KGHM Polska Miedz SA
WSE:KGH
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KGHM Polska Miedz SA
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Ladies and gentlemen, I would like to give you a very warm welcome at the conference focused on the results of KGHM Group for the first quarter 2022. We'll give you a warm welcome, and -- on the trading floor of the Warsaw Stock Exchange. We also welcome those who view us online.
The effects of our work in the first 3 months of the year will be presented by Marcin Chludzinski, CEO; Andrzej Kensbok, Vice President for Finances; and Marek Swider, President for Production.
We will start traditionally with Management Board's comment on events of the last quarter, then we will proceed to Q&A. Questions from the chat that will not be covered today and those that will be asked here will be presented on our website alongside the transcript of the entire session at our email, er -- irkghm.com. You can ask those questions.
Marcin Chludzinski?
Good afternoon, ladies and gentlemen. We have almost only good news for you today, good news concerning our production and financial results. I think the most important piece of information is that in the last quarter, we had historically the best EBITDA result, the best in the history of our company. That's the first piece of good information.
We have a slide that will sum up the events of 2022. And of course, we have to admit that prices supported us. Copper quotations year-on-year were higher 18% -- quarter-to-quarter basically because we're talking about average quarterly prices. Silver was cheaper, and hence our financial results, combined with the production, which was up by 4%, so a 20% higher EBITDA quarter-to-quarter. Higher revenues, 33%, also quarter-to-quarter.
The price was supportive. But at the same time, our better production results were due to a better scale of production that built on the previous year. It was already quite good as that further leveraged our situation. We can see that quite well if we compare ourselves with other mining companies, as you can see in this slide, which shows KGHM quarter-to-quarter, the first slide in the upper part of the screen that's in the context of production results, we are #2, 3 among the biggest production companies. The other three -- well, actually we can see here the results of the group and stand-alone results. The second company will be Freeport-McMoRan. Those two companies were growing. The other companies within the sector had lower output.
And in the second graph, you can see the last quarter for 2021 and the first quarter of 2022. And here, we are the leader. Growth in the whole group by 7% and then KGHM alone, 9% up. Other companies had decreasing production. So we maintain very high. operational capacity that is continually expanded, which leads to greater output but also strongly improves our revenues and sales, which in turn drives EBITDA. The prices on their own would help us, but we keep working on our operational capacity in all our assets not only in Poland but also in our foreign assets. So these are good facts both in production and financial terms. You can see that in the quarterly results that we reported to the market. We're very pleased about it. We try to control things that are under our control and do so in a way that is beneficial to shareholders and to our business.
That would be it by way of introduction. I will be back with a summary. And now I would like to hand over to Marek Swider, who will sum up our production results.
Good afternoon, ladies and gentlemen. As regards production of metals in our group, paid copper were 193,000 tonnes, plus 4% quarter-to-quarter. Well, the breakdown into national and foreign assets, 78% production in national assets, 22% in foreign assets.
Silver, 348 tonnes, plus 13% quarter-on-quarter. And here, nationally, 98%. TPMs, that is precious metals, 43,000 ounces, plus 23% quarter-to-quarter.
Molybdenum, 1.2 million pounds, lower quarter-on-quarter. But I would like to note that it is aligned with our production plans and results from lower content of molybdenum in our Sierra Gorda deposit.
Operational results are shown in the mines [ GMTs ]. 7.7 million dry tonnes. That's higher -- that's a high content of copper than planned. Electrolytic copper, 151,000 tonnes, plus 3.4% quarter-on-quarter. And silver, 340 tonnes, plus 13.7% quarter-on-quarter. Concentrate copper, plus 3.1% quarter-on-quarter.
Production results on Sierra Gorda, that is our foreign asset, 23,900 tonnes, plus 4% quarter-on-quarter. The higher output results from higher processing and high-content silver production is lower quarter-on-quarter, but that results from the exploitation of deposit with lower parameters. TPMs on Sierra Gorda quarter-on-quarter, unchanged. Molybdenum, 1.2 million pounds, lower but still higher than the plan for the first quarter this year.
KGHM International. Here, paid copper, 18,200 tonnes, plus 12% quarter-on-quarter. That came from Robinson because this mine offered a high output of higher content. Silver production was lower in KGHM International, but it also resulted from the fact that in Sudbury, we exploited a deposit with lower content. TPMs, 15,100 ounces, plus 24% quarter-on-quarter. And molybdenum quarter-on-quarter, unchanged. Thank you.
Financial results and our investment will be presented by Mr. Kensbok.
Good afternoon, ladies and gentlemen. Indeed, we do present good, even very good financials, as our CEO pointed out, but I would like to refer to what we addressed when we presented our annual results and our key message that we have kept repeating over the last months. We make sure that we are stable, predictable producer, both in mining and in smeltering, in turbulent times.
Now we may forget this, but the first quarter was marked by the COVID situation, where we had coped very well. And the end of the first quarter is marked by the war in Ukraine, difficult international situation, and also issues linked to expanding sanctions, expanding changes in trade -- international trade in metals, energy, resources and other raw materials. So we take those turbulences in commodities markets -- you keep that in mind.
We prepared plans that will prevent impact of those turbulences on our activities. So the first quarter does not fully reflect those problems. But when we come to the summary of the first half of the year, we will be able to tell you more about actions that we took in order to counteract, mitigate those turbulences.
Now as regards the revenues of the group, 33% year-on-year growth to about PLN 9 billion for the group. Of course, this excludes revenues from Sierra Gorda. We do not consolidate the numbers here. But we are happy that our revenues grew in all segments with the highest growth recorded in production of Polska Miedz. Here, the growth in Polska Miedz alone was PLN 566 million, a slight expected decrease in KGHM International. But in total, that is PLN 425 million up in sales.
Change in quotations of key products. The first quarter of this year was characterized by an increase in the price of copper quarter-on-quarter chained in the PLN-to-dollar exchange rate. Last year, in the first quarter, that was about PLN 3.78 per dollar. In the first quarter this year, that was PLN 4.13.
So the change is significant and it had impact on many areas. The first of them was revenues. There was a positive change. We addressed this repeatedly on our presentation, that is, impact of hedging transactions on our result. Here, the impact was positive because our hedging transactions in the first quarter had a negative settlement, but this negative effect was much lower than the first quarter last year. So all in all, the result is positive.
And the remaining area is mainly driven by the finance results of domestic subsidiaries. Some are coping well. Some are coping very well. And that is why the total growth is good.
Stand-alone cost per unit cost. Here, we have a growth. Fortunately, this growth is proportionate to our profit growth. We monitor very closely the impact of costs on our financial results.
We are aware of the fact that some costs grow faster than inflation. Mainly, that is energy, resources, gas and fuels in this particular case. Some costs are kept in line with inflation rate. Some are kept below inflation rate.
Also, we are running a number of programs that are aimed at reduction or minimization of consumption of energy and materials, which also contributes to us keeping per unit cost under control. But we do know, and this is in line with what is happening in -- with other major peers, that energy prices affects everyone in a very palpable way.
Now moving on, operating results. In other words, adjusted EBITDA.
We are up 20% quarter-on-quarter. And the final result for Q1 2022 is PLN 3,133 million in operating income. And the main contribution came from Polish copper, but we had a very decent growth across all our sectors. To us, it means that everyone is making an equal contribution to this performance.
The growth has been driven by the higher prices of metal and also ForEx contribution, in other words Polish zloty exchange rate, and the sales volume, which was also up quarter-on-quarter.
Now at KGHM International, it was mainly driven by the higher prices of metals. But we also had a higher inventory. I think that we said that on several occasions, that we are sort of managing our inventory depending on the technological situation in our smelters and mines. So this is not a sustainable effect. But in this case, we are actually with positive effect at the international level.
Now financial results. It's one -- nearly PLN 1.9 billion in net income. And this number was driven by PLN 395 million (sic) [ PLN 359 million ] increase in sales. And if you go bar by bar, you can see a number of items that contributed to change in revenue. Copper, PLN 1.5 billion, and then silver and gold. And PLN 1,050,000,000 was dependent on the cost of energy cost. And also, third-party inputs contributed because this is not only our own resources but also third-party inputs and the scrap that we buy or our third-party inputs had also higher prices. The employees' benefits were up by PLN 100 million, and this is due to the collective labor agreement that has been signed with our workforce. And that provides for the pay raise on a year-to-year basis.
Everything else, so what you -- like the change in inventory and production in progress, work in progress, so all those things have to do with our -- with the processing that we have. PLN 150 million, it's joint ventures. So that was the reversed accounting and also gain on interest.
Gain on disposal of intangible assets that was the sale of oxide project to joint venture, Sierra Gorda. The contract was closed in December, but it was actually consumed in January. Therefore, it's contributed to Q1 2022.
And as I said earlier, we had less negative impact from our derivative transactions from hedging. So this is a positive input, PLN 130 million.
Exchange differences are a negative territory because here, we have the negative valuation of loans. But revenue and interest are positive, so that's the offset number. But it was fairly expected. So that was the fairly expected result of the exchange rate differences.
Now moving on to the cash flow. Actually, some -- a lot was happening in Q1. We were -- Sierra Gorda paid off -- paid back over PLN 200 million, another installment of the loan. $110 million was for KGHM. So it was approximately PLN 400 million. In addition to that, the sale of the oxide project generated the positive cash flow for KGHM Poland, PLN 135 million. In addition to that, we also closed Interferie sale, and that was the profit of PLN 138 million as compared to the valuation of Interferie.
So these were the main events.
And we also reported an important event. That is the sale of the Franke mine. It happened in April, so it was a post-balance sheet event and it was reported as such. But we communicated that because it was a positive development for us. So we show the accounting profit, and we were able to optimize our production portfolio. We want to continue our development in Chile, but I will talk about it later when we speak about investments. We have the investment program for Sierra Gorda and for the oxide project. So in case of Chile, we are actually -- we have a strong footing. We just want to better optimize our business.
So in terms of the balance sheet, after all those changes, we are at PLN 3.335 billion, and there is a small difference here of PLN 18 million, difference in the balance sheet. PLN 18 million is the value of assets that are for sale.
Now the debt position of our group. It is in a good place. In nominal terms, our debt has not changed. We have not done anything. We didn't pay back our debt, and we were not drawing new loans either. But since our cash position has improved, our net debt was down from PLN 4 billion to PLN 2.6 billion, which means that our debt-to-EBITDA ratio at the end of Q1 was 0.3. So this is very low number, very, very safe. We already communicated that during the previous quarters, but we are really cautious to use factoring just not to incur financial expenses related to factoring services. But we do use, to some extent, factoring services to recover our receivables.
We also improved our debt structure. So we improved our terms of our loans. And this year, we are going to close two other contracts that will improve our liquidity and reduce our financial costs. So in terms of the lending contracts, banking agreements, the situation is very good. We do see sufficient capacity to incur additional debt if needed.
Now moving on to our development projects. In Q1 2022, we had CapEx of PLN 486 million, and this is PLN 40 million up compared to the Q1 2021. This is nearly in line with the budget for Q1. But I remind you that Q1 was like the time when we were impacted by the prices, but we were also impacted by the supplies. Especially when it comes to steel and steel structures, there were some disruptions in the supply chain, especially supplies that were sourced from industrial regions of Ukraine. So now we are replacing that with supplies from other regions.
We do have continuity of supply. However, there are some delays. And we know that the Chinese ports suffered from closure because of the lockdowns, so that generated some delays, too. Not major but nevertheless visible delays with our CapEx program in Q1.
And to get into details, an important area was the Deep Glogów, and this is probably a place where most things happen in terms of preparations. Production is in line with the plan. It's slightly below the budget, but we are actually happy with that because it means that all the work that is done in the Deep Glogów is mostly focused on drilling. So this is not production, but this is about reaching out to the new prospective production sites. So this is the investment that we have to make. We just have to sort of drill the routes that will take us there.
Now here, we have a lot of details about our CapEx. Let me highlight the most important events.
We continue to prepare GG-1 shaft; so-called Odra Shaft, GG-2 shaft. We have already completed the first phase and then where we -- where the drill holes were completed.
Now GG-1 climate station has been also advanced and the connection of air-conditioning shafts in Polkowice and Rudna. So basically, all the areas that we wanted to have connected to the air-conditioning, to have them chilled, have -- already have been hooked up. So we also completed over 10 kilometers of the new routes, and there was a number of mechanical projects delivered. What about it? That was mostly about the infrastructure, about pipes and the pumps that would help drain the sites and improve the capacity of the main pumping station. So these are the underground works going on.
Glogów II copper smelter is currently shut down, but it was scheduled. This is for 78 days. And everything goes according to the plan. There are no negative surprises. This is part of our CapEx.
And in Legnica, we are completing the SOLINOX installation, which is for dedusting and neutralization of air emissions. So we launched the new phases of this installation. This is about mercury and arsenic gases processing.
In Zelazny Most -- well, the southern section has been -- the Southern Quarter has been completed. And right now, we are launching our -- the position of the deposit sites for thick (sic) [ thickening ] and tailings and everything goes according to the plan.
Now just a few words about our energy program. As you know, it is our fifth strategic E and we pay a lot of attention to it. And the very fact that the cost of energy and the supplies of energy have been disrupted, this program has become a priority. So we continued the projects that have already been launched. So we are still deploying our own photovoltaic facility. We prepared new projects that will be deployed on our sites: copper smelter in Cedynia site.
But important developments in Q1 is the early works agreement signed. So this is the agreement for preparatory work or for the overall feasibility assessment. That was agreement signed with NuScale Power, and they will assess the possibility to build a small nuclear plant using NuScale technology.
Currently, we have documentation process. We translate the documents. We work with the Polish atomic agency. We are getting all the paperwork done to be able to start the permitting process and the site location process.
We have also signed MOU with a French partner, TotalEnergies, and this is about the joint project that we may have with offshore farms -- wind farms. So together, we applied for a number of licenses, and the licensing process has been just completed. So we applied for the licenses, but in our joint opinions were the most promising and the most attractive. We cannot disclose the details at this point. The licensing process has been ended this week, and the licensing procedure will continue. But right now, well, we work with TotalEnergies that is very much interested in developing renewable energy facilities, and they want to do it together with us.
As KGHM, we became parties to two sectoral agreement. One is for the nitrogen (sic) [ hydrogen ] development in Poland and the other one -- nitrogen-based (sic) [ hydrogen-based ] economy in Poland and offshore power development. So we are active members of both communities, and we are very much interested in pursuing hydrogen-based projects and also offshore wind projects.
So to sum up, we uphold our declarations of attaining the goal of energy self-sufficiency, own generation by 2030 goal. And we hope that the mix that we want to have by 2030 will be different from what we presented 2 or 3 years ago. And different, meaning with a higher share of wind and nuclear energy. But we are also very flexible in our responses to the situation of gas availability and prices. We have sources, but the utilization depends on the differential -- difference price and using this gas or buying gas from the market. We are not dogmatic in our approach. We are flexible and use those resources which are most efficient and economical for us at a given point in time.
Ladies and gentlemen, we make every effort to do what we declare and declare what we do. Step by step, the idea of energy self-sufficiency based on nuclear energy is being implemented. We want to have this certification process with the Polish atomic energy agency done soon. We are tightening cooperation with other partners, Doosan from Korea and Samsung, with regard to production. So we think that we will be able to develop nuclear energy as part of this element of our activity.
We also try to use the opportunities that the economy presents. Now there are good times and bad times, so we can simply keep in mind that the situation in which we are at present is not constant or eternal. We were able to cope in situations where the prices were difficult, prices were low. We were able to cope in COVID with problems with supply chains. There were such difficult situations, but we need to react flexibly. So we hope that this good patch will last for some time. However, we monitor the market closely, we follow the developments and trends, and we are flexible in our responses. Thank you.
Thank you very much for this comment. After presentation of the results. So we proceed now to the Q&A session, Janusz Krystosiak, who is the Head of our Investor Relationships department.
Please use the microphone because we have online transmission, and present your name and the name of the institution which you represent.
[ Robert Oraczinsky ], [ Portal & Economy ]. You mentioned the impact of sanctions on the company's results. Could you be more specific about any forecasts of how those sanctions could affect your operations and results in the upcoming quarters?
We do not really have any impact of sanctions that would affect us adversely. We do not have large-scale trading partners there.
And as regards delivery supplies, we cannot use the supplies from the companies that -- on which sanctions were imposed, but the scale is very small. And even if we face such constraints, we are able to replace those suppliers with others not covered by sanctions. So these were operational steps, which we needed to take in order to adjust our operations to the war situation. So that was more this than anything that could affect our operational capacity.
And I have another question. In the context of energy development program in KGHM, I understand that you are doing this above all in order to meet your own energy requirements. But do your forecasts contain any assumptions as to improvement of the energy situation, for example, in the region?
Well, in the context of Polish energy, if the trend linked to certificates, CO2 emission certificates is a lasting trend, a lot of things may change as a result of the current situation. And then the needs of the energy system are high, not only ours as a company that is an industrial company and a big consumer but in general, the needs of the entire market. So within our products, the nuclear energy program on its own allows a certain independence.
And if other projects also succeed, the projects that we have on our agenda related to renewable energy sources, for example, it will be possible to scale up the nuclear energy project. And we're obviously prepared to sell this energy to the general distribution grid and also for the purposes of industry and the individual users in order to provide the cheapest and the most available energy possible.
In the case of nuclear energy, the linearity of supplies is particularly important, and this has to be repeated and reiterated because it is not obvious. Green energy is not the energy that provides stable supplies. We have 30% of a year that -- when solar energy can be generated. Wind is not always available. And we have a linear constant requirements of energy. That is why we need nuclear energy. And this is the direction.
The situation is different in Chile, where in Atacama Desert there is some -- all-day long. So there -- in 2023, it will be possible to provide 100% of energy supplies for Sierra Gorda from solar energy. So that is it in a nutshell.
Can you hear me okay? Pawel Puchalski, Santander. I would like to start with the basics. We're already in May. I would like to ask you about the dividend that the company is going to pay this year. I would like to figure it out, and I still do not see any message on this. Should we assume that -- if the company's profit tripled, should we assume a tripled dividend?
You cannot find any message on that and a press release on that because there is not such a release. The Management Board has not yet made a decision. We have not yet recommended it to the Supervisory Board. But we are on the eve of taking this decision and we will soon address this.
But as you pointed out, the company's profit in 2021 was much higher. The dividend policy stays unchanged. That is, we have a dividend policy that assumes payment of the dividend.
And the third circumstance, there is always an element of uncertainty but also investment needs. Within those three parameters, we will make a recommendation to our governing bodies. But in general, we are positive and optimistic about this point.
So maybe some more details. First, you have just sold Franke mine. And I understand that very soon, you will announce an adjustment of your annual budget because I think Franke was included in the budget, especially in KGHM International. So my first question now would be when the adjustment of the budget will take place to take into account Franke.
And C1 cost of KGHM International, am I right in assuming that C1 of Franke was significantly higher, That is as regards Franke.
We will not adjust the budget. We will not revise the budget because of that because the production volume of Franke mine was not included in the budget. We were already in the advanced stage of the transaction, so we did not budget that production. But your intuition is right. The cost of copper production in Franke was growing very fast, and that was one of the reasons for which we decided to sell this mine, because it became unprofitable.
Okay. So to stay close to the topic of budget and its performance, you budgeted specific amounts in the mother company while performance is very good in terms of many parameters. It's not about sales, it's about production. You are several percent up higher above your budget. And now a simple question. Are you planning to revise the parent company's budget upward? Or was the first quarter exceptionally good and performance in the next quarter should be lower to meet all the year's budget all in all?
We do not plan any revision of the budget. As for our copper production increase, it is linked to processing a greater amount of third-party input.
As for availability of third-party input, especially scrap, we can never be sure. So we don't want to go beyond budgeted volumes in our production plans. And production from our own input remains at a stable level, basically.
As regards silver production, which, much to our enjoyment, is higher than in the first quarter last year, this is simply related to the fact that we are getting through an area with a high grade -- with a high content of silver than what had been anticipated in the budget for this year or what was exploited last year. We are not really guided in the content of silver in the deposits. That is as a result. But we are happy about it. And we -- also, keep in mind that there might be a war situation. We do not have any geological studies regarding silver -- grade or silver content.
And talking of silver, how long will it take -- I know that you cannot give any guarantees as to the deposit -- content of this deposit. But are you close to getting through this deposit? I would be happy to know what higher content of silver can be expected to last for the next 12 months, maybe just until tomorrow.
As you have noted, copper content and what we had in the first quarter was 1.48. The plan was 1.47. Silver is the result of the content of copper as well. Here, we gained about 6% in production of silver.
Okay. So if I may continue. I would like to ask about one more item in your budget, total cost. But it sounds silly when I say it, but it was prewar cost budgeting. And we know what inflation is. We know where the energy costs come from that affects directly. But I would like to find out to what extent you believe that your cost budget has to be adjusted upwards.
I think that it's too early for such adjustments. We've seen the natural gas prices moving. The price quadrupled before the war. And during the war, it was going down, paradoxically. We shall see how the supply and demand will play out. And in that extent, this is still uncertain.
And in terms of electricity prices, in 2022, 90% of our energy supplies have already been fixed. Therefore, it would be sort of premature to make adjustments in our budgets. But we are watching the price developments. We are modeling that, and we are trying to figure out to what extent that would affect our pricing structure. It will certainly affect production, but perhaps there would be some offsetting developments like the higher price of copper or a better exchange rate on the zloty. So we are not really adjusting our budget on the go as the market situation changes, unless the trend is sustainable, but that will be reflected in the next year budget.
Well, you're saying that revenue might offset your costs. I was not asking about the revenue, and I was not asking about the EBITDA. I'm asking about the costs. And in terms of the cost, well, it doesn't matter what your volume is or what is the exchange rate. The inflation rate is above 10%. You are saying that your electricity supplies have been hedged like up to 90%, which means that for the remaining 10%, you pay PLN 1,000. So in my opinion, there are many reasons why your cost budget that you shared with investors should be adjusted, unless you claim that the budget that you showed in January or early 2022 continues to be up to date.
Well, I think that this is somewhat an academic discussion. What is a budgetary adjustment? We are showing how costs affect our bottom line. And we may share with you our pricing analysis for electricity or overall energy commodities. But I'm not sure if there is like an automatic necessity to actually adjust your budget as the production costs may change.
As I said, I think that this is somewhat an academic discussion. And off-line, I'm really happy to get into a more detailed discussion with a group of analysts where we can ponder what will be the right underlying causes for revising our budget because the budget is, well, the budget that we have delivered at the end of the day. So we are not planning our sales and our costs separately.
When we have these two sides and both are moving up, then we believe that we may continue to target the financial performance as we have done so far. But I will be happy to discuss the details.
But yes -- but on a closing note, let me say that what we are sharing is the cost. We as analysts are trying to add to that our best estimate of revenue and EBITDA. And let's be honest about it, the price of copper and silver and the exchange rate for zloty are exchange factors and -- are external factors that you have no control over.
But cost is something that you have under control, and you should know how your costs behave. I just want to find out about things that you communicate. You have not communicated EBITDA forecast. You communicated cost forecast. My question is whether it's still up to date.
We were also sharing our EBITDA and revenue projections. But with the cost, it's not entirely accurate, what you say, because we control the consumption, but we have no control over prices that affect our cost base. We would be happy to control the prices, but we don't have that force or capacity at this point. So whenever there is a room for substitution, obviously we take advantage of that. But otherwise, we have no control over the prices of coking coal, natural gas or steel or electricity.
In terms of consumption, I have already said that we set up a number of working groups that work on minimizing the cost inputs. So everything that contributes to the cost base, including the lubricating materials and oils, et cetera. So whenever we may control the situation, we do so.
But let me repeat what I have said, that it will be a better discussion in this group of analysts what your expectation is in terms of cost modeling, because we are happy to share the information with you, but it would be -- I think that it would be good to use some market benchmarks. We just want to make sure that we are not at the top of the wave. In other words, our costs do not grow faster than someplace else. And obviously, the major changes were triggered by the war, and we are trying to reflect that in our numbers to the extent that is necessary.
[ Monica Berkostka ], [ Imperia ]. I want to find out about the Chinese situation. So in other words, what is the situation with the supplies? We understand that China continues to fight pandemic and how that affects your business.
We had stable trade with China, and our trade position has not been affected by Chinese lockdowns. We are watching the Chinese developments because we are waiting for their decision whether they are going to turn around their position or whether they are going to stand on zero COVID policy.
At this point, it doesn't affect us in terms of trade. But even if it does, we are able to place the products someplace else. But it may affect the overall global economy, and that's why we need to be -- need to have this factor on the radar.
That may affect their demand, but it may also undermine the stability of the supply chain. So we have already experienced that during the COVID pandemic.
The COVID pandemic has somehow come to the end here in Europe but apparently not in China. So from the point of view of the security of supplies, so where we want to source semifinished products or some components for our machines, so -- well, the -- our procurement continues to watch that and monitors that on an ongoing basis.
I have another question about your CapEx. PLN 1.8 billion in CapEx was planned for 2022. Is it still valid? Or given the fact that there might be some disruption in the supply chain and, on the other hand, costs that are rising because of the rising prices of commodities and goods in the markets, are we are likely to expect some revisions here?
Well, your intuition is right about it. There is a risk that a part of the CapEx may not be delivered. And this has mainly to do with the deliveries of some underground machines. The budget will be delivered, though, because of the growing prices. So the cost of the projects go up and -- or the costs of machines and equipment that we are acquiring also goes up. That is not threatening to our production. Obviously, we are not happy about the trend. But nevertheless, we just need to accept the objective developments that affected the capacities of our suppliers.
So the CapEx, that is still under our control. So belt conveyors, et cetera. So these things have actually accelerated. So whatever we can do and whatever we have under control and it also has to do with our production capacity, that goes as planned and we intend to deliver it fully.
In terms of conveyor belts. Last year, we built 17 conveyor belts. And in 2022, the plan is 19 and then 20 and 23 in the following years. So that would help keep the costs low because the closer the conveyor belts to our outlets, to our branches, the lower the costs.
Any further questions?
Daniel Czyzewski, Energetyka24.com. Not -- some time ago, there were some news that Sierra Gorda can be nationalized. Is this -- has the spread disappeared or it can come back? And if so, do you have any strategy to cope with it?
Yes, it is true that when we had a cut in power in Chile, there were such political postulates. But currently, the bodies that decide the legislation in Chile are not likely to embrace this particular idea. It's not at the top of the political agenda. Obviously, things may change. And at some point, someone said that this is the end of the history. But as we see, it has not ended. It continues to roll. So we may say that any time, someone can come back with this idea. But for the time being, the situation has been stabilized and the radical wing of the Chilean political class is revising their political agenda.
Since we speak about Chilean operations, let me read the online question. Reuters. "What is your plan for further development in Chile? And what is your acquisition plan? Are you interested in acquiring new sites, new mines in Poland or beyond Poland?"
All I may say is that we continue to monitor the market for feasible, good quality projects. And I believe that we have more focus on the sites that are logistically closer to us. So Polish sites have priority based on the deposits that have already been identified and possible exploration of the sites that are under licenses and -- or are adjacent to our current sites. But nevertheless, wherever we have political and economic stability in Europe and there is a production prospect, we may consider investing. So we have a team that is actually reviewing that and working on that.
Now a question about the Chilean operation in Sierra Gorda, [ Jakob Schoppak ]. "Copper production in Sierra Gorda. Budget for '22 showed the transient decline in production, but Q1 data shows that the production was up. So at what point in 2022 we may expect the decline in production in Sierra Gorda?"
Well, in terms of the Sierra Gorda production, well, it is the lower-grade deposit. And I think that the decline will be visible in Q2 2022.
Another question from a [ Jakob ] and this is about the tax that we have in Poland. "Until November 2022, we have mineral extraction tax in Poland. Do you believe that the same rate would be applicable for the years to come?"
Well, it's not really that -- it's not really the question for the Management Board, it's really the question for the government. So this is where the decision-making power sits. And whenever we inform about the situation and the investments in Poland, we always point out about the tax, but the -- point out to the tax, but the tax decision is made by the government. It's not our decision to make.
Lubin24. "When do you plan to run the repairs of the Legnica smelter?"
In terms of the Legnica smelter, we do not intend to have any repairs on shaft furnaces. We will have the repair of the scrap furnace, but it will be in June and July.
No further questions from the room, but we have one more online question, [ Arnold Yawat ]. "What are the current prices of steel? And what were the maximum prices of steel? What are your current prices of steel? So we have already covered cost of materials. Would you like to provide additional information about it?"
Well, I'm not going to comment steel prices that we have in our contracts because the contracts are confidential. But it is no secret that the price of steel is up and the market benchmarks are available for individual types of steel. So no, we -- the prices are known. You just take our volume into account. And since we have high volumes, we may be in the position to negotiate the better price. But otherwise, this is the information available on the market.
Now UBS. "Could I ask for any guidance as to when you intend to start higher capital expenditures on nuclear projects?"
Could you read it again, please?
Can you give us any guidance as to when you intend or when you can intensify your expenditures on nuclear projects?
Well, we can intensify them when the project is over and the invoice is paid. That is, we are talking about year 2029. But I guess that the essence of this question was whether we can expect high expenditures before it is built.
The investment process takes 2 or 3 years, maybe 3. So we have intense construction, including preparatory administrative work, obtaining permits, environmental permits and so on. That, of course, implies certain expenditures but not as significant expenditures as those that are required for building the infrastructure for the construction as such. So the highest capital expenditures should be expected in the third part of the period that we still have until 2029, 2030.
I have a question from [ Ukash Rudniktrikam ]. "Is there any chance for higher production of molybdenum in Sierra Gorda next year? We were talking about production of copper. And can you tell us something about molybdenum?"
As of now, I do not have the data.
Ladies and gentlemen, are there any questions from the room?
In that case, the remaining questions, which are actually similar to the ones that have already been asked, will be addressed later. You can always use our email address to submit further questions. All questions, including those asked today and those that will be asked, will be reflected in the transcript. We remain at your disposal after the conference, and we -- you are also invited to approach us between conferences. The next one will be focused on our half year results. Thank you very much for today. Thank you.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]