATIONAL LTD. Group prepared in accordance with IFRSs. The involvement in Sierra Gorda S.C.M. is accounted for using the equity method,
The segment Sierra Gorda S.C.M comprises the 55% share of assets, liabilities, revenues and costs of this venture presented in the separate financial statements of Sierra Gorda S.C.M. prepared in accordance with IFRSs,
Other segments comprises aggregated data of individual subsidiaries after excluding transactions and balances between them.

The Management Board of the Parent Entity assesses performance of segments on the basis of adjusted EBITDA and the profit or loss for the period.

The Group defines adjusted EBITDA as profit/loss for the period pursuant to IFRS, excluding taxes (current and deferred income tax as well as the mining tax), finance income and costs, other operating income and costs, profit or loss on involvement in joint ventures, depreciation/amortisation and recognition/reversal of impairment losses on property, plant and equipment and intangible assets included in the cost of sales, selling costs and administrative expenses. Adjusted EBITDA – as a financial indicator not defined by IFRSs – is not a standardised measure and therefore its method of calculation may vary between entities, and consequently the presentation and calculation of adjusted EBITDA applied by the Group may not be comparable to that applied by other market entities.

Revenues from transactions with external entities and inter-segment transactions are carried out at arm's length. Eliminations of mutual settlements, revenues and costs between segments were presented in the item "Consolidation adjustments".

Unallocated assets and liabilities concern companies which have not been allocated to any segment. Assets which have not been allocated to the segments comprise cash, trade receivables and deferred tax assets. Liabilities which have not been allocated to the segments comprise trade liabilities and current corporate tax liabilities.

Financial data of the segment Sierra Gorda S.C.M. (55% share), presented in part 3 of the consolidated financial statements - Information on operating segments and revenues, does not include changes in the assumptions concerning the forecasts of pricing paths of commodities, adopted by the Company in the measurement of loans granted to Sierra Gorda S.C.M. As it was described in detail in the Consolidated half-year report PSr 2021, in the opinion of the Company's Management Board, the application of assumptions updated in this regard in assessment of the recoverable amount of non-current assets of Sierra Gorda S.C.M. could result in a reversal of a significant part of the impairment loss on non-current assets recognised in prior years.

The potential reversal of an impairment loss on non-current assets by Sierra Gorda S.C.M. would not have an impact on the carrying amount of the investment in Sierra Gorda S.C.M. (zero value) accounted for using the equity method, because the equity of Sierra Gorda S.C.M. remains at a negative level.

Note 3.2 Financial results of reporting segments

	from 1 January 2021 to 30 September 2021
					Reconciliation items
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	Elimination of data of the segment Sierra Gorda S.C.M	Adjustments ****	Consolidated financial statements
Total revenues from contracts with customers, of which:	17 970	2 292	3 277	7 490	(3 277)	(6 017)	21 735
- inter-segment	292	17	-	5 708	-	(6 017)	-
- external	17 678	2 275	3 277	1 782	(3 277)	-	21 735
Segment result – profit/(loss) for the period	4 852	1 855	737	77	( 737)	(2 022)	4 762
Additional information on significant
Depreciation/amortisation recognised in profit or loss	(1 015)	( 401)	( 561)	( 191)	561	9	(1 598)
Reversal/(recognition) of impairment losses on non-current assets, including:	1 470	1 684	-	-	-	(1 484)	1 670
reversal of impairment losses on investments in subsidiaries	1 010	-	-	-	-	(1 010)	-
reversal/(recognition) of allowances for impairment of loans granted	473	1 655	-	-	-	( 473)	1 655

Assets, including:	42 602	13 343	10 683	6 066	(10 683)	(15 865)	46 146
Segment assets, including:	42 602	13 343	10 683	6 066	(10 683)	(15 871)	46 140
held for sale	-	443	-	-	-	-	443
Assets unallocated to segments	-	-	-	-	-	6	6
Liabilities, including:	17 209	18 582	13 664	3 114	(13 664)	(18 352)	20 553
Segment liabilities, including:	17 209	18 582	13 664	3 114	(13 664)	(18 410)	20 495
held for sale	-	424	-	-	-	-	424
Liabilities unallocated to segments	-	-	-	-	-	58	58
Other information	from 1 January 2021 to 30 September 2021
Cash expenditures on property, plant and equipment and intangible assets – cash flows	1 745	656	442	341	( 442)	( 139)	2 603
Production and cost data	from 1 January 2021 to 30 September 2021
Payable copper (kt)	440.1	55.4	78.4
Molybdenum (million pounds)	-	0.2	7.0
Silver (t)	982.6	1.6	23.4
TPM (koz t)	61.4	39.9	22.9
C1 cash cost of producing copper in concentrate (USD/lb PLN/lb)**	2.24 8.53	1.93 7.36	0.81 3.07
Segment result - Adjusted EBITDA	4 272	993	2 237	228	-	-	7 730
EBITDA margin***	24%	43%	68%	3%	-	-	31%
	cost/revenue items of the segment				As at 30 September 2021		to consolidated data

* 55% of the Group's share in Sierra Gorda S.C.M.'s financial and production data.

** Unit cash cost of payable copper production, reflecting 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 is in regard to payable copper in own concentrate in the case of the segment KGHM Polska Miedź S.A. and payable copper in end products of individual mines of the segment KGHM INTERNATIONAL LTD. and the segment Sierra Gorda S.C.M. C1 cost in PLN/lb was calculated using the average exchange rate by the NBP (arithmetical average of daily quotations per the NBP's tables).

*** Adjusted EBITDA to revenues from sales. For the purposes of calculating the Group's EBITDA margin (31%), the consolidated revenues from sales were increased by revenues from sales of the segment Sierra Gorda S.C.M.

[7 730 / (21 735 + 3 277) * 100]

**** Adjustments arise from consolidation eliminations and financial data of companies unallocated to any segment.

Financial results of reporting segments for the comparable period

				from 1 January 2020 to 30 September 2020
					Reconciliation items
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	to consolidated data Elimination of data of the segment Sierra Gorda S.C.M	Consolidation adjustments****	Consolidated financial statements
Revenues from contracts with customers, of which:	13 360	2 026	1 674	5 629	(1 674)	(4 435)	16 580
- inter-segment	228	16	4	4 191	( 4)	(4 435)	-
- external	13 132	2 010	1 670	1 438	(1 670)	-	16 580
Segment result - profit/(loss) for the period	1 156	( 670)	( 329)	( 87)	329	773	1 172
Additional information on significant revenue/cost items of the segment
Depreciation/amortisation recognised in profit or loss	( 896)	( 333)	( 575)	( 179)	575	17	(1 391)
Recognition of impairment losses on non-current assets, including:	( 187)	-	-	( 92)	-	187	( 92)
impairment losses on investments in subsidiaries	( 131)	-	-	-	-	131	-
allowances for impairment of loans granted	( 56)				-	56	-
Share of losses of joint ventures accounted for using the equity method	-	( 206)	-	-	-	-	( 206)
				As at 31 December 2020
Assets, including:	39 342	10 811	9 701	5 636	(9 701)	(13 009)	42 780
Segment assets	39 342	10 811	9 701	5 636	(9 701)	(13 017)	42 772
Assets unallocated to segments	-	-	-	-	-	8	8
Liabilities, including:	18 616	17 569	13 232	2 778	(13 232)	(17 264)	21 699
Segment liabilities	18 616	17 569	13 232	2 778	(13 232)	(17 290)	21 673
Liabilities unallocated to segments	-	-	-	-	-	26	26
Other information				from 1 January 2020 to 30 September 2020
Cash expenditures on property, plant and equipment and intangible assets – cash flows	1 841	431	376	243	( 376)	( 28)	2 487
Production and cost data				from 1 January 2020 to 30 September 2020
Payable copper (kt)	411.9	49.2	59.9
Molybdenum (million pounds)	-	0.4	6.9
Silver (t)	975.4	1.2	20.0
TPM (koz t)	67.1	54.4	23.8
C1 cash cost of producing copper in concentrate (USD/lb PLN/lb)**
Segment result - adjusted EBITDA	1.60 6.29 3 052	1.87 7.38 395	1.24 4.90 779	192	-	-	4 418
EBITDA margin***	23%	19%	47%	3%	-	-	24%

* 55% of the Group's share in Sierra Gorda S.C.M.'s financial and production data.

*** Adjusted EBITDA to revenues from sales. For the purposes of calculating the Group's EBITDA margin (24%), the consolidated revenues from sales were increased by revenues from sales of the segment Sierra Gorda S.C.M.

[4 418 / (16 580 + 1 670) * 100]

**** Adjustments arise from consolidation eliminations and financial data of companies unallocated to any segment.

Reconciliation of adjusted EBITDA	from 1 January 2021 to 30 September 2021
	KGHM KGHM Polska Miedź S.A. INTERNATIONAL LTD.		Other segments	Consolidation adjustments*	Consolidated financial statements	Sierra Gorda S.C.M. **	Adjusted EBITDA (segments, total)
	1	2	3	4	5 (1+2+3+4)	6	7 (5+6-4)
Profit/(Loss) for the period	4 852	1 855	77	(2 022)	4 762	737
[-] Profit or loss on involvement in joint ventures	-	1 977	-	-	1 977	-
[-] Taxes	(1 218)	( 22)	( 49)	( 54)	(1 343)	( 365)
[-] Depreciation/amortisation recognised in profit or loss	(1 015)	( 401)	( 191)	9	(1 598)	( 561)
[-] Finance income and (costs)	( 377)	( 767)	( 14)	784	( 374)	( 585)
[-] Other operating income and (costs)	3 197	44	103	(2 713)	631	11
[-] (Recognition)/reversal of impairment losses on non-current assets recognised in cost of sales, selling costs and administrative expenses	( 7)	31	-	-	24	-
Segment result - adjusted EBITDA	4 272	993	228	( 48)	5 445	2 237	7 730

* Adjustments arise from consolidation eliminations and financial data of companies unallocated to any segment.

**55% share of the Group in the financial data of Sierra Gorda S.C.M.

Reconciliation of adjusted EBITDA	from 1 January 2020 to 30 September 2020
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.		Consolidation adjustments*	Consolidated financial statements	Sierra Gorda S.C.M. **	Adjusted EBITDA (segments, total)
	1	2	3	4	5 (1+2+3+4)	6	7 (5+6-4)
Profit/(Loss) for the period	1 156	( 670)	( 87)	773	1 172	( 329)
[-] Profit or loss on involvement in joint ventures	-	78	-	-	78	-
[-] Current and deferred income tax	( 671)	( 17)	( 31)	12	( 707)	108
[-] Depreciation/amortisation recognised in profit or loss	( 896)	( 333)	( 179)	17	(1 391)	( 575)
[-] Finance income and (costs)	( 62)	( 788)	( 16)	790	( 76)	( 637)
[-] Other operating income and (costs)	( 267)	( 5)	39	4	( 229)	( 4)
[-] (Recognition)/reversal of impairment losses on non-current assets recognised in cost of sales, selling costs and administrative expenses	-	-	( 92)	-	( 92)	-
Segment result - adjusted EBITDA	3 052	395	192	( 50)	3 589	779	4 418

* Adjustments arise from consolidation eliminations and financial data of companies unallocated to any segment.

**55% share of the Group in the financial data of Sierra Gorda S.C.M.

Note 3.3 Revenues from contracts with customers of the Group – breakdown by products

					Reconciliation items to consolidated data
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	Elimination of data of the segment Sierra Gorda S.C.M.	Consolidation adjustments	Consolidated data
Copper	13 811	1 721	2 686	6	(2 686)	( 21)	15 517
Silver	3 048	5	72	-	( 72)	-	3 053
Gold	403	183	152	-	( 152)	-	586
Services	106	300	-	1 636	-	(1 285)	757
Energy	40	-	-	167	-	( 121)	86
Salt	21	-	-	-	-	25	46
Blasting materials and explosives	-	-	-	162	-	( 64)	98
Mining machinery, transport vehicles and other types of machinery and equipment	-	-	-	153	-	( 125)	28
Fuel additives	-	-	-	80	-	-	80
Lead	194	-	-	-	-	-	194
Products from other non-ferrous metals	-	-	-	80	-	( 4)	76
Steel	-	-	-	470	-	( 54)	416
Petroleum and its derivatives	-	-	-	230	-	( 194)	36
Other merchandise and materials	189	-	-	4 168	-	(4 019)	338
Other products	158	83	367	338	( 367)	( 155)	424
TOTAL	17 970	2 292	3 277	7 490	(3 277)	(6 017)	21 735

from 1 January 2021 to 30 September 2021

					Reconciliation items to consolidated data
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	Elimination of data of the segment Sierra Gorda S.C.M.	Consolidation adjustments	Consolidated data
Copper	9 897	1 152	1 248	5	(1 248)	( 11)	11 043
Silver	2 326	17	48	-	( 48)	-	2 343
Gold	457	242	162	-	( 162)	-	699
Services	86	444	-	1 695	-	(1 390)	835
Energy	34	-	-	131	-	( 98)	67
Salt	19	-	-	-	-	( 4)	15
Blasting materials and explosives	-	-	-	167	-	( 61)	106
Mining machinery, transport vehicles and other types of machinery and equipment	-	-	-	142	-	( 113)	29
Fuel additives	-	-	-	64	-	-	64
Lead	162	-	-	-	-	-	162
Products from other non-ferrous metals	-	-	-	55	-	( 3)	52
Steel	-	-	-	304	-	( 24)	280
Petroleum and its derivatives	-	-	-	187	-	( 167)	20
Other merchandise and materials	275	-	-	2 796	-	(2 640)	431
Other products	104	171	216	83	( 216)	76	434
TOTAL	13 360	2 026	1 674	5 629	(1 674)	(4 435)	16 580

from 1 January 2020 to 30 September 2020

Note 3.4 Revenues from contracts with customers of the Group – breakdown by type of contract

	from 1 January 2021 to 30 September 2021
					Reconciliation items to consolidated data
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	Elimination of data of the segment Sierra Gorda S.C.M.	Consolidation adjustments	Consolidated data
Total revenues from contracts with customers	17 970	2 292	3 277	7 490	(3 277)	(6 017)	21 735
Revenues from sales contracts, for which the price is set after the date of recognition of the sales (M+ principle), of which:	14 361	1 999	3 166	-	(3 166)	( 60)	16 300
settled	13 661	1 860	981	-	( 981)	( 59)	15 462
unsettled	700	139	2 185	-	(2 185)	( 1)	838
Revenues from realisation of long-term contracts	-	283	-	181	-	( 171)	293
Revenues from other sales contracts	3 609	10	111	7 309	( 111)	(5 786)	5 142
Total revenues from contracts with customers, of which:	17 970	2 292	3 277	7 490	(3 277)	(6 017)	21 735
in factoring	6 637	-	-	58	-	( 14)	6 681
not in factoring	11 333	2 292	3 277	7 432	(3 277)	(6 003)	15 054

	from 1 January 2021 to 30 September 2021	from 1 January 2020 to 30 September 2020
Total revenues from contracts with customers, of which:	21 735	16 580
transferred at a certain moment	20 842	15 678
transferred over time	893	902

	from 1 January 2020 to 30 September 2020

	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	Elimination of data of the segment Sierra Gorda S.C.M.	Consolidation adjustments	Consolidated data
Total revenues from contracts with customers	13 360	2 026	1 674	5 629	(1 674)	(4 435)	16 580
Revenues from sales contracts, for which the price is set after the date of recognition of the sales (M+ principle), of which:	9 870	1 582	1 634	-	(1 634)	( 48)	11 404
settled	9 419	1 106	575	-	( 575)	( 47)	10 478
unsettled	451	476	1 059	-	(1 059)	( 1)	926
Revenues from realisation of long-term contracts	-	429	-	152	-	( 139)	442
Revenues from other sales contracts	3 490	15	40	5 477	( 40)	(4 248)	4 734
Total revenues from contracts with customers, of which:	13 360	2 026	1 674	5 629	(1 674)	(4 435)	16 580
in factoring	5 085	16	-	-	-	-	5 101
not in factoring	8 275	2 010	1 674	5 629	(1 674)	(4 435)	11 479

Note 3.5 Revenues from contracts with customers of the Group – geographical breakdown reflecting the location of end clients

		from 1 January 2021 to 30 September 2021						from 1 January 2020 to 30 September 2020
					Reconciliation items to consolidated data
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Sierra Gorda S.C.M.*	Other segments	Elimination of data of the segment Sierra Gorda S.C.M.	Consolidation adjustments	Consolidated data	KGHM Polska Miedź S.A. Group
Poland	4 217	-	9	7 228	( 9)	(6 007)	5 438	4 067
Austria	325	-	-	21	-	-	346	136
Belgium	10	-	-	9	-	-	19	59
Bulgaria	31	-	-	4	-	-	35	14
Czechia	1 411	-	-	19	-	-	1 430	1 079
Denmark	24	-	-	1	-	-	25	11
Estonia	10	-	-	1	-	-	11	14
France	685	-	-	3	-	-	688	390
Spain	-	-	( 1)	1	1	-	1	243
The Netherlands	2	-	64	-	( 64)	-	2	2
Germany	2 652	-	2	61	( 2)	-	2 713	2 237
Romania	223	-	-	2	-	-	225	129
Slovakia	90	-	-	13	-	-	103	68
Slovenia	117	-	-	2	-	-	119	44
Sweden	18	-	-	29	-	-	47	40
Hungary	872	-	-	4	-	-	876	524
The United Kingdom	967	-	-	4	-	-	971	1 551
Italy	1 379	-	-	18	-	-	1 397	778
Australia	766	-	-	-	-	-	766	607
Chile	-	140	389	-	( 389)	-	140	24
China	1 814	886	2 098	-	(2 098)	-	2 700	2 055
India	-	-	20	-	( 20)	-	-	1
Japan	-	135	611	-	( 611)	-	135	62
Canada	13	358	-	-	-	( 6)	365	367
South Korea	29	4	56	-	( 56)	-	33	151
Norway	-	-	-	12	-	-	12	10
Russia	-	-	-	23	-	( 4)	19	23
The United States of America	1 130	769	( 1)	5	1	-	1 904	719
Switzerland	443	-	-	-	-	-	443	459
Turkey	79	-	-	3	-	-	82	66
Taiwan		-	-	-	-	-	-	222
Morocco	12	-	-	-	-	-	12	-
Brazil	8	-	30	-	( 30)	-	8	4
Thailand	335	-	-	-	-	-	335	131
Philippines	4	-	-	-	-	-	4	152
Malaysia	48	-	-	-	-	-	48	32
Vietnam	254	-	-	-	-	-	254	68
Other countries	2	-	-	27	-	-	29	41
TOTAL	17 970	2 292	3 277	7 490	(3 277)	(6 017)	21 735	16 580

* 55% share of the Group in the revenues of Sierra Gorda S.C.M.

Note 3.6 Main customers

In the period from 1 January 2021 to 30 September 2021 and in the comparable period the revenues from no single contractor exceeded 10% of the revenues from contracts with customers of the Group.

Note 3.7 Non-current assets – geographical breakdown

	As at 30 September 2021	As at 31 December 2020
Poland	22 870	22 502
Canada	1 647	1 441
The United States of America	1 599	1 416
Chile	272	353
Other countries	27	16
TOTAL*	26 415	25 728

* Non-current assets, excluding: derivatives, other financial instruments, other non-financial assets and deferred tax assets (IFRS 8.33b) in the total amount of PLN 10 648 million as at 30 September 2021 (PLN 8 319 million as at 31 December 2020).

Note 3.8 Information on segments' results

3.8.1 The segment KGHM Polska Miedź S.A.

Production results

	Unit	First 9 months of 2021	First 9 months of 2020	Change (%)	3rd quarter of 2021	2nd quarter of 2021	1st quarter of 2021
Ore extraction (dry weight)	mn t	22.8	22.4	+1.8	7.8	7.5	7.5
Copper content in ore	%	1.48	1.50	(1.3)	1.5	1.47	1.48
Copper production in concentrate	kt	296.1	296.8	(0.2)	100.9	98.2	96.9
Silver production in concentrate	t	976.9	916.9	+6.5	336.6	327.3	313.0
Production of electrolytic copper	kt	440.1	411.9	+6.8	146.9	146.8	146.4
- including from own concentrate	kt	286.0	287.1	(0.4)	93.8	92.6	99.6
Production of metallic silver	t	982.6	975.4	+0.7	323.2	360.8	298.6
Production of gold	koz t	61.4	67.1	(8.5)	23.3	21.5	16.6

In the first nine months of 2021, there was an increase in ore extraction (dry weight) as compared to the corresponding period of 2020. Copper content in ore decreased to 1.48% due to the lower content and thickness of the mined deposit.

Copper production in concentrate decreased by approx. 0.7 thousand tonnes as compared to the first nine months of 2020 as a result of processing a higher amount of lower quality feed.

As compared to the corresponding period of 2020, there was an increase in electrolytic copper production by 28.2 thousand tonnes. Cathode production increased due to the availability of feed and higher availability of the production line since there were no maintenance shutdowns in 2021.

Production of metallic silver amounted to 982.6 tonnes and was higher by 7.2 tonnes (+0.7%) as compared to the first nine months of 2020. Metallic silver production increased due to the higher silver content in concentrate and higher copper cathode production.

Production of metallic gold amounted to 61.4 thousand troy ounces and was lower by 5.7 thousand troy ounces (-8.5%) as compared to the first nine months of 2020. Metallic gold production decreased due to the lower gold content in feed material.

Sales

Revenues from contracts with customers

	Unit	First 9 months of 2021	First 9 months of 2020	Change (%)	3rd quarter of 2021	2nd quarter of 2021	1st quarter of 2021
Revenues from contracts with customers, including:	PLN mn	17 970	13 360	+34.5	5 826	6 575	5 569
- copper	PLN mn	13 811	9 897	+39.5	4 403	5 108	4 300
- silver	PLN mn	3 048	2 326	+31.0	1 052	1 096	900
Volume of copper sales	kt	417.1	404.9	+3.0	132.1	148.4	136.6
Volume of silver sales	t	950.6	990.1	(4.0)	331.4	340.4	278.8

Revenues after the first three quarters of 2021 amounted to PLN 17 970 million and were higher than in the corresponding period of 2020 by 35%. The main factors behind this increase in revenues were: higher prices of copper (+57%) and silver (+34%) alongside a change in adjustment to revenues due to hedging transactions from PLN 330 million to –PLN 1 159 million.

Costs

Costs and C1 unit cost

Unit	First 9 months of 2021	First 9 months of 2020	Change (%)	3rd quarter of 2021	2nd quarter of 2021	1st quarter of 2021
PLN mn	14 720	11 204	+31.4	5 070	5 440	4 210
PLN mn	16 233	11 090	+46.4	5 555	5 724	4 954
PLN/t	32 108	25 618	+25.3	35 600	32 984	28 095
PLN/t	20 921	17 201	+21.6	24 423	21 461	17 214
USD/lb	2.24	1.60	+40.0	2.48	2.30	1.93

1) Unit cost prior to decrease by the value of anode slimes containing, among others, silver and gold

2) Cash cost of concentrate production reflecting the minerals extraction tax, plus administrative expenses and smelter treatment and refining charges (TC/RC), less depreciation/amortisation cost and the value of by-product premiums, calculated for sold payable copper in concentrate

The Parent Entity's cost of sales, selling costs and administrative expenses (cost of products, merchandise and materials sold, selling costs and administrative expenses) for the first nine months of 2021 amounted to PLN 14 720 million and were higher by 31% as compared to the corresponding period of 2020, mainly due to an increase in sales of copper products alongside the utilisation in production of more purchased metal-bearing materials.

In the first nine months of 2021, total expenses by nature were higher by PLN 5 143 million as compared to the corresponding period of 2020, alongside a minerals extraction tax charge higher by PLN 1 419 million (due to higher prices of copper and silver) and higher costs of consumption of purchased metal-bearing materials by PLN 2 489 million (due to a higher volume of consumption by 40 thousand tonnes of copper alongside a 39.2% higher purchase price).

The increase in expenses by nature, excluding purchased metal-bearing materials and the minerals extraction tax, amounted to PLN 1 235 million and resulted mainly from the increase in costs of technological materials, fuels, electrical and other energy due to an increase in prices, labour costs due to wage increases, CO2 emissions charges and depreciation/amortisation.

C1 cost for the first nine months of 2021 amounted to 2.24 USD/lb and was higher than in the corresponding period of 2020 by 40%. The increase in this cost was mainly caused by the higher minerals extraction tax charge (the first nine months of 2020: 0.43 USD/lb; the first nine months of 2021: 1.04 USD/lb). C1 cost, excluding the minerals extraction tax, was higher as compared to 2020 by 2.7% alongside a higher value of by-products due to an increase in the prices of precious metals and the weakening of the US dollar exchange rate by 3.4%.

The pre-precious metals credit unit cost of electrolytic copper production from own concentrate (unit cost prior to decrease by the value of anode slimes containing, among others, silver and gold) amounted to 32 108 PLN/t (in the comparable period of 2020: 25 618 PLN/t) and was higher by 25%, mainly due to the higher minerals extraction tax.

The pre-precious metals credit unit cost of electrolytic copper production from own concentrate, excluding the minerals extraction tax, amounted to 24 166 PLN/t (in the corresponding period of 2020: 21 954 PLN/t).

The total unit cost of electrolytic copper production from own concentrate amounted to 20 921 PLN/t and was higher by 22% as compared to the first nine months of 2020. Excluding the minerals extraction tax, it was lower by 4% due to the higher value of associated metals.

Financial results

Statement of profit or loss

The Company recorded a profit in the amount of PLN 4 852 million for the first three quarters of 2021, or PLN 3 696 million higher than in the corresponding period of 2020.

Basic items of the statement of profit or loss (in PLN million)

	First 9	First 9
	months of	months of		Change (%) 3rd quarter	2ndquarter	1st quarter
	2021	2020		of 2021	of 2021	of 2021
Revenues from contracts with customers, including:	17 970	13 360	+34.5	5 826	6 575	5 569
- adjustment of revenues due to hedging transactions	(1 159)	330	×	(417)	(476)	(266)
Cost of sales, selling costs and administrative expenses	(14 720)	(11 204)	+31.4	(5 070)	(5 440)	(4 210)
Profit on sales (EBIT)	3 250	2 156	+50.7	756	1 135	1 359
Other operating income and (costs), including:	3 197	(267)	×	404	2 425	368
Interest on loans granted and other financial receivables	225	205	+9.8	94	64	67
Realisation of derivatives	(364)	(209)	+74.2	(85)	(166)	(113)
Measurement of derivatives	86	1	×86.0	(60)	213	(67)
Exchange gains/(losses) on assets and liabilities other than borrowings	376	(119)	×	229	(211)	358
Reversal/(recognition) of impairment losses on investment certificates and shares	1 010	(131)	×	-	1 013	(3)
Reversal/(recognition) of impairment losses on financial instruments measured at amortised cost	523	(60)	×	23	487	13
Fees and charges on re-invoicing of costs of bank guarantees securing payments of liabilities	67	50	+34.0	6	13	48
Fair value gains/(losses) on financial assets measured at fair value through profit or loss	1 229	13	×94.5	170	989	70
Release/(recognition) of provisions	(15)	(6)	×2.5	(11)	3	(7)
Other	60	(11)	×	38	20	2
Finance income and (costs), including:	(377)	(62)	×6.1	(168)	93	(302)
Exchange gains/(losses) on borrowings	(284)	81	×	(146)	135	(273)
Interest on borrowings	(62)	(111)	(44.1)	(14)	(30)	(18)
Measurement of derivatives	(1)	-	×	-	-	(1)
Realisation of derivatives	(3)	(5)	(40.0)	-	(3)	-
Other	(27)	(27)	-	(8)	(9)	(10)
Profit before income tax	6 070	1 827	×3.3	992	3 653	1 425
Income tax expense	(1 218)	(671)	+81.5	(366)	(402)	(450)
Profit for the period	4 852	1 156	×4.2	626	3 251	975
Adjusted EBITDA1	4 272	3 052	+40.0	1 115	1 482	1 675

1) Adjusted EBITDA = profit or loss on sales + depreciation/amortisation (recognised in profit or loss) + impairment loss (-reversal of impairment losses) on non-current assets, recognised in cost of sales, selling costs and administrative expenses

Main reasons for the change in profit or loss

Item	Impact on change in profit or loss (in PLN million)	Description
	+6 371	An increase in revenues due to higher prices of copper (+3 340 USD/t, +57%), silver (+6.50 USD/oz t, +34%) and gold (+65 USD/oz t, +4%)
	(1 489)	Change in the adjustment of revenues due to hedging transactions, from +PLN 330 million to –PLN 1 159 million
An increase in revenues from contracts with	(436)	A decrease in revenues from sales of basic products (copper, silver, gold) due to a less favourable average USD/PLN exchange rate (a change from 3.94 to 3.80 USD/PLN)
customers (+PLN 4 610 million)	+137	An increase in revenues due to a higher volume of sales of copper (+12.2 thousand tonnes, +3%) alongside lower volume of sales of silver (-40 t, -4%) and gold (-8.8 koz t, -13%)
	+27	An increase in other revenues from sales, including from the sale of refined lead (+PLN 32 million), sulphuric acid (+PLN 24 million), rhenium (+PLN 21 million) and other merchandise and services (+PLN 36 million) with a decrease in sales of goods and materials (including production materials) and waste (-PLN 86 million)
	+1 576	Lower utilisation of inventories (change in 2021: -PLN 1 606 million; in 2020: -PLN 30 million)
An increase in cost of sales,	(2 489)	Higher volume of consumption of purchased metal-bearing materials by 40 thousand tonnes of copper at a purchase price higher by 39%
selling costs and administrative expenses(1 (-PLN 3 516 million)	(2 603)	Including an increase in other expenses by nature by PLN 2 654 million, mainly due to an increase in costs: the minerals extraction tax charge (by PLN 1 419 million), employee benefits (by PLN 378 million), utilisation of materials other than purchased metal-bearing materials (by PLN 234 million), electrical and other energy (by PLN 218 million), other taxes and charges (by PLN 183 million) and depreciation/amortisation (by PLN 123 million)
Fair value gains/losses on financial assets measured at fair value through profit or loss (+PLN 1 216 million)	+1 216	An improvement of the result on changes in the fair value of financial assets measured at fair value through profit or loss, from +PLN 13 million to +PLN 1 229 million, including due to loans from +PLN 42 million to +PLN 1 303 million
Reversal/ recognition of impairment losses on investment certificates and shares in subsidiaries (+PLN 1 141 million)	+1 141	A change in differences between impairment losses recognised and reversed on shares and investment certificates, from -PLN 131 million to +PLN 1 010 million
Reversal/ recognition of impairment losses on financial instruments measured at amortised cost (+PLN 583 million)	+583	A change in differences between impairment losses recognised and reversed on financial instruments measured at amortised cost, from -PLN 60 million to +PLN 523 million, including due to loans from -PLN 56 million to +PLN 474 million
Impact of exchange	+495	A change in the result due to exchange differences from the measurement of assets and liabilities other than borrowings – in other operating activities
differences (+PLN 130 million)	(365)	A change in the result due to exchange differences from the measurement of liabilities due to borrowings (presented in finance costs)
Impact of derivatives and hedging transactions(2 (-PLN 69 million)	(70)	A change in the result due to the measurement and realisation of derivatives in other operating activities from -PLN 208 million to -PLN 278 million
	+1	A change in the result due to the measurement and realisation of derivatives in financing activities from -PLN 5 million to -PLN 4 million
Change in the balance of	+20	An increase in income due to interest on loans granted and other financial receivables
income and costs due to interest on borrowings and other financial receivables (+PLN 69 million)	+49	Lower interest costs on borrowings
Increase in income tax (-PLN 547 million)	(547)	An increase in income tax resulted from an increase in current income tax (-PLN 626 million), mainly due to an increase in revenues from sales and tax deductible costs

1) Cost of products, merchandise and materials sold, selling costs and administrative expenses

2) Excluding adjustment to revenues due to hedging transactions

Capital expenditures

In the first three quarters of 2021, capital expenditures on property, plant and equipment amounted to PLN 1 471 million and were lower by 7% as compared to the corresponding period of 2020. Total capital expenditures, including expenditures on leases and uncompleted development work amounted to PLN 1 540 million.

Structure of expenditures on property, plant and equipment and intangible assets (PLN million)

	First 9 months of 2021	First 9 months of 2020	Change (%)	3rd quarter of 2021	2nd quarter of 2021	1st quarter of 2021
Mining	1 105	1 099	0.5	379	399	327
Metallurgy	319	493	(35.3)	102	132	85
Other activities	47	14	x3.4	15	17	15
Development work - uncompleted	1	1	-	-	-	1
Leases per IFRS 16	68	56	21.4	8	41	19
Total	1 540	1 663	(7.4)	504	589	447
including borrowing costs	90	100	(10.0)	28	31	31

Investment activities comprised projects related to replacement, maintenance and development:

Projects related to replacement aimed at maintaining production equipment in an undeteriorated condition, represent 29% of expenditures incurred.

Chart 2. Structure of expenditures on replacement

Projects related to maintenance aimed at maintaining mine production at the level set in the approved Production Plan (development of infrastructure to match mine advancement) represent 31% of total expenditures incurred.

Chart 3. Structure of expenditures on maintenance

Development projects aimed at increasing the production volume of the core business, implementation of technical and technological activities optimising the use of existing infrastructure, maintaining production costs and adaptation of the company's operations to changes in standards, laws and regulations (conformatory projects and those related to environmental protection) represent 40% of expenditures incurred.

Chart 4. Structure of expenditures on development

Detailed information on the advancement of key projects may be found in Part 2 of this Report on the realisation of Strategy in 2021.

3.8.2 The segment KGHM INTERNATIONAL LTD.