Ladies and gentlemen, I'd like to welcome all of you to Boliden's Q3 2019 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, the stage is yours.
Good morning, everybody, and welcome. It is clearly nice to stand here today and present the results to all of you. Let me just go directly into the numbers. The numbers that we released today in the morning feel pretty good, and we're strong about what we've done. I would like to start off with the thing that's maybe least commented upon, which is that our CapEx plans are on plan. As you know, we've been in this industry for a while, that is not always the case when you're doing big expansions that you manage to run these projects basically on budget and basically on time. We are there. That means that we are around the SEK 8 billion or just less than SEK 8 billion that we said that we were going to invest this year.
It also means that we're continuing with these investment plans on track into next year, and we have today guided for the investment levels for next year of around SEK 7 billion. Apart from that, the production in the quarter has been quite stable, especially on the mining side, where we've been quite pleased with what we've been able to do. Also on the smelters, even though we've had record maintenance stops, those maintenance stops have been basically also according to plan. We also guided for the failure that we had in one of the nickel furnaces in Harjavalta that was known to us as we stood here three months ago, and we guided that as an extra maintenance stop already back then.
We didn't talk about it in specifics because back then we didn't know exactly what it was or exactly how long it would take, but we made an estimate. This estimate turned out to be relatively good, even though we do, as you've seen, have slightly higher impact from maintenance stops because this failure in the nickel line was slightly more expensive than we thought when we were making the estimates three months back. What has happened during the quarter, which doesn't really show up in the P&L, and we're happy that doesn't show up in the P&L, is the quite a lot of disturbances that we've had on the logistics side. It's always tricky when you're doing maintenance stops to try to get your inventory right because you need to match non-continuous processes and make sure that you get the inventory right.
On top of that, we've had quite significant failures on the railway line between Aitik Mine and Rönnskär. We've had two derailments and one, whatever you call, wheel explosion on top of that. That has made that a quite tricky thing, and we had to buy extra external concentrate to make sure that we fed Rönnskär before the stop, and therefore we have lots of copper concentrate. We've also had a rebuilding or a modification of Dublin Port, which has made it difficult for us to get out the concentrate out of Tara. On top of that, the nickel shutdown in Harjavalta caused some problems because the nickel concentrate from Kevitsa cannot really go anywhere else, or that's not really feasible. We had to store that as well. You see that we have record amounts of inventory. That's not really a big thing.
We are, as we're speaking right now, already going down in those inventories, and we expect that by the end of Q4, we will be back to quite normal inventory levels. As you know, in this industry, the risk of obsolescence is basically zero. If you look at the general market, well, you can all read our prices, and I'll come back to the prices in a while, and you see how they developed. Generally speaking, yes, we do feel also a little bit the slowdown that we're seeing on the demand side, especially on the zinc side. As you've seen, the zinc year-on-year globally is actually slightly down in terms of demand. This is very much driven by the automotive sector that has a significant decrease. We see this also in our customers who are taking out slightly less amounts of zinc.
It is something that we do see, and of course, it's also reflected in that the zinc prices have gone down during the period. Maybe more surprising is that the copper prices are down. We see a pretty strong copper demand. If you go into the details, you will see that it's a little bit quite significant what's happening on the concentrate side, where there's lots of zinc concentrates available right now, and the TC, especially spot TCs for zinc are actually very high, extremely high. We do not really benefit so much from this because we are mainly on annual contracts, so it's not a big thing for us. As you know, on zinc, we're actually pretty balanced.
On copper, it's the other way around. Right now, the spot TCs are on a record low level, which is, of course, over time, making copper smelting a more tricky proposition as we go forward. If you start looking at the prices, well, you all know the prices. There's nothing new about this, but we've seen this decline in both zinc and copper prices over the last quarter, as you can see here. What you also can see, especially on the zinc side, is that the official inventories are going down and are very low level. On the copper side, the inventories have gone up slightly, but it's still on a very low level compared to what they've been historically. You see nickel, where we've had quite a, for us, very good development in terms of nickel prices going up. Very good.
I'll come back to why this was more or less necessary in a few slides. You also see that the inventories of nickel have gone down and continue to go down, even though there was a little uptick just towards the end of the quarter. If you move over to the pressure side, you all know that during this time, we've also had good developments on gold and silver, and lead prices have also kept up very strong in this period. I'll come back a little bit what this mix makes to Boliden. Now I told you, I said that this increase that we're seeing in nickel was more or less necessary. If you look at this slide and look to the very right, you will see the nickel price, the high, the low, and the average for the year, and you see where the cost curves are.
Here you could see that before we got this increase in nickel prices, for a long time nickel mines have barely made the cash cost. That we can also see that there are very few mines who, for a long time, been coming online, and this has been a challenge for the whole industry. Now, with the recent uptick in the nickel prices, there is a pretty good chance that we might be able to see more nickel mine supply coming over time, but you know that these supply chains are pretty long, and it doesn't happen overnight. The other thing you can see here if you go to the very left is the zinc, that you've seen that the zinc prices have gone down.
Some will say they're on a pretty high level still compared to where they've historically been, where we've seen prices under 2,000 for quite some time. You can also see that the cost level for zinc mines in the world have gone up pretty significantly. We are right now in a situation that when we have lower zinc price, we're actually somewhere around the 90th percentile of the cost curve. This cost increase has many different backgrounds. One is the high zinc prices that we had a couple of years back that made lots of new mine capacity come online. Some of that mine capacity is pretty high cost. It's also the high TCs that is reflected here as a cost for the mining companies. You can also see that on the copper side, we're relatively flat in terms of the cost development.
You can see there is still some headroom from the cost curve up to the prices. On the other hand, we also see that the supply of copper going forward is not that great, which means that it also looks pretty good for these metals. If you add this to Boliden, you've seen this chart for many quarters, historically. You can see the metal prices index, if you look at that left, that the balance of our metals is basically around 100. You can argue what 100 is, but that's what we consider to be kind of a normal level. They're basically around 100, whereas the currency index has moved quite north for us, which is good.
When you multiply these parts together, you can see that we still have a very good situation with a very good revenue mix linked between the currencies and the metal prices. Sorry. If you start looking into the two business areas, we start with the mines. The mines, as I said, have had a good quarter generally. Very stable production as such, and also very stable in terms of the projects that we're running and the expansions. They're all on budget and on time. We've had a record throughput in Garpenberg, so always nice to have records to report to the crowd. We do have lower grades in Aitik and Kevitsa. I think these were well guided for and well known to everybody. We have had logistical disturbances, which means that also the inventories in the mines were relatively high as we could not get everything out.
When you look at the production as such, yes, you see that on the copper side, the throughput is relatively stable, whereas the metal content is going down, but that's in line with the lower grades that has been guided. On the zinc side, you can see a very good throughput, and you can also see that the metal production level is ticking up because of the better grades compared to last quarter. You see on nickel, an interesting one, but of course we only have one mine. You see basically almost a record throughput in Kevitsa. We are, to some extent, through the worst issues that we've had regarding throughput in Kevitsa, as we have now gotten going on the stage 4 or pushback number 4, which means that we have more places to work from, which means that we get more to the concentrator.
Now you can see the grades are lower compared to what they used to be, and therefore the metal content is lower, but that you know from all kind of open pit operations, that metal content or grades will variate and go up and down, and this was also, I think, well guided for. You can also, of course, see that Yeah, see the lower grades actually makes a big difference compared to last year, but of course, last year we had very high nickel grades in the Kevitsa mine. If we move over to the smelters, we're also very pleased generally with the performance in the smelters. We have several operations that have been working quite well. Both the CapEx that we do have and the maintenance stops have basically gone according to plan, all of them.
I said, we had this breakdown in the nickel electric furnace in Harjavalta, but with that down, we cannot run the line at all. The line was down for 7 weeks, as we had to take care of the wall that also collapsed in this part. We're of course in a business where these things do happen, even though it was a long time since this happened last. We're of course taking all the learnings to make sure that we will have these events occurring as rarely as ever possible, trying to understand exactly what went wrong in this case. We do not have the exact answer what went wrong, but we're working on to make sure that it doesn't repeat. I said, after 7 weeks, we're up and running, and we've been running well since we got it up going again.
If you look over the metal production, of course, on the copper side, you see that this is the second quarter of pretty low throughput. In last quarter, it was Harjavalta that had a big maintenance stop. This quarter, it's Rönnskär that has a big maintenance stop. On the zinc side, you can see that the throughput is quite online and actually on a very good level as both Kokkola and Odda have been working quite well during this time. If you look at the nickel matte production, that's of course very much lower, but that's due to the seven weeks shutdown that we had in the period. With that, I'll give it to you, Håkan, to go through the financials.
Thank you, Mikael. Good morning. Mikael has talked about the main points in the result that we've released, but let's run through the numbers in a bit more detail. We have presented Q3 earnings, which are very much in line with Q2. CapEx is according to plan. Free cash flow, however, is negative, which is, of course, a disappointment. I'll come back to that in a while. Let's start with the EBIT comparing Q3 of this year with Q3 last year. We're slightly down on EBIT, about SEK 400 million. Most of that is related to volumes, and most of that is well known in advance. We are mining in lower grade areas. We have a higher maintenance this quarter compared to last quarter or last year, both in the quarter and in the year, we do see a high maintenance quarter.
The effect of the maintenance stop was slightly bigger than we anticipated. In addition to that, we've had some effect of the logistic challenges that Mikael talked about, and it all adds up to about a SEK 1 billion negative volume impact. Costs comparing to last year are about SEK 250 million higher. There is a fairly small element of underlying inflation here. Inflation is at a relatively low level. On top of that, we have costs related to the maintenance and disturbances that Mikael has been talking about. Prices, on the other hand, prices and terms are positive, almost SEK 900 million. We have higher metal prices, primarily nickel and precious metals. We have higher zinc TCs, we have a stronger US dollar and also higher by-product prices. All in all, a quite good development.
Comparing Q3 sequentially to Q2 this year, we're pretty much flat when it comes to profit. We have lower volumes related to lower deliveries in mines, related to the logistic challenges that Mikael addressed. We also have a bit higher maintenance and the effect of the nickel breakdown in Harjavalta influencing smelters. This is offset by lower costs. We seasonally have lower costs in Q3 compared to Q2. On top of that, slightly better prices and terms. All in all, the net effect is that we end up in a result that is similar to Q2. Moving over to the cash flow. We've talked about the earnings level. We also talked about the CapEx, which is in line with our plans. Here you see then the number that stands out is the working capital increase of 1.3 billion SEK.
In here, the main thing that has happened is an increase of raw material inventories, concentrates and others. We have about SEK 600 million higher inventories in Harjavalta due to the seven-week nickel breakdown. We have about SEK 400 million higher inventories in Rönnskär, which is connected mainly to the maintenance that we had, but also the logistic challenges between Aitik and Rönnskär. Those two adds up to SEK 1 billion, and we expect that to normalize in the course of next quarter. The remainder is timing on payments, price effects and similar. The second thing I'd like to draw your attention to in this slide is the taxes paid. We are paying this quarter less than last year. We have some catching up to do still of taxes to be paid.
If you look at the balance sheet, in case anyone has had the time to do that yet, we have a short-term liability of about SEK 400 million, tax liability. That will be paid basically in Q4 and to some extent in Q1. I would expect higher tax payments in the next couple of quarters. With a negative cash flow, we have seen a slightly higher gearing. This is net debt to equity excluding reclamation liabilities. We've increased to 15%, a slight increase. However, as you can see, this is a very strong balance sheet. We have SEK 50 billion capital employed. We have SEK 40 billion equity. We have a net debt of SEK 6 billion. On top of that, a robust, strong financing with an average interest rate of 1.1%. We feel that we're in good shape. Mikael?
Thank you, Håkan. We also today have some interesting things to talk about going forward. We have announced today in the morning also a new investment. Those of you who've been around know that we have had a test line for trolley assist, about a 700-meter test line in Aitik. Now we are extending this test line to a couple of kilometers. We're also gearing up and taking more trolley trucks or making more trucks available for trolley. We're also doing the same right off from Kevitsa. Altogether, this is an investment of about SEK 300 million that will happen over the 2020 and to some extent 2021, and we'll get it fully up and running early 2022. This is really a good investment that we like.
It is good financially. It's also good from the environmental point of view, where we will be reducing the amount of diesel that we are consuming quite significantly. Also just maybe more of a fun fact, we are actually using 27 tons of copper just in these trolley lines. Copper is needed. As I've said many times before, everything that is going to be done to fight climate change typically has to do with electrification that typically needs lots of copper. That's true for our own decarbonization strategy as well as everybody else's. That's a little bit to say about that I think copper is a great metal. Going forward, we're also announcing today what I think is some good news for many of you.
We are announcing the grades for the next year or altogether for the next 5 quarters, we are having Aitik at 0.25, which is still above the long-term grade average. We have done a re-optimization over Aitik, we can continue to run for another year at these relatively high levels. In Garpenberg, we are now guiding for 3.7 and 100 for silver for the next 5 quarters. Just not forget, both in Aitik and on Garpenberg, we are quite firm on the volume guidance for next year of the 45 million tons and the 3 million tons. In Kevitsa, we will get up to the 9.5 million pace during next year, exactly as we communicated before. Even though things have gotten better, we will still be mining below reserve average in Kevitsa also for 2020.
The maintenance stop for this last quarter is in line what I think we said before. The total for the year will be bigger, but that was already done now in Q3. CapEx, we have, as I said in the beginning, now guided for SEK 7 billion for next year. With that, I need to put this one on top and saying, if I said something I shouldn't say, I haven't said it, and I will leave the question open for you, Olof.
Yes. Ladies and gentlemen, that opens up our Q3 2019 Q&A session, and we will start here in Stockholm. Gustav Sfiréen, Pareto, please.
Thank you for that, Olof. Two questions from my side. Firstly, on working capital release in Q4, should we expect at least SEK 1 billion in release then given your inventory levels in Q3 now?
Yes.
Okay. It could be more than that as well?
Working capital will have an impact on a lot of things, including prices. I stated two specific inventory positions in Rönnskär and in High Level that adds up to SEK 1 billion, and we should see those normalizing, yeah.
Okay. Secondly, just to understand your new CapEx guidance. At the CMD, I think you showed an indicative figure. It looked to be around SEK 6.5, something like that. With this additional SEK 300 in Aitik, is there anything else new in your CapEx guidance, or is it basically what you've been saying before plus this new investment?
There is nothing new that is big enough worth mentioning, and then otherwise we would have mentioned it. You're right. This SEK 300 doesn't all come in next year, but it comes a little bit over two years. Adding everything up, this is what we get.
All right. Thank you.
Ola Södermark, Kepler Cheuvreux, please.
Yes. I must say the smelters had a very good performance despite the maintenance stop and the breakdown in the nickel process. Is this the kind of level we can expect to be sustainable at current market conditions, the underlying levels, if you are adjusting for maintenance?
I would have to say yes to that because we don't have anything that is extraordinarily good in that sense.
Okay, that's very good. When it comes to the investment in Aitik and Kevitsa in expanding the electrification having there, you are saying you're reducing diesel consumption by 5.5 cubic meters.
Thousand cubic meters.
Thousand cubic meters. Is it possible to quantify the effects? You're going to use more power and so on, and so assume there are some efficient gains as well, so we can get a grasp over the effects.
Well, you have a grasp of how much money we're saving from the diesel that we have announced. Of course, there will be some electricity cost associated with it, but it's a very neat investment.
Okay. Yep. That's fine for me. Thank you.
Thank you.
Any more questions here from the audience in Stockholm? Okay, operator, we open up for questions from the web, please.
Okay. Thank you. Ladies and gentlemen, if you do have a question, please press zero one on your telephone keypad. Our first question comes from the line of Alain Gabriel from Morgan Stanley. Please go ahead. Your line is now open.
Yes. Good morning, gents. Three short questions on my side. Mikael, you mentioned some disturbances in the smelting business throughout the quarter. Can you quantify the financial impact of those disturbances if that was outside of the maintenance cost that you have guided for? Second question is on the electrification investment. Clearly there are many different moving parts to let us calculate the benefit, the profit, or the annual EBITDA uplift from that investment. Can you give us a range of the IRR of that investment? Third question is on capital allocation. Clearly you are now below your 20% threshold. How should we think about your priorities going into year-end? Is it more for additional deleveraging or more for special dividends? How should we think about that? Thank you.
Okay. Let me take this through. I think regarding smelters, that was unclear. I would say that apart from the maintenance stops that we've had, there's been pretty solid operations in the smelters. We haven't had any other disturbances apart from that. The disturbances addition I talked about was on logistics, but that hasn't really impacted apart from the fact that we have very high inventories. The electrification IRR, we're not giving a specific number because it depends, of course, what you think about diesel prices and diesel taxes going forward, and therefore we don't want to talk too much about that. You can say that this is a very clear, at least the numbers that we have, but that's also depending on what diesel price you put in going forward.
It's clearly a nice IRR, well above our 10% threshold line. Regarding capital allocation, let me just say that we are at 15% right now, but that is, remember, excluding the provisions for decommissioning mines. If you add up that provisioning, we're actually right around the 20% threshold. Regarding what will happen, apart from our ordinary dividend, our payout ratio, what will happen apart from that will have to be seen.
Okay, thank you.
Our next question comes from the line of Jatinder Gill from Exane BNP Paribas. Please go ahead. Your line is now open.
Thank you. Good morning. Three questions, please. Firstly, you mentioned copper smelting is becoming more tricky proposition. If you see the trend as structural, would you move actively towards higher integration, i.e., building or buying more copper upstream exposure? Second question, are you able to indicate how much sustaining CapEx is in your 2020 guidance? Is it still around SEK 4 billion, Seth? Finally, on grades. In the previous call you mentioned underground grades should move more gradually, while open pit can grow more quickly towards reserve, but looks like it's the other way around based on 2020 guidance. Just to be clear, will Garpenberg see any recovery or are we heading towards reserve grade from 2020 onwards, based on 3.7%? Has that surprised you on the downside versus your 4% guidance for this year?
Let me take the first and the last, and I'll leave the middle one to you, Håkan. If we start from the grades in Garpenberg, number 1, as we don't guide from 2021 and onwards, you will have to use the assumption around the grade averages that you have in the ore base reserve calculations. Am I surprised that we're going from 4.0 to 3.7? Maybe I am, but you can also say that silver is holding up very well. If you look at the mixture of the two, I think that we're pretty well off anyway. Yes, also underground mines can go up and down depending on which areas and which ore bodies you're mining at what time. Regarding the copper smelting, basically you're turning it the other way around.
You say that the copper mining is going to become more lucrative given that the TCs might be lower long term. I will say the answer to that is that we will always look at potential copper projects, but the TC is only one factor out of many in looking to whether a copper project will be viable or not. I'll leave the sustaining CapEx to you, Håkan.
Yes. The question was the level of the sustaining CapEx and it has increased in the guiding for next year. It's slightly above SEK 4.5 billion, and the reason is that we, in the re-optimization that Mikael talked about, we have more stripping in Aitik. Then there was some advantages grade-wise and so on.
Okay. Thank you. If I could just follow up on Kevitsa grades, you mentioned below reserve grade. Fair to assume it'll be above 2019 levels in 2020, though?
Yeah. Basically, yes.
Great. Thank you.
Our next question comes from the line of Liam Fitzpatrick from Deutsche Bank. Your line is now open. Please go ahead with your question.
Morning. I've got three questions. Firstly, on the smelters, it was a very strong quarter despite the maintenance. I just wanted to check, is there anything exceptional in the quarter? Is there any mismatch between sales and production? Looking into Q4, it looks like with maintenance dropping off, there should be a big uplift in EBIT. I just wanted to check that assumption. Secondly, on Garpenberg, throughput was very high in Q3. The targeted capacity next year is to hit three million tons. Is that looking conservative given how this asset is performing at the moment? Thirdly, just a quick point to check. When you say mines were impacted by delayed deliveries, I assume that means lower sales. Thank you.
Yes. Let me take this little bit by bit. Regarding smelters, there was basically nothing really that happened apart from one thing that Håkan mentioned, which of course goes through both business area, which is that we have seasonally lower costs in Q3, which will, of course, affect both business areas going into Q4. You know the background of this, it's a little bit stupid, but that's the way we account for white collar people, that when they take vacation in the summer they don't cost anything. Then when they come back and they work in Q4, they cost. That's the way our accounting goes. Apart from that kind of seasonal effect, there should not really be anything else that was extraordinary in Q3. Garpenberg 3.0, things are going very well. There is only one but to this, which I think is well known to everybody.
Our environmental permit is for 3.0, so we're not going to produce more than three unless we change the environmental permit, and that is not going to happen for 2020 for sure.
Whether the logistic disturbances means lower sales from mines. Yes.
Yes. There was slightly lower sales from mines. There were higher inventories also in the mines. Yes.
Okay. That's very clear. If I could briefly follow up just on that big Garpenberg point that you made. Is that something that you're investigating? Can you give us any kind of rough timescale of when you might be able to increase the license?
Well, the first answer is yes. We are investigating this in many different dimensions. Could we increase it slightly? Could we increase it a lot? If we increase a lot, we will also need to do quite a lot of investments so it all fits together. The answer is yes, we're investigating. The second part is this going to happen in the short term? No. These processes take quite some time. Okay, got it. Thank you.
Thank you. Our next question comes from the line of Luke Nelson from JPMorgan. Please go ahead. Your line is now open.
Good morning. Just in the four and a half billion SEK of sustaining CapEx, can you break out how much of that is typical underlying SIB sustained business capital, and how much of that is stripping at Kevitsa? Also just on the stripping profile at Kevitsa, the midterm outlook on pushback 4 and potentially further pushbacks there. Secondly, just on the vacation reserves, is it possible to give an indication of how much relief that was, just relative to your comments in the prior question? Thanks.
Should I start with a couple of them?
Yeah.
Yeah. Okay. The seasonally lower cost of the vacation reserve, that's about SEK 150 million for the whole company. Roughly equal parts in the two business areas. Out of the slightly above SEK four and a half sustaining CapEx, I'd say that about SEK two and a half is stripping rock development and smaller expansions of the tailing side, and about SEK two is replacement CapEx.
I can say regarding the question whether there will be an additional pushback in Kevitsa. As you know right now in our mining plan, we only have the four pushbacks. The number four we just started. Regarding a decision on a potential pushback 5, it's probably about three or four years out that we have to make that decision in order to make it fit with the existing mine plan. There are lots of loose parts before we make such a decision, including the kind of simple thing of also having a new tailings facility.
Okay, great. Thank you.
Our next question comes from the line of Daniel Major from UBS. You may go ahead. Your line is now open.
Hi, guys. A few questions. Firstly, the CapEx for this year and also for next year. Can you let us know what FX assumption is factored into that SEK 7 billion number for next year? If I look at the guidance for this year, you're saying eight or slightly below eight, and that's despite, I guess the SEK being weaker than you expected at the start of the year. Does that imply your effective CapEx spend is slightly lower than you expected, given I'm assuming a decent proportion of that is in US dollars? That's the first question.
I can take the kind of FX part is that there's not so much in US dollars. That's not a big issue on the FX side, but there is in euros. It's the euro-SEK exchange rate that does matter in this regard. Yes, it's been a little bit of an uphill, but yes, we have been able to swallow the kind of headwind we've had there, but it hasn't been that big. Exactly which euro-SEK exchange rate I'll leave to my CFO.
Yeah, we can put it this way. We base the plans basically on the current euro-SEK exchange rate. As Mikael said, it's the euro that is significant given the SEK number. The US dollar has a smaller impact.
Okay, thanks. Very clear. Second question is on the tax payments relative to what's through the P&L. You obviously flagged the SEK 400 million is now a short-term liability, so it should come out over the next two quarters. Beyond that, would you expect P&L and cash tax payments to then normalize, or is there still some catch-up payment that sits in the longer-term liabilities, not all flow out over the medium term?
I guess it's always in the process of normalizing. That's the trick. I mean, the tax is charged on the P&L, that follows the result. There is a time lag for the payments. We're coming from earnings levels that were higher in the last couple of years due to higher grades, for example. We are catching up that part. I think that will be done about, let's say, Q1 next year. There will always be a time lag where you're catching up in either way, depending on how the profits move. The 400 I talked about, it's done by Q1.
Okay. Very clear. Final question on Kevitsa. The throughput was strong this quarter above 2 million tons. You've indicated you get to your 9.5 somewhere in the second half of 2020. Would it be fair to assume a higher than 2 million ton run rate for the next couple of quarters before the expansion to 9.5 comes in at the second half of next year?
No, because without that extra mill that comes with the expansion, we cannot really get more than this through.
Yeah. I meant your run rate for start of the year was more like 1,750, and you were above 2 million tons this quarter. Should we assume 2 million tons is sustained, or would it drop back to the kind of 1,750 level until the new mill is commissioned?
I think that there will always be things going up and down, but SEK 2 million before the new mill is a very good result.
Okay. This quarter was exceptionally good. Yeah. Okay. Very clear. Thank you.
Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. Our next question comes from the line of Olivia Du from Bank of America Merrill Lynch. Your line is now open. You may ask a question.
Hi. Good morning, thank you very much for taking my question. Most of my questions have been answered, so I just have a few ones. First off, for the cost savings benefit from the trolley assist in Aitik, when did that start to realize? In terms of the execution in Kevitsa, should we expect very similar timeline? Number 2, recently I think there's some negotiation between the copper mines and the Chinese corporate purchase team. Have you heard any news on the potential TC floor for next year despite low spot TCs? First, these two, please.
I can take that. Regarding the second one first, what is happening with the benchmark negotiations. As you all know, we're not sitting at that table, so we're not in any way, any prime information. The only thing that I can say that I understand that is pretty heated negotiations going on, but I have no insight whatsoever about what levels is being discussed. It will be very interesting LME week next week, by the way, see if something comes out already then or whether these negotiations will be continued afterwards. Regarding the cost saving and how quickly they will come, there will be some of this coming 2020 and 2021, but of course it's 2022 that we have this basically fully in place. I will not be more specific on that.
What about Kevitsa? That would be
So this-
This is Kevitsa.
That's both Aitik and Kevitsa. Aitik is a little bit before, but Kevitsa a little bit later. They're basically going in parallel.
Okay, thank you. Next, sorry, very short one. The inventory revaluation was quite a positive, SEK 200 million in Q3. What is the outlook for the fourth quarter?
The inventory valuation is more or less entirely based on market prices. The positive amount we had was an effect of the upturn in market prices that we saw during the quarter. It's difficult to give an outlook without actually giving a forecast on price levels at December 31st. I mean, that's the background.
Yeah, sure. Last one. Just thinking about your exploration progress because from memory last year you didn't have any increase in your reserves. So far how is this going this year, and is there any update regarding a target? Yeah, just some update would be appreciated. Thanks.
In February, we will update you both on what is happening on exploration in general and what's happening specifically in Tara Deep.
Okay, thank you.
We appear to have no further questions from the telephone line at this time. I'll hand the conference back to the audience in the room. Thank you.
Okay. Ladies and gentlemen, let me just please double check. Do we have any final questions from the audience here in Stockholm? Please go ahead then. There appears to be no more further questions. Ladies and gentlemen, thank you for attending, and leave the final word to Mr. Staffas.
Well, I will also say just thank you for listening. It's always good to be here. Bye.