Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q4 2022 results presentation. My name is Olof Grenmark 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 which we will start here in Stockholm. The whole call is scheduled for one hour. Mikael, the stage is yours. Welcome.

Thank you, Olof, and welcome all of you over in the camera over there as well. And happy Valentine to everybody. We have wonderful weather here in Stockholm, and somebody has put lots of red hearts around all this venue this morning, so we feel very welcome. So the presentation today, and I'll just start with getting the general message across. We've had a good quarter, even though the good quarter is, of course, we've had good situation in terms of our prices and terms that have helped us a lot. And that's, of course, the basis for everything. We have had lower grades in our mines, which is nothing new. You all know about this and it's been well guided for in advance. But the smelters have performed very well, not just because of price and terms, but also because of good performance in general and good production. We're having a little bit more than three billion in EBIT coming online here, but we also have a very strong cash flow of more than three and a half billion, despite the fact that we've been investing record amounts as well in line with the guidance that we did have. The dividend proposal is out as well, and we're following our dividend policy exactly the way that it has been done before. And therefore, it happens to come out at 50 or more than last year. Somebody made a joke this morning that you have tweaked your dividend policy to be able to say that you've increased it. No, we have not. We've followed the dividend policy to the letter, and that's what it comes out with. Our projects are doing fine, both in ODA and the big project in ITIC are both moving ahead according to the schedule, the way that it's set up. And also, we have gotten a clearly improved production in the nickel line in Hayao Alta, where you can see that now the ramp-up is completed. Too late, but better late than never. So generally speaking, the EBIT level, if you look first at the solid line here, you get the rolling 12 months. You will also see that 2022 was a record year altogether, which was a good thing. Now, if you look sequentially, yes, we have lower profitability, which is due both to lower grades in the mines, as well as that we don't have quite as brilliant price and terms as we did earlier in the year, even though they're still on a very good level. And I'll come back to that in just a moment. Talk a little bit about health and safety and environment and other sustainability issues. We've also had a good quarter. Our LTI frequency has come down. 2022 is the best year that we've had regarding occupational health. We have a 15th year of fatality-free operation and the LTI frequency, as I said, is getting lower. We've also continued to improve our CO2 emissions. The intensity measure that we have in, this is the last quarter, I will use what I call the old measure and we will move over to a science-based target as reporting as of 2023. But also according to this old way of measuring, we have had a very good quarter. You can see a clear reduction compared to same period last year. What is a little bit disturbing for us, it's disturbing in many aspects, is the high sick leave that we have. That one is record high, which is nothing that we're proud of. It also does affect our productivity and does affect our production, especially in the mining side. And I'll come back a little bit to that as I move on. The price index, as we said, we're still just don't fool anybody. We're still having very good prices and terms. We are being helped by high metal prices, even though they're not as high as they were in the early part of 2022. We're also being helped by strong currencies, strong currencies from our perspective, the way that we measure starting in the Swedish krona. We've had good currency that does help us with the revenue side. If you look on the prices, as we have shown this exhibit many times over and over again, you will see that the prices are good. They are way above the cost levels in the industry and everybody's basically making good money. What you can see from this one is that the inflation that we have in the industry, and I'll come back to talk about our inflation in a while, is getting a bite into the industry. And we see that the cost levels in the industry are going up. We also see that, especially on the nickel side, the cost levels are going up due to the fact that also new marginal production is coming online, which is driving up the cost level in the industry. But as you see, you cannot really complain as industry saying that the price are too low. They're actually in a pretty decent level, I would say. So if you go through the production that we had, we had in ITK, I would say, a decent quarter in terms of throughput, not quite as good as last year. We have been hit partially by winter condition, but also by the high sick leave. And high sick leave, as you know, especially in the open pit mines, actually hits us pretty hard. If you don't have somebody showing up for work in the morning, that truck will not move. It's not that we have somebody else sitting beside waiting, and it's not like in a control room where it might be six people working, and if five show up, well, you can do most things anyway. In the open pits, that's not the case, and we're suffering from that both in Itik and in Kevitse. The grade is down to 0.17 as we had guided. We're already in Q4 coming into the levels that we will see also for 2023. In Garpen Bay, also strong production. The zinc grade is 3.6 according to the level that we had guided for, and also the silver grades being in line with what I think most people had expected. Kevitsa, 2.6 million tons in the quarter, which means that we're over 10. Some of you know that we have an environmental permit that is 10, so some would say, have you broken the environmental permit? In Finland, you can occasionally, if you don't do a habit of it, go over your permit. So this was in the full year about 2.2 or 2.3 million tons, which is okay if you don't repeat it. So for all of you out there, you can't expect that to really be repeated, but we have proven with the investments that we can fulfill the permit that we do have. Bulletin area has had a good mill volume and good grades in general speaking. And the Bulletin area, if you look at it, is probably the one that's performing best of all our mining areas. Tara is coming back from a low level, but has had a relatively good production, increasing the build volumes. And we're still waiting to get into the really good stoves to get up the grade, but still working on that. On the smelter side, generally a very strong quarter, generally good production in the smelters all in all. We've also been able to produce a lot of gold. This is by far a record gold quarter. As you know from before, we've been suffering a little bit from having lots of gold in intermediate products. We've been good at getting it out, which is also the basis for getting a very strong cash flow in the quarter. And we are now down to, I would say, working capital levels that are kind of, you know, significant or normal for the season as such. In Harjavalt, the nickel line has also improved. You can say it's more or less up to full speed as of the fourth quarter. In Rönnskär, also strong production, strong throughput. Also there, good precious metal production coming through. The zinc smelters, also good production. The power prices have been lower than they were in Q3, which means that we have not as much as before taken voluntary curtailment of production to sell power. That has happened, and we do have some margin from selling power, but it's not that often, and we have been able to do what we want to do, produce zinc most of the time, which you can see. Barry Seward has a planned maintenance stopper. Basically, Barry Seward, from the issues that we had earlier in the year, is basically up to full speed. So if you look at the full year, as I said before, the full year for 2022 is by far the best year that we've ever had with, of course, very good price in terms when you put in the earlier quarters that we did have in the year. We've had improved volumes, but the grades were heading down already in this quarter in the mines. The volumes in smelters have been going up. Generally, smelters have had a very good year, a record year in smelters. And then, of course, we've been stuck by high inflation. And especially as we measure in this Swedish corona that has also been suffering from the current exchange rate, as much as it helps us on the revenue side, of course, also biting us on the cost side. If you look just quarter four, over quarter four, we're close to 20% inflation level. If you look the whole year, as I said here, it's not quite as much because it was a bit less in the beginning of the year, but it's well over 15% for the whole year in terms of inflation. The mines, you can see very similar types of profit levels for the individual mines this year compared to what they have been in previous year. This is, of course, a mixture of better prices and terms and lower grades that makes this to become relatively similar. What is, of course, interesting and new is this picture on the smelter side, where you can see that many of the smelters have taken big steps forward and are now making very good profitability levels. Harjavata especially, but also Kockla and Odda have increased the margins during the year, all in all. Exploration. We're also today releasing the R&R statements. Number one, which I think I've alerted before, we have not curtailed investments into exploration. Rather, it's a record year in terms of spending on exploration. This is partially an inflation piece in this as well, but it's also an increased ambition of being able to explore the way that we want to do. The really good news on this R&R update is Garpon Bay, where we have both improved resources and improved reserves at the same time. And you have to remember, we measure resources without the reserves in them. So when I say that, the sum has gone up even more, which is very good, which means that we, from a strategic point, will have to come back to you about how we're going to handle the improved geological situation that we have in Garpon Bay. Otherwise, relatively small updates. Bullion area continues to add a year per year. Tara, with the issues with the water in leak that we've had and therefore lack of possibility for exploration, not quite a year in every year. And then in the open pits in the north, we actually have a little bit of reduction of the relatively long times as we have had to factor in higher costs. But that negative in terms of volume comes back with higher costs. average grades, and ITIC has now moved from 0.22 to 0.23 average grade again in the R&R statement. So having said that, you can see here now in Garpenberry what a long life of mine we have, and that's something, as I said, I alerted that we will have to think about over time what we can do about that from a project point of view. And the minimum resources have also fared relatively well. With that, I will leave it over to you, Håkan, to go through some of the finances.

Thank you, Michael, and good morning. I'll just try to sum up the financial position that we have. Michael has covered parts of it. We are reporting an EBITDA today of 5 billion. which is on par with Q3 at about 300 million up compared to the same quarter last year. Looking at EBIT before inventory evaluations, we are at 3.2, which is down from the 3.5 billion that we saw in Q3. The difference is mainly the write-down of exploration rights in Kölö-Lakti that we talked about in the capital market stays and that we charged the P&L this quarter. Investments are over 3.7 billion, which is up compared to both comparisons. We do see the projects in Odda and itech getting up to speed. Free cash flow, 3.5 billion. This is, in fact, the strongest cash flow number we have reported in a quarter. And, of course, it feels good to be able both to report record investments and record cash flow in the same quarter. By business area, as you can see, mines see an impact from lower grades. We are reducing the profit level there compared to both comparison periods, while smelters is, for the fourth consecutive quarter, stable on a very good level at about 1.3, 1.5 billion Swedish kronor. Looking at the analysis of the changes in profit this quarter compared to the same quarter last year, we are up about 350 million compared to last year. We have a big impact from favorable currencies with a strong dollar relative to the Swedish krona, which adds up to about 1.3. Then we have seen lower metal prices in the quarter year on year, which is then compensated by a good development of metal premium and byproduct prices. Volume wise, we are roughly stable compared to last year. We have lost about one billion worth in grades, but that has been compensated by a good performance in smelters and in this quarter by a reduction in inventories. Most importantly, we have reduced the inventories of gold that was tied in the processes, and that has had a significant contribution to the P&L. Inflation and cost is up. We are increasing the cost by about 941 million. Included in there is an increased reclamation reserve or a cost for reclamation in Coqcolo 54. But it's a significant cost increase and we are looking at about 20% inflation in the quarter. Out of that increase of 940, 700 million is an increase in energy and consumables, consumables meaning then explosives and similar. So that is really where we see the cost increase. The remaining parts are fairly stable. I already talked about the write down that we had in Kölö-Latte, which is the 259 affecting comparability. Looking sequentially, Q4 versus Q3, we have a reduction of 295 million, which is basically the same amount as the write-down I just talked about. We have stronger prices, metal prices are up, especially copper, nickel is the most important one here, and silver. Volumes are also positive, lower inventories and good production in smelters. On the cost side, we are up. There is a fairly significant seasonal effect here. I would say that roughly 200 million is a seasonal effect between Q3 and Q4 that we see every year. And then we have the bit of inflation and the 54 million reclamation cost in Coca-Cola. Moving on then to the cash flow again, record high cash flow, which is of course driven by a good underlying earnings with the EBTA excluding process inventories of close to 5 billion. We have high investments, but we've been able to release a lot of working capital. It's about 3.2 billion released in the quarter. This brings inventories down to a normal level for this time of the year. We have reduced a lot of the gold that we had in the processes, and we've also reduced most of the nickel that we talked about previously, the extra nickel stock that we had. Taxes is fairly high. There is always a lag between the taxes charged to the P&L and the taxes charged to the cash flow. So far, for the full year, there's about 400 million lag in taxes where we are charging more to the P&L than the cash flow. And that will, of course, be recovered in the following year. So as a final slide for me, then, we end the year with a very strong financial position. We have, in fact, a net cash position, small net cash position. It says 0.0 here, but it's a plus before the 0.0, if you get that. And also, we have a net payment capacity of 23 billion Swedish krona in the beginning of the year. Those 23 billion are made up of 12 billion cash. and 11 billion credits that are not yet utilized. So we feel that we're in a strong position and again, a strong quarter. So with that, Michael.