POLISH FINANCIAL SUPERVISION AUTHORITY

Consolidated quarterly report QSr 3 / 2020

(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 2020 from 1 July 2020 to 30 September 2020 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: 18 November 2020

KGHM Polska Miedź Spółka Akcyjna (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 2020 to 30 September 2020	from 1 January 2019 to 30 September 2019	from 1 January 2020 to 30 September 2020	from 1 January 2019 to 30 September 2019
I. Revenues from contracts with customers	16 580	16 869	3 733	3 915
II. Profit on sales	2 106	2 228	474	517
III. Profit before income tax	1 879	2 424	423	563
IV. Profit for the period	1 172	1 666	264	387
V. Profit for the period attributable to shareholders of the Parent Entity	1 174	1 664	264	387
VI. Profit for the period attributable to non-controlling interest	( 2)	2	-	-
VII. Other comprehensive income	( 345)	( 581)	( 78)	( 135)
VIII. Total comprehensive income	827	1 085	186	252
IX. Total comprehensive income attributable to shareholders of the Parent Entity	829	1 082	186	251
X. Total comprehensive income attributable to non controlling interest	( 2)	3	-	1
XI. Number of shares issued (million)	200	200	200	200
XII. Earnings per ordinary share (PLN/EUR) attributable to shareholders of the Parent Entity	5.87	8.32	1.32	1.94
XIII. Net cash generated from operating activities	3 254	2 496	733	579
XIV. Net cash used in investing activities	( 2 675)	( 2 518)	( 602)	( 584)
XV. Net cash used in financing activities	( 482)	( 144)	( 109)	( 33)
XVI. Total net cash flow	97	( 166)	22	( 38)

	As at	As at	As at	As at
	30 September 2020	31 December 2019	30 September 2020	31 December 2019
XVII. Non-current assets	33 726	31 669	7 450	7 436
XVIII. Current assets	7 990	7 740	1 765	1 818
XIX. Total assets	41 716	39 409	9 215	9 254
XX. Non-current liabilities	13 921	13 171	3 075	3 093
XXI. Current liabilities	6 766	6 036	1 495	1 417
XXII. Equity	21 029	20 202	4 645	4 744
XXIII. Equity attributable to shareholders of the Parent Entity	20 939	20 110	4 625	4 722
XXIV. Equity attributable to non-controlling interest	90	92	20	22

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

	in PLN mn		in EUR mn
	from 1 January 2020 to 30 September 2020	from 1 January 2019 to 30 September 2019	from 1 January 2020 to 30 September 2020	from 1 January 2019 to 30 September 2019
I. Revenues from contracts with customers	13 360	13 050	3 008	3 029
II. Profit on sales	2 156	1 975	485	458
III. Profit before income tax	1 827	2 370	411	550
IV. Profit for the period	1 156	1 663	260	386
V. Other comprehensive net income	( 310)	( 446)	( 70)	( 104)
VI. Total comprehensive income	846	1 217	190	282
VII. Number of shares issued (million)	200	200	200	200
VIII. Earnings per ordinary share (PLN/EUR)	5.78	8.32	1.30	1.93
IX. Net cash generated from operating activities	2 860	1 845	644	428
X. Net cash used in investing activities	( 2 160)	( 1 979)	( 486)	( 459)
XI. Net cash used in financing activities	( 452)	( 125)	( 102)	( 29)
XII. Total net cash flow	248	( 259)	56	( 60)
	As at	As at	As at	As at

	30 September 2020	31 December 2019	30 September 2020	31 December 2019
XIII. Non-current assets	32 104	30 111	7 092	7 071
XIV. Current assets	6 171	5 878	1 363	1 380
XV. Total assets	38 275	35 989	8 455	8 451
XVI. Non-current liabilities	11 739	11 105	2 593	2 608
XVII. Current liabilities	5 801	4 995	1 281	1 173
XVIII. Equity	20 735	19 889	4 581	4 670

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 as at 30 September 2020	9
Note 1.3 Exchange rates applied	11
Note 1.4 Accounting policies and the impact of new and amended standards and interpretations	11
Note 1.5 Impairment of assets	12
2 – Realisation of strategy	17
3 –Information on operating segments and revenues	22
Note 3.1 Operating segments	22
Note 3.2 Financial results of reporting segments	25
Note 3.3 Revenues from contracts with customers of the Group – breakdown by products	28
Note 3.4 Revenues from contracts with customers of the Group – breakdown by type of contract	30
Note 3.5 Revenues from contracts with customers of the Group – geographical breakdown reflecting the location of
end clients	31
Note 3.6 Main customers	32
Note 3.7 Non-current assets – geographical breakdown	32
Note 3.8 Information on segments' results	33
4 – Selected additional explanatory notes	44
Note 4.1 Expenses by nature	44
Note 4.2 Other operating income and (costs)	45
Note 4.3 Finance income and (costs)	46
Note 4.4 Information on property, plant and equipment and intangible assets	46
Note 4.5 Involvement in joint ventures	47
Note 4.6 Financial instruments	48
Note 4.7 Commodity, currency and interest rate risk management in the KGHM Polska Miedź S.A. Group	51
Note 4.8 Liquidity risk and capital management in the KGHM Polska Miedź S.A. Group Note 4.9 Related party transactions	56 58
Note 4.10 Assets and liabilities not recognised in the statement of financial position	60
Note 4.11 Changes in working capital	60
Note 4.12 Other adjustments in the statement of cash flows	61
Note 4.13 Non-current assets held for sale and liabilities associated with them	61
5 – Additional information to the consolidated quarterly report	62
Note 5.1 Effects of changes in the organisational structure of the KGHM Polska Miedź S.A. Group	62
Note 5.2 Seasonal or cyclical activities	62
Note 5.3 Information on the issuance, redemption and repayment of debt and equity securities	62
Note 5.4 Information related to paid (declared) dividend, total and per share	62
Note 5.5 Other information to the consolidated quarterly report	62
Note 5.6 Subsequent events	66
Part 2 Quarterly financial information of KGHM Polska Miedź S.A.	68
STATEMENT OF PROFIT OR LOSS	68
STATEMENT OF COMPREHENSIVE INCOME	68
STATEMENT OF CASH FLOWS	69
STATEMENT OF FINANCIAL POSITION	70
STATEMENT OF CHANGES IN EQUITY	71
Explanatory notes	72
Note 1 Impairment of assets	72
Note 2 Revenues from contracts with customers – geographical breakdown reflecting the location of end clients	74
Note 3 Expenses by nature	75
Note 4 Other operating income and (costs)	76
Note 5 Finance income and (costs)	77
Note 6 Changes in working capital	77
Note 7 Other adjustments in the statement of cash flows	78

Table of contents

Part 1 – Condensed consolidated financial statements

CONSOLIDATED STATEMENT OF PROFIT OR LOSS

			from 1 January 2020
		from 1 July 2020 to	to 30 September	from 1 July 2019 to	from 1 January 2019
		30 September 2020	2020	30 September 2019	to 30 September 2019
Note 3.3	Revenues from contracts with customers	5 632	16 580	5 641	16 869
Note 4.1	Cost of sales	(4 296)	(13 430)	(4 431)	(13 577)
	Gross profit	1 336	3 150	1 210	3 292
Note 4.1	Selling costs and administrative expenses	( 370)	(1 044)	( 387)	(1 064)
	Profit on sales	966	2 106	823	2 228
Note 4.5	Share of losses of joint ventures accounted for using the equity method	4	( 206)	( 106)	( 169)
Note 4.5	Interest income on loans granted to joint ventures calculated using the effective interest rate method	91	284	89	255
Note 4.5	Profit or loss on involvement in joint ventures	95	78	( 17)	86
Note 4.2	Other operating income	167	494	826	1 084
Note 4.2	Other operating costs	( 556)	( 723)	( 106)	( 334)
Note 4.3	Finance income	117	115	-	3
Note 4.3	Finance costs	( 17)	( 191)	( 554)	( 643)
	Profit before income tax	772	1 879	972	2 424
	Income tax expense	( 299)	( 707)	( 276)	( 758)
	PROFIT FOR THE PERIOD	473	1 172	696	1 666
	Profit for the period attributable to:
	Shareholders of the Parent Entity	472	1 174	695	1 664
	Non-controlling interest	1	( 2)	1	2
	Weighted average number of ordinary shares (million)	200	200	200	200
	Basic/diluted earnings per share (in PLN)	2.36	5.87	3.48	8.32

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

			from 1 July 2019 to
	from 1 July 2020 to 30 September 2020	from 1 January 2020 to 30 September 2020	30 September 2019	from 1 January 2019 to 30 September 2019
Profit for the period	473	1 172	696	1 666
Measurement of hedging instruments net of the tax effect	140	( 128)	( 268)	( 328)
Exchange differences from the translation of statements of operations with a functional currency other than PLN	75	( 36)	( 149)	( 132)
Other comprehensive income which will be reclassified to profit or loss	215	( 164)	( 417)	( 460)
Measurement of equity financial instruments at fair value through other comprehensive income, net of the tax effect	( 29)	80	( 31)	( 94)
Actuarial (losses)/gains net of the tax effect	( 34)	( 261)	98	( 27)
Other comprehensive income, which will not be reclassified to profit or loss	( 63)	( 181)	67	( 121)
Total other comprehensive income	152	( 345)	( 350)	( 581)
TOTAL COMPREHENSIVE INCOME	625	827	346	1 085
Total comprehensive income attributable to:
Shareholders of the Parent Entity	624	829	344	1 082
Non-controlling interest	1	( 2)	2	3

from 1 January 2020 to 30 September 2020 from 1 January 2019 to 30 September 2019 Cash flow from operating activities Profit before income tax 1 879 2 424 Depreciation/amortisation recognised in profit or loss 1 391 1 358 Share of losses of joint ventures accounted for using the equity method ²⁰⁶ ¹⁶⁹ Interest on loans granted to joint ventures ( 284) ( 255) Interest on borrowings 120 106 Impairment losses on property, plant and equipment 94 - Exchange differences, of which: ( 255) ( 110) from investment activities and cash ( 175) ( 584) from financing activities ( 80) 474 Change in provisions and employee benefits liabilities 29 ( 23) Change in other receivables and liabilities other than working capital 59 ( 347) Change in assets and liabilities due to derivatives 48 2 Reclassification of other comprehensive income to profit or loss due to the realisation of hedging derivatives ( 122) ( 61) Note 4.12 Other adjustments 14 6 Exclusions of income and costs, total 1 300 845 Income tax paid ( 444) ( 334) Note 4.11 Changes in working capital, including: 519 ( 439) change in trade payables transferred to factoring 460 5 Net cash generated from operating activities 3 254 2 496 Cash flow from investing activities Expenditures on mining and metallurgical assets, including: (2 199) (2 065) paid capitalised interest on borrowings ( 96) ( 133) Expenditures on other property, plant and equipment and intangible assets ( 288) ( 249) Expenditures on financial assets designated for decommissioning of mines and other technological facilities ( 22) ( 292) Acquisition of newly-issued shares of joint ventures ( 207) ( 172) Proceeds from financial assets designated for decommissioning of mines and other technological facilities ³ ²⁶⁸ Other 38 ( 8) Net cash used in investing activities (2 675) (2 518) Cash flow from financing activities Proceeds from borrowings 4 181 4 397 Proceeds from the issue of debt financial instruments - 2 000 Proceeds from derivatives related to sources of external financing 34 - Repayment of borrowings (4 429) (6 382) Repayment of lease liabilities ( 85) ( 43) Expenditures due to derivatives related to sources of external financing ( 40) - Payment of interest on borrowings ( 149) ( 117) Other 6 1 Net cash used in financing activities ( 482) ( 144) NET CASH FLOW 97 ( 166) Exchange gains/(losses) 6 ( 43) Cash and cash equivalents at beginning of the period 1 016 957 Cash and cash equivalents at end of the period, including: 1 119 748 restricted cash 35 14

CONSOLIDATED STATEMENT OF CASH FLOWS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

		As at 30 September 2020	As at 31 December 2019
	ASSETS
	Mining and metallurgical property, plant and equipment	20 291	19 498
	Mining and metallurgical intangible assets	2 048	1 966
	Mining and metallurgical property, plant and equipment and intangible assets	22 339	21 464
	Other property, plant and equipment	2 795	2 829
	Other intangible assets	133	155
	Other property, plant and equipment and intangible assets	2 928	2 984
Note 4.5	Involvement in joint ventures – loans granted	6 075	5 694
	Derivatives	864	124
	Other financial instruments measured at fair value	532	448
	Other financial instruments measured at amortised cost	699	656
Note 4.6	Financial instruments, total	2 095	1 228
	Deferred tax assets	150	157
	Other non-financial assets	139	142
	Non-current assets	33 726	31 669
	Inventories	4 854	4 741
Note 4.6	Trade receivables, including:	745	688
	Trade receivables measured at fair value through profit or loss	222	300
	Tax assets	426	571
Note 4.6	Derivatives	269	293
	Other financial assets	298	280
	Other non-financial assets	248	151
Note 4.6	Cash and cash equivalents	1 119	1 016
Note 4.13	Non-current assets held for sale	31	-
	Current assets	7 990	7 740
	TOTAL ASSETS	41 716	39 409
	EQUITY AND LIABILITIES
	Share capital	2 000	2 000
	Other reserves from measurement of financial instruments, including:	( 786)	( 738)
	Accumulated costs associated with non-current assets held for sale	( 14)	-
	Accumulated other comprehensive income, other than from measurement of	1 657	1 954
	financial instruments Retained earnings	18 068	16 894
	Equity attributable to shareholders of the Parent Entity	20 939	20 110
	Equity attributable to non-controlling interest	90	92
	Equity	21 029	20 202
Note 4.6	Borrowings, lease and debt securities	7 093	7 525
Note 4.6	Derivatives	825	183
	Employee benefits liabilities	2 986	2 613
	Provisions for decommissioning costs of mines and other technological	1 862	1 774
	facilities Deferred tax liabilities	544	445
	Other liabilities	611	631
	Non-current liabilities	13 921	13 171
Note 4.6	Borrowings, lease and debt securities	404	348
Note 4.6	Derivatives	252	91
Note 4.6	Trade and similar payables	3 146	2 766
	Employee benefits liabilities	1 189	1 150
	Tax liabilities	545	433
	Provisions for liabilities and other charges	178	222
	Other liabilities	1 048	1 026
Note 4.13	Liabilities associated with non-current assets held for sale	4	-
	Current liabilities	6 766	6 036
	Non-current and current liabilities	20 687	19 207
	TOTAL EQUITY AND LIABILITIES	41 716	39 409

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 2019	2 000	( 444)	2 005	15 572	19 133	92	19 225
Profit for the period	-	-	-	1 664	1 664	2	1 666
Other comprehensive income	-	( 422)	( 160)	-	( 582)	1	( 581)
Total comprehensive income	-	( 422)	( 160)	1 664	1 082	3	1 085
Reclassification of the result of measurement of equity instruments measured at fair value through other comprehensive income	-	99	-	( 99)	-	-	-
As at 30 September 2019	2 000	( 767)	1 845	17 137	20 215	95	20 310
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 non-current assets held for sale	-	( 14)	-	-	( 14)	-	( 14)

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 Center 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) 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 2020

In the current quarter KGHM Polska Miedź S.A. consolidated 71 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 4.4420 EURPLN*,
for the conversion of turnover, profit or loss and cash flow for the comparable period, the rate of 4.3086 EURPLN*,
for the conversion of assets, equity and liabilities at 30 September 2020, the current average exchange rate announced by the National Bank of Poland (NBP) as at 30 September 2020, of 4.5268 EURPLN,
for the conversion of assets, equity and liabilities at 31 December 2019, the current average exchange rate announced by the NBP as at 31 December 2019, of 4.2585 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 2020 and 2019.

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 2020 and the comparable period from 1 January to 30 September 2019, 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 2020 and the comparable period from 1 January to 30 September 2019 (Part 2).

Neither the condensed consolidated financial statements for the period from 1 January to 30 September 2020 and as at 30 September 2020 nor the condensed separate financial statements for the period from 1 January to 30 September 2020 and as at 30 September 2020 were subject to audit by a certified auditor.

The consolidated quarterly report for the period from 1 January 2020 to 30 September 2020 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 R 2019 and the Consolidated annual report RS 2019.

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 2019.

Note 1.4.1 Impact of new and amended standards and interpretations

The Group is bound by the following amendments to standards from 1 January 2020:

Amendments to IAS 1 and IAS 8 on the definition of "material",
Amendments to IFRS 9, IAS 39 and IFRS 7 on the interest rate benchmark reform,
Amendments to IFRS 3 on the definition of a business,
Amendments to IFRS 16 on Covid-19-Related Rent Concessions,
Amendments to References to the Conceptual Framework in IFRS.

Up to the date of publication of these consolidated financial statements, the aforementioned amendments to the standards were adopted for use by the European Union. In the Group's opinion, these standards will be applicable to the Group's activities in the scope of future economic operations, transactions or other events, towards which these amendments to standards are applicable. However, in the Group's opinion, this impact will not be significant, taking into account adopted amendments to IFRS 9, IAS 39 and IFRS 7 on the interest rate benchmark reform with respect to hedge accounting.

Note 1.5 Impairment of assets

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

In the first three quarters of 2020, the COVID-19 (coronavirus) epidemic was still spreading across the world, and its impact was noticeable in many areas. Among others, due to the coronavirus market indices drastically fell.

The share price of KGHM Polska Miedź S.A. in the first nine months of 2020 initially fell to PLN 49.40 (share price on 12 March 2020) or a decrease by 48% as compared to the share price from the end of 2019 and then rose to PLN 118.00 as at 30 September 2020. During the same period the WIG and WIG20 indices fell by 36% and 39% as compared to 31 December 2019 and by 15% and 20% as compared to 30 September 2020, respectively. As a result, the Company's market capitalisation increased from PLN 19 116 million to PLN 23 600 million, and therefore as at 30 September 2020 it was 12.23% above the value of the net assets of the Group. After the end of the reporting period, according to the closing price as at 17 November 2020, the share price of KGHM Polska Miedź S.A. amounted to PLN 142.60 and the Company's market capitalisation was still higher than the value of the net assets of the Group.

The drop in share prices caused by the COVID-19 epidemic affected share prices of companies in the majority of sectors, in many economic sectors, and reflected investor uncertainty as to the future. This was confirmed by the increase in the value of typically conservative instruments such as gold and the exchange rates of certain currencies.

From the point of view of the Company's operations, the key factor is first and foremost the copper price. At the start of the epidemic, this metal was substantially undervalued. As at 31 December 2019, the price of copper amounted to 6 156 USD/t. During the reporting period, as at 23 March 2020 the copper price had fallen to 4 617 USD/t, but nonetheless, as time passed, with the inflow of more hopeful information as respects demand for this commodity, prices returned to their level at the start of 2020 and on 30 September 2020 the copper price reached the level of 6 610 USD/t.

The share prices of companies involved in the mining and processing of copper are strongly correlated with the price of this metal. The decrease in the market capitalisation of companies in this sector, including KGHM Polska Miedź S.A., was therefore of a temporary nature, and reflected the initial panic of investors related with the coronavirus pandemic and the associated drop in the prices of the major metals. Once it became evident that the pandemic would not have a significant impact, on either the production or sales of these entities, share prices returned to their former levels.

It is also worth mentioning that in the case of the Polish assets, of significance are PLN-expressed metals prices, which are also affected by the USD/PLN exchange rate. Fluctuations in the price of copper related to the volatility on the financial markets, whose origins may often be found not only in macroeconomics but also in geopolitics, are usually to a large extent offset by changes in the USD/PLN exchange rate.

Since the outbreak of the pandemic at the turn of February and March 2020, KGHM Polska Miedź S.A. has maintained full operational capability and is advancing its production and sales plans.

With respect to the international mining assets, the epidemic had an impact on the operating results, mainly due to the decrease in copper and molybdenum prices in the first and second quarters of 2020. It should be noted that only KGHM INTERNATIONAL LTD. experienced a decrease in EBITDA, but in this case the situation on the copper market was not the main reason behind the decrease in revenues.

The epidemic situation in Chile had an impact on the realisation of the sale schedule of copper produced by Sierra Gorda S.C.M. Due to slowdowns in the port of Antofagasta, shipments of some of parties of copper were rescheduled from the first to the second quarter of 2020, which in addition to lower prices contributed to the achievement of relatively weak results in the first quarter of 2020. Nevertheless it should be noted that in the second quarter of 2020 the situation had significantly improved, meaning that the EBITDA achieved by Sierra Gorda S.C.M. in the first half of 2020 was (in PLN) 23% higher than in the corresponding period of 2019 and close to budget targets. In the third quarter of 2020, market conditions have significantly improved despite the on-going epidemic threat. Metal prices increased, which resulted in improved financial results by the international mining assets.

There were no production slowdowns recorded in KGHM Polska Miedź S.A. or in any of the international mines of the KGHM Polska Miedź S.A. Group or Sierra Gorda S.C.M. which could be directly attributable to the pandemic.

As a result of the assessment, there were no indications identified suggesting the risk of impairment of assets related to activities of KGHM Polska Miedź S.A. in Poland and abroad.

Due to the uncertainty and the significant volatility of basic economic parameters, including metals prices and currency exchange rates, and dynamic development of the epidemiological situation in Poland and globally, and its impact on the economic situation, the Company is continuously monitoring the global situation in order to assess its potential impact on the Group.

TEST FOR THE IMPAIRMENT OF THE NON-CURRENT ASSETS OF SPA COMPANIES – Segment – Other segments

The outbreak of the COVID-19 epidemic had a substantial impact on the Group's secondary activities with respect to the providing of spa services by the following companies (CGUs): Uzdrowiska Kłodzkie S.A. - Grupa PGU, Uzdrowisko Połczyn Grupa PGU S.A., Uzdrowisko Cieplice Sp. z o.o. - Grupa PGU, Uzdrowisko Świeradów - Czerniawa Sp. z o.o. – Grupa PGU and as at 30 June 2020, the Group performed impairment testing of assets of spa companies and recognised an impairment loss in the amount of PLN 71 million. Assumptions adopted for impairment testing of assets of companies of the Group which provide spa services and results of the tests as at 30 June 2020 were presented in the Consolidated halfyear report PSr 2020.

As at 30 September 2020, the analysis to determine the risk of an impairment of these assets which included the verification of discount rates, sale volumes, margins and forecasted cash flows comprised of, among others, expected capital expenditures and working capital, confirmed that assumptions used by the KGHM Polska Miedź S.A. Group to assess the non-current assets of spa companies as at 30 June 2020 are up to date.

As at 30 September 2020, the analysis conducted by the Group did not provide a basis to recognise an additional impairment loss to the ones recognised as at 30 June 2020.

TEST FOR IMPAIRMENT OF PROPERTY, PLANT AND EQUIPMENT OF POL-MIEDŹ TRANS Sp. z o.o. – Segment – Other segments

As at 30 June 2020, due to indications of the possibility of changes in the recoverable amount of the property, plant and equipment of the company POL-MIEDŹ TRANS Sp. z o.o., the Management Board of the Parent Entity performed impairment testing of these assets. The key indication to perform a test was a loss for the first half of 2020, deviating from the financial results assumed for that period.

The carrying amount of the property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o. as at 30 June 2020 amounted to PLN 246 million. For the purpose of estimating the recoverable amount, in the conducted test the value in use of property, plant and equipment was measured using the DCF method, i.e. the method of discounted cash flows.

Basic assumptions adopted for impairment testing
Assumption	Level adopted in testing
Detailed forecast period	07.2020-12.2024
Operating margin	0.3% during the forecast period, 1.9% in the residual value
Capital expenditures during the forecast period	PLN 237 million
Discount rate	4.64% (nominal rate after taxation)
Growth rate following the forecast period	0%

As a result of the impairment testing of the property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o., the recoverable amount of the tested assets was determined to be at the level of PLN 225 million, which was lower than the carrying amount of these assets, which gave a basis to recognise an impairment loss in the amount of PLN 21 million.

The measurement of the property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o. indicates a significant sensitivity to the adopted discount rates and operating margin. The following table presents the impact of changes to these parameters on the measurement of the assets.

Sensitivity analysis of the recoverable amount of property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o.

	The recoverable amount for a given discount rate
	lower by 1 pp.	per test	higher by 1 pp.
Discount rate 4.64% (test)	396	225	162
	The recoverable amount for a given operating margin
	lower by 1 pp.	per test	higher by 1 pp.
Operating margin 0.3%, 1.9% in residual value (test)	120	225	329

In order to monitor the risk of impairment of property, plant and equipment in subsequent reporting periods, it was determined that the recoverable amount would be equal to the carrying amount of property, plant and equipment if the discount rate were to decrease to 4.44% or if the operating margin were to increase by 0.2 pp.

As at 30 September 2020, realisation of the financial results of POL-MIEDŹ TRANS Sp. z o.o. was analysed once more, and as a result it was determined there is an indication of a possible change in the recoverable amount of the property, plant and equipment of the company. The loss for the first 9 months of 2020 deviated from the financial results assumed for that period and provided a basis to conduct a test for impairment of these assets.

The carrying amount of the property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o. as at 30 September 2020 amounted to PLN 232 million. For the purpose of estimating the recoverable amount, in the conducted test the value in use of property, plant and equipment was measured using the DCF method, i.e. the method of discounted cash flows.

Basic assumptions adopted for impairment testing
Assumption	Level adopted in testing
Detailed forecast period	10.2020-12.2024
Operating margin	0.9% during the forecast period, 1.9% in the residual value
Capital expenditures during the forecast period	PLN 224 million
Discount rate	4.64% (nominal rate after taxation)
Growth rate following the forecast period	0%

As a result of the impairment testing of the property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o., the recoverable amount of the tested assets was determined to be at the level of the carrying amount of these assets, which did not give a basis to recognise an additional impairment loss.

Sensitivity analysis of the recoverable amount of property, plant and equipment of POL-MIEDŹ TRANS Sp. z o.o.

	The recoverable amount for a given discount rate
	lower by 1 pp.	per test	higher by 1 pp.
Discount rate 4.64% (test)	403	233	170
	The recoverable amount for a given operating margin
	lower by 1 pp.	per test	higher by 1 pp.
Operating margin 0.9%, 1.9% in residual value (test)	128	233	337

In order to monitor the risk of impairment of property, plant and equipment in subsequent reporting periods, it was determined that the recoverable amount would be equal to the carrying amount of property, plant and equipment if the discount rate were to increase to 4.65% or if the operating margin were to decrease by 0.01 pp.

EVALUATION OF RISK OF THE IMPAIRMENT OF ASSETS OF THE COMPANY INTERFERIE S.A. IN THE CONTEXT OF MARKET CAPITALISATION – Segment – Other segments

The market capitalisation of the subsidiary INTERFERIE S.A. in the first nine months of 2020 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 (the carrying amount of the tested assets was PLN 139 million).

Due to the emergence at the end of 2019 in China of the SARS-CoV-2 virus and its subsequent global spread, the management board of the company INTERFERIE S.A. is continuously monitoring the global economic situation and the potential negative impact on the INTERFERIE Group. Restrictions related to the impossibility of providing hotel services were laid down in the Decree of the Council of Ministers dated 31 March 2020 establishing specified restrictions, orders and bans. Due to the spread of the SARS-CoV-2 virus, in the first quarter of 2020 a decision was made to temporarily suspend activities in the company's facilities. The subsequent impact of this situation on its activities, i.e. a possible decrease in the sale of services, and therefore worsening of liquidity and the financial result, was announced by the unit via regulatory filings.

On 16 March 2020, activities of two of the facilities of this company, i.e. in Świeradów Zdrój and Kołobrzeg, were temporarily suspended. The management board of INTERFERIE S.A., following a detailed analysis of the situation, determined that in these two facilities it was not possible to reorganise the services provided to clients to be compliant with the Decree of the Minister of Health dated 13 March 2020. Following the hotel checkout on 21 March 2020, the activities of INTERFERIE in Ustronie Morskie Leisure and Sanatorium CECHSZTYN were temporarily suspended until further notice.

The next facility suspended from operations was Hotel BORNIT in Szklarska Poręba, in which, until further notice, activities were temporarily suspended on 23 March 2020. Suspension of this company's facilities resulted in a decrease in the number of sold person/days ratio from 296.1 thousand in the first nine months of 2019 to 136.3 thousand in the first nine months of 2020, or by 54%. Revenues from sales for the first nine months of 2020 amounted to PLN 19 460 thousand and decreased, as compared to the first nine months of 2019, by 48%. Total comprehensive income for the first nine months of 2020 amounted to PLN (6 769) thousand as compared to PLN 4 280 thousand for the first nine months of 2019.

Restrictions to the company's activities, which resulted in the decrease in revenues, also impacted the following sectors of the company's activities: MICE (Meetings, Incentives, Conferences and Exhibitions), the large conferences sector, camps, green schools, swimming pool services, night club services and discoteque services.

In order to assess the impairment, the Company identified the following 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. In order to assess the impairment, the fair value of the assets was estimated 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, with the exception of CGU INTERFERIE Hotel in Głogów, CGU INTERFERIE Hotel Bornit in Szklarska Poręba and INTERFERIE in Świeradów Zdrój – Hotel Malachit, for which the fair value was determined on the basis of valuation reports.

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

The Company conducted impairment testing with the following assumptions:

a) the company will continue as a going concern in a significantly unaltered scope and using current operating units,
b) cash flows adopted on the basis of reliable estimates of the Management Board of INTERFERIE S.A., including the impact of COVID-19 on the current condition of the company,
c) a forecast period of 10 years for facilities with planned significant investments and 5 years for other facilities,
d) a discount rate calculated at the net level of 7.5% assuming the current macroeconomic and sector parameters for the company, while a prudent discount rate at the level of 8.5% was adopted for facilities with planned significant investments,
e) average EBITDA margin in the forecast period at the level of 21%,
f) level of capital expenditures in the forecast period at the level of PLN 95 million,
g) costs to sale in the total amount of 3% (including: legal services, real estate agencies and other charges related to sale transactions),
h) a growth rate following the forecast period at the level of 2%.

As a result of the impairment testing conducted on the company's assets, the estimated recoverable amount of the assets was determined to be higher than their carrying amount, which did not provide a basis to recognise an impairment loss.

CGU	Carrying amount /PLN mn/	Recoverable amount /PLN mn/
INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn	10	15
INTERFERIE in Kołobrzeg Leisure and Sanatorium Chalkozyn	19	46
INTERFERIE in Dąbki Sanatorium Argentyt	62	79
INTERFERIE in Świeradów Zdrój – Hotel Malachit	22	25
INTERFERIE Hotel Bornit in Szklarska Poręba	24	25
INTERFERIE Hotel in Głogów	2	2

The company's share price results from, among others, their low liquidity (which is related to stable share ownership), and the on-going process of rebuilding the company's value.

The measurement indicated a significant sensitivity of fair value to the adopted discount rates, the volatility of operating profit during the forecast period and the growth rate following the forecast period of the following CGUs:

Sensitivity analysis of fair value
CGU	Fair value /PLN	Discount rate		Operating profit		Growth rate following the forecast period
	mn/	+6%	-6%	+6%	-6%	+ 1pp.	- 1 pp.
INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn	15	13	16	16	14	18	13
INTERFERIE in Kołobrzeg Leisure and Sanatorium Chalkozyn	46	39	55	51	41	57	40
INTERFERIE in Dąbki Sanatorium Argentyt	79	72	87	84	74	88	73

The discount rate and change in the amount of operating profit, beyond which the value of assets would be lower than the carrying amount:

Level of change in assumptions implicating an impairment loss
CGU	Increase in discount rate	Decrease in operating profit
INTERFERIE in Ustronie Morskie - Leisure and Sanatorium Cechsztyn	2.4 pp.	32%
INTERFERIE in Kołobrzeg Leisure and Sanatorium Chalkozyn	2.8 pp.	34%
INTERFERIE in Dąbki Sanatorium Argentyt	1.5 pp.	21%

The results of the impairment testing of assets of the Group as at 31 December 2019 were presented in the part 3 of the Consolidated annual report RS 2019.

2 – Realisation of strategy

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

The Company 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 eindustry) 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 ORGANISATION	Implement systemic solutions aimed at increasing the KGHM Group's value
PEOPLE AND THE ENVIRONMENT	Growth based on the idea of sustainable development and safety as well as enhancing the KGHM Group's image of social responsibility

Advancement of the Strategy in the third quarter of 2020

In advancing the Strategy, 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.

Following are the key achievements in the third quarter of 2020 with respect to strategic programs and projects being advanced under individual areas of the Strategy:

Strategic area/ Programs and projects	Degree of advancement
PRODUCTION
Selected actions aimed at improving the efficiency of the core production line in Poland	The advancement of projects aimed at automatisation of production in the Mining Divisions of KGHM, under the KGHM 4.0 program in the area INDUSTRY, was continued:  "The placement and identification of machinery and persons in underground mines" – the system was launched as a pilot version and was built and handed over for operation. The process of gathering user opinions is underway in order to develop a report, based on which further decisions will be taken.  "Broad-band data transmission in underground mines". This project is being advanced in the mining divisions, where a total of 78 Wi-Fi access points have been constructed. In September 2020 completion of the process of starting up the equipment was completed.  "Monitoring of utilities – power, ventilation, water". Work continued on advancing the project – the process of procurement was carried out along with negotiations with bidders.  "Robotisation of production and auxiliary processes" - construction of a CuXRF robot for scanning for copper content at the working faces. The process is underway of signing an agreement with the National Centre for Nuclear Research for the modernisation of the x-ray head, a prototype made specially for use on the robot. Tender procedures are underway to create an electric, battery-powered mobile platform for the CuXRF robot. Following its completion a tender will be launched to build the robotic arm and to integrate all of the robotic elements.  "Center of Advanced Data Analysis (Centrum Zaawansowanych Danych Analitycznych - CZAD)". The algorithms involving analysis of the loads borne by the conveyor belts in the mines, developed by KGHM Cuprum, were positively verified by the users. In the second and third quarters of 2020 the functioning of the algorithms on actual data on the servers of KGHM CUPRUM was tested. Work is underway on implementing these analytics in the divisions of KGHM. For identified projects deemed to have substantial potential to receive energy efficiency certificates, two energy efficiency audits were performed, with another three being near completion. Changes were made in the PN-EN ISO50001:2012-compliant Energy Management System (EMS) to ensure its compliance with the new PN-EN ISO 50001:2018-09 standard. The effectiveness of the actions taken was confirmed by a certificate issued by an authorised body
	(UDT Cert) during the process of re-certifying KGHM's EMS.

	As part of the development of KGHM's Integrated Management System, which includes the EMS (compliant with ISO 50001:2018) and the Occupational Health and Safety Management System (compliant with ISO 45001:2015), actions were initiated aimed at improving EMS procedures, including their integration with the OHS Management System procedures.
Sierra Gorda mine in Chile – Phase 1 (KGHM INTERNATIONAL	In the first three quarters of 2020, production of payable copper amounted to 59.9 thousand tonnes, and production of molybdenum amounted to 6.9 million pounds (based on the 55% interest held by KGHM Polska Miedź S.A. in the Sierra Gorda mine).
Ltd. Group - 55%, Sumitomo Metal Mining and Sumitomo	Sierra Gorda focused on implementing the optimisation program oriented on improving the work of the mine, processing plant, infrastructure and the tailings storage facility. The goal of these actions is to enhance the operational efficiency of the infrastructure and its processing capacity.
Corporation - 45%) Metallurgy Development Program	The process of concluding the Metallurgy Development Program continues.
Increasing cathode	Revolving-Casting-Refining (RCR) Furnace
production at the Legnica Copper Smelter and Refinery	As of 6 July 2020 the RCR furnace was handed over for use. One of four units to measure gas pressure at 15 kPa was installed. A "spark arrester" was supplied (an element of the furnace's gas extraction installation), which will be installed during the next maintenance shutdown.
to 160 kt/year	Permanent starter sheet technology The decision to advance this part of the project has been deferred until January 2021. Work is underway on preparing a recommendation by the Division as respects further actions in this regard.
Construction of a 5 MW photovoltaic power plant on the grounds of the "Obora" Sandpit	This project is being advanced under the Strategic Program "Development of Power-Generation Capacity". In the third quarter an agreement was signed with the project contractor. Stage I of the agreement commenced, involving a preparation of the spatial plan. A technical plan was prepared for restoring the post-industrial terrain of the Obora Sandpit. An application was filed with the County Head Office (Starostwo Powiatowe) in Lubin to change the direction of the terrain's restoration.
Construction of the	Under the Strategic Program "Development of Power-Generation Capacity", a project was created to
photovoltaic power plant complex HMG I III	build a photovoltaic power plant complex on the grounds of the Głogów Copper Smelter and Refinery. An agreement was signed with the entity responsible for preparing the project and gaining administrative decisions to enable its construction. Work commenced on stage I of the agreement,
	i.e. preparing a spatial plan.
DEVELOPMENT
Deposit Access Program	Construction of the GG-1 shaft Shaft sinking reached a depth of 1204.2 m. The following was completed: sinking within the main dolomite layer within the final lining. The following is underway: advancement of the subsequent stage, including sinking within the rock salt interval.
	Construction of the GG-2 "Odra" shaft Procedures are underway related to the amendment of planning documentation with a planned publication date of 15 February 2021. Work on the geological project for construction of the GG-2 shaft was advanced. Due to the lack of a legal title to the land for construction purposes, actions are underway aimed at dealing with the risk of a lack of agreement with the owner of the property.
	Construction of the Gaworzyce shaft Stage I of the Spatial Plan for the Gaworzyce shaft (KPP – Koncepcja Programowo - Przestrzenna) was handed over. Work is underway on selecting a site for the Shaft and on the handover of work expanding the scope of the KPP by additional sites.
	Access and development tunnels In the first three quarters of 2020, 30.1 km of tunneling were excavated (plan – 30.9 km) along with infrastructure in the Rudna and Polkowice-Sieroszowice mines. Progress on the excavation of tunnels in the main direction towards the GG-1 shaft reached 36% of the target for the year. The delay is the result of challenging geological and mining conditions (the Jakubów tectonic fault), gas geodynamic hazards (ceiling rock falls, gas caverns), and additionally of challenges related to air conditioning and ventilation.
	Surface-based Central Air Conditioning System (SCA) Construction continued on the SCA at the GG-1 shaft. Work continues on construction of the power building and completion work.
	Ice Water Transportation System (IWTS) Assembly of the tri-unit feeder continues. Work continues on the laying of surface-based piping.

Development of the Żelazny Most Tailings Storage Facility	Construction of the Southern Quarter  Based on the current building permits, work continued on construction of the Southern Quarter. Commencement of the consecutive storage of tailings is planned for March 2021, and completion of construction by June 2022.  Hydrotechnical construction work is underway.  Work is underway on water management and electrical power infrastructure.  Work is underway on tailings management infrastructure for the Southern Quarter. Construction of the Tailings Segregation and Thickening Station (TSTS)  The TSTS project was advanced in that part related to hydrocyclone technology, and work related with thickening technology is at an advanced stage of realisation.
	 Work is underway involving architecture and internal water-sewage installations, as well as ventilation for the hall and the power building.  Work is underway on assembly of the technological part of the TSTS.  Work is underway on internal power installations.
Construction of an Upcast 2 production line	 Work is underway on the construction of infrastructure in the vicinity of the station. The goal of the Upcast 2 project is to increase the production capacity of the Cedynia Wire Rod Plant's CuOFE rod line (oxygen-free rod) to 30 thousand tonnes/year with the possibility of expanding the product assortment to include CuMg and CuSn wire alloys. The plan calls for a second Upcast line to be built alongside the existing line as well as the requisite technical and logistical infrastructure. In the third quarter of 2020, design work was performed. In November 2020 the handover of installation design documentation is planned.
Exploration projects in Poland (concessions to explore	Retków–Ścinawa and Głogów A drillhole was completed on the Głogów concession.
for and evaluate copper ore deposits)	Synklina Grodziecka and Konrad Geological research continued, the process of amending both concessions was advanced.
	Bytom-Odrzański, Kulów-Luboszyce Concession-related proceedings continued before the Minister of Climate. The Company expects a re assessment of both concessions and the issuance of decisions.
Other concessions	Puck region Preparatory work was carried out aimed at commencing the sinking of another drillhole, the completion of which is planned to the end of 2020.
	Nowe Miasteczko Geophysical and geological work was performed.
Projects involving development of the international assets	Victoria project Exploratory work continued, aimed at increasing knowledge of the project's mineral resources and actions aimed at maintaining good relations with key stakeholders in the project.
	Ajax project As a result of the decision to not grant an Environmental Assessment Certificate for the Ajax project in 2019, the work carried out was mainly related to monitoring and securing of the project terrain in accordance with law in force.
	Sierra Gorda Oxide Work continued aimed at preparing the project for realisation.
INNOVATION
CuBR Program	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 being advanced. In total, 25 projects have been advanced in the four editions of the competition.
	 Currently, 15 Projects are being advanced.  8 projects have been completed, while realisation of further two was suspended due to the inability to implement the results of the research.  Among others, 4 new projects were commenced under the 4th competition of the CuBR
	Venture, which involve subjects related to the Circular Economy (CE), the completion of which
Selected R&D initiatives	is expected in the fourth quarter of 2020. In the third quarter of 2020, work continued on advancing the Implementation Doctorates Program for employees of KGHM, in which at the end of the third quarter of 2020, 40 Doctoral students from the two editions participated.

	The first three tasks in the process of digitisation and modern archivisation of knowledge resources at the head office of KGHM were completed. Actions were continued with respect to "Building and implementing a workflow system for R&D processes".
	Work continues on building a prototype self-propelled battery-powered transport vehicle.
	Work continues on building a prototype self-propelled bolting rig equipped with an automatic bolting
	turret. Initiatives continue involving the testing of electric, battery-powered self-propelled mining machinery aimed at gaining knowledge and data necessary for the utilisation of electric, battery-powered machinery under the conditions existing in the mines of KGHM Polska Miedź S.A.
	Projects subsidised under KIC Raw Materials (Knowledge and Innovation Community):  Work continued on subsidised research projects. Projects subsidised under the Horizon 2020 Program:  Work continued on advancing the project "Development of technological assumptions to improve the recovery of useful metals contained in particulates in mineral resources processing", in which methods for improving particulate flotation in the Concentrators division are undergoing analysis.  Work commenced on the project "Development of constructed facilities monitoring systems", under which it is planned to pre-test machine learning and Artificial Intelligence in systems monitoring the condition of the Żelazny Most TSF.  Two applications were submitted for subsidization of the projects "Ore flow control system" and "Intelligent steering of mine production 2".
Intellectual property	 Proceedings are underway to obtain a protection right for the word trademark "KGHM", announced in an international procedure, in the following countries: China and Turkey.  Protection was received for the word trademark "KGHM" on the territories of the USA, Switzerland,
	Ukraine, Japan and India.  A patent application was submitted for the invention "A unit and method for the measurement of horizontal mine roofs" (P.435393).  Proceedings are underway at the Patent Office of the Republic of Poland for the granting of patents for the following inventions: "Cables for above-ground suspended power lines" (P.397200), "Means for positioning equipment and/or mobile elements of equipment, especially at the working face of a mine" (P.423699), "Control and registrational equipment for instrumented mining bolts,
	especially cemented bolts, a unit to monitor changes in concentrations, application of a unit to monitor concentrations and a means for the continuous monitoring of changes in concentrations of instrumented mining bolts" (P.427282), "Sensor for concentrations for non-instrumented mining bolts, especially for expansion bolts, a unit to monitor concentrations, application of a unit to monitor concentrations and a means for the continuous monitoring of changes in the load on non instrumented mining bolts" (P.427284), "Means and equipment to assess the state of seating of bolts, especially bonding bolts" (P.427285).
FINANCIAL STABILITY
Basing the KGHM Group's financing	Centralisation of external financing at the level of the Parent Entity resulted in extending the average weighted maturity of the entire KGHM Polska Miedź S.A. Group's external debt.
structure on long term instruments	The financial needs of companies in the KGHM Group are met through the use of intra-Group cash transfers. These processes are based mainly on management of the current liquidity of the KGHM Group, based on the cash pooling tool, which substantially increases the effectiveness of financial management for the KGHM Group, as well as on long-term owner loans, and on bonds with a long maturity period.
Shortening of the cash conversion cycle	The Company remains engaged in actions aimed at shortening the receivables recovery period and extending the payables payment period. At the end of the third quarter of 2020, the balance of trade payables transferred to reverse factoring amounted to PLN 1 056 million, and the level of factoring amounted to PLN 1 994 million. In advancing the assumptions of the Financial Stability strategy, the Company is in the process of organising a Factoring Syndicate, whose aim is to ensure permanent and safe access to factoring for the KGHM Group.
Effective market and credit risk management in the KGHM Group	As part of the advancement of the Company's strategic plan to secure against market risk, in the third quarter of 2020 strategies were implemented hedging revenues from the sale of copper in the period 2021-2022 for a total notional amount of 138 thousand tonnes, as well as hedging strategies on the silver market for a total notional amount of 24.6 million ounces with maturity in the years 2021-2023. In addition, the Company restructured an open hedge position on the copper and currency markets.
EFFICIENT ORGANISATION
KGHM 4.0 Program	With respect to ICT projects (Information and Communication Technology):

	 The configured CRM (Customer Relationship Management) system was handed over for
	operation.
	With respect to Industry projects (industrial production):
	 The project involving broadband data transmission in the underground mines was advanced
	in line with its assumptions. The topology of network nodal connections ensures redundancy,
	which in the conditions prevailing in the mines, where there is a high risk of damage from
	moving mining machinery or rock-mass movements, is of fundamental importance.
PEOPLE AND THE ENVIRONMENT
Program to adapt the	In the first three quarters of 2020, under the BATAs Program, 14 projects were advanced – these were
technological	at the Copper Smelters and Refineries at Głogów and Legnica. Work was completed on the construction
installations of KGHM	of an installation for the transport of lead slag within the Głogów Copper Smelter and Refinery, and the
to the requirements	process of obtaining an operating permit is underway. Work was completed on the construction of an
of BAT Conclusions for	installation for the desulphurisation of gases from the Kaldo furnace of the Precious Metals Plant at
the nonferrous metals	the Głogów Copper Smelter and Refinery. In relation to the other projects, construction and assembly
industry and to	work was carried out at the Głogów and Legnica Copper Smelters and Refineries.
restrict emissions of
arsenic (BATAs)
Program to Improve	In the third quarter of 2020, tasks were advanced under the Program to Improve Occupational Health
Occupational Health	and Safety in the area "attitude".
and Safety in KGHM	Main achievements:
Polska Miedź S.A.	 A new OHS Policy for KGHM Polska Miedź S.A. was adopted, uniformly for all Divisions,
	 A new OHS standard ISO 45001:2018 is being consistently implemented in the Concentrators
	Division, and preparations are underway to implement it the Mining Divisions, the Data
	Processing Center and the Head Office,
	 Joint risk assessment cards were implemented to support on-going analysis of OHS risk resulting
	from an external factor in the form of the SarsCov-2 pandemic,
	 Instructional films, iconography and OHS-themed articles were prepared, aimed at raising the
	consciousness of employees and enhancing their safety,
	 Cooperation was carried out with international institutions, for example Euromines, with respect
	to planned changes to legal acts as regards harmful substances in workplaces located in the
	Company's plants,
	 A variety of actions were taken related with mitigating the threat of the SarsCov – 2 pandemic.

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: Sudbury Basin, Robinson, Carlota, Franke 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: 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 2 Sp. z o.o., Future 3 Sp. z o.o., Future 4 Sp. z o.o., Future 5 Sp. z o.o., Future 6 Sp. z o.o. in liquidation and Future 7 Sp. z o.o. in liquidation, which operate in the structure related to the establishment of a Tax Group.

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. 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 VI FIZAN, 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., Staropolanka Sp. z o.o. in liquidation, 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 a segment's performance based on 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 income tax (current and deferred), finance income and costs, other operating income and costs, the share of losses of joint ventures accounted for using the equity method, impairment losses on interest in a joint venture, depreciation/amortisation and impairment losses on property, plant and equipment 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.

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.

Note 3.2 Financial results of reporting segments

		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 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	4 162	( 4)	(4 406)	-
- external	13 132	2 010	1 670	1 467	(1 670)	( 29)	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)
Impairment losses on non-current assets, including:	( 187)	-	-	( 92)	-	187	( 92)
impairment losses on investments in subsidiaries	( 131)	-	-	-	-	131	-
Share of losses of joint ventures accounted for using the equity method	-	( 206)	-	-	-	- - -	( 206)
				As at 30 September 2020
Assets, including:	38 275	10 996	9 897	5 478	(9 897)	(13 033)	41 716
Segment assets	38 275	10 996	9 897	5 478	(9 897)	(13 041)	41 708
Assets unallocated to segments	-	-	-	-	-	8	8
Liabilities, including:	17 540	17 926	13 728	2 613	(13 728)	(17 392)	20 687
Segment liabilities	17 540	17 926	13 728	2 613	(13 728)	(17 413)	20 666
Liabilities unallocated to segments	-	-	-	-	-	21	21
Other information				from 1 January 2020 to 30 September 2020
Cash expenditures on property, plant and equipment and intangible assets	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)**	1.60 6.29	1.87 7.38	1.24 4.90
Segment result - adjusted EBITDA	3 052	395	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.

** 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. *** 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 + 1 674) * 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 2019 to 30 September 2019
	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 financial statements
Revenues from contracts with customers, of which:	13 050	2 311	1 522	5 475	(1 522)	(3 967)	16 869
- inter-segment	234	15	-	3 714	-	(3 963)	-
- external	12 816	2 296	1 522	1 761	(1 522)	( 4)	16 869
Segment result - profit/(loss) for the period	1 663	( 441)	( 390)	12	390	432	1 666
Additional information on significant revenue/cost items of the segment
Depreciation/amortisation recognised in profit or loss	( 893)	( 292)	( 381)	( 178)	381	5	(1 358)
Share of losses of joint ventures accounted for using the equity method	-	( 169)	-	-	-	-	( 169)
	As at 31 December 2019
Assets, including:	35 989	10 689	9 156	5 386	(9 156)	(12 655)	39 409
Segment assets	35 989	10 689	9 156	5 386	(9 156)	(12 664)	39 400
Joint ventures accounted for using the equity method	-	-	-	-	-	4	4
Assets unallocated to segments	-	-	-	-	-	5	5
Liabilities, including:	16 100	16 849	12 801	2 552	(12 801)	(16 294)	19 207
Segments liabilities	16 100	16 849	12 801	2 552	(12 801)	(16 314)	19 187
Liabilities unallocated to segments	-	-	-	-	-	20	20
Other information	from 1 January 2019 to 30 September 2019
Cash expenditures on property, plant and equipment and intangible assets	1 774	478	463	187	( 463)	( 125)	2 314
Production and cost data	from 1 January 2019 to 30 September 2019
Payable copper (kt)	427.6	57.5	44.4
Molybdenum (million pounds)	-	0.6	8.2
Silver (t)	1 017.9	1.7	10.9
TPM (koz t)	71.4	62.9	22.8
C1 cash cost of producing copper in concentrate (USD/lb PLN/lb)**	1.71 6.57	1.79 6.86	1.39 5.33
Segment result - adjusted EBITDA	2 868	515	522	207	-	-	4 112
EBITDA margin***	22%	22%	34%	4%	-	-	22%

* 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. *** Adjusted EBITDA to revenues from sales. For the purposes of calculating the Group's EBITDA margin (22%), the consolidated revenues from sales were increased by revenues from sales of the segment Sierra Gorda S.C.M.

[4 112 / (16 869 + 1 522) * 100]

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

Reconciliation of adjusted EBITDA	from 1 January 2020 to 30 September 2020
	KGHM Polska Miedź S.A.	KGHM INTERNATIONAL LTD.	Other Consolidation segments 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.

Reconciliation of adjusted EBITDA	from 1 January 2019 to 30 September2019
	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	1 663	( 441)	12	432	1 666	( 390)
[-] Profit or loss on involvement in joint ventures	-	86	-	-	86	-
[-] Current and deferred income tax	( 707)	( 39)	( 25)	13	( 758)	105
[-] Depreciation/amortisation recognised in profit or loss	( 893)	( 292)	( 178)	5	(1 358)	( 381)
[-] Finance income and (costs)	( 621)	( 969)	( 14)	964	( 640)	( 629)
[-] Other operating income and (costs)	1 016	258	22	( 801)	495	( 7)
[-] (Recognition)/reversal of impairment losses on non-current assets recognised in cost of sales, selling costs and administrative expenses	-	-	-	-	-	-
Segment result - adjusted EBITDA	2 868	515	207	251	3 841	522	4 112

* 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	9 897	1 152	1 248	5	(1 248)	( 11)	11 043
Silver	2 326	17	48	-	( 48)	-	2 343
Gold	457	243	162	-	( 162)	( 1)	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
Merchandise and materials	275	-	-	2 796	-	(2 640)	431
Other products	104	170	216	83	( 216)	77	434
TOTAL	13 360	2 026	1 674	5 629	(1 674)	(4 435)	16 580

from 1 January 2020 to 30 September 2020

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

					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	10 046	1 126	966	5	( 966)	( 16)	11 161
Silver	2 004	5	22	-	( 22)	-	2 009
Gold	357	164	127	-	( 127)	-	521
Services	67	822	-	1 634	-	(1 149)	1 374
Energy	29	-	-	118	-	( 84)	63
Salt	27	-	-	23	-	-	50
Blasting materials and explosives	-	-	-	160	-	( 60)	100
Mining machinery, transport vehicles and other types of machinery and equipment	-	-	-	125	-	( 94)	31
Fuel additives	-	-	-	71	-	-	71
Lead	176	-	-	-	-	-	176
Products from other non-ferrous metals	-	-	-	63	-	( 3)	60
Steel	-	-	-	367	-	( 34)	333
Petroleum and its derivatives	-	-	-	219	-	( 183)	36
Merchandise and materials	195	-	-	2 639	-	(2 466)	368
Other products	149	194	407	51	( 407)	122	516
TOTAL	13 050	2 311	1 522	5 475	(1 522)	(3 967)	16 869

from 1 January 2019 to 30 September 2019

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

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

	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
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

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

	from 1 January 2019 to 30 September 2019
					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	13 050	2 311	1 522	5 475	(1 522)	(3 967)	16 869
Revenues from sales contracts, for which the price is set after the date of recognition of the sales (M+ principle), of which:	10 863	1 487	1 549	-	(1 549)	( 58)	12 292
settled	10 409	804	652	-	( 652)	( 58)	11 155
unsettled	454	683	897	-	( 897)	-	1 137
Revenues from realisation of long-term contracts	-	807	-	132	-	( 117)	822
Revenues from other sales contracts	2 187	17	( 27)	5 343	27	(3 792)	3 755
Total revenues from contracts with customers, of which:	13 050	2 311	1 522	5 475	(1 522)	(3 967)	16 869
in factoring	5 056	68	-	-	-	-	5 124
not in factoring	7 994	2 243	1 522	5 475	(1 522)	(3 967)	11 745

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

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

		from 1 January 2020 to 30 September 2020						from 1 January 2019 to 30 September 2019
		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	3 087	-	4	5 410	( 4)	(4 430)	4 067	4 525
Austria	120	-	-	16	-	-	136	163
Belgium	51	-	-	8	-	-	59	164
Bulgaria	9	( 1)	-	6	-	-	14	15
Czechia	1 069	-	-	10	-	-	1 079	1 030
Denmark	10	-	-	1	-	-	11	43
Estonia	13	-	-	1	-	-	14	10
Finland	-	-	-	4	-	-	4	68
France	387	-	-	3	-	-	390	550
Spain	-	241	-	2	-	-	243	201
Netherlands	2	-	44	-	( 44)	-	2	5
Germany	2 195	-	-	42	-	-	2 237	2 041
Romania	127	-	-	2	-	-	129	147
Slovakia	62	-	-	6	-	-	68	78
Slovenia	42	-	-	2	-	-	44	55
Sweden	15	-	-	25	-	-	40	35
Hungary	522	-	-	2	-	-	524	532
The United Kingdom	1 306	239	-	7	-	( 1)	1 551	2 183
Italy	772	-	-	6	-	-	778	696
Australia	607	-	-	-	-	-	607	79
Bosnia and Hercegovina	-	-	-	2	-	-	2	29
Chile	-	24	203	-	( 203)	-	24	16
China	1 597	458	877	-	( 877)	-	2 055	1 761
India	-	-	17	1	( 17)	-	1	1
Japan	1	61	465	-	( 465)	-	62	152
Canada	1	366	-	1	-	( 1)	367	445
South Korea	-	151	40	-	( 40)	-	151	59
Russia	-	-	-	26	-	( 3)	23	36
The United States of America	376	340	( 1)	3	1	-	719	730
Switzerland	459	-	-	-	-	-	459	477
Turkey	63	-	-	3	-	-	66	163
Taiwan	222	-	-	-	-	-	222	49
Brazil	-	4	25	-	( 25)	-	4	51
Thailand	129	-	-	2	-	-	131	57
Philippines	9	143	-	-	-	-	152	168
Malaysia	32	-	-	-	-	-	32	-
Vietnam	68	-	-	-	-	-	68	-
Other countries	7	-	-	38	-	-	45	55
TOTAL	13 360	2 026	1 674	5 629	(1 674)	(4 435)	16 580	16 869

* 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 2020 to 30 September 2020 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 2020	As at 31 December 2019
Poland	22 009	21 349
Canada	1 459	1 368
The United States of America	1 470	1 418
Chile	408	388
Other countries	23	16
TOTAL*	25 369	24 539

* 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 8 357 million as at 30 September 2020 (PLN 7 130 million as at 31 December 2019).

Note 3.8 Information on segments' results

3.8.1 The segment KGHM Polska Miedź S.A.

Production results

Table 1. Production results of KGHM Polska Miedź S.A.

	Unit	first three quarters of 2020	first three quarters of 2019	Change (%)	rd quarter 3 of 2020	nd quarter 2 of 2020	st quarter 1 of 2020
Ore extraction (dry weight)	mn t	22.4	22.8	(1.9)	7.6	7.5	7.4
Copper content in ore	%	1.50	1.51	(0.7)	1.48	1.50	1.52
Copper production in concentrate	kt	296.8	304.9	(2.6)	98.0	99.7	99.1
Silver production in concentrate	t	916.9	952.1	(3.7)	299.9	305.0	312.0
Production of electrolytic copper	kt	411.9	427.6	(3.7)	131.1	139.8	141.0
- including from own concentrate	kt	287.1	313.1	(8.3)	81.3	102.8	103.0
Production of metallic silver	t	975.4	1 017.9	(4.2)	280.4	365.9	329.2
Production of gold	mn oz t	67.1	71.4	(6.0)	21.5	20.4	25.2

In the first 9 months of 2020, there was a decrease in ore extraction (dry weight) as compared to the corresponding period of 2019. Copper content in ore decreased to 1.50% due to lower content and thickness of the mined deposit. Copper production in concentrate decreased by approx. 8.1 thousand tonnes as compared to the first nine months of 2019 as a result of processing a lower amount of lower quality feed.

As compared to the corresponding period of 2019, there was a decrease in electrolytic copper production by 15.7 thousand tonnes. Cathode production decreased due to a limited supply of copper scrap in the first half and accumulating anode inventories, which was necessary to ensure the continuity of production during the maintenance shutdown at the Głogów I Copper Smelter and Refinery.

Production of metallic silver was lower because of a decrease in cathode production.

Revenues

Table 2. Revenues from contracts with customers of KGHM Polska Miedź S.A.

	Unit	first three quarters of 2020	first three quarters of 2019	Change (%)	rd quarter 3 of 2020	nd quarter 2 of 2020	st quarter 1 of 2020
Revenues from contracts with customers, including:	PLN mn	13 360	13 050	+2.4	4 463	4 672	4 225
- copper	PLN mn	9 897	10 046	(1.5)	3 354	3 460	3 083
- silver	PLN mn	2 326	2 004	+16.1	802	776	748
Volume of copper sales	kt	404.9	414.7	(2.4)	127.9	144.8	132.1
Volume of silver sales	t	990.1	1 029.1	(3.8)	280.7	364.1	345.3

Revenues after the first three quarters of 2020 amounted to PLN 13 360 million and were higher than in the corresponding period of 2019 by 2%. The main factors behind this increase in revenues were: a PLN 160 million higher adjustment to revenues due to hedging transactions, a more favourable USD/PLN exchange rate (+3%) and higher silver (+22%) and gold (+27%) prices.

Costs

Table 3. Costs of KGHM Polska Miedź S.A.

	Unit	first three quarters of 2020	first three quarters of 2019	Change (%)	rd quarter 3 of 2020	nd quarter 2 of 2020	st quarter 1 of 2020
Cost of sales, selling costs and administrative expenses	PLN mn	11 204	11 075	+1.2	3 643	3 952	3 609
Expenses by nature	PLN mn	11 090	11 125	(0.3)	3 941	3 513	3 636
Pre-precious metals credit unit cost of electrolytic copper production from own concentrate(1	PLN/t	25 618	24 895	+2.9	26 945	25 312	24 880
Total unit cost of electrolytic copper production from own concentrate	PLN/t	17 201	18 159	(5.3)	16 085	18 533	16 755
C1 unit cost(2	USD/lb	1.60	1.71	(6.4)	1.61	1.59	1.58

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 2020 amounted to PLN 11 204 million and were higher by 1.2% as compared to the corresponding period of 2019 due to the utilisation of inventories from prior periods, which enabled the sale of a higher volume of products. Moreover, the cost of sales was higher due to the purchase of medical supplies.

In the first 9 months of 2020, total expenses by nature were lower by PLN 35 million as compared to the first nine months of 2019, alongside a minerals extraction tax lower by PLN 72 million due to a change in the methodology of calculating the tax from 1 July 2019 and lower costs of consumption of purchased metal-bearing materials by PLN 14 million (due to a 0.8 thousand tonnes of copper lower volume of consumption alongside a 0.8% higher purchase price).

The increase in expenses by nature, excluding the purchased metal-bearing materials and the minerals extraction tax, amounted to PLN 51 million and resulted mainly from the increase in labour costs by PLN 116 million (increase in remuneration) and higher costs of energy and energy carriers by PLN 44 million (in 2019 energy costs were decreased by the compensation for energy price rises).

C1 cost for the first 9 months of 2020 amounted to 1.60 USD/lb and was lower than in the corresponding period of 2019 by 6.4%. The decrease in the cost was mainly caused by the strengthening of the US dollar versus the Polish zloty (+2.8%), a lower minerals extraction tax charge (first 9 months of 2019: 0.49 USD/lb; first 9 months of 2020: 0.43 USD/lb) and the higher value of by-products due to an increase in the prices of precious metals.

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 25 618 PLN/t (in the comparable period of 2019: 24 895 PLN/t) and was higher by 2.9% alongside lower production from own concentrate by 8.3%. The pre-precious metals credit unit cost of electrolytic copper production from own concentrate, excluding the minerals extraction tax, amounted to 21 954 PLN/t (in the corresponding period of 2019: 20 893 PLN/t).

The total unit cost of electrolytic copper production from own concentrate amounted to 17 201 PLN/t and was lower by 5.3% as compared to the first nine months of 2019 due to the higher value of associated metals (higher prices of silver and gold).

Financial results

Table 4. Basic items of the statement of profit or loss of KGHM Polska Miedź S.A. (in PLN million)

	first three	first three			nd 2
	quarters	quarters	Change	rd quarter 3	quarter of	st quarter 1
	of 2020	of 2019	(%)	of 2020	2020	of 2020
Revenues from contracts with customers, including:	13 360	13 050	+2.4	4 463	4 672	4 225
- adjustment of revenues due to hedging transactions	330	170	+94.1	38	169	123
Cost of sales, selling costs and administrative expenses 1	(11 204)	(11 075)	+1.2	(3 643)	(3 952)	(3 609)
- including the minerals extraction tax	(1 118)	(1 213)	(7.8)	(380)	(363)	(375)
Profit on sales	2 156	1 975	+9.2	820	720	616
Other operating income and (costs), including:	(267)	1 016	×	(223)	(532)	488
Interest on loans granted and other financial receivables	205	212	(3.3)	64	68	73
Realisation of derivatives	(209)	(101)	×2.1	(102)	(49)	(58)
Measurement of derivatives	1	44	(97.7)	28	4	(31)
Exchange gains/(losses) on assets and liabilities other than
borrowings	(119)	508	×	(145)	(420)	446
Impairment losses on investment certificates and shares	(131)	-	×	-	(89)	(42)
Reversal of allowances for impairment of loans measured at	-	128	×	-	-	-
amortised cost
Impairment gains/(losses) on financial instruments measured	(63)	(30)	×2.1	25	88	(176)
at amortised cost
Fees and charges on re-invoicing of costs of bank guarantees	50	50	-	23	7	20
securing payments of liabilities
Fair value gains/(losses) on financial assets measured at fair	13	137	(90.5)	(99)	(175)	287
value through profit or loss
Release/(recognition) of provisions	(6)	39	×	-	(3)	(3)
Other	(8)	29	×	(17)	37	(28)
Finance income and (costs), including:	(62)	(621)	(90.0)	89	345	(496)
Exchange gains/(losses) on borrowings	81	(474)	×	117	401	(437)
Interest on borrowings	(111)	(75)	+48.0	(22)	(48)	(41)
Measurement of derivatives	-	(14)	×	1	2	(3)
Realisation of derivatives	(5)	(4)	+25.0	-	(5)	-
Other	(27)	(54)	(50.0)	(7)	(5)	(15)
Profit before income tax	1 827	2 370	(22.9)	686	533	608
Income tax expense	(671)	(707)	(5.1)	(277)	(185)	(209)
Profit for the period	1 156	1 663	(30.5)	409	348	399
Depreciation/amortisation recognised in profit or loss	896	893	+0.3	301	311	284
Adjusted EBITDA2	3 052	2 868	+6.4	1 121	1 031	900

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

2) Adjusted EBITDA = profit 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

	Impact on
Item	change in result	Description
	(PLN million)
Increase in revenues from contracts with customers	+344	An increase in revenues from sales of basic products (Cu, Ag, Au) due to a more favourable average annual USD/PLN exchange rate (a change from 3.83 to 3.94 USD/PLN)
excluding the impact of	(317)	A decrease in revenues due to a lower volume of sales of copper (-2%), silver (-4%) and gold (-2%)
hedging transactions (+PLN 150 million)	+87	An increase in revenues due to higher prices of silver and gold (respectively by 22% and 27%) alongside lower copper price (-3%)
	+36	A change in other revenues from contracts with customers, including an increase in revenues from the sale of merchandise and materials by PLN 80 million alongside a decrease in revenues from the sale of sulphuric acid (-PLN 13 million), rock salt (-PLN 8 million) and refined lead (- PLN 14 million)
Increase in cost of sales, selling costs and	(76)	A change in inventories of finished goods, half-finished products and work in progress, mainly due to a decrease in inventories due to the utilisation of own concentrate inventories and inventories of finished goods
administrative expenses (1 (-PLN 129 million)	+14	Lower consumption of purchased metal-bearing materials by 0.8 thousand tonnes of copper (-0.7%) alongside a 0.8% higher purchase price
	(67)	An increase in other costs, including an increase in the value of sold merchandise and materials by PLN 98 million and of other expenses by nature – mainly employee benefits by PLN 116 million and of energy and energy-related factors by PLN 44 million alongside a decrease in the minerals extraction tax in expenses by nature by PLN 72 million
Impairment losses on investment certificates and shares	(131)	Impairment losses on investment certificates and shares in the amount of –PLN 131 million in 2020 versus no impairment losses on this item in the corresponding period of 2019
(-PLN 131 million)
Reversal of allowances for impairment of loans measured at amortised cost (-PLN 128 million)	(128)	After the first 9 months of 2019 the amount was PLN 128 million, while in the current year this item did not occur
Impairment losses on financial instruments measured at amortised cost (-PLN 33 million)	(33)	An increase in impairment loss from –PLN 30 million to –PLN 63 million
Fair value gains/(losses) on financial assets measured at fair value through profit or loss (-PLN 124 million)	(124)	A change in the amount of fair value gains/losses on financial assets measured at fair value through profit or loss from PLN 137 million to PLN 13 million
Impact of exchange	(627)	A change in the result due to exchange differences in other operating activities
differences (-PLN 72 million)	+555	A change in the result due to exchange differences on sources of financing (presented in finance income and costs)
(Recognition)/release of provisions (-PLN 45 million)	(45)	Lower balance of recognised and released provisions – after the first 9 months of 2020 at the level of –PLN 6 million while in the corresponding period of 2019 it was +PLN 39 million
	+160	An increase in positive adjustments to revenue due to the settlement of hedging transactions, from PLN 170 million to PLN 330 million
Impact of hedging transactions	(29)	A change in the result due to the measurement of derivatives, from PLN 30 million to PLN 1 million
(+PLN 22 million)	(109)	A change in the result due to the realisation of derivatives, from –PLN 105 million to –PLN 214 million
Decrease in income tax	+36	The lower tax results from the lower tax base

Table 5. Main reasons for the change in financial result of KGHM Polska Miedź S.A.

(+PLN 36 million)

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

Chart 1. Change in profit/(loss) for the period of KGHM Polska Miedź S.A. (PLN million)

1)excluding impact of hedging transactions

Capital expenditures

After the first three quarters of 2020, expenditures on property, plant and equipment and intangible assets amounted to PLN 1 663 million.

Table 6. Structure of expenditures on property, plant and equipment and intangible assets (PLN million)

	first three quarters of 2020	first three quarters of 2019	Change (%)	rd quarter 3 of 2020	nd quarter 2 of 2020	st quarter 1 of 2020
Mining	1 099	1 203	(8.6)	412	380	307
Metallurgy	493	332	+48.5	218	191	84
Other activities	14	21	(33.3)	1	10	3
Development work - uncompleted	1	4	(75.0)	-	1	-
Leases per IFRS 16	56	51	+9.8	7	42	7
Total	1 663	1 611	+3.2	637	624	401
including borrowing costs	100	183	(45.4)	32	31	37

Investment activities comprised projects related to replacement, maintenance and development in mining, metallurgy and other activities.

Projects related to replacement aimed at maintaining production equipment in an undeteriorated condition, represent 33% 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 34% 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, optimising 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 33% of expenditures incurred.

Chart 4. Structure of expenditures on development

Detailed information on the advancement of key projects may be found in Part 1, Note 2 of this Report on the realisation of Strategy in 2020.

3.8.2 The segment KGHM INTERNATIONAL LTD.