Ladies and gentlemen, I'd like to welcome you to this Boliden telephone conference. My name is Olof Grenmark, and I'm Head of Investor Relations. Today, we will have an update by our President and CEO, Mikael Staffas, based on the press release that we sent out last evening. We will also have a Q&A session where our President, Boliden Mines, Stefan Romedahl, will also participate alongside Mr. Staffas. Mikael, I hand over to you. Welcome.
Thank you, Olof, and welcome all of you out there. I will briefly in a couple of minutes, just go through the general situation, covering what we have already sent out in the release, last night, and then I will leave the floor open for questions. Just to go back and look at what has been positive development, the first of maybe the most obvious positive development is that the seismic activity that caused the problems in the first time has gone back, and we're now back to normal levels. That's good. We managed to start inspections already a week ago, but those inspections were, you know, somewhat slow and somewhat tedious. They were done under the special safety protocols, which meant that only very few people could be involved in it.
As we have been able to restore some of the safety infrastructure, including rescue chambers, we can now get the larger crews underground and start working on the repairs that need to be done. This is all good. The other part that's good is that we have now seen that lots of the big infrastructure pieces that we have underground, including the crushers, the hoist system, the workshops, and so on, are either not damaged at all or only moderately damaged, which is good. The media underground, including ventilation, water pumping, power systems, compressed air systems and so on, have been hurt to some extent, but we don't think it's gonna take very long to repair them. We're talking about one or a couple of weeks. These are the good things.
The other thing that's good is that the majority of the ore that we have underground is in a very good condition. That's also good. We have a good position on Kvarnberget. We have a good situation regarding Dammsjön. We have a good situation regarding the lower parts of Lappberget. We also have good situation regarding the Huvudmalmen, which is an area where we're not producing at all right now. What we can see there, it also looks like that's all good, which is linked to the new hoist and so on. However, the issue is, and that's very clear, that the area that has been most severely affected is the upper part of the Lappberget ore body. That's where we have the majority of our production.
Around 70% of the plant production is in those areas. Even though we haven't done detailed inspections finished yet and even less than any kind of planning, it is obvious to us that the damages here are big enough that it's gonna be very difficult to restart mining here in the short term, and in some positions probably also forever that we will lose some of these tons. Just to get a sense of order of magnitude to all of you guys, if we were to lose all of it, which we don't really think, but if we were to lose all of it, that's about a little bit north of 10 million tons, maybe up to 13 million tons out of the 104 million tons that we have in the reserves.
That's a little bit more than 10% of the loss, but we still have SEK 90 million left. Out of the SEK 150 million that we have in resources, most of that is very undamaged and still around. The long-term prospect for the mine is still good even though the short term is tricky. The time frame for us now is that basically as of today, we have started the repair works. It will take a couple of weeks. We don't know exactly, but that's that order of magnitude to get the things in place that we will need to have in order to start producing.
We will then start production, and we will start hopefully at around 30% of normal capacity, and that's what we get from Kvarnberget, from Dammsjön and from the lower parts of Lappberget. It is then very difficult for us to have assessments of how things will develop going forward. We still have to work on those plans quite a lot, but we're of course working in two directions. One is to see what can be done out of the upper Lappberget. This is something there that can be rescued. That's probably gonna take a while, and it's gonna be relatively low volumes, but we will look into that. The other one is, of course, how can we speed up developments in our other ore bodies, the ones that are unhurt, so that we can ramp up production there.
It's also, as you those of you who've done a mine plan know it's quite difficult to know exactly how fast that can be done when you haven't really tested what is doable, and so on. When it comes to the other kind of financing consequences, we have gone out today with that we will have in Q1, we are losing about SEK 400 million compared to what somebody could have guessed. It depends a little bit on what prices and terms we use, but if you use some prices and terms as of today or a couple of days back, that's the order of magnitude. On top of that, we have not yet assessed whether we will need to make a write-down of some of the infrastructure parts linked to the Lappberget ore body.
That's, of course, a fully non-cash item, but we will have to come back to that as well. That's the kind of general information that I wanted to convey to you. With that, operator, I leave the floor open 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.
Yes, hello. I appreciate you setting up this call. Two questions from my end. First of all, in your mine plan for Garpenberg prior to the rock fall, was the upper Lappberget zone supposed to account for the majority of production for many years to come, or was this a zone that you were sort of gradually moving away from anyway in a couple of years?
Yeah, I can take that one very quickly. The answer is yes to both of your questions. It would have been the majority of the production for a couple of years forward, but it was slowly getting less as it was coming, you know, slowly towards an end.
Second question, or I guess how much of the cost base would you be able to scale down on fairly short notice? As I'm thinking for 2026 while you are on this lower production. I'm just trying to get an understanding of the under absorption effect on the lower volumes.
Yes, I understand that. That's another good question that I don't have a good answer to. Some of what would have been OpEx otherwise is likely to become CapEx because we are likely to do much more drifting and development, which comes as a CapEx rather than OpEx, although it cash-wise might be the same kind of cost. We will save some cost, but it's a little bit difficult to say exactly how much in the mill, where we will use, of course, less power and we use less chemicals and so on when we are producing less. We'll have to come back to those questions as well in more detail.
Okay. Understood. In that case, thank you. That's all for me.
Thank you.
The next question comes from Alain Gabriel from Morgan Stanley. Please go ahead.
Hi, everyone. Thanks for taking my questions. A couple of questions. One, Mikael, you talked about the 30% production level, towards the back end of Q2. What are the practical and physical limiting factors to you lifting your throughput rates above the 30%? That's my first question.
Developments. We need more development. We have development roughly in place for those 30%. I can answer that one quickly.
Okay, thanks. The second one is on the expansion plans for Garpenberg. I guess it's still early stage, but preliminarily, do you think that this incident now will prompt you to put all the expansion plans on hold for now, or how are you thinking about the expansion project?
From a practical point of view, we don't really know yet. Of course, we will have to do certain, you know, things around the new hoist and see whether there has been some geotechnical changes on. From a strategic point of view, that investment becomes even more important. That one is there in order to be able to develop Huvudmalmen, the next kind of big one towards the depth. If we're now losing tonnage in the upper part of Lappberget, we will have to get to Huvudmalmen sooner rather than later. It puts the strategic rationale even more in the forefront.
Thank you. Thank you. Very clear.
The next question comes from Marina Calero from RBC Capital Markets. Please go ahead.
Good afternoon. Thanks for the call. A couple of questions from my side. First, do you know what caused this event? Do you see any risk of this happening again in the short term or in the medium term? The second question is, do you have any insurance in place that could help you to cover the potential infrastructure cost or repairs that you have to do right now?
I will take the second one first, and I'll leave the first one to Stefan to get into in a little while. Regarding insurance, yes, we do have some insurance. It is on a very low level because there are very few things underground that our insurance covers. So it's, there's likely to be some kind of insurance money, but it's gonna be on a very small scale. I can say it is absolutely not gonna be more than SEK 1 billion because that's the ceiling, but it's likely that it will be less because there are actually things that are insured underground are the ones that have been actually doing pretty well. The things that are not insurable underground are the things that have been faring worse.
This will be a long discussion. Regarding the cause of the event, I will leave it over to my mine director to see if he can make some sense so that you all understand.
This is quite complicated in one way, but if we start with the simple answer is that if you are doing mining as we do, then we will have a seismic event. Even if we're backfilling the voids that we are creating, that backfill will not prevent seismic events. We will have seismic events even going forward. The thing is that the mining method is, as such, should be possible to put up in a way that we should be able to mine, even if we have these seismic events. In this certain occasion, it had been a really long-term build-up of stress in the rock mass, and this have been released in a way that we are not have seen before.
After this have happened, it was in two phases actually. First one, big one, and then later on, a smaller one going down in the number of seismicity as well as amplitude of the events. The stresses around the rock mass around our ore bodies have changed now after these events. That will take some time to build up a new stress in rock mass before the next relief of that. This will have an effect of how we are looking into the mining method and if we should do changes to that, of course. The main principles it's the same.
It will be stope production and it will be paste that we are using for backfilling. We can't say that these kind of events will never happen again. It will, but we hopefully will be more prepared to steer them in another way than it have happened this time.
Thank you.
The next question comes from Liam Fitzpatrick from Deutsche Bank. Please go ahead.
Hi Mikael and Stefan. Just a question on the flexibility that you have to kind of pivot your mine plan. I know you're still working through all of this, but if we take the scenario that you can't get back into the upper parts of this section of the mine for the foreseeable future, what sort of timeframe do you think we'll be looking at or could be looking at to open up new areas and get back towards that pre-incident type levels of production and throughput into the mill? Is it one to two years? Could it be a lot longer? Could it be shorter? Just any kind of color on that would be helpful.
You will not get much color because I will say what I said before, we have not done the plan yet. Before you do the plan, you should be very careful about saying things. There are so many things that you need to coordinate, not just getting the development meters done. They need to be done in the right sequence, in the right order to make sure that everything from ventilation to other things, you know, work out fine. I will not give you another number on that yet. Hopefully, we'll be able to say something more as we release the Q1 report.
Could I maybe try and ask it a slightly different way? If you want to expand production from the other unaffected parts of the ore body, is there scope to kind of to ramp up production from those fairly short order?
I mean, it's whether it's short or not, it's a little bit of a question. Yes, those who've been in Garpenberg, you will know that there are other smaller ore bodies around that we have been mining before, where there might be positions left, places like Kaskasvare, Renström and so on. We will look everywhere to see where we can find volume in a useful way. Let us do the planning first, and then we'll come back to you once we have the sense of how this can be done.
Okay. Thank you.
The next question comes from Krishan Agarwal from Citigroup. Please go ahead.
Hi. Thanks a lot for taking my question. Could you elaborate on which of the smelters are actually dependent on the Garpenberg feed? And is there any kind of a, you know, rerouting of feed for the smelters you will have to do post this incident?
The Garpenberg feed goes to many places, but the main part is, of course, the zinc concentrate that goes to Odda and to Kokkola. Without getting into too much details, of course, we're working on trying to make sure that we can work on our concentrate book to not get too much of an impact. We'll have to come back to how we can manage that as well. There are smaller feeds of lead concentrate going both internally and externally. Some copper concentrate going both internally and externally. I think in those cases, the damage is probably less on the receiving end. We have, of course, declared force majeure on all our deliveries because of this.
I understand. I'm assuming that the SEK 400 million impact which you have guided include any kind of impact from this, you know, concentrate rerouting as well.
Yeah. Yes, it does because we have not had the issue so far. I mean, it's. There is enough to handle the smelters during Q1 during these kind of two to three weeks that you have until the end of the month, rather than what it would be longer term if this has gone for a long time. We'll come back to that as well.
Okay. Then finally, a quick clarification. The incident happened or initially was reported in early March. The SEK 400 million impact, which you have given is essentially for like three weeks impact?
Yes.
Okay. Thanks a lot.
The next question comes from Amos Fletcher from Barclays. Please go ahead.
Yeah, thanks for the opportunity, guys. One question for Stefan. I just wanted to ask, have you changed the mining method or the pillar sizes in any parts of the mine in the course of recent months or years that could possibly be a contributory factor to this happening?
Not really. It's a panel stoping mine plan that we have and the mining method that we have used. We are mining secondary stopes mainly. All the primaries is taken out, and we are following the sequence for the secondary stopes. It's no big changes in the design of the stopes. The ore body itself is quite wide, so it's about 120 meters thickness. That means that you divide those primary stopes and secondary stopes in more or less three levels when you're going in. That also make the full void, if I say so, we leave behind to be quite extensive, both in heights and width and depth.
It's the number or the amount of backfill paste and the remaining secondary stopes that have collapsed together, if I say so, based on the seismic events.
Okay. Understood. The second question was just on CapEx. Have you got a sort of preliminary estimate of the capital cost to restore production, you know, back to 30% and then potentially back to 100% over the medium term?
No. Up to the 30% should be relatively low. As I said, these are minor repairs. That one year I can just a low, very low number, not material. The number for getting up to a 100% could be more material, but we need to get back to that.
Okay. Then just last final question was just around, have you got any sort of indication you could give us on grade and throughput for 2027 at this stage?
I will be very careful with that. As you understand, we're now gonna have to redo the mining plan for 2026. We have given some estimates there because we know roughly which position we're gonna go to, and we know that it's slightly higher silver grade and average for the whole thing is slightly lower zinc grade, maybe similar in lead as ours adding them together. 2027, it's gonna matter a lot how we decide to speed up development and which positions we're gonna be able to get to.
Okay. Understood. All right. Thanks very much.
Thank you.
The next question comes from Boris Bourdet from Kepler Cheuvreux. Please go ahead.
Hi. Good afternoon. Thank you for taking my question. I will ask two questions. The first is to try and assess the financial impact for the full- year. If I look at the press release, you indicate that there is 0.8 million tons to be produced in Q1 and then 0.1 million ton per month. That leads to 1.7, 1.8 million tons per year for this year. It's roughly half of what was expected initially. Should we cut EBITDA contribution in two? Would that be a fair way to assess the broad financial impact for this year? The second question is about the implications for the ongoing appeal.
Do you see this event as adding some risk to the decision that's to be taken at the end of the year? Thank you.
I don't think that this will impact the appeal process on the environmental permit at all. Regarding financial impact, if just to help you on the tons, we basically said it's gonna be 800 in Q1, and then, you know, it will be maybe a month where there's nothing. Then if you do 100 per month for the last eight months, and it's like 1.6, so that's less than half. We're gonna lose more than half for the year. Of course, in the quarters, you know, Q2, 2s and 3s and 4s will of course be less than half of that. It's so that's just an order of magnitude. It's not a detailed guidance.
Yeah. Thank you.
The next question comes from Johannes Grunselius from SB1 Markets. Please go ahead.
Hello, everyone. Johannes here. So most of the questions have already been asked, but would you think, Mikael, that when you report to Q1 that you are able to provide some kind of 2027 guidance on ore production on Garpenberg? Or do you need more time to work through the mine plan?
We're gonna need more time. I will be happy if I can have some more light on Q3 and Q4 of 2026.
Right. On Lappberget, I understand this is usually difficult, but you say worst case scenario, you leave Lappberget, which is 10 million tons of rich silver and zinc ore. But are you able to sort of provide any kind of rough estimate on the risk here or for such a scenario?
That's also very, very difficult, and it will have to do with timing. Actually, Stefan should answer this question more than me, because I've asked this so many times to him, I kind of know the answer. The answer is that there is a risk that we will leave all of it. That one might not be the total risk, but whatever will be mined will not be all of it, and it will be mined in a slow pace. Correct me if I'm wrong, Stefan.
No, I mean, if we do remnant mining, which will be the case in this situation, then it's really detailed planning to do that. You can't really say that you should do that in a high pace. You have to be very gentle when you're taking out some of the ore. I think it's doable, but it's a lot of engineering needed to be done to make sure that we don't worsen the situation. Because if we just mine out areas that we can start mining, if I say so, then we will increase the open void, and that might affect the seismicity going forward also. We have to be very careful how we are proceeding here.
All right. Thank you.
The next question comes from Richard Hatch from Berenberg. Please go ahead.
Yeah. Thanks for the call. Yeah, just a couple. Firstly, have you got any stockpiles that you can use at the moment to fill the mill while you're impacted by hauling, hoisting primary ore? That's the first one.
I think we have, like, five days worth of production on ground that we could process at some stage.
Okay.
It's something but not really meaningful.
Okay. I'm just trying again, like, we're trying to understand the cost impact. Like, have you got a steer as to what percentage of the operating cost of the mine is fixed versus variable?
No, I think I will pass on that one because, you know, there's lots of costs here that are semi-fixed and semi-variable, and we need to get our arms around exactly how they work out. Just one thing, just to be very clear, we have still not really worked out how we're gonna run the mill. Most likely, we'll batch it, and it will be working for a week and then stand still and so on. How that affects, you know, consumption of chemicals and so on is something that we need to look into as well.
Okay, thanks. Just two more. The first was just a clarification point. I didn't hear you fully. Did you say you are or are not going to have to declare force majeure on the smelter feed from the smelter?
No, we will because we're fully sold out. Of course, we're only going to be able to deliver maybe one-third for the rest of the year compared to what was expected. Yes, we will. It's a question what we will negotiate with the customers around that if we, you know, if we can postpone deliveries and all these things that you do in these situations.
Yeah. Got you. The last one is just on the technical side of it. Like, are you confident that you weren't over-mining the ore body? I appreciate it's a fluid situation, but in some of the deep levels African mines have to de-stress the ore body, right? Is this something that you're considering now? You did mention it sort of slightly earlier on, but are you confident you weren't over-mining? Secondly, are you considering de-stressing in the future to avoid this sort of thing?
We are looking into this from a rock mechanics point of view. As I mentioned before, the dimension of Lappberget and the void that is backfilled with paste as well as remaining part in secondary stopes that full solid, if I say so, or void, have to be analyzed from a rock mechanics point of view going forward, of course. The width of the ore body is the challenge when it comes to stability over time. This incident with this high release of stress that was not in our plans.
Okay. You don't think you were over-mining?
Mm-hmm.
Now, are we going to a new way of mining? No, we will keep more or less the same way of mining, but we might look into the details how to get things right.
Okay. Thanks for your time.
The next question comes from Jason Fairclough from Bank of America. Please go ahead.
Good afternoon, guys. Thanks again for the call. Just to kind of follow up on the actual technical issues here. I was wondering, could you talk a little bit about any history of seismicity at this mine? Again, it's kind of been asked already, but has something changed to actually cause this problem? If we look elsewhere when we've had these sort of, I'm not gonna say catastrophic, but these big seismic events, typically it's been because of a change in approach to mining. Kamoa-Kakula, for example, they were behind on backfilling, it sounds like. I'm just wondering, has something changed?
Not really. It's if you start with the seismic activities, we have normally about 20-50 events per day. That's quite normal. It's small seismic events as well as a bit bigger. That's a normal situation. In this case, it's starting to pick up the numbers quite dramatically when it comes to events. When it was at worst, we had about 400 seismic events an hour. That's a huge change, and the amplitude was up to about two. But this is starting to activate two known geological structures, one in the hanging wall as well as another structure that is known since before.
The view is that the total void, the volume of the total void, is quite big. We haven't changed the mining method as such, and we are not more behind now than before when it comes to backfilling. That's been in the same kind of level. It's just that more have been mined out or backfilled over time.
again, does this have any implications then for the plans to increase the mining rate longer term? Are you actually, and I guess this is what Richard was getting at, gonna run up against sort of natural limitations in the ore body in terms of how quickly you can actually mine here?
Yeah, that can be a consequence of it if you look at the Lappberget with this kind of geometry that Lappberget have even towards depth. The main ore bodies going forward long term, that's Huvudmalmen, and that have another kind of geometry. It's always also wide, but this is a few years from now before we are there. Anyhow, it will affect the way we are looking into it when it comes to the primaries and secondaries and the sequence of how we do it. Of course, we need to have a look into that. Even so, I think that we will have enough mining areas to increase production towards the target that we have in the long term.
Okay. Last one. I mean, in terms of backfilling, you said that on the one hand you weren't behind on backfilling, but on the other hand, maybe the void was a little bit bigger than normal. Can you just help me understand that?
Yeah. You know, the paste filling in that room that was starting in one of the first collapse in the secondary stope. Here, normally we had paste pipes going into several kind of positions in the roof. That was unfortunately two of those positions was taken out of operation. So we have like it was starting to get like a slope down over these 60 meters, if you can see it in front of you. Basically based on that, we couldn't fill up in a with equal level based on the missing of those tools. So that made a bit of a slope.
When we have this fall in the secondary stope, that's when we had a bit of an air shock coming out, but that's not directly connected to the seismic event that happened a few hours later. It could be, of course, a related thing over time, when it comes to the stress build-up.
I might just be a bit cheeky here. Mikael, in terms of thinking about safety, do we call this a. What would you call it? A high potential incident or a near miss? How do you think about that, and how does it potentially impact how you run the business?
Well, number one, it is an LTI. The first event there was an LTI because we had the air shockwave that fell people over. We should be very clear that there was not really any risk for anybody getting onto rockfall. We had the actual seismic event. We have clear instructions of when we will evacuate the mine, and we did that, and everybody were out, I think by 11:00 P.M., and the big seismic activity started around 2:00 A.M., three hours later. I don't know what you call that. I suppose you call it an incident, but all the routines were followed and nobody was really close to being hurt in the actual seismic event.
Okay. All right. Thanks for the color. I appreciate it, guys.
Yeah.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Alain Gabriel from Morgan Stanley. Please go ahead.
Hi, again. Just two quick follow-up questions. Mikael, I guess, how long do you think it will take you to figure out what the right mine plan is going forward? Is it with the Q1 results that you've stated or is it gonna take longer for you to update the market? That's my first follow-up.
Well, I think that we will have some kind of update on, in the Q1, but it might not be a complete update.
Okay, thank you. The second question is on the grade differential between, if I pronounce it correctly, Lappberget and the second one, which is Huvudmalmen. Sorry I've mispronounced it, but what is the grade differential between the two different sections of the underground?
Regarding Huvudmalmen, I'm actually not quite sure. Stefan might be able to answer that one. Right now the differential between Lappberget and Kvarnberget and Dammsjön, which are the other two active mining areas that we're using is not a big difference. It's about the same NSR. It's actually maybe slightly higher in Kvarnberget and Dammsjön 'cause they have higher silver grades, but slightly lower zinc grades. Then regarding Huvudmalmen, Stefan.
The difference in between Lappberget and those ore bodies that Mikael was talking about here also is the size. Lappberget is much bigger and so on. The other ore bodies is smaller. Huvudmalmen is looking really big going downwards towards depth here now. We haven't prepared Huvudmalmen for production yet. That will come in the next years.
Yeah.
The grade differential?
What's the grade in Huvudmalmen? I actually don't know. I'm looking at Stefan.
It's, uh-
We might have to come back to you regarding that one.
Okay.
I don't know exactly. It's not a major difference, but maybe slightly lower, but I'm guessing.
We can say like this, you have some high-grade areas, but that's towards the depth in Huvudmalmen. Then you have quite many tons with an average to low grade also. It's a mixture of the different grades here, depending on where you are in the ore body.
Okay. Understood. Thank you.
The next question comes from Richard Hatch from Berenberg. Please go ahead.
Sorry. Sorry if this one's already been kinda half addressed, but I'm just sort of looking at the plan of the Garpenberg mine and just wonder if a medium-term consideration would be to drift into that new Huvudmalmen area, so you can access some more and at least sort of drive into it from your existing workings or is that not an option?
I can say the following, but this is very, kind of, very preliminary timing is unclear. You know, we will be drifting close to Huvudmalmen or tunneling close to Huvudmalmen and ramping to get down in order to get the base position for the new shaft anyway. It was not envisioned to do to use those for getting access to the ore, but maybe we could. That's kind of one area that's being looked into. In what timescale and when, I think that's way too early to tell. We are looking to kind of ways to get to Huvudmalmen earlier. It what exactly the smartest way is, it's kind of too short time to think for that.
Understood. Thanks for your time and good luck. Cheers.
Thank you. Operator, is there anybody else?
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay, guys. Thank you for listening to us for this last 45 minutes. I hope that we've been able to shed some more light on both what happened and what the actions are that we're doing. With this, I wish you all a good afternoon if you're in kind of our time zone, otherwise a good day if you're in North America. I look forward to talking to most of you again as we come into Q1 results at about a month from now. Bye-bye.