Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q1 2023 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 Staffass, and followed by our CFO, Håkan Gabrielsson. We will also have a Q&A session, which will be led by the operator. Mikael Staffass, welcome.

Thank you, Olof, and good morning to all of you coming here from Garpenberg, where we're going to have our AGM in a few hours as well. It's a classical Swedish spring day today. When I woke up this morning outside Garpenberg here, it was snow on the ground. We thought that hopefully we'd get some warm weather, but it's rainy and snowy this morning. But it feels good to be out here in the operations. Now, the results of today are, you can say, characterized by maybe not the best production quarter that we've had on the mine side. We've had quite a few, or can you say minor, in and of itself, each of them minor production issues, but we've had too many of them in the quarter, and therefore the production there is not what it should be. Now, if we also focus on what has been good in the quarter, we've also had a good production in smelters, where we have really managed to establish the smelters on a level that is quite high. And if you look a few years back on a level that we never thought we were going to be able to have sustainably. We also have a good progress on our big projects in the quarter and they are all on schedule to be able to deliver the way that they're expected to do. So all in all, we've had a profit, an EBIT excluding process inventory valuation of just over 3 billion Swedish krona. We have a cash flow that is close to zero, which is not too bad given the fact that we're investing the way that we are investing. So as you said, maybe the disappointment there is the EVIT in the mines, and I'll come more into the details around that soon, whereas the smelters have had a strong EVIT level throughout the quarter. If we talk about ESG and spend a little bit of time with that, which is also an area where we feel good and feel strong, in terms of LTI frequency, we have had the best quarter ever. By the way, followed by the Q4 last year, which was the best quarter ever at that time. So we've had two very good quarters in a row, which makes us feel very good about that we are doing that one and coming into the right direction. And we're also now up to 15 years of fatality-free operations, which is in itself unique in this industry. The sick leave that we've had problems with during COVID is turning the right direction. The level of 5.8 in the quarter is still a level that is too high, higher than the four that we have as our target, but clearly lower than last year and lower than what we saw in Q4 as well. So hopefully we are now coming out of COVID times and getting back into track again. CO2 emissions is doing really well as well. We've had actually a super quarter in the first quarter in terms of emissions. We are not too obsessed about every individual quarter, but of course, it's good that we're on the right direction to meet the targets that we set for ourselves for 2030. And of course, a good quarter like this makes that we feel even stronger about the ability to be able to reach the targets as we see them coming forward. Prices and terms. Well, prices and terms, as you can all know and all have read about beforehand, are still pretty good. Even though they have been down from what they were a year back, they're still on a decent level. And the currencies are also holding up pretty strongly. And on top of that, we've gotten an improvement compared to last year of both zinc TCs and copper TCs with the benchmarks that now have been settled. If you look into the market around our main metals, you can also see that the prices are holding up very well. And there are, as you can see, also increases in prices, which are increasing cost along the line. the cost curve. And you should also know that this is net here of the cost net of buy credits. And of course, the higher gold price and the higher silver price is helping to keep the cost curve down so that you maybe don't see the exact impact of inflation. But you can say that all the price increases of the precious metals is being eaten up by inflation in this situation. If you then start looking at our production and you start looking with mines, we're not pleased with the production that we've seen in the quarter. We've had disturbances in most of our operations. We've had disturbances in Itik where we've had a failure in a conveyor belt. during the quarter that meant that we had an unplanned maintenance stop that we needed to do we had the same in tara by the way also a conveyor belt that meant that we had to have an unplanned maintenance stop here in garpenberg we had problems early in the quarter with the hoist and then towards the end of the quarter we had problems with the primary mill in the concentrator that caused us problems and we needed to take an extra unplanned maintenance stop for that as well and in the Boliden area we've had an unusual winter in the sense that it's been cold that's not new but it was also warm and when you have warm and cold you get melting snow coming into the ore and that then froze it froze and we had problems getting ore into the mill in the speed that we wanted to and then finally in Kivica we've had problem with the primary crusher the ore production is actually very good and it's been piling up and we have a ROM pad that is well and full now going forward but of course the throughput was not quite what we wanted in the quarter the grades there are some ups and downs I think it's actually better than what we have for the full year, which is good. Here in Garpenberg, the grades are slightly lower, which is linked to the issues that we've had with the production, because it meant that in order for us to keep the production up as much as possible, we had to go to some reserve stoves that had lower grades, but they were more easily available to be able to truck up the ore when we had problems with the hoist. On the smelter side, the situation is much better. The zinc smelters have actually performed very well, as well as the lead smelter in Beisö. The copper smelters have had some issues in the quarter, because in Harjavata we have not had a perfect feed mix, and this is partially due to ourselves, but also due to the transport strike that was in the Finnish ports, which meant that we did not get all the deliveries we wanted to, and we had to to make do what we had available and therefore we had to do this not so perfect feed mix and what we felt feed it into the smelter. But all in all, the production situation in smelters is relatively good. So with that, I'll leave it over to you, Håkan, to get into the financial summary.

Thank you, Mikael, and good morning. So as Michael talked about, we released a quarterly result of just about 3 billion Swedish krona. Compared to last year, we are down about 1.5 billion, mainly due to grades and prices. I'll come back to that. Sequentially, comparing to Q4, We're slightly down on the EBITDA and EBIT excluding process inventories, but slightly up on the EBIT number. Investments are high, 2.9 billion, in line with our annual guiding, and free cash flow slightly negative, which in itself is a bit better than we expected. I'll come back to that as well. Looking by business area, as you can see in the chart to the left here, it is a weaker result in the mining side. And as Michael talked about, we have established a smelting division on a profitability level, on a profit level for five quarters now that we have not seen earlier in the history. If we dive in then to a comparison quarter to quarter and start with a comparison to the same quarter last year. we have a positive price and terms deviations. There is a big negative on the metal prices side, about 1.1 billion. A large part of that is offset by more favorable currencies. But we also have a good development of the treatment charges and the metal premium, which adds up to this number. Volume-wise, looking at the year-over-year perspective, one year back, the main cause behind the negative 6.63 there is lower grades. A big part of that has been guided for. We are mining at lower grades in IT compared to one year back, and we are mining below reserve grades in Kevins as well. In addition, as Michael talked about, there has been some process disturbances in the zinc smelters. That means that we temporarily have been mining in lower grade areas, both when it comes to zinc and silver. Again, in a year-over-year perspective, we see a significant cost increase, one billion, a bit more than one billion. Of this, about 750 is inflation. We look at a 16% cost increase. And in that 16% cost increase, that includes the normal inflation that we see on consumables and other purchases. It includes salary revisions, and it also includes about 250 million higher electricity costs. I mean, that is price related, but also the fact that the Tara mine has a lower hedge rate right now and are more exposed to market prices. We also have invested a bit more in exploration. And as a result of the disturbances we talked about, we have somewhat higher spare parts cost in the quarter. If we then move over to the sequential comparison and look at Q1 compared to Q4, Again, you see a positive price effect here, 266. That is, in fact, primarily metal premiums that are up 240 million Swedish krona compared to Q4. So a continued strong development of the premium and a strong European market primarily in zinc. When it comes to metal prices, It's slightly up. The average prices are clearly up, as I'm sure you have seen. But as many of you know, we are exposed to quarter end prices, especially for metals with long quotational periods, which is a result of our pricing method. And nickel and palladium are down about 20% quarter end compared to quarter end. And that actually adds up to a negative impact of around 400 million kronor between the quarters. Volumes are down 800 million and in the shorter perspective Q4 to Q1, the main reason is the disturbances that Michael talked about and lower mill volume. We've had conveyors in Taranaitic and mill maintenance in Garpenberg and Zahn. The smelters had a fairly good quarter. Volumes are slightly down compared to last quarter for two reasons. One is that last quarter we had some one-off revenues connected to a reduction of gold inventories. We talked about that in a previous call and that has not been repeated in this quarter. Additionally, we didn't have an ideal concentrate mix in the quarter in smelters. This is a result of some logistical disturbances, delayed transports in, and a part of that is the finish strike that has had some impact as well in the quarter. Cash flow. slightly negative which is an effect of the EBTA level and the fact that we're investing this year on record levels. We were expecting slightly higher capital bill. We typically do that in Q1 and as you can see Q1 of last year we tied about 3 billion in working capital. We had some big shipments that were delayed coming in late in the quarter, and that means that they were not paid at the quarter end. So we came in significantly better than our own plans in the working capital side, but we have seen that outflow in the beginning of Q2. Finally then, the capital structure, the balance sheet and the financing, still strong position. Net debt close to zero. We are currently also at about 26 billion in payment capacity, half of that is cash. So we feel that we are in a strong position when it comes to our financials. And with that, Michael, hand over to you again.