Poland’s copper tax cut positive for KGHM valuation, aimed at boosting investments (opinion)

At a joint conference on Friday, the finance and state assets ministers Andrzej Domanski and Jakub Jaworowski announced their plans to reduce the tax on copper extraction.

"The changes in the tax are positive for KGHM. They are significant for the company's valuation. With the new copper mining tax formula, this adds PLN 38 per share in value for KGHM," Szkopek assessed.

"If we include today’s announcement that from 2028 onwards KGHM can deduct 50 percent of qualifying development costs from the tax, the amount rises to PLN 47 per share," he added.

The analyst explained that the tax reduction will also make KGHM a slightly cheaper copper producer, which is another positive thing.

He indicated that the goal of the tax changes is to increase investments, particularly in the domestic market.

"This does not mean that the funds will be used for dividends to shareholders," Szkopek stressed, pointing out that Friday's conference highlighted several times that the planned tax reduction will be aimed at promoting investment, particularly in Poland.

"Even before the summer, KGHM will present an update of its strategy. The management has already said on several occasions that the strategy will go in the direction of investments," the Erste analyst added.

Poland's Finance Minister Domanski announced on Friday that the cost to the budget of the cut in the so-called copper tax would PLN 500 million (EUR 117.8 mln) in 2026, PLN 750 million (EUR 176.7 mln) in 2027 and PLN 750 million (EUR 176.7 mln) in 2028.

As he pointed out, after 2028, the changes also assume a mechanism for deducting from tax the costs incurred for capital expenditures. Over 10 years, the changes' cost to the budget is expected to reach PLN 10 billion (EUR 2.36 bln).

pel/ nl/ ao/