38. Assets and liabilities not recognised in the statement of financial position

The value of contingent assets and liabilities and liabilities not recognised in the statement of financial position were determined based on estimates.

31 December 201431 December 2013
Contingent assets 474 529
disputed State Budget issues 2 22
guarantees received (1) 223 248
promissory note receivables 109 126
real estate tax on mining facilities (2) 87 87
inventions, implementation of projects 47 44
other 6 2
Contingent liabilities 1,720 892
guarantees of which: 1,429 620
a letter of credit granted to secure the proper performance of a
long-term contract for the supply of electricity for the JV Sierra
Gorda S.C.M. (3)
482 414
guarantees granted to additionally secure the proper performance
of leasing agreements entered into by the JV Sierra Gorda S.C.M.(4)
341 184
guarantees granted to secure the proper performance of future
environmental obligations of the Parent Entity to restore the area,
following the decommissioning of the “Żelazny Most” facility
a letter of credit granted to secure the proper performance by KGHM
INTERNATIONAL LTD. of the future environmental obligations to
restore the area following the closure of the Robinson mine
promissory note liabilities 2 15
disputed issues, pending court proceedings 43 74
liabilities due to implementation of projects, inventions (5) 154 123
real estate tax on mining facilities 70 42
other 22 18
Liabilities not recognised in the statement of financial position 244 308
liabilities towards local government entities due to expansion
of the tailings pond (6)
120 187
liabilities due to operating leases 124 121

(1) Bid securities and security deposits in the form of bank guarantees to cover proper execution of agreements by contractors.
(2) Claims for the return of overpaid property tax due to exclusion by the Parent Entity from the taxable base of the value of underground mines, following the issuance by the Constitutional Tribunal of a judgment dated 13 September 2011. On 23 January 2014, the first judgment in this case was issued by the Supreme Administrative Court. The Supreme Administrative Court confirmed the validity of the manner of proceeding adopted by the Parent Entity, and revoked both the judgment of the Regional Administrative Court in Wrocław as well as the decisions of tax bodies in both instances questioning the formal manner of proceeding by Parent Entity and therefore disallowing a substantive hearing on the request. The Court at this stage did not address the issue of a return of the overpayment, but called for further proceedings to be held, in which the tax bodies were ordered to prepare a substantive assessment of the request submitted by the Parent Entity for the return of the overpayment.
(3) According to the terms of the „Sierra Gorda Power Puchase Agreement” regarding the construction of a power plant and electricity supply, entered into between Sierra Gorda and Empresa Electrica Cochrane S.A., the co-controlling partners of the Sierra Gorda project are required to ensure security for the payment of liabilities. KGHM INTERNATIONAL LTD. met this requirement by issuing a letter of credit in the amount of USD 138 million, as part of a loan agreement dated 19 June 2013, based on which the lender, The Bank of Nova Scotia, granted a credit limit in the amount of USD 200 million.
(4) On 20 May and 24 June 2014, Sierra Gorda S.C.M. signed leaseback agreements with Banco de Chile and Banco Satander respectively for USD 53 million and USD 51 million. These transactions concerned 21 trucks and additional equipment. These leases were settled as finance leases for the period of 84 months, with an interest at the level of 6-month LIBOR plus a margin. As a result of these sale and leaseback transactions, Sierra Gorda S.C.M. signed an agreement with the Parent Entity to additionally secure the proper performance of leasing agreements.ù
(5) Liabilities due to disputed issues against the Parent Entity concerning unpaid royalties for inventors, deemed baseless and undue by the Parent Entity.
(6) A liability due to compensation for the economic activity of the Parent Entity in some surrounding municipialities. Based on signed agreements the Parent Entity is commited to the payment of funds to these municipialities for the purposes and under the conditions stipulated in the agreements. As part of its operations, DMC Mining Services Ltd., belonging to the KGHM INTERNATIONAL LTD. Group, enters into contracts with customers in which it commits to paying compensation for failure to carry out such contracts without specifying a limit for this liability. The Group has not to date made such a payment nor has it recognised contingent liabilities related to it, however, due to the risk associated with the performance of the Janzen project it has recognised a provision for future costs in the amount of USD 5 million (PLN 18 million at the average exchange rate announced by the National Bank of Poland as at 31 December 2014) .