Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q4 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 where we will start here in Stockholm. Mikael, welcome.

Thank you, Olof, and good morning, everybody. I would like to start by actually talking not about the last quarter, but about the last 100 years. As most of you already know, we are celebrating our 100-year celebration this year. Our official birthday, if you want to use that sentence, is actually in December. So we're not quite 100 years yet, but we're going to take the opportunity to celebrate this the whole year and maybe to then top it off with a big celebration in December. We are quite proud about the history that we do have. how we've been able to, during these 100 years, be very much a part of developing the societies where we are active. So with that in mind, let's talk about also the very recent past, about the last quarter. The key highlights is that if you compare to last year, of course, the prices and terms are quite a lot weaker. We'll come into more details around this, but it's especially zinc and nickel that is weaker. It's also weaker sequentially compared to a previous quarter. We are to some extent saved by the weak Swedish krona for the Swedish operation, but the euro is relatively strong compared to the dollar. So there's no help in the euro-based operations that we do have. We have lower volumes in Rönnskär but that's in line with what should be expected given that we do operate without a tank house and the operations in Rönnskär you can see is now in a full mode given the fact that we don't have a tank house as operational. We had no production in Tara due to the care and maintenance which has also been well communicated beforehand. You can say we have a stable production in all of our mines except Aitik where we did have an unplanned maintenance stop that caused a stop in one of the mills for several weeks. That is now solved and it was also communicated well in advance. We have a strong production in Finland and our finished smelters, Harjavalta and especially Kokkola, has had very good quarters. Our projects in Odda, Kristineberg and Aitik are progressing well, especially Odda. We are into the peak, if you want to say so, the peak timing where we have the most people working on site to get ready for the start later this year. We will come back to all these three projects in our capital markets day that we will have in the end of March. The financial performance, a little bit more than 2 billion Swedish krona in EBITX peer. The free cash flow was good, 1.6 billion Swedish, despite having record amount of investments. We're still in a positive cash flow territory. The board has also proposed a dividend of 7 krona 50, which is very much in line with our dividend policy of one third payout ratio. As I said, if you look at the development, we have a little bit kind of a fun fact that we actually happen to have exactly the same profit in our two business areas down to the million Swedish krona of 985. But all in all, a little bit more than 2 billion profit, including Expeer. The sustainability numbers, if you look just at the quarter, may not look so impressive. We have a slightly higher LTI frequency than we had the same quarter last year. We have a slightly higher sick leave than we had the same quarter last year, and we have slightly higher CO2 emissions than the same quarter last year. However, when we look at the whole year, as we're also, in combination with this, also summing up 2023 as a whole year, We will have record low LTI frequency. We will have a lower sick leave than we had last year. And we have clearly lower CO2 emissions than last year. So we are, even though the quarter itself was higher than last year, the full year was pretty good. The market developments. I dwelled a little bit on this in the beginning. This lower zinc and nickel prices that are of course the most prevailing ones. And I'll come back and show this in a little slide forward here. We also have weakening spot metal premiums, weakening spot TCs and weakening sulfuric acid prices on spot level. These things only come into our P&L a little bit slower. because we also have some of these on long-term agreements, but it's clearly a sign that there's a weakening general industrial cycle out there. The currencies are slightly weaker for us if you look on this sequentially. If you look at the prices, and here you can take, if you start to read this one from the right, you will see that the nickel price is on a record, I would say record low level, even though it has been lower previously. But if you look compared to the cost curve of nickel mines in the world, it is on a low level. And we are clearly seeing this around ourselves, that nickel mines are having a big problem. We could have a long discussion about where the nickel price is going. Of course, nickel has come from a time when the electrification and the EVs were going to use so much nickel and need so much nickel that the prices went very high. Now there's been a clear setback in these expectations. It is pretty clear that nickel price cannot stay on these levels if the nickel is going to be used in any substantial way in electrification, because at these levels, of course, no new mines will ever be started on nickel. And of course, this also hurts us relatively clearly since we have relatively long what we call periods for quotation, means that we have long periods where we have to have definitive pricing on this. On the zinc side, we also have low prices. And you can see here that the prices have come down and are on the lower level. And we're also down into the cost curves on zinc, which is obvious. It's not just us in Tara. There are many other mines around the world that are in care maintenance or curtailing production. Zinc is, of course, very dependent on the general economic development and construction around the world. And that is seeing here, we're taking a hit on that on zinc. Copper, the situation is much more, if you want to say, so normal. The prices have come down a little bit over what's been in the last few years, but it's still on a relatively good level. We can also see on copper mines where the demand is relatively good that we also see an increase in the cost for the high-cost mines in the world, which means that the margins are not so big as they used to be for the high-cost mines in that space. When we look into the mines and the mines production, the volume in I think were lower than they should have been, or they should have been, or that you might have anticipated had you not seen the notion that we did have a break in one of the mills that led us to have a unplanned maintenance stop in one of the two primary mills. We've also had during the year a little bit of adverse weather effect where we didn't have ventilation the way it should be for several days in the pit. The grades came in exactly where they were a year ago and also exactly as they were guided for. In Garpenberg, the middle volume slightly higher than last year, the grade slightly lower than last year, but I would say both the volume and the grades very much in line with what we had guided for. Kivitsa volume is very much in line with the 10 million environmental permit that we have in Kivitsa. The grades are slightly lower than last year, but on a relatively okay level. Boden area produced well and Tara was in care of maintenance. On the smelter side, in Harjavata, we had especially strong nickel production. The second quarter in a row with very strong nickel production. We had also in Harjavata an increased utilization rate in the tank house because Harjavata is now receiving anodes from Rönnskär to be able to fill the capacity to the full extent. We had a weaker silver production in Harjavata, but this is also part of the optimization between Harjavata and Rönnskär. where lots of the slimes contained lots of rich and silver, went back to Rönnscher for being treated in the precious metal plant in Rönnscher. Rönnscher, of course, had a full quarter of not operating with a tank house. The annual production was ramped up and the precious metal production was also ramped up and back to the levels that it can be given that we don't have a tank house. Coca-Cola, very stable and high concentrate feed throughout the quarter. Record production of silver coming out of there, which is all good news. Oda had an unplanned shutdown in the roaster. We also shut cell house number four permanently. This is part of our developments in Oda where the new tank house number six will replace tank house number four. So we took tank house number four out of production already at this relatively early stage. And in Bergse, our smallest units also had strong production, also had favorable mix of materials that helped them to get good results. Full year, adding up the four quarters of last year in total. Yes, we have lower volumes in both business areas. We have lower grades. This is about two and a half billion out of that reduction altogether. Out of that, you can say that at least one and a half was very well guided for beforehand with the lower grades in ITIC. One billion is maybe more related to Kivica, which was not that well guided for beforehand. Tar is in care and maintenance. That is an interesting one, how that one works out. But when tar is standing in care and maintenance, we are not producing because of bad zinc prices, but it comes out as a volume effect in our bridges, the way that we account for it. That's a philosophical discussion, but that's the way that it's reported. We had a fire in Rensselaer that took out, and you can say both of those took out maybe half a billion each around that. We had a high inflation, especially in the beginning of the year. Now, towards the end, we are more or less facing zero inflation. But if you look at a total year, that's part of it. We had weaker prices in terms of, once again, the zinc and nickel that has been the main parts of this. We've had also weaker byproduct prices. PGA metals are down, although stronger premiums and TCs helped us a little bit on this one. On the CapEx side, 15.5 billion for the full year, more or less in line with what it was guided for, mind-sustaining, F3.5 of that. The other expansion, which is achieving scale, digitalization automation. with a total capex of €850 million. As I said before, we're having good progress. Actually, I would say maybe theoretically a little bit before time schedule even. But we are in the very peak part of this. We have 1,000 persons on site working with the installations. So there's lots of things that are happening right now. We will come back more in detail on all of these projects in March, and we will be able to give a better estimate of the exact time timing and budgets around them. The ITIC dam project has also worked well during the year. As I think I said last year, we at one stage said that this has to be finished by May 24 or we will have to shut ITIC. We have through different measures been able to buy ourselves some time. So compared to the very initial time plans, we are on purpose a little bit late. We still need to be done with this through the year. We've given ourselves a full 24 days And we're well on track with this revised time plan. The Kristineberg mine expansion is also moving on well. Production has already started. We're starting producing through the old infrastructure. The new infrastructure, which would mean the fully electric mine with the electric trolley and the new haulage system, is still on plan for start in the first quarter of 2025. So mine, so the full year, yes, lower grades, lower price and terms, lower mill volume in the open pits. We have not been able to repeat the high levels of 22 in 23. We had tar and carry maintenance and we had on the positive side a new annual record for throughput in Garpenberg. You can see that ITIC, we can see all this come down, but it was really clear. You see most is the fact that Kivica for the full year is basically just breaking even. This is a, as once again, the situation with the low nickel prices, it's difficult to deal with this. You can also see the loss that we have in Tara. This loss would, of course, have been even bigger had we continued to produce and not gone into care and maintenance. If you look on the smelter side, yes, Rancho is, of course, the big disappointment. I think I said half a billion on the last slide. I meant one billion down, and that's what you see here. You also see Haryabata coming down from a very strong 22. Kokkola has had a very good 23 instead. Oda around the same. And Bergsjö, even though you see that there's very small numbers because it's a smaller unit, but Bergsjö had a very good year and very good developments in total. Let's see if we get this one to move ahead. Exploration. We're also today coming out with our R&R statements. Around these, you can say that generally we are saying that we're having a good development in the Nauton and project close to ITIC. We also have good exploration results and good developments of reserves in the Bulletin area. Regarding ITIC and Gartenberg, you can say, is not so much news. These are long-life mines, and we are moving around a little bit with cut-off costs and everything else. This has made the slight extension of IT and a slight reduction in Gartenberg. It's not really something that is making too much of a difference. The negative news here is Kiewitza. One part is that we have now given the examples from this year, but we have a larger waste rock dilution than we had in original plans. That also comes through into the research statement and we do have the slower grades in Kivisa than we have announced before with the higher assumed waste rock dilution. It's also formally a shorter one because we due to regulations around dam structures and everything else, and exactly what kind of permit you need to have to be able to call something a reserve, as opposed to a resource, has meant that we have officially a shorter reserve life. We are not too worried about this. We think we will be able to sort out the environmental permit for an extension, but this is the situation right now. So if you look at the numbers, as I said, I think not much of a difference. The same grades as before, Bulletin Area, and now two years longer than it was before. Reserve grades also similar. Gartenberg has officially lost a year, but this is more due to optimizations around the cutoff grades. Tara, we have no new update because of the care maintenance situation. We have not been able to update the situation. So this is exactly last year's number minus the production that we did in the early part of the year. And Kevitsa does have a lower grade. and now in the reserves as compared to before. And we have, as it looks here, lost a year of production. But as I said, this is due to around exactly what the environmental permit discussions are around raising the dams in Kevitsa. On the resources side, without going too much in detail, you can say that generally speaking, this is looking relatively good. And you can see right down at the bottom that in Kivica, we're getting all those tons that we lost in reserves are coming back into resources. It's the downgrading because of the environmental permit that is the result of that. On the financial side, Håkan, welcome.

Thank you, and good morning. Good to see you here. So, you want to bring it? So we are presenting today, as you have seen, a result with an EBIT of just above 2 billion Swedish kronor, which is slightly up compared to Q3, but down compared to last year. Michael talked about investments and a high activity level in most of our, all of our key projects. And at the end, it's positive to be able to report a good cash flow. at the quarter where we also have record investments. All in all, it adds up to an earnings per share of 6 krona and 6 öre. By business area, Michael talked about both business areas delivering 985 million Swedish kronor. Both are coming down compared to last year, where both also had similar results, about 1.5 billion. Comparing to the last quarter or the last couple of quarters, there are slightly different trends, though. Mines are improving, and they are improving in spite of weaker prices in nickel and zinc, and that is due to grades coming up a bit. We have also been successful in releasing gold inventories from, in particular, the Boliden area mines or plant. And then we have a one-off insurance compensation recorded, which is related to an incident in 2021 in Tara. On the smelting side, we are reporting a lower result than last quarter. That is related to lower prices, which we can feel, and it's also related to seasonally higher costs. Going into the analysis of EBIT Q4 this year compared to Q4 last year. As you can see, we are down about 1.2 billion Swedish krona between the quarters. Prices have come down. Half a billion is in there. It's primarily nickel and zinc, but also sulfuric acid has come down. And on the other side, on the positive side, we have seen higher premiums and treatment charges. But the net effect is half a billion compared to the same quarter last year. And then you can slice this in different ways. But if you combine volumes and costs together, we have basically lost 300 million each in Rönnskär and Tara. So adding the price drop of 500 million and then 300 each in Rönnskär and Tara, that explains the deviation. But if we go through this analysis line by line, we are one and a half billion down on volumes. About half of that is Tara. And if you add Rönnskär, it's about 75% of that number due to the fire and care and maintenance then. And then... Then the rest is the unplanned maintenance that we had in ITIC in the last quarter. Then Michael touched upon the philosophical question there, so I'm not going to dive into that more, but even if the reason for the current maintenance in Tara was completely a crisis, the fact that no zinc comes out of the mine is in this context reported as volumes. On the cost side, we are half a billion better than the same quarter last year, and that is entirely up to Tara being in care and maintenance and having lower costs. Inflation in the quarter, as we see it, it's sometimes a bit difficult to measure shorter periods like a quarter, is about zero. There is a slight increase in services and personnel, but at the same time, energy and other is coming down. We also had about 120 million positive impact from one-offs in the quarter. That is an insurance compensation that we got related to the flooding in Tara in late 2021. And we also have some costs related to restructuring in Rönnskär and asset rights in Odda. So that's 120 this quarter. Then we had a negative write-down Q4 of last year of 260, which was related to exploration rights. And then the difference between the two is 380 here. Sequentially, the movements are slightly smaller. We are a little bit up in spite of prices coming down. There are small movements on the pricing side. What we see here is mainly an effect of negative currency development, and that's mainly Swedish krona having a negative movement compared to the dollar. Volumes are up. We have reduced inventories, mainly gold. I would estimate the impact of that inventory reduction to be about close to 200 million in the quarter. We have higher grades in mines. And we've had higher feed in smelters. In Q3, Rönnskär was still ramping up after the fire. And in Q4, it's running well according to the new business setup producing anodes. Cost is up. We do have a seasonal increase. Q3 is a cheap quarter due to a lot of staff being on vacation. And Q4 is more expensive. And in particular, as we have ramped up the production in Rönnskär, that has an impact on cost. And here you can also see the 120 one-off star with the main insurance payout in Tara. Cash flow, we have a cash flow of more than 1.6 billion, so it was a good end of the year in that respect. It's down compared to last year, which is not a surprise given the price development, the result development and the high capex. But we're happy to have released about 3 billion of working capital in the quarter. Those of you that have followed us for a while knows that there's some seasonality in this. We typically have a good Q4, and then it swings back a little bit into Q1, so I think that's to be expected this year as well. Then on taxes paid, there we have... one-off payments, return payments from tax authorities of about 300 million krona that will be flowing back in Q1. So there is a one-off positive in here of about 300 million. I'm not going to go into the technical details of taxes, but it's related to preliminary tax payments being adjusted between legal entities and then some falling before the year end and some falling after. So expect this to catch up a bit in Q1 on cash flow. Capital structure, well, strong balance sheet, happy with that. Net debt to equity 19%, which is a healthy number. Net payment capacity of close to 15 billion, so we feel well positioned when it comes to the balance sheet. And finally, for those of you that are doing detailed modeling of us, we have updated the process inventory volumes. Process inventory is the tons of metal that is tied up in the production processes in our smelters. This is material that is not hedged and that is then revalued every quarter on the income statement. And that is what shows up as the difference between EBIT excluding process inventories and the regular EBIT, if you like. There is no cash effect in this. So for those of you modeling, you can see the new tonnage here. And it's an updated view depending on our current metal flows. So with that, Michael...