5. Operating segments

The Parent Entity and the KGHM INTERNATIONAL LTD. (a subgroup) have a fundamental impact on assets and the generation of revenues in the KGHM Polska Miedź S.A. Group. The activities of KGHM Polska Miedź S.A. are concentrated on the mining industry in Poland, while those of the KGHM INTERNATIONAL LTD. Group are concentrated on the mining industry in the countries of North and South America. The profile of activities of the majority of remaining subsidiaries of the KGHM Polska Miedź S.A. Group differs from the main profile of activities of the Parent Entity.

In the adopted model for managing the Group's structure, and also taking into account the principles of IFRS 8, as well as the usefulness of the information to users of the financial statements, five operating segments were identified which are analysed in detail by management bodies. The identified operating segments are simultaneously reporting segments:

• KGHM Polska Miedź S.A. – this segment comprises KGHM Polska Miedź S.A.
• KGHM INTERNATIONAL LTD. - this segment comprises companies of the KGHM INTERNATIONAL LTD. Group
• Sierra Gorda project - this segment comprises the joint venture Sierra Gorda S.C.M.
• resource base development – this segment comprises companies involved in the exploration for and evaluation of minerals resources, intended to carry out mining
• support of the core business – this segment comprises companies directly related to the core business of the Parent Entity*
• other segments includes companies of the Group not related to the mining industry

* in the reporting period and in the comparable periods KGHM Metraco S.A. was classified to the segment “support of the core business” due to its significant share in securing supplies of copper scrap for KGHM Polska Miedź S.A.

Fermat 1 S. á r. l., Fermat 2 S. á r. l., Fermat 3 S. á r. l. and 0929260 B.C.U.L.C were founded within the holding structure created to acquire KGHM INTERNATIONAL LTD. These companies’ scope of activities include: foundation, development, management and exercise of control over other companies within this structure. These companies do not conduct operating activities which could impact the financial results achieved by individual segments. Because of this they were not classified to any of the aforementioned segments and data concerning these companies was included in the column “Consolidation adjustments and adjustments of segments to consolidated amounts”.

The arrangement of the KGHM Polska Miedź S.A. Group by segment is presented in the following diagram.

Segments’ results are measured by: Profit/(loss) for the period and operating profit plus depreciation/amortisation (EBITDA).

Internal reports on the results of the Group are prepared monthly in a condensed form, and quarterly in an expanded scope. The Management Board of the Parent Entity is the body which performs regular reviews of the internal financial reports of the whole Group for purposes of making major investment decisions, as it is the body which is responsible for allocating resources within the Group.

Inter-segment transaction prices are set under arm’s length conditions, similarly as in relations with parties external to the Group.

Main customers

During the period from 1 January 2014 to 31 December 2014 and in the comparable period, the sales revenues from no single customer exceeded 10% of the revenues of the Group.

70.82% of the non-current assets (property, plant and equipment and intangible assets) of the Group are located in Poland. The remaining 29.18% of the non-current assets are located in: Canada – 16.60%; the USA – 6.32%; Chile – 2.56%; other countries – 3.70%.