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WARSAW, May 13 (Reuters) - Poland's KGHM, Europe's No.2 copper producer, said on Friday it was delaying the next phase of expansion at its key overseas mine in Chile, after stubbornly low metals prices more than halved its net profit in the first quarter.
The Chilean Sierra Gorda mine, which KGHM co-owns with Japan's Sumitomo , started commercial production last year and has largely completed its first-stage ramp-up.
The mine, in which state-run KGHM holds 55 percent, produced 84,000 tonnes of copper concentrate and 15 million pounds of molybdenum last year, a far cry from over 220,000 tonnes and 25 million pounds, respectively, targeted after the second phase.
"Taking into account the current prices of molybdenum and copper as well as the current level of operating efficiency at Sierra Gorda, it is not possible now to decide on launching the project's phase two," KGHM said in a statement.
KGHM, also the world's largest silver miner, had planned to almost double its copper output to more than 1 million tonnes a year by 2020, but signalled a change to its plans after worries about Chinese demand battered metals prices.
It wants to announce new targets in February or March 2017.
KGHM, worth 12.8 billion zlotys ($3.3 billion) on the Warsaw bourse, expects copper prices to average $5,000 a tonne in 2016 compared with $5,495 last year, and expects its full-year output to fall 9 percent to 525,400 tonnes.
As with many of its rivals, the slump in metal prices has led KGHM to book writedowns, mainly at Sierra Gorda. It reported a record net loss of 5.01 billion zlotys in 2015.
Net profit more than halved in the first quarter of 2016 to 161 million zlotys, with sales 17 percent down to 3.91 billion.
The company's Polish business, on which KGHM's dividends are based, saw a 26-percent fall in first-quarter net profit to 370 million zlotys, on sales down 21 percent at 2.98 billion.
KGHM shares have edged up 0.6 percent this year, after plunging 42 percent in 2015.
$1 = 3.9060 zlotys Reporting by Adrian Krajewski; Editing by Mark Potter