Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q2 2024 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. Good morning to all of you out there as well. Now the cameras think it's moving along as well. As I said, good morning to all of you from a sunny Stockholm. I hope that you're having equally nice weather wherever you are this morning. Let's jump into the quarter and look at the highlights of the of the quarter. And there's been lots of moving parts and many interesting things happening during the quarters. Let me try to jump into them right away. The big thing is, of course, that we've had a big one off insurance booking coming into our accounts of two point four billion related to the venture fire. We've also had improvement in the prices. We've had stable currencies and we've had somewhat of a negative development on the treatment charges. And we've had a very good production quarter in the smelters in general. We've had a big maintenance quarter and the maintenance activities have more or less all of them been on time and on budget, which is a big relief. And we're now set for operating for another year. We have only very limited maintenance left for the season coming into Q3. And we have on the negative side, low mill volumes in ITIC. Come back a little bit to that later. But in essence, we've had problems and issues with the ramp up of the Likavara satellite pit. And we've also had issues with the availability of equipment and to some extent competition between the project in ITIC and the operations for the hauling capacity that we have. In Galpenberg we're very happy we have record throughput production coming out of there. We've made a decision to reopen Tara and we've been handling lots of administration around the reopening of Tara in the quarter and getting a plan together and now we will ramp up in the sense of getting people back and getting people retrained during Q3 and then we will eventually see some production in Q4. Our key projects are all doing quite well. We have a very good development on the ITIC project, scheduled to land on expected budget and expected time by the end of this year, well in time for next year's dam raising season, which is then one that we need to make. Also, the Kristineberg Extension in Revliden is doing well. We are producing already from the Revliden Extension, but we're doing that through the old infrastructure. The new infrastructure development is well underway to get production coming through in Q1 of next year. In Odda, we are in a very intensive part of the project. We have gotten quite a few things done in the quarter. We have, for example, gotten all the infrastructure around the power, coming into the site that's all been commissioned. And we're now moving ahead with the different units for commissioning later this year and production by the end of this year. On the financial performance, we've had an interesting, very even number of 4 billion Swedish krona of profit, excluding the process inventory revaluation. We've had one-offs, which are almost 2 billion. In that, we have the positive from the insurance booking that's come to the P&L, and then the negative from the one-off related to the restructuring in Tara. We have a cash flow of 400 million positive despite the very intensive investment phase that we're in. Håkan will come back and talk about that a little bit more. And CapEx is moving ahead according to plan with about 3.7 billion in this quarter. The key projects, just an update on it, I spoke about the other expansion already and that we have the infrastructure in place, have all the power coming in and we're now starting to commissioning slowly the different parts and we're still also working on installations and it will be busy times towards the end of the year. Dam reinforcement in Aitik is moving ahead very well. The Christmas expansion is set very well. In the Rönnskär tank house, we have started the groundwork. Physical around this one is still very much on plan for production in the second half of 26. The Boliden area extension, we have started some groundwork there as well. And also there we'll expect to get production coming out of that by mid-26. And the Tara reopening, as I dwelled upon before, we have gotten a new agreement with the unions. We're implementing that agreement. We are starting in about a week. We will start getting the first people coming back and we will start a training program where people will be trained for their... At least some will have new work chores coming back. For those who haven't read the details, we will... reduce the workforce in Tara from about 600 people to about 400 with a slightly lower production. But this means that we also need to get the productivity increases to make that work and that we feel also very good about. On the ESG side, it's been a challenging quarter in terms of lost time injury and safety. We are, I don't know if we can say that we are any specific things to point to, but we are in a negative trend regarding that right now. We are, of course, working very hard to reduce this as much as possible and try to come back on track to get this one's number coming down again. We have CO2 emissions that look relatively high in a quarter, but this is a little bit of accounting in this because when we're doing the big ITIC project, there's quite a lot of trucking going in there and the trucking requires diesel and the diesel gets CO2, but it doesn't give any production as such. I think that over time there will be lots of discussion around how should we actually account for the CO2 from an investment project like that. But the way that it works for us right now is that it comes straight through as a P&L item, if you want to use that word, which means that we have high CO2 in this individual quarter. That should then be reduced once we're back again and done with the ITEC project. Sick leave, very much similar to what it's been for the last couple of quarters in the last year. It is still on an elevated level compared to pre-COVID. Here we are similar to the society at large where we are operating, where we do see higher sick leave ratios and we're working hard to try to get that back again also to the levels that we saw pre-COVID. On the market side, the base metal prices have been helpful to us and has been going up. They were especially going up in the beginning of the quarter. Nickel, not so much, even though nickel also went up initially. Nickel has come down towards the end of the quarter. And the way that we price in things with the mama effect, or I would say not the mama effect, but also the quotation periods with a very long quotation period on nickel, means that when we have negative development towards the end of a quarter, that also affects the total profit that we can report to the P&L for that particular quarter. Precious metal prices are nice and doing things that are good for us. So that's helping us a lot, whereas the PGM, which is also an important revenue base for us, are weaker in this one. There are weak spot TCs. As you know, we are not that exposed to spot TCs. It's there for a part of our mix, but we have mainly benchmark TCs in the way that we operate. But we have seen some negative development from this in the quarter that also comes a little bit into our numbers. And then we have a slightly weaker Krona compared to the previous quarter. If you look at where we're standing in the industry compared to where the cash costs are, if you start from the left in this chart, you see that copper is actually performing very well. We have a price level that is way beyond the cost level in the industry. Everybody in the industry more or less makes money at these levels. And you can also see there's a relatively good cost discipline in the industry. Cost levels are relatively flat towards the end here. That's a little bit cheating because the gold price has gone up and there are many copper mines with gold credits, which means that actually costs should go down. And that we see on the zinc side where we have costs coming down quite a lot from increased silver prices that comes as a negative and reduces costs down. But also the lower TCs also plays in. This is a miner's point of view on where the costs are. You can also see that the zinc price has come up and is now at somewhat decent level, and it's coming above the cost curve compared to where we were earlier in this year or last year, but nowhere near to where copper is, which means that I would say that there is an upside risk on the zinc price, whereas you could argue that at least short-term there could be a downside risk on the copper price given the relatively high margins that there are right now. Then looking to the right and looking at nickel, we have the biggest challenge, I think, for the general industry. You can see that nickel prices are now on levels where there are lots of people in the industry that don't make any money. There are announcements that nickel capacity are being withdrawn. At the same time, everybody wants nickel for the electrification of society going forward. This is a little bit of an enigma for everybody to understand how this will work out as we move forward. If we then look at our numbers, we can say that on ITIC, we had a low throughput of about less than 10 million tons in the quarter. We had a slow ramp up, as I said, in Likavara. We've also tried to put automated hauling system in place in Likavara. It's a very good place to do that in principle, but we had some teething problem in getting that to work. We've also had lower equipment availability than we would like to have also in other parts of the mine, which has been part of the challenges here. The copper grade is at 0.17, which is around what we have guided for. And as I said last quarter, I hope that the 0.15 that we had then will be the lowest in this kind of cycle. And it feels good that we're now up to at least the decent levels. But as we said, as we come over the next few years, we should see that climbing up slowly. Carpenberg, record mill volume. Very proud about that. We've had good trimming of infrastructure in general to be able to achieve this. The zinc rate has been slightly lower than was guided for. This also then should come up a little bit towards the end of the year in this situation. Inkevitsa grades much better than last year, but you remember the issues we had last year and in line with what we have guided for, mill volume in line with what we typically have for a quarter like this. Boliden area has had a very strong production, especially strong gold production and a favorable ore mix coming out there. And Tara was in care maintenance for this quarter. On the smelter side, we've had maintenance stop everywhere except in Odda, which of course plays into these numbers. The maintenance is this year, it's not a super maintenance year this year. It's actually lower than the average maintenance if you look on a cycle, but it has been for different reasons very much concentrated to Q2. And therefore we are, apart from a little bit of maintenance in Odda, we're done with a big part of maintenance. In Rönnsjö we have improved the feed and the copper anode production has gone up in a quarter. In Harjavata, we've also had a very strong nickel production where we've gotten improved process stability coming out of that one, also good copper production coming out of there. Kokkola has also produced strong and according to plan without any major issues. The challenging part is all that, but it's related to it's not that easy to operate a zinc smelter when you have a major project going on at the same site at the same time. Comparing to last year, you also know that we have taken, as part of the other project, we've taken tank house four out of operation. So we are down in tank house capacity while we're waiting for the new tank house six to get into operation as well. Bergis has also had a maintenance stop and has also worked out well according to plan. With that, I'll leave it over to you, Håkan, to go through the financial numbers.

Thank you, Michael, and good morning. Well, as you have seen, we have reported an operating profit excluding process inventory of 4 billion. That includes 2 billion one-offs. That's insurance income related to Rönnskär, and that's restructuring in Tara. Both of them have been covered in press releases during the quarter, and there is also some more detail in the report in case you want to go into more detail about that. It's also worth noting that the operating profit, including process inventory, is $4.8 billion. we have a significant positive contribution from from process inventory this quarter as you might recall from the year end we have increased the process inventory not least because we have taken in more precious metals in the feed and have a higher amount of gold in the process inventory and that adds to to the result this quarter capex 3.7 in line with with the fully guidance Free cash flow is 400. Now that includes 600 million insurance proceeds, but it's also an improvement of the operational working capital that is coming in there. Earnings per share 13.20. A significant part of that is of course related to insurance, but nevertheless a strong number. Looking at the profit by business area, we can start with mines, who report a profit of 1.1 billion. That includes the restructuring of Tara, which is just above 30 million euros, so 350 million SEK. It's an improvement compared to both comparisons periods, primarily due to the recovery of metal prices that we've seen over the last quarter. sorry going back looking at smelters and there we have a profit of three billion and therefore that of course includes the um the big insurance income uh if we back out the insurance income the result is slightly better than the last quarter it is better than last quarter which as you recall was impacted by by political strikes in finland It's slightly down compared to last year as a result of lower benchmark TECs and metal premiums. And going into the deviation analysis, there will be a lot of moving parts, as Michael talked about. There is insurance, there is restructuring, there is care and maintenance. Last quarter, we saw the strikes in Finland, prices have moved and so on. I don't think there should be any surprises in those areas, but you will also see that ITIC had a weak quarter. But let's start by diving into the comparison of Q2 of this year, this quarter, to Q2 of last year. Profit has moved from about 800 million last year to 4 billion this year. Higher metal prices contributes. That's primarily zinc, copper and gold. It is though partially offset by lower benchmark TCs and lower metal premium. Volumes are up and this is largely internal profit this time. As you recall, in Q2 of last year, we had just had the fire in Rönnskär. Inventories piled up, and we made quite large internal profit elimination that had a negative impact on that quarter, comparing then to Q2 this year, where we have a positive impact and have released inventories. Apart from that there is of course a negative impact from Tara being in care and maintenance and Rönnskär after the fire and a weak water in Aitik. But year on year that is largely compensated by better production in other units. For instance Boliden area, Kevitsa and also Härjevalta. We have Well, some saving on costs, we have depreciation pretty much in line with last quarter, and then we have the big impact for the one of items that I just mentioned. Looking at the sequential comparison instead, we are moving from 1.2 billion to 4 billion. Again, prices are up. And as a reminder, when we have higher prices, that means that we eliminate a bit more on the internal profit side. So that's on the negative side. And we also see a negative impact of lower benchmark TSEs and premiums, the full quarter effect on that. But net, there is almost a billion contribution from better prices. Volumes are up despite the maintenance stop that we've had in smelters in this quarter. So smelters are improving and that is of course largely due to the fact that Q1 was impacted by strikes and also severe winter conditions. Mines, on the other hand, are slightly negative on the volume side, and that's primarily due to volumes in the open pits, primarily ITIC, that came in lower than the last quarter. Costs are up compared to last quarter. Half of that is in smelters and the other half is in mines. In smelters, the main explanation is the maintenance stop that we've done. And in mines, we have had higher costs related to the issues that Michael talked about in ITIC. Looking at the cash flow then, I'd like to start to talk a bit about how the insurance proceeds affects the cash flow side. We have 600 million payments received in a quarter. On the first line here, we have 2.4 from the income statement, 2.4 billion. 600 million of those flows down all the way to the free cash flow, and then we have a negative of 1.8 billion in the working capital, which is then the receivable on the insurance company. So it is a clear improvement. The insurance proceeds of 600 million is one part, but also backing out the insurance effect on working capital, it is a good development in the quarter of the operational working capital. And we've also seen a normalization of the paid tax that was unusually high in Q1. So a good development in the cash flow. Looking at the capital structure, I think the main difference is that we've increased the net debt by 2 billion, and that is entirely related to the dividend that was paid out during the quarter of 2 billion Swedish krona. Apart from that, this is fairly similar numbers and a healthy net payment capacity. So with that, I hand back to Michael.