Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q3 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 which will start here in Stockholm. Mikael, the stage is yours.

Thank you, Olof, and welcome everybody out there as well. It's good to have you here. It's good to have you in a rainy Stockholm today, and it's good to be able to present these results that we have here today. So if we start with the key highlights, just not to forget that we are in a situation where the prices and terms are challenging. They're especially challenging for the mines, given the relatively low metal prices and also relatively high treatment charges. For the smelters, of course, the lower metal prices also play in, but the relatively high treatment charges make things relatively easier from a prices and terms point of view for the smelters. Otherwise, we've had a stable mining rate going in our mines, with the exception of ITIC. ITIC has had an extra-long maintenance stop that was unplanned, and it's also a problem with the rope shovel. But apart from ITIC, the production and throughput is good in the mines. The grades are low. They are low as guided, and also in Garpenberg maybe lower than perceived, but it's still within what you can say normal differences. We've had very strong nickel production in Haiavalta. I'm very pleased that the nickel production has come back up to speed again after the expansion that we did that had a long time to ramp up. Now we're fully ramped up and we'll see when we come into the smelter part around exactly how good that has gone. The production in Rönnskär has also ramped up nicely during the quarter. Of course, it started very low after the fire, but we've been able to ramp that up and we'll come back to that. The projects that we have, our big projects, are all doing well. They're all more or less on budget and on time. We'll come back a little bit to them later in the presentation, but things are generally going well there as well. On the financial performance, we do have a profit of almost 2 billion Swedish krona. That's, of course, much lower than it was last year, but it's a good pick up and recovery from what we had last quarter. The cash flow is negative, and that's, of course, the situation where you're doing big investment projects that we're doing right now. We are, as you can say, also in these market conditions, almost able to fully finance that from internal cash flows, which we are also happy about. And the CapEx is moving, as I said, according to plan, about 3.5 or 3.6 billion krona in the quarter. So altogether she said the sorry altogether the EBIT is at 1940 the mines at 750 and the smelters at 1303. If you look on health and safety, we are also having a good development. The lost time injury frequency in the quarter was low. And as you start looking at rolling 12 numbers here, we are on record low levels, which we feel good about. The sick leave rate is not really coming off as quickly as we would have hoped after the pandemic. I don't think that we're the only company around that has challenges to get the sick leave down again. We're working hard on that topic around how to see that we can get that down to levels that we saw before the pandemic. The CO2 emissions in absolute numbers look very good. This is of course partially due to the fact that we have put certain operations in care and maintenance, but also if you look at our CO2 program and how we are working to get our CO2 emissions down in line with the science-based targets until 2030, we are performing well and progressing well in our program there. On the market side, year-on-year, of course, we have clearly lower prices and terms, especially on the zinc side, which is hitting certain aspects more than others. We have strong premiums and we have declining by-product prices, which is also playing into this role, and by-products, of course, we mainly mean sulfuric acid. But we have a positive currency and that's mainly the weak Swedish krona, which is helping the operations in Sweden specifically. If you look at what's happening in the world, you can see there are actually quite a lot of changes going on right now. On the copper side, you can see that the cost level of the 90th percentile is coming up relatively sharply, probably due to inflation and other issues that are helping this one coming up and will provide at some stage a floor also to copper prices. On the zinc side you can see that the zinc prices are now down to levels where you're approaching the cash cost curve and the 19th percentile. The 19th percentile looks like it's going down. It looks like zinc mines around the world are doing lots of good things to cut costs down. That's probably not the case. This is due to the fact that silver prices are actually pretty strong compared to last year, which cuts down the cash cost of zinc. And then on nickel, you can see the big diversion. Number one, you can see also that the price level is clearly down into the cost curves on the nickel side. And you see especially that the high cost nickel mines have increasing cost levels. If you then look at the mines, we've had a 10 million ton production in the quarter in Itik, which is lower than it was last year and lower than it was last quarter as well. As I said in the beginning, we've had challenges with a maintenance stop that took longer than it should have in the mill, and we've had issues with one of the rope shovels. Those things are now under control and we should be moving on relatively well forward. We are at low grades at 0.17. This is exactly as guided and we feel good about the generally about the guidance of the grades in ITEC. In Garpenberg, we also had strong volumes. We are clearly producing to the 3.3 pace that we are supposed to do. We've had some rock mechanical challenge in the quarter, which meant that we've had some high-grade stopes that we could not access. We've been able to replace that tonnage by other tonnage that we had in the mine to be able to get the strong throughput, but that has hurt grades, so the grades were down to 3.0 in the quarter. In Kevica, we've also had a very strong production quarter, 2.7 million tons through the mill, which is on a higher pace than our 10 million tons per year environmental permit, which has all been good. The grades are low, but they are in line with what we guided for in the last result. Boolinaria has had strong production and Tara has been in care and maintenance. With this all in all, of course, our zinc production goes down with Tara being in care and maintenance. Otherwise, you can see that nickel production picking up from the pickup in the Kevitsa mine production. On the smelter side, of course in Hjelvalta the really positive thing is the record nickel production that you see here. You see it down to the right, of course, is by far margin the best quarter ever. This is a combination of the fact that we have now gotten the expansion project that was done ramped up and it's working really well. We've also had quite good feed in here with relatively high nickel content that has also helped to bring this nickel in mat up very high. While nickel was doing good, we've had some challenges with the feed of copper in Hariyabata. We've had some unplanned maintenance that we've had to do there to be able to handle it and we lost production there. But then we also have an increased utilization rate in the tank house in in Harjavata because we do have some over capacity there or have had and we're taking now anodes from Rönnskär to Harjavata and thus the production of cathodes is very strong in Rönnskär the ramp up and production has gone very well of course the cell house is not producing it's down and is burned down I'll come back to that later but the rest of the operations have gradually during the quarter picked up to more or less full production of anodes and this you can see in the picture up to the right of course you see cathode production coming down as we don't have any cathodes coming anymore from Rönnskär it's only the Harjavalta cathodes that are shown there but if you look on anodes you can see a pickup again from the low levels in Q2 where we got more anode production now starting up in Rönnskär and in Harjavalta. So we feel good about that and we will start talking more about annual production going forward as that is also now a more relevant number for the total production level. In the zinc smelters, we've generally had good production. There has been some challenges with getting the right feed in there. There's been a combination of the fact that Tara fell away. And of course, you need to get replacements. You need to get a replacement of the right quality. We've gotten that, but maybe it was some delay. We also had a challenge that we had problems in the Panama Canal. Some things coming from South America. And we had delay of zinc concentrate deliveries during the quarter. So with that, I will leave it over to you, Håkan, to talk about the financial summary. Welcome, Håkan.

Thank you, Michael. And again, welcome. It's good to see you all. So let me dive in a little bit more and give some flavor on the financial results. As you've seen, we report an EBIT excluding process inventories of just shy of $2 billion, capital expenditure of close to $3.6 billion and a negative cash flow of $1.2 billion. Looking at this per segment or by business area, mines reached a profit of 750 million. That's clearly up compared to Q2. And this is due to reduced losses in Tara as a result of the current maintenance decision and also improved results in Garpeberg, Boliden and Kevica. On the smelting side, again, that's an improvement compared to Q2. We had some one-offs related to the Rönnskär fire, and we also had a quarter of heavy maintenance. And all in all, that adds up to 1,940. Looking at the changes quarter to quarter then and starting with Q3 of this year compared to Q3 2022. Prices and terms when you put everything together is more or less flat. We have lower metal prices but we have a stronger dollar and we have higher metal premiums offsetting that. In this of course we don't include the impact of the cost inflation that is further down on the chart. Volumes are down significantly. Out of that, a big part is explained by the current maintenance in Tara and the burnt down cell house in Rönnskär. Those two together makes up about 850 million Swedish krona quarter three to quarter three last year. And then grades represent 750 million krona here. Costs are actually lower than previous year. Again, Tara and Rönnskjer makes up a big part, about 300 million positive due to the care and maintenance decision there. But we also have lower costs for energy and consumables. And if you add everything together, purchase materials, when you look at the energy consumables and other purchase material, Inflation quarter three this year to quarter three last year is close to zero, which then of course follows a number of quarters with very high inflation. Moving on to a sequential comparison, Q3 to Q2. Again, relatively limited movements on the price side. We have a stronger dollar that helps us, but all in all, fairly small changes. Volumes are slightly down. Tara and Rönnskjer more than explains the full change. But apart from that, there are some moving parts. We have lower grades in Garpenberg. We have slightly lower mill throughput in Itik, but we have better throughput in a number of sites and we have a lower impact from maintenance stops. Costs, one billion down compared to Q2. Again, half of that amount is explained by Tara and Rönnskjer. And out of the remaining half billion, that is evenly distributed between a lower impact from maintenance stop, lower energy and consumable prices, and seasonally lower costs that we typically see in Q3. We also, in this comparison, have a positive impact due to the one-offs that we took in Q2. cash flow as you saw on the first slide minus 1.2 and that is a a function of of a high investment level uh and and an earnings level that is slightly lower working capital was fairly stable in the quarter as you know we had a challenging situation where material piled up in the big in in late q2 as a result of the fire in raja We have, and that continued in the earlier parts of this quarter, but towards the end, we've been able to release more of that as renters have picked up in production. So this minus 400 working capital here, that is basically a function of currencies and prices for those relevant products. All in all, inventories are still on an elevated level. The capital structure is strong. We have a gearing of 22% and we have a payment capacity of 12 billion. So we feel good about the balance sheet also in this period of high investments and unexpected events in Rönnskär. So good shape. And with that, I think, Michael, if you take the investments, right? Yes.