Boliden — Call Transcript 2016

Speaker 14: A warm welcome to Boliden's Q2 earnings call. My name is Sophie Arnius, and I am Head of Investor Relations. Today's presenters are our CEO and President, Lennart Evrell, and CFO, Håkan Gabrielsson. After their presentations, there will be an opportunity to ask questions via the phone. Let me now hand over to Lennart.

Speaker 8: Good morning, everybody, welcome to this conference call about the second quarter of Boliden. The headlines, as you can see, is high production by mines. It's quite amazing actually that we can put this headline given that Aitik is struggling with crusher availability, and we have actually low production in Aitik, but that is more than compensated by the other mines and excluding the Kevitsa acquisition. Revenues were SEK 9.5 billion, down from last year. EBIT, excluding process inventory revaluations, SEK 900 million, which is a very good number but it includes several one-time items, including a big plus from pensions in Tara. Mines were doing good, as I said. We had big maintenance shutdowns, even exceeding the anticipated profit impact. We see the market improving towards the end of the quarter, and we come back more on that later on. The special items are several. We have the pension benefits from Tara, where we changed from a defined benefit to a defined contribution system, which gave a SEK 240 million positive. We have minuses. Acquisition-related cost in Kevitsa. We had increased provision in closed mines, reclamation provisions. Of course, we have the smelter breakdown, or smelters maintenance shutdowns. Several big numbers, and what you prefer to see, well, they are all of them quite special. Some of them are definitely not recurring, some are coming back regularly, like the maintenance. The Kevitsa impact in the second quarter is mainly on the balance sheet, the acquisition value, and the debt. More on that later. The market, in general, had growth in the metal markets, even though it's soft. On base metals, we have a different reaction to the market demand due to the supply side, where zinc is demonstrating strength with weak supply, where copper is a bit oversupplied as well as nickel, but nickel rebounds a bit basically from what I would call impossible low levels. It's still on very low levels, but not quite as bad as a few months ago. We have seen better development after the quarter. On next slide, you see the zinc price, where we have seen a long horizontal for several years. It has been around USD 2,000. It was dipping down a bit, and now we're back up on over USD 2,000. Copper has a different pattern, where the long-term trend has been negative and where the short-term trend has been flat, and we have seen also here a bit of improvement towards the end of the quarter. Nickel on the long term is lower than in the years demonstrated here in the 10 years. We see the short-term movement up. I would say this is not a sign of a good macro, it's just that the prices cannot be as low down into the cash cost as it has been. 10, I would regard as a worst-case scenario, we're now slightly above that level. Gold and silver are good. Lead is looking a bit like zinc. I think gold and precious metals are all quite normal that they are strong in the sort of market turmoil or political turmoil in the world. On next slide, we can see the volatilities on copper and zinc. We can see that zinc is clearly higher than the low points if you compare with historic lows. Copper is still around the 90th percentile, slightly above. I would say copper is still low, for a natural reason. Too many big copper mines were built. If you compare the prices and the currencies, we have seen a positive currency movement, a negative price movement, one of the strengths of Boliden is that it's quite common that we see the two going opposite direction, the combined you see on the graph to the right. We're well-balanced in currencies and prices. We are balanced between precious and base metals and mines and smelters. I think Boliden continues to demonstrate the sort of the natural hedge in several dimensions. If you go to the mines and look at earnings it look good, there we have the positive of Tara and several minuses as explained earlier. I would say that mines demonstrated very strong development in most of the mines. If we look at the production, we can see on copper, the lighter colored line on top, that is pro forma, including the production or the metal content in Kevitsa. The mill throughput is on the bars, we put all the Kevitsa down on the nickel bars below We can see there that the solid line on copper is higher than the historic numbers, we're close to all-time high, certainly including one month of Kevitsa, we are. The zinc on the right, also very good. Tara developed well, Garpenberg continues to be very stable. At the bottom, we see Kevitsa. We have the historic performance there, as you can see, after a weak first quarter, we see improvements also slightly higher grades. You can see the metal content came up. In darker blue at the bottom is the June result, the June month where we owned the mine. The Kevitsa slide is for reference. The acquisition came through on June 1st. The result was a slight EBIT minus SEK 12 million and an EBITDA plus of SEK 40 million in the month. The rest is well known to you, I think. If we turn to the smelters. I think considering the shutdowns, which were a bit more costly than planned, it was an okay month or quarter. The reason for the increased cost of shutdowns is when you open up the furnaces or equipment, you sometimes see things that you decide on short notice, "No case. We don't put this together before we have repaired what we see here." Therefore, we had a longer than planned shutdowns in a few units. This is not anything alarming at all, as things happens. We have been free from cost overruns in most of the shutdowns for several years. I regret that we had this one, but there is nothing worrying in it. Else than that, we can say that the TC is lower this year than last year. We have a full impact in the second quarter, and we see, like in mines, a positive impact towards the end of the quarter. Looking at the production numbers, you see the relative, certainly quarter-by-quarter, but that's normally it's a bleak quarter. Also, if you look at the typical maintenance quarter of Q2, it's a rather low production in copper. It's a rather low production in zinc. I would say a so-so quarter, but given the increased shutdowns or maintenance, it's okay. Håkan, I turn to you to take us through the financials.

Speaker 7: Okay. Thank you, Lennart, good morning to all. I'd like to continue with a few slides on the financial performance in the quarter. Lennart already covered a few of the items. We reached an EBIT excluding process inventory revaluations of just over SEK 900 million, which is SEK 130 million up from Q1. Looking further down on this slide, the free cash flow and the gearing is very much influenced by the Kevitsa acquisition. I'll come back to that later on. Let me go into some more detail on Q2 compared to Q1. As Lennart mentioned, metal production has been very good in mines in the quarter. This explains most of the SEK 300 million positive volume effect that you can see on this slide. In fact, you have to go back quite a few years to see the same levels of metal production, both when it comes to zinc, copper, and silver. That is also true when excluding Kevitsa. We had a positive impact of prices where metal prices have been stronger, partially offset by lower TCs that have a full impact in this quarter. Regarding costs, there are some items mentioned here. Kevitsa is included, reclamation reserves, which Lennart mentioned, also the maintenance. That explains the cost increase of just over SEK 300. I think the rest have been covered and adding up to a positive deviation of SEK 133. If we instead look at Q2 compared to the same quarter last year, again, you can see the effect of the very good metal production in mines. Compared to last year, though, we had a significantly lower price level with metal and TCs moving in the same direction and having a negative impact of close to SEK 600 million. Going further down, costs, depreciation, and items affecting comparability are the same as has been mentioned previously, adding up to a net effect of minus SEK 350. We then move over to the balance sheet, there are a few things that have happened compared to Q1 that has happened in this quarter. First of all, of course, the Kevitsa acquisition has been completed. Secondly, we have done a refinancing of parts of our debt. Also the dividend has been paid in the quarter. Gearing has increased to 43%, and this is in line with the 20% that we talked about in the press release related to the acquisition and financing. It's slightly higher than the 2013 levels, as you can see on the graph on the right-hand side of the picture, but well within our comfort zone. The loan duration has increased to 3.6 years as a result of the refinancing. We can also see the average interest rate, which has come down from 1.3% to 1.2%. The new financing is included only with one month in this number, but we're happy with the terms, and I think that will be more evident in the next quarter. Moving over to cash flow. For reference, I think we've been through most of this. We've talked about the earnings. I'd like to draw your attention to that we've had a positive development of working capital compared to previous quarters, especially with regards to inventories and payables. There are some natural variations quarter to quarter, but there is also a structural part in the payable side where we've been focusing payment terms quite hard over the last few quarters. Free cash flow, however, is of course negative then with the acquisition of Kevitsa. Finally, we've also added a slide on process inventory volumes. We review that on a regular basis, and here are some updated numbers. Not going through that in details, but you have it for reference to use in your modeling. With that, I hand back to Lennart for some concluding remarks.

Speaker 8: I think it's a very special quarter with the acquisition and a big debt coming in and not so much impact on the profit and loss. We are seeing mines, Aitik negative, all the other mines very positive. We have seen metal prices having very strong momentum, certainly after the half-year break. We of course hope that continues, but we have low macro visibility. That's clear, and I still continue to be a bit nervous about copper, less nervous about zinc. Nickel turned up a little bit from the impossible levels, and the fact that the precious metals are good is not so surprising. I think this is very much in line with what we have sort of been talking about the metal macro for several years, actually. On mines, we have volatile production. I think it is great that we could compensate Aitik. We continue to guide for 0.21% in the total year. We have Garpenberg guidance there. As you can see, we are in the quarters, we have seen a very strong profit in Boliden area because we have been running a lot of Renström ore. We have produced Maurliden stockpiles. Maurliden is a lot lower grade. It's the lowest grade in the stockpile. It's the highest grade we have produced. In next quarter, we're going to see a trend going opposite direction in Boliden. Certainly, I hope that Aitik would be doing something better at the same time. Kevitsa will have a full quarter effect compared to only one month in the quarter. Smelters will not have the big shutdowns. The planned maintenance is only SEK 50 million in Q3. No maintenance in Q1 next year and Q4 of this year. Odda, the P200 expansion project has been continuing to go very, very well. We have actually done some test runs already in the early days of Q3 a little. We are going to do some more. The ramp-up is starting in Q4. We are ahead of plan, as we have said before. CapEx guidance is impacted, of course, by Kevitsa. The difference here from what we have seen before is the Kevitsa impact and nothing else. Slightly above SEK 4 billion this year and SEK 5 billion next year. I think my conclusion is we are demonstrating again a strong free cash flow capability. We are seeing a very balanced mix of metals, mines and smelters and currencies. We hope that Kevitsa will be a good acquisition. I hope that we will see nickel prices coming up later on and that we are not going below $10,000. Of course, time will tell. With that, I think we're prepared to take your questions.

Speaker 14: Let's open up for questions. Operator, please go ahead.

Speaker 11: If you wish to ask a question, please press 01 on your telephone keypad. We have a first question from Liam Fitzpatrick from Credit Suisse. Sir, please go ahead.

Speaker 9: Morning, everyone. A couple of questions, firstly on production and then on working capital. Just on the mining production, could you just give us a little bit more color on the main mines in terms of throughput for the rest of the year? I think Aitik in the past, you loosely guided to 36 to 39, Garpenberg around two and a half million tons. Tara, you suggested we shouldn't read too much into the strong Q1 performance, but it's continued into Q2. For the guidance on that. On working capital, yeah, I seem to ask this every quarter, but just whether this is a normalized level or whether we should expect to build later in the year.

Speaker 8: I think on copper, obviously, there's a big disappointment. We have one of the crushers still on maintenance a couple of weeks into the quarter or actually, I think it's three weeks of July or even into August, it's going to stand still. We are struggling in Aitik and no doubt this is the one disappointment we have in the quarter. Everything else has been going well. Kylylahti, very, very strong. We see Kevitsa coming in with a reasonably good or with a good copper production. In zinc, as you're saying, we didn't dare to believe that the high production volume in Tara would continue, but we have changed the organization. We have a number of long-term actions a year back. We think that that is sort of coming through. It's a good development, but still, we are probably over the normal. We are going to have a realigning in Tara in the third quarter. I can almost guarantee that Q3 will not be on the same high level. It's going well in Tara. I have to say that Tara is good. Garpenberg, very stable, no surprises either up or down. I think the guiding is very good. Finally, nickel. I think one month is nothing that we can judge too much from. We have seen a rebound or an improvement from the soft Q1 where an open pit in the Arctic climate, just like Aitik, we're not surprised that the Q1 is soft. You can see it on some of the historic numbers that we have provided that Q1 is soft. Those are some of the favors I can put on the mines. On the working capital. Working capitals are going up and down. We have a well-managed balance sheet. I don't think that a quarter good will be automatically something which is holding over time. It's coming back. If it's positive now, it's negative next time, kind of. We have a few things which probably are more of a recurring or a long-term impact. As Håkan said, we are working very hard with our suppliers. Some of the improvements, I think is sort of an ongoing nature. I think those are the comments on the working capital.

Speaker 9: Could I just follow up on Garpenberg? Would it be a sort of internal goal that you could actually keep production above the 2.5 nameplates, or would you suggest that we stick to 2.5?

Speaker 8: We always have internal targets which are slightly higher than communicated. What we communicate is what we see with the normal variation is normal. I think the guidance for Garpenberg 2.5 is what you should stick to. With a great comfort, though it is going very well for us. I think 2.5 is fine.

Speaker 9: Okay. Thank you.

Speaker 11: The following question is from Daniel Major from UBS. Please go ahead, sir.

Speaker 6: Yeah, thanks for the call. Two questions from me. Firstly, I just wanted to be absolutely clear on the one-off items that you disclosed sort of within the mining component of this result. Can you just confirm that's SEK 350 million of sort of one-off items, and if you adjusted the sort of mining EBIT for that, it'd be about SEK 270, and the group EBIT would be about SEK 550. Is that correct?

Speaker 8: No. I think if you look at the slide set, we have a positive of SEK 248, which you could obviously That is definitely a one-off, you should take that off. Then you should add back, depending on how you see it, but the acquisition cost is SEK 39 million. That should, I think, be regarded as a one-off. We have increased provisions for post mine of minus SEK 87. That is also a quite clear unusual item, even if it happens that we are looking at closed mines and we realize, as a good citizen, we should be doing improvements, and they are not cheap. In this quarter, we posted an SEK 87 million. If we take all the three together there, plus SEK 248, minus SEK 39 for Kevitsa acquisition and minus SEK 87 is SEK 122 positive. That should be taken off the mines and the group in my opinion. You can have different views on the SEK 87, if you like. That's how I would look at it.

Speaker 6: The second question on Kevitsa, you gave some details, obviously, on the breakdown of operating profit and cost, et cetera, in the quarter, which suggests that the EBITDA has improved substantially versus what First Quantum suggested in Q1. Can you give us a sense of what commodity prices you would expect this asset to be free cash flow neutral in the remainder of 2016 and into 2017?

Speaker 8: I think again, now we have posted sort of a metal price sensitivity in the sensitivity tables, and you have the June results. There I tell you, a single month result is a very, very difficult one to extrapolate to a quarter or a year. Still, you look at the quarter or at the month, we had an M/M effect there, so we had a sort of final pricing effect that with the improved nickel price, we also could get some impact from the previous month. That would only continue if the price continues to move upwards. It is a SEK 12 million negative EBIT and a SEK 40 million positive EBITDA, and depreciations are approximately SEK 30 million, the normalized or the sort of normalized depreciation. We are hovering somewhere on I would say that we are cash flow neutral somewhere here. If we keep the good production level we have right now. Again, what we have said is we are going to give you more guidance and more flavor of the acquisition after six months or something like that when we have the plans together. I would say this quarter and this month is demonstrating we have the situation well under control, and we are happy with what we bought. Yeah. That's my comments on it.

Speaker 6: Just because at these kind of levels, prices exit sort of rate of Q2, you think the asset is broadly speaking, sort of free cash flow neutral after any CapEx?

Speaker 8: I think so. I really stress think. We are one month into it. Yes, ballpark here. Yes.

Speaker 6: Great. Thank you very much.

Speaker 8: Thank you.

Speaker 11: The following question is from Alain Gabriel from Deutsche Bank. Please go ahead, sir.

Speaker 1: Yes. Morning, Sophie. Morning, gents. Most of my question has been answered, but just two quick follow-up ones from me. On the treatment charges, can you give us a sense in terms of whether the impact was coming mainly from the zinc treatment charges or the copper treatment charges?

Speaker 8: We have seen both coming down, zinc more than copper. I don't have the breakdown by heart, I'm sure that if you call Sophie, she can give you a little bit more information. These are public data, you should be able to probably get a good fix on it, I don't have it by heart.

Speaker 1: Okay. Would you expect as we go forward in the year, would you expect the zinc treatment charges to get better given that we will have an impact on the-

Speaker 8: Yeah. Sure. Absolutely. We are now into the terms of 2016. The variable part are according to the market data. Yes, the escalation, well, the price escalators are in place. Yes, absolutely. Increased price, increased TC. Yes.

Speaker 1: Okay. My second question is on your silver production, which went up during the quarter. Do you have discretion in terms of whether you can pull a lot more silver out of the mines or this was really mainly random in nature?

Speaker 8: We had great silver in Garpenberg and we try to optimize the mine on sort of logistics and on combined grade. We knew we would have slightly higher silver, but it came in very strong. No, I don't think you should look at the reserve grade average, and it's very difficult with the tiny, after all tiny grades, even though they are for silver very high, but they are varying quite a bit. Be careful in extrapolating that one.

Speaker 1: Okay. Thank you.

Speaker 8: Thank you.

Speaker 11: We now have a question from Philippe d'Encausse from ABG. Please go ahead, sir.

Speaker 13: Yeah, good morning. Thank you for taking my questions. Two questions. First of all on the Kylylahti mine, can you indicate how, I do not know if you mentioned at the start of the presentation, but I might have missed it otherwise, but can you indicate how sustainable you believe the current levels of ore production are that we saw in Q2, and also the copper grades, which has significantly increased quarter-on-quarter? That was my first question, and my second question is the impact of the Renström mine, the shutdown you indicated there will be a deterioration in the ore mix. Are you able to give any kind of guidance on what we should be thinking of maybe in terms of grades going forward? You do quantify a bit of the impact for the smelters, the maintenance shutdown, but I am just looking what it would be for the mines. Those are my questions for now.

Speaker 8: Yeah. On the grades in the Boliden areas, it is clearly going to be a significant drop in grades from Q2 to Q3. We have a maintenance of the shaft in Renström. It is going to take many weeks. We have sort of stockpiled in order to run the concentrator on a good level, but the concentrator will run low grades. It is going to be a quite significant change, but this is the smallest mine area. The impact is there and would, for example, Aitik go as poorly as it does today, this will have a material impact on the profit. Now, I hope that we can compensate some from Aitik. When it comes to Kylylahti, we have, I would say, extremely strong production results and the life of mine is quite short. What we need to see is positive results from exploration. We are going to talk about that after this year. The short term, I think that you should be a bit careful because Kylylahti was really excelling.

Speaker 13: Okay.

Speaker 8: Nothing else on that.

Speaker 13: Okay. Maybe my last question, the rest is clear. On the reclamation provision, can you just give a bit more background on the provision? What triggered it? Which decommissioned mine does it relate to? I expect that you don't expect any further increases in provisions, but I'm looking for a bit more background to get a bit of a feel on it.

Speaker 8: Boliden has many historic small mines spread around in Sweden. We are monitoring them with rigor and see what happens. We try to accrue for what we know. Sometimes we know that the reclamation done 20, 30 years ago is not of the quality of our own ambition, but also sometimes for the legislation or the rules we have. Sometimes when we build a new mine like Garpenberg, we have in the conditions that we have to clean up something old. Of course, we accrue as soon as we know something or as soon as we have a decision which impacts. It also happens that we are just reviewing our mines and we are saying, "Guys, we are having a liability here that we have to deal with." When we have those feasibilities or those reports done, as soon as they are there, we accrue for it so that we are a bit conservative or we are at least not the opposite. We try to be a bit conservative on the accounting. Will it happen again? Yeah, I think so. Will it happen often? No, I certainly hope not. It has happened before. It will happen in the future. How often? I cannot tell.

Speaker 13: Yep. Okay. Thank you very much.

Speaker 8: Thank you.

Speaker 11: The following question is from Christian Kopfer from Nordea. Please go ahead, sir.

Speaker 4: All right. Thanks, operator. Good morning, everyone. A few follow-ups from me. Firstly, on the grade in Aitik, you mentioned, Lennart, that you say guide for 0.21. Should we still interpret that as the uncertainty of that guidance is ±10%? Should it come down dramatically for the second half of this year? Thanks.

Speaker 8: The problem with Aitik right now, it's evident if you look at the numbers that we have a continual problem there. We have a problem in the crushers. We have a problem to forecast which area we're going to mine. Therefore, I think the variations, the volatility on production is unfortunately also in grade. Now, with the present setup, we have the crushers in the pit going and on the surface not. Sometimes we have a tendency that low volume can be compensated by slightly higher grades. That is nothing I'm going to promise. Absolutely not. The tendency is there. When you're not in good control, you're not in good control. Sometimes we have to-

Speaker 4: Right

Speaker 8: drive long distances.

Speaker 4: Right. About volumes, you hope those in Aitik to come up in Q3, obviously. Can you mention how-

Speaker 8: I can promise you one thing. I hope they will come up.

Speaker 4: Right.

Speaker 8: I think that this is a low point. If it is not a low point, we have a serious problem. We have a lot of short-term actions here with I think that we shouldn't be lower than what we have seen. Absolutely not.

Speaker 4: Right. Can you mention something, Lennart, what the crusher availability has been so far in July?

Speaker 8: No, they have not been good in July either because one is still standing.

Speaker 4: Right.

Speaker 8: We're working hard and we have good people, better than more staffing and more focus than ever before.

Speaker 4: Right. Depreciation charges, those came up partly due to that you're mining capital-intensive areas. Is that set to remain also in the second half of this year?

Speaker 8: Same answer as grades and on volume. Depends on where we are mining.

Speaker 4: Right.

Speaker 8: I cannot tell. No, it depends on the volatility basically.

Speaker 4: Thanks. Finally from me, on maintenance CapEx, previously you have mentioned that the maintenance CapEx level is in the region of SEK 2.5 billion annually. Is that still relevant also after Kevitsa, or how do you see that?

Speaker 8: Håkan, what do we say about maintenance CapEx level?

Speaker 7: Raise that number to SEK 3 billion going forward with the inclusion of Kevitsa.

Speaker 8: SEK 3 billion annually in maintenance.

Speaker 7: Maintenance CapEx. That's correct.

Speaker 4: All right. Thank you very much.

Speaker 11: The following question is from Oskar Lindström from Danske Bank. Go ahead, sir.

Speaker 12: Yes, good morning, everyone. I have three questions. The first two about Aitik. You talk in the report about the impact of a new crushing organization in Aitik, and you mentioned it here in your previous answer. Obviously you're hoping to improve the performance of the crushers. Will this new organization also lead to higher costs going forward?

Speaker 8: Margin. No, it will be [inaudible] , you can put it this way. One of the guys, or the guy we have put in charge, I'm calling him the most expensive guy in the company because he's going to spend money on getting our act together. That has the shortest payback you could think of. I would say no, it has a very positive cost impact, even though short-term maybe. I think on your sort of models, no, I don't think you need to take any special cost for it.

Speaker 12: Okay. The second question around Aitik is you talk about the new crushing station which will be in place in 2018 sometime. First of all, when in 2018 and has that investment decision been approved already, and is it included in your 2017 CapEx guidance?

Speaker 8: It is included, it is approved, the project is on plan.

Speaker 12: When during 2018 do you expect it to be operational?

Speaker 8: We are going to ramp it up 2018, it will be, if I recall right, maybe in the second quarter, we are starting it slowly, if I remember right. We are certainly going to give more accuracy on that timing in one or two quarters.

Speaker 12: Okay. Thank you. My third and final question is around your balance sheet, you know how you're back at 40% gearing, you're increasing your CapEx guidance and meanwhile, the smelting profits are down quite significantly. How do you feel about that sort of combination? Is that something we should be worried about?

Speaker 8: I think we did a bit in the smelters of SEK 400 million, we had over SEK 200 in maintenance CapEx. I think it's not too dramatic. No, I think we're feeling quite comfortable. We have mines developing very well, considering that Aitik is bad, Aitik will not continue to be bad forever. We have action plans there, it's going to take a while before we get stability back. I think the general picture is, we're confident. No, it looks good.

Speaker 12: Is your focus going to be sort of debt reduction going forward? Or is this the kind of?

Speaker 8: Yeah, absolutely. Yeah.

Speaker 12: All right. Thank you very much. Those were my questions.

Speaker 8: Thank you.

Speaker 11: Now we have a question from Amos Fletcher from Barclays. Please go ahead.

Speaker 2: Morning, gentlemen. Yeah, just one question, really. I was just wondering if you can clarify the increase in the CapEx guidance for 2017. Is this entirely down to the Kevitsa acquisition or is there inflation in any other areas? It just seems that when you compare the SEK 500 million increase, it's roughly double what was in the most recent Kevitsa technical report.

Speaker 8: Yeah, I think we might be more prudent than in the technical reports. This is primarily we have to speed stripping in or [contain] speed, I should say, because we are in a high strip year and for several years, we're going to have a lot of stripping to do. Most of the CapEx is not equipment acquisitions, it's stripping. Else than that, it's smaller things, so it's stripping basically.

Speaker 2: Okay, thanks.

Speaker 11: The following question is from Olof Grenmark from ABG. Go ahead, sir.

Speaker 10: Yes, good morning. You gave us some extra details regarding the outlook for zinc treatment charges. Is it possible to elaborate how you look upon the equivalent area for copper treatment charges, please?

Speaker 8: We have 90% or 95% of the volumes contracted at benchmark levels or benchmark levels plus minus. Unless there is very big sort of mix changes between different suppliers or different concentrates, we are on a stable level through this year and into the first quarter of next year when the stocks are sort of expiring or consumed. I think copper will be stable from the second quarter onwards.

Speaker 10: Okay, thank you. Also regarding the upcoming maintenance cost that you guide for SEK 50 million in the smelters in Q3, how difficult is that maintenance stop from a historical point of view, if you could scale it somehow?

Speaker 8: Well, we have been very accurate in our maintenance stops, and the second quarter of this year, or the second quarter we present now, is a cost overrun. Your question is, are we going to see another cost overrun on the SEK 50? No.

Speaker 10: Yeah.

Speaker 8: I don't think so.

Speaker 10: Okay, fair enough. Thank you very much.

Speaker 11: We have a new question from Daniel Major from UBS. Go ahead, sir.

Speaker 6: Hi there. Very quick follow-up question. Just wanted to elaborate a little bit on the provisions that you accounted for this quarter, the SEK 87 million. How much of that is a cash component and if there is a cash component associated, when would you expect to actually spend the money with relation to that provision or is it a non-cash item?

Speaker 8: No, it's a cash item, and it's going to be spent in the next, I'm guessing now, 24 months.

Speaker 6: Excellent. Thank you so much.

Speaker 11: We have no further questions at the moment. Ladies and gentlemen, I remind you that if you wish to ask a question, please press zero one on your telephone keypad. We now have a question from Daniel Lurch from Exane BNP Paribas. Go ahead, sir.

Speaker 5: Hi, it's Daniel Lurch speaking from Exane. Thanks very much for taking my question. Just a quick follow-up on copper treatment charges. Treatment charges are holding up quite well in the spot market right now. Do you expect in copper TCRCs in the next couple of months, and do you think the current highest spot rates can be sustained? Maybe a quick question also on the market, this time on copper scrap. Is that something where you see tightness here? Is this in any way influencing your view on copper? Thank you very much.

Speaker 8: No, I think that it's a surprisingly strong spot level. I think that we don't have a different view than metal analysts in the market. I think it is of short-term nature. I think the tendency is low or is that the TCs are going to be under pressure in copper. Of course it's good when the TCs are high. We're a net smelter, and we enjoy it, but we have very little of spot deals. The impact on us is not so good or not so big. No, we don't draw any particular conclusion. We're slightly surprised, but there are reasons behind it, but no other comment.

Speaker 5: Right. In terms of copper scrap, is that something where you see any tightness of that impacting your price guides in the short term?

Speaker 8: No, we have from our suppliers and for our needs of scrap, we have a quite good situation. Yeah.

Speaker 5: Thank you.

Speaker 11: We now have a question from Avril Hong from Bloomberg. Please go ahead.

Speaker 3: Hello. Good morning, Lennart and everyone. Thank you for taking my questions. I have three questions. The first is on nickel. Lennart, you mentioned that you hope you don't see nickel prices below $10,000. Can I imply that is the break-even price, nickel price assumption for Boliden's nickel business? Also, what do you see as the key trend that may drive nickel prices down to $10,000?

Speaker 8: I see the low point not being nine but rather 10. I think that 10 is already deep into the cash cost curves. I was extremely surprised to see $8,500, $9,000 for a period of time, and I have repeatedly said that these are impossible levels. The low points for any kind of length of time is probably around 10. Around 10 is our break-even point ballpark, as I said before.

Speaker 3: The second question is on zinc. You mentioned that you're less nervous about zinc. Could you expand your forecast? Would that be on the demand side or on the supply side?

Speaker 8: The reason for my positive view on zinc is that the supply is squeezed. We have seen very few new mines. We have seen few new discoveries and several mines have depleted, and therefore the supply is scarce. We see the official numbers for zinc production is going down in a world where there is a small positive growth in demand. Zinc is a scarce metal right now, which is supporting the positive price and our sort of attitude or anticipation of what we have in front of us.

Speaker 3: Thank you. The final question is on CapEx. With today's CapEx forecast for 2016 of SEK 4 billion, could I just ask if there's any changes to the 2017 target that was mentioned earlier about SEK 4.5 billion? Thank you.

Speaker 8: Yeah, the increase is that we have bought the Kevitsa mine and the added or the increased value is due to the acquisition only.

Speaker 3: Thank you very much.

Speaker 8: Thank you.

Speaker 14: We have no further questions.

Speaker 8: Yeah.

Speaker 14: Okay, thank you for joining us today. Boliden's Q3 report will be published on the 20th of October. Thank you