The Banks on the Other Side of the HedgeThin moat

KGHM Polska Miedź (KGH) — moat facet

Hedging removes price risk by adding somebody else's balance sheet - and one name is now 28% of it.

KGHM's most consequential counterparties are not buyers of metal at all. They are the financial institutions that take metal price risk off its books.

Largest derivative counterparty share15%31 December 202528%30 June 2026Derivative carrying amounts rose 1 268m zł over the half as copper and silver hedges moved into the money
Hedging removes price risk by adding somebody else's balance sheet, and that exposure nearly doubled in six months.

The group hedges copper and silver with derivatives, and the positions are large enough to move the balance sheet: the carrying amount of derivatives rose 1 268 million złoty over the first half of 2026, mainly on copper and silver instruments1, and the group also carries derivative liabilities that stood at 1 626 million złoty at the end of 20252.

The purpose is to convert an uncontrollable price into a partly predictable one for a defined period. That is prudent for a company with a fixed cost base and a state-set tax charged on production. It is also why a rising metal price shows up in KGHM's accounts as both a gain in revenue and a loss on hedges, which is one reason reported results and underlying performance diverge.

The exposure created is credit rather than market: KGHM is relying on those banks to pay. The company discloses that the largest single counterparty share of its derivative and settled-derivative receivables reached 28% at 30 June 2026, against 15% at the end of 20253.

That is a real concentration, and it doubled in six months as the hedges moved into the money.

The measure is that counterparty share. Hedging removes price risk by adding somebody else's balance sheet, and 28% in one name is where that trade becomes visible.

Moat trajectory: Narrowing

The largest counterparty's share of derivative receivables went from 15% at the end of 2025 to 28% at 30 June 2026 as the hedges moved into the money.

The number that tests this moat
Reported
Largest derivative counterparty share
28% at 30 June 2026, from 15%

KGHM hedges copper and silver, which removes price risk by adding somebody else's balance sheet. The concentration of that credit exposure nearly doubled in six months as the hedges moved into the money.

Source: KGHM Group condensed consolidated financial statements for H1 2026 ↗
References
  1. ReportedThe group hedges copper and silver with derivatives, and the positions are large enough to move the balance sheet: the carrying amount of derivatives rose 1 268 million złoty over the first half of 2026, mainly on copper and silver...
    KGHM Polska Miedz S.A. Group - Management Board's report on activities in the first half of 2026, financial results (revenue of 24 711m złoty up 40,8%, profit for the period of 5 579m against 580m, adjusted EBITDA of 9 198m up 89,1%, capital expenditure of 1 663m, net debt down 13,5% to 4 691m, equity of 39 814m, available financing of 16 978m, and the 1 979m złoty increase in the minerals extraction tax on higher copper and silver prices) — H1 2026 · publ. August 2026 · source ↗
  2. ReportedThe group hedges copper and silver with derivatives, and the positions are large enough to move the balance sheet: the carrying amount of derivatives rose 1 268 million złoty over the first half of 2026, mainly on copper and silver...
    KGHM Polska Miedz S.A. Group - Management Board's report on activities in the first half of 2026, financial results (revenue of 24 711m złoty up 40,8%, profit for the period of 5 579m against 580m, adjusted EBITDA of 9 198m up 89,1%, capital expenditure of 1 663m, net debt down 13,5% to 4 691m, equity of 39 814m, available financing of 16 978m, and the 1 979m złoty increase in the minerals extraction tax on higher copper and silver prices) — H1 2026 · publ. August 2026 · source ↗
  3. ReportedThe company discloses that the largest single counterparty share of its derivative and settled-derivative receivables reached 28% at 30 June 2026, against 15% at the end of 2025.
    KGHM Polska Miedz S.A. Group condensed consolidated financial statements for the first half of 2026 (the note stating that revenues from no single contractor exceeded 10% of group sales, the geographical breakdown by end-customer location totalling 21 927m złoty with Poland at 4 845m and Germany at 2 815m, parent revenue of 14 430m from copper and 5 843m from silver, the amending act on the minerals extraction tax in force from 1 January 2026, the group structure and equity accounting of Sierra Gorda, and derivative counterparty concentration) — H1 2026 · publ. August 2026 · source ↗
Sources
Generated September 24, 2026