Boliden AB 1 2015-11-12
Interim Report
January-September 2007
Svante Nilsson, acting President and CEO
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The Metals’ Market
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Market development
Copper:
Pressure on concentrate market. Global cathode production in Q3 4.4 million tonnes and consumption 4.5 million tonnes.
Zinc:
Good availability of zinc concentrate. Balance between production (casted zinc) and consumption in Q3 – 2.8 million tonnes.
Source: CRU
Global
Cu Consumption 4%
Zn Consumption 2%
USA
Cu Consumption - 2%
Zn Consumption - 9%
Europe
Cu Consumption - 2%
Zn Consumption 1%
China
Cu Consumption 16%
Zn Consumption 7%
Q1-Q3
2007
Global (IMF) 5.2% 2007 4.8% 2008
USA 1.9% 1.9%
W Europe 2.5% 2.1%
China 11.5% 10.0%
GDP forecast 2007-2008
Source: IMF Sep 2007
Q 1-3
2007
Industrial production Q 3 2007 Global 4.2%
USA 1.6%
W Europe 2.1%
Japan 2.4%
China 18.7% Source: Brook Hunt
Metal consumption
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LME Zinc Price and Stocks
Source: LME, Closing tonnage
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
0
125 000
250 000
375 000
500 000
625 000
750 000
875 000
1 000 000
Tonnes USD/tonne
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China’s Net Imports/Exports
Source: Metals Insider
China’s Net Imports of Zinc 2004-2007
-60 000
-40 000
-20 000
0
20 000
40 000
60 000
To
nn
es
Jan-Aug 2007: net exports 144,000 tonnes
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High import of zinc to Europe
Source: CHR
Europe is today a net importer of zinc, after being a net
exporter until end 2004. During the period January – August 2007
net imports reached approx. 230,000 tonnes.
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Source: CRU Monitor Zinc
US Midwest Delivered Europe ex-works Far East (Western)
…puts pressure on zinc premium
209
231
270 265254
265275
265
243233
210
177 177
143133
10593
230
275265 265
320 320
360380
350
320 320
285
265
250
230 230
145
100 100 95 100 100 95 9097.5 95 90 90
100110 110 110
125
320
50
100
150
200
250
300
350
400
M ay-06 Jun-06 Jul -06 Aug-06 Sept -06 Oct -06 Nov-06 Dec-06 Jan-07 Feb-07 M ar -07 Apr -07 M ay-07 Jun-07 Jul -07 Aug-07 Cur r ent
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LME Copper Price and Stocks
Source: LME
1 200
1 980
2 760
3 540
4 320
5 100
5 880
6 660
7 440
8 220
9 000
0
100 000
200 000
300 000
400 000
500 000
600 000
700 000
800 000
900 000
1 000 000
Tonnes USD/tonne
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China’s import of copper
Source: Metals Insider
China’s Net Imports of Copper 2004-2007
0
50 000
100 000
150 000
200 000
250 000
To
nn
es
China’s imports expected to increase during Q4
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Copper Premium in Europe
110
100
80
70 70
60 60
50
80 80
45 50
65
45
65
45
45 45
40
93
93
50
113 120
155
115
135
140
30
50
70
90
110
130
150
170
Jun-05 Jul-05 Aug-05 Sept-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-05 Sept-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 jul-07 Aug-45 Current
Spot Copper premium CIF W. Europe
Benchmark 2005 115 USD annual
Benchmark 2007
125 USD annual
Benchmark 2006 105 USD annual
USD/tonne
Source: CRU Monitor Copper
Benchmark Codelco 2008: CIF Europe 115 USD/tonne
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Financials
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Result Q 3, 2007
Revenues 8 166 9 299 - 12
Operating profit (EBIT) 1 332 2 095 - 36
Profit before tax 1 234 2 067 - 40
Earnings per share, SEK 3.20 5.32 - 40
Cashflow from operating activities 592 1 681 - 65
Return on capital employed (%) 29 51
Net debt/Shareholders’ equity (%) 40 16
Change
SEK m 2007 2006 %
Q 3
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Operating profit (EBIT) per quarter – SEK million
398 351
686
1634
1750
2451
2095
2225
1286
2220
1332
0
500
1000
1500
2000
2500
Q1 -05 Q2 -05 Q3 -05 Q4 -05 Q1 -06 Q2 -06 Q3 -06 Q4 -06 Q1 -07 Q2 -07 Q3 -07
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Deviations Q 3 and 9 months: 2007 - 2006
Net price deviation - 198 - 361
Of which, Currencies - 316 - 1 042
Hedges 273 208
Final Prices (MAMA) 21 - 248
Stock results - 267 - 637
TC/RC - 171 - 328
Other prices and terms 262 1 686
Volume deviations Mines - 222 - 647
Volume deviations Smelters - 163 - 38
Net cost deviations - 147 - 376
Others - 33 - 37
Deviations
EBIT 1 332 (2 095) respectively 4 838 (6 297) - 763 - 1 459
SEK m 2007 - 2006 2007 - 2006
9 months Q 3
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Deviations Q 3 vs Q 2, 2007
Net price deviation - 431
Of which, Currencies - 132
Hedges 197
Final prices (MAMA) - 40
Stock results - 287
TC/RC 24
Other prices and terms - 193
Volume deviations Mines - 511
Volume deviations Smelters - 48
Net cost deviations 89
Others 13
Deviations, EBIT 1 332 (2 020) SEK million - 888
SEK m
Quarter 3 –
Quarter 2
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Operating profit per segment
EBIT-deviation Mines:
- Prices and terms SEK 289 million
- Volume deviation SEK -222 million
- Costs SEK -106 million
Mines 691 716 - 3
Smelters 617 1 406 - 56
Others 24 - 27 189
The Boliden Group 1 332 2 095 - 36
Change
SEK m 2007 2006 %
Q 3
EBIT-deviation Smelters:
- Prices and terms SEK -574 million
- Volume deviation SEK -163 million
- Costs SEK -51 million
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Smelters
EBIT SEK 617
million Mines
EBIT SEK 691
million EBIT
1.3 bn 1)
EBIT for Segment Mines includes hedges of SEK -350 million and for Smelters
hedges of SEK -61million.
1) Including ”Others” SEK 24 million
Operating profit Q 3 – Mines and Smelters
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Cashflow Q 3
Cashflow from operating activities SEK 592 million (1 681)
Investments SEK 530 million (428)
Free cashflow SEK 62 million (1 358)
Share buy-back SEK 1 430 million
Net loans SEK 668 million
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Capital structure by the end of the quarter
Return of capital to shareholders SEK 6.6 bn
- Dividend SEK 1 158 million
- Redemption SEK 3 464 million
- Share buy-back SEK 2 020 million
Balance sheet total, SEK bn 27.0 25.1
Capital employed, SEK bn 19.0 16.7
Shareholders’ equity,
SEK bn 12.2 13.4
Net debt, SEK bn 4.8 2.2
Gearing, % 40 16
Equity/assets ratio, % 45 54
30 Sep 30 Sep
2007 2006 Net debt
16%
-1%
-8%
27%
40%
-15%
-5%
5%
15%
25%
35%
45%
Q 3
2006
Q 4
2006
Q 1
2007
Q 2
2007
Q 3
2007
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Segment Mines
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Production Mines
76 288 82 040
89 031 86 682
76 100
0
20 000
40 000
60 000
80 000
100 000
Tonnes
Q 3
2006
Q 4
2006
Q 1
2007
Q 2
2007
Q 3
2007
Zinc (metal content)
19 858 19 515 14 703
16 598 13 675
0
20 000
40 000
60 000
80 000
100 000
Tonnes
Q 3
2006
Q 4
2006
Q 1
2007
Q 2
2007
Q 3
2007
Copper (metal content)
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AITIK (Cu)Milled production, head grades, metal content
0
5 000
10 000
15 000
20 000
tonnes
0.00%
0.05%0.10%
0.15%
0.20%
0.25%0.30%
0.35%
0.40%
M illed prod (ktonnes) 4 611 4 705 4 678 4 637 4 097
M etal content, Cu (t) 15 132 14 847 11 116 13 004 11 453
Ore grades, Cu act. 0.36% 0.35% 0.28% 0.32% 0.32%
Ore reserve grade, Cu ave. 0.31% 0.31% 0.28% 0.28% 0.28%
Q3-06 Q4-06 Q1-07 Q2-07 Q3-07
Production Aitik
Lower grades according to plan 2007 vs 2006.
Lower average mill throughput during third quarter.
Copper grade is expected to be slightly higher than the average grade
during fourth quarter.
Permit granted to commence expansion of Aitik 36 million tonnes.
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BOLIDEN AREA (Zn)Milled production, head grades, metal content
0
10 000
20 000
30 000
tonnes
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%
M illed prod (ktonnes) 380 450 454 456 479
M etal content, Zn (t) 14 979 16 849 18 229 19 769 15 334
Ore grades, Zn act. 5.6% 4.7% 5.1% 5.4% 4.0%
Ore reserve grade, Zn ave. 6.7% 6.7% 5.0% 5.0% 5.0%
Q3-06 Q4-06 Q1-07 Q2-07 Q3-07
Production Boliden Area
Lower zinc production during the quarter due to seasonal variations (Maurliden).
Lower grades at Storliden due to mining of marginal ore.
Planned change in ore mix during the first 9 months of the year results in:
-Reduced copper and gold production
-Unchanged zinc production
-Increased lead and silver production
Lower head grades YTD 2007. During Q 4 head grades are expected to be lower
than the average grade for the ore reserve.
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GARPENBERG (Zn)Milled production, head grades, metal content
0
5 000
10 000
15 000
20 000
tonnes
5.4%5.5%5.6%5.7%5.8%5.9%6.0%6.1%6.2%6.3%
Milled prod (ktonnes) 322 305 314 293 319
Metal content, Zn (t) 17 793 16 172 17 056 16 640 17 562
Ore grades, Zn act. 6.0% 5.8% 6.1% 6.2% 6.0%
Ore reserve grade, Zn ave. 5.7% 5.7% 5.8% 5.8% 5.8%
Q3-06 Q4-06 Q1-07 Q2-07 Q3-07
Production Garpenberg
High metal production during the year due to:
-High head grades
-Good throughput
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TARA (Zn)Milled production, head grades, metal content
0
20 000
40 000
60 000
tonnes
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%8.0%9.0%
Milled prod (ktonnes) 710 654 686 661 653
Metal content, Zn (t) 43 516 49 019 53 746 50 273 43 204
Ore grades, Zn act. 6.7% 8.2% 8.5% 8.1% 7.1%
Ore reserve grade, Zn ave. 8.5% 8.5% 8.4% 8.4% 8.4%
Q3-06 Q4-06 Q1-07 Q2-07 Q3-07
Production Tara
Lower head grades during the third quarter.
Head grades are expected to be below the ore reserve’s average grade during the
fourth quarter.
Investment in a new autogenous grinding circuit will halve operating costs for
grinding.
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Segment Smelters
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Production Copper Smelters
Extensive maintenance shutdown at Rönnskär during the third quarter.
Start-up problems at Harjavalta after the expansion investment.
Copper concentrate of different qualities and lower grades leads to lower
anode and cathode production levels.
Increased concentrate stocks at Harjavalta.
Copper Smelters Cu - Concentrate Feed & Cathode production
0
50 000
100 000
150 000
200 000
250 000
300 000
350 000
tonnes
Harjavalta Cu feed - concentrate 135 730 125 076 146 325 130 632 118 497 98 436 115 710
Rönnskär Cu feed - concentrate 147 085 136 048 148 477 155 558 150 324 149 217 143 669
Cathode production total 90 029 87 866 87 843 90 653 90 072 78 377 66 605
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007
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Production Zinc Smelters
Record production levels at Kokkola during the first 9 months.
Processing and production at Odda was on par with levels in
2006.
Zinc Smelters Zn - Total Feed & Production
0
50 000
100 000
150 000
200 000
250 000
tonnes
Odda Zn feed 72 131 75 301 71 936 71 188 73 137 71 792 71 357
Kokkola Zn feed 139 358 121 884 142 976 144 027 141 159 147 120 143 536
Casted Zinc total 108 455 109 566 112 814 112 073 114 759 117 731 117 476
Q1 2006 Q2 2006 Q3 2006 Q4 2006 Q1 2007 Q2 2007 Q3 2007
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Outlook 2008
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Forecast for continued good market 2008
Continued good demand for metals due to strong global GDP-growth of
approx. 4.8%.
The decline in USA and Europe is compensated by growth in Asia, in
China in particular.
Treatment and refining charges for copper are expected to be lower
2008 vs 2007. Boliden applies a brick system by which approx. 50% is
renegotiated on a yearly basis.
Benchmark premiums of copper are expected to be lower 2008 vs 2007.
Codelco’s benchmark for CIF Europe is USD 115 (125)/tonne 2008.
Zinc treatment charges are expected to be higher than in 2007.
Zinc premiums on a continued high level in Europe.
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Organic growth projects
Mines
Aitik: 36 million tonnes
Tara: Autogenous grinding circuit
Smelters
Harjavalta: Anode-, cathode production +30% and +20%
Rönnskär: +15 000 tonnes
Kokkola: Capacity increase +7%
Pre-studies
Garpenberg: Increased production
Rönnskär: Recycling of E-scrap
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”Boliden produces metals that
make modern life work”