Boliden AB (publ)

Ladies and gentlemen, I'd like to welcome you to Boliden's Q3 2022 results presentation. My name is Olof Glennmark and I'm Head of Investor Relations. Today we will have a results presentation led by our President and CEO Mikael Staffas and our CFO Håkan Gabrielsson. We will also have a Q&A session and we will start with questions here in Stockholm. Michael, welcome.

Thank you, Olof, and a very warm welcome from me as well to all of you out there. I'll just jump right into it and start the presentation. So we've had a quarter that has been a strong quarter, I would say with good results, though we have experienced quite a lot of inflation and we'll come back around that. We have favorable currencies, and the favorable currencies that are in overpriced, in total is of course very good to us is of course also part of these things that we're seeing on the inflation side where the currencies will drive up prices even though our suppliers might be invoicing us in euros or in Swedish krona of course the underlying dollar exchange rate does matter. We've had a strong production result in our mines but the grades are lower. This I think is also in line with the guiding that we have done. On the smelter side, we've had a good quarter, but we have lower production in our zinc smelters. However, we have a positive contribution from selling power that we'll come back into the details around, but we have voluntarily curtailed zinc production in order to save on power. Inventories are high. It's mainly an issue related to that we're not been able to get everything out of the precious metal plants that we wanted to, and we have a unusually high amount of especially gold and to some extent P&G platinum group metals in our In our inventory Financial performance close to three and a half billion Swedish krona clearly up from last year free cash flow close to zero which is down has to do with the Inventory build-up that Hawkeye will talk a little bit more about capex about two and a half billion which is in line with the guidance that we've given The projects are generally going fine. The big projects in Oda, Kristineberg and Aitek dam projects are all advancing according to plan. And we've had an improvement of the ramp up in the Harjavata nickel line. It is still not 100% at what it's going to be, but much better than before. And we're very good optimism that we'll be able to reach the full production soon. So all in all, we have the three and a half billion profits, mines roughly a little bit less than two and smelters a billion and a half. If you look in a historical context, it's of course a very good result anyway, even though it's slightly lower than the previous two record quarters. Looking at the ESG side, we have a lost time injury development that we are not happy with, even though it's about the same as it was last year. It is clearly worse than it was during Q2. These things sometimes go up and down and a little bit difficult to understand exactly the the dynamics that goes in between we're working intensely to make sure that we keep it as low as ever possible the sick leave rate is also still a little bit high this is mainly due to short-term absentees we don't know exactly but we have a sense that we're not alone and we have a sense that to some extent this is a little bit left of covid but it's also regular viruses that we haven't really been able to to get used to during covid times and now as we're getting back and getting to know people and meet people we're also getting some normal codes a little bit more than normal we're working hard to get this one down as well on the co2 side and the climate side we are Happy with the progress that we're having towards the targets that we have. And we have our intensity number at 0.59 this quarter, which is clearly better than last year. And you can see to the right here the development over time, but we're also slowly getting down to better levels. The bullion price index, we've had a strong but deteriorating average prices and terms. You can see on the graph on the top that the currencies are coming up. They're typically very stable, but the currencies have been better for us. Whereas the metal prices have come down still from a relatively high level. And if you multiply these together, you can see in the bottom chart there that, yes, we're coming down, but we're still on a relatively good level. If you look at the spot TCs that lots of people talked about, connection to the power situation, you can see that they were actually not that high during Q3, even though they did come up towards the end of the Q3. And there is an exhibit in the appendix here for those who want to look more in detail on that. And we've seen large curtailments of European zinc production towards the end of the quarter, zinc smelter production. And that is, of course, changing lots of things throughout the supply chain. which we have been able to adjust to well in this context. If you look at the prices, what you can see from this chart is that the present market prices as of yesterday, which is the dotted line, are close to the lows that we've had in the whole year, but still relatively good levels. The prices are still clearly above the cost curve. So in that sense, there is still some room to fall, but the room is smaller. And you can also see from this chart relatively clearly that inflation is not hitting only us. It's hitting everybody in the world. And you see the costs going up both for Copper mines for zinc mines and also for the nickel mines. So the inflation is universal and hitting everybody. If we then look at our production that we have ourselves and start looking into the mines, I think we've had another good production quarter, 45 million tons now achieved two quarters in a row. The grade is lower than it was last year, slightly higher than we actually guided for. In Garpenberg, we've had some issues during the quarter. We are not 100% satisfied with the throughput level. Among other things, we did have a one-week unemployment. unannounced or unplanned maintenance shutdown in the shaft due to maintenance reasons that we had to do. The grades are also low in this quarter, which is something that happens now up and then. So the Kaffenberg performance was not as stellar as it usually is. We were slightly helped by relatively good silver grades, even though they were also lower than it was last year. Kevetsa also another good quarter with milled volumes now up to a pace of $10 million. tons per year, which we're very happy about. The grades are also in line with what can be expected. We have slightly lower recoveries in Kevitsa that we're working with and making sure that we try to get our arms around. Those of you who know the Kevitsa mineralization know that it is not uniform and we believe that we are in areas right now where it is more difficult to get the recoveries up, but we're working hard to get them back to the levels that they should be on. Boliden area, Even though we have lower mill volume, the bullionaire is doing very well with good production. We also have higher grades here and we're also working well into getting into some of the tougher ore areas where we had some hard-grained ore, but those are the things that you need to get through. Tara, still a little bit recovering from the events last year with the flooding. We're still not really into plan. We have low grades in Tara because some of the high-grade stoves have not been possible to develop as of quite yet, but it doesn't really change anything in the long term. We'll get to those high-grade stoves as we move forward. On the smelter side generally in Harjavata and you can say it's good or it's generally on the copper side relatively good production. In Harjavata also an improved ramp up of the nickel line which you can see on the bottom of the charts to the right the improvement in the nickel production. You see on the zinc side a small but clear step down. This has really nothing to do with that we cannot produce. This is the effect of voluntary curtailments that you see here that we've done in order to be able to sell electricity at times when that is a better commercial solution. January has had a very good quarter after those unannounced stops that we had in Q2. So with that, I'll leave it over to you, Håkan, to go through the finance.

Thank you, Michael. And good morning, everybody. As I'm sure you've seen, we've presented a third quarter with an EBITDA of about 5 billion SEK and an EBIT excluding process inventories of 3.5. That is an increase compared to last year, but it is a decrease compared to the previous quarter Q2. CapEx investments is up to 2.5 billion. There is a slight increase to Q2 and the reason is that we're getting up to speed in some of the key projects. This will continue through Q4 and onwards. But as you've seen, we've reduced the guidance for CapEx for 2022. Michael will come back to that number. Free cash flow is low, 97 million SEK. I will come back to that in a separate slide. Looking by business area, we have mines at 1,964,000,000, which is a good quarter, but we can see on the chart down to the left, the effect of gradually lower metal prices that we've seen in Q2 and Q3 has an impact. Smelters is now delivering a third consecutive very strong quarter at 1.564 million SEK. That is in fact the strongest quarter on record that we see for smelters. So it's a very good performance. Other than elimination, small numbers and close to expectations, I would assume. Inflation. Well, the overall picture is similar to what we talked about last quarter. There is a strong inflation still present. When we try to measure it Q3 this year to Q3 last year, it's close to 20% year on year. It's still very much related to consumables, chemicals, energy, diesel, caustic soda, etc., explosives. So it's a similar picture. And then, as Michael alluded to, even if we do not buy much directly in U.S. dollars, it doesn't say dollar on our invoice when we buy things. It does have a big indirect impact. And the fact that dollar to SEC is up 22% compared to the same quarter last year and 7% compared to Q2, it does also affect the inflation when we measure it in Swedish krona. Going then into some details comparing the profit quarter on quarter and starting with the same quarter last year. We have an improvement of roughly 1 billion Swedish krona. Prices and terms have been beneficial to us. We have 1.9 helped by stronger prices and terms. And the most important part is the stronger US dollar. You can see that the currency altogether adds up to 1.4 billion, and the dollar is the main component in there. But we also see stronger byproduct prices and stronger metal premium, bigger numbers than we typically see on these EBIT comparisons. Byproducts and premium add up to half a billion improvement compared to last year. Volumes are pretty flat. We have higher mill volume, but that is offset by lower grades. And then the cost side, inflation is of course the important part here. The 20% inflation is very visible in this number. We do have higher mill volume. We have about 10% higher mill volume in the open pit mines, which has a variable costs in the order of magnitude, just below a hundred million SEK roughly. We've also written down as a one of about 70 million from warehouses. But the main part is inflation in here. So that's in line with the 20% number I talked about recently. And then finally on the line other here, we have the effect of selling energy in connection to the curtailments that Michael talked about. In here, we've got about 170 million Swedish Krona, which is then the net effect of selling energy and then the actual cost of energy. We have accounted for that at a separate line as other operating revenues rather than netting it against the cost. But that's a good contribution. Comparing Q3 to Q2, the difference is also 1 billion, but in the other direction. So this is a decrease of 1 billion. We have lower metal prices. It's partly offset by a stronger dollar, but the base metal prices have come down between the quarters. What we refer to sometimes as mama effect, the effect of definitive pricing is about 80 millions between the quarters. Volumes are down close to 700 millions. We have lower grades. That's the main explanation. We also have lower sink production in smelters. That is connected to the curtailment of production due to energy reasons. And then also some a bit lower production in the sink mines. Costs are on roughly a similar level as Q2. There is a seasonality effect here. We typically have about 150 million Swedish kronor lower cost in Q3 compared to Q2. So that is in here and also less planned maintenance. And then in addition to that, there is an increase in energy and consumables. And again, we have on the other line here, we have the contribution of solar electricity. Cash flow is low at 97 million Swedish kronor. That's a 2 billion decrease compared to Q2, sequentially. 1 billion of those is connected to EBITDA, which we talked about. Half a billion is connected to tying working capital and the remaining half billion is spread across investments, taxes and the financial net. Now, we are at relatively high levels of working capital, and there are a few reasons. Firstly, there is an effect from prices. When you compare inventory positions, you look at prices the last day of each quarter, and we've had about 200 million in this capital tide is palladium that have had a good price development. We have also taken a decision not to sell off any excess zinc or nickel concentrate due to the difficult market conditions. That adds up to about one and a half billion in excess inventory and out of that about 400 million were built in this quarter. The main part of that we've seen in Q1 and Q2. We've also sourced a higher share than normal of concentrate with a high content of precious metals. This is primarily in the Hayavalta plant. This is profitable concentrate, but we haven't been able to feed it as quickly as expected, so we're sitting on too much inventory in the precious metal side. That explained most of the difference here. And then finally, we have slightly higher sink inventories due to the curtailments on the smelting side. We still have about a hundred million more in inventories in there. Most of that will come out in Q4. Moving on to capital structure, very strong balance sheet as previous quarters. You may see that the average interest rate is still on a fairly low level, 1.7%. It increased fairly sharply in September, so we expect a higher number next quarter, but that's following the market trends. It's still a good number. Finally, I'd just like to draw your attention to the fact that we have issued green bonds during the quarter. It's a two billion bond, one tranche of one billion for three years and one tranche of one billion for five years. And it's to support the investment in Odda, the expansion in Odda, which has a very good environmental footprint. So I'm happy about this for a couple of reasons. Firstly, it's our biggest bond so far with good margin. And we're very happy that there's such a big interest among investors to finance our sustainability journey. Secondly, it's good to be an early issuer of green bonds in the base metals arena. This is one of the first green bonds in base metals. So we're happy about that as well. There are more details about terms and so on on our website in case anyone wants to look at that. But with that, Michael, I think it's for you to talk about the capital market today.

Thank you, Håkan. It's limited, but in terms of attending either in person in Stockholm or attending electronically the day one, there are still open slots. Contact Olof if you want to have any more details. Now, Outlook. And let us talk a little bit around these ones. Number one, iTic. Regarding Q4, there is no change of plans. of guidance compared to previously. It's about 0.20 grade. Now for 2023, we are now guiding at 0.17. This is in essence no news. You all know that we had very good years for many years in ITIC with, I think, annual grades of up to 0.29. And we have in our R&R statement always had an average of around 0.23 or 0.22. And if you're going to make that average work out, you're also going to have to go low A couple of years. The point 17 might be the lowest point of the cycle. It's a bit unclear what happens for 24 and 25. But that's the on the lower end as we will then in a couple of years start moving up again. And the late 20s will be a very nice time to get to be a general manager in ITIC. Garpenberry, no change in terms of grade guidance for 2023, still the 3.6%. The silver grade is declining slightly. And we are both in ITIC, it doesn't say here, but we are guiding for the 45 million tons as it's now the standard rate for Garpenberry coming up to 3.3% for 2023. In KVC, we're also increasing the guidance on throughput from 9.5 to 10. So more throughput coming through. The rates in KVC will be slightly below the reserve averages for next year. Maintenance side, the maintenance shutdowns, we are not guiding yet for 2023. We'll come back to that next quarter. There is not really any substantial change, even though it's slightly smaller maintenance for Q4 than I think previous was announced. So inflationary pressure, we are continuing to see an inflationary pressure. Those of you who have been around and following us for a while know that we had in the fall of 21, we had very low inflation in Q3 and Q4 due to the fact that we had quite a lot of annual contracts that we could keep the cost level to that full year. Now that has all changed and been renegotiated. And as we're now looking into costs for Q4, we're comparing to a previous year on relatively low levels. And we will see that there's still a continuous strong inflationary pressure of similar levels to what we've seen in this quarter, somewhere close to 20%. CapEx, we are guiding the full year now slightly above $10 billion. I'd like to just briefly just get a sense of that. We started this year with $10 billion. We then added a billion because we added on the I Think Them project. We then told you that we're having also inflation on the CapEx side. That one is also maybe of the order of magnitude 20%. But, of course, some of that takes a while until it plays in. But those of you who would have looked at that would have said that's probably another billion. We should have had 12, everything else equaled this year. Now we're coming in at roughly 10. We are 2 billion, you can say, late. It's a little bit what happens exactly around New Year that plays around what comes in December and what comes in January. But we are slightly late. We're not proud of that. We would have liked to be 100% of the time, but we're slightly behind. We're now guiding for next year of 15, which is, of course, those two that we don't do this year come over to next year. Of those 15, roughly half is those three named expansion projects in Oda, in, well, in Arctic Dams and in Kristineberg Revliden. Those make up roughly half of the of the 15 and the other half is the kind of normal if you want to say so investment level it's important to point out there is no change of guidance in terms of the total cost of these projects that was guided been guided before that it's not moving this is just getting a timing into it And I would say that with a word of caution, the number 15 might also change because also if you're looking at the end of December and New Year's coming 23, 24 will also be kind of intensive times and it's a little bit of a peak investment season and whether things will happen in 23 or 24 could also matter. But according to our plans, we will be able to spend almost 15 in the year of 23, which add up 22 and 23 will be about 25. So with that outlook and outlook statement. Just want to remind everybody about Boliden. This is Boliden. We are here to provide the metals essential to improve society for generations to come. We have a vision to be the most climate-friendly and respected metal provider, and we do that through care, courage, and responsibility. With that, I open the floor for questions.

Ladies and gentlemen, that opens up our Q3 2022 Q&A session. And we will start here in Stockholm. Victor Trollsten, Danske Bank, please.

Thank you so much. Maybe just a follow up on the ITIC grade guidance. Could you give us an indication how to think about recoveries in ITIC when grades fall?

Recoveries might go down a little bit because lower grades usually means it's a little bit more difficult to get the recoveries at the same level. But it shouldn't be a big difference. I mean, we may be talking about a little slight decrease in recoveries. Okay.

And then in the Harjevalta ramp-up, could you just remind us how far has it come in that ramp-up if you can give us any percentage or something?

I would say that the production in the quarter is around 90% of what it should be. So we still have those 10% to go. And as of right now, it looks relatively good. As I think I told before, we have a specific issue with the new concentrate dryer. That was a new technology that we've been working with. That seems to be working much better right now. But there has been some maintenance issues before with it. Hopefully we are through that.

And final, from me on the working capital building in Q3, could you just help us? How should we think about that now going into Q4? You mentioned strategic inventories of nickel. I suppose that will be more long duration. But then also from the strike, if you could just help us to bridge that.

I would say that out of where we stand today, for the entire year, there is about 1.5 billion that has a long-term horizon, which is the nickel. In the 1.6 that we built in Q3, 400 was the long-term nickel build-up. I think that we have about 2 billion SEC in excess inventories that we will be able to release in Q4.

Super.

Thank you very much.

Yes, I have a question on the smelters. Obviously, very nice progress there earnings-wise. We have seen from competitors that premiums for the smelters on the copper side is moving up. I suppose you are quite optimistic when it comes to TCRCs. Could you give some color on the gross profit side and also if you can talk about maybe the net effect because you also have the cost inflation going on. If you can see this trend continuing basically on the smelters.

This is, of course, a very difficult question to answer because lots of things are happening around smelters. You're right that there is a trend for increasing TCs, which is good. There is a trend for increasing premiums, which is good. And there is a trend of maybe not increasing, but at least keeping the byproducts on relatively high level or maybe not thinking very much. All these are good. On the other side, we have the cost inflation, which is difficult to get your arms around. But if you look at things like, you know, caustic soda and other things, the inflation that we're seeing on chemicals has been humongous. And I'm not really in that business to be able to tell exactly what happens. But in the end, it has to do with gas prices. And we get our fair share of that. So it is difficult. I also comment just on the power side. You see now that we are very true in the fact that we can adjust our production to be able to sell off at those times when there's more favorable to sell power rather than to use it to produce zinc. That's very unfortunate. We don't like that. We are industrialists. We like to produce metals, but we have to kind of abide by commercial reality.

Maybe you can, I mean, what we have seen from your competitors on copper premiums from the smelters is like up $100. Is that what you foresee as well for next year?

I think that's a little bit too early to tell. Just make one comment that premium is not for copper cathode, that premium is for copper tubing and wire rods. It's a little bit different. But we will have negotiation with our customers as we're speaking and in the next few months, and we'll see where we end up. But generally speaking, the balance looks favorable. We'll see where we end up.

Then I have a final question on ITIC and how to look at the grades. But in the fourth quarter, I mean, you maintain the full year grade guidance. So that implies actually that grades might come off to, you know, 14.14, 15. I suppose that will not happen. But could you help us a bit there what we should see for Q4?

I think Q4 we have guided at 0.20 for the quarter.

For the quarter as such?

For the quarter, so there's no change. And then we move into next year and then the average for next year is 0.17.

Okay, then I understand. And I mean, you have consistently been above the grades in ITIC for many years compared to your guidance. Should we see your new guidance for 2023 as kind of conservative guidance?

No, it's a best estimate, as always.

All right, thanks.

Adrian Gilani, ABG, Sundahl Collier, please.

Yeah, hi. First of all, just a question on the cost inflation. You talk about mostly cost inflation excluding wages. What's your sort of best estimation for wage inflation going into 2023 when it's time to discuss with the labor unions?

Yeah. I prefer not to answer that one. I can say that what I said before is that it's going to be interesting labor negotiations. And I think anybody who follows kind of European, Scandinavian, Irish discussions know that there is, of course, some people who want to get fully compensated for inflation and others who don't want to fully compensate. We have interesting times. We have Finland going on right now. Ireland is kind of in the starting point. And Sweden is coming towards the end of first quarter. So there will be intensive negotiations. Norway is done. I think it was 4.5% that came out of the Norwegian wage negotiations. So that one is the only one that's kind of taken care of.

Okay, thanks. Also on your voluntary curtailments and the smelters, could you just give us some insight on sort of how the contracts are structured? Are you allowed to sell as much of the electricity as you want or is a certain portion of the electricity you purchase, is that earmarked for production as well?

I don't want to go into exactly all the commercial details of all these contracts because it's a whole portfolio of contracts that has different things. But in reality, as long as we're speaking the kind of curtailment that we have right now, which is we can sell it and we're actually forced to sell it. But yes, there are also some limitations. So it's not fully free to sell everything.

Okay. And just a final one from my side on the CapEx for 2022. You said you were 2 billion late. Could you just specify what exactly is or what exactly you are late on? Is it primarily the Alda expansion, DAM investments in ITIC, or is it something else?

I can say both of them are slightly later than we had in our initial plans, but it's also lots of small projects that are late because of the 2 billion. big projects and the three big projects take some time. I will also say by the way the Kristineberg project is actually one if you it's a smaller project but that's the one that is most late because it took longer time than we thought to get the environmental permits. So in terms of the project itself that's probably the one that's latest.

Okay thanks that's all for me.

Mattias Wadsten, SCB.

Yes, a few more on CapEx for me. I guess on the maintenance part of the CapEx, can you share with us any color on what magnitude you see this being at next year? I mean, we have talked about the six billion in maintenance CapEx.

If you go back to what we said, when we talked about the capital market stay and if you add the guidance for 2022, I would say that we talked about 6.5 billion for maintenance capex plus what we have referred to as stay and business capex. And that is environmental investments, productivity investments and similar that are needed to stay competitive. Those 6.5, adding inflation to that leads to 7.5 billion. So that's what we see as a base level. And in there is mine sustaining, stripping, replacement investments at a normal rate and environmental investments needed to sort of drive that part of our journey. And then on top of that, we have full speed on the three key projects that we mentioned that add up to seven and a half billion. So that's the 15.

yes and i guess a follow-up just on odda do you now expect sort of less odda investments so to speak after 2023 meaning that you're more aggressive on how fast you can get this running throughout 2023 at the same time as you may have lost some momentum or at the start of the investment in 2022 so to speak are you more aggressive on the pace in odda in 2023

I would say yes. The answer is that what is part of this 15, I won't go into detail, but of course the major part of all the investment will be done by the end of 23. Then there will be lots of smaller things coming towards the end. to be able to then have the ramp of the production towards the end of 2024. But yes, this 2015 entails a relatively aggressive pace in ODA during the year.

But just to be clear, that doesn't necessarily mean that you expect production pace to increase faster versus what you have previously expected?

Everything in terms of both timing of the project and the total capex of the project is unchanged compared to any previous guidance given.

Thank you very much. Any other questions in Stockholm? Yes, Robert Hedin, Carnegie, please.

Yeah, can I come back to that ITIC guidance again? So, I mean, Mikael, you said that 0.17 could be the low in the sort of next coming year's grade profile of ITIC, but the 0.2425 was a bit uncertain. Could you go into what sort of the building blocks or catalysts are for pushing that more in higher or lower?

I think there are a couple of things in there. It's always when you're dealing with an open pit, there's a question of which pushbacks you can take in which pace and how quickly you get into the kind of juicier places. Another thing that is a little bit moving around for us is the Lika Vara, which has higher grades than average. We are not, you know, exactly when that one will come online is a little bit unclear because that one is actually to some extent limited. dependent on how the dam investment is going, because we're using the same truck fleet for the stripping in Likabara as we will do for the dam investment. And those are things that are not 100% clear yet. So if you want to take the losing part, yes, when will Likabara come online? Exactly what will the optimization look for at the other pushbacks?

All right, thank you. And just a note on those cash cost curves you showed us. So, I mean, inflation in SEC is strong, but is it also your view that the inflation of the movement of those cost curves is upwards also in U.S. dollars at the moment?

Yes.

All right, perfect. Thanks.

We have a final question in Stockholm. Alexander Vilval, Pareto, thanks.

Thank you. Would you say that inflationary pressure is higher when it comes to investments than in OPEX going forward?

That's what I did say a quarterback and then it was clearly true. Today it's maybe more even because some of the really heavy things that were hitting investments like steel has actually come off. So we haven't done any deep analysis but I would say that if you ask me to give a gut feeling I would say that it's maybe even.

Thank you. And then a final question, I would assume, regarding fundamentals when it comes to smelting on the copper side and on the zinc side. We see the spot thesis and so on, how they're moving now. But how do you sort of paint a picture of the fundamentals currently, the differences between the copper side and the zinc side when it comes to smelting?

Well, there is a difference. Or maybe there are two differences. But one clear difference is, of course, the power. There's so much more power intensity in zinc smelting compared to copper smelting. And the power prices will play a bigger role into the whole zinc smelting value chain. And that is both bad news because we get higher prices, but also good news because we were losing some competition. On the other hand, we also have competition coming in from outside Europe, and we don't know where Europe is going to end up in terms of its trade policies around zinc. So there are lots of moving parts in zinc that is very difficult to kind of add up. But I would say that anyway, we are in a relatively good position. Copper. Of course, the movements are much smaller, even though there are movements there as well. Copper is not as affected by the higher power prices as zinc is, and therefore it is more kind of general development. We're seeing on the copper side to some extent a lesser connectivity in Asia, on the copper smelting side, which I suppose in some ways is good for us as well.

Thank you.

Operator, please go ahead with questions via the telephone conference.

If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Liam Fitzpatrick from Deutsche Bank. Please go ahead.

Good morning everyone. three or four follow-ups, if that's okay. The first one is on working capital. I just wanted to be clear on what the message is there, because I think you talked about kind of long-term working capital build, and then you mentioned 2 billion unwind in Q4. So just like, yeah, clarity on what the guidance is in terms of the Q4 working capital reduction. And then on ITIC, I appreciate the comments around the liquor vara pit and the uncertainties there. But is it fair to assume that there should be a grade recovery post 2023 as you access that ore? And then the final question is just on the CapEx side, just in terms of obviously there's a big currency impact running through costs and CapEx. What sort of currency assumption is embedded in that 15 billion number for next year? Thank you.

Okay, I will start with the IT grades and then maybe I'll leave the next to Håkan to answer. Regarding the grades, I said many times that I've used the kind of biblical metaphor about seven good years and seven bad years. We're not out of the grade slump for quite a few years. Maybe we are two or three years into a grade slump. And I would say that what we're guiding for next year is clearly going to be on the lower part of things. But exactly how the recovery will happen and exactly when we will have to come back to, there's a constant mine optimization going into that. And of course, the other part of this is that once you start looking towards the end of the 20s, it starts looking much nicer. I don't know if I answered your question, but at least gave you some color on it. I'll leave the working capital and the CapEx currency part to you, Håkan.

Okay, working capital. The ambition is to normalize the zinc and the precious metal inventories by year end. And that means an inventory release or a working capital release of 2 billion during Q4. That's the ambition. Regarding CapEx, that's connected to our planning process. So we typically base CapEx assumptions on the currencies at the last day of August. So that's what we've done this year as well.

Sorry, if I could just ask one follow-up. Just on the mine side in terms of volumes for Q4 and beyond, it did seem that zinc volumes were quite weak in Q3 because of the issues that you flagged on grades and throughput at Garpenberg and Tara. Should we expect a recovery into Q4? at both of those mines?

Yes, you should. We have not guided for any continued production problems in either of them and also not continued for any grade deviations compared to what we have said before or to what we had guided before, which is higher than what we had in the quarter.

Great. Thank you.

The next question comes from Sandeep Piti from Morgan Stanley. Please go ahead. The next question comes from Daniel Major from UBS. Please go ahead.

Hi, can you hear me okay? Hello, can you hear me all right?

I hear you all right. Do you hear me?

Yeah, yeah, fine, thanks. Yeah, thanks. First question, just on the CapEx for 2023, you said half of the spend will be on Odder and Christina Bay, specifically on Odder. Does that imply CapEx spend of about 6 billion? You obviously haven't disclosed how much you specifically want to spend this year. Just trying to get a sense of how much of the split between 22, 23, 24. That's the first question.

I take that project into that mix. So the number in order will not be as high as you mentioned, but I will not go more into detail.

Right. So you can't give a breakdown specifically of order ITIC capex, I think you said, is 4 billion.

The total ITIC dam project has been guided as five for the full project, with the majority or the biggest part coming in 2023. And then the ODA is guided now for 850 million euros, the majority coming in 2023.

All right. Thank you. Yeah. And then the next question, you've obviously seen this big working capital build. And just to clarify, out of the 5.9 billion we've seen year to date, it's one and a half you don't expect to reverse. So is it fair to assume the remainder will be reversed into 2023? Is that correct?

If you look at the full-year bill, there is a price and currency aspect in that as well. But if you back out, what will deviate from normal levels going into next year? Well, I expect there will be about 1.5 billion more nickel cons than normal. Apart from that, we should normalize.

Okay, thanks. And just the final one, I mean, with respect to the dividend outlook for 2023, obviously the working capital build will impact the balance sheet position at the end of the year. Is it just fair to assume we follow the same formula and, you know, no deviation regardless of some of this working capital build?

We have not announced any changes in our dividend policy.

Okay. All right. Thanks very much.

The next question comes from Sandeep Petey from Morgan Stanley. Please go ahead.

Good morning, gentlemen. There are a couple of questions from my side. Firstly, can you quantify the operating profit that was linked to sale of electricity sale and at which melters did you realize that profit? And do you plan to do that during 4Q? And the second question is on OPEX inflation. The company has seen 20% increase in inflation year on year during the quarter. This is up from 15% OPEX inflation that the company saw during 2Q. But that was including electricity expenses, whereas the current one is excluding electricity expenses. If you include electricity, then what level of inflation you saw during the quarter? Thank you.

Let me take that. I think it's just very clear. It's almost impossible to have an operating profit from this electricity. We have a contribution of 170 million from it. But then, of course, you have costs of standstill costs of the of the operations at that time. And you can allocate that whichever way you want to. So we don't. So we just talk about the margins that we have, the gross margin or whatever you want to call it. Regarding the sale of power in Q4, we have no plans or we have a simple plan. We will sell hour by hour. We will sell the power if it makes more sense to sell the power rather than operate the assets. This is mainly an issue for the zinc smelters in Oda and in Kokkola. We have very much fewer occasions to do this financially in a good way in the copper smelters or in the mines where the power is a smaller part of the total cost and therefore it's difficult to motivate stopping those because of high power prices even though we hate the high power prices it doesn't on the margin make them negative contribution. So that's the thing on power. Regarding inflation, do you want to take that one, Okan?

Well, it's slightly less if you add electricity into that. Slightly less.

Thank you.

The next question comes from Christian Kopfer from Handels Banken. Please go ahead.

Thanks, operator. Good morning, everyone. Sorry for if you have already answered a bit of my question. We had some other conference calls in parallel here, so sorry about that. But just on the CapEx side, uh we've been pretty clear about the about guidance for this year next year so my question is how much if you look at all strategic projects that you have approved how much capex on those strategic products are to be left to be spent after 2023 with the guidance taken into consideration

We have not guided for that, Christian. We might do that a little bit later, maybe at the Capital Markets Day. But as I said before, the majority will have been taken care of. Both ITIC and the other project, the two really big ones, will be having passed the peak. And the Kristineberg project might almost be finished by the end of 2023.

I'm a little bit surprised. I mean, if you are very explicit about the CapEx, why can't you say how much of the CapEx that is assignable to the strategic projects?

Well, the point is, Christian, that I don't know exactly. So I need to look at the number.

Okay. All right. And then on Tara Deep, what is the scope here, do you think, Michael, on... putting that project on stream when it comes to volumes. And then obviously assuming that you will go ahead with the project.

All right, Deep. Number one, we're going to come into more details on the capital markets day, but without selling too much beforehand. We have lost about a year in terms of exploration because of the flooding that we had. So we are behind. A reasonable timeline for making a decision is probably probably now 2025. However, that should still be possible if we decide to go ahead to be able to get it bolted on to the existing Tara mine, i.e. we will be able to do that seamlessly, not go down in production because the reserves in the existing Tara mine are good for about 2029 or maybe even 2030. And by the way, also likely to be extended with kind of normal exploration success. And therefore, we are not worried about that we would have to come into this situation where we would have to go down to then restart again.

All right. Okay, that's good. And then finally, for me, for you, Håkan, I'm sorry again if you have mentioned it already, but what was the mama effect in Q3?

We haven't mentioned it, I think, at least. It was a negative 80 million. Negative 80. It's zero.

Yeah. All right. Thank you very much.

Okay.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

May I just say one thing? Sorry about that. Sorry to interrupt you. First of all, I was glad that you mentioned the Capital Markets Day so many times. I think that was an excellent teaser for our Capital Markets Day coming up November 15th and 16th. For those of you who haven't signed up, once again, it's possible to join the first day at least. And for those who have... signed up for the second day, you're more than welcome to join us to sunny Finland in November. And I've also got some mails here during the Q&A session that we have had some technical problems today, unfortunately. But you know where to reach us. So if you have follow-ups, please come back to us. Now I'd like to hand over to our president and CEO, Mikael Staffaas.

Okay, sorry to hear that we've had technical issues again. Very sorry about that. At least the recording of this session will be available for everybody to listen to afterwards. I'd just like to summary of this that we've had a good quarter. We have also... Good prospects going forward and we haven't really changed the guidance of anything even though we've become more detailed regarding CapEx and detailed regarding the great profile of ITIC for the next year. With that, I look forward to seeing many of you in about three weeks at the Capital Markets Day and look forward to see the rest of you over time. Thank you all.