KGHM Polska Miedz S.A. (KGH) Earnings Call Transcript & Summary

Good afternoon. Welcome to the conference. During which, we will present the results of the fourth quarter and whole 2019 of KGHM, the company and the group. Today, we have a video conference, which is why all the questions that you want to ask, please submit them to [email protected] (sic) [ [email protected] ] We will read the questions right after the presentation. You can download the presentation files. Today, we will not show all the slides, but slide numbers are not changed. So if your question is about a specific slide, please provide the name of the slide and then ask your question, and then we will be able to respond. The Management Board is here for you, that's Marcin Chludzinski, President of the Board; Professor Katarzyna Kreczmanska-Gigol, Vice President for Financial Matters; Radoslaw Stach, Vice President for Production; and Adam Bugajczuk, Vice President, for development. We will start with the Board's commentary about the results, and then we will proceed to questions. If we have a lot of questions or perhaps if the questions are similar, we will process them after the presentation. And we will display those questions on the website together with the answers. In this way, we will guarantee a full transparency of what is going on today and what the questions and comments were about. So answers will be provided either directly today at the video conference or afterwards on the website.

Thank you very much. Good afternoon. My name is Marcin Chludzinski, President of the Board. Actually, this is the first time we are having a video conference, but the reality is what it is. Mr. Pawel Gruza is not here today. If you want to ask about this, Pawel is not -- does not have the virus. He's ending the quarantine today. And the other vice presidents will handle questions about international situation. Let me start by making some references to the virus. So let me tell you exactly what the capital group is doing and what we are doing as a company to support our associates and stakeholders. The most important thing is our staff. First of all, production has not been interrupted, and that's the most important. Production is responding to all commercial needs. And so far, we haven't observed any changes in sales volume and in demand for our products, which is good news. Last week, we started a 24/7 hotline. All our employees can ask questions, can consult about their concerns and threats related to health and safety. There is a dedicated e-mail address and answers are provided in real time. Some time ago, earlier last week, we suspended all international travel, and we limited domestic travel so we actually acted in advance. We also suspended leaves of people who are of key importance in terms of health and safety. Home office is recommended for everyone who can and wants to do that, especially people who are 65 or older because they are the most vulnerable or people who have children and have to stay home with them. On top of that, we do a poster campaign. We use our internal TV to deliver updates and to provide reliable information. We also offer disinfectants and sanitizers. We reduced the number of people who enter the elevators that go underground. We ensure the availability of personal protection equipment, and we are using remote works, remote work as far as possible. We will stay up to date to changing regulations because new situations emerge. There are new laws being passed as we speak, but we keep tabs on that. Apart from dealing with our internal situation, we also want to support the society as such. That's why [ NITROERG ] who will start biocidal agent production. On an everyday basis, they do explosives. They don't have a dedicated process line for biocidal agents. But with a fast track of administrative efforts and technological efforts, we have already manufactured a test, lots of a test batch of that agent, and now we are moving on to mass production. Our quality research center, which is of key importance for our company has also joined the efforts to work on the tests for coronavirus. We want to provide those tests to hospitals and other health care institutions, but if necessary, we can do those tests as well. We also allocated one of our buildings in Glogów for quarantine purposes. We are ready to provide more buildings, but this will depend on the administrative decisions. Some of our surplus face masks were donated to the Ministry of Health and the local governor's office. Right now we are in the process of buying equipment for hospitals that are especially in need of that equipment. For instance, the hospital in Legnica will be one of the beneficiaries. We want to help those hospitals, which we can reach quickly, possibly tomorrow, perhaps next week, not in 8 weeks from now. So we start to help them procure the necessary equipment. We cooperate with the local task force and with national institutions, the Ministry of Health and the Prime Minister's office. Also, we have a grassroot effort. Our employees spontaneously help elderly people, many people volunteer to do this and to buy some groceries, to visit a drugstore because elderly people should stay at home and they shouldn't do the shopping themselves. We are glad that our people stay responsible. They all feel that they can contribute. So we are staying safe, and we are happy that the response has been so positive. Also, talking about international contacts in China. We already are ordering some personal protection equipment from China, we are waiting for final confirmation of the order. Speaking of which, probably there will be more questions about that. And we'll try to answer those questions during the Q&A. But immediately before the conference, the Polish President and Prime Minister presented the details of an economy saving package, and this is the broadest package of all packages communicated so far in Europe. We are working quite fast because this is actually one of the first packages of this size that has been declared. We are particularly happy about the package of infrastructural investments that will keep the economy alive. There are a lot of incentives and reliefs for affected businesses. This is a comprehensive package, which hopefully will help Polish economy face the threat related to the virus. Moving on to the results for 2019. Well, we are happy about these results, but since -- I started with the coronavirus because that's interesting for everyone. But still, we are here to discuss 2019, and that's what we are going to do. This is what we managed to do, thanks to hard work and involvement of a lot of people in this company. So these figures show us where we were at the end of 2019. So given the market -- the macroeconomic environment, which was much worse than in 2018. So the copper prices fell by 8%. The average price in 2019 was $6,000, which is 8% less than in 2019 -- than in 2018. Silver prices were okay, but here, the increase was just 3%. And the dollar grew stronger over zloty by 6%. Production figures and cost figures. Copper production went up by 11%, which is very important because of mostly attributable to greater smelting capacity and more mining production abroad. Outside Poland, silver production increased by 18% and silver with growing prices, we were particularly happy about this, and our cost went down by 6%. This gave us a positive financial performance. Our revenues grew by 11%, up to PLN 22,723 million. And our EBITDA went up by 5% to PLN 5,229 million. So that's the figures. For this slide, we will discuss the details as well as regards macroeconomic situation. We already communicated last year. Well, to give you an idea of what I want to show you. Well, the winds of macro economy were against us. So we had some headwind. The macroeconomic situation was not supporting us. In 2019, the average price was $6,000, far less than in 2018. Also, the prices were volatile in terms of relationships with China and the trade agreement. There was a lot of uncertainty, and it was well visible in the second half of 2019. When we thought about our growth in 2018 when we built our strategy and then communicated that strategy, we actually predicted this because the main -- the 2 key assumptions of our strategy has been flexibility and performance. So flexibility and resilience in terms of response to the macroeconomic situation and performance in terms of the best possible use of our resources. So these 2 assumptions helped us cope well with the macroeconomic situation. So even with adverse macroeconomic parameters, our financial performance is better. Talking about production indicators and the production group, 702 tonnes, which is 11% more year-on-year, which is very good production results. Sierra Gorda helped us. Smelting helped us. Mining has been sustained on a good level despite a number of problems. You know that our geological situation is more and more challenging. Our EBITDA went up by 5%. Group revenues are also higher. We should also mention that for the first time in a number of years, we had positive contribution from our international assets. We used some of our reserves that we made for the Victoria project in Sierra Gorda. Victoria is that project, that notorious project with which we always have problems. Now we already sorted out all the permissions, land use, licenses, et cetera. So we recalculated the value of that project. We want to continue with it, and we want to be ready to launch it. It's not that we just go ahead with it. Before we go ahead with it, we need to have all the administrative permissions in place. Production figures. I will ask Rados to give you the details, so let me skip it for now. Our financial situation. Again, Katarzyna will take this. As regards our financial situation, we are very happy to see greater revenues, greater EBITDA, lower debt ratio. We maintained our debt below the budget. Our unitary cost is also below our prediction in the budget, which is very important for us and for the group. So that's it in a nutshell. Last but not least, let me give you a wrap-up. That's something I already mentioned when I discussed the macroeconomic situation. So had it not been for our assumptions, flexibility and sustainability, which is very important in the context of the Green Deal, the results would not be what they are. But in the challenging year of 2019, we successfully faced the reality. And this is one of the reasons why we are better prepared for facing 2020, which will probably be even more challenging than 2019. So we are -- well, the baptism of fire is behind us. So we have made it successfully through some harsh experiences in 2019, and we are -- we feel ready and prepared for 2020. I would like to say that we managed to predict macroeconomics in 2019 because we are not omnipotent. But still, we successfully identified macro trends and responded to those trends, so a lot of hard work of people at all levels in KGHM. Now a number of regulatory issues. Perhaps in the current situation of the coronavirus, the question of our influence on the environment is perhaps less important, but still we have to -- we must not forget this. And as you know, the industry -- the copper industry in Europe is responsible for just 0.4% of CO2 emissions in Europe, whereas it reduces emissions in Europe by 75% as regards to the use of copper. So we are of key importance in building green sources, and our pollution activity is very, very low, which is 0.4% of all CO2 emissions. And these arguments are presented to the European Commission, and the commission apparently understands these arguments. And also, we use these figures to prepare for the market because despite the problems, we are necessary. We are an indispensable element in the energy transformation in Europe and beyond. These charts show our emissions, that's dust, sulfur. You will note the decline rate over the years. You see how much work we did. You can see the results in 2019. So the company is evolving all the time. And that's despite the legal obligations. We know we have to make improvements. Here, you can see lead and copper emissions in our smelting plants. You can see that these -- the current amounts are at the trace level, and we are still working on that. So that's again, a reference to the Green Deal, even though, as I said, Green Deal seems to be somehow less important in the times of the coronavirus. Okay. Now the production results.

Now moving on to the financial results to discuss them. Let me tell you that there have been several key importance projects which allowed us to deliver on the production, I mean, the concentrate, plant and roasting plant. That was our task. And we achieved stable operations with that plant, so we achieved good results in 2019. Another important project was the commissioning of the WTR (sic) [ RCR ] furnace at Legnica smelting plant, which will allow us to smelt scrap metal, copper, scrap metal and also the repairs finished at Legnica and setting up smelting plants which were finished on time. At one of our conferences, we also mentioned that there was the incident in Rudna, but with a very quick response, we achieved good results on that. So as has been mentioned, payable copper production, 11% are above the plan of -- for 2018. And most important information here shows us that the whole production in 2019, including Sierra Gorda and KGHM International was delivered on the budget. So the budget was achieved. That's very important. Talking about our -- the domestic production. As you can see in the slide, it was achieved in quarter 4, where we're comparing with the other quarters, of course, which is not as good as the previous quarter, but it did not have an impact on the annual result. In some cases, it is not comparable to 2018. But all in all, when we compare it with the budget, these and parameters were achieved. So smelting production plants, 13%; silver, plus 18%, one of the best results in KGHM's history. Because of the silver content in the ore, it allows us to achieve such results with the final product at our smelting facilities. Talking about this -- talk -- inventories, we're showing at our conferences, we have been going down gradually especially with the copper inventories at our smelting plants in order not to freeze cash. And also anodes, anodes inventories, we would like to have them at the minimum level to avoid impact on the group's financial results. And the presentation shows us that we have been delivering or achieving these objectives gradually. Talking about Sierra Gorda production. The results have also been very good, so better than in 2018, and also higher than the budget so it was accomplished. We know that historically, we had many problems at Sierra Gorda mine, but good management decisions and good efforts from our employees, the result, final result is very good. The only thing is the molybdenum production, which is lower than in 2018, but the budget was achieved, which is also very important. Now the results of KGHM International. Compared with 2018, they are a little bit smaller or lower, but talking about Robinson and the other mines, the results have been achieved. So platinum and gold -- well, these results are very good. So to sum up, the production results across the group, Polish operations and abroad, it's been a good year. Many challenges but importantly, it's in line with our strategy we announced back in 2018 for 3 years. So the strategy is being pursued consistently. Thank you.

Now ladies and gentlemen, talking about the income. Revenues, they are higher or up by 11%. And this is thanks to a higher sales volume which is positive. That's the most important factor influencing the increase in revenues. What also helped us was the dollar exchange rate. But we need to see that the copper prices were not favorable to us, and in spite of that, we were able to achieve revenues higher than in 2018. C1 cost, the unit cost across the group, was lower by 6% in spite of the unfavorable circumstances or the environment. And besides or apart from Sierra Gorda, where lower molybdenum sales volume had an effect, but that was due to the ore content and not to our decisions. In all other sectors, the C1 cost was lower than in 2018. Now the net result of the group. Well, the net result is down by 14%, but we need to note that the results or the reasons for the lower net profit are related to accruals rather than the cash aspect. So because with the revenues which were lower, we need to know that there was a change in stock. So this movement in inventories was down with a minus so we can have higher sales revenues, and they were higher. But at the same time, the expenses incurred to produce the inventories in the previous periods are recognized as an expense, and they actually bring our profit down. Let me also add with reference to expenses, the costs by nature had a negative impact. And there were also factors or reasons behind this change. So these include higher labor. Because we have a social contract with our employees, we fulfill this contract. And the increase in salaries and wages in Polish businesses actually made us also increased the salaries. There were also higher energy costs because of the prices on the one hand, but also higher consumption because of the increased production. And talking about the other factors here. Please note that we reversed the provisions related to our foreign businesses. And when we also look at our foreign businesses, in 2019, we had to inject funds into these foreign operations so that it can develop and grow. But this brought positive results in terms of higher profits and EBITDA and overall better performance in our foreign operations. Talking of the cash flows. So the cash in 2019 was higher compared with 2018 and it resulted from what we have done. So the pretax profit was higher, but there was also the impact of the other activities. We released more than PLN 1.1 billion of working capital in our operations. We did it by reducing stock receivables and also changing the scale of using liabilities for funding, but we were not in delay in areas within the payments to our suppliers. Another factor or the reason behind this change in cash was the adjustment. The profit, we adjusted that for amortization and depreciation. So it is a cost, but not an expenditure. It's higher than in -- compared with 2018 so that's because of our investment projects so -- and the fixed assets, which were brought into use. Because of that, the depreciation expense grew. And there's also a significant item of issuance of debt securities. So we issued bonds, but they did not raise our debt, because at the same time, we repaid other debts or liabilities. So we pursue the financial safety strategy for the group. We changed our financing structure. So we're using long-term debt mostly for funding. So the debt level is lower than in 2018. This is confirmed by the ratio, net debt to adjusted EBITDA was 1.6 in 2018. Now it's 1.5. But we need to remember about the changes in accounting laws. So this is the impact of IFRS 16. So the debt is shown PLN 627 million higher, but we did not incur any additional liabilities. Just follow a different recognition rule on the IFRS 16. Otherwise, it would be 1.4 ratio. So it shows on that. Our financial operations, I'll say for the situation is more secure in terms of financing activities compared with 2018. Thank you.

Ladies and gentlemen, talking about development initiatives and projects, it was a very positive and successful year. Many projects were completed, including 2 major projects for our company. So I mean the concentrate roasting installation and copper scrap processing furnace at Legnica copper smelter. They were commissioned, and they are in operation delivering the results we expected. Talking about the program for the Deposit Access Program, a multi-annual program for the future and to use resources to achieve stable production. So we achieved 48 kilometers of underground workings built and mine shaft work is going to schedule. So we deepened that down to 1,099 meters. The concentrate roasting plant, as has been mentioned, that has been commissioned, and now it's in operation. So it's brought online. It's finished. And the same with the RCR furnace at the Legnica copper smelter, it's in operation, brought online, and these projects have been completed, and they will no longer be shown in other slides of the quarters. So talking about waste disposal. Well, we have managed to achieve what we planned on budget and in time, so we -- the progress for the -- for this project is more than 50%, so on tailings storage facility. And the same with the BAT Conclusions project, where we have between 10 and 20 projects at Glogów and Legnica Copper Smelter plants and they're going are in line with schedule. So the forecast we had for 2019 is very good, and what we achieved has been very successful. We have completed all the key projects. So I mean, both the time schedule and also in terms of the amounts of the sums involved. So now let me also show you the role of Deep Glogów mine. So we talked about that in previous conferences. So this is a comparison year-to-year. Less ore extraction dry weight. And the increased amount of copper in ore by 31%. And amount of silver in ore, an increase by 27%. This is a very important area for us, and we hope we will achieve a lot in that respect. But the objectives have been achieved so far. So we're very much satisfied. Thank you.

And now talking about the development of the power industry and our energy conversion program. Now we talk -- we're at a stage where projects have been identified. So some of them also have the formalities dealt with because there are many formalities in terms of the environment and the planning. We're beginning the first project in mid-April. 3 megawatts higher capacity in Legnica, and we will also obtain additional permits. We also have our own sources, more than 20%, but they can be made more efficient. And we can also achieve high energy efficiency on the consumption side in our smelting and mining operations, and we have been doing that. Continuously, we have dedicated task forces and a team at our headquarters dedicated to energy. And these are the areas where we are. So these projects where we have the preparation stage. So the Piaskownia Obora project near Lubin. We don't have any mines there, although it's a nice area. Glogów Copper Smelter and Refinery, 4 megawatts potentially. And the large Wierzba project, so this is also next to the Glogów smelting plant. And Konrad project, a very big project, former Konrad Mine, but it's a longer time perspective. The data are indicative only. Some of them can be -- can speed up when formalities are dealt with more quickly. And an important project, which is not shown here which we -- beginning with our subsidiary ZANAM and Legnica smelter plant, it's scheduled for April this year. So whenever possible, we'll try to deal with formalities quicker and speed up these projects. So to sum up this presentation, we need to tell you first, and I'll repeat that, difficult -- we have had a difficult situation in the macroeconomic environment but good performance, good results in terms of production and financials with the involvement and efforts of many people from KGHM and also in our foreign operations, foreign assets because we treat this company as a large multinational corporation, and people working for us in the U.S. and Canada, very important to us. And we've seen the growing involvement and very significant contribution in this difficult year will help us -- the past difficult year will help us to face the challenges of this year. So the experience we've had where we learned flexibility, responsiveness and the use of IT and ICT technologies for logistics, for purchasing, where we generate savings and streamline our operations. Although we also need to say that we've had the successful projects. People tend to say -- or the public would say that we're not building new mines. But every year in terms of the walkways, in terms of the infrastructure, we build many more than the largest mine built by the potential foreign investors. So it's not a new mine in terms of the maintenance department, new manager and new infrastructure. But in our old deposits, we have huge projects, and they are much bigger than those of potential copper sector investors in Poland. So we're waiting for the administrative decisions for Bytom Odrzanski project. It's not up to us. So we'll wait for the decision of the administrative authorities. But in spite of the decision, whatever it is, finally, we also can develop in other areas, but decisions need to be made quickly in the mining industry to have results in 10 years. So this is the reality in our sector. So let me thank you again for the efforts in 2019. And I think that we will need to make even stronger efforts in 2020.

Thank you very much for this presentation. Now we move on to questions. The questions still can be sent to [email protected]. There are a lot of questions already. We will not manage to answer all these questions today, but we do promise that all the questions and the answers will be displayed on the Investors Relations website. Now I give the floor to Mr. Krystosiak from the Investor Relations department.

Yes, indeed, we do have quite a lot of questions. I've been trying to monitor them somehow. I also received some questions to my mobile phone. Please excuse me if the sequence of answers does not match the sequence of questions. Some questions may be duplicated, but we will try to answer every single one, and I will ask the Board to take these questions. So the first one. The first question is -- I already forwarded to the Board. So if you are ready, maybe we'll start with the first one. My apologies for this, but that's -- we have some technical constraints here.

So the first question is about the coronavirus situation in Chile. The situation is as follows. Chile has undertaken some steps. The borders are closed for noncitizens. Schools are closed down. We are constantly monitoring the situation in Chile. Currently, the Sierra Gorda is working at full capacity. We don't have any cases of the virus in the mine itself. The number of cases in the region of Chile is also quite low. So there are no serious concerns about continuity of our production. That said, we will have to follow the recommendations or legislation changes in the future. That's beyond our control. But so far, so good.

Okay. The next question is about international production, especially a question whether we have some plans or options regarding the coronavirus? Well, currently, we are monitoring the situation. We are thinking of some scenarios, and we will see if we have to reduce our production. Are we able to sell concentrate from the mines? As for now, we don't have any problems with sales of concentrate as regards production in KGHM. So the next question, are you foreseeing any reduction in your production? It's hard to say really. Of course, we realize that the situation -- the virus situation is serious, but we have prepared some scenarios. We are prepared. But as for now as for today, our production has not been affected.

The next question is about available funding for KGHM. Let me answer this way. In our financing strategy, we planned greater financial security. And as a result, we want to change our financing structure. And originally, we wanted to diversify our sources of financing and to increase the maturity dates. And we were implementing that strategy in 2019 for the whole year. And the most important elements of this strategy are already in place. So we issued bonds. We informed the market about that. The value of those bonds is PLN 2 billion. And most importantly, the maturity of most of those bonds is 10 years. A small percentage, PLN 0.4 billion matures in 5 years. We also took a loan from BGK. We reported that loan to the market, and that loan is 5 plus 2 years, 7 years in total. At the end of 2019, as reported to the market, we refinanced our consortium credit. And the maturity of the new facility is 5 plus 1 plus 1. So again, 7 years maturity. At the end of 2019, the balance of facilities available to us was 14.5 billion. That was still available, and we have consumed 7.2 billion. So we still have a lion's share of those facilities that has not been used yet. Thank you very much.

Okay. 3 questions from Daniel Major of UBS, they are quite lengthy. In fact, let me read the question. I just need to translate the question into Polish, and then I will ask the Financial President for taking the first 2 questions, and Mr. President will take the third one. So the first one, when you reduced your working capital, can -- would you say that this is a lasting trend? What are the expectations regarding the levels of your working capital in 2020? Assuming that the copper prices will stay at the current level? That's the first question. The second question, let me read it. The expected CapEx for 2020 at the level of PLN 2.25 billion. How much can you reduce that figure if copper prices continue to fall? Question #3, that's about dividends. With macroeconomic uncertainty and with the growing debt in 2019, can it be expected that the Board once again will not recommend a dividend payment? Again, sorry for this rather course technical solution.

So the question #1, reduction of our net working capital, that's a lasting trend, yes, indeed. Because in our financing strategy, we assume that apart from diversifying financing sources and extending the maturity of those sources, we will increase factor -- the importance of factoring, and we will concentrate on reducing our inventories. So a reduction of the net working capital is a result of greater use of factoring, both in terms of liabilities and receivables. And we want to reduce our inventories, and we want to keep doing that because this is part of our strategy. The second question, the expected CapEx, PLN 2.25 billion, can it be reduced? Well, as far as our investments are concerned, we have investments at the level of PLN 2 billion to PLN 2.5 billion each year. Some of those investments are replacement investments. Some of them are developmental investments. If copper prices stay low for -- copper and silver prices stay low for a longer period of time, then yes, obviously, we will contemplate some new developments, new investments. We will postpone them to a later date unless they are urgent. So if such postponements does not affect our production, then yes, obviously, we can do that.

Let me add that we are ready for all sorts of scenarios involving reduction in CapEx without reducing our production output, so we consider those variance. We classified our investments into those that are absolutely necessary and those that can be postponed without affecting our output.

As regards to dividend payment. This is not the time to recommend such a decision. We are still monitoring the situation in the global market. And we, as the Management Board, we are quite positive about the dividend payment mechanism, and we are not saying no. But nevertheless, we will have to monitor the situation. So far, we are selling our products. So far, buyers want to buy more and there has been no decline in demand, but the price is changing. We must not forget that. The nearest 2 months will show us the direction where the world is headed or the -- where the industry is headed, and we will know whether we have to rethink our plans for 2020.

Thank you very much. 2 more question from Robert Maj from IPOPEMA. Question #2 has just been answered. So the question about what will be the dividend proposed by the Board for the current year. And the first question from Robert, the record level of cost -- of selling costs and overheads in Poland. Is this what we can expect in 2020?

As regards the selling cost and overheads, I understand that this is a question related to the fourth quarter, where indeed, these figures were higher, but this is nothing unusual, especially that in the fourth quarter, we make a reserve for the annual bonus. So no, we don't want to pay the annual bonus every quarter. And hence, we don't expect these growing cost to continue in the quarters to come. Thank you.

Thank you. Here come 2 questions about our energy policy. The first one is from Pawel Puchalski from Santander. Is KGHM considering closer cooperation with TAURON in the area of renewable energy? Your strategies are quite similar. Is KGHM considering buying conventional power units from TAURON to diversify risk?

Well, as regards the power sector, we have 2 objectives. First, we want to secure the power supply. And secondly, we want our power sources to be economically viable. Economic viability simply boils down to the prices. So we do everything that's reasonable to give us cheap energy in the long run. Renewable projects are those that we have to fuel to power our own facilities, our production plants. In the context of these projects, we do not cooperate with TAURON or any other power company. We want to do these projects on our own with the help of external contractors. We do consider other options. Also in the context of EU policy, we consider a major gas source. A gas source is -- would be necessary because PV will be insufficient to provide the amount of energy we need. However, we are not expecting purchasing any power units from TAURON or any other company. If we have any green energy projects or gas projects that are economically viable, then we are very much open to that.

And another similar question about PV, [ Datyatik Zaya ] from Radio Plus. In the current virus situation, do you still want to launch your PV investment that was planned in April? Or will you postpone the launch?

Right now we have received a permit for that project. We are physically ready to launch it. The current situation does not indicate any operational threats. However, if we have some problems with operators or any other problems, then things may change. But as for now, there are no threats. But let's remember that things may change, and we don't know what may happen in a short period of time or in the middle period of time.

Okay. Question from [ Oliver Brandesky, ] Nationale-Nederlanden. Since the beginning of the virus situation in the world, copper has been quite strong. What would have to happen for copper to follow the trends that we have with other commodities?

Well, the underlying reason is the global expectations about the outcome of the whole situation. So there are a lot of macroeconomic mechanisms that contributes to the current price. The price is what it is. All I can say is that it's not without the reason that we are so happy to have so good hedging teams. The first hedging operation have been made, and we've been preparing for that. This is why we have those people. We want to stay safe against such situations. That's why the prices affect us, but not as much as it could.

What is the reason behind the current decline in silver prices? And is this a trend already?

In the context of the virus situation that is changing overnight, you just cannot talk about trends. You have to wait a month or 2 and then see what happens. Well, recently, silver prices could fall and then rise again. So I can't see any trends. All we can do is wait.

[ Andrzej Lampert ] from TVP Polish Television. A question about the current situation. I guess we spoke about this, but let me read the question. What is the current staffing situation? I'm talking about production and sales force. Question #2, the Polish government is talking about various forms of support for companies. Is KGHM in -- considering asking for a permission to suspend the mining tax?

Well, talking about attendance rates. We don't have any situation where a lot of people would be absent. Quite to the contrary, people are mobilized, and I would like to thank them for them -- for that. People work as hard as they can. As regards sales, our sales have been constant in January, in February, in March, we don't have any major deviations, which seems to confirm that our buyers keep running and they still need copper. I don't know what the situation will be like in 1 month or in 2 months, we'll see what happens, and we will be responding. As regards to governmental package of incentives or subsidies, well, this is a very good, very powerful package for the current crisis. If you look at the European Union, this is the most comprehensive package. I think it will help those who are actually affected, whether it's a private person, a small business or a large business. So this package can be quite helpful. We asked for considering possible forms of support in terms of suspending various obligations, but this is hypothetical as of today. However, if our sales go down, if the prices go down, if we are more affected -- if we are actually affected, then we will be actually asking for assistance.

To add about production, we are very much aware of the seriousness of the situation as a production enterprise. We have meetings with managers, directors and we are up to date as to how many people are on sick leave or absent. But it's difficult to say what the future holds for us. The changes are very dynamic parts. We have a message to our employees to think about the consequences. If someone feels sick, suspects that he or she is infected, appropriate steps must be taken. So we haven't seen any drop in the number of our employees coming to work today.

Roosevelt said: "Do whatever you can, with what you have, in the time you have." And this is the approach we have with prevention measures and also what we have been doing to calm people down to assure them and also the hedging strategies and the financial strategies we have. So with all these activities, we have been effective. And also today, we will have a conference call with directors of our divisions to talk about the continuity of plans and activities. And so we work on that on a daily basis.

[ Martina Grange of Skarphol Business. ] So President is talking about buying facemasks from China. Will KGHM play a role?

Well, we do play a role in terms of what we can do in Poland. And also the sanitizer, the liquid, what we have been doing -- also met with Zanam company, producing face masks and well, launching the production very quickly. We need to thank our employees, and we've also worked a long time with China Minmetals, our Chinese partner. So we can rely on their support. We -- they have been helping us strongly in terms of buying the products which are needed in Poland right now.

And a question from [ Magdalena. ] So how different is this situation to the previous economic breakdowns? And how did KGHM prepare to the previous situations like this?

Well, this is a situation which is different in terms of the origins, the source or the DNA of the situation. The previous one, the financial bubble, and the virtual money was what the previous crisis was about. Today is potential crisis or the slowdown economic recession, results from the realistic threat of people being absent from work and also disturbances or disruption to the supply chains because the just-in-time production no longer works. So the old rule of having the stock will be used or followed after this crisis because just-in-time doesn't work right now. We're also looking at the situation in China. So we'll have information from our partners in China. And well, we can see that the production -- industrial production is resumed then. Well, situation is coming back to what it was and people go to work, but it started earlier then. And also other preventive mechanisms were used. But when we see a strong intervention of the state, of the government, it's badly needed, well, we have lower optimism of consumers, lower number of orders, and companies have to survive. So the government has responded and addressed these needs, and the response has been very comprehensive from the Polish government. We're looking at the situation every day, so looking at our efforts to maintain production, the cost discipline and the potential plans for 2020. Well, they can be revised if needed actually to ensure safety of the company. So we managed that in previous years, also in 2019. And this -- with this experience, we can succeed in 2020, I think.

[ Thomas Uzbiac, ] Radio Elka. What is the situation in Polkowice-Sieroszowice because of the excess water? And what is the future of G-63 department which was closed? And how did it affect the results?

Well, Polkowice-Sieroszowice mine, well, it -- the situation was stabilized. So the inflow was half of what we had in November, 8 cubic meters per minute. And an entirely new plant was built to pump water out, and this flow of water is actually normal in mines when it's -- what can happen. So the situation is normalized. G-63 is not available right now, that department, but we're also building a department in another operational area. And talking about the impact on production, it did not have an impact as such on the entire KGHM, although it had some impact on the mine, but I don't think it will have any serious impact on the whole results -- the whole group.

There's also a question from Daniel Shaw from Morgan Stanley. Are you able to sell constant rates? And at what level -- and apologies for this rough translation -- in this year?

Let me answer this way. We ready today with our smelting capacities to increase them, to increase our smelting operations. And our plan is not to sell concentrate. We're planning to increase our throughput, our production capacity. I don't see any reason why we should be selling concentrate.

So I think we've touched upon all these aspects included in the questions. The questions we have received remotely or electronically. So I have consulted my colleague and...

Yes. And with regard to the questions we are receiving right now, and those we have not answered yet, we will be responding. Today, you will see the answers at KGHM Investor Relations website. You'll see those -- also those questions we've answered. And we also give you more precise figures in answers to the financial questions. Let me thank you very much.

Thank you.