KGHM management has decided to abandon the mining project in Kongo, where it has sunk USD 36m, but said it would require additional investment in smelter for USD 23m to return profit, according to today’s ‘Rzeczpospolita’. Management said that it would still look other mining projects abroad.
Separately, the Supervisory Board will debate today on changing the rules for selecting the employee representative to the Board of Directors. Lately, the largest trade union at KGHM has demanded new elections for the post.
Our view: We think it is likely that the present management, nominated by right wing government, will oppose and try to neutralise the demands of the left wing trade union. But it might turn out difficult to get rid of an awkward position of employee representative entirely.
The pull out of Kongo has been fully provisioned for and expected. We think that today the market is likely to rebound after major, 8.3%, drop on profit taking yesterday, considering that the copper price regained most of the midday loses and returned to the level of USD/t 7985 on the closing yesterday.