interim report - boliden – metals for modern life...interim report january – march 2011 lennart...

Interim ReportJanuary – March 2011

Lennart EvrellPresident & CEO

Håkan GabrielssonDirector Group Control

Q1 Summary

Market Industrial activity continued to improve Good metal demand Precious metals – strong price

development Volatile macro environment

Boliden Revenues MSEK 10,158 (8,316) EBIT ex PIR* MSEK 1,500 (1,043)

‒ Operating profit MSEK 1,359 (1,230) Free Cash Flow MSEK 448 (-52) Stronger SEK offsets price increases

in USD

Lower terms for smelters Aitik ramp-up continued

‒ Low availability of equipment in Q1 E-scrap expansion on plan Decision to start Kankberg gold mine Decision to expand Garpenberg

2011-05-03Boliden Group 2

* PIR=Process Inventory Revaluation

Group EBIT Development

2011-05-033Boliden Group

*Process Inventory Revaluation

-500

0

500

1 000

1 500

2 000

2 500

Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410 Q111

MSEK

Quarterly EBIT

Quarterly EBIT excl PIR*

The Market


Metal markets – first quarter 2011

Demand‒ Continued growth in zinc and copper demand

‒ Copper demand in China lower in Q1‒ Good industrial demand in Europe

Supply‒ Lower growth in metals production‒ Zinc concentrate market in deficit, copper in balance mid quarter, surplus in

March‒ Low activity short term among Chinese smelters

Prices‒ Average USD prices up – offset by stronger SEK for Boliden‒ Silver price, strong development + 23% in Q1

Concentrate market‒ Zinc TC 226* (264) USD/t concentrate‒ Copper TC up to 56.5* (46.5) USD/t concentrate‒ Several copper contracts on 2-3 years average TC terms‒ Free metals minimized


* Based on comments by external research companies

-10

-5

0

5

10

15

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Year on year %

World China USA EU

Source: Reuters Datastream, IMF, Boliden calculation of world GDP

World: Countries accounting for approx.80% of world GDP

Global GDP development


Continued robust global growth China , continued strong development

2005 2006 2007 2008 2009 2010 2011

Construction Market

No sign of slowdown in China USA still weak Europe mixed


-20

-10

0

10

20

30

40

Year on year %

China-residential investments cumulative value

USA-total construction spending value

EU construction production

Source: Reuters Datastream

China

EU

USA

2006 2007 2008 2009 2010 2011

Automotive Market

Europe and North America

‒ High growth in USA

‒ Germany somewhat slower

‒ Export lead production in Europe

‒ Production level still well below last peak in mature economies


0.0

1.0

2.0

3.0

4.0

5.0

Million units

Car production - Quarterly

China USA W.Europe Japan

Source: CRU (www.crumonitor.com), JD Powers

2005 2006 2007 2008 2009 2010 2011

Metal Market


-1,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

mt Zincglobal metal market balance

Balance Metals production Metals demand

2009 2010 2011

Source: © CRU (www.crugroup.com)

-1,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

mtCopper

global metal market balance

Balance Metals production Metals demandSource: © CRU (www.crugroup.com)

2009 2010 2011

Metals demand growth Q110 Q210 Q310 Q410 Q111

Global 24% 22% 11% 8% 5%

-Asia 26% 18% 9% 8% 5%

-RoW 23% 25% 13% 8% 5%

Metals demand growth Q110 Q210 Q310 Q410 Q111

Global 10% 7% 9% 7% 2%

-China 18% 12% 12% 10% -5%

-RoW -8% -5% -3% -3% 7%

Zinc Price and Inventories


Zinc price (LME average)

USD/tQ1-11 vs period

Q1 10 2,288 + 5%

Q2 10 2,018 + 19%

Q3 10 2,013 + 19%

Q4 10 2,315 + 3%

Q1 11 2,393 -

Price decreased in the quarter by 5% Inventories up 9% in Q1

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/t Tonnes

Shanghai inventory LME Inventory Cash Price LME Quarterly average

Zinc – treatment charges and premiums


0

100

200

300

400

500

600

USD/t conc. Zinc treatment charge

Realised TC (including price participation)Spot TC - outturn


2006 2007 2008 2009 2010 2011

Benchmark TC down – approx 230 USD/ton at 2,500 USD

Stable spot TC but well below contract TC

0

50

100

150

200

250

300

350

400

USD/t metal Zinc metal price premium

Europe ex-works US Midwest DeliveredFar East (Western)


2005 2006 2007 2008 2009 2010 2011

European premium up

Copper Price and Inventories


Copper price (LME average)

USD/tQ1-11 vs period

Q1 10 7,243 + 33%

Q2 10 7,013 + 38%

Q3 10 7,242 + 33%

Q4 10 8,634 + 12%

Q1 11 9,646 -

Price decreased in the quarter by 4%

Inventories up 21% in Q1

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

11 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

TonnesUSD/tCOMEX Inventory Shanghai inventory LME Inventory LME Cash Price Quarterly average

Copper – treatment charges and premiums


0

20

40

60

80

100

120

140

160

180

USD/t metal Copper metal price premium

Spot Copper premium CIF W. EuropeBenchmark CIF Europe


2005 2006 2007 2008 2009 2010 2011

Benchmark TC/RC up – 46.5 to 56.5 USD/ton

Spot TC/RC down to contract level in Jan-Feb, up sharply in March

European premium sharply down

0

20

40

60

80

100

120

140

160

USD/t conc. Copper treatment charge

Standard grade TC Cif spot mine/trader USD/tTC Annual contract benchmark


2006 2007 2008 2009 2010 2011

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

0500

1 0001 5002 0002 5003 0003 5004 0004 5005 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/t TonnesLME Inventory LME Cash Price Quarterly average

Gold, Silver and Lead prices


Silver

Lead

Gold

Average prices Q1 2011 vs period

Q1-10 Q4-10

Gold + 25% + 1%

Silver + 88% + 21%

Lead + 17% + 9%

0

5

10

15

20

25

30

35

40

45

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/oz

0

200

400

600

800

1 000

1 200

1 400

1 600

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/oz

Business Area Mines


Mines - Production

Metal production -7% vs Q4 Lower grades in Boliden area and

Garpenberg


0

4 000

8 000

12 000

16 000

20 000

24 000

0

2 000

4 000

6 000

8 000

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Metal content, tonnes

Milled ore, ktonnes

Copper

Milled ore (Aitik) Metal content

0

20 000

40 000

60 000

80 000

100 000

0

300

600

900

1 200

1 500

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Metal content, tonnes

Milled ore, ktonnes Zinc

Milled ore Zinc metal content

Metal production -4% vs Q4 Low production in Aitik

‒ Low availability on crushers Volumes up sharply in Boliden area

Mines - Financial Summary Q1


EBIT– MSEK 1,156 (800) in Q1– MSEK 1,217 in Q4 2010

Volumes down Low crusher availability in

Aitik Costs slightly higher

excluding Q4 one-offs0

200

400

600

800

1 000

1 200

1 400

MSEK

Quarterly EBIT

Aitik Expansion - update


Capacity Reliability

Mine and logistics √

Crushers √Conveyors √Mills √ √Flotation √ √

Ramp-up period Mine and logistics

‒ Action plan, improved truck availability

Crushers‒ All ore through new crushers Q1-

Q2‒ Availability not yet satisfactory‒ Crusher 165 (old) disconnected,

to be reconnected end Q2 Grade decline late Q2 36 Mtonnes 2014

Garpenberg Expansion - update

Project‒ Capex: SEK 3.9 billion‒ Ore production from 1.4 to 2.5

million tonnes‒ Production starts 2014 , full

production end 2015‒ New concentrator and

underground infrastructure‒ Production through 2030

Hedging‒ Zinc, copper, lead, gold and silver ‒ Approx 1/3 of Group's metal price

risk‒ Corresponding exchange rate risk‒ Refers to 2011, 2012 and 1H 2013


Kankberg - update

Project‒ Capex: MSEK 475‒ High rate of return‒ Life of mine - 2020‒ Start mid 2012‒ Production (yearly average):

‒ Ore 320 ktonnes‒ Gold 1,150 kg1) (high yearly

variations)‒ Tellurium 41 tonnes1)

Hedges and contracts‒ Gold production hedged, 80% at

1,460 USD/tr oz‒ Tellurium sales, long term contract

at 280 USD/kg


1) Metal in concentrate

Business Area Smelters


Smelters - Production

Strong YoY but lower than Q4 Lead alloys -15 % compared to Q4

Kokkola -4 % compared to Q4 Odda +5 % compared to Q4


0

20 000

40 000

60 000

80 000

100 000

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Cathode production,

tonnes

Total feed, tonnes Copper

Copper feed, total Copper cathode production

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

0

50 000

100 000

150 000

200 000

250 000

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Metal production,

tonnes

Total feed, tonnes

Zinc

Zinc feed, total Zinc metal production

Smelters – Financial Summary Q1

EBIT excl. PIR*‒ MSEK 226 (256) in Q1‒ MSEK 530 in Q4 2010

Lower volumes of free metals Unfavourable feed mix Lower zinc TCs


* Process Inventory Revaluation

-500

-300

-100

100

300

500

700

900

1 100

1 300

MSEK

Quarterly EBIT

Quarterly EBIT excl PIR*

Update E-scrap expansion

Increased recycling capacity for electronic scrap from 45,000 to 120,000 tonnes/year

New recycling plant –Capex 1.3 billion

Start 2011/2012 On plan


Financials


Financial Summary


MSEK Q1 2011 Q4 2010 Q1 2010

Revenues 10 158 10 120 8 316

Operating profit (EBIT) 1 359 1 942 1 230

EBIT excl Process Inventory Revaluation 1 500 1 445 1 043

EBIT excl PIR margin 15% 14% 13%

Free cash flow 448 1 850 -52

Capex 664 1 025 598

Earnings per share, SEK 3,51 5,17 3,21

Gearing 21% 24% 43%

MSEK Q1 2011 Q1 2010 Q4 2010EBIT 1 359 1 230 1 942Process Inventory revaluation -142 187 496EBIT excl Process Inventory Revaluation

1 500 1 043 1 445

Deviation 457 55

Specification of deviationVolume 529 -238Costs -464 144Prices & Terms 819 400

Metal prices and terms 1 045 411

Realised Metal- & Currency hedge* -184 45

TC/RC terms -80 -68

Premiums 34 47

Definitive pricing (MAMA)* 4 -35

Currency effects -426 -239w hereof translation effects -33 -11

Others -1 -12

Deviation 457 55

*Result for respective periodRealised Metal- & Currency hedge 12 196 -33Definitive pricing (MAMA) -10 -14 25

Group EBIT Q1 2011 versus Q1 2010


Higher Copper production in Aitik

Copper USD/ton +33%Zinc USD/ton +5%

USD/SEK -10 %EUR/SEK -11 %

Aitik expansionHigher energy

costs

MSEK Q1 2011 Q1 2010 Q4 2010EBIT 1 359 1 230 1 942Process Inventory revaluation -142 187 496EBIT excl Process Inventory Revaluation

1 500 1 043 1 445

Deviation 457 55

Specification of deviationVolume 529 -238Costs -464 144Prices & Terms 819 400

Metal prices and terms 1 045 411

Realised Metal- & Currency hedge* -184 45

TC/RC terms -80 -68

Premiums 34 47

Definitive pricing (MAMA)* 4 -35

Currency effects -426 -239w hereof translation effects -33 -11

Others -1 -12

Deviation 457 55

*Result for respective periodRealised Metal- & Currency hedge 12 196 -33Definitive pricing (MAMA) -10 -14 25

Group EBIT Q1 2011 versus Q4 2010


One-off reclamation costs Q4Higher personnel

costs in Q4

Lower production volume in Aitik Lower grades in

both Boliden and AitikLower free metals

in Rönnskär

Copper USD/ton +12 %Zinc USD/ton +3%

USD/SEK -4 %EUR/SEK -4 %

Cash Flow

Tax payment of MSEK 908 in Q1 Capex in 2011 approx. SEK 4-5 billion


MSEK Q1 11 Q4 10 Q1 10Op profit before depreciation (EBITDA)* 1 833 2 397 1 632

Changes in working capital* 171 483 -1 274

Capital expenditure -664 -1 025 -598

Free cash flow 448 1 850 -52*Includes Process Inventory Revaluation

Capital Structure


1. Shareholders’ equity includes the value of outstanding hedge contracts

46%43%

46%

37%

24%21%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Q409 Q110 Q210 Q310 Q410 Q111

GearingSEK bnUnless otherwise stated

31 Mar2011

31 Dec2010

Total Asset 35,1 35,1

Capital employed 26,8 27,2

Shareholders' equity1 19,6 18,8

Net debt 4,1 4,6

Gearing % 21 24

Equity/asset ratio, % 56 54

Duration of committed credit facilities, years 3,9 4,2

Average interest rate, % 3,34 3,29

Interest duration, years 1,7 2,0

Net payment capacity 11,154 10,728

Sensitivity Analysis


Changein metalprices,+10%

EBITeffect, SEK m

Change inUSD, +10%

EBITeffect, SEK m

Change inTC/RC,+10%

EBITeffect,SEK m

Copper 475 USD/SEK 1 060 TC Zn 40

Zinc 530 EUR/USD 395 TC/RC Cu 45

Lead 105 USD/NOK 75 TC Pb -10

Gold 115

Silver 185

Summary

Low mine production in quarter Lower volumes of free metals and lower zinc TC put pressure on smelter

profits Aitik ramp-up:

‒ Crusher availability still low‒ Old crusher reconnected end of Q2‒ Grades decline late Q2‒ 36 Mton/year 2014

E-scrap expansion in Rönnskär – 2011/2012 Kankberg gold mine 2012 Garpenberg expansion 2014 and new hedge program

Maintenance stops in Q2 will effect EBIT by 170 MSEK, lower in Q3


Disclaimer

This presentation has been prepared by Boliden for information purposes only. Nothing in this material shall be construed as an offer or solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction.

This presentation has been prepared as per the indicated date and Boliden does not undertake any obligation to correct or update the information or any statements made therein. Views that may have been expressed may be subject to change without notice.

Certain statements in this presentation are forward-looking and are based on plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other circumstances may also have a material effect on the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange or interest rates or metal prices, technological factors, interruptions in supply or production, actions of courts, regulators, governmental agencies, competitors, customers, suppliers, employees or other third parties.

Nothing contained herein shall constitute any representation or warranty as to the accuracy or completeness and Boliden accepts no responsibility or liability as to the accuracy or completeness of the information contained herein. The material may include information from third party sources believed to be reliable. However, Boliden has not made an independent verification of the information provided.

Save as by prior approval in writing, this material may not be copied, transmitted or disclosed, whether in print, electronic or any other format. All rights to the material are reserved.

Boliden does not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from or in connection with any use of this information.

This material has not been reviewed, registered or approved by any authority under any applicable laws.

Boliden Group 2011-05-0333

Boliden producerar metaller för det moderna samhället

interim report - boliden – metals for modern life...interim report january – march 2011 lennart...

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