Ladies and gentlemen, I'd like to welcome you to Boliden's Q1 2021 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. May I please ask you to limit yourselves to one, maximum two questions. Mikael, the stage is yours. Welcome.
Thank you, Olof, and welcome everybody also from me. It's very good to see you all around or to know that you're on the other end, even though I don't see you myself. Welcome to this presentation of the first quarter. The first thing that I would like to say is that what everybody already knows that we've had a very good quarter in terms of prices and terms, and which, by the way, has continued also into the second quarter. We'll come back and talk a little bit more about that as we move forward. We've also had a very good quarter in the smelters with good and even production. We'll talk a little bit more details, but generally good situation. On the mining side, we've had some issues on the production side.
They've been well communicated beforehand, especially the ones in Aitik and in Tara. We've been able to move ahead, and I think handle those very well, and those issues are now behind us as we are now in the early parts of Q2. Financial performance, we'll come back and talk about details, but we had close to SEK 2.5 billion of profit, EBIT excl. PIR. We had a very good free cash flow in the quarter, especially compared to last year. If you remember last year, we on purpose built working capital to take care of the COVID situation. This year, we've had a good cash flow, both from a slight release in working capital, which was not really intended, had to do with the production issues in the mines.
On top of that, the CapEx is a little bit behind schedule, and we had a low CapEx in the first quarter, but we're likely to catch that up. On the product side, you already know that Kevitsa and Garpenberg are up at design capacity. Aitik is still ramping up, and we had the production issues there, which means that we're slightly delayed on that one. The copper expansion in Rönnskär and the Harjavalta nickel expansions are so far doing fine. We have now decided also to move ahead in Kristineberg with the Rävliden expansion towards the mineralization. I'll talk a little bit more about that as well. The leach plant in Rönnskär is under commissioning as we speak, and hopefully we'll have commercial production in a few weeks.
Looking at the EBIT development, we have, as you can see here, not quite as brilliant results as we had in Q4, but you all know that Q4 was a quarter where everything basically went perfect. We have, compared to last year, a much stronger result, especially on the mining side, which had some problems on the first quarter last year and has been performing better, even though we had some issues already also in this quarter. The smelter division has been doing fine, and Håkan will come back and talk more about in the details about the financial performance. ESG is always very important, and we'll talk about that, and we'll try to make that a regular feature with these presentations. This quarter was maybe not the absolutely best one in that sense.
We had a lost time injury frequency of 6.5, which is similar to last year, so it's not an improvement. It's also not worse. This is an area that we're focusing very much on. It's a very high importance to us. We're very proud of our 13 years of fatality-free operations that we hope to extend for many, many more years. This quarter was a so-so quarter in terms of the safety performance. Sick leave is higher than last year, which is not strange. This year was fully COVID quarter, whereas last year was only an initial COVID quarter. This is hurting us, and we don't have a situation where we can, you know, say that somebody's gone, and we're gonna produce as much.
It is a little bit of a puzzle for managers to handle all the time as we get this short-term absenteeism. On top of this, which you don't see in this number, is also the fact that many people stay home not because they're sick, but because they're home, self-quarantining or voluntary quarantining because somebody in their family is sick or may be sick and until the testing is done for COVID, everybody stays home, which means that actually there's more than this that we actually lose in terms of productive hours. The CO2 intensity, which we're also very proud of, and it's also going in the right direction, and we talked a lot about on the Capital Markets Day, actually on Q1 was not doing so well.
It has to do with the lower grades, but also with the problems in Aitik. We had to change the feed mix. We also had to take in e-scrap with lower quality, more plastics. That meant that in this first quarter, the CO2 performance is not so good. We're very confident that we'll be able to drive this the right direction going forward. If you then look at the market terms, you all know about this. We've had a very good run on the base metals, especially on the copper side, but also other base metals are doing fine. The high price precious metal prices that we've had are still keeping up very well, even though they're not increasing, maybe slightly decreasing. We've had a slightly weaker $ as well.
Adding all these things together, we as Boliden have the best market terms that we've had since we started measuring in this way that we do measure it now. If you then look at the individual metals, you can see here, you know, especially on the copper side, but also on the zinc side, that the prices are well above the cost curves of the world. If you look at them, and if you take them one by one, you can start with zinc, but it's similar for copper. You can get the idea that every miner in the world is very good at pushing out cost, but you know how this works. It is the high silver price on the zinc side and the high gold price on the copper side that works as credit and drives the prices down.
We have, as you can see, very high prices, and we started on a high price, and you can also see the level. This is, I think, from Friday with the copper price approaching $10,000. On the nickel side, not quite as advanced. We are not as much pushing the limits of what we can do, and you can also see that actually the cost curve for nickel mines is moving slightly upwards. We can see that this price of nickel is a much more fundamentally base price that we feel is very good for the future and could potentially rise even more going forward. If we move over to the mines and just go through, we'll start with Garpenberg, where we had record production.
We had mill volume, which is, well in line with the 3 million ton permit that we have per year. The zinc grades were, I think, exactly on what we guided for, slightly higher silver grades than we guided for. In Kevitsa, we're also very good in terms of the mill volume. The 2.4 that we have is well in line with the 9.5 pace that we need to have for the year. In Aitik, we've had issues. We know about that. You know about that. We had an unplanned stop for 4 weeks almost in one of the two primary mills due to issues in the hydraulic system.
We've also had impact from COVID-19, and this gets much more pronounced in the open pit mines when you have people missing or you don't have the full shift in terms of truck drivers and so on. The mill volume was at 8.5 million tons, which is of course far below where it should be, but in line with what we had communicated before. Copper grades were down, not quite as much as we had guided for, but this also has to do with the issues that we had in production. 'Cause when production is lower, you can be slightly more picky which grades you take, and of course, we've done that in this quarter and taken the high grades that were available, and it doesn't really change anything for the total guidance of the year.
The Boliden Area has had some rock stability issues, which comes across as a lower mill volume and also lower grades 'cause we haven't been able to access exactly the position that we wanted to access. No positions are lost, and we will be able to get back and get those positions later. In Tara, we've also had production challenges in the sense of that we had a fail in the skip that led to a 1-week stop in the skipping of ore. We managed to put that one together, and we're now up and running again as normal in Tara. We also had a negative grade deviance, which was partly connected to this, partly on its own. On the smelter side, generally a strong smelting performance. On Harjavalta, it's moving on.
We've had record copper and record gold production. Slightly lower nickel in matte production due to lower energy content in the nickel concentrate, which means that we need to feed pyrite together with the nickel to make sure that we get enough energy into the equation. Generally speaking, very strong quarter from Harjavalta. Rönnskär has had some, you could say, follow-on issues from the issues that we've had in Aitik. When Rönnskär don't get the feed exactly they want to, we've been able to handle it in terms of volume, but you don't get exactly the qualities that you want to have and don't exactly get the feed mix that you want to have. That should all be getting back and get better again as Aitik stability is back online.
The other three smelters, basically stable production, not much to report from Kokkola, Odda, and Bergsöe. With that, I'll leave it over to you, Håkan, to talk us through the financial summary.
Thank you, Mikael, and it's a pleasure to talk to you remotely this time again. As Mikael just said, we had a strong quarter. EBIT excluding process inventory amounted to SEK 2.449 billion. Free cash flow, SEK 2.165 billion, and we recorded an earnings per share of just shy of 8 SEK. Looking back to the first quarter of last year, profit is up about SEK 1 billion, primarily due to stronger prices and terms. Cash flow is up almost SEK 3 billion for the same reasons and in addition, the lower working capital build that Mikael touched upon. Looking at the earnings per share, it's about doubled compared to Q1 of last year.
If we instead compare to Q4, we're about SEK 600 million down, both in profits and in free cash flow, primarily related to lower volumes. Investments are fairly low in the quarter. However, the guidance for the full year, our plans for the full year remain unchanged. We'll come back to that as well. We look by business area. We have mines at SEK 1.6 billion, smelters at SEK 949 million, and a negative other of SEK 131 million, which is driven primarily by the internal profit adjustments.
There is a good improvement in mines, especially compared to the same quarter last year, while smelters is stable on a very good level, although slightly down from the comparison periods. Looking into a bit more detail and comparing the EBIT excluding process inventory, Q1 this year to Q1 of last year, there's a SEK 1 billion increase, which is then primarily driven by stronger prices and terms. Metal prices are up SEK 1.9 billion, which is then offset by a lower dollar rate amounting to a net effect of about SEK 1 billion. We have seen a strong recovery of metal prices, above all base metal prices starting in June of last year, and that has a significant impact on the P&L.
Q1 of this year also includes a definitive pricing adjustment, which we sometimes refer to as MAMA, of + SEK 110 million. Whereas last year in this quarter, it was a - SEK 120 million. That has a significant effect. Once on the topic of pricing, we had a question in the latest Capital Markets Day about the open positions, which I think can help those of you that are modeling our results, and you'll find a slide on that in the appendix. Volumes are slightly up. It's fairly small changes. It's a stable production in smelters. In mines, we have a somewhat lower volume, which is then offset by higher grades and higher recoveries.
We've also been able to take down inventories during the quarter, which has a positive impact. Costs are also fairly small amounts here. We have a cost increase of SEK 40 million, which is about 1%, so a small difference year-on-year. Inflation at the moment is low. The inflation on external purchases is about flat or slightly negative, while the salary inflation is the regular 2%. We also have an impact of a higher cost base based on the expansions that we've carried out, which is then offset by the closure of Kylylahti. If we then look at the sequential comparison, Q1 of this year compared to Q4, the previous quarter, we are, as I mentioned earlier, SEK 600 million down. Prices helped us.
We've seen a continued recovery of prices, primarily base metal prices and in there it's copper that is the main effect. Slightly lower dollar and also a lower zinc TC, where the benchmark level has been set to $159. We have about half of the volume this quarter on last year's terms, so you see only a limited impact in Q1. As you know, in our case, the zinc is to a large extent internal trades between own mines and own smelters. The overall company effect is limited. The main change compared to Q4 is lower volumes. Almost SEK 1.5 billion in the effect on the P&L. Of that SEK 1.5 billion, SEK 1 billion comes from our mines.
Half a billion in there is lower grades, and Aitik is the main contributor, and that has been known a while. We are moving into lower grade areas, even if the impact, as Mikael mentioned, in this quarter is a bit less than expected. We also have about half a billion lower mill volume. We've communicated the disturbances that we've had in Aitik and in Kevitsa, which altogether had an impact of SEK 300 million on the EBIT. There is also the fact that we've closed the Kylylahti mine, which is about SEK 100 million less this quarter. Costs are lower. We have less maintenance in smelters. We have closed Kylylahti, and there are some savings on the variable side. We also have significantly lower depreciations.
We depreciate the stripping costs in the open pit mines based on the amount of metals produced. Since we are down this quarter, it also means that the depreciation is down accordingly. Looking at the cash flow, it was strong in the quarter. We've had good prices and terms. That's a starting point. But we have built less working capital than we typically do in a first quarter. This is partially due to the disturbances in mines. As you can see, last year we had a cash flow from working capital of -SEK 1.3 billion, which is also connected to the fact that we built extra inventories ahead of the COVID crisis.
Investments are low in the quarter, so all in all, it's a strong cash flow in what typically is a seasonally weak quarter when it comes to cash flow. That of course has a direct implication on the balance sheet and on the capital structure. Net debt to equity is close to zero. We have a payment capacity of SEK 15 billion, so a really strong balance sheet. We will of course come up a bit in net debt if the AGM decides on the proposed dividends. That is well-known. We're in good shape. With that, Mikael, you want to continue?
Thank you, Håkan. I'll just put us to the end of this. We have today announced the Rävliden Project, or what we now will refer to as the expansion of Kristineberg towards the Rävliden mineralization. We've spoken about this one before, and you've known it, and you've seen around this, but just to be very clear, we've not put down a decision to go ahead. The CapEx is SEK 1.25 billion to go ahead. The planned production start is in 2023. There is an issue here that we are in the midst of renewing the environmental permit for the whole Kristineberg mine, which where we'll also take everything into account. That one is not in place, and therefore we will tread a little bit cautiously until we have it in place.
Some of this investment is things that we would have to do anyway to get the Kristineberg mine to continue, including some water issues and water handling issues around that. The Rävliden mineralization will serve many purposes. It will serve a purpose to make sure that our grand old lady, Kristineberg, which has been around for, I think, 80 years or so by now, will be around for many more years. It's a future-proofing of the operation. It also future-proofs in that sense the Boliden area to make sure that we have enough volumes. We'll also be able to fill the mill. Now, somebody will argue we're roughly filling the mill today.
That is true, but there is some more volumes that can come through the mill that will come through Rävliden, but it's also so that the reason why we have relatively good mill volumes today in the Boliden area is that we are milling some marginal waste rock positions of way back when, which is partially giving some contribution. That's why we're doing it, but it's also solving a legacy environmental problem. Over time, we want to make sure that we fill the mill in Boliden with real ore and real profit-generating ore. We're doing that. It sets a very good financial target.
You all know how difficult it is to make an exact contribution calculation in an area like Boliden Area where everything is lots of things, pieces are moving, and you can choose your base case a little bit to how you want to do it. A little bit however you turn yourself, this is a very good project, and it sets financial return which is well above Boliden targets. On top of that, we will also make this hopefully a poster child in terms of automation and in terms of electrification. We will have a substantially better CO2 footprint as we move forward with this expansion, moving towards potentially totally fossil-free transport in the mining area, in the mine, which would be a great achievement.
The timing of this investment is that most of the investment will happen in 2022. There is something in 2021. There's also things carrying over to 2023. The exact timing is a little bit dependent on the permit, how quickly we get the permit and how quickly therefore can go ahead. Otherwise, I'd just like to confirm the outlook for going forward. There's not much change on this one. Regarding Aitik, we have communicated that we are into lower grade areas and that means that for this year we will be around 0.21 grade on copper and 0.11 on gold. Regarding Garpenberg, we have continuing the guiding of 3.8 on zinc and 110 on silver. The maintenance stops slightly down from a previous communication.
The main reason why they're down is that we have moved to this is a COVID issue, but also a general improvement issue to move a maintenance stop in Rönnskär from 2021 to 2022. It's not really saving maintenance, but it's moving it further out. Then as you all know, when the metal prices get higher, it gets more expensive to have maintenance stops because the opportunity cost of standing still is bigger. The CapEx is still unchanged. That's slightly above SEK 7 billion. The part of Rävliden that will come in this year will not change that. We already had space in our budgets for that early piece of the Rävliden project.
With that, I think we have come to a conclusion regarding this one, and we will open up for questions, and then I'm going to try to do a magic thing and see if I can get this one in because I needed to hear you.
Thank you. Ladies and gentlemen, if you have a question, please press zero one on your telephone keypad, and you enter a queue. Our first question comes from the line of Gustaf Schwerin from Handelsbanken . Please go ahead, your line is open.
Yes. Hello. Thanks for taking my question. Just one from my side on Aitik. You say you're losing about 2 million tons on the production issues and the higher sick leave in the quarter, and if we add that back, we're basically flat quarter-over-quarter. My question is, are you actually making any progress in terms of the ramp-up in Q1? Is the winter effect sort of offsetting some of that improvement? And any thoughts on when we should expect to reach that run rate now? Is basically higher sick leave in Q2 the only thing preventing that from happening already then? Thanks.
It's the higher sick leave, and it is also the fact that this issue that we had with the mill ran a little bit into early part of Q2 as well. Otherwise, you can say it's the sick leave is the main factor.
Yeah. I guess we won't see it in Q2, but I mean, given that we have a successful rollout of vaccines, I mean, will we have the run rate in Q3? Are there any other things preventing you from reaching that?
No, they're not really. As of Q3, hopefully if vaccines and other things do the trick, we should be in a pretty good position.
Okay. Very clear. Thank you.
Thank you. Our next question comes from the line of Daniel Major from UBS. Please go ahead, your line is open.
Hi guys. Yeah, a couple of questions. First, can you just walk us through a reminder of the transition to the lower zinc benchmark TC and what that means in terms of the earnings sensitivity for the second quarter? That's my first question.
You wanna take that Håkan? Yeah.
I can take that. Well, it's included in the sensitivity tables that you have in the report. What we see is that in this quarter we have about half of the volumes produced out of with old benchmark terms and about half of it is in the current price level. You'll see a part of it, and then it will be the full effect for next year. The sensitivities you'll find in the table further back in the report.
Am I correct in saying about 15% of your volumes are spot, and the rest is contract, so we should adjust for that when thinking about that transition and same with the copper treatment charges given the very low spot we're seeing at the moment?
Yeah, that's correct.
Okay, great. Thanks. Just second question, I appreciate it might not be easy to answer it, but can you give us any indication on your current base case timeline for the permit at Odda, and therefore the approval if it occurs of the expansion?
I can just say that as we said on the Capital Markets Day, we still are hoping to be able to announce this project by the summer. We do not, as of today, have an environmental permit yet. It could be coming in the next few days or weeks, but we're dealing with authorities that can always extend their own timing if they want to.
Okay, thanks. Just final one on the maintenance stops and forgive me if I kind of missed anything. That's. Is it right that they're going up from SEK 345 to SEK 500? What was the driver there again? A few more details there would be good.
Well, number one I said it's going down because last time when we talked about the guidance it was SEK 550 and now it's SEK 500. The reason why it's gone up from last year has to do with the general maintenance cycle where you know that, you know, some years are less maintenance and 2020 was a low maintenance year. 2021 is a high maintenance year, so that has to do with the general cycle. On top of that, maintenance stops do get more expensive with high metal prices because in that EBIT effect is also the opportunity cost of standing still. That was all in and then that came to SEK 550, now we're down to SEK 500. It has to do with that we have moved one maintenance stop from 2021 to 2022.
Okay, perfect. Thanks very much.
Thank you. Our next question comes from the line of Tyler Broda from RBC. Please go ahead. Your line is open.
Great. Thanks very much and thanks for the call today. Just in terms of the for Rävliden and the permitting there, what would you be able to provide a bit more specifics around what is causing the delay? Is it anything that could that you may not be able to get a permit for or is that more just a logistical issue? Secondly, just looking at the CapEx spend in the first quarter, obviously SEK 1 billion, you know, quite below the run rate for the full year. How much is there a risk that you're sort of falling a little bit behind on some of the operational sort of maintenance CapEx at this point with the COVID?
Is that something that's happening here or is it more just a regular timing issue? Thanks very much.
If I start with the second one, I think it's more a regular timing issue, but there is a little bit of COVID playing into this as well. We need to be able to catch that up to make sure that we can do the maintenance that we need to do and the CapEx that we need to do. Regarding the Rävliden permit, it's a little bit of a situation that is a little bit difficult to explain. Basically what we're doing is that we have a permit for the Kristineberg mine. That permit needs to be renewed, occasionally and we're heading up for renewal anyway. We would be able to produce under the existing permit from Rävliden. That's not the issue as such.
We would have some limitation on how to produce and we wouldn't be able to produce exactly the way we want to under the existing permit, but it fits very well into the cycle of renewing the permit we was up anyway. In this case there will be no changes on the surface. We will keep on in our industrial area the way that we have it. The only kind of changes on the surface is there will be new ventilation shaft coming up somewhere but that's a very small thing compared to other things that we have and therefore we don't see any kind of real issues with this permit. It's a typical update on permits. It could theoretically have some minor, obviously minor impact on timing and minor impact on some of the engineering choices.
As I did mention, we do have anyway a need to renew our equipment for water cleaning in Kristineberg, which include in this. I will put it's not a big issue, but it needs to be done and we will need to adjust the timing of the investment according to how we get permit.
No, that's great. Thanks. Thanks very much.
Thank you. I remind you that if you want to ask a question you will have to press zero one on your telephone keypad now. We have a question coming from the line of [Hachinda Luanne] from Exane BNP Paribas. Please go ahead, your line is open.
Good morning. Thanks, operator. Just a question. Apologies I joined the call a bit late if you have already addressed it. On Kristineberg expansion or Rävliden development, is there an indicative CapEx allocation between these 3 years? Or would you expect much to be spent this year irrespective of the permitting situation?
Well, we would expect a couple of hundred maybe this year, the major part next year, and then part of it coming in 2023 as well.
Okay. Would that still be that 200 is still keeping your SEK 7 billion give or take guidance unchanged?
Yes. That's what we said. We had already priced for that early part in the guidance as we had it before. There's no increase for this year.
Understood. Very clear. Thank you.
Thank you. Our next question comes to the line of Ioannis Masvoulas from Morgan Stanley. Please go ahead. Your line is open.
Yes, good morning, and thanks for the presentation. Just a clarification from my side around Rävliden. When we say an additional 200,000 tons, is that based on the 2020 milled ore of 1.9 million tons or closer to the 2019, which was north of 2 million tons? Thank you.
You have to be careful. Those numbers that you just mentioned there is including the slag milling from Rönnskär. If you take away slag milling, we roughly have a run rate of about 1.7 million tons of ore that goes in, and we're aiming for 1.8, which then somebody says, "That's not 200. That's only a hundred." Well, that is. We also have around 100,000 that's included now in the ore rate that go through the Boliden mill, which is not ore at all. That's actually all waste rock that we are taking in, which, as I said before, it has a positive contribution, otherwise we wouldn't do it, but it's mainly a cleanup operation and has low grades.
Understood. Thanks very much.
Thank you. There are no further questions at this time. Please go ahead, speakers.
Ladies and gentlemen, that concludes our Q&A session for our Q1 2021 results. Mr. Staffas, I leave it up to you to conclude.
Well, thank you, Olof, and thank you, everybody, for listening. I think this has been a good quarter, and I very much look forward to continue the operation going forward, and I think we'll have some interesting discussions when we meet again in the next quarter. Thank you, everybody.