KGHM May Increase 2010 Forecasts as Weaker Zloty Boosts Revenue, CEO Says

KGHM Polska Miedz SA, Poland’s only copper producer, may increase its 2010 forecasts and has shelved plans for a bond sale, as a weaker zloty helps earnings, Chief Executive Officer Herbert Wirth said.

“An upward revision of our 2010 budget at the beginning of the second half is possible,” Wirth said in an interview yesterday, adding that higher revenue means the company has abandoned plans to sell bonds “for now.”

KGHM forecast in February it would increase 2010 net income to 2.9 billion zloty ($880 million) on sales of 11.7 billion zloty. The estimates assumed copper would trade at $6,700 a ton and the zloty’s average exchange rate would be 2.7 per dollar.

Copper’s average price on the London Metal Exchange since the beginning of the year amounted to $7,203 a ton and the Polish currency averaged 2.9990 per dollar, according to Bloomberg data.

KGHM stock rose as much as 1.1 percent to 94.6 zloty at 1:07 p.m. in Warsaw, erasing its earlier decline of 1.6 percent. The benchmark WIG20 Index was little changed.

The zloty strengthened to 3.2878 to the dollar and copper fell 1.5 percent to $6,549 a ton today.

In an April interview with the Rzeczpospolita newspaper Wirth forecast that KGHM would start raising funds under a 500 million-zloty domestic bond program that’s already been approved by the board.

“When I said we’d need to sell bonds, the zloty was stronger,” he said yesterday. ‘Its weakening means that our revenue is higher than I forecast then” and “for now” the company “will be able to finance all our investments from our own capital.”

Tauron Sale

KGHM, which had planned to invest 3.27 billion zloty this year, spending 1.63 billion zloty on acquisitions, will now exceed this amount as it decided to buy a stake in Tauron Polska Energia SA’s initial public offering that the Polish utility is holding this month.

KGHM may spend 1.11 billion zloty for Tauron if it receives the entire 11.3 percent stake for which it subscribed in the book building of the country’s second-largest power group.

The final budgeted amount of 1.63 billion zloty for acquisitions, which excludes the Tauron investment, may be lower due to “all kinds of savings” and the delay until future years of some planned costs of the Canadian copper deposit KGHM is buying, Wirth said.

Afton Ajax, the 50,000 ton-a-year Canadian deposit that KGHM is buying from Abacus Mining & Exploration Corp., is the company’s first acquisition outside Poland since 1996. The copper producer plans to buy more deposits abroad as it seeks to raise output 40 percent to 700,000 tons a year.

“I don’t rule out that we’ll announce a preliminary agreement on a second Canadian deposit sometime this year,” Wirth said. “Our goal is to add 200,000 tons a year” to production and “I’d prefer that the next project was significantly bigger than Afton Ajax.”

To contact the reporter on this story: Maciej Martewicz in Warsaw at mmartewicz@bloomberg.net

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