Ladies and gentlemen, I would like to give you a warm welcome at the conference on the financial results of both the group and the company, for the first half of twenty twenty one. We meet together mainly through video broadcast, but I would also like to welcome all those who came in person to the Wolters Kluwer Exchange. We'll start traditionally with management's comments on the results for the first half of the year, and then we will move on to the Q and A session. Now we will questions asked both here in the room and the ones that you send via chat, at kghm.com. If there are any questions that we want people to answer today for questions that will require more detailed answers.
We will answer them in a more detailed manner on our site, and you will be able to find all the answers there. The results of KJ Chairman, Andre Pukajuk, Vice President For Development Pavel Gruza, Vice President For Foreign Assets and Andrei Van Vlok, I'm Vice President for Financial Matters. We do not have here Darul Shielinski, but we will also address production mechanisms and for the ones related to National Domestic Operations. Ladies and gentlemen, I would like to give the floor to President, Marcin Prudinski. Ladies and gentlemen, we would like to welcome you on this still summertime afternoon.
We have already passed 12. We have a few pieces of good news about the operations of the company in the first half of twenty twenty one. I think that the figures of our direct meeting, EUR 132,000,000 EUR433,000,000 EUR433,000,000. Why these numbers? 1 100 percent higher year on year Adjusted EBITDA, 30% higher revenues, 4 33% higher net profit.
If we make reference to the first half of twenty twenty, class, what we experienced in macroeconomic space. And the recurring comment is that Copper prices were favorable to us. I cannot deny that. For the first time in quite a while, I'm sure this is the first thing that We have a tailwind rather than have to struggle against the wind. The prices in the first half of the year were very difficult, even the prices being 5,000 per ton.
In 2018 2019. We're not available to us either. But copper prices is not the only or not the main reason why we can share those good numbers with you today. We implemented a number of optimization initiatives, and we can see the results. And if you look at this year, Raghulda comes another good number.
And I think that's very relevant here. This is the 1st year where money is flowing not from Poland to Chile, but from Chile to Poland. So we are facing the situation where about EUR 100,000,000 came back from Sierra Gorda to Poland. And that's not the end of it. The next amount are planned for this year.
So we will not end with this number. I think good production parameters continued good financial parameters continue, that should become reality. Of course, this happened much later than we had planned. It was when we started this investment, but 3 has a very intense work of the management board and people who are responsible for Sierra Garda, both Polish people and Chilean's winner and in the headquarters of the company, But Food. In spite of lower prices, we were able to show you much Better Financial with us improvement on our production volumes and the market for this project in terms of cost, in terms of optimization of production capacity.
All that is bringing results in that price does support us. But even without this favorable price, we could see with positive impact on our financial results. Maybe this will sound like an anecdote, but There are quite a few examples like that, where several dozen cars more vehicles that carry output to the mill and give us a specific with the results because that at the end of the day means more copper. That was just one of the many optimization initiatives. And again, this is mostly the end of our initiatives in this regard.
Most importantly, this is happening without any new major new capital expenditures. We basically only optimize what we had previously, and we try to create value based on what we have already invested. We're trying to increase the value of our assets to improve the financial result. By the way, we are trying to do exactly the same thing in Poland in terms of cost, in terms of maintenance of our production. We earn out perfectly well that grade is not favorable as time goes on and the content of copper is decreasing.
And Sierra in operating a stick in cycles occasionally we encounter greater content. And in the mining industry worldwide, that's one of the deposits with lower content in the call. So that's not a project that It brings those results on its own. We have to combat to get them. So we are happy we are getting those results.
We're also happy that For the first time in a long time, macroeconomic conditions support us. We are uncertain, and we also have to admit openly that there is an ongoing battle in the market in terms of price. Sometimes, we can see declining prices and remember there are intense efforts to push it up. This is something we are monitoring closely. We are prepared for a number of various options.
Also, as past year showed, we are ready for crisis scenarios. And in spite of those kind of conditions, we're able to show good financial results. As regards specific financials. Today, we will be presented by individual members of our management partner. I would like to give the floor to Andre Khandbook, who will tell us about production figures, but also financial data.
Good afternoon, ladies and gentlemen. I'd also like to give a warm welcome to everyone present here via our broadcast. Ladies and gentlemen, as we balance production results, metals show an increase paid copper 8.6% up, 6 months to 6 months. We can say that this growth we call it in all segments in Poland. KJG International, Doctor.
Simone Robinson at Sierra Gorda. As we announced the production of our 2 other products that is silver. It is slightly lower than last year. And that results from the fact that we particularly in Poland. We process more foreign concentrates with a slightly different type from the one that we processed last year.
Therefore, with higher content of copper, but not necessarily with higher content of silver. So availability of silver in 3rd party concentrate is slightly lower. As regards to North American lines, we are getting through areas that contain slightly less precious metal CPMs. We should also tell viewers about the results of for Potamix SR as the main holding company in the group. Here, I would like to bring your attention to maintenance of the level of mining output.
This is Important because we know that mining conditions are deteriorating. We operate in increasingly difficult geological conditions, getting deeper and deeper on the more expensive area of the mine. But the output level was maintained and even slightly exceeded from the first half of twenty twenty. So the initiatives that were linked to making the deposit available, extraction where the functioning of the entire mining complex, transportation, processing and so on and so forth, all that functions smoothly. And we are able to cope with the situation.
Production of electronic copper increased, and that increase stemmed from greater processing of 3rd party input, scrap and 3rd party input. We are also expanding the range of 1st party input, trying to adjust the capacity of Auris Motors to greater opportunities of choosing and optimizing the purchases of 3rd party inputs. On the other hand, our smelters also adjust their technology to be able to process those increased quantities. We are preparing for that by building storage centers, warehousing centers and all of us supporting logistics to transport first party. That is becoming a significant element of our production, but it helps us because it gives us an opportunity to fully utilize the capacity for smelting and for raffination in our smelters to push up our volumes.
A decrease in electrolytic copper production from our own input without only from a year on year comparison. In the middle of last year, we were still processing the remains of the surplus that we had accumulated before. And at the beginning of 2020, we still processed that previous was hanged. We had slightly higher processing of our own input now. We are running on an ongoing basis that whatever is extracted is subsequently processed.
As for collection results in SIRACORDA, I will give the floor to my colleague. Thank you, Andre. Ladies and gentlemen, the returns on our foreign assets in particular regard, Dinesh Robinson of Eragon. You can see or hear those numbers that we are very proud of. This is the effect of both of the management of the mine and of processing plants in Sierra Gorda.
But also it results from our good relations with trade unions. We managed to sign the agreement at the very early stage, and that allowed us to work in calm conditions. In spite of the turbulent moment that Chile is going through right now, Chile and the mining companies operating under the jurisdiction. I would also like to mention the financial results and add a few words to what the President said regarding repatriation of cash from Chile to Poland. Last year, we managed to maintain of Financial Supplies from Poland.
And this year, thanks to good production, thanks to the fact that The first time we are being supported in the term of the Service Management Board. We are being supported by the macroeconomic situation. We can see the possibility of reversing this financial vector, which now points back towards Poland. And we are very happy about that, thanks to cost savings, which we were able to implement. The price went down to very low levels below 5,000 per ton.
We were able in Syroglobe and our foreign assets implement those savings. And thanks to our discipline, the savings also this year. As of now, this year we generate a financial surplus, which is then brought back to Poland. With regard to KJ German International, we can boast excellent production results of Robinson, which is also working on the extension of its LOM plan of planned life of the mine, and that generates the value facets on our books. Thank you.
So speaking of our financial performance, Let me start with the revenue. The revenues of the Capital Group were up 32% on a year to year basis. And it is important to say that we have seen that group across all the segments of our business. The main driving factor was price increase for all the metals that we sell. The Exchange rate, the zloty against U.
S. Dollar was working against us. Zloty depreciated against The U. S. Dollar, but has a negative impact on our financial performance.
So we have actually experienced some adverse effect of exchange rate. The volume was down by $388,000,000 and this is due to the logistics of sales. So first, we have to accumulate goods before we sell the transactions. That happens in the U. S.
And in Poland for silver. So this is a temporary arrangement. We simply had to stock up We had to stock up some products before the 30th June when we were closing the books for the quarter. It's a negative result on our derivatives. It's the outcome of our hedging transactions.
We adjusted the hedgings during the first 6 months of the year. As much as we could on the market, but our Surgical hedging transactions that were depending on our position during the all time lows for the copper continue to affect us. But this negative effect is generously offset by the revenue increase and also an higher factor that I'm going to address in a second. Now let me turn to the cost. C1 unit cost, which is the cash cost of production of payable copper.
We can tell, but it went up from $1.6 to $1.89 per pound. But there's a number of factors that contributed to that. First of all, C1 cost was Actually going down in Poland. So unit cost in Poland in Polish production was going down. At Siragorda, we also had C1 unit cost selling in Poland.
The main thing is the increase of price of silver. In Sierra Gorda, the main driving force was the increase in the production volume. However, the negative effect is the increased net tax, so called copper tax. It is included in C1 cost, and it is calculated based on the price of the copper and the volume that was produced. Since the volume is stable, but the price was up substantially, the tax was also much higher, and that affected at our C1 cost position.
So the operating result. So as the CEO said, we've seen the increase in that EBITDA by 100% on a year to year basis. And again, let me emphasize that we've seen that growth across all the segments, in Poland, in North America and in Sierra Garda. We've also had EBITDA going up in the smaller companies of the group like ZANAM, PEDECA, etcetera, they are doing quite well. They are not growing at such a dynamic rate.
But nevertheless, because of that growth, they were able to keep their balance is in check, and they were able to keep the financial arrangements to the benefits. Obviously, this is all driven by increased revenue. But I may say that contributors to the EBITDA growth, To some extent, but also related to the fact that we are able to keep the production stable in terms of cost, whatever is possible. I will address the cost at the later length later. But as a result of these measures, our operating margin was up 2 fold nearly.
Now The net income the net result of the Capital Group was up to EUR 4,000,000,000 EUR 723,000,000. The main driving factor was, again, increased revenue. The change in the cost by type related to the fact that we need to buy more 3rd party ore because we have to increase our volume. Therefore, the production in progress and products contributed positively to that, and therefore, we have seeing the growth. But an important factor that I mentioned earlier is that Verified that we were part of the joint venture projects, namely the stable, predictable production And the growing prices of copper enabled us to come up with the revaluation of the loans that were granted to Sierra Garda.
And that revaluation showed that the value of loans were up by EUR 1,000,000,000,000 8 $66,000,000 So this is our consolidated profit. When you look at the stand alone results, We show even higher number there. And in that result, we had to include the reversal of the previous write ups of loans that were granted to other entities that were involved with Sierra Gorda. They were not included in Sierra Gorda in consolidated statements. But overall, this is the same outcome.
So we have better operational results of Sierra Gorda. We have more predictable revenue and profit. And overall, the macroeconomic environment is much more conducive to our business. Now speaking of costs, the main driver for cost is not greater acquisition of 3rd party ore, but when it comes to the cost by type. We are tracking them very closely.
And there are 3rd party services and raw materials consumption on electricity and other energy consumption. This is under control, but there are some other price factors that are beyond our control, like the much higher prices of diesel fuel and the natural gas. And in addition to that, higher prices of EPS allowances. We are hedging these positions, but hedging is not long term, and we are not able to hedge ourselves long term. Our hedging policy works short term, and we can see the results.
And on top of it, the price of the steel was up substantially under the narrow market, and we are actually using quite a lot of steel in the mining operations. And third of all, we were impacted adversely by the growing prices of steel. But again, let me emphasize that we are tracking the consumption of raw materials very strictly, and we are tracking the cost of energy. There are no negative deviations. We do have savings, and provided for savings in our budget, and we are right on target here in line with the budget.
Now the next slide shows our cash flow. At this point, I would like to highlight the negative number that you see there, the negative cash flow, which is related to the change in the working capital. And I've already explained that we had increased inventory, which was a temporary thing. It was a technical arrangement, And it was mostly anode copper that we had to stack up. We had to stack it up before we actually prepared ourselves for best matter repair.
We also had higher stock out of concentrate copper in the port, and that was to prepare for the next year. And as a result, we had more ships coming to the port at the same time, all in June. So it's all coincided in time. In addition to that, we So had a reduction in our debt factoring. The factoring was paid off since there was no need to use it, and we didn't want to incur unnecessary financial expenses.
Another thing was the acquisition of intangible assets. So CapEx, It was CapEx for Polish operations and for international operations, specifically Robinson Mine. It was all in line with the plan. And the third thing that contributed to that negative number was the payback of our loan to one of the banks, dollars 450,000,000 We took advantage of the fact that we had free cash flow, and we didn't want to pay the cost of the debt and therefore, we decided to reduce our debt position. So moving on to the debt.
Our net debt to adjusted EBITDA currently or actually at the end of Q2 was at 0.7. So this is a much better situation than last year, and this is all in line with the policy that we follow. The net debt has been fairly stable. But as we indicated here, We took advantage of the fact that we had some positive cash flow, and we decided to pay back our one of our loans and everything else is pretty stable. We don't want to keep too much cash because the cash that sits idle does not generate any income, and we don't want to maintain the excessive debt because this is costly.
We have an open credit line for CLAR 8.2 volumes, Laurence. And this is a very flexible credit line. We have very good terms. Therefore, whenever needed, we can actually take advantage of that open credit line. Our financial structure and our structure of financing is currently very optimum, and we continue to optimize that.
And our goal is to avoid financial expenses that are not needed. I think that we have pretty much covered our financial performance. So let me turn the floor to Mr. Bugajcak. Good afternoon, everyone.
Let me walk you through our investment projects and development projects. The first 6 months, we're closed with the CapEx So at PLN 1,036,000,000, on the pie chart, you can see the breakdown of the CapEx for the 1st 6 months of 2021. Perhaps the number is not very impressive, but let me say that our projects are very complex. And many times, these are our multi annual projects. Therefore, we like historically, the Q4 always shows more weight.
And I just want to assure you that all the investment projects delivered according to the plan. And this is the More and more important role of the deep guagos, the numbers are quite impressive. The annual growth is over 40% at each stage of operation. So looking at this ratio and looking at this growth, we may mention 2 things. First of all, we have more preparatory work completed, and we are also actually getting to the mining in that particular area.
Per where you may expect to see a growing production. Now key projects. First of all, the tailing processing facility at the South is pretty much completed, and all different installations that have been planned will be delivered as scheduled. Now deposit access program, we continue to sync DG-one shaft. Which hit 1231 meters.
And for the Scharf GG2, we do have a special plan, special development plan already published, and now we are actually moving on with the drill holes. We have also completed our central air cooling system. This is an important project. It will actually help us produced at the sections of the deposit were not accessible since the conditions of mining were not adequate. Now all the projects related to BAC conclusions are moving on as scheduled, both in Guagav and at Lagnitsa site.
We are working on the Vodafone smelter. And again, the work goes as scheduled. Now our energy development program, we move in twofold. We are working on the renewable energy sources, But at the same time, we continue to optimize our energy consumption. And we have already seen the first outcomes.
We were able to reduce energy consumption with the same production parameters as we move to have. And the next slide shows how we want to reach fifty-fifty split, 50% of energy will be from our own generation, including renewable sources by 2,030. As of today, the plan is such that we will switch to this fifty-fifty system, And we will save on CO2 emission by 900,000 tons, give and take. And by 2030, Sierra Gorda mine will have 100% of electricity from Renewable Sources. So we have the right data to show.
Now the next slide shows the photovoltaic farm, And we were able to build that at Lagnisa smelter. And we also have 2 other projects at Abare and Guowulf. All the numbers for these investments are shown next to the pictures. So all these projects have been delivered as scheduled.
Ladies and gentlemen, it seems that we are getting to the end of our presentation. And maybe as a wrap up, I would like to say that it is worth mentioning that obviously, we will not have lost our laurels having communicated this good news to you. As I mentioned before, we are working on updating our strategy. And hopefully, by September, we will be ready to share with you the results of our studies. But in general, we can say that unless something Fundamental Changes Worldwide.
We assume that the following years will be the years of copper and silver. If that is indeed the case, then we need to produce as much as possible with the optimum cost level and with the highest sales while taking care of the costs. But in order to do that, the company needs to transform. It needs to transform those in the context of increasingly restructured regulations for the energy sector and in the context of for Environment Energy Youth. Also in the context of optimization of processes, the use of new technologies, automation and in the context of securing new deposits for further exploration and operation of our business.
So what we are looking into very closely right now, That's actually something you are well familiar with. We have been working on green energy, on new energy sources, namely small nuclear reactors and as a source of energy, hydrogen, which is potentially a very interesting source of energy in our sector. Also, offshore projects are being considered. A big project for us, bitomovznaiski license that is basically a new mine, a new technology, a new regulatory environment as a priority topic for us. Under the license in potassium salts, there's also very promising future oriented subject in the context of the current business cycle.
All of that is the subject of our analysis. We do not fundamentally change our assumptions. In December 2017 when we developed our original strategy. We had this motto, uncertainty is the only thing. But it's certain you have to be ready all options.
But at the same time, the company needs to transform in the context of opportunities that open up to it. And that is why we are updating our strategy, and that is what we will bring to you in detail in September. Thank you. Thank you very much to the management board members for their comments. Now I open the Q and A session.
This time, we have questions both from the room here and from the chat. Irkjhm.com. Please also ask questions here. The Q and A session will be chaired by Janusz Christoszczak, Head of our Investor Relations department. I can see the first question.
Good afternoon, ladies and gentlemen. Pavel at Pablo Projovsky Santander. I have 6 questions altogether. Should I split it up by sector? Okay, 1 by 1.
There will be a few short ones. 1st, does the company intend to change, adjust its volume guidance for any of the projects for any of the metals for the whole 2021. Are you talking about production? Yes, production. Okay, that was my first question.
The second, You have mentioned this lower content on international. So I would like to find out whether and when we can expect any changes in the metal content. If my recollection is correct, maybe you talk with us. What do you mean? Content?
Grade grade. Okay, great. And another simple question, we have major one offs. Does the company intend to maintain its dividend payout at the same level as it paid this year? That is will one off change in next year's dividend or not.
Then. There is a beautiful project, 3 Megawatt in photovoltaics. My general question is about your strategy. A few years when you showed this strategy, My understanding was, there is still have changed with regard to renewable energy sources. So now please do not give us a plan for 2,030, that's easy to come up with, but a plan for the next 2, 3 years.
How exactly megawatts in photovoltaics onshore you are going to put up. There is one more question about progress in the sale of assets. Has there been any progress in your selling of the assets? And the last thing, which also contributes to the results, I would appreciate very much a short but informative discussion of this component of cost stock. You've added minus 700 in the first and adjustment of costs by stock minus €700,000,000 in the first quarter, minus €300,000,000 in the second quarter.
So I would be happy to find out what is the management board's view of what the value might be in the Q3 or in the second half of the year. That's it from me. Okay. We'll try to address those questions quickly now. As for the changes in our production plans, excluding unpredictable events, those related to nature and random events.
We do not plan any change here in terms of our production. As for the grade, lower grade on international, Pavel. Maybe you can take it. In Liebengen, the subject you have brought up concerns. 1 of the assets, which is now in the process of sale.
So it is inconvenient for us to discuss it at the moment. That results from the existing geology. We are transparent on this point towards the participants of the disposal process. This is being assessed by our potential buyers of those assets. And with regard to your second question, I would like to inform you that the process of for sale of our assets is MovingOn S brand in accordance with the procedure that we developed, transparent procedure that was communicated inside our organization.
We are now at a very sensitive first stage of this process. That's why my constraint in informing you more broadly about the subject. I think at the end of the year, we will be able to present you much more information on that point. As regards our approach to dividend next year, it's not going to change. The dividend policy remains in place.
You know that for a couple of years, the company did not payout. The dividend 2020 was the 1st year for which the dividend was paid after a long break. Maintaining of the trends maintaining of the results on the current trends allows us to be optimistic about dividend. Our dividend policy does not change. That's what I can tell you right now.
And as for photovoltaic projects, It's not just the Portugal types. It is broadly understood energy optimization. Ladies and gentlemen, we do not have already projects in this field, so we had to build them from scratch. You know the facing development plans, environmental impact assessment. Those procedures are very time assuming it doesn't take several months, it may take as long as years.
So the process of placing investments on our land takes time because the formalities takes time. We will start 1 8 megawatt investment, then we will start another of 6 megawatts and 2 smaller ones. So that will be the beginning of the investment process once we have gone through the administrative preparation. We also had some vapor and gas plants, which helps us improve our energy management. The production process is more intense, and we use less energy.
We have lower energy consumption. Very soon, we will go out to the market with an acquisition process. Apart from What we are working on, we want to acquire processes, projects that are already prepared for development. So we will also have PPA. And apart from our own investments, we will have it's weeks or months rather than years that we will be in the market.
These are in fact strategic conference. If you make a rough calculation, you will know that if we relied all and photovoltaics, we would have to cover the area of 3 more large ships in our panels. So this is not the only source so that we can utilize in the context of delivering on the promise of being green in Energy. So this machine is going at full steam as much as the reality allows us to. And Pavel commented on sales.
There was also a question about stock in the future.
In terms of inventory, as I explained, the inventory was up for technical reasons. We actually have to suck up more inventory since we know that The modernization program will be continued for the next year and probably 2 years. And that is mostly the Guagav smelter. Therefore, this inventory will be maintained, perhaps in a different form. And at the same time, we also process more 3rd party ore.
And Since we work on the 3rd party material, we have to stock it up first, so that it's ready for the smelters. So this is all technical. And therefore, it doesn't affect our performance because this is a repeated cycle. And we've already said that this is Also an additional element like sales logistics. And this is a temporary increase in inventory that tends to go down during the next quarter.
I don't want to predict when we are going to have it up and down because it's not related to the shipment cycles for them or our silver concentrate or rolled material. For instance, for Sildenia, we have a higher inventory of rolled sheets because we are getting ready for several weeks of downtime of Sertinias Motor. Any other questions from the room? Well, thank you for all the answers. But if I may, my first question was about the volume guidance for the year.
As far as I remember, you are way above the plans for mausoleum in Sierra Gorda. And you said that you're not going to change your assumptions. So does it mean that you're going to reduce your production of molybdenum dramatically? Or you're just being cautious and you'd rather keep a Surplus in place instead of facing a different scenario. So how should we look at it.
You think that you will deliver the volume as actually identified in the guidance? Or are you actually playing it safe? Well, the Sierra Gorda budget is subject to different rules at our KGHM in Poland or international. At Siragorda, we have to actually come to the arrangements with our partners of the joint ventures every time we work on the budget. At this moment, we have not had any discussions about any adjustment of the Sierra Gorda budget, including the production volume.
Therefore, at this point, we are not going to come up with any formal position regarding the future And just to make everything clear, it's not going to be less than the budget Unless something unexpected happens. But we always played safe because, as you know, we are in a business where there are many factors that are beyond our control. So we sometimes we are at the mercy of nature. And Whatever possible, we try to over deliver If situation is conducive and the production situation allows that. And to speak about molybdenum and Sierra Garda, Production during the 1st 6 months of this year was actually lower than the production for the same time last year.
However, the revenue sales revenue is higher because the price was up. In terms of volume, we were down slightly, but the Revenue was up because of the higher price. Any higher questions from the room from the audience. Yes. But you get too big business alert.
I just want to make sure whether you meant on the short or offshore. This is the question for a CEO, but you're speaking about the strategy update? Or So you said that you are looking at various electricity options. Yes, we are also looking at offshore options, Yes. And I also wanted to ask you about the impact of electricity prices on your financial performance.
And Mr. Kinstock said that Natural gas prices is also a major factor because the price of natural gas is going up. So are you still looking at the gas units because we know that natural gas has a tap in the EU. And I also have a question about the new deposits. Are we going to expect it any time during the coming conference season?
I think that I addressed the first question already in terms of electricity prices and prices of the natural gas and the impact of that on our business. I think Andre will provide more detail in a minute. But overall, Well, the only reasonable response that we can take is long term, and this is all about the transformation and transition. And there is no other long term option to actually avoid increasing the EPS allowances prices, but determine at the end of the day the price of Energy. So we are trying to regroup and we are transforming our electricity consumption and we are trying optimize consumption wherever possible.
We want to come up with the technologies that will allow us to reduce energy consumption. And in terms of the current developments, over to Andre. So I'm not sure if I have all the numbers at hand. If not, we will prepare the answer and send it up to you. But speaking of the Polish Copper Because I think that that was your question.
So the cost of electricity was up by SEK 102,000,000, €70,000,000 because of the higher power price, euros 77,000,000 up because of the ETS prices and And €19,000,000 up because of the increase in natural gas and diesel fuel prices. So this is the breakdown of energy prices. And in terms of the gas fired units, well, to be honest, the price dynamics It's not very encouraging. Therefore, we are not taking any decisions, but we are watching the trend because it may change. It would be much better if we had more regulatory certainty within the European Union in terms of the Natural Gas Supply from Russia.
I have to actually add to what I said, but we are expecting the power capacity fee to go down, we know that the increase that we've seen in this component is not Because the cost was also the question was also about the cost of energy. So I believe that we have covered this one. Any other questions from the audience? Yes. Jakub Shkari, M Bank Brokerage House.
I have a question about your renewable energy target at Sierra Gorda. And I would like to point out what is the current situation and how do you go about it? Do you actually have photovoltaic farms? How you're going to actually develop that? Is CapEx going to be shouldered by Sierra Gorda or by external partners?
And I also have about the surplus that you show at Sierra Gorda. Are you going to actually continue to transfer back to Poland? Or you really think about future development like Sierra Gorda 2, the project that was considered at some time or Sierra Gorda Oxide that was in the plan at some point in time. Actually, as of today, Sierra Gorda has some electricity generated by Renewable Sources. And the ultimate 100% target has been adopted because of very advantageous contracts that we have signed that are future forward looking.
So we are actually looking we are waiting for the supplier of electricity to complete their project. So this is all actually secured, and we are really happy with this electricity transition at Sierra Gorda. And to answer your question about cash flow from Sierra Gorda, well, at this point, Sierra Gorda is not planning the second phase. There is no discussion about Sierra Gorda 2 at this point. So there is no investment planning towards that.
We continue the same investment methodology that we adopted for Sierra Gorda at the very beginning of our engagement there when we actually stepped into this function of the management board. So we want to optimize the operations while containing our financial exposure. So this is what we continue to do. We do have CapEx for improvements and that are needed. It is not That we are going to double the CapEx for Sierra Gorda or that we want to double the capacity of Sierra Gorda?
No. But we to take a lot of small steps to move forward. And despite the CapEx that is dedicated to improvements. We continue to have substantial cash flow to Poland. Final question.
There is a very new trend of electromobility in the deep mines. Suppliers of this equipment are actually talking about it everywhere. Have you ever considered that? And would it be an option to reduce your energy consumption because you because you won't be able to contain your cost related to ventilation and temperature reduction. I know that one of your companies has such a big portfolio.
So let me answer that question, and Adam Bogajtek, who is responsible for development, may provide more details. Well, it is true that there is a trend in place. I believe that we need time for technology to develop. And many times, suppliers are actually speaking much more before they are able to deliver because the loader has to lift 12 tons per hour, and it needs a lot of electricity from the battery. And It means that it would have to be charged several times during the 6 hour cycle to be able to replace the currently operated diesel fuel machines.
So we are looking for options for options that would help us keep our production cycle intact, so but we do not need to make it longer. So we can actually think about the transportation of people with the use of electricity. We are testing that. The drilling machines is Also a good option. But loaders, well, or trucks that are heavy duty, not Yes, probably.
If the batteries develop substantially, then it could be feasible. And at Sierra Gorda, we actually have for huge machines that are also electrical, but they head to load vehicles that have capacity of 250 tons. So These are electrical machines, but they need to be supplied from the grid. It's not possible to operate these machines from the battery because the battery will be up very soon. But your question about Sierra Gorda Electricity is very interesting.
Chileans has it much easier because we spoke about the area that you have to dedicate to the photovoltaic. They have the entire Atacama desert. And this is one of the sunniest places in the world. And on top of it, it is completely empty. And the mine, such as ours, takes just a tiny fraction of this dessert.
Therefore, it's much easier to deploy photovoltaic farms there. And for photovoltaics, you need to have appropriate acreage. And they have much more ambitious plans. They want to use electrolysis to generate hydrogen, and they want to be become a leading producer of hydrogen in the world. And they will ship that through the by the sea with ships.
Obviously, Ferris, they have to concentrate that into ammonia. Esna, over to my colleague.
Thank you, Esna. I do confirm what Marcin has said. In two cases, we checked what the companies had previously promised, and they were unable to deliver to us the machinery that would correspond to our profile. We are in talks with all major manufacturers worldwide. So that's the situation right now.
As we've got lower, but the temperature is unfortunately just one degree. We will have temperature lower underground by 1 degree. That will not solve the problem of cooling the formation. We are thinking about that. We are open to this direction developments.
But apart from that, we need to optimize and cope with the difficult conditions. Thank you very much. I would like to come back for a second to the theme of operations and results on Sierra Gorda. I would like Pablo Croza to answer the question from Tomel Trzesinski. Thanks.
To what activities did you the greater amount of copper in Sierra Gorda. Will you be able to maintain the 30% growth of the Chilean company. In principle, the output as a function of metal content in the ore, but also that depends on optimization of the process itself and on parameterization of this process. Let me remind you that in the last quarters, We also concluded certain investments that were those tiny steps low cost, low capital intensity, baby steps that allowed us to improve the parameters of the installation. We could enumerate here a number of elements, for example, hydrocyclones and other in technological elements.
So all those activities taken together translated to greater capacity for processing and Greater Recovery on what geology offers to us. If you ask about the second half of the year, As I said, we do not expect any major collapse in the production, anything that would threaten our good results. But also at present, we are not giving any clear guidance and quantified plan. Thank you very much. I think the President's comment and previous answers exhaust to the questions that I'm going to read out right now, but there was a question addressed to Marcin Plozynski from Yakup Karynovich.
Lot to the greatest extent contributed to the improvement of the situation here at Agorvda, which factors were of key importance in this process. Well, I tried to explain this at the beginning of my presentation, but maybe I'll addresses in more detail. Ladies and gentlemen, when we joined this company, we had our in trace fall of some big CapEx projects, which mean that by investing more billions, our production could grow. We took a risky decision. We invested in the form of purchase price plus loans for the development of this project that with billions of zlotys.
Maybe it's high time now to use ordinary Optimization of Maintenance and Management of Industrial Asset, if you do, Manager Industrial Assets and try to squeeze as much of it as possible so that in the following stages, we get even better financial results. So in a nutshell, through a series of organizational initiatives, I can give you an example of vehicles. If One vehicle is loaded to a greater extent, thanks to better capacity better motivation system, incentive system for the driver for the loader. We have a dozen percent higher volume of those trucks. And if we have better transportation to the mills.
And then we have better coordination with maintenance. We act proactively. We eliminate all those risks that can potentially threaten us because they might bring down our production capacity down to 60% rather than 85%, which is in the industry. So we took a number of those baby steps, and as a result, we are able to produce more. That is the work of Us as the Home Management Board, Cargo Managers here in Poland, we are working on this all the time.
People know that this is Polish money of a Polish company, but we need to make sure that the investment is conducted in a way that pace off. And also on the cost level, we undertook a number of initiatives. Wherever possible. We try to do things in a less expensive way, like in this photovoltaic project, to RES, non closing down of the company during COVID. It was not easy at all to continue production.
COVID is still at high risk of COVID. We have frequent inspections. We go through them with a positive outcome. And that means that we're able to manage the company that are quite well, also relations with trade unions. This is a delicate matter in Chile, and we are nevertheless able to find common language share with workers.
With the scale of production that is 1,000,000 of dollars, we were able to in insured transportation for employees continuity of operations. So that was a whole range of such factors. I would call and importance, significant, good management. And without any extra CapEx, we can see our results. CapEx can be brought in as this trend becomes a lasting one.
Then you can consider adding additional to expenditures. Thank you very much. Let me just briefly read out a question to Andrei Kansbok. Ruka Shrutnik and UBS asked this question. And it concerns doubts about the significant increase in remuneration at KTHM in the Q2.
Should that be treated this second quarter level be treated as a starting point for the following ones? Ladies and gentlemen, remuneration cost is derivative of a collective bargaining agreement that we signed. With collective bonding agreement identifies quite precisely the algorithm that determines salaries, and it is a derivative of this arrangement. In the collective bargaining agreement, We also included awards from the Prophet. If all the factors that we have mentioned today continue on the positive trend, we forecast a record high profit.
And then we are obliged to establish a provision for an increased bonus for the crew. So we pay out more. But on the other hand, we also have the feeling that this collective bargaining agreement and our activities allow us to share the beneficial situation of the company with a broad range of stakeholders, I. E. Employees.
Thank you very much. I have a financial question as well. I will quickly answer it right now, reminding you the impact of hedging on our results. Rafael Biak asks about how much hedging came on sales and how was on the remaining activities. In the first half of the year, on hedging.
We had EUR 742,000,000 adjustment on revenue, EUR 733 €1,000,000 reduction of the result on other operations and remaining €20,000,000 was assigned to financial results. And you can find it in our presentation in its full version, but I just mentioned that this is something that facilitates our modeling. Are there any questions from the room? It seems we have more questions coming in. Some of them have already been answered.
So I'm quickly going through what comes in here online. I would just like to refer to the question that was asked before about Electrical Energy. The CEO answered that you expected, among other things, reduction, I think it was a reduction, reduction in the power capacity fee. Why do you expect this fee to be reduced. Does it follow from any regulations?
Yes, it does follow from regulations. We in the regulatory policy of the European Commission. We are on the list of industries that can be exempted from the fee, mining copper mining can be exempted from the fee. And now a resolution is being considered where this exemption is envisaged. And what was this fee in the first half twenty twenty one?
About PLN 100,000,000. And this fee will continue till the end of 2021, That depends on when the resolution that the CEO has just mentioned will come into force. Thank you very much. I have 2 quick questions regarding whether we can say something more that we can dwell on the subject of our interest in MSCR Reactive and Hydrogen. We have already mentioned here that those things are being studied as part of a broader discussion broader thinking, as a result of which we will try to show you when we talk about update of our strategy or certain elements of the strategy.
On my part, we have exhausted the questions that were sent in by e mail. So thank you very much. Let me just remind you that all questions and answers from today and the questions that you will still send to us by e mail will be published on our website. We will provide answers and we will add and the details if you have any more specific questions. We are at your disposal also right after this conference.
Let's hope we will meet again next quarter, hopefully, with a bigger number of participants. Thank you very much. I would like to thank the management part as well. Thank you.