In 2014 a „Market Risk Management Policy in the KGHM Polska Miedź S.A. Group” was approved which covers selected mining companies in the Group.

Design work also began on the implementation of consistent credit risk management principles in these companies.

Market risk management Market risk is understood as the possible negative impact on the results of the Group resulting from changes in the market prices of commodities, exchange rates and interest rates, as well as the share prices of listed companies. In 2014, key tasks were centralised in the Parent Entity related to the process of market risk management in the Group (such as coordination of the identification of sources of exposure to market risk, proposing hedging strategies, contacting financial institutions in order to sign, confirm and settle derivatives transactions, and calculating measurement to fair value).

The Management Board is responsible for market risk management and compliance with policy adopted in this area. The major body involved in performing market risk management is the Market Risk Committee, which makes recommendations to the Management Board in this area.

In 2014, the Group was mainly exposed to the risk of the changes in the prices of metals it sells: copper and silver. Foreign exchange risk, including in particular the USD/ PLN exchange rate, played a significant role. In 2014, pursuant to the Market Risk Management Policy, KGHM continuously identified and measured market risk related to changes in metals prices and exchange rates. Monitoring the size of market risk was based on analyses of the impact of market risk factors on the Parent Entity’s operations (profit, balance sheet, cash flow), among others using the market risk measure Earningsat-Risk, based on Corporate Metrics methodology. This methodology allows the calculation of net profit reflecting the impact of changes in market prices of copper, silver and the exchange rate in the context of planned budgets.

As at 31 December 2014, KGHM held an open hedged position on the copper market of 48 thousand tonnes and on the currency market of USD 2 220 million in planned revenues from sales. Detailed activities in this area are described in the 2014 Consolidated Annual Report (RS), available publicly on the website at www.kghm.com [2].