Boliden AB (publ)

Ladies and gentlemen, I'd like to welcome you to Boliden's Q2 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 Staffas and our CFO Håkan Gabrielsson. We will also have a Q&A session. Mikael, welcome.

Thank you Olof and hello everybody out there. It has for sure been a very, very intensive and very special quarter from our side. And I'll try to go through all the things that have happened. It's, as I said, been a very intense quarter for us. So if we just start going through, one of the highlights that all you know is, of course, the fire in Rönnscher. And I'll come back and talk more about the fire in Rönnscher in a little while. But we had the major fire. We had the total shutdown of the operations. We are now, as we're speaking, up and running. All the units except the electrolysis plant are running. We still have some curtail capacity at some of them, but they're all running and we have a good hope that we very soon be able to run all of them full and thus be able to produce anode copper at full production. But I'll come back to that. The other big thing for us in the quarter has been the general development of the prices and terms. And as you can see, when you look at our numbers, you can see that we've been hit not just by lower metal prices. Zinc prices especially have gone down dramatically. We've also been hit by lower byproduct prices. And in our case, lots of people who are based in Sweden think that we are winning from currency, but we're actually not compared to last quarter. Because of the strengthening of the euro compared to the US dollar, we're actually having a negative development in terms of the currency effect as well. This all led to a situation where we decided to put the Tara mining care maintenance because the escalating costs there and the lowering the zinc price, which we decided back in June and we have now effectuated Tara will be down. We will come back when the prices and terms have returned so that we can run Tara profitably. And we do think that we can do that. Otherwise, we, of course, have another solution than carry maintenance for Tara. We are very positive that we will come back in a strong way whenever prices return. On top of that, we've had low grades in mines. Partially, this has been well communicated far in advance with the developments in ITIC. And then also we had to Because of rock stability issues and changing our mining plan, we also got a lower grade in Kivica that we announced in an extra press release a few weeks back. Then also a very big maintenance stop in Harjavata, one of the biggest ones in many years. We went through. The maintenance costed or took a little bit more longer time than we thought, so it was a little bit more expensive than first anticipated. But it also feels good that we're through the majority of the maintenance for this year. On top of that, we can also say that, of course, inflation, especially if you compare to last year, is still hitting us relatively hard, although inflation quarter on quarter is very low now. Our major projects are all of three going according to plan, and we're developing well both in ODA, in ITIC, and in the Kristineberg project that we're doing. So all in all, and we'll come back to that, this has led to a reduction, sharp reduction in the profitability for the quarter, especially compared to last year. We have a negative free cash flow. We'll come back to that partially because of the fire in Runshare. We also had a higher working capital and CapEx now up at levels around what we have guided for. So if you look at the profitability development, we had a little bit less than a billion, 833 million profit for the group. We'll come back to details around that. There are some one-offs in that number as well, especially the mines have been struggling with the lower grades. Smelters also back mainly due to the big maintenance stop, but also the fire in Rönnskärm. On the ESG side, we've also had a struggling quarter. The LTI frequency that we for a number of quarters have been coming down to very low levels and of course maybe has made us a little bit spoiled. We are now having a setback in this quarter with a number which is more like what we had a couple of years back. We still feel good about the progress that we have. We still feel good about the general safety development, even though these kind of quarters do unfortunately happen now and then. The sick leave is going down if you compare to Q1, and we're heading down to lower levels. However, it was not quite as low as we had hoped for and anticipated, and we're working hard to see whether we can get the sick leave down even further. What was good in the quarters is CO2 emissions are continuing to develop in the right direction. And you can see here that we have a lowering of the CO2 emissions scope 1 and scope 2 from 206 to 190 in the Q2 compared to last year. The metal or the price in terms, especially zinc with 19% down in the quarter is the one that hits us pretty hard. And you know that with our pricing model, what definitive pricing comes up to four months in certain cases. After delivery, that hits us hard and we have a negative development on the prices and terms. We have a strong negative development on the byproduct side, especially sulfuric acid. We also have declining premiums for the spot side, which is in line with this. And we have a negative currency development for Bullen as a group because of the strong euro, even though the Swedish krona is weak and helping us, the strong euro is actually making it altogether a negative currency development compared to last quarter. We can also say that in part of this, this is what we see and this is what comes from LME numbers and so on. We also see, and we've been open with this, that when we look locally at the markets where we are present, we also see clearly lower activities. We see our customer's taking out less volumes than normally. And we can really see that in the sectors that are using our metals, clearly recession has entered into Europe. And this was also been a discussion as we've been talking about Tara, because of course, if you believe that the zinc prices would jump up next month, you wouldn't put Tara into care and maintenance. But as we see it right now, we cannot foresee that the zinc prices will jump up really in the short term. We're probably talking into 2024. until we get a good rebound in the zinc prices. If you look down on the prices, you can see that the prices right now, both for zinc and for nickel, are down around the cost curve, which is usually a sign that the prices don't really go that much further down, but it's also not sure that they will jump up very fast. Copper is still developing well, has had a much better development in the quarter, even though the copper price is also down. And the copper price is still well above where the cost levels in the industry are. If you look at production, I must first say that we had a good production in our mines almost all the way through. We've had good throughput in Aitik, 45 million tons more or less. Apart from the beginning of the quarter, which we guided for where we had problems floating over with the The mill issues that we had in Garpenberg, after that was solved in April, we've been producing very well, and the throughput has been very good in May and June. Also in Kevitsa, we are having throughputs very close to the 10 million tons, which is our permit level around there. So throughput, and also in the Boulinera, throughput is good. Tara throughput was also relatively decent. With the announcement of the care and maintenance, the production went down, so looking at it for the whole quarter, it is below what it should be, but... It was doing relatively well up until then. The issue that we've had has to do with grades. In ITIC, we are now down to the point 17 that we have guided for for the full year. We knew that we were going to come there. And we have also indicated in the Capital Markets Day that this is a level roughly where we could be expecting to stay for a couple of years before we get the grades coming back up again. In Garpenberg, we've had some issues with the grades. We've been in lower areas. That's really a temporary thing, and we should get the grades back in Garpenberg, and we don't have any change in the forecast for the year. Kivica, this is quite in line with what we communicated a couple of weeks back. We've had rock stability issues in Kivica, which has made it for long parts impossible to mine from the pushback number three where the high grades are and we've been mining from pushback number four instead. We've been able to keep the volumes up which is good but of course it's hitting the grades and we are now at those grades as we communicated there. On the smelter side, well the big thing on the smelter side throughput is the very major maintenance shot that we had in Harjavata which was well communicated beforehand It took about a week extra, longer than we had anticipated, a little bit in different parts. That's things that happens when you do these major stops. You only find out exactly the condition of the furnaces once you have cooled them down. It took extra time for us to do this, but we feel good about this. We also had a chance in the meantime to rebuild the nickel concentrate dryer, which has been causing us issues, and now it looks better once we've been able to get going with that one again. In the zinc smelters, we've had a relatively good production, even though we had a little bit of an issue with the electrolysis plant in Oda, number four. But otherwise, the zinc smelters have been doing well. The big thing is, of course, the fire in Oda that totally shut down Oda on June 13. It was down for about two weeks. To the most extent, we've been starting up the different parts. We have been able to start produce anodes we have actually shipped anodes we have developed a limited contract basis for anodes and we are as we're speaking building up the the book around how to sell the anodes we're not really worried about it but it will take some time to establish this we are a brand new player in this market and we need to put a name to ourselves around it but we're not in any sense worried that we're going to be able to sell the anodes that's going to be quite possible Now, Håkan, I'll leave it over to you to talk a little bit about the numbers.

Thank you and good morning. Well, as you have seen, we have reported an EBIT excluding process inventories of 833, capex of 4.2 billion. That means that we have now spent just over 7 billion, which is in line with the full year guidance of 15. And as a consequence, that means that we have a negative cash flow of minus 3.8 billion. We look at the profit by business area. You can see what Michael talked about. There is a decline in mines, a sharp decline in mines related to lower metal prices and grades. On the smelting side, we have a significant, a big plant maintenance. And on top of that, the fire in Rönnskär had a major impact. So those will be the main changes in the results. If we look a little bit more in detail and start down with Q2 compared to Q2 of last year, year on year there is a big drop in prices. We have an EBIT impact of about 750 million compared to last year from the zinc price reduction. Also price reductions of copper and byproducts, sulfuric acid, is significant in this analysis. Year on year, the price drop on metals and sulfuric acid is partly compensated by better premiums and better currencies. But all in all, it's adding up to a negative price impact of minus 841 million Swedish kronor. Volumes are down 2.1. More than half of that is related to metal grades in mines. This is mainly Kevitsa in line with the announcement a few weeks back, and Itik mining at 0.17% copper, which is in line with the full-year guidance. So those will be the most significant ones when it comes to grades. The fire in Rönnskär, we estimate, had an EBIT impact of about 400 million Swedish kronor. A volume impact of 400 million. 200 of that is direct production losses in the smelter. The other 200 is related to the timing of profit recognition in mines. When we've had one smelter close due to fire and the other one in maintenance, concentrate had piled up. And that means that we have not been able to recognize the full profit of the mining production. This is a timing effect, and we expect that to normalize during the coming quarter. We also have a bigger maintenance stop this year, which has a negative impact on volumes. Costs. The main reason to the cost increase is inflation. We have a high single-digit inflation, so a bit below 10% year on year. In there, there is of course also a currency component. The Swedish krona has further weakened against the euro and dollar, which plays into this. In addition, we have slightly higher maintenance cost and higher exploration. On the items affecting comparability, we have a few components related to Tara and related to Rönnskär. We have made a provision for early retirement in Tara, 53 million Swedish kronor. We have a provision for demolition of the cell house that was destroyed, 75 million kronor. And we have a write-down of 88 million krona, which is the book value of the cell house. A fairly low book value as it was mostly depreciated. If we look sequentially and compare Q2 to the previous quarter, the main components are the same. Prices and terms just below 800, negative impact. Base metal prices down. Again, zinc is the most important component with about half a billion Swedish krona impact compared to Q1, so significant. Also, the currencies are slightly negative. You can see 120 here, and that is related, as Michael talked about, to the euro strengthening against the dollar, meaning that the profitability in our euro-based units, Tara, Kevitsa, and the Finnish smelters, has had a negative impact. Volumes is a billion down compared to Q1. Again, grades is significant, about 400 million. Aytek and Kevitsa, according to the announcements earlier on. Also here we have the 400 million impact from the fire in Rönnskär. Same order of magnitude is the volume impact from the maintenance stops, primarily in Harjavalta. But on the plus side, we had about 300 million improvements due to higher milled volume compared to Q1. The costs are slightly up compared to Q1 due to maintenance stops. There is no significant inflation that we see compared to Q1. And then we have the same one-offs related to Rönnskär and Tara. Cash flow, well, the main difference is a lower EBITDA. We also have high investments and then we've built working capital roughly at 1.7 billion. And the reasons to that are two. We talked about already at the last quarterly report where we had a seasonal working capital build that didn't happen in Q1 and that we guided for would happen in Q2. So there's one background and the second one is of course the fire in Rönnskär where a lot of Concentrate stocks have piled up as we have not been able to process and ship that. Moving on then to the capital structure, we have a net debt of 11 billion. The main change compared to last quarter is a 7.3 billion dividend payment, including then the redemption of shares. And then in addition, the negative cash flow I just talked about. So that adds up to a net debt of 11. and a gearing net-to-equity ratio of 20%. We still have a strong balance sheet, 14.5 billion in payment capacity and strong numbers. So with that, I'll hand over to you again, Michael.

Thank you, Håkan. Let me then just go through some of these situations a little bit more in detail. If we start with the fire in Rönnskär, It was happening in the cell house, we all know that. Production has already, as I said, partially resumed. The first part was resuming, I think, after 10 days, and then we have been gradually stepping up to different areas. And as I said, now all units except the tank house are operating. Some of them cannot operate at full capacity yet, but in a month or so, we should be able to operate all units at full capacity. And then We have a commercial setup that needs to be handled around this. We are building a book of anode customers that is in progress. Some anode contracts are in place, but most are still to be handled. I think that many of you would like to have a guidance regarding what is Rönnschar going to have as a level of earnings now that we don't have a tank house anymore. I will not guide you this time because it is linked to the commercial setup and exactly how well we'll get paid. But of course, we will have a lower profitability and run share going forward. I mean, there is a reason why you have a tank house at a smelter. And in our setup, it is important to have that. So it will be a lower EBIT, but by how much, we'll have to come back to you. In Q2, we had the one-offs of $88 million. for the actual tank house, and 75 for the cleanup after the fire. We have had two different impacts. One is the actual downtown in Rönnstrad itself, about 200 million. But then we have the impact from the fact that we cannot ship concentrates. Rönnstrad is not only a consumer of concentrate, but also a shipping port, which has backed up concentrate from the Boliden area, which has not been able to be shipped out to other units. It is also... of course, backed up some concentrate from the ITIC, but also lead concentrate from Garpenberg that has had to back up because of the fact that they were not being processed at this time. Insurance, we are fully insured, but as everybody with insurance, there's always a discussion around what exactly they will compensate and not, both in terms of the actual lost property and in terms of the disruption. But we will continue to discuss this. At some stage, I think we will see a nice one-off positive regarding this, but we'll come back to that once we know a little bit more. We have also, just as I pointed out before, we have started a feasibility study for putting a new tank house in place. We don't know exactly how long it will take until we have a new tank house in place. Our ambition is that we should be able to make a decision on a tank house by the end of this year. But... We'll see how quickly we can move on with the feasibility study. It should be mentioned that even though everything looks good, we should be very clear. We have not yet access to the fireside. It is still under control. There are safety issues. We're walking in there. We need to do lots of preparation before we can start walking in. That is important both to understand the root cause of the fire. It's important to understand what can potentially be used of the old electrolysis plant or tank house in the new construction. And it's also important for understanding how we'll get the process inventory, i.e. the copper and gold and silver and so on, that is in there and get it out. We have not made any provisions. We're pretty confident that we'll be able to get the full metal value out of the tank house. But it will take some time over Q3 and Q4 to get that out and be able to put it back into the process and get it into anodes. In Tara, as I said before, the main reason for putting Tara into care and maintenance is the poor profitability. As you see, we lost 38 million euros in the quarter, which is, of course, totally unacceptable. The main reason is the lower zinc price and the higher cost levels that we have, both general cost inflation and higher zinc TCs, which has been the main combination, but also energy prices play into this equation. And as I said before, we do not see a quick rebound in this and we decided therefore to put Tara into care and maintenance. That is a better both short term but also long term option for Tara. We have a connection with this also with the union negotiations given offers for some early retirement that we have made the provision for at 35 million. 53 million krona in this quarter. Going forward, we have roughly a standstill cost of about 12 million euro per quarter. This third quarter will be a little more expensive because all the costs were not gone as of July 1. So we had some higher cost in July, which means that we're roughly at 18 million euro negative EBIT from standing still in Q3. We've also decided to put the exploration of Tara Deep on hold. There are a couple of reasons behind this. One is that what is important for Tara Deep is to do exploration from underground. With having the mine into care and maintenance, it is for safety reasons not that easy to be able to do exploration from underground, to have people working underground when the actual operation of the mine is not in place regarding first responders and safety and so on. But the other reason is also that, of course, while Tara is standing still, we're not taking up space into the tailing pond, and we're also not depleting the old mine, which means that we can move the whole decision-making basically one day forward for every day that we stand still, and thus the pressure on time for Tara Deep is also a bit less. And in that combination, we've decided to also pause the development of the Tara Deep project. Kevitsa the Kevitsa situation we've talked about and we had the extra call around that we've had problems with rock stability which has meant that it's been impossible to mine from pushback 3 for a large part of the quarter and it will continue to be difficult to mine from pushback 3 also for the next coming quarters we have been able to increase the speed at pushback 4 which means that the total tonnage is saved and we get the we're going to get the 10 million tons for the whole year, but we will get that at lower grades. We ended the quarter two where we had guided for and the extra guiding a couple of weeks back, and we are now reiterating the guiding for Q3-4 as we did, as we took it out a couple of weeks back. If we then summarize it, what does that look forward? Well, ITIC is now producing well. It's producing at this 45 million ton throughput level But we are hitting these low grades and we are reiterating the grade guidance of 0.17 copper and 0.07 gold for the year. In Garpenberg, producing well 3.3 million tons should be doable. We should come back and get some positive grades around this and we are reiterating the full year guidance of 3.6% zinc and 100 grams per ton of silver. Kevitsav, we are reiterating the 0.25 copper and 0.18 nickel as we communicated a few weeks back. And in Tara, we are giving the guidance that it's going to cost 18 million euros in negative EBIT for Q3 and then from there on about 12 million negative EBIT as long as we keep on standing. Maintenance shutdowns, we have done the vast majority of maintenance shutdowns for the year when we're now down in Haryavalta. We do still have some maintenance stop coming up, especially in Kokkola, and we have an impact of 140 million for Q3 and nothing for Q4. As I said with Rönnskär, it's very difficult to give you an estimate of what is the earning potential in Rönnskär in its new commercial setup, selling anodes rather than cathodes, but it's of course going to be lower than what we had as a going run rate before the fire. So exactly where we'll have to come back to. And regarding CapEx, we are reiterating the previous guidance of close to 15 billion Swedish for the year. And the projects, as I said before, are all moving on relatively well. With that, I will open up for questions.

If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Adrian Jelani from ABG Sundal Collier. Please go ahead.

Hi, it's Adrian here at ABG. A few questions from my end. First of all, on the Garpenberry zinc grade of 3.1%, that was very low, but you still decide to keep the outlook of 3.6% for the full year. I guess, how confident are you in that figure, given that it implies around 4% zinc rate for the second half of the year?

Well, we wouldn't put it out there if we wouldn't be confident.

Sure, that's clear. And then the 400 million EBIT effect from build-up of concentrate inventories. Is that something you will be able to catch up on in coming quarters and sort of reverse?

Well, like I said, the 400 was 200 plus 200. The 200 that was lost because of Rancho standing still, that is lost. It's not going to come back. The 400 that was tied up because of slow deliveries from mines should revert as we get the production... resuming and also the port resuming back to normal operations, that should revert.

Just to be clear, 200 will revert and 200 will not revert. Just to be clear.

And the 200 that will revert, you should see that entire effect in Q3?

That is my expectation, yes.

And then I guess finally on the inflation, You didn't give us an exact number like you've done in some quarters before. You just say that it's easing. Are you able to say some year-on-year percentage figure on this and perhaps also what you expect going into Q3?

We can give a number. It's slightly below 10%. So to give a number, if you want to be very exact, I would say 9% year-over-year. And we see a downward trend. The... The components are coming down at a little bit different pace, but currently in the quarter at 9%.

Okay, perfect. That's all for me. Thanks.

The next question comes from Liam Fitzpatrick from Deutsche Bank. Please go ahead.

Good morning. Three questions from myself. Firstly, just on your zinc smelters, can you just give us some guidance on the impact from the Tara closure in terms of how that could impact profitability for your zinc smelters moving forward? Have you been able to secure concentrate both short term and over the medium term? Second question on Ronscale. I know you don't want to say too much at this stage, but can you give us some color in terms of what the potential CapEx ranges and timeline could be in terms of rebuilding the cell house? And is it your expectation that that will be mostly covered by insurance? And then the The third one, just on volumes, and I guess this is for Håkan, it's a very complicated quarter for both the mines and smelters with all the moving parts. Could you walk us through on the volume front what sort of uplifts we should be seeing into Q3? I understood the point earlier around the concentrate at the mines, and I think the maintenance guidance is pretty clear. But over and above that, Are there other sort of key volume movements that you can help quantify for us? Thank you.

I can start with the two first, and I'll give the last one to Håkan. Regarding the zinc smelters, yes, I would say the following. I'll put the following. We've been able to replace most of the TARA volumes. We are still working to replace the last ones. We feel relatively confident around it. Regarding run share and the... a new plant and insurance coverage. I have told many people before that it's a little bit like when you have insurance for your bathroom and you get a water leak and you have to rebuild the whole thing and you are fully insured. Usually you don't build what you had before. You build something else and the insurance company will argue that they are only liable to rebuild exactly what was there before and then you have a negotiation how much it should cover the new thing. I think exactly the same thing will happen here. We are fully insured. We are, you know, we have to know that this plant that was burned down, the newest part of it was almost 25 years old. And the older part were over 50 and so years old as well. So we're not going to rebuild or we don't intend, you know, the intention is not to rebuild exactly what was there, but something different, reflecting new technologies and everything else around us. And of course, then the insurance company will say, we're not going to pay for all of that. We'll pay for part of that. How that all will work out is all part of the feasibility study that I said we have started and that we hope will finish and be able to make a decision on how to move forward by the end of the year.

And then when it comes to volumes, I think the main components are related to grades. We just go through the activities one by one. I mean, the throughput, the mill volume in mines was good in the quarter. It was a good step up from last quarter. We have reiterated the grade guidance for Garpenberg and Kevisa, which should be an improvement for the second half of the year. When it comes to Rönnskär, We were still a couple of weeks, so we will ramp up the anode production in this quarter. So the volumes will be there, but at a lower margin. And then we have about 200 million concentrate that is not increased production volumes, but we will be able to recognize the revenues and the profit of those 200 million in Q3. I think those are the main components that should change between the quarters. For sink smelters, I don't foresee any major change.

Could I just briefly follow up on those volume points? On the mine grades, are you able to quantify that in terms of any ranges? And then on Ronscar, where I'm struggling is, obviously, it's returning in terms of volume, but at a lower profitability rate. So when we're thinking about Ronscar in Q3 versus Q2, Is it going to be up? Is it going to be down? Is it going to be flattish? Any color on that would be helpful.

Okay, I'm not sure quite how to answer that, but I'm not sure if I can put a Swedish krona value or a monetary amount to the grade profiles, but I think if you look at the grade guidance that we have provided for the full year, that means a good step up in a couple of the mines for the second half. And again, regarding Rönnskärr, There is a big uncertainty in the exact impact until we have established the commercial terms for this. So therefore, it is a bit difficult to guide on the EBIT impact. Volume in production, though, should be back or is back when it comes to producing anodes.

Matt, I think if that's okay with you, we'll move on.

Thank you.

The next question comes from Daniel Major from UBS. Please go ahead.

Hi there. Yeah, thanks for the questions. First one is a follow up on Ron Scar and the insurance dynamic. I totally understand the concept you've put forward on the negotiating the absolute amount. I think the key thing from a perspective of your group cash flow and balance sheet dividend for the next few years is how the payment will be structured. Would you expect to receive a proportion of the insurance claim as you rebuild the smelter, or would you expect to have to finance the full rebuild of the tank house and then receive a lump sum payment at the end of the construction period once all of the outstanding amount has been determined?

I would say that we're really guessing at this stage, but if you force me to guess, I would say that once we make an agreement with the insurance company, and hopefully we can do that in a timely matters so that we don't delay the construction of a new tank house because of this, we should be able to get payout kind of in line with how we build the new tank house proportionally. Regarding the payments for business interruption, which is also substantial with this, and there I think that there is a risk that we will be negotiating for a long time and get a lump sum sometime in the future when we will get covered for for the business interruption. As you know, with these kinds of discussions, there could be long discussions around what would we have made in terms of money had we not had the interruption. So that one I expect to come later after the fact.

That's very useful. Thank you. And then next question, just to be clear on some of these one-off items that you've detailed. 200 million for the locked up inventory. Was that reflected in the mining EBIT this quarter and therefore should reverse in mining next period? Is that correct?

It's partially mining, but it's also partially in the internal profit elimination. I don't know how much is each. Do you know that?

The main part of that, as you say, it's in both, but the main part is in the segment of the business area, other in the internal profit elimination.

Okay. And then just to follow up to that, if we look at the bridge on the mining business, you did 178 million of EBIT last quarter. I think 38 million euros is about 435 million. million sec was um associated with tara so if we we sort of back that out um it would have normalized earnings for the mining business to be somewhere in the region of seven eight hundred for the quarter as a starting point um and then obviously we've got the volume benefits that you highlighted but is that the right way of thinking about it excluding the losses from tara

I would say that, yes, it's a good start, but there are other things involved as well. You have to remember the mining business was also hit negatively on the prices and terms with the definite pricing when you have a relatively low price at the end of the quarter. And hopefully, if the prices remain stable or even go up, that effect will also revert.

Okay. Can you quantify the provisional pricing impact during the quarter?

About 90 million. Negative 90 million, 9-0.

Okay. All right. Yeah, that's very helpful. Thank you.

The next question comes from Victor Trollston from Danske. Please go ahead.

Thank you, Operator. Good morning, Mikael and Håkan. Firstly, on grades in the Boliden area, if I may, where we have seen a bit you know, lower grades in terms of zinc this quarter and also the last? Is this sort of, you know, according to plan? And how should we, you know, think about that grade going forward?

Well, the way you should think about going forward is according to the R&R statement. So that's what you can look at. Yes, it's been low at this quarter. It has to do with the mix of different ores, which means also if you look at it, I believe gold has been higher than the R&R statement because we have been focusing on ores that have been slightly more gold-rich and less zinc-rich. And all in all, you can say that we've had a slightly weaker... If you take the whole thing together, then on an average, but it's maybe not too much to talk about it. It's just below some kind of par.

Yeah. Okay. Now that's clear. And then maybe on just how we should think about working capital from here, given the balance between mines and And smelters now, would we expect similar seasonal patterns as we've seen historically now? Or is it possible that you tie more working capital in the second half?

In general, I would expect a release. I mean, we typically build the working capital in the earlier parts of the year and then we release it in the second half. In this year, I expect that to be a little bit, how should I say, accelerated. partly because we've tied more due to the fire, and then secondly, the methyl in the tank house, we should be able to realize that number. There is some uncertainty in the timing, though, because as Michael said, we have not yet gotten access to that area. But the tendency is that rather, I think we should be able to deliver a fairly significant release of working capital during the second half. Then beyond that, the long-term capital build, I think it's difficult to say, again, with reference to the discussions on terms for anode sales.

Okay, I know that's helpful. And then if I may, on byproducts and premiums going down, how does that look into Q3? Will that be an additional headwind, or are we more on stable levels now?

Yeah, this is, of course, the most difficult thing to predict. If you were to ask me, I don't see byproducts jumping up in terms of price in the short term. I would expect them, in line with the kind of general recession that we're heading into right now, to remain low or theoretically become even lower than they were in Q2.

Okay, so we could see some additional headwind from that perspective?

Possible. Yeah, okay.

And then finally, just to try maybe to push you a bit more on Rönnskär and the production loss of 200 million. You touched upon this, but unknown sales ramping up in Q3. And obviously, depending on how we think about the profitability level, I must say I have a hard time seeing that it will be a negative impact sequentially. from the 200 million? Is that completely off or, you know?

I will prefer not to comment on that.

OK, OK. Yeah, that's all from me. Thank you.

The next question comes from Johannes Mazvulas from Morgan Stanley. Please go ahead.

Hi, good morning. Thanks for the presentation. Just a few questions left from my side. Starting with the first one, do you think you could place the entire copper anode from Roscar to the market? And therefore, at what capacity utilization could you run the smelter? An earlier press release suggested that you might not be able to run it fully. So keen to hear your latest thoughts on that.

I would say from a commercial point of view, we don't see any risk of being able to place the anodes as such, if you just want to have somebody who's going to accept them. But you know that with anodes, given that there, especially in our anodes, is a very high proportion of precious metals, given that we have such a portfolio of concentrates, we of course need to make sure that we get well paid for those precious metals in the anodes. And that's of course a commercial discussion that's ongoing. Another commercial discussion that's ongoing is linked to the question that came a little while ago, which has to do with the working capital. Since this is not a set business model in the sense as cathode sales was, there are still, you can say, some contracts that might give you better profitability but will tie up with more working capital. We are looking into tolling solutions, for example, that we would toll the material ourselves at third-party tank houses that will probably be more profitable but tying more working capital compared to straight sales of anodes. But to come back to your initial question, we don't see any reason that it will be difficult to sell the anodes as such. It's just a matter of how much money we'll make on them. The curtailments that we talked about and that should be easing off during Q3 and should not be a major part, but we have had problems running certain, especially the precious metal plant FOOL, because of where it was physically at and some of the media that went into the pressured metal plant came from the tank house. And we have reestablished that on some level, but not fully.

Okay, very clear. Thank you. Second question on Kvitsa. Do you have a line of sight on next year's grade profile? Basically, the question is whether you think the challenge around the pushback number three will be fully addressed in the second half or maybe there is a spillover into next year?

Of course there's a plan but I prefer not to comment regarding that plan because as you can understand we are having pretty big discussions around this internally both the major reason why this happened is rock instability we had fallouts in certain parts of the mine which made it impossible from a safety point of view to work below will we be able to get out of those? Are we entirely sure exactly if this is possible to happen again? And what is happening? We prefer not to comment on that. We will get back to guidance exactly on how, well, the guidance for the life of mine is, of course, what is in the R&R statement, but how that, the timing of that, what happens in 24, 25 and so on, we'll come back to that later in the year.

Very clear. And the last question on Tara. Are there any cost improvements or other operational improvements here that could help you boost the economics of the asset, whether it's power, labor or anything else? Or is it purely a function of a higher zinc price that will drive the restart decision?

I mean, there's always a full slate of things where the zinc price is the most important one. But we have been hit by very high power prices. If there is some way to sort out that we can get lower power prices on Ireland, of course, that's going to make us sooner come to a decision to restart than if we were not. We have the general cost inflation with quite a lot of the chemicals used in the process have been very high. If those come down, that will also make it easier. So there are things that can make it faster, but the zinc price is the most important part.

Okay, very clear. Thank you very much.

The next question comes from Richard Hatch from Burenberg. Please go ahead.

Yeah, thanks. Morning and thanks for the call. Just a few questions on grades to start with. If I kind of look at the grades of what you've been doing at Garpenberg, guidance this year is 3.6, reserve statements anywhere between 3.1 and 2.5. And, you know, over what kind of time period do you think that we move towards that level? And then the same goes for Kavitsa, but the other way around. You know, you're mining at 0.25%, reserve statement sort of sitting at 0.33% COP approved and 0.38% probable. So, you know, when are we going to see that great sort of reversion for Gartenberg and then improvement for Kavitsa, please?

Regarding kivits, I think we just had that in the previous question. We will come back to that later. The issue there is how do we think that these rock stability issues, these wedges that you get into the wall of the open pits, how prevalent will they be going forward and so on? That's what we're looking into, so it's going to be difficult to tell exactly. Regarding Garpenberg, the general thing on how quickly it will decline, I've said this many times, that when you have an underground mine like Garpenberg, you will always mine above the reserve average because you can, especially when you have long life for mine, you will go to the good parts first and you'll leave the less good part for later. That means that you're mining over the average, but the average will go down over time. We have not really guided how quickly that is likely to happen, but we said that, you know, over the next kind of five years, there will be nothing really kind of, very big, even though we might see lowering grades, but we're not heading down close to the R&R averages for the next five years.

Okay, thanks. And just on Kvitsa, I can just push you a bit on it. I mean, forgive me if I've missed this, but so you're now undertaking geotech drilling to just kind of get a better understanding of the ore body and your ability to access those areas? Yes.

The issue, just to be very clear, is that we've had fallout from the walls, and we've had fallout when we do blasting on the upper levels, i.e. pushback 4, which has been not the way that we thought, and we have had falldowns going over the side and going down and starting to roll down towards the bottom where pushback 3 is, and thus we cannot work there. We are now going through the information that we have to see whether This thing that happened was just something that could not have been foreseen, could have been foreseen, could we have done something in a different way, could we have blasted in a different way to make sure this doesn't happen. And all those things I think that we're now working into the new mine plan as we're doing it, as we're speaking, that we will finish during the fall. And therefore I think it will be too early to tell exactly how that will conclude.

Do you think that might mean that you have to ease the slope angle then?

I don't think it's an issue of slope angle because you have a stability that's good over time. So I don't think that a slope angle is the way to go at it. I think it's more a discussion of the mind design. It's not just that we have pushback four on top of pushback three. We have pushback four for a while right on top of pushback three. And if you can move that a little bit to the side, you will have increased degrees of freedom, even though it's also affecting the ramp, what is happening now at pushback four.

Okay, right, thanks. And then, sorry, just last ones on Ron's car. I think we're all trying to kind of get it from different angles, but perhaps if you might be able to help me in any way, shape or form on just any kind of margin differential between uranoids and the cathodes that we were previously selling, just so we can kind of try and get a handle on what the EBIT impact might be whilst you go through this period of rebuilding. Thanks.

I will not comment on the margins at all because this is due to commercial discussions that I don't want to foreclose. They're ongoing as we're speaking and we are, of course, doing our utmost to make sure that we use the situation to our advantage and not to our disadvantage by telling others what we might expect. But it's, of course, I think it's been mentioned before, this is not my number, but somebody else has said that it might cost 3 billion Swedish to build a tank house. It's not my number. We haven't done the feasibility. We don't know. But if you just do that one as a kind of mind gaming, we say that in operations in a copper smelter like Rönnscher, it surely makes sense to have a tank house. And if it's going to make sense to have a tank house, you're going to have to have at least 300 million return per year to meet our 10%. If you say that's going to be by a margin, you might need to have something like you know, 500. And that might be then some 300 to 500 that we're losing in the meantime to be able to come back to where we were. But once again, this is not a guidance. This is just a way that you can start playing with numbers.

Thank you very much for that, Kala. Much appreciated. Cheers.

The next question comes from Igor Tubik from Carnegie. Please go ahead.

Good morning, thank you. Just two questions from me. The first one is around Garpenberg and the grades. I'm just curious to see if the lower grades that you had this quarter in primarily zinc were expected. And the second question refers to the capex and the stronger Swedish krona. all costs hedged in terms of capex going forward for all your projects, or how should we think about that?

Thank you. Gartenberg grades, we thought that we were going to come in lower than the 3.6 in Q2, which is, by the way, related to the problems that we had with already back in Q1, you know, that we have problems with the hoist. And when we have problems with the hoist, in order to get the tons up, we decided to move tons to the surface from close to surface, and close to surface you have lower grades, and therefore that came into there. So we would expect it to be lower. They came a little bit surprisingly low for us as well at 3.1, but it's a little bit difficult, especially when you kind of have to deviate from your original mine plan and get into stopes that you had not originally planned to do. It's a little bit difficult to have full control of this. So So we had expected in ourselves and our own management to have lower grades, but maybe not this low. And then capex and exchange rates. That's a very good question. We can spend hours on talking about this way and how it's accounted for and everything else. Regarding hedging, we hedge the big packages that are within, but we only hedge the package from where we make the decision on that individual package in a And, you know, in an investment like Alda, there are quite a few big packages and they're hedged when we step into the actual fixed contract and then they run for that. So then you have all kind of ifs and buts around this thing, around what happens. And at one day, we'll come back and give you some kind of post calculations on the big projects. But so far, we are just reiterating the guidance that we've given before.

OK, thank you.

The next question comes from Anders Poland from Bernstein. Please go ahead.

Hi, good morning. I'm just going back to Ronschart Insurance. Last call, you mentioned that insurance should cover the profit losses from the fire. Are you hoping that's also going to include the lost cathode premium or is it just going to be from the loss of volumes?

Thanks. Well, this is where insurance negotiations start. It's always when you have a business interruption. We will claim that this interruption made us lose this and this and this and this. And the insurance company will question those calculations and say it's that and that and that. And at the end of the day, we'll agree to something. Exactly what those details are. But in theory, we should get compensated for the business interruption.

Okay, thank you.

The next question comes from Christian Kopfer from Handelsbanken. Please go ahead.

All right. Thanks, operator, for that. Just a few follow-ups. I came in very late to the call here, so sorry if you have already answered these questions. First, John Kivica, you keep your... grade guidance for the year despite all these uncertainties. So we are very certain still then on the grades for second half that's good. But so grades should improve dramatically here in the second half. I hope that will happen then. And then on the recovery side, recoveries came down to really low levels here in Q2. Do you also expect recoveries to come back to, say, historical averages for kvitsa in the second half?

You're asking good questions. Regarding the guidance, I don't think that we need a drastic jump in grades to get to our annual guidance, but we need to have a little bit of a step up. So yes, we will have a little bit of a step up, but we'll still be mining below reserve grades. The issue that you're bringing up regarding recovery is a good question, which is a little bit separate. We have experienced, as you know, problems with recoveries and they're also continuing. They're not getting worse, but they're continuing into this quarter. We have some idea what this is about, but we can't say that we have it fully under control. There is talc involved in this and there are other things around the fine-graining of this and how to make sure that you get also the fine particle and recoveries there. We have ordered some new equipment that will come during, after the summer. So we have plans, but I'm not going to stand here and say that we have figured out the recovery problem. We're working on it.

But is it fair to say still that recoveries will come up slightly due to better grades?

Yes, they should come up due to that part. And hopefully they'll also come up due to the fact that we've gotten our arms around some of the issues there. But that is a very, very weak guidance.

Okay. But going into next year, you expect the mine to perform?

Going into next year, things should look better. But as I said, regarding the grade, we had this question before, regarding the grade profile and exactly what to expect for 2024, And 25 will come back to, maybe at least 24 will come back to later in the year as we get our mine plan in order.

All right. And then for mines in general, I think you had this question, just to sort this out, to understand what is the underlying profitability of the mines here. So if we just say that Tara is not there, you don't have an extra cost for Tara, and you don't have any you don't have any definite pricing effects. Is it fair to say that if that should be the case, mines should have been able to deliver between 800 and 900 million in EBIT for Q2?

I'm looking at my CFO just to make sure that we get the number right here.

I mean, there are many parts in this, but we said that we had one effect of final pricing of 90 million. So that... That is one improvement. We had about 38 million euros negative in Tara, which over time should go to 12 as long as it is in care maintenance. So that's an additional improvement. And then as your first question, both... Tara and Kevitz are looking at better grades during the second half in relation to our grade guidance. So those would be the moving parts as I see it.

Yeah, I was just talking about Q2. So if you didn't have Tara in Q2 and if you didn't have any definite pricing effects in Q2, I just wonder what the base I should have, you know, when looking at the Q3. So is that correct, between 8 and 900 in Q2?

Well, the negative impact of TARA was 38 million Swedish krona in Euro, sorry, 38 million Euro in Q2. And the final pricing impact was minus 90 million in Euro. And there is a small bit that we... had some cons still in the books of Boliden and Garpenberg, but that's a relatively small amount. Most of that is in the mining profit already, but not in the group profits, the 200 million that we referred to earlier.

Okay. And the item affecting comparability of 50 million, should I add that? Is that in addition to this...

That's part of the 38 million in Tara.

Yes.

So you can't add it again, then you're double counting.

Ah, okay, okay. All right, all right. All right. Okay. Sounds a little bit complicated. Okay, but all right. Thank you for this, and I'll let the next one in then.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Tyler Broder from RBC Capital Markets. Please go ahead.

Thanks very much for the call. My question is probably more of a higher level. I guess this is an elevated CapEx period. metals prices where they are, some of the operational issues unfold. I think, you know, in a spot where we get negative free cash flow for the next sort of, you know, to 2024. How do you sort of look at the balance sheet here, obviously starting from a strong position, but how do you look at the balance sheet here and whether there's any flex in CapEx or how are you thinking about the CapEx program in light of these circumstances? Thank you.

Regarding the capex, there is, of course, maybe some flexibility regarding new projects as we move forward. But regarding the existing projects, we are not in a situation where there's any benefit for us in trying to be aggressive in cutting any capex. I think it's good that we move these projects forward. And then when it comes to that, we'll have to see what will come as we start adding up for 2024. But I would say generally, we do have a strong balance sheet. We do believe that the capex that we are spending is value-added. So therefore, even though we have questioned it, have come to the conclusion that it's the best thing to move ahead with it. I'm getting signals here that we have to wind up because the hour is finished. So with that, I would like to thank you all for listening in this morning. As I said in the beginning, this has been a very, very eventful quarter. Trust me, it's been new information, new things to deal with every day. I personally feel very good about how we have handled this difficult situation, how we very quickly came to a decision to minimize the losses in Tara, how we have been able to get back after the devastating fire in Ranshah. I think both these things show that we have a resilient organization that can manage also and deal with also a very odd situation that we should probably not get too often. With that I wish you all who are not already on summer vacation I wish you all a very good summer. Bye.