Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q2 2025 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 be led by the operator. Mikael, welcome.

Thank you, Olof, and welcome to all of you out there as well. I hope you're doing fine. Let's get going and get to talking about the quarter and the core report that we have just released. If you look at the highlights, we had a profit-excluding inventory valuation of almost 1.3 billion SEK. There's been quite a lot of accounting going on in this quarter and Håkan will come back and talk a little bit about those things that are affecting plus and minus. What is clear though is that we have a negative currency effect of about 600 million compared both to last year and compared to first quarter. It happened to be the same numbers. We've also had extensive planned maintenance and this was well communicated beforehand and We were happy to be able to complete them exactly according to plan. As always, when you have major maintenance stops, you're always a little bit nervous when you cool down the processes and start looking at what you have, that you will find something more that needs to get done while you're doing things. But this year, most of the things were in the condition that we expected and we could do the needed actions as was planned. We have a stable production and a stable underlying cash flow. We'll talk more about that coming forward. We've included the two Lundin mines as of this quarter, as of April 16, to be more exact. The integration is going fine and we're moving along well there as well. This also creates some accounting issues, but Håkan will clear it all out for you as it comes in a little while. We have a record production in ITIC and we're bringing this up here because it is important It is so that regarding ore production, we are producing according to what we have guided. We are around a 40 million ton pace right now. But we have been able and we're very happy that we're so good getting the stripping done that has been a issue during the whole dam project that stripping was falling a little bit behind it's part of the issues right now that we don't really have too many alternative places to go to when things happen the fact that we get stripping going now will give us more flexibility going forward to handle issues our big projects are according planning and planning They're going on according to plan as we have presented them in the Capital Markets Day back in March. So the financial performance talked about just shy of 1.3 billion. In there, there is a real comparison issue, which is linked to the one-off cost for advisors, et cetera, linked to the acquisition and the equity rates that we did with the Lundin assets. And we had the plan maintenance at $400. million sec EBIT impact, just as it was communicated. Free cash flow, if you exclude the proceeds for the acquisition, was at 2 billion krona. We're very strong and happy about that. Almost one of it came from insurance money, but that was also well communicated beforehand and part of the project that we're doing right now. The total free cash flow, then, if you take also the acquisition amount into place, was, of course, much more negative. We're happy with the 29% gearing. This is, in our mind at least, a stronger balance sheet than we would have planned to have after the acquisition, of course, thanks to the relatively strong cash flow that we had in the quarter. CapEx is moving along according to what has been communicated. On the big projects, the ODA project, nothing really major to happen compared to what we said in March. The commissioning is ongoing and we're looking for ramp up now in the second half of the year. The Kristineberg expansion is more or less done. It was inaugurated back in May and the last pieces are coming in place as we're speaking. The Rönnsche Tankhouse, well on track. We will see the ramp up here of the second half of next year. The Aitik Dam is already completed because there's already history, but we did mention it here that we actually now have all the permits in place. When we did the Aitik Dam, we used an exception in the Swedish environmental law that you can do certain things and ask for a permit afterwards. Normally, you have to ask for the permit first. There is a little bit of a risk with this. We never thought it was very big, but of course, good now that we actually do have the permit in line with what we thought we would get. The Boliden area tailings recycling is also well underway completion in the second half of next year and also here and this one is we're also very happy with we've gotten the permits regarding this in place during this quarter so we now have all the prerequisites ready to be able to continue going forward. On the ESG side, things are also moving well forward. The greenhouse gas emission looks like it's going the wrong way, but here you have to remember that we're now including two more units into this one and that we will, of course, also we will restate our base year in the science-based target as we move forward. We had a good quarter when it comes to LTIs, so we are clearly better than last year and we're also moving our 12-month rolling average down. So we're in a good place regarding that. Also sick leave, as you know, it's been a little bit of a tough issue for us. Sick leave went up during COVID and hasn't really come down yet. But now finally we're seeing trends coming in the right direction. Let's hope that we can keep that trend in place. And it's important to understand that Swimming Corps and Zinc Ruban are included in the last quarter, but not recalculated the numbers here for historical periods. On the market side, well, lots of things have happened on the market side. As you recall, we had a a very clear dip on metal prices and currency during April. Metal prices basically recovering in the later part of the quarter, whereas the exchange rates for the dollar has continued to be weaker than we've been used to. So we see that, and if you look more on the metal side, we also see that the zinc price has been going lower, whereas the precious metals have been going higher, but the total mix for us is about zero. There is a very big push on the copper spot TCs. It doesn't affect us so much directly because we have very little on spot. Most of our copper comes on benchmark. But of course, as this very low spot TC continues into the second half of the year, it will of course have some effect on benchmark for next year. So it's a development which is clearly problematic from our point of view, and I think it's problematic for the whole industry point of view, because the levels that we see on the Theses right now is not sustainable for the industry as such, even though the miners right now have a very good time. The byproducts, including sulfuric acid prices, have been quite stable for us as well. If you look generally what's happening in the market on the cost situation, you can see here when we're looking at the different percentile development, you can see that copper, still the copper price is quite a lot above where the cost curves are. There is a shortage of copper that is already priced in into the price, but the price has been relatively stable during this latest time. You can also see here that the cost is coming down. It looks like copper miners around the world are good at taking costs out. But do remember that the high gold price is part of this and also the low copper TCs start playing in as a kind of freebie for the copper miners in lowering their costs. If you move over to the zinc side, once again, it's been for a while, the zinc price is relatively low. It also looks like zinc mines around the world are extremely good at taking out costs. Here, the high silver price is helping a lot, and also the lower zinc TCs is helping to get the cost level down. It is not so much that the mines around the world are that good at taking out costs. Looking at nickel, nickel is problematic. You can see that there are very few nickel mines in the world that make any kind of money at all. There has been a hard push to get the costs down. Here there are some real costs. Cost cutting has been going on and it's now on a level and the nickel price is on a level where it's very unsustainable for many in the industry over time. If we move over to mine production, when you look at that here, number one, just to be very clear, we have once again included Zincurvan and Somincor as they have produced during the 10 weeks of the quarter that we have owned them. We have not adjusted historical periods. Therefore, of course, zinc looks extremely strong with the profile of the new mines. Also copper gets some help from Somincor. And nickel is, of course, only Kevica that pushes it. Having said that, we've had a relatively strong production in all the mines. The ITIC is aligned with what we guided for in the 40 million pays as we can have now with the thyroid issue. Recoveries are going the right direction and better than they were in Q1. Still a little bit to go to get back to the normal levels, but we're heading in the right direction and we're getting out of this oxidized zone. In Garpenbury, the throughput is slightly lower. We've had quite a lot of maintenance in Garpenbury as well during the quarter. And we have a lower sink rate compared to last year. We're having silt pillar mining that is slower than we had anticipated. Or I should say high-grade silt pillar mining is progressing slower. We have not sterilized any of this. It's not that we have lost any of the high grades. stopes but we've had to in the short term replace the high grade stopes with some alternative stopes which have been lower grade and we're coming back a little bit to the outlook and we don't think that we're going to be able to speed up this silver mining in the very short term. Kevitz has strong production also relatively good grades. The Boliden area very stable production good grades even though they're lower than last year but last year was crazy high grades in the Boliden area. Entara, the ramp up is going on. Somincor, stable production. We've had some issues, as you all read about, the big power outage in the Iberian Peninsula. We had a separate power outage, which was more local around Somincor, that has impacted negatively, but otherwise generally moving on nicely. Zincruvan moving on nicely. They've had slightly lower grades than what they usually have and what they have in the in the R&R statement, but not really much around that. On the smelter side, also good production. Rönnskär, strong and stable production. We've managed to find absolutely the right feed for Rönnskär. We have very strong free metals coming out of Rönnskär in this quarter, partly linked to the fact that we've been producing well and we've been having a good mixture and also part to that you know as as with this free metals part of that is is linked to inventory and inventory measurement and we have done some inventory and been able to adjust uh positively according to that harry about the major maintenance stop but apart from that also good production around that around that solid production coccola major maintenance stop a good production around that and also very well planned beforehand. We managed to get inventories of semi-products within the system so that we could run the areas that were not having maintenance in a good way. So very strong performance there. In Odda, we're moving in the right direction in terms of getting up to the 200, as you know, from 160 to 200. That is progressing well, although we did have a unplanned maintenance situation around that, but otherwise well around that. And as we come into the fall, we'll start looking at the 350 level. Also, Bergse, small, but has a strong production in this quarter. So with that, financial summary. Håkan, please.

Thank you Mikael and good morning. Well as you have seen we have reported an EBIT result excluding process inventories just shy of 1.3 billion in a quarter that has been characterized by production at or above expectation in most units. lower prices significantly lower prices in particular dollar and then as usual in the summer months or summer quarters high planned maintenance. This is down compared to last year but then bear in mind though that last year had 2.4 billion insurance income included in the results. Capital expenditure is at 4.2 billion which is an increase compared to both comparison periods but fully in line with our full year guidance. Free cash flow, a number that we're quite happy with, 2 billion, excluding then the cost of the acquisition of Sommelkorn and Sinkgruvan. And that is an improvement compared to both comparison quarters. I'll come back to that in a while. Looking at the result by business area, mines delivered just about 1 billion, relatively stable compared to the comparisons. Smelters, a really strong quarter at 600 millions, close to 600 millions. And this is in a quarter where we have the full quarterly impact of the lower treatment charges. high planned maintenance. So I think this is a sign of strength from the smelting division. Obviously, it's lower than last year when we had the one-off in the form of insurance income in the income statement. Other elimination then, that's mainly the internal profit elimination that we do, which is a timing adjustment connected to revenue recognition. That is a negative 300 million. In there, there is about 100 million that is an internal profit elimination connected to the new mines, Somincor and Sinkruvan, which are now classified as internal feed. Going in a bit more into detail about the changes between quarters, there have been quite a few moving parts. Year on year, if you put everything together, the development of prices and terms is actually flat. We have a significant negative impact from the US dollar, about 600 million. treatment charges negative about 300 million. But then compared to last year, we have a good development of metal prices and in particular than precious metals, which improved by about 700 million. And then we also had a good run on byproducts. Volumes are up by a bit more than one billion, and that's primarily the acquired units. On top of that, we have a negative impact from internal profit eliminations. This year it was negative, last year it was positive, so that makes a fairly big difference here in this line. Costs are up again due to Sommelkorn and Zinkgruvan being consolidated and also due to the ramp up of the Tara mine. We also had a bit more maintenance costs in smelters compared to last year. Depreciation up 700 million. Here, the new units account for almost 500 million. But we also have increases in TARA, ODDA and ITIC as a result of recent investments and the ramp up of TARA. Odda, just putting some numbers on that. Last year we were running at 50 million Swedish krona per quarter depreciation. This quarter we are running at 100 million. But as the project is fully commissioned, the GZO expansion project is fully commissioned, I expect that number to come up further to about 275 million. ish per quarter. And then of course I've commented on the items affecting comparability and that's included in this comparison as well of course. Looking at quarter per quarter, here we see a significant price reduction. Again, dollar is the main part, roughly 650 million negative. Treatment charges going from half of the impact in Q1 to full impact in Q2, that makes up about 150 million. And then metals all put together is about 100 negative. There we have a fairly big impact from definitive pricing of volumes that were preliminary priced at the last quarter end. So we had a negative impact of about 300 million from that. But then that was largely countered by a good development on precious metals, which contributed by about 250 million in this quarter compared to Q1. So all in all, a fairly big change, mainly attributable to dollar. Volumes were up. We had the impact of Sommelkorn and Zinkgruvan being consolidated. We had some negative internal profit, as I commented, but we also had a strong development of free metals in smelters. That was a mix of a number of reasons. One is the relatively favorable concentrate mix in the quarter. we've had good recoveries in production in the smelters. And then there is also a component, a positive component from the stock take where we actually had more metals than anticipated. So really strong performance in smelters in that respect. And then on the cost side, again, mostly related to the changes, mostly related to Sonicor and Syncrüvan plus a little bit more planned maintenance in smelters. And then items affecting comparability here is mainly the transaction costs for Sommelkorn and Sinkgruvan that we wrote about also in the Q1 report in the outlook. Moving over then to cash flow, we have a good cash flow here, 2 billion, if we back out the cost for the acquisition of the two new mines. We had cash flow of about 3.5 billion each from EBITDA and from working capital. And in particular, the working capital is good. It is true that we were helped in there with about 1 billion from insurance income, insurance cash flow, and also in a situation with prices coming down that automatically means that we release a little bit of working capital. But it was still well-managed inventory positions during the maintenance stops in smelters. So we're happy about that. All in all, when we look at the balance sheet and the financing, you can see the impact of the acquisitions. We have total assets coming up to 136 capital employed to close to 100 billion Swedish kronor. And also the net reclamation liability is coming up from 6 to 8%. So that's all impact from the two acquisitions, the two acquired mines. But we are really happy that we have been able to maintain a net debt to equity at below 30% this close to an acquisition. Again, that is a position of strength and we have a robust balance sheet. So I'm very happy with that. And for the outlook, I hand over again to you, Mikael.