Boliden AB

Ladies and gentlemen, I'd like to welcome you to Boliden's Q2 2026 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 led by the operator. Mikael, welcome.

Thank you, Olaf, and good morning to all of you out there. Let's just jump into this presentation right away, and then we'll see what discussions we'll have and what questions you have coming up afterwards. The highlights of the quarter, I just first want to point out that we have a strong quarter. We have about 2.9 billion Swedish kronor in the EBIT, ex-profit inventory evaluation, clearly up from what we had last year. We have a quarter with relatively weak cash flow. This cash flow is both seasonal in the sense that we have maintenance stops in Q2, which typically is that we're tying up capital in our inventories, but it's also seasonal. linked to a little bit of timing events again around the end of the quarter. Actually, the inventory built up is much bigger than these $2 billion because there are some other parts of working capital working the other way around. And the high inventories, and we'll get to that, also affects the internal profit elimination, which is also a bit of discussion here. We have, of course, significantly lower earnings from Garpenberg compared to any comparison quarter, both first quarter and last year. But we're very positive around Garpenberg. Garpenberg has started up according to plan, has delivered according to the plan we gave in Q1. We have now all infrastructure in Garpenberg up and running, with the exception of the personnel hoist, which is not really crucial and will come roughly in September. But otherwise, everything is up and running and we're up and producing. We're also up and developing and, you know, not losing any time and trying to get to the other war bodies in the area now that Lapland is going to be impaired for quite some time. So Garpenberg moving nice according to the plan that we had last time. We have, and we just want to make that point, a very strong contribution from the acquired mines. Both Zincruvan and especially, I would say, Sommelkor is producing clearly better than our own expectations. And we're quite pleased with the developments that are going on there. In Aitik, we have also a strong quarter. clearly improved mill volumes, and the total volumes mined, if you also include the stripping, is a record high of ever. You know that one of the challenges has been over time that we have been a little bit behind in stripping. We're catching that up, and you're also seeing that now as we can get the ore volumes up as well, which we also feel very good about. On the other side, what has not worked perfectly? Well, the ODA ramp-up has not been ideal. We've encountered quite some issues on the ramp-up of ODA. Just to have a sense of it, it is nothing that is fundamentally problematic. The roaster works at full capacity when it runs. But we've had way too many shutdowns linked to both IT and control systems and linked to some parts of the conveyor system and others that have not been able to produce. So the financial performance, as I said, in EBIT, including profits and inventory valuation of 2.9 billion Swedish, clearly up against last year. The financial impact from the planned maintenance came in at... 350, which is a little bit in line with last year and very much in line with the guidance that we had given. Cash flow, as we said, clearly negative, partially seasonal, but also partially a timing issue that comes in around that. CapEx at a little bit more than $4 billion, right around where our guidance is. On the gap and by update, so we had the abnormal rockfall and the seismic event back in March. All the infrastructure, including the ore hoist, is now up and running and operational as of end of Q2, you could say. It's only the personnel shaft that is still being repaired, but it's not crucial for production, and it should be done by September. The production has restarted according to guidance, exactly as we expected. Also, the developments have come along according to what we thought ourselves, so that's also working well. The paste production, which is important because, as you know, we have a big void after we had the ore body go down. This void needs to be filled both for safety reasons and water reasons, all kinds of reasons. That has been not quite completed, but it's very well underway. In order to do this, we have also managed to produce... paste and produce paste from the existing, using tailings from the existing tailings dam. I think we've been very quick at developing and rebuilding in the concentrators to be able to take tailing sand the other way that you usually don't do it, to truck it back from the dam as opposed to get it to the dam. The ambition is still to have a full production by, here it says 2032, so it's a full year, but to get the new hoist in place by 2031 so that we will be full mining in the bottom parts. And we're not changing any guidance. We're having the same guidance at 1.5 million tons for 2026 and at 2.3 million tons for 2027. Key projects, if you go through, well, the Oda tank house project is also moving on very nicely. We have it scheduled for ramp up in Q4 of this year. The sand recycling project is also on track and it looks quite promising, both on a kind of technical point of view, but also to make sure we get the environmental size right. And we're about to start, you know, during the next winter to start commencing using the equipment. Rönnscher Cementum and the Garpen by 4.5 million expansions are in very early days, but so far so good. The other one is, as I spoke about, is the Alda and the Alda expansion. Ramp-up is ongoing. It is at a lower pace than expected. And the challenge has been with the roaster. So that's where we can isolate the issues around that. There has been one set of issues linked to automation and programming where the roaster went into emergency stop way too easy. And we got emergency stops early on. And with the roaster, as you know, it could take several days to cool down. So you can go in and do some adjustments to sensors and other things. And then it takes several days to restart. So we've been spending way too many times cooling it down and warming it up again to fix things around that. We have that now, I would say, more or less under control. We have now put that in a good situation. It doesn't put emergency stops where it's not supposed to. We've also had some very mundane issues also around the roaster, for example, with conveyors. Conveyors is nothing high-tech or fancy, but we've had issues with them that we have tried to repair, and we have them now up and running. So as I'm speaking, we're running at full speed in Oda, and we have been running at full speed when we've been running, but we went down way too much. And I would say it's quite some confidence that we feel that we sorted out several of the issues. We might encounter some more issue, but there is nothing fundamental with the design of the roaster or anything else. We have also, in the time we have been running full, we've also been able to check the equipment that's been ready for quite some time, including the tank house and the new foundry and the leaching section. We've been able to test that at full capacity for shorter times, and we've also done that very successfully. If you then move over to the ESG development, we've also had a very good and strong second quarter. We have an injury frequency, which is one of the lowest ones that we've ever had, maybe the lowest for any individual quarter, and we've had quite some good development on that side for quite some time. The sick leave that went up during COVID is now more or less back on pre-COVID levels and is sticking on that level. And we are on our plan regarding the greenhouse gas emissions. It's a little bit difficult to see in this graph, but you have to remember here that we have not restated any history regarding the acquisitions from Lundin, and therefore it looks like we have an increase of CO2, whereas in reality we have a decrease. If you look at market developments, and those of you out there, you will notice relatively well that we had, of course, a very good pickup of market developments in the early part of this year. During the quarter, it's been moving more sideways, or actually sideways, to some extent a little bit a little bit downwards but it's still just on a compared to historic level very high metal prices that we have right now and we also have a slightly higher dollar that helps us as well a little bit weaker spot TCs working against us but then we have the very strong sulfuric acid prices, which helps us, maybe not as much as you think, because we have lots of our assets sold in long-term contracts with slow-moving prices, but of course, it's helping for the spot volumes that we're selling with the very high spot prices on sulfur. If you look at the development in the world on the copper price and where it's going, you can see that the copper price is at a high level, and most copper mines in the world make quite nice money. You can also see that the cost level has started to nudge up a little bit in the last quarter, I think with a combination of both a lower gold price that puts the copper price up, but also the cost related to what's happening in the Persian Gulf starting to show through a little bit. On the zinc side, we've had a little bit slower development, but the prices are now on quite a healthy level. And here the cost level in the world mining is still going downwards. Looking at our production, as I said before, I think it comes out very strong with almost 11 million tons. So it's close to 44 million tons on an annual pace. We feel good about that. We have a record mine production if you also include the stripping. And as you know, for a long time, stripping has been a challenge. So I think that actually looks quite good. The copper grade is nudging upwards. And as you know, since before, we're expecting to continue to nudge upwards. and go up during the second half of the year, which looks good. Bullion area, very stable operations. Now, bullion area has had so many records in the last couple of years, so it's difficult to beat those, but we're clearly adding another very strong quarter in the bullion area. We talked about Garpenberg around that. Kevitsa, slightly lower mill volume, but once again, the permit is the limiting factor in Kevitsa, and we will for sure going to use the full environmental permit for the year. Somincor and Zincruvan, strong production, developing well. The challenge that we have is Tara and the ramp up issues that we're having there since the care and maintenance. And we're also guiding down the total production for the year in Tara. If you then move over to the smelters, of course, this is a quarter where there's been big maintenance stops, which of course has an impact. One unit that has not had maintenance stop that has it in Q3 is Berrisø. They have then had, it's the smallest unit, but they've had record production of lead alloys in the quarter, which we feel good about. And Harjavata and Kokkola are both, of course, marked by the high level of maintenance that we've had there. Rönnskär, also a high level of maintenance. In Rönnskär, we had some ramp-up issues after maintenance. I wouldn't say major, but it took some extra days to get going after the maintenance stop was done. And finally, regarding Odda, we've spoken about Odda, that we have continued with the ramp-up as we have, but it's been slower than expected due to issues with the new roadster, and the roadster has been a challenge. With that, I'll leave the word to you, Håkan, to comment a little bit more on the financials.

Good morning. Good to talk to you. I hope my voice manages it. It's not what it typically is, but let's go. You've seen the result. We deliver an EBITDA of 5.5 billion SEK, an operating profit excluding process inventory of 2.9 and an EPS of 7.81. All of those numbers are clearly up from last year, but lower sequentially compared to Q1. CapEx is 4 billion, which is in line with plan. Free cash flow is a negative 2 billion. We've been successful a number of quarters going back to reduce working capital in spite of higher prices, and this time We had some build and I will come back to that later on. Looking by business area, what I said about up substantially year on year and a bit lower than Q1 still holds for both of them. And the reduction sequentially in mines is all Garpenberg and the reduction in smelters is mainly the maintenance, the heavy maintenance that we do in Q2. Looking at the EBIT bridges, And then starting with the comparison year on year, comparing Q2 of 26 to Q2 of 25. As you can see, we have a major support from prices. And that's metal prices across all metals, basically base metals, precious metals, that really supports the result. The negative impact there of about 1.2 billion in volumes is all Garpenberg. It's fully explained by Garpenberg. Looking at the other business, apart from Garpenberg, we have a good contribution from the acquired mines. They have been running well. And then also Q2 of last year, there were two weeks that we didn't own them. So it's a full quarter. But then on the other hand, we have slightly lower grades in Kevitsa. But again, the big impact of volumes is Gapenberg. Costs are a bit higher. There is an effect of full quarter with acquired mines also there. But we're starting to see some oil price-related cost inflation increasing. We're talking about excluding electricity somewhere in the range of 2.5% to 3% inflation after having been at much lower numbers for a while. I think with that, I'll leave this bridge and move on to the sequential one, comparing quarter... one with quarter two as you can see here prices are more or less flat there are some moving parts we have weaker metal prices than which is then offset by a stronger dollar and and a better sulfuric acid level but all in all the impact from prices is is is quite small Again, volumes, we have a significant drop there from Carpenberg out of the 1.5 billion, if we round it in this chart, 1.4 comes from Carpenberg. And in addition, we have maintenance in smelters and then the rest slightly positive. Costs. are up compared to last quarter. It was a fairly expensive quarter, this one. A big part is maintenance. The maintenance stops, drives costs. So we have the cost part of the maintenance is about 200 million compared to last quarter. And again, there is some oil-related inflation also in these numbers. Depreciations, maybe I could say something about that. We have basically no major change sequentially. We've had 2.3 billion in the quarter, and we had a similar level last quarter, not including the impairment we did in Gapenberg. If we look forward for the rest of the year, when Odda starts depreciating, I estimate that to be about 2.6 billion, so moving from 2.3 billion per quarter to 2.6 billion per quarter. But so far this year, not a big change. The one-off items affecting comparability is the big write-down that we had last quarter. And that concludes this EBIT bridge. Moving on then to cash flow. As I said, we've had over the last couple of years a quite good run with working capital in spite of higher prices. This time we built some capital. It's a lot of timing. One part is the slower ramp up in Odda where inventory piles up. And then also Michael referred to some ramp up issues in Rönnskär, a bit minor. It still has had an impact on inventories. And then a lot is timing on shipments. So it hasn't been an ideal quarter when it comes to working capital. My expectation, though, is that if we look one quarter ahead, especially towards the later part of that quarter, will revert that for ongoing business. So if it's just regular ongoing business, I think the 2 billion should come back next quarter. Having said that, we will start to prepare for the ramp-up in Rönnskär shortly, and that means a working capital build that we've guided for in the vicinity of 1.5 to 2 billion. So if you put all of that together, my best estimate right now is that the working capital build contribution to cash flow in the quarter to come is around zero. Finally, looking at the balance sheet and the capital structure, still a very strong balance sheet. We've had an increase of net debt of $5 billion. Three of that is the dividend that was paid, and two is the negative cash flow we just talked about. But all in all, a strong balance sheet with a gearing of 24%. So with that, Mikael, hand over to you.

And I'll just conclude this session with the outlook page. And as we all alert to, we're repeating all the guidance for the full year, with the exception of Tara, where we're going down the throughput from 1.8 to 1.6 million tons. And the only 2027 guidance that we have out, which is the guidance in Gartenberg, is also unchanged. So with that, operator, we're ready to take questions.

Please go ahead.

Yes, good morning. Two questions from my end. First of all, regarding the Rönnskär tankhouse ramp-up, can you help us how to think about the timeline for that, considering that the old ramp-up has encountered several delays? Are you more confident that that will be a fairly quick ramp-up, or can that be drawn out as well?

Well, we can say that we say many things about ODA, but ODA has also built a tank house, and the tank house in ODA ramped up exactly according to plan. So it's quite a difference building a roaster and building a tank house. We are quite confident that we will be able to start a tank house quite on time and very quickly reach a very high utilization level.

Okay, perfect. That's helpful. And then the second one is on grades. Since you have several mines... that have been running below the full-year grade guidance in the first half of the year? I'm thinking mainly of ITIC, which you mentioned, but also Bolinaria on Zinc and Silver and Tara as well on Zinc. How confident are you in the implied step-up in grades for the second half of the year that is sort of baked into your current guidance? Was this always the plan for the first half to be lower than the second half?

Yes, it was always, and I think we said that clearly, that the first half would be slower than the second half, so it was always in the plan. Then it's a little bit different in different locations, but we are operating more or less according to plan regarding the grades.

Okay, perfect. In that case, that's all from me.

The next question comes from Alan Gabriel from Morgan Stanley. Please go ahead.

Good morning. Thank you for taking my questions. I have a couple of questions. First, a high-level capital allocation and strategy question. What are the merits of growing your zinc smelting footprint and expanding any jurisdiction that is a bit outside of your core European markets? So it would be great if you can help us put any M&A ambitions in the context of your group strategy and the broader capital allocation framework? That's my first question. Thank you.

Let me just comment on that one. Just to put it in context, we are constantly talking to many other players in the industry about potential next steps. We have, in the last 10 years, we've done two deals, including three assets. Now, looking at that, what a percentage out of the total discussions we've had, it's a relatively small percentage. And we typically, at any given time, have these kind of discussions ongoing with quite a few people. The only reason why we have made the NEXA discussions public is that there was a leak in Brazil around this, where we were specifically mentioned, and we had to, because of stock exchange rules, confess that we are having discussions. Just to be very clear, We have not commented on what kind of deal we're actually talking about or what kind of price we're talking about and what kind of other things we're talking about, just to take that first. Now, secondly, why are they at least kind of interesting to talk to? Well, Nexa has a couple of mines that are very similar to the mines we have in terms of technical challenges and opportunities that we think you can work around. They have a couple of zinc smelters where at least one is very similar to the ones that we have and where we feel very good about the way that we operate our own zinc smelter and the way that we could operate that. So we feel that we would be a good operator there. We also feel that the jurisdictions are not that strange and that it would provide potentially an easy next step. But as I said, there are many things that need to fall in place for there to be a deal.

Thank you. Thanks, Mikael. That's very clear. And the second question is on ODA. So you touched on the roster issues you faced during Q2. How is the exit rate in Q2 and what signposts we should be expecting over the course of Q3 to give us a bit more comfort that the ramp-up is now back on track or at least back on the new revised trajectory? Thank you.

Well, I think that one comfort you should have about going forward is what I said. There's not been any kind of fundamental design issue or anything else. The roaster is there. It's working. When it worked, it has been working at basically full capacity. So that's the good thing. We've had the problem with the stoppages. And as I said, when you stop a roaster or have to go in and do some maintenance in the roaster, it unfortunately takes quite some time. You need to cool it down and then you need to do whatever you need to do and then heat it up again. And it could be a 10-day thing for a relatively small thing. So what you can feel comfortable is that I think that we had many of the initial automation issues that we've faced. We have them behind ourselves. We have some of the simpler mechanical issues regarding conveyors behind ourselves, and we don't have a fundamental problem. Will we encounter something else? Yes, we will encounter something else at some stage. But for everything that you encounter, we have so far been able to manage it. And as we're speaking, the roaster is running full speed. So it does run full speed when it runs, and we just need to get more running days out of this one. And it feels relatively good from the level we are today.

Thank you. That's very clear. Thanks.

The next question comes from Caleb Solomon from SEB. Please go ahead.

Hi, and thank you for taking my questions. Just two from me. On GARP Embedded, going from sort of 10% of the previous run rate to 13Q3, can you just help us size the SORT OF SEQUENTIAL REDUCTION IN UNDER ABSORPTION HEADLINES.

JUST TO, IF YOU START THE, YOU KNOW, GOING FROM 100,000 TO 300,000, YOU COULD SAY THAT DURING Q2 WE HAVE MORE OR LESS ONLY OPERATED PRODUCTION FOR A MONTH, SO WE'VE BEEN OPERATING AT THAT 100,000 TONS PER MONTH PACE, AND THAT'S WHAT WE WILL HAVE NOW FOR EVERY MONTH IN Q3. So that's the operating part of it. Regarding costs, most of the costs in the mine are fixed. And that's something Håkan didn't mention that, but it could be also a little bit regarding costs that we, even though we have much lower production, most of the cost is actually fixed. And as we then start ramping up production, we should not see that much extra cost increase because we're already carrying, especially the personnel costs already there.

Okay, that's clear. Thank you. And last quarter, you also mentioned that if sulfuric acid prices hold up, there would be a sort of meaningful impact in the second half this year as contracts sort of start to roll over. Can you give us any sense of the magnitude of that tailwind relative to what you saw in Q2? And maybe sort of the same question of how much rolls over in Q4 versus Q3?

How can you know that?

Well, most is connected. I think that's one important point is that most what we have is connected to the European indexes. And that hasn't had as dramatic swings. I think we had a positive amount in the EBIT bridge of 100 million this quarter. I'm not going to guide for it going forward, but it should definitely be higher than 100.

That's clear. And maybe just a last follow-up on ITEC. Because Production was abnormally good this quarter, but you're keeping your production guidance. So I'm just wondering if there was anything specific sort of causing abnormally good production, or should we sort of assume quite a slowdown in Q3?

Well, number one, we had a slow Q1, so we had to kind of make up for that in order to kind of move our guidance. We usually don't talk about maintenance in the mines so much, but we had a quarter... which had maybe a little bit less of relining than a normal quarter. And then we know from a seasonality point of view that Q2 is usually one of the best quarters we have. And I think winter is always a little more tricky, but when you come into spring and summer, it's usually easier. Q3 is also pretty good. So with that all taken into account, we have stuck to the guidance. It's pretty much, if you look at the whole first year, we're pretty much on this one. So that means that we're not expecting it to fall if you look on a half-year number.

Okay, that's all from me. Thank you for taking my questions.

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

Hi, Michael.

First one just on Nexa. I appreciate, you know, this was a leak that you didn't want to become public. But can you just talk about the timing of this? Because obviously over the last year and beyond, you've had some challenges at several assets. You've already got 12 assets. So this would be increasing the complexity of the business, perhaps not at the right time. So do you actually think now is the right time to actually bring more assets into the business? That's the first question.

Well, linked to that, I mean, I would say that we are ready to do it. The exact right timing when you're buying is is always difficult to get because it's the seller who kind of sets a timeline rather than the buyer. But we said, and I said many times, that when things are moving in this industry, we are interested in looking at it.

Okay. And then just a couple of questions on Gartenberg. Can you just give an update in terms of where the review and the whole studies on, I guess, the recovery and production are at the moment and whether we're going to have to wait until the 8th of December or whether we could find out a little bit earlier in terms of the production profile for that asset over the next few years. And then perhaps one for Horkan, I appreciate Q2 was low volume. So perhaps we shouldn't read too much into it, but milled throughput was very low at Gartenberg. The grade was very low, but the cash cost also remained very low. So some explanation around that would be helpful. Thank you.

to do the cash cost one and how we calculate that one with rolling 12 and things like that. Regarding Garp and Berry and the geotechnical studies and so on, you're highly unlikely to get any more information regarding 28 and beyond until December. We will run that through our due diligence process in the normal course that we every fall build up a life of my plan. And I suppose it's only if we find something very strange that we'll have to tell it beforehand. Otherwise, we'll have to wait till December. We will also, in parallel, and that was, I don't know if you're going to publish it or in which way you're going to publish it, but just for you guys to know, we're also, of course, working on establishing What happened? Why did it happen? If it has any consequence anywhere else, we're doing that one quite thoroughly, both internal and we have external third party looking into that one. We also expect to finish those studies in the second half of the year so that we know which also plays into, you know, we don't want to run into the Lappite, even if it's theoretically possible, just to create another seismic event. So we need to be better understanding what exactly caused the ripple effect that eventually led to where we are right now.

Okay, just going into the cost, I think just to repeat what Mikael said, is that a big part of the mining cost that we see is fixed. The cost that we've taken in Q2 is marginally lower than Q1, so we have basically been running more or less at the same cost level. because of repairs and other things in Q2 the mill throughput was exactly in line with what we said and I think the way to look at it forward is that we guided for the mill throughput and then cost is what it is Then when it comes to the cash cost, there is a lot of moving parts in there. I mean, we have the TCs, that is one component. The silver price, this is one component. We're looking at rolling 12 months where this has moved a lot. So I think it's... I'm not sure if I can... comment in too much detail on that right now, but I think if you look at the overall message that Mikael gave, I think you should get that right going forward at least.

And I will say a little bit different, Håkan is just saying that you should expect the published cash cuts to go up over the next few quarters as we roll in bad quarters into those 12-month rolling average.

Okay, so there's an inventory effect, I guess is what you're saying.

Well, there's an inventory effect, but also when you take the average cost per ton for the last 12 months, you have to remember that we had nine months or at least eight months that were pretty well producing. But if you look at this a year from now or nine months from now, you will look at 12 pretty bad producing months. And then, of course, the cost per ton will go up.

Understood. If I could squeeze one quick one in, just on acids, Håkan, could you confirm what the uplift was, Q over Q, from acid prices for the smelters?

I think that we had... Year on year, I think it's available in the bridges in the report. I think we had an uptick of about 100 million, something along that line. And... If we stay at these prices with European indexes as the contracts are renewed because they are not renewed every quarter, that should gradually improve the price level and thus we should see similar or better upticks year on year in future quarters.

Okay, thank you.

The next question comes from Marina Calero from RBC Capital Markets. Please go ahead. Good morning.

Thanks for the call. I have a question on Gartenberg. What sort of development rates do you need to achieve in Q3 and going forward to hit your 2026 and 2027 guidance?

It's a good question that I might not be able to answer straight off the bat how much development we will actually need. I don't know if you know that, Håkan.

No, I think that's a part of the revised mine plan that we're doing. I mean, we keep the same cost base, but a part of the personnel is spending work with development instead of mining. And we'll have to see whether some of that will go into CAPEX or not. But the underlying cost base is relatively unchanged.

But I can get a frame of it. We are producing now and will continue to produce roughly 100,000 tons per year from the existing Kvarnberget and Damsjön ore bodies. For that, we don't need any accelerated development. Those are well in line and everything else. The challenge, which I think you're referring to, Marina, is that in order for us to go up to about 200,000 tons per month, which we have guided for 2020, 27 we will then need to have another hundred thousand that comes from other places Part of that will come from things that are already developed and could be easily taken out. For example, in Kasper Spur, where we have some smaller pieces, it could be taken out from relatively easy to get to the developments in the lower part of Lappberg. But I suppose your question is, are we sure that we also have enough speed in our developments to get to all of that uptick from 100,000 to 200,000 tons per month? And I will say just on the bottom of, you know, from the gut feeling, that is going quite well. Developers are going quite well. But exactly the amount of meters we need to reach this year in order to be able to start getting these other positions in place by January, I cannot say right now.

Okay, understood. And another question on capital allocation. I understand you have your ratios, target ratios through the cycle, but how much flexibility do you have in that generation in the event an acquisition like the one you're discussing with NEXA happens?

How much flexibility do we have in the gearing numbers that we've communicated? That's what I understand is the question. Well, we want to keep the gearing less than... I mean, we can accept a gearing of around 50%, but then I should emphasize that that is always in a stressed scenario. So we should stay below a 50% gearing even if we get a severe downturn. for a year or so. And that typically means because we don't end up in those downturns every year that we stay at substantially lower levels. I think you can look at the recent Lundin acquisition that was in our stress test close to those high levels that we were talking about. Then obviously we didn't get the downturn instead we got a spike in gold prices so we never really climbed that high. But that's That's the flexibility to go up to 50% or possibly slightly more, 55%, but then in a simulated severe downturn.

And this is a great year. Thank you.

The next question comes from Matt Green from Goldman Sachs. Please go ahead.

Hi, good morning, Mikael.

I have a couple of questions on Garpenberg. Could you just touch on if there's any ongoing regulatory investigations relating to the incidents, and could the outcome of this actually impact the restart timelines or your operating rates in the next 18 months?

There is an official inquiry into the occupational health side of things. Did we pose a too large risk to our employees there? That is ongoing with the authorities. I don't think that that will in any way affect the production rate. It could theoretically affect that we will have a fine. It could also theoretically lead to that we would not be allowed to use certain mining methods that are then deemed dangerous and that would then have an impact. But I think that's very far-fetched that they would come to that. Apart from this investigation linked to occupational health, there is not really any investigation ongoing. And in the Swedish context, we managed this whole thing without breaking our environmental permit on any level. So there's no Thank you very much. The ones who have the right to really stop production if they feel it's necessary are the unions. The unions have a very strong position to stop any kind of work that is perceived to be unsecure. We are, of course, the unions are also following very closely what the authorities are coming up to and also our own internal investigations. We do not foresee that the unions will come to a conclusion that we that we, by doing the way that we operate, put our employees at a too high risk. But that's the one. And I know they're looking into this, but I don't foresee that as a big challenge either.

That's great. Thanks. Just another one on, just following on from the previous question is, you touched on development rates, but Are you happy that your fleet size, the ventilation can support your development and mining activities as you go deeper and more laterally to mine from these alternative ore bodies?

The answer is yes. And that is because we have always planned to go to these alternative ore bodies. So we have already planned that ventilation in advance. So we are not short of air in Garpenberg for this production. And of course, being lower in the actual production level, even if some of it comes horizontally, as you're pointing out, and maybe if not from a deal place, but we are emitting less by mucking less.

That's great. Thank you.

The next question comes from Christian Kopfer from Arctic Securities. Please go ahead.

All right. Thanks, operator.

Just a few follow-ups from my side. Firstly, sorry if you mentioned it already, but what was the final pricing effect on Q2, I guess, versus Q1? Positive about 150.

Right, thanks. And then on this... Just to clarify, but that's perhaps obvious.

And then on the smelter side, if I read your comments on specific smelters, you seem to have been running into perhaps minor, but still issues in all the smelters in the quarter, except for very certain. So those, I mean, I know that you have commented on, so maybe one more. But those issues, have those in general been sorted out?

A little bit uncertain exactly what you're referring to, but, of course, we've had maintenance that has been a big part. Otherwise, yes, there's been a little bit of an issue with the silver furnace and the precious metal plant in Runcia that has an effect that it builds up some inventory because we have to store some intermediaries before we can work on that one. But otherwise, I would say that the smelters... have been running relatively strong and not without much deviances, apart from the maintenance, which is, of course, a major distraction.

Okay, but it seems, for example, Harjavälta, leakage in the boiler, Coca-Cola, disturbances in the boiler, Odda, you have mentioned Rönnskär, ramp-up issues of the maintenance. So it seems that you have issues in pretty much all these matters.

Yeah, but still relatively small. Apart from all that, I would call it a more substantial issue with the ramp-up.

All right, thanks.

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

Hi, thank you for the questions. The first one, I know we've had a few on Garvin Bay already, but a little bit further since the incident, when you assess the ore body going forward, would you say there's, how would you assess the probability of being able to access any of the Lat Bay ore body before the shaft is completed? Is that outlook improved, or should we assume the base case is, you know, just keep the flat run rate similar to 2027 out to 2032.

Well, you're asking for the right question, and you're not going to get an answer from me, but I can say something of ambition. You're absolutely right that we have nothing in the Lappari production for the guidance that we have for 26 and 27. The trick that we're working with is, of course, to get to see how much of Lappari we can mine in 28, 29, and 30, and which parts. And I said to some people I would be very surprised if the number would be zero, because there are parts of the ore body that looks relatively good. I would also be extremely surprised if we managed to mine all the 14 million tons that was in that part. Some of it will be sterilized and lost forever. How much of which, I will not say then because it would be too much of a guidance. But we're very disappointed if it's zero. Put it that way.

Okay. Okay, that's useful. Thank you. And then a few specific items, just trying to help us a little bit on the short-term financials, maybe a few for you, Håkan. You specifically mentioned sulfuric. I just wanted to clarify. I mean, the bridge on the smelter says 98 million increase on quarter-on-quarter on by-product pricing. Did you say that you would expect a sequentially higher positive contribution if sulfuric acid prices day-to-day, so implying over $100 million? improvement from Sophoric. Is that the right read?

Probably around 100, possibly slightly better year on year for each quarter going forward as we roll over the contracts.

Okay, but year on year the change is 47 and quarter on quarter the change is 98. So you're saying what would the sequential be like relative to Q1?

That's a good point. I'm not sure if I have that number, but I don't think I can provide a good answer to that. But what we're seeing still is that, I mean, you see the magnitude of numbers. We've had roughly 100, and I think we can continue with... improvements in that order of magnitude. I mean, sometimes far bigger numbers have been suggested and that I don't think we should count on, but we should be able to deliver some further improvements.

Okay, thank you. And then just another few clarities. You said depreciation would lift to 2.6 billion per, was that exit rate at this year or sequentially into Q3?

What I said is that we had about 2.3 billion in Q2, the reported number, and then what I expect is 2.6 billion in total depreciation for each of the quarters Q3 and Q4.

Okay, so that should be 2.6 in Q3. Yeah. Okay, that's good. And then just the final one, you talked to the 600 million of sequential cost inflation across the group. quarter-on-quarter being predominantly maintenance and smelters, but the increase in costs and smelters is only 300 million, implying the rest is in mines. What is the impact of the fuel on costs? And if oil prices stay the same, would fuel be a positive or negative delta into Q3?

If we start with the maintenance, I think that was about 200 million that we had sequentially increase the maintenance cost. Then I think I gave the numbers for oil and power in the last quarter and I can He said that this quarter we spent about 400 million on oil and we spent about 550 to 600 on power. And the movements are moving quite quickly. But then you have to spend for this quarter at least. And then I think you can compare that with what we talked about last quarter to get a feeling of the development.

Okay. All right. Thanks for that.

I'll go back in the queue.

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

Yeah, good morning, guys. I guess the first question was just... On Garpenberg, can you give us the Q2 EBIT contribution from Garpenberg, which could then help us think about what the Q3 delta should be?

Let's see if I recall that. The Q2 EBIT contribution, I think that was around zero from Garpenberg. Obviously, since it didn't produce most of the quarter, I think we're quite happy with that result. We were helped a little bit in the beginning of the quarter by sales out of inventory, and then we got the production up. But that's where we stand, about zero result in the quarter.

Is there any rough estimate for what that could do into Q3?

No, it all depends on prices, but basically the production level will triple going into Q3 compared to Q2. So I think with that, it should be clearly a better position.

Okay. And then I wanted to ask a question on order. You mentioned that ramp-up should continue over the coming quarters. Is it reasonable to assume we get to full production, say, by the end of the year or sooner or later? What do you think is a reasonable assumption?

Of course, when you're standing today, you have a little bit of a broken self-confidence regarding all that. But I will say that I expect to get to full production in Q3. I might have to revise that when we talk at the end of Q3. But during Q3, we should get up to full production. As I said, or maybe I didn't say it clear enough, but just to get the whole thing of it, all those many things. We have checked out the tank house before that it works, but it was never tested at full capacity because we couldn't do that. It's not been tested at full capacity. That worked out. Unfortunately, the test was only a week long, but at least for a week it worked out. Then we didn't have enough material to test it. We have tested the foundry for about a week as well, and it also worked very well in the full place. And so that one has been tested. We have been testing the leaching system. system also full pays only for about a week but also kind of qualified those testing so it we can kind of in a way feel secure that it shouldn't be any issues outside the roaster and acid plant and the roaster has so far been Thank you very much. We have these mechanical failures which are a little bit unexplainable and extremely, you can say upsetting and extremely bad feeling. Why can't you build a conveyor that actually works? We shouldn't have a long discussion about that one, but we feel good about those as well. And once these positions are in place, yes, there will be some further issues somewhere, but it's a little bit unclear exactly what it will be. It's not that we're waiting for a long list.

Okay. Thanks. And then I guess the last question was just on Tara. Is it reasonable to infer that the timeline to get back to full capacity at Tara is going to be a bit more extended, maybe out into 28 or so, just given how ground stability performs, how the workforce is coping with the higher workloads you put on them?

We're not guiding for 27 now, but of course you can say that the fact that we're not quite reaching where we should be in 26 maybe implies that we'll have to revise budgets and so on down for, and thus guidance for 27 down from what it would have been otherwise. But I don't know about how much, and we'll have to see that. That's why we do a full budget cycle every year to make sure we get this right.

Okay, cool. All right, that's everything. Thanks very much.

The next question comes from Johannes Grunzelius from SB1 Markets. Please go ahead.

Hi, everyone.

It's Johannes here. I have a question on ODDA, or, you know, a question on your expected earnings impact kind of in absolute terms, because I know you've given us, helped us with your expectation about annual EBITDA contribution from the new order. Since then, a lot of things have obviously happened with prices and currency and so forth. So could you please provide us a new update on the EBITDA contribution, please? Thanks.

I'm afraid I haven't done an updated analysis on that, so I'll have to pass on that question.

But you can say, last time we spoke, we said 250, right? Yeah. With the market conditions at that time, just to get an order of magnitude of things. Silver prices are down, which is, of course, a little bit making that number slightly lower. Zinc prices are actually up, since we said that, which will make the number slightly better. TCs are down, which will make the number slightly worse. And So if your gases are higher, which would make this number slightly better. Without doing the depth of the math, I would argue that those 250 probably hold. So that's it on the EBDA, and then you have to add the depreciation, or just subtract the depreciation, just as Håkan said.

Okay, that's very helpful. And we talked about depreciation for the group. It's stepping up in Q3. Is that due to that you activate the ODA DNA in the third quarter? That's the reason, yes.

That, I think, is the only reason, right? Everything else is more or less the same.

We will see a slight increase in IT because there is some that is depreciated as a function of metal production. And with better grades, also depreciation should climb up a little bit. but that's kind of almost rounding in that context, so it's basically all done.

Yes, I also have a question on your thinking about or what you see in the market regarding price premiums on top of LME prices, especially in the light of sort of more complicated logistics, higher, you know, oil price kicking in for transports. You provide your customers are in Europe. Do you see a push up on premiums these days?

I would say that we're seeing a slight push up on premiums. You're actually right. On the other hand, if you look at net premiums, when you subtract the logistics costs that we have to support, that is maybe more flat.

Okay.

Valuable comment. Thank you.

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

Thanks.

Yeah, morning. Just two questions for me. First one, just on Tara, off the back of the discussions around the ramp-up pace, can you just clarify whether the restart did envisage the mine milling 2.2 million tons per annum in line with previous capacity or not? And then secondly, I'm just curious as to why silver volumes materially dropped quarter on quarter, last quarter you smelted 2.5 million ounces this quarter, 1.6. Thanks.

If you take the silver one, I think I a little bit answered that one by the latest comments that we do have a silver furnace linked to the precious metal plant in Runsha that is down. And that is, I think, explaining or even over-explaining the lower silver production out of the smelters. Tara, the ambition is clearly to get up to the 2.2. I think I alerted you in a previous answer that how quickly will that happen. We'll have to get back to that once we see exactly where we'll end up in 26 and once we're through the budgeting process in the end of the year.

Thanks.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the President and CEO, Mikael Staafers, for any closing comments.

Well, thank you all. Thank you all for watching. And thank you for all your questions. I think we've had a good session. I want to take this chance to wish all of you a very happy summer. We have very nice weather here in Stockholm today. I don't know what it's like where you are after having had quite bad weather for the last couple of days. And maybe some of you are after this reporting season now heading for vacation. I hope you'll all have nice vacations. With that, thank you, everybody.

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