⚠ Refining Is a Toll at Somebody Else's PriceHigh threat

KGHM Polska Miedź (KGH) — threat to the moat

Treatment charges are set globally and the feed price rises with the metal - the spread is nobody's decision.

The third of KGHM's refined copper that comes from purchased material earns a processing margin, and KGHM does not set it.

Rise in parent costs, H1 2026 against H1 2025 (zl m)Bought copper feed+2 301Minerals extraction tax+1 979Labour+617KGHM H1 2026 Management Board report; feed price +29%, volume +23 kt of copper
The two largest cost increases were set by the metal market and the state; wages rose a quarter as much.

Treatment and refining charges are negotiated globally between miners and smelters, and they swing with how much concentrate is available relative to how much smelting capacity exists. When new smelters are built — as they have been, at scale, in Asia — charges collapse and the toll business earns very little. KGHM's own reporting notes that in the first half of 2026 the charges were more favourable than the prior year1, which is a pleasant way of saying the number moves without reference to anything KGHM does.

The cost side is equally exposed. Purchased metal-bearing materials cost 8 335 million złoty in 20252, and the first half of 2026 added 2 301 million to that line on a purchase price 29% higher and 23 thousand tonnes more consumption3. Buying feed in a rising metal market means paying a rising price for it.

So the smelter's contribution is a spread between two numbers the market sets, on volumes constrained by what scrap and third-party concentrate the market offers. That is a business, and it is not a moat.

The measure is the share of electrolytic copper produced from own concentrate. It was 63% in the first half of 20264; the lower it goes, the more of KGHM's output is earning a toll rather than a mining margin.

References
  1. ReportedKGHM's own reporting notes that in the first half of 2026 the charges were more favourable than the prior year, which is a pleasant way of saying the number moves without reference to anything KGHM does.
    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. ReportedPurchased metal-bearing materials cost 8 335 million złoty in 2025, and the first half of 2026 added 2 301 million to that line on a purchase price 29% higher and 23 thousand tonnes more consumption.
    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. ReportedPurchased metal-bearing materials cost 8 335 million złoty in 2025, and the first half of 2026 added 2 301 million to that line on a purchase price 29% higher and 23 thousand tonnes more consumption.
    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 ↗
  4. Moat Explorer calcIt was 63% in the first half of 2026; the lower it goes, the more of KGHM's output is earning a toll rather than a mining margin.
    Moat Explorer calculation - arithmetic on figures KGHM reports: ore grade (30 387 thousand tonnes of copper over 1 858 259 thousand tonnes of ore, and 91 837 tonnes of silver over the same), the by-product credit (52 201 less 17 415 złoty a tonne), the European share of parent sales (about 17 147m of 21 927m), copper and silver as a share of parent revenue (22 378m and 6 133m of 30 964m), the minerals extraction tax against parent net profit (4 693m over 1 946m), the dividend against trailing earnings (1,50 against 43,44 a share), and own concentrate as a share of refined output (183,6 of 291,5 thousand tonnes) — FY2023-H1 2026 · publ. September 2026 · source ↗
Sources
Generated September 24, 2026