Ladies and gentlemen, I'd like to welcome you to Boliden's Q2 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. Mikael, welcome.
Thank you, Olof. Hello, everybody out there. It has for sure been a very intensive and very special quarter from our side. I'll try to go through all the things that have happened. It's as I said, been a very intense quarter for us. If we just start going through, I mean, one of the highlights that all you know is, of course, the fire in Rönnskär. I'll come back and talk more about the fire in Rönnskär in a little while. We had the major fire, we had the total shutdown of the operations. We are now, as we're speaking, up and running. All the units except the electrolysis plant are running.
We still have some curtailed capacity at some of them, but they're all running, and we have a good hope that we very soon be able to run all of them full and thus be able to produce anode copper at full production. I'll come back to that. The other big thing for us in the quarter has been the general development of the prices and terms. As you can see when you look at our numbers, you can see that we've been hit not just by lower metal prices, zinc prices especially have gone down dramatically. We've also been hit by lower by-product prices. In our case, lots of people who are based in Sweden think that we're winning from currency, but we're actually not compared to last quarter.
Because of the strengthening of the euro compared to the U.S. dollar, we're actually having a negative development in terms of the currency effect as well. This all led to a situation where we decided to put the Tara mining care and maintenance because the escalating cost there and the lowering zinc price, which we decided back in June, and we have now effectuated. Tara will be down, we will come back when the prices and terms have returned so that we can run Tara profitably, and we do think that we can do that. Otherwise, we of course, have another solution than care and maintenance for Tara. We are very positive that we will come back in a strong way whenever prices return. On top of that, we've had low grades in mines.
Partially, this has been well communicated far in advance, with the developments in Aitik. We had to, because of rock stability issues and changing our mining plan, we also got a lower grade in Kevitsa that we announced in an extra press release a few weeks back. A very big maintenance stop in Harjavalta, one of the biggest one in many years. We went through, the maintenance costed or took a little bit more longer time than we thought, so it was a little bit more expensive than first anticipated, but it also feels good that we're through the majority of the maintenance for this year. We can also say that, of course, inflation, especially if you compare to last year, is still hitting us relatively hard, although inflation quarter- on- quarter is very low now.
Our major projects are going basically, are all the three going in according to plan, and we're developing well, both in Odda, in Aitik, and in the Kiiskenkallio project that we're doing. All in all, and we'll come back to that, this has led to a reduction, sharp reduction in the profitability for the quarter, especially compared to last year. We have a negative free cash flow. We'll come back to that because of the, partially because of the fire in Rönnskär, we also had a higher working capital and CapEx now up at levels around what we have guided for. If you look at the profitability development, we had a little bit less than SEK 1 billion, SEK 833 million profit for the group. We'll come back to details around that.
There are some one-offs in that number as well. Especially, the mines have been struggling with the lower grades. Smelters also back, mainly due to the big maintenance stop, but also the fire in Rönnskär. On the ESG side, we've also had a struggling quarter. The LTI frequency that we for a number of quarter have been coming down to very low levels, and of course, maybe has made us a little bit spoiled. We are now having a setback in this quarter with a number which is more like what we had a couple of years back. We still feel good about the progress that we have. We still feel good about the general safety development, even though these kind of quarters do unfortunately happens now and then.
The sick leave is going down if you compare to Q1, and we're heading down to lower levels. However, it was not quite as low as we had hoped for and anticipated, and we're working hard to see whether we can get the sick leave down even further. What was good in the quarter is the CO2 emissions are continuing to develop in the right direction, and you can see here that we have a lowering of the CO2 emission Scope 1 and Scope 2 from 206 to 190 in the Q2 compared to last year. The metal or the price and terms, especially zinc, with 19% down in the quarter, is the one that hits us pretty hard.
You know that with our pricing model, what definitely pricing comes up to four months in certain cases after delivery, that hits us hard, and we have a negative development on the prices and terms. We have a strong negative development on the by-product side, especially sulfuric acid. We also have declining premiums for the spot side, which is in line with this, and we have a negative currency development for Boliden as a group because of the strong euro, even though the Swedish krona is weak and helping us, the strong euro is actually making it altogether a negative currency development compared to last quarter. We can also say that in part of this is what we see, and this is what comes from LME numbers and so on.
We also see, and we've been open with this, that, when we look locally at the markets where we are present, we also see clearly lower activities. We see our customers taking out less volumes than normally, we can really see that in the sectors that are using our metals, clearly, recession has entered into Europe, this was also been a discussion as we've been talking about Tara, because, of course, if you believe that the zinc prices would jump up next month, you wouldn't put Tara in a Care and Maintenance. As we see it right now, we cannot foresee that the zinc prices will jump up, really in the short term. We're probably talking into 2024 until we get a good rebound in the zinc prices.
If you look down on the prices, you can see that the prices right now, both for zinc and for nickel, are down at around the cost curve, which is usually a sign that the prices don't really go that much further down, but it's also not sure that they will jump up very fast. Copper is still developing well, has had a much better development in the quarter, even though the copper price is also down, and the copper price is still well above, where the cost levels in the industry are. If you look at production, I must first say that we had a good production in our mines almost all the way through. We've had good throughput in Aitik, 45 million ton, more or less.
Apart from the beginning of the quarter, which we guided for, where we had problems floating over with the mill issues that we had in Garpenberg. After that was solved in April, we've been producing very well, and the throughput has been very good in May and June. Also in Kevitsa, we are having throughputs very close to the 10 million tonnes, which is our permit level around there. Throughput and also in the Boliden Area, throughput is good. Tara throughput was also relatively decent. With the announcement of the care and maintenance, the production went down. Looking at it for the whole quarter, it is below what it should be, but it was doing relatively well up until then. The issue that we've had has to do with the grades.
In Aitik, we are now down to 0.17 that we have guided for the full year. We knew that we were going to come there. We have also indicated in the capital markets day that this is a level roughly where we could be expecting to stay for a couple of years before we get the grades coming back up again. In Garpenberg, we've had some issues with the grades. We've been in lower areas. That's really a temporary thing. We should get the grades back in Garpenberg, and we don't have any change in the forecast for the year. Kevitsa, this is quite in line with what we communicated a couple of weeks back.
We've had rock stability issues in Kevitsa, which has made it, for long parts, impossible to mine from the Pushback 3, where the high grades are. We've been mining from Pushback 4 instead. We've been able to keep the volumes up, which is good. Of course, it's hitting the grades, and we are now at those grades as we communicated there. On the smelter side, well, the big thing on the smelter side, throughput is the very major maintenance shot that we had in Harjavalta, which was well, communicated beforehand. It took about one week extra, longer than we had anticipated, a little bit in different parts. That's things that happens when you do these major stops. You only find out exactly the condition of the furnaces once you have cooled them down.
It took extra time for us to do this. We feel good about this. We also had a chance, in the meantime, to rebuild the nickel concentrate dryer, which has been causing us issues, and now it looks better once we've been able to get going with that one again. In the zinc smelters, we've had a relatively good production, even though we had a little bit of an issue with the electrolysis plant in Odda number four, but otherwise, the zinc smelters have been doing well. The big thing is, of course, the fire in Odda that totally shut down Odda on June 13. It was down for about two weeks. To most extent, we've been starting up the different parts. We have been able to start produce anodes. We have actually shipped anodes.
We have developed a limited contract basis for anodes, and we are, as we're speaking, building up the book around how to sell the anodes. We're not really worried about it. It will take some time to establish this. We are a brand-new player in this market, and we need to put a name to ourselves around it. We're not in any sense worried that we're going to be able to sell the anodes. That's going to be quite possible. Now, Håkan, I'll leave it over to you to talk a little bit about the numbers.
Thank you, good morning. Well, as you have seen, we have reported an EBIT excluding process inventories of SEK 833 million, CapEx of SEK 4.2 billion. That means that we have now spent just over SEK 7 billion, which is in line with the full year guidance of SEK 15 billion. As a consequence, that means that we have a negative cash flow of -SEK 3.8 billion. We look at the profit by business area, you can see what Mikael talked about. There is a decline in mines, a sharp decline in mines related to lower metal prices and grades. On the smelting side, we have a significant, a big planned maintenance, and on top of that, the fire in Rönnskär had a major impact....
Those will be the main changes in the results. If we look a little bit more in detail and start down with Q2 compared to Q2 of last year-on-year, there is a big drop in prices. We have an EBIT impact of about SEK 750 million compared to last year from the zinc price reduction. Also, price reductions of copper and byproduct sulfuric acid is significant in this analysis. Year-on-year, the price drop on metals and sulfuric acid is partly compensated by better premiums and better currencies. All in all, it's adding up to a negative price impact of minus SEK 841 million. Volumes are down 2.1.
More than half of that is related to metal grades in mines. This is mainly Kevitsa in line with the announcement a few weeks back, and Aitik, mining at 0.17% copper, which is in line with the full year guidance. Those will be the most significant ones when it comes to grades. The Rönnskär fire, the fire in Rönnskär, we estimate had an EBIT impact of about SEK 400 million. Or sorry, a volume impact of SEK 400 million. 200 of that is direct production losses in the smelter. The other 200 is related to the timing of profit recognition in mines.
When we've had one smelter closed due to fire and the other one in maintenance, concentrate stocks, concentrate had piled up. That means that we have not been able to recognize the full profit of the mining production. This is a timing effect. We expect that to normalize during the coming quarter. We also have a bigger maintenance stop this year, which has a negative impact on volumes. Costs. The main reason to the cost increase is inflation. We have a high single-digit inflation, so a bit below 10% year-on-year. In there is, of course, also a currency component. The Swedish krona has further weakened against the euro and the dollar, which plays into this. In addition, we have slightly higher maintenance cost and higher exploration.
On the items affecting comparability, we have a few components related to Tara and related to Rönnskär. We have made a provision for early retirement in Tara, SEK 53 million. We have a provision for demolition of the cell house that was destroyed, SEK 75 million. We have a write-down of SEK 88 million, which is the book value of the cell house. A fairly low book value as it was mostly depreciated. If we look sequentially and compare Q2 to the previous quarter, the main components are the same. Prices and terms, just below SEK 800 million negative impact. Base metal prices down. Again, zinc is the most important component with about 500 million Swedish krona impact compared to Q1, so significant. The currencies are slightly negative.
You can see SEK 120 here, and that is related, as Mikael Staffas talked about, to the euro strengthening against the U.S. dollar, meaning that the profitability in our euro-based units, Tara, Kevitsa, and the Finnish smelters, has had a negative impact. Volumes is SEK 1 billion down compared to Q1. Again, grades is significant, about SEK 400 million, Aitik and Kevitsa, according to the announcements earlier on. Also here, we have a SEK 400 million impact from the fire in Rönnskär. Same order of magnitude is the volume impact from the maintenance stops, primarily in Harjavalta. But on the plus side, we had about SEK 300 million improvements due to higher mill volume compared to Q1. The costs are slightly up compared to Q1 due to maintenance stops.
There is no significant inflation that we see compared to Q1. And then we have the same one-offs related to Rönnskär and Tara. Cash flow, well, the main difference is a lower EBITDA. We also have high investments, and then we've built working capital, roughly 1.7 billion SEK. The reasons to that are two: we talked about already at the last quarterly report, where we had a seasonal working capital build that didn't happen in Q1, one, and that we guided for would happen in Q2. That is one background, and the second one is, of course, the fire in Rönnskär, where a lot of concentrate stocks have piled up as we have not been able to process and ship that.
Moving on then to the capital structure, we have a net debt of SEK 11 billion. The main change compared to last quarter is a SEK 7.3 billion dividend payment, including then the redemption of shares, and then in addition, the negative cash flow I just talked about. That adds up to a net debt of SEK 11 billion and a gearing net debt/equity ratio of 20%. Now, we still have a strong balance sheet, SEK 14 billion-14.5 billion in payment capacity and, you know, strong numbers. With that, I'll hand over to you again, Mikael.
Thank you, Håkan. Let me just go through some of these situations a little bit more in detail. We start with the fire in Rönnskär, it was happening in the cell house, we all know that. Production has already, as I said, partially resumed. The first part was resuming, I think, after 10 days, we have been gradually stepping up the different areas. As I said, now, all units except the tank house are operating. Some of them cannot operate at full capacity yet, but in a month or so, we should be able to operate all units at full capacity. We have a commercial setup that needs to be handled around this.
We are building a book of anode customers that is in progress. Some anode contracts are in place, but most are still to be handled. I think that many of you would like to have a guidance regarding what is Rönnskär going to have as a level of earnings now that we don't have a tank house anymore. I will not guide you this time because it is linked to the commercial setup and exactly how well we get paid. Of course, we will have a lower profitability in Rönnskär going forward. I mean, there is a reason why you have a tank house at a smelter, and in our setup, it is important to have that, so it will be a lower EBIT, but by how much, we'll have to come back to you.
In Q2, we had the one-offs of SEK 88 million for the actual tank house and SEK 75 million for the cleanup after the fire. We have had two different impacts. One is the actual downtime in Rönnskär itself, for about SEK 200 million, but then we have the impact from the fact that we cannot ship concentrates. Rönnskär is not only a consumer of concentrate, but also a shipping port, which has backed up concentrate from the Boliden Area, which has not been able to be shipped out to other units. It has also, of course, backed up some concentrate from the Aitik, but also lead concentrate from Garpenberg that has had to back up because of the fact that they were not being processed at this time.
Insurance, we are fully insured, but you know that as everybody with insurance, there's always a discussion around what exactly they will compensate or not, both in terms of the actual lost property and in terms of the disruption. We will continue to discuss this, and at some stage, I think we will see a nice one-off positive regarding this, but we'll come back to that once we know a little bit more. We have also, just as I pointed out before, we have started a feasibility study for putting a new tank house in place. We don't know exactly how long it will take until we have a new tank house in place.
Our ambition is that we should be able to make a decision on a tank house by the end of this year, but we'll see how quickly we can move on with the feasibility study. It should be mentioned that even though everything looks good, we should be very clear, we have not yet access to the fire site. It is still under control. There are safety issues with walking in there. We need to do lots of preparation before we can start walking in. That is important both to understand the root cause of the fire. It's important to understand what can potentially be used of the old electrolysis plant or tank house in the new construction.
It's also important for understanding how we will get the process inventory, i.e., the copper and gold and silver and so on, that is in there, and get that out. We have not made any provisions. We're pretty confident that we'll be able to get the full metal value out of the tank house, but it will take some time over Q3 and Q4 to get that out and be able to put it back into the process and get it into anodes. In Tara, as I said before, the main reason for putting Tara into care and maintenance is the poor profitability. As you've seen, we lost EUR 38 million in the quarter, which is, of course, totally unacceptable.
the lower zinc price and the higher cost levels that we have, both general cost inflation and higher zinc TCS, which has been the main combination, but also energy prices play into this equation. As I said before, we do not see a quick rebound in this, and we decided, therefore, to put Tara into care and maintenance. That is a better, both short-term but also long-term option for Tara. We have a connection with this also with the union negotiations, given offers for some early retirement that we have made the provision for at SEK 53 million in this quarter. Going forward, we have roughly a standstill cost of about EUR 12 million per quarter
This Q3 will be a little bit more expensive 'cause all the costs were not gone as of July 1. We had some higher cost in July, which means that we're roughly at EUR 18 million negative EBIT from standing still in Q3. We've also decided to put the exploration on Tara Deep on hold. There are a couple of reasons behind this. One is that what is important for Tara Deep is to do exploration from underground. With having the mine into Care and Maintenance, it is from safety reasons, not that easy to be able to do exploration from underground, to have people working underground when the actual operation of the mine is not in place regarding first responders and safety and so on.
The other reason is also that, of course, while Tara is standing still, we're not taking up space into the tailing pond, and we're also not depleting the old mine, which means that we can move the whole decision-making basically one day forward for every day we stand still, and thus, the pressure on time for Tara Deep is also a bit less. That, in that combination, we've decided to also pause the development of the Tara Deep project. Kevitsa, the Kevitsa situation we've talked about, and we had the extra call around that. We've had problem with rock stability, which has meant that it's been impossible to mine from Pushback 3 for a large part of the quarter, and it will continue to be difficult to mine from Pushback 3 also for the four next coming quarters.
We have been able to increase the speed at Pushback 4, which means that the total tonnage is saved, and we get, we're gonna get the 10 million tonnes for the whole year, but we will get that at lower grades. We had ended the Q2, where we had guided for and the extra guiding a couple weeks back, and we are now reiterating the guiding for Q3, Q4 as we took it out a couple of weeks back. If we summarize it, what does that look forward? Well, Aitik is now producing well, is producing at this 45 million ton throughput level, but we are hitting these low grades, and we are reiterating the grade guidance of 0.17 copper and 0.07 gold for the year.
In Garpenberg, producing well 3.3 million tonnes should be doable. We are should come back and get some positive grades around this, and we're reiterating the full year guidance of 3.3-3.6, I should say, % zinc, and the 100 grams per tonne of silver. Kevitsa, we are reiterating the 0.25 copper and 0.18 nickel, as we communicated a few years, a few weeks back. In Tara, we are giving the guidance that it's gonna cost EUR 18 million in negative EBIT for Q3, then from there on, about EUR 12 million negative EBIT, as long as we keep on standing. Maintenance shutdowns, we have done the vast majority of maintenance shutdowns for the year when we're now done in Harjavalta.
We do still have some maintenance stop coming up, especially in Kokkola, and we have an impact of SEK 140 million for Q3 and nothing for Q4. As I said, with Rönnskär, it's very difficult to give you an estimate of what is the earning potential in Rönnskär in its new commercial setup, selling anodes rather than cathodes, but it's, of course, going to be lower than what we had as a going run rate before the fire. Exactly where we'll have to come back to. Regarding CapEx, we are reiterating the previous guidance of close to SEK 15 billion for the year. The projects, as I said before, are all moving on relatively well. With that, I will open up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Adrian Gilani from ABG Sundal Collier. Please go ahead.
Hi, it's Adrian here at ABG. A few questions from my end. First of all, on the Garpenberg zinc grade of 3.1%, that was very low, you still decide to keep the outlook of 3.6% for the full year. I guess, how confident are you in that figure, given that it implies around 4% zinc grade for the H2 of the year?
Well, we wouldn't put it out there if we wouldn't be confident.
Okay. Yeah. Sure, that's clear. Then the SEK 400 million EBIT effect from buildup of concentrate inventories, is that something you will be able to catch up on in coming quarters, some sort of reverse?
Well, like I said, the SEK 400 was SEK 200+ SEK 200. The SEK 200 that was lost because of Rönnskär standing still, that is lost. That's not gonna come back. The SEK 400 that was tied up because of slow deliveries from mines should revert. As we get, the production resuming in Rönnskär and also the port, resuming back to normal operations, that should revert.
Just to be clear, the 200.
Understood.
200 will revert and 200 will not revert, just to be clear.
Yep, yep. The 200 SEK that will revert, you should see that entire effect in Q3?
That is my expectation, yes.
Okay. I guess finally on the inflation, you didn't give us an exact number like you've done in some quarters before. You just say that it's easing. Are you able to say some year-on-year % figure on this, and perhaps also what you expect going into Q3?
Yeah, we can give a number. It's slightly below 10%. To give a number, if you want to be very exact, I would say 9% year-over-year, and we see a downward trend. The components are coming down in a little bit different pace, but currently in the quarter at 9%.
Okay, perfect. That's all for me. Thanks.
The next question comes from Liam Fitzpatrick from Deutsche Bank. Please go ahead.
Good morning. Three questions from myself. Firstly, just on your zinc smelters, can you just give us some guidance on the impact from the Tara closure in terms of how that could impact profitability for your zinc smelters moving forward? Have you been able to, you know, secure, concentrate, both short term and over the medium term? Second question on Rönnskär. I know you don't want to say too much at this stage, but can you give us some color in terms of, you know, what the potential kind of CapEx ranges and timeline could be in terms of rebuilding the cell house? Is it your expectation that that will be mostly covered by insurance? The third one, just on volumes, and I guess this is for Håkan.
Look, it's a very complicated quarter for both the mines and smelters with all the moving parts. Could you walk us through, on the volume front, what sort of uplifts we should be seeing into Q3? I understood the point earlier around, you know, the concentrate at the mines, and I think the maintenance guidance is pretty clear. Over and above that, are there other sort of key volume movements that you can help quantify for us? Thank you.
I can start with the two first, then I'll give the last one to Håkan. Regarding the zinc smelters, yes, I would say the following, I'll put the following: that we've been able to replace most of the Tara volumes. We are still working to replace the last ones. We feel relatively confident around it. Regarding Rönnskär and a new plant and insurance coverage, I have told many people before that it's a little bit like when you have insurance for your, for your bathroom, and you get a, you know, a water leak, and you have to rebuild the whole thing, and you are fully insured.
Usually, you don't build what you had before, you build something else. The insurance company will argue that they are only liable to rebuild exactly what was there before, then you have a negotiation, you know, how much they should cover the new thing. I think exactly the same thing will happen here. We are fully insured. We are, you know, we have to know that this plant that was burned down, the newest part of it was almost 25 years old. The older part were over 50 and so years old as well. We're not gonna rebuild, or we don't intend, you know, the intention is not to rebuild exactly what was there, but something different, reflecting new technologies and everything else around us.
Of course, then the insurance company will say, "We're not gonna pay for all of that. We'll pay for part of that." How that all will work out is all part of the feasibility study that I said we have started, and that we hope we'll finish and be able to make a decision on how to move forward by the end of the year.
When it comes to volumes, I think the main components are related to grades. If we just go through the activities one by one, I mean, the throughput and the milled volume in mines was good in the quarter. It was a good step up from last quarter. We have reiterated the grade guidance for Garpenberg and Kevitsa, which should be an improvement for the H2 of the year. When it comes to Rönnskär, we were still a couple of weeks, so we will ramp up the anode production in this, in this quarter. The volumes will be there, but at a lower margin.
We have about SEK 200 million concentrate that is not increased production volumes, but we will be able to recognize the revenues and the profit of those SEK 200 million in Q3. I think those are the main components that should change between the quarters. For zinc smelters, I don't foresee any major change.
Could I just briefly follow up on those volume points? On the mine grades, are you able to kind of quantify that in terms of any ranges? Then on Rönnskär, where I'm struggling is, obviously, it's returning in terms of volume, but at a lower profitability rate. When we're thinking about Rönnskär in Q3 versus Q2, is it gonna be up? Is it gonna be down? Is it gonna be flattish? Any color on that would be helpful.
Okay. I'm not sure quite how to answer that, but, I'm not sure if I can put a Swedish krona value or a monetary amount to the grade profiles. I think if you look at the grade guidance that we have provided for the full year, that means a good step up in a couple of the mines for the H2 . Again, regarding Rönnskär, there is a big uncertainty in the exact impact until we have established the commercial terms for this. Therefore, it is a bit difficult to guide on the EBIT impact. Volume in production, though, should be back or is back when it comes to producing anodes. Anything to add on that one?
No, I think we're. Maybe if that's okay with you, we'll move on.
Thank you.
The next question comes from Daniel Major from UBS. Please go ahead.
Hi there. Thanks for the questions. First one is a follow-up on Rönnskär and the insurance dynamic. I totally understand the concept you've put forward on the negotiating the absolute amount. I think the key thing from a perspective of your group cash flow and balance sheet dividend for the next few years is how the payment will be structured, i.e., would you expect to receive a proportion of the insurance claim as you rebuild the smelter? Or would you expect to have to finance the full rebuild of the tank house, and then receive a lump sum payment at the end of the construction period, once all of the outstanding amount has been determined?
I would say that we're really guessing at this stage, but if you, if you force me to guess, I would say that once we make an agreement with the insurance company, and hopefully we can do that in a time matter so that we don't delay the construction of a new tank house because of this, we should be able to get payouts kind of in line with how we build the new tank house proportionally. Regarding the payments for business interruption, which is also substantial with this, there, I think that there is a risk that we will be negotiating for a long time and get a long lump sum sometime in the future, when we will get covered for the business interruption.
As you know, with these kind of discussions, there could be long discussions around what would we have made, in terms of money, had we not had the interruption. That one I expect to come later, after the fact.
That's very useful. Thank you. Next question, just to be clear on some of these one-off items that you've detailed. The SEK 200 million for the locked up inventory, was that reflected in the mining EBIT this quarter, and therefore should reverse in mining next period? Is that correct?
Partially mining.
Okay.
It's partially mining, but it's also partially in the internal profit elimination. It ends up...
Okay.
I don't know how much is each. Do you know that?
The main part of that, as you say, it's in both, but the main part is in the segment or the business area, other, in the.
Okay
... internal profit elimination.
Okay. Just to follow up to that, if we look at the bridge on the mining business, you did 178 million of EBIT last quarter. I think EUR 38 million is about SEK 435 million was associated with Tara. If we sort of back that out, it would a normalized earnings for the mining business be somewhere in the region of SEK 700-800 million for the quarter as a starting point. Then, obviously, we've got the volume benefits that you highlighted. Is that the right way of thinking about it, excluding the losses from Tara?
I would say that yes, it's a good start, but there are other things involved in it as well. You have to remember, the mining business was also hit negatively on the prices and terms with the provisional pricing, when you have a relatively low price at the end of the quarter. Hopefully if the prices remain stable or even go up, that effect will also revert.
Yeah.
Okay.
Yeah.
Yeah. Can you quantify the provisional pricing impact during the quarter?
About SEK 90 million.
In mining.
Negative SEK 90 million.
SEK 90 million.
990.
Okay. All right. Yeah, that's very helpful. Thank you.
The next question comes from Viktor Trollsten from Danske. Please go ahead.
Thank you, operator. Good morning, Mikael and Håkan. Firstly, on grades in the Boliden Area, if I may, where we have seen, you know, a bit, you know, lower grades in terms of zinc, this quarter and also, the last. Is this sort of, you know, according to plan, and how should we, you know, think about that grade going forward, if I may? Thank you.
The way you should think about going forward is according to the R&R statement. That's what you can look at. Yes, it's been low at this quarter. It has to do with the mix of different ores, which means also, if you look at, I think, believe gold has been higher than the R&R statement because we have been focusing on ores that have been, you know, slightly more gold rich and less zinc rich. All in all, you can say that we've had a slightly weaker grades, if you take the whole thing together than on an average, it's just below some kind of par.
Yeah. Yeah. Okay. Now that's clear. Maybe on just how we should think about working capital from here, given, call it, the balance between mines and smelters now. Would we expect, you know, similar seasonal patterns as we've seen historically now, or, you know, will is it possible that you tie more working capital in the H2 ?
In general, I would expect a release. We typically build the working capital in the earlier parts of the year, and then we release it in the H2 . In this year, I expect that to be a little bit, how should I say, accelerated, partly because we tied more due to the fire, and then secondly, the metal in the tank house, we should be able to realize that number. There is some uncertainty in the timing, though, because as Mikael said, we have not yet gotten access to that area. But the tendency is that rather, I think we should be able to deliver a fairly significant release of working capital during the H2 .
Beyond that, the long-term capital build, I think it's difficult to say, again, with reference to the discussions on terms for anode sales.
Okay. No, that's helpful. Then if I may, on byproducts and premiums, going down, how does that look into Q3? Will that be an additional headwind, or are we more on, you know, stable levels now?
Yeah, this is, of course, the most difficult thing to predict. If you were to ask me, I don't see byproducts jumping up in terms of price in the short term. I would expect them in line with the kind of general recession that we're heading into right now to remain low, or theoretically become even lower than they were in Q2.
Okay, we could see some additional headwind, from that perspective?
Possible. Yeah.
Yeah. Yeah. Okay. Then finally, just to try or maybe to push you a bit more on Rönnskär and, you know, the production loss of SEK 200 million, and you touched upon this, but anode sales ramping up in Q3, and obviously, depending on how we think about the profitability level, you know, I must say I have a hard time seeing that it will be a negative impact sequentially from the SEK 200 million. Is that completely off or, you know?
I would prefer not to comment on that.
Okay. Okay. Yeah, that's all from me. Thank you.
The next question comes from Ioannis Masvoulas from Morgan Stanley. Please go ahead.
Hi, good morning. Thanks for the presentation. Just a few questions left from my side. Starting with the first one, do you think you could place the entire copper anodes from Rönnskär to the market? Therefore, at what capacity utilization could you run the smelter? On an earlier press release, you said that you might not be able to run it fully, so keen to hear your latest thoughts on that.
I would say from a commercial point of view, we don't see any risk of being able to place the anodes as such, if you just wanna have somebody who's gonna accept them. You know that with anodes, given that they're, especially in our anodes, is a very high proportion of precious metals, given that we have such a portfolio of concentrates, we, of course, need to make sure that we get well paid for those precious metals in the anodes. That's, of course, a commercial discussion that's ongoing. Another commercial discussion that's ongoing is linked to the question that came a little while ago, which has to do with the working capital.
Since this is not a set business model in the sense as cathode sales was, there are still, you can say, some contracts that might give you a better profitability, but will tie up with more working capital. We are looking into tolling solutions, for example, that we would toll the material ourselves at third-party tank houses. That will probably be more profitable, but tying up more working capital compared to straight sales of anodes. To come back to your initial question, we don't see any reason that it would be difficult to sell the anodes as such, it's just a matter of how much money we'll make on them.
The curtailments that we talked about. That should be easing off during Q3 and should not be a major part. We have had problems running certain, especially the precious metal plant, full because of where it was physically at. Some of the media that went into the precious metal plant came from the tank house. We have reestablished that on some level, but not fully.
Okay, very clear. Thank you. Second question on Kevitsa. Do you have a line of sight on next year's grade profile? Basically, the question is whether you think the challenge around the Pushback 3 will be fully addressed in the H2 , or maybe there is a spillover into next year?
Of course, there's a plan, but I prefer not to comment regarding that plan because, as you can understand, we are having pretty big discussions around this internally. You know, the major reason why this happened is rock instability. We had fallouts in certain parts of the mine, which made it impossible from a safety point of view to work below. Will we be able to get out of those? Are we entirely sure exactly if this is possible to happen again? What is happening, we prefer not to comment on that. We will get back to guidance exactly on how...
Well, I mean, the guidance for the life of mine is, of course, what is in the R&R statement, but how that, the timing of that, what happens in 2024, 2025, and so on, we'll come back to that later in the year.
Okay. Very clear. The last question on Tara: Are there any cost improvements or other operational improvements here that could help you boost the economics of the asset, whether it's power, labor, or anything else? Or is it purely a function of a higher zinc price that will drive the restart decision?
I mean, there's as always, a full slate of things where the zinc price is the most important one. We have been hit by very high power prices. If there is some way to sort out that we can get lower power prices on Ireland, of course, that's gonna make us sooner come to a decision to restart than if we were not. We have the general cost inflation with quite a lot of the chemicals used in the process have been very high. If those come down, that will also make it easier. There are things that could make it faster, but the zinc price is the most important part.
Okay. Very clear. Thank you very much.
The next question comes from Richard Hatch from Berenberg. Please go ahead.
Yeah, thanks, morning, thanks for the call. Just a few questions on grades to start with. You know, if I kinda look at the grades at what you've been doing at Garpenberg, you know, guidance this year is 3.6, reserve statements anywhere between 3.1 and 2.5%. You know, over what kind of time period do you think that we move towards that level? The same goes for Kevitsa, but the other way around. You know, you're mining at 0.25% copper reserve statement, so we're sitting at 0.33% copper approved and 0.38% probable.
You know, when are we gonna see that grade sort of, reversion for Garpenberg and then, improvement for Kevitsa, please?
Regarding Kevitsa, I think we just had that in the previous question. We will come back to that later. The issue there is how do we think that these rock stability issues, these wedges that you get into the wall of the open pits, how prevalent will they be going forward, and so on? That's what we're looking into, so it's gonna be difficult to tell exactly. Regarding Garpenberg, the general thing on how quickly we'll decline, I've said this many times, that when you have an underground mine like Garpenberg, you will always mine above the reserve average because you can. Especially when you have long life for mine, you will go to the good parts first, and you'll leave the less good part for later.
That means that you're mining over the average. The average will go down over time. We have not really guided how quickly that is likely to happen. We said that, you know, over the next kind of five years, there will be nothing really kind of very big, even though we might see lowering grades, but not to any, we're not heading down close to the R&R averages for the next five years.
Okay, thanks. Just on Kevitsa, if I can just push you a bit on it. I mean, forgive me if I've missed this, you're now undertaking geotech drilling to just kind of get a better understanding of the ore body and your ability to access those areas?
Yeah. The issue, just to be very clear, is that we've had fallouts from the walls, we've had fallouts of when we do blasting on the upper levels, i.e., Pushback 4, which has been not the way that we thought, we have had fall downs going over the side and going down and starting to roll down towards the bottom, where Pushback 3 is, thus, we cannot work there. We are now going through the information that we have to see whether this thing that happened was just something that we could not have been foreseen, could have been foreseen, could we have done something in a different way? Could we have blasted in a different way to make sure this doesn't happen?
All those things, I think, that we're now working into the new mine plan as we're doing it, as we're speaking, that we will finish during the fall, and therefore, I think it's a bit too early to tell exactly how that will conclude.
Okay. Do you think that might mean that you have to ease the slope angle, then?
I don't think it's an issue of slope angle 'cause you have a stability that's good over time. I don't think that the slope angle is the way to go at it. I think it's more a discussion of the mine design. It's not just that we have Pushback 4 on top of Pushback 3, we had Pushback 4 for a while right on top of Pushback 3. If you can move that a little bit to the side, you will have increased degrees of freedom, even though it's also affecting the ramp, what is happening now at Pushback 4.
Right. Thanks. Just last one on Rönnskär. I think we're all trying to kind of get it, get at it from the same, from different angles, but perhaps if you might be able to help me in any way, shape, or form on just any kind of margin differential between your anodes and the cathodes that we were previously selling, just so we can kind of try and get a handle on what the EBIT impact might be whilst you go through this period of rebuilding. Thanks.
I will not comment on the margins at all because this is due to commercial discussions that I don't wanna, you know, preclude. They're ongoing as we're speaking, and we are, of course, doing our utmost to make sure that we use the situation to our advantage and not to our disadvantage by telling others what we might expect. It's, of course, you know, I think it's been mentioned before, this is not my number, but somebody else has said that it might cost 3 billion SEK to build a tank house. It's not my number. We haven't done the pre-feasibility. We don't know.
If you just do that one as a kind of mind gaming, we say that in a operations, in a copper smelter like Rönnskär, it surely makes sense to have a tank house, and if it's gonna make sense to have a tank house, you're gonna have to have at least SEK 300 million return per year to meet our 10%. If you say that's gonna be by a margin, you might need to have something like, you know, SEK 500 million, and that might be then some SEK 300 million-SEK 500 million that we're losing in the meantime to be able to come back to where we were. Once again, this is not a guidance. This is just a way that you can start playing with numbers.
Thank you very much for that color. Much appreciated. Cheers.
The next question comes from Igor Tubic from Carnegie. Please go ahead.
Good morning. Thank you. Just two questions from me. The first one is around Garpenberg and the grades. I'm just curious to see if the lower grades that you had this quarter in primarily zinc were expected. The second question refers to the CapEx and the stronger Swedish krona. Are all costs hedged in terms of CapEx going forward for all your projects, or how should we think about that? Thank you.
Garpenberg grades, we thought that we were gonna come in lower than the 3.6 in Q2, which is, by the way, related to the problems that we had with already back in Q1, you know, that we had problems with the hoist. When we had problem with the hoist, in order to get the tons up, we decided to move tons to the surface from closer surface, and closer surface we have lower grades, and therefore, that came into there. We would expect it to be lower. They came a little bit surprisingly low for us as well, at 3.1, but it's a little bit difficult, especially when you kind of have to deviate from your original mine plan and get into stopes that you had not originally planned to do.
It's a little bit difficult to have full control of this. We had expected in ourself, in our own management, to have lower grades, but maybe not this low. CapEx and exchange rates, that's a very good question. We can spend, you know, hours on talking about this way and how it's accounted for and everything else. Regarding hedging, we hedge the big packages that are within, but we only hedge the package from where we make the decision on that individual package You know, in a investment like all that, there are quite a few big packages, and they're hedged when we step into the actual fixed contract, and then they run for that.
Then you have all kind of ifs and buts around this thing, around what happens. At one day, we'll come back and give you some kind of post calculations on the big projects, so far, we are just reiterating the guidance that we've given before.
Okay, thank you.
The next question comes from Angus Poland from Bernstein. Please go ahead.
Hi, good morning. Just going back to Rönnskär Insurance. Last call, you mentioned the insurance should cover the profit losses from the fire. Are you hoping that's also going to include the lost cathode premia, or is it just gonna be from the loss of volumes? Thanks.
Well, this is where, you know, insurance negotiations start. It's always when you have a business interruption, we will claim that this interruption made us lose this and this and this and this, and the insurance company will question those calculations and say, "It's that and that and that," and in the end of the day, we'll agree to something. Exactly what those details are, but in theory, we should get compensated for the business interruption.
Okay, thank you.
The next question comes from Christian Kopfer from Handelsbanken. Please go ahead.
All right, thanks, operator, for that. Just a few follow-ups. I came in very, very late to the call here, so sorry if you have already answered these questions. First, on Kevitsa, you keep your grade guidance for the year, despite all these uncertainties, so maybe you are very certain still then on the grades for the H2 , that's good. So grades should improve dramatically here in the H2 . I hope for that to happen then. On the recovery side, recoveries came down to really low levels here in Q2. Do you also expect recoveries to come back to, say, historical averages for Kevitsa in the H2 ?
You're asking good questions. Regarding the guidance, I don't think that we need a drastic jump in grades to get to our annual guidance, but we need to have a little bit of a step-up. Yes, we will have a little bit of a step-up, but we'll still be mining below our reserve grades. The issue that you're bringing up regarding recovery is a good question, which is a little bit separate. We have experienced, as you know, problems with recoveries, and they're also continuing. They're not getting worse, but they're continuing into this quarter. We have some idea what this is about, but we can't say that we have it fully under control.
There is talc involved in this, and there are other things around the fine grinding of this and how to make sure that you get also the fine particle and recovery is there. We have ordered some new equipment that will come after the summer. We have plans, but I'm not gonna stand here and say that we have figured out the recovery problem. We're working on it.
It's fair to say, still, that the recoveries will come up, slightly due to better grades?
yes, they should come up due to that part, but. Hopefully-
Yeah
... They'll also come up due to the fact that we've gotten our arms around some of the issues there, but that is a very, very weak guidance.
Okay. G oing into next year, you expect, the mine...
Going in-
- to, perform?
Going in.
According to-
Going into next year, things should look better. As I said, regarding the grade, we had this question before. Regarding the grade profile and exactly what to expect for 2024 and 2025, or maybe at least 2024, we'll come back to later in the year as we get our mine plan in order.
All right. For, for mines in general, I think you had this question. Just to sort this out, to understand what is the underlying profitability of the mines here. If we just say that Tara is not there, you don't have an extra cost for Tara, and you don't have any provisional pricing effects. Is it fair to say that if that should be the case, mines should have been able to deliver between SEK 800 million-SEK 900 million in EBIT for Q2?
I'm looking at my CFO just to make sure that we get the number right here.
I mean, there are many parts in this, but we said that we had a one of effect of final pricing of 90 million. That is one improvement. We had about EUR 38 million negative in Tara, which over time should go to EUR 12 million as long as it is in care and maintenance. That's an additional improvement. And then as your first question, both Tara and Kevitsa are looking at better grades during the H2 in relation to our grade guidance. Those will be the moving parts as I see it.
Yeah. Håkan, I just-- I was just talking about Q2. If you, if you didn't have Tara in Q2, and if you didn't have any provisional pricing effects in Q2, I just wonder what the base I should have, you know, when looking into Q3. Is that correct, between 800-900 in Q2?
Well, the negative impact of Tara was SEK 38 million.
Euro.
Euro, sorry, EUR 38 million in.
Yeah
... In Q2, and the.
Yes
final pricing impact was -EUR 90 million.
Yeah
... in Europe.
You have the.
... A small bit that we had some cons still in the books of Boliden and Garpenberg, but that's a relatively small amount. Most of that is in the mining profit already, but it not in the group profits, the SEK 200 million that we referred to earlier.
Okay. The item, affecting comparability of SEK 50 million, should I add that? Is that in addition to this, to those that you already commented on?
That's part of the EUR 38 million in Tara.
Yes.
You can't add it again, then you're double counting.
Okay, okay. All right. All right. All right, okay. Sounds a little bit complicated. Okay, but all right. Thank you for this. I'll let the next one in then.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Tyler Broda, from RBC Capital Markets. Please go ahead.
Great. Thanks very much for the call. My question is probably more on, more of a higher level, I guess. You know, this is an elevated CapEx period, metals prices where they are, some of the operational issues, going forward, it's, I think, you know, it's spot where we get to that negative free cash flow for the next sort of, you know, up to 2024. How do you sort of look at the balance sheet here? Obviously, starting from a strong position. How do you look at the balance sheet here, and then whether there's any flex in CapEx or how you can think about the CapEx program in light of this, these circumstances? Thank you.
Regarding the CapEx, there is, of course, maybe some flexibility regarding new projects as we move forward, but regarding the existing projects, we are not in a situation where there's any benefit for us in trying to be aggressive in cutting any CapEx. I think it's good that we move these projects forward. Then when it comes to that, we'll have to see what will come as we start adding up for 2024. I would say generally, we do have a strong balance sheet. We do believe that at the CapEx that we are spending is value added. Therefore, we, even though we have questioned it, have come to the conclusion that it's the best thing to move ahead with it. That.
Thank you.
I'm getting signals here that we have to wind up because the hour is finished. With that, I would like to thank you all for listening in this morning. As I said in the beginning, this has been a very, very eventful quarter. Trust me, it's been new information, new things to deal with every day. I personally feel very good about how we have handled this difficult situation, how we very quickly came to a decision to minimize the losses in Tara, how we have been able to get back after the devastating fire in Rönnskär. I think both these things show that we have a resilient organization that can manage and deal with also a very odd situation that we should probably not get too often.
With that, I wish you all who are not already on summer vacation, I wish you all a very good summer. Bye.
Thank you.
...
Hello, everybody, welcome to Boliden's release of halfway earnings or half-year earnings. We're in Stockholm this this time around. As always, there will be the possibility to ask questions to Mikael and Håkan after the presentation, please just use your computers and ask. There's plenty to talk about. Otherwise, than that, I'll come back after Mikael's and Håkan's presentation. Thank you.
Thank you, Klas. Hello, everybody. I hope that you're doing nice and that you're having a good summer wherever you are, even if you're working or if you're having your time off. We've just presented, which is probably the most eventful quarter in the history of Boliden. Unfortunately, most of the events are negative, relatively a few are positive. We are used to that in a sense that things should not always be easy, and it's time to just make sure that we get ourselves out of this hole and continue to move forward. Just start with safety, as always important. The safety was also not very good in Q2. After a very good trend of improving the LTI frequency and other safety-related numbers, we had a Q2 that was clearly not as good as it should be.
It's clearly one of the worst one we've seen. It is mainly on the contractor side, but also on our own staff. Doesn't really matter where it is, we need to make sure that we continue to work very focused and very intensively to get the safety right. We've also had more environmental incidents reported than in many quarters. I know that there are some special explanation for this in certain cases. You can argue that they're not that severe from an environmental point of view. Doesn't matter. We need to make sure that we get our act together, that we make sure that we develop programs so that we do not break the limits that we have in our environmental programs.
With that, let's focus a little bit on Q2 and what happened there, what we've been talking to the markets around this morning. It was, in many senses, a very tough quarter, you can see that the profit has basically plumped down to almost nothing. I was gonna say, or less than SEK 1 billion. This is about 20% of what it was a year ago, and it is about half of what the analysts had expected. It was clearly a bad quarter, we see that also on the development on the stock exchange this morning. If you look at a little bit more detail, what is hitting us now is that we are seeing the beginning of a recession. The prices of metals have come down clearly, especially for zinc.
Also, the prices for byproducts have gone down. From our point of view, actually, we're not getting any help by the currencies either, because even though the Swedish krona continues to be weak, which is good for us, the euro has gotten quite strong, which makes it more challenging in operating in Finland and Ireland. With these worsening prices and terms, we came to the decision that we needed to close down Tara to avoid the massive losses that we had and curtail the losses. We did announce that to the market earlier. We have done work on that. As I speak today, Tara is down in Care and Maintenance. We have also had very big maintenance stops. That's something that's part of life. It was well known and well communicated.
The maintenance stops went over, which is, of course, better to have it done than not to do it. We need to get better at making sure that we also execute maintenance stops according to our plans. Then we've had lower grades in mines, quite severe lower grades, partially well understood and well communicated, which is Aitik. Partially very late understood and communicated very late, which is Kevitsa, which is part of the problem. We also had low grades, even though we have not communicated anything around it, also in other mines, like in Garpenberg and in the Boliden Area. Altogether, this has put us in a pretty strong financial backdrop.
We had a profit of EUR 833 million, as I said, that compares to 4.5 billion euros the same quarter a year ago. We have a very negative cash flow. We'll come back to a little bit about the details around that, but it has to do both with the less earnings, the very heavy investments, and the working capital that's been tied up, partially linked to the fire in Rönnskär. That brings me then to, on top of everything else, when this was going on, we got the big fire in Rönnskär, which has, you know, definitely impacted us in the quarter, and of course, will continue to impact the Rönnskär going forward. I'll come back a little bit to Rönnskär as we move on.
It's good with the high CapEx that the big projects that we have, both in Odda and in Aitik, and also in Kevitsa, that are moving ahead more or less according to schedule. As I said, the EBIT was not moving the way that we would like it to move, especially in mines. We are basically down to zero results in mines, very little left from earning SEK 2.7 billion last year. Also, smelters have come down compared to last year. Håkan will come back in a little while and give a little bit more flavor of what has happened and why this is. As I said, on the ESG side, we have too high LTI frequency in this quarter. Sick leave is not really developing the way that we want it to develop.
We need to continue to focus on that one as well. CO2 emissions is something that we can cherish. It's been a relatively good development in this quarter in Scope 1 and 2. We've had declining prices in terms, 19% down on zinc, 14%, I think, or 15% down on nickel. Copper is only down less, maybe 5%. Byproducts, sulfuric acid, down drastically. Premiums are down, spot premiums, and we have, from a Boliden point of view, a negative currency development with a relatively strong euro. If you look into the world, what you can see on this slide is that we think, or we hope that we've come to levels where the zinc price and the nickel price will not come down much further.
We are not, however, so optimistic that it will come up very quickly either. We are likely to see a prolonged time with zinc and nickel prices around the levels that we see right now, before we hopefully get something picking up as we move forward. The production, the good thing about production in mines is that actually, the ore production has been relatively okay across the four mines that we still operate. It was also doing okay in Tara up until we announced the care and maintenance. Then we lost the production towards the end of the quarter. The grades are the issues.
The grades are the big issues, maybe not so much in Aitik as it's well communicated, but the grade drop in Kevitsa and the grade drop in Garpenberg was, of course, not expected at this time. On the smelter side, we've had the big maintenance stop in Harjavalta, which is of course, impacting this the most. The fire in Rönnskär also impacting a lot negatively. The zinc side is actually relatively good. Both Kokkola and Odda has been performing relatively well here, even though we did have some issues in tank house four in Odda as well. The financial summary, now, Håkan, I'll invite you to get a little bit of a color on the financial numbers.
Very good. Thank you. Good morning. Well, I think Mikael mentioned the important number here. We have a profit of SEK 833, which is down compared to SEK four and a half billion last year. We have CapEx getting up to speed SEK 4.2 billion. That means that we spent SEK 7 billion so far this year out of the SEK 15 billion, that is the full year target. That adds up to a very negative cash flow of SEK 3.8 billion negative. Looking at the two business areas, we can see that mines have moved from very good profits down to basically a break-even level. This is mainly because of grades and prices, while smelters have reduced their result by half compared to Q1.
This is connected to maintenance stops and connected to the fire in Rönnskär. Just to understand a little bit the changes in the result between the periods. If we look one year back, we have lost, we have gone from 4.5 billion in profit to SEK 800 million, so a substantial loss. SEK 800 million of that is due to prices, and that is primarily the zinc price that has come down. There is also reductions in copper and sulfuric acid, but the main component is zinc. We have premiums and currencies a bit on the upside, but it all adds up to SEK 840 million negative on the pricing side. Volumes, though, are down SEK 2.2 billion.
Out of that, more than half is grades in mines. As Mikael Staffas said, there are some that we have been seeing coming for quite some time, Aitik. There is also Kevitsa and Garpenberg, et cetera, that is coming below what we expected. Basically, when the quarter started, we have about SEK 400 million effect from the fire in Rönnskär. SEK 200 million is direct production losses, and SEK 200 million is that we have concentrate stocks increasing as Rönnskär was closed due to fire and Harjavalta due to maintenance. At the same time, as prices are coming down substantially, we still have fairly significant cost inflation. It hits us in both sides.
There is an inflation of just below 10%, which adds SEK 579 million to the cost level. We are spending more on maintenance, and we are spending more on exploration. We also have some one-off costs in the quarter. We have made a provision in Tara for early retirements. We have made a provision in Rönnskär for the demolition of the tank house, and we have written down the book value of the tank house that has been destroyed. This is on a one-year horizon. Looking just comparing with Q1, which is a bit more recent, we are down a bit more than SEK 2 billion in results. Prices and terms are a significant SEK 770 million, mainly zinc, but volumes have dropped by SEK 1 billion.
Grades is an important part also here. The 400 connected to the Rönnskär fire is there, we had a quarter that was very heavy on maintenance. Substantial reduction, that means that the cash flow is strongly negative. We have lost about almost SEK 4 billion in the quarter. The two bigger part, of course, is that we have lower profits, we're spending more in CapEx. At the same time, we have built some working capital, both as a seasonal build-up ahead of the maintenance stops, but also due to the Rönnskär, to the Rönnskär fire. We are now at very elevated levels of inventories, in particular in the copper smelters.
That means that our debt and our financial positions has weakened substantially, although in this, as you can see from the chart. The most important part here, though, is that dividend has been paid according to the decisions earlier on, but we're now up to a net debt of SEK 11 billion compared to a zero debt at the start of the year. That is the brief summary of the financial position.
Thank you, Håkan. I will then just go through a little bit around what the big, items that we've had during the quarter. Regarding Rönnskär, some of you might have heard, some of you might have read, but we had the major fire. As bad as the fire was and as negative as the fire was, I'm also impressed with the organization, how quickly we managed to resume. We were resuming some production already after about 10 days. As we speak now, we have resumed production in all units, apart from the tank house, which burned down. We're not operating 100% at some of them yet, but we're working on to get that production level up.
We had to take one-off write downs because of the value that we had in the tank house in the books, but also the cost for cleaning up the site that we had taken there. We had additional effects on our earnings, both from the lost operations in Rönnskär in itself, but also the fact that when Rönnskär is standing still, there is a set of concentrate that gets backed up, either remaining at the Swedish mines or they come into Rönnskär and they get eliminated in the internal profit elimination. We need to, and we're working on transforming our business model to sell anodes rather than cathodes.
I think this transformation is progressing well, but we're still working on the commercial terms with all the counterparts that we want to see for time going forward. We, of course, have the ambition to build a new tank house, and we have initiated a feasibility study to be able to see how that gets, how quickly, how long, we don't know. We are insured here, and we will get some kind of insurance coverage out of this one. We are fully insured, but as all of you know, when we're talking to insurance companies, they will have ideas about what is really the interruption cost and what is really the cost of, you know, the value of what has burned down and how can it be used to build it up. We do have some coverage that will help us around this.
Tara Care and Maintenance, as I mentioned, we needed to take that action, given that we were losing so much money and bleeding so much money there. We've lost EUR 38 million in quarter two. As we stand still, that's not for free. It will cost, in a normal quarter, about EUR 12 million, and in Q3, as we still have some costs before we fully wind down, it will cost about EUR 18 million, but that's, of course, clearly better. We have clearly the ambition to restart Tara, as soon as we get the right zinc price and the right conditions, above that.
How long that will take, we don't know, but we don't think that the zinc price will rebound very quickly, given the general recession of the economy and how important it is with construction and cars for the zinc industry and how that will impact the demand in Europe. We have agreed with some early retirement. That is also a cost that we have in here that we do. We've also put Tara deep on hold. This is mainly because we have time, because when we don't operate Tara, we have more room left in the tailings pond that we can then utilize as we move forward for a longer time.
The same thing, of course, when we're not mining in the old Tara mine, the mine remains or the ore remains underground. We can get it. We also have issues to do exploration from underground when you're in a Care and Maintenance situation. We are postponing that. I think that the one of the main negative things in the quarter was the revision of the grade guidance for Kevitsa that we had to take. We've had rock stability issues that has led to that we, from a safety point of view, cannot mine the Pushback 3, which is the rich pushback, and we've done mainly Pushback 4, which is not so rich.
This is something that we need to get better in order to be able to better predict this going forward around how to do it, but now we have reiterated the guidance that we gave to the market a couple of weeks back. We have reiterated that again today. That also means that we have, in summary, reiterated more or less the whole guidance as from before, that we're gonna have 0.17 grade in Aitik. We're going to have 3.6 grade of zinc in Garpenberg. We will have the 0.25 and 0.18 grade in Kevitsa as we move forward into the H2 of the year. With that, I think that we've come a little bit towards the end. I will just like to summarize a little bit before you take all the questions.
I think it's important to realize that this is really bad news, that, what we, the Q2 is something that we will remember for a long time as something that we should never get into again. We need to learn from this and make sure that we get better. We need to get better in making sure that we have fire protections in place. We need to get better in how we calculate, the grades and in our mine plans so that we have a better prediction. Now, having said all that, I also think that we have shown that we have a resilience. We have managed to deal with the Rönnskär fire in a good way.
We have managed to get around and be able to make decisions regarding Tara, I think, in a good way when we saw where Tara was going in terms of its profitability. I think that, I know that there's lots of management out there who are listening to this, that have done a heck of a job. It's not easy to manage in a downturn. That's when you really get to show that you can do what you're doing. With that, I will take some questions first before I wish you all a very good summer.
Well, so far, no questions has come in from the audience, but, in general terms, the business cycle is shifting downwards. The next half year, what are the key elements for Boliden to focus on?
Well, I would say that we need to focus on what we focus on all the time. We need to focus on making sure that we stick to our budgets and that we deliver what we should deliver in terms of production. We need to make sure that we focus on safety, making sure that we improve the safety standard back to the level where it should be. We need to make sure that we don't get any more negative surprises on the environmental side or anywhere else, and that we come back into the reputation that we've had for a long time, and I think that we still have this reputation, even though it's been tarnished by this quarter.
The reputation that we are a very predictable company, and that, you know, you can trust what Boliden says, and that they will deliver that, and we'll come back to that.
Excellent. Has there been any decisions with regards to the business cycle, to do something differently, than when, than in the past?
No. I mean, you can say that the Care and Maintenance of Tara is, of course, in relation to the business cycle, both where we are and the fact that we think that we're not gonna get out of this for at least a couple of months, maybe a couple of quarters. So that's the done one. Otherwise, we have not done any of these knee-jerk reactions that you sometimes do when things go bad. We have not done any massive cutback of CapEx, saying that we want to continue the projects that we are ongoing and make sure that they deliver.
We have also not introduced yet a hiring freeze, even though we have urged everybody out there to be cautious with any new hiring, and of course, especially in the Skellefteå area, make sure that we look internally first before we look externally, given that we have a redundancy discussion going on in Rönnskär. We need to be prudent around this, but we have not done anything else which is out of the order. We'll see where it will come. As I said, we have a sense that this recession will last for a while, because one thing is the prices that we get right now, we can read from the London Metal Exchange or the LME price, and we get that all the time, and everybody can read it.
We know it's low, but we also have a little bit more information 'cause we know how our customers are behaving, and we see that our customers are actually taking out less metal, which is a sense that this is a real recession, not just whatever you wanna call it, some speculation.
Just one final question. There's also been some activity in Spain with regards to legal proceedings with the Aznalcóllar dam failure, 25 years ago. Would you care to comment?
Maybe you should comment more, Klas, 'cause you're the one who is closest to this. I can say that we've had the court proceedings, court hearings. They are finished. The judge is now sitting and writing on the verdict. We don't know when we get the verdict. The verdict, I would guess, sometime during the fall. It is highly likely that whatever the verdict is, will be appealed, and it will go to an appeal court in Spain, either by us or by the local authorities or the counterparties in this one. That's the status from an administrative point of view. I think that it's also important for those of you who haven't looked at this case too much historically, just to make clear that our point of view is, number one, that the Spanish...
Regarding environmental, criminal proceedings, those were going on in the beginning. The prosecutor took away all those claims early on and said that basically, the accident was not caused by Boliden doing anything wrong in a criminal sense, and everybody, in that sense, were clear. They weren't formally clear, 'cause it was never taken to court. We are still having a responsibility for the cost of the cleanup. In the cleanup stage, we took roughly 80% of the material and took care of that. The local government took care of about 20%. They are claiming that they did not get enough paid, compensated for the 20% that they did. They're also claiming that the 80% that we did was not done good enough, so they had to go back and do extra cleaning afterwards.
We claim that that's not true. We claim that they have, in their claims, added lots of things that has nothing to do with this accident, all other kind of costs that they had around the same time. It's a pure financial discussion. We'll see where the court will come out in this.
I can confirm that, of course, there was some attention to this question some weeks ago, but the manner in which the Spanish court handled it was very good and was very, very properly proceedings in Seville at the time. Over to you, Håkan. Looking at the numbers, the debt is increasing quite rapidly. Would you care to comment how the, how the possibilities in that area develops?
The debt is increasing rapidly. That's correct. We still have a quite strong balance sheet, although it's not quite as strong as it was a quarter ago. We are constantly preparing the financial side to be able to cope with a downturn. We are doing simulation stress tests, basically taking budgeted production and a severe downturn, and then we're adapting the financing to that, which is what we have done in order to be able to carry through the projects, even in a downturn. I think the weak spot right now is that production is quite far behind budget, we are coming in worse than our stress test said. All in all, it's still looking, you know, a strong, robust, and healthy balance sheet.
On inflation also, you said the inflation is shifting downwards. It was down to less than 10% now. What do you expect going forward? Would you expect that to be... Well, I'm sure you can't tell for sure, but what's your expectations?
Well, if I could tell for sure, I would probably head one of the bigger central banks in the world, because it is difficult to predict. The trend is clear, it's coming down. We didn't give any guidance for the future in our external calls.
In the energy and consumables.
Well, it is coming down, but it's a bit uneven. For example, caustic soda is still on a very elevated level, while the energy and the, for example, explosives have come down quite substantially. We have seen over the last quarter or two, a more general inflation coming up with services, and general cost increases. I think it's difficult to say, but it's clearly coming down, and with the outlook on the business cycle heading towards more of a downturn or a recession, I think that we should also see the inflation come down. I think for me, the question is where it will stabilize. I mean, central banks are looking at 2%, but it could stabilize on a slightly higher level as well.
Okay. Thank you. Over to you, Mikael, for your final remarks before summer.
Yeah, I just want to stress again that, of course, this Q2 was not a good quarter in many senses. We've had lots of things happening. Most of those things we would not like to happen. We need to continue to work. We need to also to be proud of the way that we've dealt with some of these issues, and that we continue to deal with them, and we need to make sure that we continue to deliver according to our plans. With that, I wish all of you who are on vacation already to have a continued good vacation, and I wish all those of you who haven't left yet to have a good vacation. I'm personally starting my vacation tomorrow morning, and I will need a couple of weeks' rest after this quarter.
With that, have a good summer, everybody. Bye.