Boliden — Call Transcript 2016

Speaker 9: Good morning. A warm welcome to the presentation of Boliden's Q4 2015 result. Our CEO and President, Lennart Evrell, together with our CFO, Mikael Staffas, will comment on the Q4 results. After their presentations, there will be an opportunity to ask questions, both from our audience here in Stockholm as well as from the telephone conference. With that said, I hand over to Lennart.

Speaker 6: Good morning, everybody. Last time we met it was after Q3. It was joy. This time we are coming in slightly below your expectations and our expectations. I think that we are a bit disappointed with the performance in Aitik, but we're very happy about the results from exploration. Therefore, all in all, I think that we can have mixed feelings, but I think Boliden is demonstrating strength, and we have a job to do in Aitik. If we look at the development, obviously we have on the rolling 12 curves, we can see a decline, which is a result of tougher market conditions. Revenues were SEK 9.6, so they were still a little bit ahead of last year, and earnings were half of the previous year. Earnings or cash flow was positive, but by a little and down from the previous year. Metal prices and slower or less favorable currencies are explaining most of the deviations here. The copper feed and production in both the smelters and the mines were good compared to Q3, but that's also partly a seasonality effect. We had a number of one-time items, but I would say that even though they are negative, they don't change the big picture. I think that it's both plus and minuses, so the group results are representative. On the full year, SEK 40 billion in sales versus SEK 36 billion a year earlier, and earnings before interest and tax, which are SEK 4 billion as compared to SEK 2.6 billion, is of course a very strong year given circumstance, given the raw material industry in general, and we are extremely pleased with it. The free cash flow of plus SEK 2.6 billion is in contrast with the general industry or in our industry in a big way. The metal prices have been going negative in the end here, but we have had very favorable currencies if you look at the full year and compared to the previous year, obviously. The big news on profits, apart from conditions, is the ramping up of Garpenberg. It has been a great success. We are on a full year disclosing all the units, and as you can see later on, it's a very strong performance from Garpenberg. We also have effects of the full year on the acquired mine in Finland, Kylylahti, and we propose one third of net profits in dividend in line with our policy, and that's SEK 3.25, which is a little bit over one third. In the market, I think you who follow Boliden and raw materials, you're well aware of the general situation. China was driving this, the difficulties in China is, of course, lowering the demand compared to expectations. I would still point out that we see positive growth numbers for base metals despite the general much softer or negative development or softer development in China and in the world. I think that we do not see a dramatic negative or something, but it's a slower growth. That is coming in parallel with several years of very high profits and big investments in expansions, and the balances are more supply and lower demand or lower demand growth means that sentiments are going down, and stocks are, in many cases, increasing, and the pressure on these volatile prices have been very dramatic. On the TC and the smelters, which are, of course, the big contribution of profits nowadays. We see copper being oversupplied in copper cons, they enjoy from many mines wanting to sell the copper concentrate to the smelters and good terms there. In zinc, it's more pressure on the zinc TCs. On copper smelters, it looks good. In zinc smelters, it looks good, but not quite as good as for the copper side. If we look at, I think most of us are wondering, are we going to see this metal price decline continuing, or are we at the bottom or floors, or where are we? These are two diagrams. As you can see here, it's on zinc to the left and copper to the right. We have the lines which are representing the cost level of the industry. You can see on the upper line, the 90th percentile, and the two below are on the 75th and the 50th percentile. At the 50th, for example, half the mines in the world are doing EBITDA plus and half are doing EBITDA loss when the price is hitting the line. We can see that we are around the 90th percentile, and these are not quite updated. In particular, in zinc, we have seen an improved price situation since the end of January, where the graph is updated to. If we look at the long-term development, we can see that if someone is asking, "What's the lowest possible level for zinc?" I would say that there is still room for decline, and it's probably not going to happen because the macro of zinc is short supply, and therefore, it can be expected to not go down to the lowest possible levels. I would say we are somewhere on the low side of zinc. In copper, we are already on the levels where the historic lows have been. I would say that if the world is not behaving in a very different way this time compared to history, we are at the low points. Individual days can probably be slightly lower, but I would say that in historic terms versus cash cost, we are low now. If we look at the currencies, which has been so positive to us. On the left side, we have the index of the metal prices in dollars, and we have the mix of currencies we have versus the dollar. The darker line is the currency impact, and the lighter blue line is the metal prices, and they are going opposite direction, as you saw also after Q3. If we add the two curves together, you have the yellow line or the diagram to the right. We can see periods in 2011 when it peaked, and we saw also in the beginning of this year that we had very favorable combined terms. We are today at a level which is not dramatic. When we talk about currencies, it is also important to note that the advantage we have with the weak Swedish krona to the dollar is shared with most currencies in raw materials. If we look at the copper groups of countries, they have had a similar soft currency compared to the dollar. If you look at the zinc nations or currencies, even more so. I would say that in our competitive position, the currency development has not changed our competitive position a lot. Basically, we are, from that parameter, on the same level. The zinc price itself, if we blow it up, we can see the longer-term trends here. We know that zinc held up very good compared to basically all raw materials or almost all raw materials, but it has been influenced by the general sentiment. Raw materials, bad news, everybody is selling, and it is putting pressure on it. I think that we have seen, in line with what we have also said many times, that zinc is probably the metal which will come back sooner of the different metals. I think in the volatilities we have seen, the short volatilities, the zinc has been popping up stronger than most other. Actually we are up. This is to the end of January, and we are higher than that right now. But still, it is negative development. Copper is more negative and has been going down also in the beginning of this year, as you can see on the blow-up to the right here. The precious metals are down. Lead is, apart from zinc, or probably the only one even beating zinc when it comes to stability. Also this, we have pointed out for a year or two that the stop functions in cars, the big car sales in China and so on, has been supporting battery sales. Lead is a good commodity. With that, I hand over to not CFO, but President of Business Area Mines. Having him here, it is good that you take that presentation.

Speaker 8: Thank you, Lennart. Thank you. I will keep the two hats on for this presentation, and I will come back as the CFO a little bit later as well. Start looking at the mines. We have had a result that is not quite satisfactory during the quarter, and it is Aitik that I think is below most of your expectations. We did say in the end of the third quarter that we had problems with the crushers in Aitik, and that was likely to spill over into Q4. That did spill over into Q4, and it spilled over more than we ourselves expected. We have had issues all along in Aitik during the quarter that has hampered our down. Apart from that, as we have also said, we have the issue that Maurliden mine in the Boliden area is out of commission, has been out of commission. That was in a way planned for, but that means that you have very little flexibility when small things happen, as they always do. Therefore, the Boliden area has not been able to quite keep up the volumes as it should do because of that. Apart from that, with those two negative sides, we've had a very positive development in Tara. You could argue from lower levels, but we do have a positive development in Tara, and Tara has been doing better in Q4 than for quite a long time in terms of volumes. We have still a positive development in Kylylahti. The production is going very well. In Garpenberg, saving the best to the last, we have come up to the two and a half million ton pace by the end of the year. The ramp-up is full, and I'll show you very briefly or very shortly, I'll show you the result for the individual units, and it's clear that Garpenberg is now the star mine that we have with our present prices and terms. That is mines, and I think I've commented around these comments that you've seen here. If you then start looking for mines for the full year, and it might become obvious when you see this, that we're making most of our money, or you can argue all of our money, in Garpenberg. The rest of the mines add up to pay for exploration, if you want to be blunt. Garpenberg has been a success throughout the year with very stable and high production according to the ramp-up curve, and compared to the others, relatively good prices and terms. Aitik has been struggling, both technically and operationally. Now, the number that you see here, the 183, is not quite as bad as this, because we have the one-off in Aitik, but it's around a SEK 400 million pace for the year, which is of course not at all satisfactory given the Aitik mine, and we'll come back at the Capital Markets Day around how we're dealing with the Aitik situation in general. It's also important to point out Tara. You see Tara is pulling a profit here, but if you take out the one-off on pensions there, it did make a loss for the whole year. It's clearly positive EBITDA, and also during Q4, with the price and terms hitting the low, Tara was still pulling out a positive EBITDA. Now, if that was a general bad situation and a relatively bad production in the quarter, we also have some very good news. The good news is the annual update on mineral reserves and mineral resources that we present this time every year. Being fairly new into the position, I had a question, and I asked around how would our geologists compare this year to previous year. It is clear that if it's not the best year, it's one of the best years that we've had in the last 50 years in terms of exploration. That also shows in the numbers. Let me just quickly go through them as a sum up. We have a positive development in terms of mineral reserves that are up in Aitik, Garpenberg, and Tara. We have a higher reserve grade for copper in Aitik, which is important, and we've been working very hard in our optimization to get this. It might not look much to go from 0.22 to 0.23, but it is a significant 5% increase in the grade, which will make a difference going forward. There are lower grades in Garpenberg and Tara, but it's not lower grades in what we had there historically. It's the added tons that are at slightly lower grades than the historic ones. Especially in Garpenberg, where we're making so much money, additional resources do make it into the reserves. We also have two new satellite positions that we will introduce. We have Nautanen, which is close to Aitik. Compared to big Aitik, it's a relatively small resource, but it's high grade and it fits well into the profile in production going forward, and we are quite hopeful that we can turn this into a mine in, say, 5 to 10 years. Rävliden, which is in the Boliden area, very close to the Kristineberg mine, is another positive development that we're looking into. It's also close to existing infrastructure and a relatively well and high-grade deposit for the Boliden area, and it's also looking very good there. I should also say that we do have one piece of bad news in the sense that we don't have any additionals for Kiirunavaara. That was, of course, one of the reasons we bought it, that we wanted to have positive exploration results. We did not really get started well until half the year. That's one reason, but we haven't had any luck. We haven't struck anything big in the six months that have been going on. If you look into the video there, here you can see it graphically, you see the bar, which is the darker blue here on Aitik. You can see that the reserves are going up. You can also see how big the reserves are compared to the production. The black line is 10 times annual production, and we have a 27-year reserve life. You can see lots of resources that could potentially be transformed. Here you also see Nautanen at the 16 million tons is a relatively small resource. This will be underground. It's 15 kilometers away from Aitik. At 1.4 copper, it is of course much richer than the other Aitik ore, and it looks quite promising from that point of view. In the Boliden area, you can see that we have a very flat and stable development. We have just shy of 10 years of reserve life there as well, and it's relatively flat, so we find as much new as we produce in a year. On top of that, you see the big jump in mineral resources, which is the Rävliden deposit that has been added to there, which also looks promising for the future. Going over to Garpenberg, you once again see here that despite that we've increased production and we're taking out two and a half million tons per year, we still have an increase in the reserves. However, a slightly lower average grades, and those average grades is partially because we've been producing over the average grade and that the additional tons that are coming towards the end are a slightly lower grade. You also see a very high increase in the resources, and once again, it's proven that there are resources around in Garpenberg. These are also at lower grades, but it looks also very promising for the long term in our most profitable mine. You also see at Kiirunavaara the negative. You see the step down from the resources that were presented a year ago, and that's basically one year's of very good production that is taking its toll on the reserves. Finally, Tara. Tara, that has been for many years around this five, six, seven-year reserve life. We now have a six-year reserve life in Tara that is proven, and we have increased the reserves compared to last year. With that, I'll give it back to you, Lennart, to talk about smelters.

Speaker 6: I think smelters continue to demonstrate very strong performance. The exceptional or the good one is Harjavalta, where we have very strong performance, and the rest is doing good. If we look at the numbers, earnings before interest and tax and before the process inventory revaluation was SEK 583. It's down from the previous year. But if you look in your notes or remember what I said, someone said or we were asked, "Is this a normalized year or is this something special with Q4?" And I said, "Yeah, it's something special." Everything is going wonderful. So this is not the new normal. This is a quite exceptional period. Q4 was up to our plans, and we are happy with the performance. CapEx were SEK 496. We are spending on a quarter, but we are spending more money on maintaining these very profitable smelters right now. We have held them back a little bit over many years when we focused our CapEx on the mines. All in all, we are reducing CapEx. We're taking it very easy right now, and we are prudent, but the tendency is that the return on better maintenance is strong. We don't like these profitable units to have interruptions or unplanned stops. The volumes were higher than Q4, and the terms were higher volume and lower terms. Of course, the impact of falling prices is impacting the free metals, but it's also impacting the zinc TCs. Compared to the previous year, as I said, it's more strong last year than anything else, or it is that. We had some internal profit eliminations where the accountings were changed, so it's a one-time effect of minus SEK 60 in the smelters business area. If we go through unit by unit, well, look at the yellow bars compared to the light blue bars and the total, I think it speaks for itself. What is exceptional is, of course, the more than double result in Harjavalta, where feed has been good in copper, where the combined copper and nickel capacity is giving us a-- We can buy profitable products and process it when we produce copper, we get some nickel, and we can produce nickel. This combined nickel copper smelter is particular suited to the markets right now. We also changed the strategy on nickel to do the nickel smelting in our own books, and it is not the reason for the exceptional result, but it's adding. So the strategic move there was good and is going according to plan. Little Bergsöe has had some issues, not a big deal, but it's probably the negative there. With that, I hand over this time to CFO, Mr. Staffas, right?

Speaker 8: Thank you. Let's briefly go through the financials. If we start with the first slide, I think you've all seen these numbers, and they're not new to you, at least they were new a couple of hours ago, but you've seen them now. The profit, excluding process inventory revaluation, just shy of SEK 600 million. The cash flow around zero this quarter. If we start looking into the bridges and see where this comes from, we'd start with comparing against Q3, the previous quarter. The volume is up. We've had higher smelter feed, mine production is up during these quarters. Prices and terms are down, mainly lower metal prices but also some lower smelter terms, taking into account the total mixture of smelter terms. We have seasonally higher costs than we always have when we compare Q4 to Q3, because it's mainly we have seasonally low cost in Q3, but also the higher mine production has to contribute a little bit to the higher cost. Then we have some items affecting comparability that I think we've spoken about of SEK 45 million. That's the comparison with last quarter. If we now compare against last year, where we have a slightly lower production than we had a year ago in terms of volume, this is mainly smelter feed that is slightly lower. As Lennart pointed out before, this is not so much that we're producing bad this time around. We just had a very good Q4 for the smelters last year that we're comparing with. The prices and terms are lower. This is, of course, mainly the lower metal prices are driving this down. We're getting some help on the US dollar, but it's not helping enough to get into positive territory. Costs year-on-year are slightly up. If you look at this number and look at some kind of internal inflation, you will figure out that we are very close to zero in the way that we can handle our own inflation. Compared to last year, that's relatively strong. We didn't have any one-offs last year, of course, the SEK -45 comes there as well in the explanation. Looking over to the cash flow, cash flow SEK 36 million or close to zero. We have invested quite a lot in the quarter. The investments in the quarter were SEK 1.2 billion, which is higher than it's been in previous quarters. This is a normal seasonal effect. We tend to always have higher investments in Q4. It's a good investment for doing, especially mine development that we tend to work on in that quarter. We do have that. Also regarding tax pay, which I think we had a discussion over the last few quarters now. This quarter you see a much more normal tax paid in line with the tax charge that we have on the P&L. Finally, on the balance sheet, it has also strengthened somewhat. It is now down to 23% net gearing at the end of the quarter. With that, Lennart. Well, sorry, I should just come very quickly on the full year first before I give it back to you, Lennart. On the full year, you see that we have now the SEK 4 billion in profit, and we have a cash flow of SEK 2.5 billion. We are both pleased for the full year with the profit and with the cash flow. Looking for the full year, we've had a very good volume development compared to 2014, with a SEK 1 billion plus in effect on the volume side. Prices and terms were also helping us. If you compare 2015 to 2014, especially the currencies, that helped us quite a lot in that comparison. That's been the two main drivers of the much stronger performance in 2015 compared to 2014. Now, Lennart, I'll get it back to you to summarize.

Speaker 6: The markets are volatile, the swings in Boliden are dramatic. The decline in mines is dramatic. The ups in smelters is equally dramatic. If we go into the units, when we've, on full year, look at the individual units, I think that Garpenberg sticks out in a big way. Despite the fact that most mines in the world are struggling, we're making a big profit there. If we look at Aitik, it looks like a very low level of profit, but Aitik is hit by SEK 200 million in a one-off that we took the charge of the diesel tax this quarter. The underlying result is SEK 200 better. The little profit we do in Tara is, on the other hand, SEK 200 worse, because it's including a positive of about the same, about SEK 200 million. It's doing a negative SEK 100 in EBIT. Tara is doing clear EBITDA plus also, EBITDA a little plus in Q4. I think the mines are having a problem. We have a good result in Garpenberg. Aitik is better than it looks, Aitik is not performing well. I think if there is one bad news, it is Aitik. Turning to smelters, I think the general picture is very good. It's great to have mines and smelters together, Harjavalta is sticking out clearly there. To have base metals and precious metals, we are talking about often that in very bad times, the precious metals tend to go up, where the general economy is pushing the base metals down. We haven't really seen that or surprisingly little of it, I think we see it now lately in the recent periods. We have seen that tendency. I think that if the markets are really going sour, if it becomes worse and more bad news in the general economies, I think that we will see, or I hope that we will see the precious supporting our business. High productivity, always important. We are driving technology in our industry. We have continued to do so in Garpenberg and elsewhere. What have we said, which we like you to bring to your models and expectations going forward? We always have this slide. Well, first of all, we do a grade guiding in Aitik, 0.21 for 2016. We are also saying that Q1 and Q4 are more often or are sometimes hit by weather. January was very cold in Aitik. The year didn't start fantastic. It will perhaps be some winter conditions, sort of in the Q1 when we arrive at that one. Garpenberg grades, as demonstrated here or shown here. We had some rock conditions in Garpenberg in the end of December, which will, we think, not hamper the volume. There are some stopes where we cannot mine as planned. We have to now quickly redirect our production in Q1 or end of December and into Q1. Today, I think it is true, unless you have very recent news, that we think we will make the volume, but we have to do stopes with slightly lower grades. Not too dramatic, but it's still something we know by now. We inform about that. We are going to manage cost. We're going to manage CapEx. We continue to be careful with what we're spending. We are coming out in 2015 lower than guided on CapEx. Some of that is moved into 2016. If the present conditions prevail, we are going to do without. We hope that we are not forced to do too dramatic changes, but we are going to push CapEx also out of 2016. What comes over the spillover from 2015, we hope to spill over as well. The smelters Maintenance shutdowns are as exhibited here. It's about 200 plus 200. 200 in Q2, a little bit more. A little less in Q3. Sorry, below 200. 165 in Q2 and 50 in Q3. On the benchmarks, we have got the benchmark levels for copper. It's 97 compared to 107, so it's down, but it's on a healthy level. Zinc is not closed yet, or we don't know, but it has price participation, so I think it's much more depending on the zinc price. That concludes our presentation for today. This is the final slide. You are invited to our Capital Markets Day. We are going to do an Odda visit. We do some general presentations in Stockholm before we fly out to Norway. If we said something forward-looking, we probably expressed ourselves wrong. Read this. With that, we conclude the presentation for this time. Maybe the last remark, I forgot the most important. Exploration. We had very good news. I would like to just underline what Mikael said. We have got additions in Aitik and Garpenberg, the two mines which are generating big profits. We have also new discoveries or new deposits, Nautanen high grade, which is quite important for the life of mine plan in Aitik, where we can fill up next pushback, where we again will start at the top of the pits, which will naturally, and we talk now somewhere behind 2020 or something. If we're lucky in that we can develop these deposits, maybe a good quite valuable and value-enhancing thing. With that, I close our presentation. We are prepared for your questions.

Speaker 9: Yes. We will start with questions from our audience here in Stockholm. Do we have any questions? Yes.

Speaker 14: Thank you. [inaudible] . On Aitik, you said that Q1 will be seasonally weak as usual. Do you have any indication of how we should look at the gradual ramp up towards 45 million tons? Will it be happening in 2016, or is it more in 2017?

Speaker 8: Well, as I said, we will come back to this in the Capital Markets Day regarding what we're doing and what the action plan will be around Aitik going forward. We have no new guidance at this stage.

Speaker 14: Okay. In Tara, you are doing cost savings, but at the same time, the mine is getting deeper, and you say costs go up when you go deeper. Do you think the net effect will feel that you get costs down, or will you be rather stable in costs?

Speaker 8: Depends on when you put your basis, overall, Tara is reducing cost. It has done. Going forward, it will continue to go deeper, and the costs are going up a little bit, but overall, it's going down. If you take the baseline two years ago, it's going down.

Speaker 14: Just the last one on Garpenberg. You guided for 4.5% of zinc grades in 2016, 2017. Then the reserve is 3.9%. Will you gradually go towards that after 2017, or do you have any indication of the mine plan?

Speaker 8: I think it's only prudent for you to use the 3.9%, which is the average. Exactly how that will happen, we don't really know. Of course, there's always a tendency that you want to take the better parts early, but you should take a flat line after that.

Speaker 14: Thank you.

Speaker 10: Ola Sörmark, Swedbank. I have to come back to Aitik. Can you say anything? I was saying that you're going to talk more about Aitik at the Capital Markets Day, but can you say everything, how you are going to improve the profitability? Because when one is looking at the bridge you showed, the costs increased quite significantly quarter-over-quarter, but the volumes were not so much up.

Speaker 8: The costs are up, that's not so much related to Aitik maybe, that's more related to other things, including the seasonal effect. There's not really a cost issue in Aitik. The issue in Aitik, as you know, when everybody's been around for a while know, it's the stability of the crushers that comes back and haunt us. We have announced already two years ago that we were going to do something about the crushers, for different reasons, we have stalled that development because we've been working with the mine plan, of which this development of 0.22 to 0.23 is a very important part in doing the re-optimization. We've been working optimization, where to put the crushers and what kind of crushers to have in there, that's what we will talk more about later.

Speaker 10: Okay. Exploration. The budget for this year compared to last year?

Speaker 8: Similar.

Speaker 9: Any more questions?

Speaker 5: It's Julian Bahr from SEB. You're leaving somewhat of a cliffhanger when it comes to your CapEx and Aitik investments until the CMD. I think all mining companies in the world have been very aggressive on cutting CapEx to reflect market conditions. Let's take a scenario where I know absolutely nothing about your previous guidance for CapEx. What are we looking at in 2016 as new CapEx? What's the rollover from 2015, and how much is variable depending on how prices develop?

Speaker 6: You can take the more detailed financial number-wise comment on it. I think if you have no idea, or if you are a newcomer, and we take the general picture, we have spent a lot of money in expansions for several years. When we did that, we held back maintenance. We have had good profit generation, and we have a strong balance sheet today. Unlike this industry, we have the financial strengths, positive cash flows, positive results, and we are really hoping that we don't have to do what many other companies are doing, big deviations, which are always related to destruction of values. You have invested, you have to stop invest, the capital already done is now standing idle until a sunny day or something. You have to do stupid stops, where you take risk on both environment, people, profit, and whatever. I think we are in an extremely favorable situation, where We are not naive about the severity of the market conditions. We are going to save, we are going to reduce, and we are going to make sure that we don't destroy the fixed assets or the assets we have. We think that we will be milder in our reactions than many others, which I think is extremely positive for the value of our company. That's a general picture. Mines are having more of a profit decline right now, or a profit decline, and smelters are going up. Well, when we did the big Garpenberg and so on, we held back the not very profitable smelters maintenance. Not in a stupid way. We had a discussion on the board meeting yesterday, and we said that they are well-maintained, but there are things where we can probably increase the uptime, the availability of some equipment, and reduce the risk for unplanned stops, and we're going to prioritize slightly more there and slightly less in the mines. It's a tendency from mines to smelters, tendency that the total is held back, but not in a too dramatic way. That is a general picture.

Speaker 8: I can just.

Speaker 6: Say that you agree that.

Speaker 8: I agree, I just have a sense of number. We said many times that SEK two and a half billion is roughly what is our investments that we need to do, which is in the unavoidable part of it's just an ongoing CapEx. Those you cannot really do much about, because it's also about development in the mines, and you cannot really stop developing, because then you will stop producing. That's around two and a half. Now we're guiding slightly shy of four. What's the difference? The difference is in there. I said we've guided for a couple of these items before. There is roughly SEK 1 billion in Rönnskär and roughly SEK 1 billion in Harjavalta that needs to be invested over a couple of years, in terms of the environmental programs that are going on in those two units. You can take those two and divide it by whatever number, four for example, you get half a billion SEK or so that comes out in this year. You have the tail end of the other investment that's coming in the year coming forward. There are other smaller bits and pieces that are in there, and that adds up to the SEK 3.5 billion. Or, sorry, the shy of SEK 4 billion. To shed a bit of light, when we guided a year ago, when we started with 2015, we were at SEK 4.5 billion. We ended up at SEK 3.5 billion before we got to the end of it. It's SEK 1 billion there that we have taken out. Is that taken out forever? No. In some way it's going to push back, but we think that we can handle it for the time being without having to take it back. That's basically, I think, where we're standing on investments.

Speaker 5: Could you just remind what the SEK 1 billion refers to, which wasn't spent in 2015?

Speaker 8: A large part of that is, of course, that we have not started building a crusher in Aitik. That's a large chunk of it. The Rönnskär environmental program has not started off spending the SEK 1 billion the way that we initially thought it would start spending its SEK 1 billion. The Odda 200 is not really later than what we said, but to some extent, we have pushed some of the investments in the Odda 200 to 2016 and so on. There are various pieces of that.

Speaker 5: Okay, great. Well, we'll wait the Capital Markets Day obviously, but it looked like you have at least got the appeal court heading to support you, should you decide to make the investment to maintain the SEK 45 million. Last question from me. You're saying that Oh, sorry. We know that the copper TC benchmark for 2016 is down about 10% year-over-year. You described the outlook as good for that and less good for zinc. Does that mean you're expecting the zinc benchmark to be down more than 10% year-over-year?

Speaker 6: I don't want to speculate about it. It's better we wait for the benchmark. Everybody can follow what's happening there. I think maybe one comment on the copper side, 10% it's a pretty significant number. In some years back, the free metals was a bigger value than the TC, and the premium was also very important today. The TC is an important part. It is the largest individual chunk of the gross profit of the smelter. When that goes down, it's significant. At the same time, maybe I can indicate some slight positive to it, because our ability to work with complex materials are playing in here. Benchmark is benchmark. We have said many times that copper concentrate is less and less of a commodity. The benchmark is more of a reference value, and all individual contracts are quite a lot deviating from the middle there. I think we're going to see a negative, but I think we're playing our cards well, and I think we're going to be reasonably happy despite.

Speaker 16: Thank you very much.

Speaker 9: Okay. Let's start with the questions from our audience via the telephone conference.

Speaker 12: Thank you. As a reminder, if you would like to ask a question, please dial 01 on your telephone keypad now to enter the queue. If you find your question is answered before it's your turn to speak, you can dial 02 to cancel. Once again, that's 01 to ask a question or 02 if you need to cancel. Our first question comes from Alain Gabriel of Morgan Stanley. Go ahead, your line is open.

Speaker 1: Good morning, ladies and gentlemen. Just two questions from my side. Well, the first question is on the cash flow statement. Mikael, you alluded before that the cash tax is going to catch up with the P&L tax, sometime maybe in Q4, and we haven't seen that happen. How do you see that evolving going into 2016?

Speaker 8: Okay. Well, we've seen the slide stopping, but we haven't seen the rollback as of yet. This is a relatively complicated equation back and forth, and I don't really have a good guidance for you, apart from that eventually you're going to have to pay this tax. I cannot give you any guidance for 2016, really.

Speaker 1: Fine. Thank you. The second question is basically on the trends that we are seeing in the smelting business, the market trends, those that we cannot really track on the screens, that includes scrap margins and the sulfuric acid prices. What are you seeing with those trends going to 2016? If you can just give some comments, qualitative comments would be fine. Thank you very much.

Speaker 6: Scrap markets are clearly more local than the metal price in or the benchmarks and the metal price, and sulfuric acid is also a more local market. We see a negative development, we are not expressing it as the biggest concern. I think we are reasonably comfortable with the development. It's not something I would point out as something hampering our production or something like that.

Speaker 1: Okay. Thank you.

Speaker 12: Thank you. Our next question comes from Gustav of Danske Bank. Go ahead, sir, your line is open.

Speaker 4: Thank you. Good morning. I have a question regarding Tara. I realize that Boliden is a rather small player in the metal markets at large, but Tara is indeed quite a substantial player in the zinc market. Given the short mine life and what one might say are lackluster margins, would you ever consider to take a top-down perspective on the implications of mothballing Tara and protect those earnings for a better day?

Speaker 6: Can I talk about mines?

Speaker 8: Well-

Speaker 6: You want to? Yeah, you can take it.

Speaker 8: In looking into shutting down and mothballing an operation like Tara, there would be lots of consideration going in. It's going to be difficult to put a value on whatever is what. The biggest chunk is always Tara's own profitability. I think it's also important to you know from a legal point of view, if you were to put Tara into care and maintenance for any other reason than its own bad profitability, you risk losing the mining license. That always has to be the main reason for putting anything into a mothballing.

Speaker 4: All right. Thank you.

Speaker 12: Thank you. Our next question comes from Liam Fitzpatrick of Credit Suisse. Go ahead, sir, your line is open.

Speaker 7: Morning. Two questions from me. Firstly, on M&A. I'm not expecting you to make any comments about what you may be looking at, but in terms of the balance sheet and potential funding, you're getting close to the lower limit that you mentioned or that you've given of around 20%. If you were to do anything, is there an upper threshold that you wouldn't want to go through? Secondly, just on the smelters, given what we know about TCs in both zinc and copper, are you able to give a percentage range of what 2016 EBIT could look compared to 2015?

Speaker 6: On the acquisitions, we continue to look. We have a strong balance sheet and are in good control where most of the companies in our industry are the opposite. The threshold and how much we could spend is of course depending on what we are looking at. If you, for example, look at something which is half invested and we would pay, say, SEK 1 billion for something and have to invest another SEK 1 billion before we get it up and running, that's clearly nothing we would consider at this time. If it is spending, a billion is a lot, but a big number, and we have something which is very cash positive even at these prices, then of course it's a different story. I cannot indicate what our levels or acceptable levels would be. It depends entirely on what we're looking for. We are looking. There isn't a lot of things which we are excited about out there, but of course we follow quite many. We do our evaluations, and we are going to really live as we are saying. We don't need to buy anything. Therefore, we are not going to just pushing ourselves that we have to buy because it got to be good because the prices are low. No, the prices are low because it's an uncertain future, and therefore we have to continue to be prudent. We are looking, and we would like to buy something if we find the right thing. If we don't, well, no problem. It was about the number-

Speaker 8: On the gearing side of what we have said publicly is that we are very uncomfortable going over 60, which means that at any kind of situation, we are doing simulations, and simulation including floor prices and very tough conditions, and we would like to stay under 60 at all those situations. Everything got very quiet.

Speaker 7: Yeah. That's fine. Just my second question, just on the smelting business, if you're willing to give perhaps a % decline range that 2016 could look like versus 2015?

Speaker 6: No, we don't do that. We don't give forecasts or we don't give the % of what? What did you ask for, sorry?

Speaker 7: Just in terms of, I mean, EBIT.

Speaker 6: Okay

Speaker 7: year.

Speaker 6: Yeah. No, we can't do that. That's a function. I think we have a stable business. We are demonstrating the sensitivities. As of now, you have all the elements to plug in the market scenarios you think should or you believe in, and then you can understand where we would end up. I think that we are not disclosing anything more than that, and it wouldn't be prudent to do so.

Speaker 7: Okay. Thank you.

Speaker 12: Okay. Our next question comes from Robert of Carnegie. Go ahead, your line is open. If you have your own phone muted, you will need to unmute that though.

Speaker 15: Yeah. Two questions from my side. In the smelters, there were some negatives in the quarter on raw materials mix and byproducts and sulfuric acid price term mix and metal premiums. Would you say any of those negatives are likely to reverse in Q1, or is there a sort of a trend in this?

Speaker 6: I think there is a bit of trend. The byproducts have price pressure. The TCs are what we said. Sure, there are some negatives in the market terms, and they should be, depends on what you expect, but I think that the tendency is, if anything, a negative. What I'm saying at the same time is we are earning a lot of money in the smelters. I think that in copper, it looks good. In zinc, it look a little bit more tricky. All in all, it's looking good. Maybe a negative trend or a negative trend on several lines. That's from the market. What we are doing. We have the Odda 200, which is a profitable investment, which is working or going on according to plan, and we have the improvements going on in Rönnskär. As you rightly said, unlike last year, everything did not work perfect this time. We have some disturbances in Kokkola, a big profit generator. We have some disturbances in Rönnskär. I would say it's more of a normal quarter. It could be that we should do a little bit better, but I think that gives some flavor on the disturbances.

Speaker 15: Perfect. Thanks. On Aitik, you've lifted that reserve grade to 2.23 and guided for 2.21 in 2016. My question is, does this change reserve average grade? Does it influence your expectations for 2017? Previously, you sort of guided to grade slightly above the average in 2017. Does this change with the update of the average to 2.23?

Speaker 8: No, I think that guidance still holds.

Speaker 15: All right.

Speaker 6: I think in Aitik, I think what you see here, we are pushing the crusher. We have problems with the crusher, and we produce little. We are having exploration results. We increase the average grade. We have found Nautanen. It gives some of the elements which we are working on. It's not a new picture at all, but we are adjusting the picture, and we have to take the new data points here before we optimize and decide which optimization we are doing. Not least, the copper price outlook is tougher. There are new elements which makes us sort of take a new grip and see how we maximize. One of the elements, obviously, is the exploration results, grade, and so on. Some different elements.

Speaker 15: Yeah, you'd still then expect a higher-than-average grade in 2017?

Speaker 6: Yeah.

Speaker 8: Yes.

Speaker 15: That's good. Thanks. Those are my questions.

Speaker 12: Thank you. Our next question comes from Daniel of UBS. Go ahead, sir, your line is open.

Speaker 3: Hi there. Yeah, a couple of questions from me. Firstly, at Garpenberg, you've obviously given the grade guidance for the full year at 4.5% but indicated that grades will be weaker in the first quarter. Can you give us any more color on the kind of grade profile you would expect for Q1 and then sort of through the rest of the year to get to that full year guidance? Flagged you had a negative working capital impact in Q4. Do you feel you're now at the sort of level that's sustainable in terms of working capital, sort of across the two businesses? A third question is on impairments. I'm assuming you went through a round of impairment testing at these results. Can you give us any indication on the inputs that we use for that, or do we have to wait for the Capital Markets Day for that?

Speaker 8: Let me take-

Speaker 6: Three questions to you, Mikael.

Speaker 8: Three questions to me. Garpenberg, regarding grades, everybody who follows us knows that we do have a somewhat of an erratic running on grades anyway. We have decided not to give any numbers, but it will most likely be lower for Q1. Exactly as Lennart said, we have had some cave-ins in some stopes that were high-grade stopes, and we have to replace them with lower grade stopes. This is part of the Garpenberg reality, actually, that we always have these things, and we have the negative with Garpenberg is that the stability of the rock is not the greatest, and we are constantly re-planning around those kind of situations. I cannot give more details on that.

Speaker 6: I can add, what we didn't do now, we will do later. The NPV is just a marginal effect of the value. I mean, the ore is there.

Speaker 8: Yeah. That's right. Regarding working capital, our working capital is also very erratic as you know. It goes up and down. It's difficult to have a good level, but the level that we've had now in the end of Q4, I would say is a normal level, roughly. It can vary both up and down from that level. We are clearly now higher than, for example, we were at the end of Q2 when we were at very low working capital levels. Regarding impairment, of course, a reality for all companies, every company, and especially coming towards the end of a fiscal year. We've been working around that. I think the main discussions regarding impairment, I would say there have been too many discussions, actually, it is Tara that will be the one that, even though it's a positive EBITDA, it might not be a very big positive EBITDA. That has been the most discussions, but we feel very comfortable about the value that we have on Tara in our books.

Speaker 6: We extend the life of mine or the reserves, that's going in a positive direction, too.

Speaker 8: Yes.

Speaker 3: Can you remind us what the book value of Tara is?

Speaker 8: A billion and a half SEK. This is a rough number. I think it's around a billion and a half SEK. I could get back to that.

Speaker 3: Thank you very much.

Speaker 12: Thank you. Our next question comes from Olof of ABG. Go ahead, your line is open.

Speaker 11: Yes, hello. Olof Grenmark from ABG Sundal Collier. Coming back to zinc treatment charges, you didn't want to give us any figures, but you said that the trend was heading downwards, but not as much as in copper. Was that the correct conclusion?

Speaker 6: Copper, we have the benchmark, and you saw it on the previous slide. What I indicate is that maybe we have a slight plus on that because of our ability to buy some high-margin stuff with the capabilities we have. Zinc is going more negative, we believe, than copper because its price or the escalators or de-escalators, the price clauses in the TC terms. It's a fixed plus variable with a price. With low zinc prices, zinc TCs are going down. It's a fundamental for it too, and that is that it's not an oversupplied zinc concentrate market, which is a negative for the TC. Whereas in copper, it is an oversupplied copper TC market, and therefore, a lot of mines want to sell their product, which improves the possibilities for the smelters. That's sort of explaining what I said before or repeating what I said before.

Speaker 11: Thank you. That's clear. Also, when we'll get more info regarding these zinc treatment charges, when will we know, so to say?

Speaker 6: At the Capital Markets Day, I think. No, it's going to clear in the near future, I would say. We don't know, but soon, I think.

Speaker 8: We are not part of that timetable, so we don't really know, but it's typically announced somewhere in March. It is announced not by us, but by the big companies who are sitting at the table.

Speaker 11: Sure. Thank you very much. That's all.

Speaker 12: Thank you. Our next question comes from Philip of ABN AMRO. Go ahead, sir, your line is open.

Speaker 13: Yes, good morning. This is Philip de Groot from ABN AMRO. I have just one follow-up question or a question on a question earlier asked. It's about the smelter TCs again. Lennart, you indicated that you expect the business that it can offset some of the negative market effects by taking in more complex materials. I was just wondering why you haven't taken that opportunity in Q4, because you indicate that the change in raw material mix also resulted in lower treatment charges. Does that have to do with your feedback? Does it take a while before you can change that? I was just wondering if you could give some more explanation on that.

Speaker 6: No, we had it in Q4, we had it in the year, and we have had it for many years. That is true now and it has been in the past. With improvement in Rönnskär, it's going to improve our abilities over time. I think the particular case is that we are not locked with one individual supplier on copper nickel feeds and that combination. That opened up

Speaker 8: In the second half of 2015 and will continue. Then, of course, individual quarters will go up and down because we are doing batch production, and sometimes we're processing high-margin stuff and sometimes lower-margin stuff. I think it's nothing new that is coming dramatic from Q1 or something. It's something which is improving our position and has been doing so, even though the strategy we have is to positioning ourselves better and better to the less standard qualities.

Speaker 13: Okay. Thanks for that.

Speaker 12: Thank you. Our next question comes from Christopher Wash of Pareto. Go ahead, sir, your line is open.

Speaker 2: Good morning, gents. Just a couple of questions from me. Looking at Aitik and the Northland resource, is that covered within your current environmental permitting, or is that something you'd have to do? Looking at trying to get that into production within five years is something you'd have to accelerate? Just to follow up on Harjavalta and the nickel processing, now that it's in-house. I know you can't give us much definition on terms, but could you give us an indication of profit margin or how the market of processing nickel concentrates changed since you took that operation in-house? Thanks.

Speaker 8: I'll start with Northland. I did say five years. Good that you asked the question, because it's not going to happen that quickly. Yes, we do need a separate environmental permit for it. We do not have an environmental permit, it's probably not going to be. It's more like we could start a project maybe in five years could have it in production three years later or so.

Speaker 6: It's the first time we publish it as mineral resource. There are ifs and buts, but we have good knowledge of the mineralization as such. The viability of it, we are quite a bit before we can be precise on that.

Speaker 8: Nickel.

Speaker 6: Nickel, yeah. Obviously, we cannot disclose the individual suppliers or margins. What we can say, though, is that when we changed the nickel strategy, we saw a need for Harjavalta in the market of selling the product nickel matte, the nickel-containing value-add material, and that several nickel mines were looking for a partner. We saw this as a business opportunity. We had to invest in working capital, but against that, we saw a better margin opportunity. I think it has played out well. In addition, we have also been having very good control of the process. When you change suppliers, and we have been working with the same for a long time, of course, there are some uncertainties on that, but it has gone very well. The processing is going well. The margins are improving. The capital is the price for it. I think all in all, we are doing something clever with a bit of luck and a bit of luck with timing and everything. Nickel is not a great place to be these days. What we are doing is actually very good.

Speaker 2: Brilliant. Thanks.

Speaker 6: Thank you. That was our final question. We thank you for joining us today and hope to see you at our Capital Markets Day on 16th-17th of March, starting here in Stockholm and then going to our zinc smelter, Odda. Thank you.

Speaker 8: Thank you very much. Thank you.