Boliden AB (publ)

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.

Thank you, Håkan. On the investments, we have spoken about 3.6 billion capex in the quarter. Otherwise, the expansions are on track. We are still working on the ODA to have it commissioned on the second half of next year. And we're still working on the 850 million euro budget. The ITGDAM project is also on track. And here, what is on track here means that we are able to do it fast enough so that we will not get any interruption and we will not have to stop the production in ITIC. That's working fine, although the project itself is going slower than initially planned, which in this case is good because we've gotten some other leeways. That means that we don't have to do all the activities as we thought until mid-July. we can probably work all of 24 to get them out. And we have thus reduced activities somewhat compared to original plans. The Revliden project is also on track. It has already started to produce from Revliden going through the old infrastructure. And then we are ready with the new infrastructure in Q1 of 25 for fossil free mining there. Now the four year capital expenditure, we are number one. We are repeating the 15 billion for the full year as we've had before. Just to get some flavor on that, that 15, given that we are now measuring this in Swedish krona, we have quite a lot of investments that are done locally in Norway, actually in Europe, because that's the base currency that we have there and also then in euros in Finland. So that 15 would have everything as equal just due to currencies would have been 16, but we have roughly 1 billion that we have pushed out. That's not been done this year or will not be done this year as originally planned. And a part of that is actually in ITIC. For next year, we are now guiding for $14 billion. We'll come to that in a later slide. And that $14 billion should be seen as $1 billion being pushed over from this year. And then, of course, also we will continue to have, and now we will take that into account, a worse currency situation than was maybe originally thought. So generally a very good situation in the projects. On Rönnskär, as I said before, I'm number one extremely pleased with how this has worked given the situation that we had in the end of last quarter. The transformation from selling cathodes to selling anodes from a commercial point of view has gone as smooth as anybody could have thought. We have basically managed to handle the fact that all of our customers who take cathodes don't get any cathodes anymore. We've been able to handle that from a customer relations point of view. We've been able to handle that sometimes buying cathodes and selling it to our customers to keep them supplied, sometimes helping to find other solutions without, I would say, any kind of big upheaval. We've also managed to find a new customer for Annos, which is a totally different set of customers, been able to build up a book around that that is stronger than we would maybe initially have feared regarding this. The redundancies will be there and redundancy negotiations with the unions are still ongoing at this stage. And we will come back once they are finished with more details regarding them. There is a loss of refining charges, of course. There's a loss of free metals with the commercial terms being different for selling purified metals. Premiums are also being lost. It's of course partially offset by lower variable costs, but that's all in all a negative, which is roughly 1 billion per year of Swedish Krona Wars situation in Rönnstrand compared to if you would have had a tank house. So about 250 on average per quarter. And the working capital level will also be increased all in all because of the fact that you don't have a situation where you can take an anode from the casting directly into a tank house next door and have very short delivery terms. Now we will have to store the anodes. The anodes have to be shipped. The customer who takes the annals might get a bigger shipment that they can feed right away and needs to have an inventory on their side. So there is naturally a bigger inventory in this supply chain and we will roughly carry a billion extra of working capital because of the new setup with the new supply chain. We are also having metal in the burned down tank house. We have as of end of Q3 not recovered any of that. We're still pretty confident we will recover all of that metal or at least enough metals on the book value so that we will be able to get that back without having any impact on our inventory valuation. So that recovery is starting Q4 and we hope to be done by the summer. It has turned out to be a from a occupational health point of view a quite difficult things to get into the burned down tank house to get all the half used anodes and then the half built up cathodes in place and then how to manage them to handle them and get the metal value out. And that's, of course, then slowly over time has the possibility to release some capital. The insurance claim is ongoing and it's going to be ongoing for still a while, but it's going very well. You know, it's no kind of strange discussions with the insurance company. We feel that they're done in a very professional way. The cap that we have in insurance is 3.4 billion Swedish krona. And since this is covering both the loss of property but also the business interruption cost, the hour cost will be bigger than 3.4. So we are very likely to get that money. However, timing wise, it is still unclear exactly when we will have the final deal with the insurance company. Feasibility study for a new tank house is ongoing. We started that one right after the summer. We have an ambition to finish this feasibility study by Q1 and then in Q1 potentially take a decision regarding a new tank house. But we cannot say anything about either the CAPEX level nor the timing of that until the feasibility study is done. Just jumping into more of an administrative point of view, we will have a capital markets update this time in what you can call a capital markets day light. It will be fully online. It will be in March of 24 and you have the date here on March 18 for all of you to mark in your calendars around that. If you then look at the outlook going forward, for 2023 in ITIC there is no change. We have the 0.17 that we have already guided for before. We are now also adding the guiding of 0.17 for next year, which I think is in line with what we talked about. In Garpenbury, the guidance for the full year is reduced from 3.6 to 3.3, but that's losses that has already occurred in the previous quarters with the lower grades. So for Q3 individually, there is no change around this. It should be around similar what we had before. For 24, we are now guiding for 3.5 and 100 grams per ton of silver. In Kivica, we are keeping to the revised guidance for this year as we gave last quarter of 0.25 and 0.18. For 2024, that will be increased to 0.28 and 0.20. In Tara, the care and maintenance cost of standing still is 13 million euros per quarter. as long as we're standing still there. We have for Q4 a very small maintenance shutdown, so about 30 million Swedish krona. And as we said, CapEx, we're repeating the close to 15 billion for this year. And we are now adding the 14 billion for next year. And I just gave some flavor of how that 14 billion is built up. We should also maybe also say, and I think we might get some question on that, in that 14 billion, we do not have a new tank house, partially because we have no clue what it's going to cost. And also, if it were to come to decision, we don't think it's going to impact 24 that much. The majority of the cost for a new tank house will come in 25 or later. So this is Boliden. We have a purpose to provide the metals essential for generations to come. And we want to be the most climate friendly and most respected metal provider in the world. With that, I think we open up to questions.

Ladies and gentlemen, that opens up our Q&A session post Q3 2023. And the first question comes from Adrian Gilani, ABG Sundal Collier.

Yeah, hello. Two questions from my end. First of all, after the Q2 report, you were fairly confident that sink grades in Garpenberg were going to be around 4% for the second half of the year. And now the full year is expected to be 3.3. Can you just give some color on what has changed between now and then?

Well, we have not been able to access some of the higher grade stopes that we would have put into the mix. And that is coming slower than we had anticipated. Therefore, we now are lower grades for this year.

Okay, and the second one from me is on the working capital release. You still have elevated inventories and some still stuck in Rönnskär. What kind of a working capital release should we expect for Q4?

I guess I'll take that. Again, it is a bit difficult to evaluate since we're still towards the end of the ramp up. Q4 is typically a strong quarter for us when it comes to working capital. Out of the metal that is stuck in the tank house, it's a pretty limited release in Q4. But we typically have, let's say, one to two billion release in the course of our normal business in the fourth quarter. I expect something similar this year. Thank you.

Ola Södermark, Kepler Chevreux.

Thank you. Coming back to Garpenberg, how confident are you that the grades are bouncing back now in the fourth quarter? Do you see it already?

Well, the fourth quarter is not that old yet. So it's a bit early to tell. But we do see that we are having, you know, we're more and more accessing the parts that we want to access. So yes, we have a good start.

Going back to Rönnskjær, at the last quarter the ambition was or the projection was that a new tank could be up and running during 2026. Is this still the ambition when you are saying that the majority of the capex are coming in 2025?

I think that we can still have an ambition that we get it up and running in 26. But as I said, we need to wait for the feasibility study to be done to be able to determine this timing.

And the costs, ballpark number, I know that you are having the upcoming feasibility study, but it's still 2-3 billion Swedish kronor or is it more?

No, I haven't. It depends on many things. It depends also how big we're going to build. Thank you.

Alexander Vival, Pareto.

Thank you. To continue on Rönnskjarp, given the performance in the anode sales now that you're up and running it towards the end of the quarter, has this in any way changed your view on anode sales versus cathode sales and impacting perhaps investment decisions concerning the tankhouse?

I mean, we are guiding for that with this setup, even though we think that we've done a very good job, we're earning a billion less per year. So that gives you a little bit of the kind of earnings potential of having a tank house.

Thank you. Also, when it comes to Tara, do you have an outer time limit when it comes to current maintenance in that asset?

Now, we don't have a specific end date. We, of course, know that if we were to stay too long, it will become more and more difficult to start again. But we don't have a specific end date as such that we have set.

Thank you. And just a final question. When it comes to what you see in the markets regarding zinc demand in Europe, can you say anything on that broader perspective?

Yeah, we can make a broad perspective. I think it's a good question. And we can say that even though we don't have any problems selling our zinc, because we can always find zinc customers or customers in general for our metals. it is clear that our normal industrials in customers are demanding less they are they are all you know more or less more as all of them are taking out less than they would normally do so if that is an indication of whether Europe is in the recession or not I think there's a good indication that Europe is in a recession because our customers as our custom base of course Europe we don't have really any any knowledge outside Europe thank you Victor trust and the Danske Bank

Thank you very much for taking my questions. Maybe first on zinc concentrate availability. Has this proven more difficult than you maybe initially thought given the closure of Tara? And just looking on the zinc smelting side, the zinc feed down in both Kokkola and Odda.

Well, you know, I'm always been on the point of view that zinc is available to anybody who wants to buy. This is a very freely traded commodity that you can always get a hand of. Now, if we do need to do things quickly, there were a couple of obstacles. One is, of course, that our own Tara mine was not producing. There are also quite a few other zinc mines in the world that have gone into care and maintenance. We are not alone. So that is playing on to it. And then on top of that, the issues in the Panama Canal is impacting this. We had one boat that came one month later than initially planned. It came up into the Panama Canal but could not get out because of low water situation. So all these things all in all meant that we could not feed exactly what we wanted to during the quarter. That is now already in place for next quarter.

And then also on the sync side, the Tara deep exploration stopped. Maybe I need to refresh my own mind, but is that what you have communicated previously also?

We said that last quarter as well.

And does that impact how you think about the timing of reopening Tara?

No, it does not really. The reason why we stopped that is, of course, one thing that it's a cost. But also when you stop Tara, that also means that the existing Tara mine will have, you know, longer life of mine and existing tailings facility will also last longer. So we have more time. So therefore, we're not in such a time pressure over Tara deep. And therefore, we decided to postpone that that cost.

And then just finally on my side, recoveries in Kvitsa, I think we touched upon that topic last quarter also. Nickel still at quite low levels. Is that a structural problem, or how should we think about that going into next year, let's say?

That's another good question, and the mineralogy in Kvitsa is tricky for many different reasons. It has to do with things like talk and things like... uh magnesium oxides and other things in there we are in areas that are tricky because of these these kind of disturbing elements if you want to use that term we are looking into whether we can do some investments to handle that better we're also looking into what it will be like when we go forward if we're getting out of some of these tricky elements So there is an insecurity regarding recoveries on the nickel line in Kevica, but we have good hopes that it can improve.

And sorry, just to follow up, but into next year, will you still be in the same phase of the mine in 2024? You know, we're looking at higher grades, of course, but... No, the pace will be very much the same.

We have a 10 million ton per year environmental permit. In the Finnish context, you can kind of go a little bit over that some years. So we had 10.2 last year. But over time, we cannot be more than 10 over time on an average.

Thank you very much. Any other questions here in Stockholm? Christian Kopfer, Handelsbanken, please.

All right, thanks for that. First, John Kivica, you are lagging quite meaningfully behind the mine guard there, you know, this year, next year. When do you expect, you know, average mine guard, let's call it that, to be realized?

Well, as always, sometimes over time, we don't really have the exact mind plan for 20 for 25 and forward is not yet in place. But of course, over time, we should get out what is in the R&R statements.

We don't have any mine plan for 2026.

We don't have an official mine plan and we don't have enough visibility to talk about that. We'll talk about 2025 later.

All right. On mill volume for 2024, you still expect that to be roughly 45 million?

Well, we expect it to be at 45 million pace in Q4. That means that we're not going to catch up the ones that we have lost.

24, I think.

Oh, so you said 24, I said 23. Yeah, yeah. No, no, for 24, yes. 24, yes.

Sorry, I missed a year. All right. And then for silver production, taking quite a lot of beating, you know, last couple of quarters. When do you expect that to be recovered? In the smelters, yeah. In the smelters.

That's mainly a Harjavalta issue. It's good to spot it. We think that that one can recover relatively fast. We are doing an investment in the precious metal plant in Harjavalta. And while that one's been done, we've had problems with the silver production. That one is coming online as we speak. And then we have an ambition to, of course, get silver out of the system. This is also part of releasing working capital to get silver out of the system.

All right. Thanks for that.

Harald Lundén, Lundén Asset Management.

I noticed that there are a number of huge projects going on in your area, be it green steel times two or north wall sets, etc. How much trouble does that create for you, if any, in terms of demand from labor, general inflation in the area, trouble to find apartments, etc.? ?

We do have a clear challenge, which is not really due to the produce you mentioned, but in the ITIC area and also, to some extent, in the Kivitz area, there is a clear demand for these kind of services that is bigger than the supply. So we are constantly working around getting subcontractors in place in those areas. In the kind of Skellefteå area, yes, there is a high activity with North Walls and others. That tends to affect us less because to some extent, yes, they're stealing our resources. I don't know what use that word in terms of mainly in terms of contractors that we use, but they're also attracting more contractors. So they are, in that sense, I would say balanced, on balance, not affecting us that much.

Okay, if there are no more questions here in Stockholm, operator, please open up for international questions.

If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Liam Fitzpatrick from DB. Please go ahead.

Good morning, everyone. Three questions from me. Firstly, just on strategy and CapEx, just interested in how you're thinking about this, because we've been in a phase now for several years where CapEx has been revised up quite materially, and now the group is delivering very limited free cash flows. So how focused are you as a management team on improving the cash flows of the business over the next couple of years? And then on 2025, I know you're not going to give us guidance, but I think it would be helpful if, can you kind of outline what CapEx would fall to if we exclude Ronscar and we also, you know, once you complete all of your major projects that are currently being built. And third and final one is just on Ronscar in terms of the inventory that's in the cell house currently. Can you put a value on that? Thank you.

I can start with the run share inventory. The value there that we have, which is the kind of normal running, which is part of the process inventory, is about 2 billion Swedish kronor in order of magnitude. About half of that is copper and around the other half is all other things that flows through a tank house. Regarding the CapEx numbers for both this year and next year, Håkan, do you want to give some light on it?

Well, I think we can start with a breakdown of 24. I think that will answer your question for 25 and onwards. out of those 14 that we have you know last year we talked about a split seven and a half seven and a half between ongoing capex and three big projects i take uh and and odda for next year there is close to six billion that remains in these three projects and that means that the remainder the sort of ongoing capex in that sense is just above eight billions In there the mine sustaining which is stripping in the open pit mines normal normal raising of dams adds up to about four and a half. So basically we're looking at at an eight billion run rate if you exclude these big projects. Then of course to that I mean there we do hope that there will be some additional projects for instance around tank house. I think that might give you a flavor on where we stand in that sense.

And I can also ask you a more general question, what's the focus on cash flow? Of course focusing on both costs and cash flow is extremely important, but the projects that we're doing, we're doing them because they have a very strong internal net present value and a very strong value creating. And we will continue to look for value creating projects going forward as well. And we will try to do them as we find them. So if you want to say that that's not the... focus on cash i wouldn't say so we have a focus on cash in everyday operations but we also have a focus on developing the business okay thank you the next question comes from daniel major from ubs please go ahead hi there yeah thanks uh for the questions

First question on the working capital. You mentioned you expect to release some working capital in Q4. Is there any way of quantifying that? And if we look into 2024, you will be targeting completion and ramp up of the order smelter in the second half. Will there be a working capital bill associated with this? And is this included in the... CapEx guidance? That's the first question.

Shall I take that? You can take the working capital release.

Yeah, the working capital. Typically, we release about one to two billion in the fourth quarter every year. And that's something in that order of magnitude we expect right now as well.

Yeah. And regarding now the working capital is not included. So the working capital increased due to increased sync deliveries and so on is not included in the capex.

Any quantification of what that might be or else equal?

no i i don't want to really guess on that one it all depends on lots of things that's uh i don't i'm not prepared to quantify that right now but but i think we can say that the main main working capital bill that we have in in the group is in the copper smelter side that's where you have the big values so okay thanks um and then uh second question um perhaps relates to the free cash flow um

Debate subject around next year. I mean if we look at your balance sheet now, you've obviously highlighted You've got 12 billion of liquidity, but your absolute level of debt is probably highest It's ever been your leverage point eight times net that EBITDA is I guess reasonably comfortable But we don't know where metal prices etc will go into next year is there a threshold leverage on a net debt EBITDA basis that you would see the regular dividend under threat.

I would say no. You're talking about the metrics that we don't really use because our EBITDA is dependent so much on metal prices. I wouldn't say that, of course, that that would never happen, but we are very far away from a scenario where regular dividends would be, or I'll put it this way, very far away from a scenario where we would change the dividend policy that we've had for many years and we feel have served us very well.

Okay, so you'd clearly allow net debt to continue to increase to pay the regular dividend? Yes. All right, thank you.

The next question comes from Amos Fletcher from Barclays. Please go ahead.

Yeah, morning, guys. Just a couple of questions. First one was just around the billion sec of working capital associated with the Anode business model. Where are we now in that sort of billion sec working capital accumulation? Second question was just following up on what Liam was asking around the breakdown of CapEx for 2024. You mentioned $6 billion of sort of large project spend in 2024. How does that number trend into 2025 if we ignore the tank house capex? And I just wanted to ask on M&A, obviously zinc price is pretty weak. My capacity is being closed. You've actually got quite a lot of payment capacity. Is that something you'd be prepared to look at at the moment?

I can take the, I'll leave the investment one for you, Håkan. On the working capital from the new business model in Russia, that billion is basically in place because we have set up that already. So that's not going to be negative in Q4. On the M&A side, not really much to comment apart from what we always say that M&A is not maybe a core part of our strategy, although we are quite willing to do it if we were to find good opportunities. And yes, good opportunities are more easily available, readily available at bad market terms. But I wouldn't really say anything more than that. We are constantly looking and we will tell you once we find something.

Okay, and then the question on working capital build and whether the extra 1 billion... The one I already took.

You took that, okay. The morning investment.

Okay, on the investment side, how much they will spill over to 2025 out of those big projects, they are mostly done. All that will be done, there will be some relatively small amounts in ITIC and Revaliden, but we're talking about significantly below half a billion SEK for 2025, for those three.

Thanks very much.

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

Thanks, Sam. Good morning, guys, and thanks for the call. I've just got three questions. The first one is just on that working capital release. We've been kind of guided to a working capital release the past couple of quarters that perhaps hasn't materialised as much as we'd have thought. So are you confident this time around that that £1 billion to £2 billion that you're guiding to release in Q4 is fair? And are you able to give us any kind of steer on any kind of working capital views as we move into 2024 as well, please?

That's the first one. If we start with the working capital side, I think what has been a bit difficult in the last quarter about working capital was to get visibility on how the fire in Rönnskär would hit. There were inventories piling up. There were new business model being created. There was an uncertainty on how much we would be hit in working capital and how much we would take in the EBIT side. So that was a difficult quarter to do. Right now, I mean, we've taken most of the effect from the Rönnsjö fire, so now it's more a matter of the regular business and how much we can release primarily in Harjavälta. I would say I'm about as confident as a typical Q4 for that. It doesn't take much to shift something over. We could have a very large amount in one vessel. If that is delayed, it would sort of shift a couple of weeks over a quarter end. So that's always a risk, which is kind of normal in our kind of business. But apart from that, I feel confident in that number.

Okay. And the 24th?

uh for 24 it is a bit difficult to predict i mean with that number we still have a slightly elevated number and we we for instance in in the in in the metal that is in the tank house we are just starting that recovery and it's a manual process getting the anodes and cathodes off uh for that from from that tank house And the timing is a bit uncertain, but we do have an opportunity to release about a couple of billion from that as well.

Okay, thanks. The next question is just on Garpenberg. Can you just give us a little bit more color as to why you're struggling to get into those high-grade stopes? And perhaps is there any more detail you can give us on the grade progression over next year? That's the second one. I've just got one more.

I will say that guide progression over next year, we have given you guidance for the full year and exactly how that plays into quarters is going to go up and down and vary. To give you a little bit of a flavor of why we are, there are two things in this. One thing that we did have earlier in the year, not now, but earlier in the year, we did have a breakdown of the hoisting up and back. That was part of the lower volumes that you saw earlier in the year. When that happened, we decided to go for quite a lot of spare stoves that we have relatively close to surface and truck the ore to keep the operations going. That ore has a lower grade and it then ended up on surface in inventory and we have fed it over time. We also had lower knowledge of the actual grade of those stoves than we would normally have or something that was planned to be produced. That's one thing. Then there's a second effect is that we have a few high-grade scopes down in the mine where we've had rock mechanical issues and we were waiting. Did you hear me still? Is the sound okay? Yeah, yeah. yeah where we are then um waiting to take those stoves because of rock mechanical issues the way that you know this whole pyramid of stoves works out in order to keep the the the stresses in the mine in place and we have decided to wait with them a little bit because of that and they will come so i don't know if i answer your question but those are the two main reasons why the grades have been lower okay that's helpful thanks and then the last one is just on the boliden area and

You haven't given us guidance in terms of grade there, but are you able to give us a bit of a steer on Ton's mind? You've got your new initial production from Roveleed and coming online in the fourth quarter. So can you just give us a bit of a steer on volumes coming out of that mind, just in terms of awe, and then we can take a view on the grade, I guess.

On the Boliden area, we usually don't say much more than it is. Normally, the mill is a bottleneck at the 1.8, or what is it now that we get through the mill? That is the point. So the volumes that we will get out of Revliden will be replacing other volumes that we have. It's not going to be a volume increase. It's more like a prolongation for the Boliden area. area just to have that in case in having that said and then guide guiding for grades in the boolean area is almost impossible because you we have so many different mines and so many different ore bodies within those mines that have very different grade profiles so suddenly in a quarter you can have high gold because you've done lots of kankberg or you could have a higher zinc because we win in some of those high stoves in in rienstrom or and so on so therefore on average it should be very much close to the rnr statement

Good stuff. I appreciate the color. Thank you very much for your time.

The next question comes from Johannes Grunzelius from DNB Markets. Please go ahead.

I have two questions. So Mikael, you said here you're hoping to sort of get most of this cap on the insurance for Ronscare, 3.4 billion. But you said timing is uncertain. Can you give some flavor on that? What do you expect, though, in terms of quarter or year when you can recover this money?

I think it will come during 2024.

Okay, 2024. Okay, that's fair enough. Then also the question on the grade progress. I appreciate you gave us grades for the full year. I know you don't want to go into the details, but Should we see 0.17 and I guess that's the sort of very bottom? How should we think about 2025? Just to give some color on that sort of change year over year.

I will refer you back to what we call the thick line graph of the last capital markets day, where you will kind of see, because we don't want to go in detail, but kind of 0.17 might be a kind of low point. It should not necessarily go so much below that. And that you could kind of look at the length that we're talking, maybe about three years, maybe a little bit more than that. And now we are doing our first year of that now in 20. in 23 and we are guiding for it in 24 and then maybe 25 could from that graph at least look that it will be similar before we start before we start heading north again yeah got you got you all right thank you those were my questions Anybody else out there? Operator?

The next question comes from Tyler Broder from RBC Capital Markets. Please go ahead.

Great. Thanks very much for the call. My question's on Roshari. I'm talking about the feasibility study there. Do you know when you have this point where you're able to announce the result of the budget? How are you thinking about that at this point? Thanks very much.

we heard you extremely poorly in the sand so the only thing that i could make out you were asking about when we will be able to have some more color on the on the ranger tank house new investment and i think the answer that is in q1 we expect to come back with an answer to that which will be both a just to put if you want some color on it but of course we're looking at is where exactly to put it We cannot put it where the old tank house was because that one is going to still be under, you know, recovery of metal and so on for quite some time. So we don't want to lose that time. So we're looking for a new place to be. We are looking at things like what size should it be? We have a much larger environmental permit in Rönnskär than the present. The present tank house was where the old tank house was. What's the appropriate size of it? We are looking to different degrees of automation. What is the appropriate degree of automation? And we're also looking into certain things like what about byproducts from electrolysis plants? How much should we have? What about copper sulfate? What about other things that we have not historically produced as much? All those things are issues that this feasibility study are taking care of. And that will come into then a number about what to do and what it will cost and what the timeframe will be. I don't know if I answered your question. I didn't hear much of the question, but I answered something.

Apologies for the bad line. Thank you.

The next question comes from Ioannis Masvoulas from Morgan Stanley. Please go ahead.

Yes, good morning. Thanks for the presentation. Most of my questions have been answered. Just a couple left from my side. First on Kivica, is the open pit now where you want it to be, or is there more work to be done with the rocket stability? In other words, is it realistic to expect something closer to reserve grades by 2025, or is it too early to tell?

It is too early to tell, but the pit is not where we want it to be. I mean, the grades for 24 are lower than we would have liked them to be. We still have issues with the pit in Kyrgyzstan, even though things are getting better.

Very clear. And then the second question around smelters and the Q3 operating profit, which was actually pretty strong. And when I look at the bridge quarter over quarter, you do indicate higher TCs and premiums. I find it a bit surprising on the treatment charges side, especially as you had to source more zinc concentrates from the spot market after this entire shutdown. Can you perhaps elaborate on this development and if there are any one-offs to keep in mind here?

Well, there is about 50 million of one-off in the premium side. We do have one contract with a true-up that comes in in Q3 that is not sort of ongoing business. 50 million, roughly. Apart from that, I don't think that there are any one-offs in the places that you talk about.

Okay, so given that now Tara is shut down, and I guess when you buy concentrates, you don't get anywhere near the benchmark terms, are we going to see more impact on the PCs in Q4? Or would you say that Q3 is the reasonable run rate for the rest of the year?

I think Q3 is a reasonable run rate. Great, thanks very much.

Operator, we have time for one final question before it's time for our president and CEO Mikael Staffaas to conclude. One more final question, please.

The next question comes from Krishan Ugawal from Citigroup. Please go ahead.

Hi, thanks for taking my question. I have two, if I may. The first question is on the tankhouse impact. Given the impact of around 1 billion annual impact, is there any kind of a potential for you to further optimize this 1 billion impact or to 15 million a quarter as you produce more from your other smelter tankhouses?

There is, yes, the one billion negative on Rönnsjö does have a, there is also a small positive on Harjavalta that we haven't talked about here. There's of course much less, but of course there is a positive, although small, effect on Harjavalta being able to run that tank house full, which we historically don't do because there's a little bit of an overcapacity. So yes, there is that. Apart from that, of course, we are always trying to work on the commercial terms and you know, we will see where they go. There are lots of things that impact commercial terms in the annual market.

I understand. And the second question is on the cost. I mean, the costs have gone down because of the TALA and no tankers working out. But then Håkan has commented that the cost inflation from the consumables and electricity have been close to zero. So is there kind of a fair assumption to see that the run rate of the cost in the Q3, which is significantly lower versus last quarter, becomes a kind of a normal run rate going into the Q4 and the 2024, or their cost can come down further?

I would say that there is one thing that's seasonal around that we have costs that are always about 200 million six lower in Q3 compared to other quarters. Otherwise, given the situation we have now with Tara in carry maintenance and Odda running, sorry, the Arantxa running the way it's running, this is a cost level that you can say is the basis for at least first half of next year before we start getting the Odda ramp up in place, which will of course also impact costs.

One additional comment on that is that in the quarter, we see a couple of hundred million negative impact from lower electricity prices and some consumables, which then compensates for a small inflation in other areas. And of course, the impact of electricity prices is always significant on our cost level going forward.

So it's fair to assume that electricity prices, which have been a headwind, probably will be a small tailwind going forward.

Well, it all depends on what you compare with. If you compare year on year, that will be a tailwind from energy prices most likely. If you compare quarter on quarter, who knows?

Yeah, I understand. Okay, thanks a lot.

Thank you very much. And thank you everybody out there who have been listening. And I would like just to summarize this, that I think that we've had a strong quarter. We've had a quarter where we have been able to continue our big projects according to time and according to budget. We also have a quarter where we've been able to stabilize and build a new business model around Rönnskär. We also have a quarter where we have gotten the nickel line in Harjavata up to full speed. Thank you all very much and I look forward to seeing you all again next quarter.