Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q2 2022 results presentation. My name is Olof Greenmark. I'm head of Invalidations. Today, we will have a results presentation led by our president and CEO, Mikael Staffas, and our CFO, Håkan Gahlbjörnsson. We will also have a session led by our operator. Mikael, welcome.

Thank you, Olof, and excuse us all for being slightly late. We had a little technical error here as we were starting. We are in Stockholm today, and it's expected to be 35 degrees today, so maybe the tech equipment has something to say when you get these kind of red hot days. I'd like to go through and present the results. And I would say that we generally had a very strong production quarter. We have our mines produced well over a quarter of a month. We're happy that Tara is up and running again according to the plan. We're happy that we have once again gotten the 45 million ton level in Ike once again confirmed. And also my urban bay would give it. And also the Bulletin area has performed very well in the quarter. On the smelting side, we've had big maintenance shutdowns, as was beforehand. There should be no need for anybody. It took slightly longer and was more expensive than we had expected, but they came up relatively slowly. And then we've had some minor issues, but generally also there is a good production quota. Now, price and terms have also been good. It's very difficult in these times to go back and then down to get the timing right in a company like Booli, where you have all kinds of mix of quotational periods that play into the equation. And therefore, it's difficult to assess exactly how the price and terms would be. But anyway, we have seen that books have made that we've gotten a record profit for the second quarter straight. We have also been hit by a strong inflation. We'll come back and talk about inflation. This is no news to anybody. We're also coming up with the fact that inflation is also a thing, some of our projects, especially the other projects. Just to start with the other projects, we are going very well according to plan. The time we want to plan and kind of unforeseen that we have found along the way. There's something in the product that is well covered by the contingency that we've had. It's not being covered by, of course, the enormous inflation that we're seeing, things that are relevant for a product. We're seeing a very strong inflation kind of deal. including steel. We're seeing a strong inflation on logistics, which is also a large part of the construction of this, and also then other things, including rebars and so on. The estimate that we have now is based on the expected influx for the whole project, i.e. for much more than one period. Also, this project is very well on track. There we have now received the environmental permit. We started without that. Of course, it's a good confirmation that we've gotten it. We're not surprised. We had expected to get it, but it's always a good sense when you do get this. We're still being on the negative side. It'll slow ramp up of the nickel line in Havata, and we'll talk a little bit more about that later. We had a group profit excluding the prospector revaluation of a little bit north of four and a half billion sec the higher had mines at 2.7 billion sec and the smelters at 1.4 also them good even though i think that might come slightly low what just had been expected but i want to get the exact timing of the effect is to to get it right sometimes The ESG was also a very strong quarter. We've had a very low LT frequency of 3.2. We are now soon up to 15 years of fatality-free operation as well. Sick leave has come back slowly, though. Still had, especially in the beginning of the quarter, COVID issues, but we're seeing life improvement over how it was last year. And also this CO2 in-city went down a lot in the quarter. We've had good and stable operations in both mines and in small houses, which very much helps the CO2 intensity to go down in individual quarters. The price terms have been tricky to deal with. You see here that we've had extremely strong prices and terms that peaked at the end of the quarter and then came down rather strong towards the end. And you know that with the way that we price and the way that we have rotational period and period pricing is very important as we reprice deliveries in previous periods. We've seen that the price might not have been as strong as everybody would have been given how strong they were if you go back in May. We should also be aware of, on the other side, we have another positive. I think that most of you have picked up. We have strong by-products, strong premiums. The prices right for sulfuric acids are also then on record levels. What the price is, well, you cannot see clearly that we are having a situation where number one, The prices have come down to the lows that they've been for the year. That's maybe so interesting. What's more interesting when you look at the chart that we have all the time is that we now see the wage is really picking up also for our competition. You can see that in the zinc, we're basically... The cost curve is affected by inflation pressures. You see that in copper. You see it especially on nickel, on silver. for the right part of the curve, where especially the produced nickel, iron, and the high intensity of coal and other fuels that go into that process have really raised the cost position for them, which means that over time, of course, this is actually something that is good in the sense that over time, the better the curves industry is going up. Even though we don't have any exact numbers yet and we don't know exactly what our position is up to, we feel that we have a higher inflation than many others. To some extent, we might have lower inflation than many of our peers. Last month, we've had a strong production quarter, very close to 45 million pays in ITEC, good production in Gapenberg, good production in Kevitsa, although it has slightly lower grades that came into exactly this quarter. A little bit less throughput than normally, but we had higher grades, and this is quite normal. When we get lots of water, that exactly depends on the lower gravity, but the higher grades that we have. And we are very happy to announce that we're back to a much more normal situation than we had before. Still slow grade, depending that we cannot access water. every stope that we provide in the mine, but we have enough positions to produce full. On the smelter side, we had two copper smelters, very extensive maintenance stops in Rönnsjö and in Havalta. Both went, to be speaking, quite well, even though, as you know, when you have so many maintenance stops, there's one thing that shows up, But generally speaking, they went well. We also had the chance in the Hariata to do some corrections to the nickel line. The nickel line has since then picked up, even though it's not still at full use, but it's getting much better as we redesigned the concentrator in the maintenance. Also, Coquelin, all produced very well, also had a maintenance stop, a small one for maintenance stop. The other kind of negative news is Barriser. Barriser had a failure in the oven in the furnace, and that had to be repaired twice, and we had an unplanned outage in Barriser. It was close to a month of this, but luckily enough, Barriser is relatively sweet to us. With that, Håkan, I'll leave it to you to go through some of the financial numbers for us.

Thank you, Michael, and good morning. Thank you. Well, as my colleague said, we presented a strong quarter. We had an EBIT excluding process inventory of 4.5 billion, which is, in fact, the strongest number so far. The process going down to the end of the quarter meant that we had a negative process inventory of 4.1 billion. It's picked with 2.2 billion, as main projects like ODA are getting up to speed. Free cash flow for 2 billion, that leads to another push of 11.54. The business area of mines reached 2.7 billion Swedish kronor. They were impacted by lower prices, in particular towards the later part of the year. Smelters stayed 1.4 compared to last quarter. We had maintenance most of the units in the smelting site, which had a negative impact on EBITs. Last year, most of the maintenance was in Q2. Last year, we had most of it in Q3. Eliminations positive, 400 due to our prices. has been strong inflation. We talked about that already last quarter, but it has picked up further in Q2, and we now see an overall on the OPEX side, on the operating expense side of 15% year-on-year, meaning I'm comparing Q2 of this year to Q2 of last year. In particular, it's energy and diesel, chemicals, explosives, transports, where we feel most of the It's fairly limited on parts of the cost base. Looking at CapEx, overall the inflation on CapEx projects is higher than on the OPEC side. In particular, we see steel having a big impact, often indexed in contracts, and also logistics. We have the ethics guidance unchanged, though, for 2022. We'll have to come back to 2023 and beyond the guidance later on. The reason for that is that at some times, which means that we're not expecting to be exceeding the previous guidance for this year, even though we have... Comparing operating profit exclusion period of last year, there is a significant improvement, of course, and we've been helped by prices, 2.3 billion between the quarters. Out of that, 1 billion is stronger, the position is stronger dollar. On the metal side, and there it's primarily zinc that helps us in the quarter. We also have bigger impacts from byproducts, meaning that sulfuric acid and metal premiums in this quarter. We have a gain of 250 million from byproducts and about 200 million from higher metal premiums due to an improved balance in the European market. Volume-wise, we're up 445 million Swedish kronor. That's probably a high-end volume in my case, with most of our units performing well. I think at the 45 pace, Kev, it's a really strong, good fossil line. We do have some... slightly lower than Kev, that is offsetting the positive meal volume. And then also an impact on the negatives from midnight stop centers, where we, as I said, we had most of it in Q2 this year, but last year most of it was done in Q3. Cost is up $750 million year on year. That's an 18% increase overall. In there, there's about 150 million increased due to maintenance stop. And if you back that up, back that out, you'll see a 50% cost increase. Now, it's pretty much exclusively energy, consumed diesels, et cetera, the areas that I mentioned before that leads to this cost increase. There is also a volume of about 100 million we have produced last year. Looking at Q1, again, slight improvements. We have a positive effect of 300 million on price rooms. Comparing these two quarters, the positive impact from currencies are offset by a lower metal price development, specifically a wash. What we see in a positive impact is high prices, treatment charges, and metal premiums. Volumes are up 5 billion. We have higher volumes of mines. In particular, the water, of course, is being hit by The water inflow situation still in Q1 should go to improvement. Costs up 546 for the same reason we talked about on the previous slide. Inflation and a hard action. Looking at, I think we covered many of these, but I'll bring one word on the working capital side. We have a cash flow of 2 billion and a tie of 1 billion in working capital in the quarter. This is primarily due to maintenance stop in smelters. The combination of very strong production in mines and maintenance stop in smelters when tying a bit of capital in the quarter. We are currently at slightly above average levels in copper and in nickel. The balance sheet is very strong. We are now at the net debt of EPS and a gearing of 7%. In Q2, we paid the ordinary dividends and the extra dividends, which explains most of the difference. And we have a robust funding and net payment capacity of close to 14 billion. So, thank you.