Boliden AB (publ)

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.

And I will just very briefly touch upon two short issues. First of all, we have a Capital Markets Day that we have now scheduled for March 18 to 19. And we will have the actual presentations in Bergen in Norway. and then build that then with a excursion to the Odda smelter and you will get to see there will then will be the newest brand newest probably most cost efficient zinc smelter in the world around that save the date there will be official invitations coming out in September On the outlook side, it's very simple. There is no change. The CAPEX guidance remains the same for the whole year. The planned maintenance is basically all done. There is about 50 left that is coming now in Q3. operating profit will be slightly worse for Q3 and Q4 since we're taking in people and starting to deliver get costs that we don't have the same revenues for until the revenues start coming a little bit in Q4 but mainly in Q1 and there are no changes to the guiding regarding grades. With that, I think we will open up for questions. Let's see who will be first.

Mikael and Håkan, two questions. The first one on acquisitions. Do you hear me?

Excuse me, do you hear me? We've had some issues here, so we didn't hear the beginning of your question, so please start over again.

Okay, can you hear me now? Yes. Okay, so two questions. The first one on acquisitions. Just be great to hear your latest thinking. Are you actively looking at opportunities to add additional copper or zinc mining exposure? And do you think you've got the balance sheet to do deals at the moment? And the second question is on ITIC. We haven't seen the asset operate consistently at that 45 million ton per annum throughput target. I think the last 12 months was around 40 million tons. So looking ahead, what do you think is a realistic annual average level for that mine? And if it is still 45 million tons, what's going to get you operating at that level consistently?

Thank you. If I start with the second question, it is a good observation that you're making and that we've had challenges with ITIC. And of course, It hasn't been helped by the fact that we have a big 5 billion project going on at the same time, to some extent competing for resources. We've also been ramping up the autonomous hauling system that we also need to get in line. So our ambition is clearly to get to the 45 million tons. It might not come directly now in Q3, but as we move in further around, we should be able to get the autonomous hauling in place and we should get less competition on trucking capacity from the project. That should make things become better as we move forward. Regarding M&A, nothing has changed. It's the same thing. M&A has always been an option for us. It hasn't been needed. It's not that we need M&A to make our strategy work. It's not that we are too small in any sense, the way we're standing. And I'll leave that with that comment.

Okay. So just to follow up briefly on ITIC, is it from 2025? you'd be more confident that you can operate at the 45 million ton level?

Yes, we will feel more confident as we get to 25.

Okay, thank you.

Please state your name and company. Please go ahead.

Yes, hi, this is Adrian here at ABG. Two questions from my end as well. First of all, You mentioned you received 600 million in the insurance proceeds already. Have you received any more clarity on the rest of the payment timeline? And also, if I remember correctly, you still have an outstanding claim of 1 billion for Rönnskär. And what's the status on that as well then?

Shall I take that? You take that. Well, if we start with the primary insurance that we have taken to the P&L... Basically, the insurance proceeds will follow the spend in the rebuild project. An indication, which is also then connected to the speed of the Rönnsjö project, is that we'll get about 200 million per quarter for Q3 and Q4 of this year. So that adds up to one billion for the full year, and then the remainder will be fairly evenly distributed between the quarters next year. Again, depending a bit on the project span. Discussions are ongoing with the secondary insurer, where the obligation sort of kicks in when the primary insurers have been fully used. I think we're confident about that, but there is some time until we can come back with more information and P&L bookings on that, so we'll have to come back to that.

Okay, I understand. And my second one is regarding the Pushback 5 decision in Kevitzheim. It's next year that that decision is supposed to be taken. And presumably on the current nickel price levels, that might not be viable for you to invest in. So can you talk a bit about roughly what kind of a nickel price you would need to actually take the investment decision for Pushback 5?

You're absolutely right that the nickel price is extremely important for the Pushback 5 decision. Exactly what we need to put as a long-term price is something that we will... look upon but we will use in our calculations the long-term prices that we have and they are published in our in our annual report but of course we will look into adjustments of that before we make a potential decision we are also looking into and and you know this that for different reasons it would be good to make a decision next year because it makes things a little bit smoother But it's not that we absolutely have to make the decision already next year because we could scale down a little bit and then scale up later if these things come to fruition. And then, of course, when you're doing these things, there is an environmental permit linked into this because we will need a new tailings facility and all these kind of things that are played into this part. So I suppose the short answer is. We'll come back to you regarding the exact nickel price we need once we are close to making the decision. We will try in the meantime, especially with the nickel markets being where they are, try to postpone the decision further out if possible and try to smoothen out things in other ways anyway. And also we need to work on the environmental permit in parallel.

Okay, perfect. That's clear. So that's all for me. Thanks.

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

Yes, good morning. Thank you very much for the presentation. A few questions from my side. First, on ITIC, can you talk about the ramp-up issues at Liccavara and the lower availability during the quarter? And to what extent have these been resolved going into the second half? Second question around the ODAS smelter expansion, do you have good line of sight and concentrates availability at this stage and have you secured sufficient material for the expanded footprint? And then lastly, the report DPS includes the 2.4 billion SEC insurance income and potentially more if you do get the additional 1 billion. insurance will this form the basis of the dividend calculation for the full year? Thank you.

Let me take this one a little bit one by one. I can start with the last one. You're absolutely right that according to our dividend policy, the proceeds will book into the bottom line and thus becomes the basis for paying dividends. We do not have any decision or any discussion so far to deviate from our dividend policy, although this is, of course, subject to discussions as we come to the end of the year. But But I would say that the basis is not. You can say that you as a shareholder got a lower dividend last year, even though you had the accident, but you did not get the benefit of the insurance then. Now you get the benefit of the insurance a little bit later. So I would say that our plan A is clear that it's a part of dividend payments. all that concentrates we are we have a very good and balanced book for for other concentrates going forward and no big challenges at all apart from that of course if you talk to some commercial people you know trying to balance a ramp up curve is always a little bit of a challenge but it looks it looks quite good and i take and what to expect and how to get further into the to the looking forward i can just say that we've had a number of issues in the quarter in Itik, some of which should disappear relatively quickly, some of which will not disappear right away. I talked about the ramp up in the Likavara satellite pit. That has to do with some rock mechanical issues getting through the first benches. That is typical when you open a new pit that you get problems in the first benches. That should come out relatively quickly. We have, as I said, decided to try to get the driverless, the autonomous trucks working on the Likavara transportation. This is a three-kilometer transportation, very good for not having drivers sitting on a relatively long distance. We've had some teething issues with that that we're working through that should be able to be sorted out, but it might take a few months. It could affect Q3 as well. And then we've had some general both availability issues and competition issues between operations and the project. And as the project finishes towards the end of the year, those competition for resources should alleviate.

Thanks very much.

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

Yeah, morning, gentlemen. Thanks for the opportunity. Two questions from my side. First one was on Kvitsa. We saw throughput going down there despite the fact we didn't have a strike and we had better weather compared to Q1. Can you just explain what was going on there? And then I guess the second question is to clarify on the secondary insurance proceeds of $1 billion. Just regarding what Håkan was saying, is it fair to assume that we don't get the proceeds from that until 2026? Thanks very much.

I can take the first one and say that we've had... We usually don't talk about the maintenance in the mines because it's a little bit erratic, but we had a very, despite we had strikes, we had a relatively good maintenance situation in Q1. Q2, we've had some maintenance and also a little bit of rock stability. But I would say that a throughput that we've had now is quite in line with the 9.5 million tons that we should get. through the year, so it hasn't been a good anything to talk about now. I think it maybe you can say was rather strong to have the 2.4 in Q1 despite winter and strikes. Now regarding insurance, I'll leave that one to you, Håkan.

And I'm not going to give a certain response as to which year we're going to book it on the P&L. We book it on the P&L when we get a firm commitment from the insurer that the claim has been accepted. and that they are committed to pay. I mean, that may happen before 2026 for sure.

Just to be very clear, that should happen maybe 24 or 25.

Yeah, exactly. But it's difficult for me at this point to give an exact date. We have been focusing our discussions with the primary insurer and to get the investigation of the cause of the fire ready and published, etc. And it's the same investigations that are used by both insurers. There's more detail about the cause of fire on our website, etc. So we'll intensify our discussions with the secondary insurer within the near future to put it that way.

But you could also say it's fair that, as I said, these are not done yet in negotiation, but the secondary insurers basically have the right to not pay anything until the first 2.4 has been paid. That's a little bit how they work. So that means if your question was when are we likely to see the cash flow, from the secondary insurance, it is probably a 26 rather than 25. Yeah. The physical cash flow. And that's, of course, one reason why the secondary insurance is not in a big hurry to sort this claim out because they feel that they have time.

Okay, great. Thanks very much.

The next question comes from Daniel Major from UBS. Please go ahead. Daniel Major UBS, your line is now unmuted. Please go ahead. The next question comes from Victor Trollston from Danske Bank. Please go ahead.

Thank you, operator, and good morning, Mikael and Håkan. So just a couple of questions on the Lykavara ramp-up, and if you could just perhaps help me first understand, you know, it sounds like you had issues with, you know, mining volumes in Lykavara and in the mining process. You know, why did that impact you know, the milling process and milled volumes, you know, couldn't you fill that up with with IT volumes? Could you just help me understand that, please?

It is not that easy to do that. And you can understand that if you move these equipment around, it's not that easy to move them back. And then when you have the issues, you have to kind of use the equipment where you are. So unfortunately, mining is not that flexible to use resources on a very short notice, especially excavators and so on.

Okay, so equipment availability. And on the slow ramp up... It's also blast availability and so on.

I mean, it's lots of things that are planned very much in advance, and you don't always have the freedom to quickly move around.

Okay, now I see. And on the slow ramp-up of Lykavara, does that change your view on how much can be blended from that pit in 2025? Or is it still, I don't remember if it's 8 million tons or what?

That's still roughly 20%. And that remains. You could maybe say that we were a little bit naive in getting it up quickly. Anybody who has started up an open pit knows that the first benches usually have some surprises.

No, I see. I see. And then on grades then, because that was actually up quarter of a quarter, and obviously, I guess, volumes wouldn't have been super high in Q2 from Lika Wara anyways, but still up quarter of a quarter. But with slower ramp up, has that sort of increased the risk on the full year, you know, guidance for grades in IT or how should we think around that?

No, I think that the four-year guidance of 0.17 is relatively robust. And excludes, likewise, the more... No, it is the guidance for the whole complex together.

Okay, okay. Thank you very much.

Regarding the grades, we're at 0.16 year-to-date in IT, and we've got it for 0.17, and it still looks good to catch up and finish the year on exactly the guided levels.

Okay. Oh, that's super. Thank you very much.

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

Yes. Hi, everyone. It's Johannes here. Just a bit of follow-up on Victor's previous question on Likavara. Can you share with us what the grade is in Likavara in the deposit and the size of the deposit? Because I can't see that in the most recent annual reports anyway.

Okay. Well, the average grade in Lika water in total is 0.26. And I think it's about 60 million tons the way it's been defined. But that one you have to don't make that too exact. But it's around that order of magnitude. But that's now scheduled for about 8 million tons per year for eight years. That's roughly the scheduling of it.

Okay, thanks for that. A bit of a question on P&L dynamics but April prices was a lot higher than prices at the end of Q1. I might have missed this but what kind of sort of preliminary price effect was included in the Q1 results?

Again, when I get this question, I typically remind that there are two parts of this definitive pricing impact. If we start with the open positions that were preliminary priced at the end of last quarter and that has been finally priced in this quarter, what we refer to sometimes as mama, that's about 280, I think 280 million SEK positive in the quarter. but you shouldn't forget also that since we have provisional pricing all of the nickel produced in a given quarter is in the closing priced at the prices in the last day of the quarter. For nickel, the quotation period is three months. For gold, silver, two months. For copper, zinc, one month. And for PGMs, four months. So that means that we had an impact also from the fact that the increase of the end of period prices is clearly less than the increase of the average prices. So in short, the... When doing the modeling, you cannot only look at average prices because then you will end up slightly wrong. And in this case, this preliminary pricing had a negative impact. I haven't quantified that, but just so that you're aware.

Yeah, yeah. But net maybe 150, 200 or something?

It depends what you compare, but I think that, for example, If I recall it correctly, copper is up about, or copper, gold, nickel, et cetera, are up about 10% to 15% average prices. But if you look at the end-of-period prices, it's only 2%, 3%. So it is a sizable downside on that comparing to an average price scenario.

Yeah. Okay, helpful. My final question is on Tara, where you are explicit on losses for Q3, Q4, but When do you expect to sort of go above breakeven for that asset?

Q1. Q1.

Q1. Okay. Clear. Thank you very much. Thank you, Jonas.

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

Great. Thanks very much for the call. Just one question. I wonder if you can just help us a bit with treatment charges. If we kind of look at the smelters on a 12-month basis, can you just sort of help us with how much treatment charges are locked in on an annualized basis versus how much of those treatment charges you're seeing on a short-term basis? Just briefly.

please thanks the the general answer to that one is even though it can vary a little bit over time is that we have around 15 to maybe 20 percent but say 15 percent at any given period that is treated on spot terms and then we have another than 80 to 85 percent which is on annual contract and so that's the that's the quick answer around that okay that's super helpful and then just just perhaps a comment would just be if just on the insurance proceeds um is

I don't know if it's possible at all, but it would be helpful if you were able to, I don't know, maybe towards the end of the quarter or just after the quarter end, just perhaps just give the market a steer as to what insurance proceeds you've received during that period, just because it's helpful from our net debt modeling. Just a feedback comment. Thanks very much for your time.

We'll see. Thank you.

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

So, Daniel, are you there now?

Hello, can you hear me okay?

Now we hear you.

Okay, thanks. Sorry, I'm not sure what the issue was there. Great, thanks. Yeah, a couple of follow-up questions. The first one, just around the insurance proceeds again, oblivious. you incur tax on those. Can you give us any indication on the timing of that, or is that included in the projections of $200 million a quarter this year and next year?

Well that's a very good question and yes you're right that there is a tax on that. We are looking into some allowances in the Swedish tax laws to push a bit of the tax payments further out. In the accounting we have assumed that it's a straight tax payment already until we know that those allowances can be used. So it's a bit, this is work in progress and it's therefore a bit difficult to guide. But we are, it's looking good that we will be able to push the tax payments more to reflect when we actually get the project in place and do the depreciation. But I cannot be too precise on that. We need to make sure that we understand the tax regulations correctly and that we're aligned with how it should be done, to put it that way.

Okay. So I guess for our modeling purposes, we should include some additional taxation in, say, like 2026, 2027. Is that the way you think about it?

Yes.

Okay. Great. Thanks. And then perhaps a follow-up question to Liam's question on M&A. So you've indicated it's, you know, It's a part of the strategy. Nothing much has changed there. If opportunities were to arise, your balance sheet's not got a huge amount of flexibility now. Would you consider raising equity to take advantage of opportunities that might come in the market?

It's a very speculative question, but if we find something that is interesting and we were to be interested in it, we'll have to figure out how to finance it and we'll sort it out then.

right specifically you wouldn't rule out raising equity for the right um opportunity no for the right option we would not great thanks that's all for me the next question comes from amos fletcher from barclays please go ahead

Yeah, hi, Jens. Just a couple of follow-up questions. I just wanted to ask on working capital, can you just, I guess, discuss what you were saying, the underlying kind of operational working capital performance was pretty good. Can you just give us some more detail on that and then your expectations for that over the course of the second half of the year? And then secondly, I just wanted to ask about cost inflation and the sort of rates that you're seeing on an underlying basis at the moment. And then the final one was on smelting. We saw the treatment charge impact quarter on quarter, sequentially quite low, sort of 102 million negative compared to what you've been saying previously. Why was it so low? Was that just because you were going through maintenance or was there some other issue there? Thanks.

Yeah, I don't know. I can start with the cost inflation. We are right now basically in a flat cost inflation on anything that we procure. The labor inflation is around 3% for many of our markets right now. So I can say that around inflation. That leaves you to walk on to discuss the working capital development and the smelting TCs impact.

Okay, so the working capital development, there is a strong focus in our smelter division to reduce working capital intermediaries and to work with capital efficiency. And we have been successful during the quarter, so there is some good work done there. And therefore, I mean, so that's a quite general statement on why Q2 is looking pretty good. Going forward, I would expect more or less normal seasonal pattern. We have a Q3, which is typically flat on working capital at constant prices assumed. And then we release capital, so we have a good cash flow effect from release of working capital in Q4. And I would expect something similar also this year. Regarding treatment charges, if I recall it correctly, compared to last quarter, we have 100 million negative impact on treatment charges, and I think that's pretty normal. basically half of the quarter impacted by the new benchmark TCs in Q1, and now we get the full quarter effect. A lot of that is, of course, you know, the right pocket and left pocket, I mean, moving revenues between mines and smelters, so the external exposure is perhaps less than assumed, but I would say that 100 million is a fairly normal number there.

Okay, I guess as we go into Q3 and we come out of maintenance, you've got bigger external exposures to spot purchases. So could we expect another kind of negative effect in Q3?

Possibly slightly, but in principle, we should have the full effect of lower TCs in the books already in Q2.

Okay, great. Thanks.

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

Thank you. Yes, one question from me. I just wonder in terms of grades when it comes to Garpenberg. I can see that the grade has come down in Q2 and that you reiterate your guidance of 3.5%. But can you please help us with this? Was this something that you expected? Because in the report I can see that you had difficulties to access high-grade stoves. Have you been able to do that lately? Thank you.

No, you're absolutely right. We did have problems to access some of the high-grade stopes, and we have now in our plans to be able to access these stopes that we've missed in the second half of the year instead, solving some rock mechanical issues. So then we had to turn to some reserve stopes, and they typically have lower grades.

Okay, thank you. And just one question also to Mikael in terms of costs in mines. I can see that they've increased a lot. And of course, it's partly due to the restructuring costs in Tara. But have you seen anything else? What has affected this cost increase compared to Q1?

I'll leave that for Håkan. It's more or less entirely ITIC and related to the issues that Michael talked about. It's unplanned maintenance. It is extra cost related to the ramp-up problems of the Likavara pit. So basically we have subcontractor costs, we have consumables, we have spares in ITIC. That explains the difference, a large part of it anyway.

Okay, thank you. That's all for me.

The next question comes from Liam Fitzpatrick from DB. Please go ahead.

Hi again. Two hopefully quick follow-ups. Håkan, you slightly lost me on the kind of provisional pricing comments there. I understood the comments around kind of core trend prices lower than the average or the percentage increase. But you mentioned a provisional pricing benefit of 280 million in Q2. I just wanted to make sure I heard that correctly. And then second one on order. I think you said at the CMD that the uplift from the expansion, once it's fully up and running, is 150 million euros. Could you give us a sphere based on current terms, what that uplift would be? Thank you.

Shall I start with the... You can start with the provisional pricing and how it works.

I'm sorry if I wasn't fully clear on that, Liam, but... what I was trying to get across anyway, I'll try to do better this time, is that we have one thing, one part that we measure actually that we typically talk about, which is the so-called MAMA effect. That's 280 million in Q2. And that relates to the the contracts, the shipments that we had done during Q1 that were preliminary priced at the end of the quarter and that has been finally priced during this quarter, during Q2. So that's 284. And then my second comment was that in addition to that, you shouldn't forget that we are not pricing any given quarter at straight average prices. There is a tilt so that the end of period price has actually become quite important in how we report things. And that part I haven't quantified specifically. So that was my comment. Sorry if it wasn't. No, no, it's my understanding.

Don't worry. Is the net effect a positive still? or do they largely cancel out?

But here you have to be careful what you compare with. But what we're saying is that when you're looking at the production and the shipments in Q2, if you're taking that one at average prices in a quarter like this when they were relatively low end of period prices, you're going to overestimate the value. If you take everything at end of period prices, you're also going to underestimate it because some shipments have actually been priced and finalized priced during the quarter. So that's what we're saying. Just be aware of shipments in any given quarter is very much skewed to the prices in the end of the quarter.

And that is particularly true for nickel and PGM.

And precious as well. So that was the kind of educational part of it. Now, you said the other uplift of 150 million euros that we have guided for, that is linked to our long-term prices and terms. If I were to look today, TECs are... probably lower than our long term, but they are lower than our long term prices and terms. You have to remember, though, that both silver and gold, which will come through the leach product that we're taking out, are clearly higher than our long term prices and terms. We have a better exchange rate than we have in our long term prices and terms. And we have a slightly better zinc price. Zinc price is more on the long term level. How that whole mix turns out, we're going to get back to better once we are getting closer to starting.

Okay. Thank you.

What I'm also saying, in other words, is don't forget that TC's is less than 50% of the revenue set up.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Christian Ugawal from Citigroup. Please go ahead.

Hi, thanks a lot for taking my question. Most of them are being answered. One follow-up from Amos's question on working capital, sort of a clarification. So you're saying that out of the $2.4 billion insurance claim, you received $600 million, and then $1.8 billion has gone into receivables. So is it a fair way to look back of the net working capital, which you are showing at 0.6 billion, the underlying operational working capital was a relief of 1.2 billion in the quarter?

Yes, because the insurance, compared to the number that you see in the cash flow statement, included there is a negative of 1.8 billion on the working capital side. So the operational side of it is clearly positive, and the numbers are correct that you're stating it.

Okay, fantastic. And then going forward, as and when you receive the insurance claim, that would also contribute to the release of working capital?

Exactly. There is a 1.8 receivable, and as we get those payments, then the receivable will decrease quarter over quarter.

Yeah, I understand. Okay, thanks a lot.

There are no more questions at this time, so I hand the conference back to the President and CEO, Mikhail Stafas for any closing comments.

Thank you very much, and thank all of you out there for listening. I hope that you got some more clarification than you had in the beginning of this call. I would like to take this opportunity to wish you all, who haven't yet been having the ability or the chance to experience the summer, that you get the chance to have some summertime and summertime off. And I look forward to meeting you all again as we come into the fall. Bye-bye, everybody.