Logo
Log in Sign up


← Back to Stock Analysis

Earnings Transcript for BOL.ST - Q4 Fiscal Year 2023

Operator: Ladies and gentlemen, I'd like to welcome you to Boliden's Q4 2023 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, where we will start here in Stockholm. Mikael, welcome.
Mikael Staffas: Thank you, Olof, and good morning, everybody. I would like to start by actually talking not about the last quarter, but about the last 100 years. As most of you already know, we are taking our 100-year celebration this year. Our official birthday, if you want to use that sense, is actually in December. So we're not quite 100 years yet, but we're going to take the opportunity to celebrate this the whole year and maybe to then top it off with the biggest celebration in December. We are quite proud about the history that we do have, how we've been able to, during this 100 years, be very much a part of developing the societies where we are active. So with that in mind, let's talk about also the very recent past about the last quarter. The key highlight is that if you compare to last year, of course, the prices and terms are quite a lot weaker. We'll come into more details around this, but it's especially zinc and nickel that is weaker, is also weaker sequentially compared to the previous quarter. We are, to some extent, saved by the weak Swedish krona for the Swedish operation, but the euro is relatively strong compared to the dollar. So there's no help in the euro-based operations that we do have. We have lower volumes in Ronnskar, but that's in line with what should be expected given that we do operate without a tank house. And the operations in Ronnskar, you can see, is now in a full mode, given the fact that we don't have a tank house as operational. We had no production in Tara due to the care and maintenance, which has also been well communicated beforehand. You can see we have a stable production in all of our mines, except Aitik, where we did have an unplanned maintenance stop that caused a stop in the mills for several weeks. That is now solved, and it was also communicated well in advance. We have a strong production in Finland. And our finished smelters, Harjavalta and especially Kokkola, has had very good quarters. Our projects in Odda, [indiscernible] and Aitik are progressing well, especially Odda, we are into the peak, if you want to say so, the peak timing, where we have the most people are working on site to get ready for -- to start later this year. We will come back to all these 3 projects in our Capital Markets Day that we will have in the end of March. The financial performance, a little bit more than SEK 2 billion in EBIT. The free cash flow was good, SEK 1.6 billion despite having record amount of investments. We're still in a positive cash flow territory. The Board has also posted a dividend of SEK 7.50, which is very much in line with our dividend policy of 1/3 payout ratio. As I said, if you look at the development, we have a little bit kind of a fun fact that we actually happen to have exactly the same profit in our 2 business areas down to SEK 1 million of SEK 985 million. But all in all, a little bit more than SEK 2 billion profit, including peer. The sustainability of our estate quarter not look so impressive. We have a slightly higher LTI frequency that we had the same quarter last year. We have a slightly higher sick leave than were the same quarter last year, and we have slightly a higher CO2 emission than the same quarter last year. However, when we look at the whole year, as we're also in combination with is also summing up 2023 as a whole year, we will have record low LTI frequency. We will have a lower sick leave than we had last year and we have clearly lower CO2 emissions than last year. So we are -- even though the quarter itself was higher than last year, the full year was pretty good. The market developments, I dwell a little bit on this in the beginning. This lower zinc and nickel prices that are, of course, the most prevailing ones, and I'll come back and show this in a little slide forward here. We also have weakening spot metal premiums, a weakening spot TCs and weakening sulfuric acid prices on spot level. And these things only come into our P&L a little bit slower because we also have some of these on long-term agreements, but it's clearly a sign that there is a weakening general industrial cycle out there. The currencies are slightly weaker for us, if you look on this sequentially. If you look at the prices. And here, you can take -- if you start to read this one from the right, you will see that the nickel price is on a record, I would say, a record low level, even though it's been lower previously. But if you look compared to the cost curve of nickel mines in the world, it is on a low level. And we are clearly seeing this around ourselves that nickel mines are having a big problem. We could have a long discussion about where the nickel price is going. Of course, nickel has come from a time when the electrification and the EVs were going to use so much nickel and need so much nickel that the prices went very high. Now there's been a clear setback in these expectations. It is pretty clear that nickel price cannot stay on these levels if the nickel is going to be used in any substantial way in electrification because at these levels, of course, no new mines will ever be started on nickel. And of course, this also hurts us relatively clearly since we have relatively long, what we call, periods for quotation means that we have long periods where we have to have definitive pricing on this. On the zinc side, we also have low prices. And you can see here that the prices have come down and are on a lower level, and we're also down into the cost curves on zinc, which is obvious. It's not just us in Tara. There are many other mines around the world that are in care maintenance or curtailing production. Zinc is, of course, very dependent on the general economic development and construction around the world, and that is seeing here, we're taking a hit on that on zinc. Copper, the situation is much more, if you want to say, is normal. The prices have come down a little bit over what's been in the last few years, but it's still on a relatively good level. We can also see on the copper mines where the demand is relatively good that we also see an increase in the costs for the high cost mines in the world, which is meaning that the margins are not so big as they used to be for the high-cost mines in that space. When we look into the mines and the mine production, the volume in Aitik were lower than they should have been at -- or they should have been or than you might have anticipated have you not seen the notion that we did have a break in the -- on other mills that led us to have an unplanned maintenance stop in 1 of the 2 primary mills. We've also had, during the year, a little bit of adverse weather effect or we didn't have ventilation the way it should be for several days in the pit. The grades came in exactly where they were a year ago and also exactly as they were guided for. In Garpenberg, the mill volumes slightly higher than last year, the grade slightly lower than last year. But I would say both the volume and the grade is very much in line with what we had guided for. Kevitsa, volume is very much in line with the SEK 10 million environmental permit that we have in Kevitsa. The grades are slightly lower than last year, but on a relatively okay level. Boliden Area produced well and Tara was in care and maintenance. On the smelter side, in Hiawatha, we had especially strong nickel production, the second quarter in a row with very strong nickel production. We had also in Hiawatha increased utilization rate in the tank house because Hiawatha is now receiving anodes from Rancher to be able to fill the capacity to the full extent. We had a weaker silver production in Hiawatha, but this is also part of the optimization between Hiawatha and Ronnskar, where lots of the slimes contain lots rich and silver went back to Ronnskar for being treated in the precious metal pan in Ronnskar. Ronnskar, of course, had a full quarter of not operating with a tank house. The and production was ramped up and the precious metal production was also ramped up and back to the levels that it can be given that we don't have a tank house. Cocoa, very stable and high concentrate feed throughout the quarter, record production of silver coming out of there. which is all good news. Odda had an unplanned shutdown in the roaster. We also shut Sellas #4 permanently. This is part of our developments in Odda, where the new tank house #6 will replace tank house #4, and we took tank house #4 out of production already at this relatively early stage. And in Bergsoe, our smallest units, also had strong production also had favorable mix of materials that help them to get good results. Full year, adding up the 4 quarters of last year in total, yes, we have lower volumes in both business areas. We have lower grades. This is about SEK 2.5 billion out of that reduction altogether. Out of that, you can say that at least SEK 1.5 billion was very well guided for beforehand with the lower grades in Aitik, SEK 1 billion is maybe more related to Kevitsa, which was not that well guided for beforehand. Tara is in care and maintenance that is an interesting one, how that one works out. But when Tara was in care and maintenance, we are not producing because of bad zinc prices, but it comes out as a volume effect in our bridges the way that we account for it. That's a philosophical discussion, but that's the way that it's reported. We had a fire in Ronnskar that took out and you can say both of those took out maybe SEK 0.5 billion each around that. We had a high inflation, especially towards -- in the beginning of the year. Now towards the end, we are more or less facing 0 inflation. But if you look at total year, that's part of it. We had weaker [indiscernible] terms. And once again, in zinc and nickel that has been the main parts of this. We've had also a weaker product prices. PGM metals are down, although stronger premiums and TCs helped us a little bit on this one. On the CapEx side, SEK 15.5 billion for the full year, more or less in line what was guided for, minus sustaining at SEK 3.5 billion of that. The other expansion, which is achieving scale, digitalization and automation with a total CapEx of SEK 850 million. As I said before, we're having good progress. We're actually, I would say, maybe theoretic a little bit before time schedule even. But we are in the very peak part of this. We have 1,000 person on site working with the installations. So there's lots of things that are happening right now. We will come back more in detail on all of these projects in March, and we will be able to give a better estimate of the exact timing and budgets around them. The Aitik Dam project has also worked well during the year. As I think I said last year, we, at one stage, said that this has to be finished by May '24 or we will have to shut Aitik. We have, through different measures, being able to buy ourselves some time. So compared to the very initial time plans, we are on purpose a little bit late. We still need to be done with this through the year. We've given ourselves to 4/'24, and we are well on track with this revised time plan. The Kristineberg mine expansion is also moving on well. Production has already started. We are starting producing through the old infrastructure, the new infrastructure, which will mean the fully electric mine with the electric trolley and the new Holif system is still on plan for start in first quarter of '25. So mines for the full year, yes, lower grades, lower price and terms, lower mill volume in the open pits. We have not been able to repeat the high levels of '22 in '23. We had Tara in maintenance. We had, on the positive side, a new annual record for throughput in Garpenberg. You can see that Aitik -- well, you can see all this come down, but it was really clear, CMOs the fact that Kevitsa for the full year is basically just breakeven. This is a, as once again the situation with the low nickel prices, it's difficult to deal with this. You can also see the loss that we have in Tara. This loss would, of course, a bit even bigger, have we continued to produce and not gone into care and maintenance. If you look on the smelter side, yes, ranges is, of course, the big disappointment. I think I said SEK 0.5 billion on the last slide. I meant SEK 1 billion down, and that's what you see here. You also see Hiawatha coming down from a very strong '22. Kokkola has had a very good '23 instead. Odda around the same. Bergsoe, even though you see that it's very small numbers because it's a smaller unit. But Bergsoe had a very good year and very good developments in total. Let's see if we get this one to move ahead. Exploration. We are also today coming out and with our R&R statements. Around these, you can say that generally, we are we are saying that we're having a good development in the Nautanen project close to Aitik. We also have good exploration results and good developments of reserves in the Boliden area. Regarding Aitik and Garpenberg, you can say it's not so much new. These are long-life mines, and we are moving around a little bit with cutoff costs and everything else, this has made the slight extension of Aitik and a slight reduction in Garpenberg is not really something that is making too much of a difference. The negative news here is Kevitsa. We are having One part is that we have now given the examples from this year, where we have a larger waste truck dilution than we had in original plans that also comes through into the research statement, and we do have thus lower grades in Kevitsa than we have announced before with the higher assumed waste truck dilution. It's also formally a shorter one because we -- due to regulations around dam structures and everything else and exactly what kind of permit you need to have to be able to call something a reserve as opposed to a resource has meant that we have officially a shorter reserve life. We are not too worried about this. We think we will able to sort out the environmental permit for an extension, but this is a situation right now. So if you look at the numbers, as I said, it's not much of a difference, the same grades as before. Boliden area and now 2 years longer than it was before. Reserve grade is also similar. Garpenberg has officially lost a year, but this is more due to optimizations around the cutoff grades. Tara, we have no new update because of the care and maintenance situation, we have not been able to update the situation. So this is exactly last year's number minus the production that we did in the early part of the year. And Kevitsa does have a lower grade now in the reserves as compared to before. And we have, as it looks here, lost a year of production. But as I said, this is due to around exactly what the environmental permit discussions are around raising the dams in Kevitsa. On the resources side, without going too much in detail, you can say that, generally speaking, this is looking relatively good. You can see right down at the bottom that in Kevitsa, we're getting all those tons that we lost in reserves are coming back into resources is the downgrading because of the environmental permit that is the result of that. On the financial side, Håkan, welcome.
Håkan Gabrielsson: Thank you, and good morning. Good to see you here. So do you want to bring it? We are presenting today, as you have seen, a result with an EBIT of just about SEK 2 billion, which is slightly up compared to Q3, but down compared to last year. Mikael talked about investments in a high activity level in most of our -- all of our key projects. And at the end, it's positive to be able to report a good cash flow at a quarter where we also have record investment. All in all, it adds up to an earnings per share of SEK 6.6. By business area, Mikael talked about both business areas delivering SEK 985 million. Both are coming down compared to last year, where both also had similar results, about SEK 1.5 billion. Comparing to the last quarter or the last couple of quarters, there are slightly different trends, though. Mines are improving, and they are improving in spite of weaker prices in nickel and zinc. And that is due to grades coming up a bit. We've also been successful in releasing gold inventories from, in particular, the Boliden Area mines or plant. And then we have a one-off insurance compensation recorded, which is related to an incident in 2021 in Tara. On the smelting side, we are reporting a lower result than last quarter. That is related to the lower prices, which we can feel and it's also related to seasonally higher costs. Going into the analysis of EBIT Q4 this year compared to Q4 last year. As you can see, we are down about SEK 1.2 billion between the quarters. Prices have come down, SEK 0.5 billion is in there. It's primarily nickel and zinc, but also sulfuric acid has come down. And on the other side, on the positive side, we have seen higher premiums and treatment charges, but the net effect is SEK 0.5 billion compared to the same quarter last year. And then you can slice this in different ways. But if you combine volumes and costs together, we have basically lost SEK 300 million each in Rane and Tara. So I think the price drop of SEK 500 million and then SEK 300 million in Ranjana and Tara, that explains the deviation. But if we go through this analysis line by line, we are SEK 1.5 billion down on volumes, about half of that is Tata. And if you add Run credit, it's about 75% of that number due to the fire and care and maintenance then. And then the rest is the unplanned maintenance that we had in Aitik in the last quarter. Then Mikael touched upon the philosophical question there, so I'm not going to dive into that more. But even if the reason for the care and maintenance in Tara was completely prices, the fact that no zinc comes out of the mine is in this context report as volumes. On the cost side, we are SEK 0.5 billion better than the same quarter last year, and that is entirely up to Tara being in care and maintenance and having low costs. Inflation in the quarter, as we see, it's sometimes a bit difficult to measure shorter periods like a quarter is about 0. There is a slight increase in services and personnel, but at the same time, energy and other is coming down. We also had about SEK 120 million positive impact from one-offs in the quarter. That is an insurance compensation that we got related to the flooding in Tara in late 2021. And we also have some costs related to restructuring in Run credit asset write as in Odda. So that's SEK 120 million this quarter. Then we had a negative write-down Q4 of last year of SEK 260 million, which was related to exploration rights. And then the difference between the 2 is SEK 380 million here. Sequential movements are slightly smaller. We are a little bit up in spite of prices coming down. The small movements on the pricing side. What we see here is mainly an effect of negative currency development and that's mainly Swedish krona being having a negative movement compared to the dollar. Volumes are up. We have reduced the inventories, mainly gold. I would estimate the impact of that inventory reduction to be about close to SEK 200 million in the quarter. We have higher grades in mines, and we've had higher feed in smelters. In Q3, Ronnskar was still ramping up after the fire. And then Q4 is running well according to the new business at producing anodes. Cost is up. We do have a seasonal increase. Q3 is a cheap quarter due to a lot of staff being on vacation. And Q4 is more expensive in particular, as we have ramped up the production in railcar, that has an impact on cost. And here, you can also see the SEK 120 million one-offs with mainly the insurance payout in Tara. Cash flow, we have a cash flow of more than SEK 1.6 billion. So it was a good year in that respect. It is down compared to last year, which is not a surprise given the result development and the high CapEx. But we're happy to have released about EUR 3 billion of working capital in the quarter. Those of you that have followed us for a while knows that this is -- there is some seasonality in this. We typically have a good Q4 and then it swings back a little bit into Q1. So I think that's to be expected this year as well. Then on taxes paid. There, we have one-off payments, return payments from tax authorities of about SEK 300 million that will be flowing back in Q1. So there is, you could say, a one-off positive in here of about SEK 300 million. I'm not going to go into the technical details of taxes, but it's related to preliminary tax payments being adjusted between legal entities and then some falling before the year-end and some falling after. So expect this to catch up a bit in Q1 on cash flow. Capital structure, well, strong balance sheet, happy with that. Net debt to equity, 19%, which is a healthy number. Net payment capacity of close to SEK 15 billion. So we feel well positioned when it comes to the balance sheet. And finally, for those of you that are doing detailed modeling of us, we have updated the process inventory volumes process inventory is the tons of metal that is tied up in the production processes in our smelters. This is a material that is not hedged, and that is then revalued every quarter on the income statement. And that is what shows up as the difference in EBIT, excluding process inventories and the regular EBIT, if you like. There is no cash effect on this. So for those of you modeling, you can see the new tonnage here, and it's an updated view depending on our current metal flows. So with that, Mikael.
Mikael Staffas: Thank you, Håkan. Yes. Those of you who read those numbers in detail, I can also understand that we have had a general change of feeding where we are feeding more precious metals into our plan, which is in line with our strategy, especially for Harjavalta. Capital Market Day, I think you all know about this one. We will provide you an update, as I said before, on the 3 big projects, where we're standing. We'll make sure that we are well detailed around that. We will also present an update of where we're standing potentially concerning new projects. And we all know that there is a potential project regarding a new tank house in runs out there. I've been told you to make sure everybody knows that we will present that when we feel it's ready and that everybody can understand having an exact timing on that doesn't really help anybody because it's also a matter of making sure that you can procure it in an efficient way and not being a very firm deadline on that. But we will provide an update on where we're standing on that one as well. As well, we'll also provide an update exactly where we're standing on the insurance discussions. I have said before and I'll repeat that, that we feel very strongly feel very good about the insurance payout possibilities. But as you know with the insurance company, you're never real until you really know. With that, looking into the first quarter of '24, we are repeating basically all the guiding that we gave before. We are still in the 0.17 range in Aitik regarding grades, 3.5 and 100 grams silver in Garpenberg and Kevitsa 0.28 and 0.20. Tara, we are in care maintenance and unlikely to change during Q1. The maintenance shutdowns for the full year of '24 estimated at SEK 400 million compared to what we had in '23 of SEK 670 million. CapEx, SEK 14 billion. That is just to be very clear, excluding a potential start of a program in Russia tank house or for that matter, any other thing that we haven't decided yet. Regarding Q1 in general, we do have political strikes in Finland, as those of you who are part and this part of the world are aware of. These are quite cumbersome for us. There was 1 set of strikes that hit right here in -- between January and February. There's another one scheduled for mid-February. And we don't really know when it will end. We are not part of this. We can just say that the one that we just had cost us around SEK 50 million. The one that is scheduled cost us around SEK 50 million. It is an unfortunate situation, we cannot do much about as it is a political strikes that has to do with the government and has nothing to do with us as employers. We also remind about winter conditions. I think that we've done this previously, and just make clear that it is winter, which does affect us. And for those of you part of Scandinavia does know that we've had even for Scandinavian circumstances very harsh winter so far with extreme colds even for our sake and also extreme wins. And I don't want to over accelerate this, but it has had effects on operations in Northern Sweden to some extent that should be taken into account. With that, I remind everybody that our purpose is to provide the Metals Essential to proof society for generations to come. Our vision is to be the most climate-friendly and most respected method provider in the world, and we do that through our 3 values of care, courage and responsibility. Olof, over to you.
Olof Grenmark: Thank you. Ladies and gentlemen, that opens up our Q&A session. And we will start here in Stockholm. And I saw that Christian Kopfer, Handelsbanken, has a question, please. .
Q - Christian Kopfer: Just a few questions from my side. Firstly, you mentioned that you see weakening metal premiums by products. Does that mean if you take into consideration also the contracts, I know you have a lot of contracts in this. But all in all, you see negative impact in the P&L from these kind of items going into Q1 versus Q4?
Mikael Staffas: Yes.
Christian Kopfer: Can you specify the magnitude?
Mikael Staffas: No. But it's -- I don't know, Håkan, you have a specific of magnitude of how much you will be on a quarter.
Håkan Gabrielsson: I think we'll have to pass on that.
Christian Kopfer: But is it several SEK 100 millions or?
Mikael Staffas: I would say triple digit, but not so high. But this is really a gut.
Christian Kopfer: Right. Okay. That was good at least to hear the details on that. Then when it comes to Harjavalta Kokkola. I think you mentioned there, Mikael, that it was quite volatile. harjavalta was maybe call it disappoint while the Kokkola was really good year-over-year, right? Going into next year, how do you see those smelters performing? Were those natural, both of them? Or were they more natural in combination? Or how do you see it going into next year?
Mikael Staffas: I would say that Kokkola production was good, but that could be assumed to continue on a good level. Now who knows what's going to happen with zinc TCs. They are not out yet. So we will have to wait until we get the zinc TCs, which is a large part of the financial performance in Kokkola. On Harjavalta, we've had a good nickel year. We have to see what happens with that one regarding nickel prices and other things. We have a potential for a better copper year given that there are some positives for Harjavalta from the negative in [indiscernible], they get to run the full tank house all the time.
Christian Kopfer: So with -- just maybe just for simplification. Just assuming everything remaining constant prices, FX and so on. Does that mean that the Harjavalta Kokkola together will show a little bit better result in 2024 just organically?
Mikael Staffas: I would say yes. Yes.
Christian Kopfer: Cool. And then also, I think, Håkan, you mentioned that it was a meaningful reduced inventory effect in the mines, I guess?
Håkan Gabrielsson: In the mines and in the smelters. I think I mentioned that we got out precious metals in a good way. A part of that is run -- is Boliden Area getting out the metal that was tied in the tanks. But we also had a good development in Harjavalta. Yes.
Christian Kopfer: But should we look at that from a one-off perspective? Or should you be able to reduce inventories even more in Q1?
Håkan Gabrielsson: I think you should see it as a bit of a one-off if you compare to Q1. There was nothing -- I mean we should be able to repeat what we did in the full year of 2023 also in 2024. But we were more successful than average in Q4 specifically, and that I don't expect to repeat.
Christian Kopfer: How much was the effect in Q4?
Håkan Gabrielsson: About SEK 200 million.
Christian Kopfer: Right. And for the full year?
Håkan Gabrielsson: Of the inventory reductions, well, we -- I think, basically 0. Because basically, we produce gold. And we've had an increased gold production, as Mikael alluded. So we had a good profit on the precious metal side. We built some inventory during the year and released it in Q4.
Olof Grenmark: Johannes Grunselius, the Norske Bank.
Johannes Grunselius: Johannes here. I have a question on to you on Kevitsa. Because you mentioned waste rock dilution is partly impacting the reserves. Is this a surprise to you? Is this a price operation? Or is it fully in line with what you have expected internally?
Mikael Staffas: It is clearly a surprise compared to a year ago. Otherwise, we wouldn't have released those R&R statements. It is not a surprise compared to what has happened during the year. I mean, we have had problems with grades in Kevitsa and waste rock dilution has been a clear issue around that, and that's, of course, also being now reflected in the R&R statements.
Johannes Grunselius: Okay. Is there somewhere you can sort of improve this with the different mining techniques or you have to live with it?
Mikael Staffas: We are, of course, working with this all the time and see what we can do about it. I don't think there's a different mining method, but this is around within a blast, trying to make sure that you load the right things, what is going to the mill is only ore and what's going to the waste rock dump is only waste rock. And this is something that we're trying to improve to monitor. It is more or less difficult in different parts of the mine. We think that we've been in a product line where this is more difficult. But this is the way that it's come out when you have the qualified person looking at the numbers.
Johannes Grunselius: Right. I also have a question on Ronnskar and the situation, the business plan without tank house. Because you're now giving us the yearly EBIT, which is highly appreciated since you did basically profit in the first quarter most likely. I mean it seems that you were making a bit of a loss when you went into the new business plan. Can you elaborate a little bit on that? Is that correct? Are you expecting kind of an EBIT breakeven going forward? Or what's the status?
Mikael Staffas: I mean what we have said is that everything else equal, you should expect about SEK 1 billion less than in '22, and '22 was SEK 1 billion plus. So there should still be some plus left.
Olof Grenmark: Ola Soedermark, Kepler Cheuvreux.
Ola Soedermark: Yes. A follow-up on Aitik and the development there during the quarter. You said that if like 25% of the SEK 1.5 billion in lower volumes and costs is associated to Aitik.
Håkan Gabrielsson: Maybe I was a bit to general there. The remaining 25% is various parts, inventories in other parts of gold. It's Aitik there, et cetera. So it's not entirely Aitik that is that 25%.
Ola Soedermark: But around SEK 300 million could be Aitik each?
Håkan Gabrielsson: I know, I think it's a slightly lower number than that, a couple of hundred.
Ola Soedermark: When looking into the first quarter now I mean the weather has been quite tough up there. Should we expect the same level in first quarter in Aitik, operational kind of volumes or...
Mikael Staffas: Now you should expect a higher volume. We should not have a failure on the mills, which was the big thing. So we should expect better in Aitik.
Ola Soedermark: Despite the winter conditions?
Mikael Staffas: Despite the winter conditions, they are still not that big.
Ola Soedermark: And also on Tara?
Mikael Staffas: I mean I can say just -- I mean we had -- this only in Aitik was maybe SEK 200 million related to the fact that we had to take the staff for the maintenance. And I was at that all of the winter conditions and everywhere around, we're maybe talking about SEK 100 million or less than SEK 100 million, and that is not all Aitik.
Ola Soedermark: Okay. and the lower diesel prices at the pumps here in Sweden, are they going to impact you as well?
Mikael Staffas: Yes. Yes, the answer is yes.
Ola Soedermark: And on Tara, you're writing that you may be going to reopen it or start production in the second quarter if everything goes as planned. What kind of lower production or what structural lower cost can we expect? Are the mine going to be profitable at current zinc prices if you restarted in the second quarter?
Mikael Staffas: I don't want to go into those details because as some of you might know, there are, as we're speaking, quite intensive negotiations going on between the local management and the unions around there. we have released and many of you have read about that or maybe even seen it to the Labor Court a rescue plan, which does involve lower volumes and then also lower manning around that. But this here, you should be careful about the word plan because normally, we say plan that's something that we intend to deliver. Here, the plan you could say it's more like a discussion starter and negotiations are ongoing.
Ola Soedermark: And do we have any kind of deadline for before you have to close it, basically?
Mikael Staffas: Not formally. I mean it's, of course, at some stage, if we don't think that we can get anywhere, so we can make it profitable, we have to close it. But what exact timing around that is relatively open.
Ola Soedermark: And how important is it for your Odda expansion?
Mikael Staffas: Not really. I mean we have [indiscernible] relationship, and it's clearly possible to procure zinc concentrate on a free market. So it doesn't really matter at all for them.
Olof Grenmark: Ola, I think we have to move on. Igor Tubic, Carnegie. Up in the corner, up in the corner. Igor Tubic, Carnegie, please?
Igor Tubic: Yes, I just have one question around Odda. You mentioned that you have reduced the capacity due to the expansion project. What should we expect going forward? And in terms of the unplanned stop, is it sold now? Or what's the stages there?
Mikael Staffas: The plant stop is sold that we had the extra maintenance in the roaster. Regarding the closed tank outs, that is a small tank house of about an annual capacity of about 40,000 tonnes. So that means that Odda, as of right now to 200 million as we used to, but 160 on an annual basis. This was all part of the plan. And as the new cell house #6 comes into a line where we get up to the 350. But in the meantime, as of Q1, we are on a kind of 160,000 tonne pace.
Olof Grenmark: Adrian Gilani, ABG Sundal Collier, please.
Adrian Gilani : Two questions from my end. First of all, with the significantly lower nickel prices, are there other mines that are being sort of put on care and maintenance on nickel? And can you perhaps share with us where Kevitsa is on the global cost curve for nickel?
Mikael Staffas: Cost curves from nickel are difficult because there's lots of buy metals around it. But if you look at nickel sulfide, Kevitsa is in a good position on the cost curve. There are clearly things going on in the nickel space around the world. Without going into any detail, there are clearly discussions about putting mines in care and maintenance that are ongoing around.
Adrian Gilani : Okay. I understand. And then perhaps a bit of a detailed question for you, Håkan. We had a positive SEK 200 million in financial income. And I assume there's something a bit unusual in that figure.
Håkan Gabrielsson: It is. It is in payments that in some -- for deposits that we have during the year that in some contracts are payable at the end of the year.
Adrian Gilani : Okay. So not something that...
Håkan Gabrielsson: No, that is an exception in that sense.
Olof Grenmark: Viktor Trollsten, Danske Bank, please.
Viktor Trollsten: Perhaps first on your CapEx comment in the report regarding Odda, where you said that it was higher CapEx in Q4 versus what you anticipated. But still you basically have the same guidance for the full year, you issued your guidance and your 2024 guidance unchanged. Can you just expand a bit on what does that mean with higher-than-anticipated CapEx?
Mikael Staffas: Well, it was higher than anticipated, but at the same time, you should also be aware that we are now in the absolute peak part of the project and what falls into December and what falls into January, both in reality and in terms of cash flow and in terms of accounting, is there are some uncertainties around that. And then we got a larger part than we thought in December.
Viktor Trollsten: So the timing effects rather than cost overruns. But why doesn't you take down your 2024 guidance then on full year CapEx?
Mikael Staffas: Because, as I did say, we will have a review of the full part of Odda once we come into March, and we're doing a full review of the end estimates between now and then.
Viktor Trollsten: Okay. Okay. And perhaps -- and I guess we will discuss this on the Capital Markets Day. But on the payback, I guess since you announced the investment, you have raised your planning prices for [indiscernible] twice. Have the payback view in a well changed?
Mikael Staffas: I think we came up with this discussion already when we were hit by the big inflation on the CapEx numbers. And where we said that when we look at the project now compared to -- well, then compared to with the region, when we made the first decision, the payback calculation looks better, even though the CapEx is higher. It has to do with zinc price. It has to do with other byproduct prices and also estimates around TCs going forward compared to also the fact that we do have a power contract in place that was said before. So we feel very good about the project despite that we had to take that inflationary increase of investment.
Viktor Trollsten: And then on unit costs within mine, up quite a bit, of course, in '23 over 2022 because of volumes and also inflation. But you mentioned the inflation is now basically 0. So as hopefully volumes ramp up a bit in Kevitsa, Aitik, et cetera, how should we think about unit cost year-over-year what we know today?
Mikael Staffas: On the short run, it shouldn't go up and maybe run a little bit. But of course, with Aitik, even though we haven't discussed exactly how long you've seen in the Capital Markets Day that we're not going to be at the 0.17 level forever. And when the grades start picking up, that will, of course, severely lower the unit cost. .
Viktor Trollsten: But doesn't higher mill or also to some extent?
Mikael Staffas: Yes, it does to some extent. But it's -- I think the grade is a much more influencing part of this.
Viktor Trollsten: And can I have just 1 short, 1 more short, and perhaps philosophically. But Kevitsa close to breakeven in 2023, I guess, Q4 is better than perhaps in midyear. But philosophically, would that go below breakeven? Would you be asking clients to close that down as Tara? Is that how you strategically think around?
Mikael Staffas: Yes. I mean we look at all of our units independently. And if it were to be that it will be more financially advantageous to put Kevitsa to care and maintenance, then to run it, we would do that. Right now, that's not the case because when you're breaking even, it does cost money to stand in care and maintenance. So we're not at that stage. It doesn't mean that it can't happen, but we're not there now.
Olof Grenmark : Excellent. Operator, please, then we start with the international questions.
Operator: [Operator Instructions] The next question comes from Ioannis Masvoulas from Morgan Stanley
Ioannis Masvoulas: A few questions from my side. The first one on -- again on -- how does the lower reserve grade or nickel price profile today impact the potential pushback #5 expansion. Is this still an option you're still pursuing actively at present?
Mikael Staffas: The answer is yes, we are looking into it. And of course, it does affect now that the pushback #5 is, of course, not the things that are in the reserve but rather was in the resource. So -- but of course, it will -- everything will be taken into account as we move forward, but we have not stopped our ambitions.
Ioannis Masvoulas: Okay. And decision expected this year? Or could that be related to next year?
Mikael Staffas: The answer is that if you want to be kind of optimal from a sense of that the decision that we made is basically to start pre-stripping. And it could be optimal to do that this year because that means that we can continue with the same fleet that we have and make that a very smooth transition. If we don't decide to do that, we will have to scale back -- that's okay for a while. If we do it for too long time, then suddenly, we would have to drastically scale up the stripping fleet in order to be able to do the pre-stripping for production. But it's not that there is a certain date and by that date, it becomes too late. And these things also change a little bit when you look over the plan. So the ambition, as we said, is to make the decision later this year. It could be a yes, then we go ahead. It could also be a wait a while decision because we want to get more information. It could also be a no.
Ioannis Masvoulas: Understood. Second question on the comment around -- maybe for Håkan on the working capital reversal in Q1. Shall we expect a partial reversal? Or could it be as big a delta as we saw in Q3. Therefore, reversing fully into Q1? And any color there would be very useful.
Håkan Gabrielsson: Well, if you're looking at the working capital, I don't think it will be a reversal of SEK 3 billion. But we typically, if you just look back over the years, we've had about 1.5 coming back in Q1. That's kind of the normal seasonality as we start to build inventories to be prepared for maintenance stocks and similar. So on working capital, about SEK 1.5 billion, roughly, it's a bit difficult to predict exactly. And then on top of that, you have the tax matter that I talked about of about SEK 300 million.
Ioannis Masvoulas: Perfect. Very clear. And last question for me. Going back to the comment you made about a 3-digit million impact in Q1. Was that referring specifically to copper treatment charges? Or are you also looking at the signs in that comment?
Mikael Staffas: I think that the comment. I made was regarding weather. And the question was, is the harsh weather going to be something like SEK 200 million, I'd say there's going to be less. And I said that is going to be spread around several units, not just Aitek.
Ioannis Masvoulas: Okay. Great. And maybe this is then on especially in copper, you typically used to have 10% to 15% exposure on spot is that the right way to be thinking about it? Or are you -- have you limited that exposure to minimal at present?
Mikael Staffas: No, I think that it’s fair to look at around a 20% exposure to spot. And then you have this kind of specialty in Q1. But all of you who have been around for a while know that, that partially, we will use material that was bought in Q4, and that’s an inventory that will have the TCs of ‘23 into them, and then we will get the benchmark TCs of ‘24 coming in towards the later part of the quarter.
Operator: The next question comes from Jason Fairclough from Bank of America.
Jason Fairclough: Good morning, folks. 2 for me. Just 1 on mine production level, the other 1 on TCRCs. I was looking at your Slide 8, which is the mine production of the key products. And if I just compare where we are today for, say, 2019, 2020, these key products of copper and zinc are up about 1/3 right? So copper used to be about 30,000, 35,000 tonnes a quarter now in 2020. And if you look at zinc, obviously, we're off more because of what's happened with Tara. So I'm just wondering, how should we think about this? Is this a structural decline in the business? Or is this more of a temporary cyclical decline? So that's the first question. Second, on copper TCRCs, given what's happening in Panama with First Quantum, we've had downgrades as well from various miners in Chile. So we've seen a complete collapse in TCRCs. And I'm just wondering whether this matters or doesn't matter for Boliden. Could it actually be a positive for you given that you're missing a tank house at the moment? So those are the 2 questions.
Mikael Staffas: If I start with the second one regarding that, we are a net smelter. And as I said before and the last question, maybe we have up to 20% spot exposure and then the rest is on benchmark. And the benchmark is off, but not – but that much. And the benchmark is set for this year. So yes, we will have slightly worse conditions for the copper smelters, but not that much, and we’re not that impacted by the spot levels. If you then move to the mine production, I think that the main thing that you need to remember here, if you start with copper, are the grades in Aitik. And as we have shown in previous Capital Market Days, we are swinging around the average. And the 0.17, as we’re into last year and this year, is clearly below the 0.23 that we just reiterated this morning again on the reserves, which means that those grades will come up and thus the copper container production will come up. Exact timing is a little bit blurry, but those who have seen the fat line chart from the Capital Market Day will have an idea that happens not this year and maybe not next year, but maybe the year after that. And I think it’s a little bit different. Yes, the big thing here is Tara. Whether Tara will come back or not is a separate discussion, although our ambition is clear that we get Tara back online. On the underground mines, the grades are declining constantly. We’re trying to cover that by increased production, which has been generally successful. So with Tara back in place, zinc production should hopefully also come back to more normal levels.
Operator: The next question comes from Krishan Agarwal from Citigroup.
Krishan Agarwal : My first question is for Håkan. If you can give us a picture on the underlying cost inflation in the fourth quarter and more so when you run your budget for the 2024, what sort of cost inflation expectation you have baked in for the full year? And the second question, probably I'll state after the first one.
Håkan Gabrielsson: Sorry, did you hear the second question?
Mikael Staffas: Yes, I'll come back to that one.
Håkan Gabrielsson: Okay. Okay. So the underlying cost inflation is about 0 in Q4. We have some inflation on salaries and services and costs for energy and some other commodities are coming down. So the net inflation in Q4 is 0. When it comes to 2024, I'd rather not do a projection. I mean we obviously have budget assumptions because we do have budgets, but those are set in August every year. So I don't think they are that relevant really for this discussion as a with the plan, a plan, but the only thing you know is that it's -- the reality is going to be something different. So I'm not going to give a forecast on the inflation for 2024. But Q4 was 0.
Krishan Agarwal : Okay. So if I can ask a follow-up. So what is the trend you are seeing already through the month of January on the cost inflation for Q1?
Håkan Gabrielsson: Similar to Q4.
Krishan Agarwal : Okay. Understood. And the second question is on the CapEx. I mean I understand that you're going to update the market on the tank house CapEx whenever you have visibility. Does it mean that you remain open to revising the full year 2024 CapEx estimates whenever you have the tank house visibility? Or full year 2024 is likely to be SEK 14 billion and then tank house most likely will come in 2025?
Håkan Gabrielsson: We're open to revising that SEK 14 billion number. And the reason is that if we get a good business case and a decision to ramp up a tank house, the payback is likely going to be so good. So it's important to start straightaway.
Mikael Staffas: Having said that, most of the CapEx is likely to happen in '25, but there will be things happening already in '24 if we were to go ahead early in the year.
Krishan Agarwal : Okay. A quick follow-up. So I mean you will come back in the plan, but can you give us a broad expectation that how much time you are expected to take once you make the decision on the tank house?
Mikael Staffas: We are on purpose vague, and we're saying that we're doing this as quickly as possible. You will understand that we have both technical things to sort out. Normally, we do investments you should say that we will have 10 years of versions of previous drawings that you can pull out of some mill managers draw because they've all been thinking about doing things. We had nothing of that in terms of building a new tank house. We have to start from scratch. On top of that, we have to find a place to build it, and we have an idea where that's to be done, where we need to do lots of groundwork and geotechnical drilling and so on. because we have not done that, and it was not originally designated to be any kind of construction in that site. So that needs to be done. We need to think about exactly how big it's going to be, which has to do with the things like that. We have to think about specific techniques to put in around these things. So there are many things around that will affect -- and I should say also, just to be very much aware, I mean, of course, there are lots of suppliers around who think that we have our back against the wall and need to build a tank house. I'd like to price it accordingly. And we are, of course, not going to go ahead until we feel that we have gotten the offers that are in line where it should be. All in all, we're working very hard and it's very high on our agenda. As Håkan alluded to, it is so you can make the back of the envelope math that if you're losing EUR 1 billion per year, this is a relatively quick payback investment. But we're not going to do it faster than what the circumstances will allow us.
Olof Grenmark: Operator, I think we only have a few minutes to go. So I think we have time for 2 more questions, and then we will have to answer the other questions after the analyst call. Please go ahead.
Operator: The next question comes from Amos Fletcher from Barclays.
Amos Fletcher : Just a couple of questions. First 1 on the impact of the Ronnskar shutdown. You were guiding to EUR 1 billion EBIT impacts from that. But if you look at the financials, you disclosed basically EUR 1 billion reduction year-over-year in 2023. We do expect the EBIT turns negative in 2024 as a result?
Mikael Staffas: I guess the answer is one, I'll come back to that. We have guided for the EUR 1 billion compared to '22. Given the price and terms stay around the same, we should make a profit. What you should not forget is that there are Ronnskar a couple of one-offs related to the fire, which means that you had a, of course, much worse Q2 than what the average will be for the rest of the year.
Amos Fletcher : Okay. And then I just wanted to ask on Kevitsa. Can you give us some guidance on when we expect mine grades to be back at the reserve levels?
Mikael Staffas: That's a good question that I cannot really answer on the top of my head. But I would just, as an estimate, probably from '25, we're still below for '24. But from '25, we should see the reserve get into play.
Amos Fletcher : Okay. And then I just wanted to ask about the tank house inventory hasn't been discussed today, but just what's the time line at the moment for getting it out? And can you update us on the tax status of that inventory?
Mikael Staffas: Say that the actual inventory reduction as such, which is happening at the same time as we are also doing the demolishment, has been -- we have initially done some initiating things, but very, very slowly. We'll learn to do this. It's very much about working in a safe way for the people who are there, who are demolishing the burn-down building at the same time as we were covering the metal. We have started. As we said, we are still in a ramp-up phase, and it's probably going to take the better part of this year until we get everything out. Regarding what we'll do with it, we have not made a final decision. As those of you who listen before know that they're basically 2 option. We could sell it off, get a good cash flow, but it will with taxable cash flow, taxable profit most of it. And then we would have to buy it back for a new tank house to put in as the stock again. Or we could simply store it, not getting the cash effect, but also not the tax effect. We have not been forced yet to make this decision. So therefore, we have postponed a little bit, and we will make the decision when we have to. We still have those both options open.
Amos Fletcher : Okay. And then I just wanted to ask on the insurance payments. Is there any updates on the sort of timeline and also your tax position for those payments?
Mikael Staffas: Regarding timeline, this is, of course, part of a discussion on the new project and ambition will be that a settlement with the insurance company will be in place at the same time, as we would announce a potential new investment. I didn't say that before, by the way, the insurance discussions are part of this whole thing around making sure that we do it that way. We are still very confident that we will get the money. Regarding taxing, yes, those proceeds will be taxable. And the tax for that is that then you use it for investment and then the depreciations from the investment becomes a tax yield. So over time, they will get the right amount of money. Of course, that has a negative timing effect on a company like Boliden but we're not much we can do about this regarding the tax matter.
Olof Grenmark : Ladies and gentlemen, unfortunately, we need to stop there, and I'll leave it to Mikael to round this off, please.
Mikael Staffas: Okay. Well, it's great to see all of you guys here. It's been great talking to all of you, and I look forward to seeing you again when we present the Q1, which is not quite 3 months from now, but about 2.5. We will then be in Boliden, Boliden, where we will both a Board meeting, and we will also have the AGM in the Industrial Society of Boliden, which was built around the mine that we found 100 years ago. Anybody who has the ability to be there, I would recommend that you will come. We will, in any way, highlights the fact that both us as a company, but also the city itself turns 100 years. Thank you, all.