⚠ A Credit Is Not a Cost AdvantageHigh threat

KGHM Polska Miedź (KGH) — threat to the moat

A C1 of 3,16 dollars says the credit makes an expensive mine viable, not a cheap one.

It is easy to read a cost of 17 415 złoty a tonne as evidence that KGHM is a low-cost producer. It is not, and the company's other disclosure says so.

C1 cash cost after by-product credits, 2025 (USD/lb)KGHM, Polish assets3,16KGHM INTERNATIONAL1,03Sierra Gorda0,86All three figures are KGHM's own, from the same report
The credit does not make KGHM cheap. It makes a structurally expensive mine viable.

C1 cash cost — the industry's standard measure, already net of by-product credits — was 3,16 dollars a pound in 20251. That is a high number. KGHM's own international assets sit well below it — 1,03 dollars a pound at KGHM INTERNATIONAL and 0,86 at Sierra Gorda2 — and they get there without needing a second metal.

So the credit is not making KGHM cheap. It is making a structurally expensive mine viable. The distinction matters because a genuine cost advantage persists through a downturn and protects the owner; a by-product credit is itself a commodity price, and it falls when metal markets fall, at exactly the moment the copper price is falling too.

The two exposures are correlated more often than not. Silver and copper both rallied through 2025 and both rallied again in the first half of 2026. An investor holding KGHM for the silver credit as protection against copper weakness is holding a hedge that tends to fail when it is needed.

The falsifier is straightforward. Watch C1 against the global cost curve in a weak year: if KGHM's cash cost sits in the upper half of the industry when metal prices are low — as 3,16 dollars a pound suggests it would — then the credit was never an advantage, only an offset.

References
  1. ReportedC1 cash cost — the industry's standard measure, already net of by-product credits — was 3,16 dollars a pound in 2025.
    KGHM Polska Miedz S.A. Group - Management Board's report on activities in 2025, the production and unit-cost record (electrolytic copper of 570,9 thousand tonnes against 588,7 in 2024, 592,4 in 2023 and 560,4 in 2020; metallic silver of 1 323 tonnes against 1 403 in 2023; C1 payable copper production cost of 3,16 USD/lb for the Polish assets against 1,03 for KGHM INTERNATIONAL and 0,86 for Sierra Gorda; group payable copper of 710,0 thousand tonnes against 753,7 in 2021; wire rod and wire production of 279,9 thousand tonnes; and world mined silver production of about 25,3 thousand tonnes) — FY2018-FY2025 · publ. 10 March 2026 · source ↗
  2. ReportedKGHM's own international assets sit well below it — 1,03 dollars a pound at KGHM INTERNATIONAL and 0,86 at Sierra Gorda — and they get there without needing a second metal.
    KGHM Polska Miedz S.A. Group - Management Board's report on activities in 2025, the production and unit-cost record (electrolytic copper of 570,9 thousand tonnes against 588,7 in 2024, 592,4 in 2023 and 560,4 in 2020; metallic silver of 1 323 tonnes against 1 403 in 2023; C1 payable copper production cost of 3,16 USD/lb for the Polish assets against 1,03 for KGHM INTERNATIONAL and 0,86 for Sierra Gorda; group payable copper of 710,0 thousand tonnes against 753,7 in 2021; wire rod and wire production of 279,9 thousand tonnes; and world mined silver production of about 25,3 thousand tonnes) — FY2018-FY2025 · publ. 10 March 2026 · source ↗
Sources
Generated September 24, 2026