Boliden AB

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.