Ladies and gentlemen, I'd like to welcome you to Boliden's Q4 and full year 2018 presentation. My name is Olof Grenmark, and I'm Head of Investor Relations. Today, we will have a presentation led by our President and CEO, Mikael Staffas, followed by our CFO, Håkan Gabrielsson. Once again, it's a pleasure for us to welcome you. Mikael Staffas, the stage is yours.
Thank you, Olof, and welcome everybody, both here in the room and you who are attending over the internet. I would also like to point out that we will also touch upon the R&R update that we have had released this morning as we go through this presentation. You've all seen the numbers coming out, and you've seen the numbers that we're presenting for the fourth quarter. This is going very quickly. We've had a stable production in general, and we received almost exactly SEK 2 billion EBIT excluding process inventory revaluation in the quarter. Metal prices have, during the fall, as you most know, been quite stable, even though they're of course, on a much lower level than they were a year back. We've had a good, stable production. Especially, I'm proud about the smelters that had a good production during the quarter.
I'll come back a little bit to that. On the cost side, yes, we're still seeing the inflation mainly in energy and chemicals that we talked about in previous quarters, although it's not so preeminent in this quarter as it's been previously. When you look at the full year, you can see this is a record year for us. We've had a record profit, which we're quite happy with, even though it's only marginally better than last year. It's still on a very high level compared to historic levels. We've had also throughout the year very good production, and also, of course, we've been helped by the fact that smelters have had a year with relatively low maintenance shutdowns. Normally, they would have much bigger maintenance shutdowns, and we will see more of that as we saw in 2017 and also a bigger maintenance year in 2019.
We've had increased prices and terms if you take 2018 compared to 2017. Also about the dividend that we've given out for the whole year, there will be some discussions about, I'm sure. We have adjusted our targets for how strong balance sheet we should have. We have historically not included the reclamation debt that we have on the balance sheet when we calculate how much we can dividend out, and we have a too strong balance sheet. We have now included that. That gives maybe a slightly lower number than many of you had anticipated. We still feel very strongly about the number is totally SEK 13, separated out through SEK 8.75 on a cash dividend, and then redemption shares of SEK 4.25. Looking at the market, yes, we, as so many others, see somewhat slower growth in terms of the general economy.
The prices and terms are lower than last year. This is quite similar to what we've seen previous during the fall. Copper and nickel demand grew pretty substantially. It's going pretty well, although the zinc demand is stable or actually declined a little bit compared to previous year. We also see an increased interest in the precious metals, which is an interesting side effect, and you see that also slight in the gold price as I will show in a few minutes. On the concentrate market, we're seeing also quite interesting things. We're seeing an increase in zinc concentrate output, which means something that we see very high spot TCs on zinc. This is a little bit of a new market situation. This, of course, will play into the benchmark discussions that are ongoing right now for zinc TCs.
We are personally or we as a company are not involved in these discussions. Of course, this will play out in those discussions as well. On the copper concentrate market is more a balanced situation. Also here, the spot TCs do remain above the contract level or the benchmark TCs, which is also sending a signal that maybe the TCs are on the way up again. Metal prices, as I said, are relatively stable. You can see that the copper prices, if you look at the last half year, has been on a stable level, so as zinc. Nickel, still a little bit low. As you can see from the slide down there, the inventories of nickel that have historically been very high are coming down pretty fast. We're still quite confident that nickel prices do have a possibility to grow going forward.
As you can see then looking at the precious metal prices, you see that gold has taken up in the last quarter, which is good. So has silver, whereas lead is performing very much similar to the zinc price as often. When you then compare the prices of the metals compared to where we are on the cost curve, you can see that copper prices and zinc prices still have relatively healthy margin compared to cash costs, whereas nickel is still hovering around the cash cost of the nickel mines, which is, of course, also an interesting situation. There are not many nickel products around the world because it's difficult to make money in nickel. As I said, this situation might get better. We feel that we're well-positioned also in the nickel market.
When you add all this up together, you can see that our market term, what you see in this slide here, is that it went down pretty sharply over the summer. That's old news. Since then, it's been relatively stable. We're still on pretty good levels compared to historic levels with our weighted index at around 120 compared to some kind of average level around 100. If we move over to the mines and talk about that, we've had a good run in the mines as well. Of course, here we are very much affected by the lower metal prices. Comparing to a year back is, of course, a very difficult comparison for us to make. By comparing to previous quarters, we're doing fine. On top of the fact that we're having lower metal prices, we're also affected by lower grades. This is also no news to anybody.
We've been mining above reserve grade for a long time, and we're going slightly down towards the reserve grades averages, and that's also seen here in the numbers. The throughput was relatively stable. Aitik was doing relatively good, even though we've had some minor disturbances there as well, but also good situation. We've had slightly lower throughput in Garpenberg, Kevitsa, and Tara. The Kevitsa situation is due to the ore, more difficult grindable ore. In the other ones, I think it's more due to smaller instances that should not be reoccurring. For the full year, here you can see that in Aitik, we're having a situation with SEK 2.4 billion profit, slightly up from the year before.
Garpenberg slightly down, also considering that they have lower grades than they used to have the year before. Generally stable situation for most of our mines. I will soon come back into the R&R update regarding the mines. On the production side, the copper production is down. This is lower grades in Kevitsa compared to last year that had very high grades. The zinc production is also down. There's more of a lower throughput in Garpenberg and Tara also compared to last year that was very good. Nickel production is very stable altogether. If you go into the R&R statement, you can say that generally in the R&R statement, we're having a year where we're not quite adding one year to the mineral reserves after one year of mining. We're still adding somewhere between half a year and three quarters of a year.
We're still confirming the long life of mine that we do have in our big mines in Aitik, Kevitsa, and Garpenberg. Even though we have limited new additions, we do have some additions. The very positive news in this one is the Tara Deep development, where we're having 5 million extra tons going from 13 million tons to a little more than 18 million tons. This is still, you should know, only drilled from surface as the underground drift that we're doing towards Tara Deep is actually slightly delayed. We're not on target to start drilling from underground. We're very happy what we've achieved from surface. This is, we think, a good basis for going forward with the Tara Deep project. We'll see what the next test will be there.
The negative news here is the developments in Kylälähti, where we have not been able to find substantially more ore, even though we found a little bit and we've added about half a year length to the Kylälähti mine. It is now scheduled for close down sometime in 2020. Just looking at the numbers, you can say that in Aitik, we have roughly unchanged reserves. The copper grade is going down from 0.23%- 0.22%. This is simply a mathematical consequence of the fact that we've been mining above reserve grade for so long. The remaining in reserve is then lower. At some stage it will come over the rounding error and come down one step. This is what happened this year. In the Boliden Area, roughly unchanged reserves.
Here we have been able to add one year, so we still have about seven years of official life or reserve life. Moving over to Garpenberg, roughly unchanged reserves as well. Here we are also having roughly unchanged grades. We have 25 years reserve life. Still a long planning horizon. In Kevitsa, we have a slight decrease in the mineral reserve. We have not been able to really replenish the year that we have mined. We also here have an adjustment, which I think is more of a rounding error in nickel from 0.23%- 0.22% as well, which is also due to the fact that we have been mining above reserve average, and that's the math that works out over time. We still have 30 years of life, and this is calculated on the increased production that we have in our plans going up to 9.5 million tons.
In Kylälähti, as I said in the beginning, we do not have any major breakthrough. That is disappointing results. We do have six-month extra, which gives us roughly two-year reserve life still in Kylälähti. All in all, Kylälähti is heading for a closing in around two years from now. In Tara, roughly unchanged reserves. We have also been able to, in the old mine, to replenish the production that we have done during the year. Then we have an increased inferred resource, I should say, from Tara Deep, going from about 13 million tons to about 18 million tons. Once again, Tara also about seven-year lifespan with the reserves in place. Moving over to the smelters, we had a good production with stable production in the smelters.
The TCs are slightly lower and so on, but it's met by the currency, so it's a relatively stable price in terms. We had no maintenance shutdown in the quarter that of course helps us quite a lot also comparing to previous years.
For the full year, once again, you can see here that we have one unit standing out, which is Harjavalta. Harjavalta has had a very good year. I think we have alerted that in different presentations during the year. Harjavalta has been in a position, both from strong production throughout the year, enjoying good nickel terms in terms of the TCs for the nickel that was being done, and also there are good timing effects in Harjavalta. After the investments that we have done there, they have been able to use old inventories with relatively good margins to process, which has been helping us to get to those results.
The smelters production in general in Q4 was good. Copper is slightly up. This is more due to Rönnskär had a relatively good quarter. Zinc productions is up. That is mainly due to that in the last year, Odda had a big maintenance shutdown. That was not the case now. The nickel production in Harjavalta has worked very good with improved efficiencies and very stable production. With that, I will leave it over to you, Håkan, to talk about the financials.
Thank you, Mikael. Good morning. As Mikael said, we presented a stable profit, EBIT excluding process inventory just over SEK 2 billion, which is very much in line with last quarter. What I would like to highlight on this slide is also the cash flow. In the quarter, we had SEK 1.7 billion free cash flow, which is roughly SEK 900 million up compared to last quarter. In that number, we have a fairly high CapEx number, but we've had a better development in working capital and a lower pay tax. If we look at it by segment, you can see that the improvement compared to Q3 is mainly in mines. Smelters show a stable result. Then we have the other and eliminations, which is internal profit that is still positive, but not as positive as last quarter.
Here I should perhaps already highlight, since the internal profit is entirely a matter of timing, and we've had two consecutive quarters with positive amounts. We are currently at fairly low inventory levels. So I think for those of you modeling the result, you should perhaps take height for a negative swing in the next quarter. If we dive into Q4, comparing to the same quarter last year, we have a negative deviation of SEK 900 million, and I think the main components are very evident from this. We're SEK 400 million down on prices, and we're SEK 500 million down on volumes. Prices in terms is mainly a reduction of metal prices. At this time last year, we were about $3,000 per ton in zinc, and we were at around $6.8, I believe, in copper.
This is on a lower level at this point in time, a bit compensated by a stronger dollar. The volume impact of half a billion negative impact on volume is entirely grades. I think this is known to all of you. We were at 0.36% copper grades in Aitik last quarter, and we're currently at 0.27%. So it's a fairly significant reduction. Still mining above reserve grade, but clearly a reduction. At the cost side, we've been talking about inflation for most of the quarters this year. This is a fairly moderate increase in Q4 to Q4, an increase of 1.6%, which is lower than the inflation we see around us. So that's a good thing.
Then we have one item affecting comparability, which is the sale of a closed asset on the other side of the Atlantic, the Premier Gold, which is described a bit more in the report. Comparing sequentially Q4 to Q3, it's very much a stable development. We are very similar in the result. Volume, all taken together is stable, as Mikael indicated. We're slightly better on prices, and we have a cost increase of SEK 300 million. Out of that cost increase, roughly half is related to seasonal variations. We have higher salary costs during Q4 than the holiday period in Q3, and the remainder is, among other things, a bit more maintenance in mines and slightly higher exploration costs.
Looking at the full year development, we are slightly above last year in EBIT excluding process inventory, and that is in fact the highest number that we have seen in Boliden so far, just above SEK 9 billion. We have also delivered the best net profit that we have seen in Boliden. With the free cash flow, we round out a net debt to equity of 5%. The EBIT bridge, we have a slight improvement compared to last year, but a very significant improvement in volumes. This time, this is primarily in smelters. Mikael talked about it briefly. We have clearly higher free metals in the smelting side. We have slightly less maintenance, but the big part is free metals. Here, again, I would like to highlight Harjavalta that has had a very good performance.
In addition to delivering good production and high free metals, Harjavalta has been helped by good market conditions in nickel and by processing of intermediate stocks. A good improvement in the smelting side. Prices, fairly small change year-over-year. Looking at cost, SEK 600 million is up. This is 4%, and quite close to the inflation we have been talking about. We are seeing roughly 4% on the external material that we purchase and a bit less on salaries. This is mainly driven by inflation in chemicals and in energy, as we have been talking about a couple of quarters. Moving over to the cash flow. As you can see, a good number, SEK 1.7 billion. That is SEK 900 million up in spite of higher CapEx in this quarter. CapEx for the full year, as you saw, is very much in line with guiding.
This is in line with what we expected. Working capital development in this quarter is better than both comparisons. As you might recall, we had a fairly big tax payment last quarter related to the Swedish tax returns, and it is clearly lower this quarter. This is a good quarter for cash flow. That leads up to a balance sheet that is on a very strong level. Net debt to equity, 5%. Net debt, SEK 2 billion. The financing side, we are happy with that part as well. 1.3% interest rates on average, competitive financing. We have a net payment capacity of SEK 10 billion and a loan duration of three and a half years. We feel that we are in good shape balance sheet-wise. With that, Mikael, you want to continue?
Thank you, Håkan. I will come back to the dividend proposal. As you have seen, as I said before, we have proposed an ordinary dividend of SEK 8.75 and a redemption share of SEK 4.25. The ordinary dividend is quite in line with our payout ratio of one third. The redemption shares is in line with the extra dividend or the extra distribution of cash, I say, to shareholders that we do when we have a balance sheet that is stronger than needed. This has been before mentioned as 20% of debt to equity. We have refined or clarified this definition to also include the net reserve or reservations that we have for reclamation. We are quite happy of the targets that we have had in place for almost 10 years. Worked very well. We do not want to change them at all.
When they were put in place 10 years ago, the net reclamation charge on the balance sheet was very low. It has grown over time. It is about SEK 1.7 billion today. Depending, of course, what happens, but if nothing else happens, that we are mining straight out the assets that we have, then this will increase over time. It increases by about SEK 100 million per year. We are doing this adjustment now to include also this debt into our definitions, and that gives us the room for the SEK 4.25 of redemption shares that we have. The financial targets are very happy. The decision will, of course, be done on the AGM on May 3rd. Going forward, we are mainly reiterating all the guidance that we have done before.
Aitik is on track for the 45 million tons in 2020, the guidance is still for 4.25, still over reserve grade, but not as much as it has been for the next 12 months. Garpenberg, we are still guiding the 4.0 for the zinc for the next 24 months, and the expansion to three million tons for 2020 is on track. In Kevitsa, the expansion to 9.5 million for 2021 or to achieve the pace during 2020 is still on track. Nothing new there. Here we are now guiding for going from slightly above reserve grade to actually slightly below reserve grades for 2019. The background is that we are about to deplete the pushback number two, which has been very great with grades, and we are moving over to pushbacks number three and four, get more volume from there.
They are right now in lower grade areas, therefore we will see lower grades during this year. Then over time, the reserve will be the reserve average. Planned maintenance stops for 2019 are up from 2018. 2018 was a low maintenance year. If you add this up, you get around SEK 480 million or something like that, which is a high maintenance year, 2019. You have been with us around for a long time, you know that we have this cycle. Typically every second year is a big one, every second year is a smaller one. We are reiterating the CapEx guidance of close to SEK 8 billion compared to the SEK 6.6 billion that we ended up with in 2018.
For those of you who want to learn more about this and the details, we will talk more about this at the Capital Markets Day that we will have in March for giving some more flavor to the details of the different investments. The conclusion as we are standing here is that we are still well positioned in the metal markets. We have stable prices and terms. We are working with the right metals. We have a high productivity. We have had it for a long time, still working on that. We are good at corporate responsibility. We have long life of mine that we have now extended for close to a year for most places. We are in stable jurisdictions, strong balance sheets, we are working with our growth options that we are in place, and we are delivering these projects roughly on time.
With that, I will just say one second about what I just said, that we have a Capital Markets Day. I think there might be one or two seats left for those who have not yet decided to come. We're starting in Stockholm. Then we have a second day in Aitik. For more information, you can talk to Olof or Investor Relations.
Well, thank you, Mikael. Literally, we have maybe one or two seats left, please sign up for the Capital Markets Day. Ladies and gentlemen, that opens up for our Q&A session. We will start here in Stockholm. Gustaf?
Thank you very much, Olof. Gustaf Schwerin from Pareto Securities. Two questions from my side. First of all, you mentioned some sort of minor problems in Aitik during the quarter. Is that mainly related to the new crusher and any hiccups there? Is it the normal seasonality pattern we normally see?
I think we've had some teething problem with the new crusher. The main part has been that we had one of the excavators that was down for quite some time that was, say, the major part of the hiccup.
Running smoothly at the moment?
As I said, we're having some teething problem, but I wouldn't say there's anything major around that.
Fair enough. Secondly, on Tara, the grades in this quarter, they were more stable quarter-on-quarter than we've seen maybe in the past year or so. Do you want to comment anything on how we should look at this now going into 2019, especially Q1?
Not really. There's not really any guidance above what we've said. You should always count on the reserve average if we don't say anything else in terms of grades. In terms of productions, yes, we're not quite satisfied with the level. We're working on getting the level up a little bit, and we'll see how quickly we can get that in place.
Thank you.
Johannes.
Thank you. Yes, it's Johannes here at Handelsbanken. Two questions. The first one is on cost inflation. You mentioned here, Håkan, that for the full year, you see 4% cost inflation. Can you elaborate a bit on 2019 and beyond?
If we start with 2018, you're right. If you bring everything together, including salary expenses and so on, we're a bit over 3%. Excluding salaries, personal expenses, we're at about 4% for the totality. Inflation Q4 to Q4 was slightly lower than that, and we're still early in the year. We're not seeing the same pressure year-over-year right now that we saw from last year. It's more normalizing.
Less than 4%, in other words.
If you talk about so far 2019 to so far 2018, yes.
My second question is on CapEx. I appreciate your more detailed comments now on 2019, that half of the SEK 8 billion is maintenance. Could you say anything, just to get a feeling for how we should look into 2020 on the CapEx side? That would be very useful. Thanks.
We welcome you to the Capital Markets Day, but you might not get too much of a flavor there either. We'll talk a little bit about the fact what we can do with the present, what will happen with the present portfolio that we have. As always, we will not be too clear on guiding anything else because we are, of course, also interested in finding more projects.
Can you help us if we should think about 2020 being a lower CapEx year than 2019?
As I said before, if we don't announce anything new, then 2020 will be lower than 2019 for sure.
Thank you.
Christian.
Okay, thank you very much. It's Christian Kopfer from Nordea. A few questions from my side. Firstly, on Aitik, you said you had some problems with the excavators. Still a little bit concerned. You have invested SEK 1 billion in new crushers and steel volumes are down year-over-year in Q4. I guess you want to have a return of 15% or so on that SEK 1 billion. How is it working with the new crushers?
Yeah. I don't know if I can say more than I said before. In general, the new crushers are working well. We've had other issues around, and as I said, the excavator is one thing. Also, the trucking capacity is still not really adjusted to 45 million tons. As you know, we've ordered new trucks as well that are coming in during 2019, which is part of the investment as well. Regarding the crushers, yes, if you understand it rightly, yes, we've had some teething problems. We've had some issues with one of the two crushers that has not been having the kind of availability that we want it to have, but we're not too worried about that as well. That has not really been the bottleneck in the production.
Okay. All in all, if you include, you're investing quite a lot in Aitik with new trucks and crushers. What kind of returns are we talking about on those investments?
That's always a very difficult part to say. The answer is what is Aitik 45 giving compared to what an Aitik 36 would have given, and how much of the investments that are ongoing are actually part of just sustaining the mine. That we can have a long discussion about. Most of the investments are actually about sustaining the mine. The bigger investment, which you don't even mention here, is the whole investment that we're doing into the new extended tailings facilities, which is just for the run of mine that we're doing for the water treatment connected to the run of mine, that we're doing for the new overflow control of the tailings dam, which is also connected to run of mine. Yes, there are big investments going into Aitik. The vast majority of the investments are actually just to keep the operations going.
Okay. On the cost side on Aitik, it seems like the costs have gone up year-over-year, cost per ton. I know you have a lot of problems in 2017. You had a lot of stoppages and a lot of inefficiencies in the mine, and still costs are going up. How is that possible?
To begin with, we've had some maintenance also this year, and the inflation numbers that we just talked about, including energy, for example, and diesel, which is significant for Aitik, is also hitting the Aitik P&L. I think we'll see the full impact. We've been talking about a cost reduction in relation to Aitik 45, and I think it's a bit too early where we stand right now to really see that in the numbers. We still have some way to go until we're at the 45 level.
Expect costs to come down meaningfully per ton or already during in 2019 or?
Well, for sure it'll be down 2020. 2019 is a transitional year.
Okay.
Just to avoid any questions, you talk about ton of ore or ton of metal?
Ton of ore.
Yeah. No, that was done. Yeah.
On smelters, looking at the volumes year-over-year and quarter-over-quarter, I think Q4 2017 was quite bad in the smelters. Still, you had a lot of the process instability and such things. Still volumes were not meaningfully up in the smelters. You said you were happy with the smelters in Q4. You have a negative volume effect quarter-over-quarter. What drove the negative volumes in the smelters?
I think to begin with, one of the reasons that we're happy with the smelting side is, if you recall the slide comparing the full year compared to the previous year. We had a positive impact in the smelting side of roughly half a billion, which is due to more free metals related to recovery, processing, intermediate stocks, et cetera. It's not always a matter of pushing more tons through the system. It's a matter of making more money out of the tons that we put to the system. In that respect, especially in combination in Harjavalta with the nickel business model, yes, we are happy with the results. I think that's the reason to the positive comments.
How is the process stability program going? Because you had a lot of thoughts on that in the previous Capital Markets Day as well.
Yeah. I think that there is an improvement. The process issues we talked about in 2017 was mainly related to the zinc smelters, and we have seen an improvement in both zinc smelters. I think we're on the right track. Is there still potential? Yes, I think there is. We hope to take another step in 2019.
Okay, I will not drag so much on the smelters then. Finally, on the dividends. What was the trigger behind this change in how you measure net debt? Because it has not happened so much on the reclamation cost. It's up SEK 200 million or so year-over-year.
Well, at some stage we've had discussions around the fact that we're having SEK 1.7 billion of debt that we're considering working capital debt. If you come down to a closer point, if nothing else happened, that would rather be SEK 4 billion. Is it responsible to have a dividend policy where you will dividend out money that is actually needed for the reclamation? We've had that discussion for a long time. At some stage, you will have to make a decision, and this year we said it's the right time to include also reclamation debt. That is as much as debt as a pension debt, for example. The pension debt has always been part of the debt calculation. Now, we're not changing the accounting ways of this, but we are changing it for how we are willing to dividend money.
Still seems quite conservative to me. To me, you could easily meet consensus expectations on the dividends. You have very strong balance sheet.
Well, you have to stick to your policy, and we have a policy that is long-term going to be problematic unless you adjust it, and we have decided to adjust it.
Okay, thanks.
I think we have one more question here in Stockholm. Ola Södermark, please.
Yes. Ola Södermark, Kepler Cheuvreux. Just to follow up on Aitik and the production profile for current year. How should we view it quarter-over-quarter? The run rate now is roughly 40 million tons.
Yeah. That should, of course, in some way ramp up a little bit, otherwise we can't make 45 million tons next year, we're not going to be more detailed than that.
Maybe we could comment a bit. You know this well, cold winters typically makes Q1 a bit more difficult compared to the remaining quarters. Other than that, I don't think we should comment any more on the exact quarterly split.
If I guess that roughly flat quarter-over-quarter in Q1 then improve 1 million tons per quarter.
That's a guess.
Okay. One more on Tara Deep. You increased the ore body there from surface drilling. You also said that you are slightly behind the schedule on the contour drift. When can we expect some more information about Tara Deep?
I think that you will have to wait at least another year because the drift is unfortunately behind schedule due to methane gas problems. We are not quite there, and we will not start underground drilling for maybe another year. Then we will continue the surface drilling program, but we're not doing that as intensive as we would from underground, just simply because of the cost. We will see where we get, but of course, we also are quite enthused about the fact that we're approaching this 20 million that we set ourselves. That's a threshold for starting to be able to motivate infrastructure into an area like Tara Deep, and we're heading there. Of course, in parallel with exploration, we are now starting our own discussions about feasibility, but it will take time to develop an asset like this.
As I said before, the kind of timing of a Tara Deep to come into production is much more of a 2026 type of timeline when we are coming to the end of the existing Tara mine.
Okay. Operator, I think that opens up for questions from the web, please.
Thank you. If any participants would like to ask a question, please press zero one on your telephone keypad now. Our first question comes from line of Conor Rowley from Credit Suisse. Please go ahead. Your line is now open.
Hi there. Just two questions on CapEx. The first one on the maintenance CapEx, can you talk a bit about the components of the maintenance shutdowns this year? You mentioned alternating big and small years, so is that the way we should think about it? So, SEK 200 million-ish impact next year and then back to SEK 450 million or so in 2021? Just the second question on your actual CapEx is, can you remind us what the FX component was for the increase this year? Or I guess to put it another way, what 2018 CapEx would've been based on spot FX, to give us an idea of how much that might go away if the currency strengthens into 2020?
On the first one, yes, you could assume that we will have a roughly second year bigger and second year lower. You've seen a low year in 2018, you're seeing a high year in 2019. For lack of anything else, yes, that's a good way to look at it. Now, regarding the FX component of the SEK 6.1 million, if you would've had that FX in the year before, Håkan, do you have a good number?
It was about SEK 300 million FX impact comparing to when the year started.
If you would've had the same conditions for 2018 all the year on FX as we had on January 1, it would have been SEK 5.8.
SEK 5.8, correct.
Okay, thank you.
Thank you. Our next question comes from line of Alain Gabriel from Morgan Stanley. Please go ahead, your line is now open.
Good morning, gentlemen. Two questions from my side. First thing on the copper TCRC. The benchmark is down year-on-year, but spot is up. How should we think about your own realizations if nothing changes from now until year-end? The second question is more bigger picture. If you look at the growth project that you have in the pipeline, 2020 should be your peak production year. Then post that you will have grades mean reversing lower at Aitik and then Kevitsa, which means your production profile will start declining post then. I appreciate you'll be giving more details during the CMD, but can you give us a bit of a teaser about your thinking on the mining business growth post 2020? Thank you.
I'll start with the second one. You're absolutely right that we have declining grades and that will be part of our profile, and we're countering that with the increased production of ore. Regarding potential projects beyond 2020, I don't think we will talk anything about that on the Capital Markets Day because we don't have anything that we are ready to announce at this stage. We will come back to you once we have something that we are ready to talk about. I'll start with that one. Then the other question was on copper TCRC. You're saying that you're seeing the spot TCRCs higher than benchmark right now in the market, and then you question about realization.
This realization is relatively slow for us because we're having, as you know, in the copper business, not only do we have a benchmark, which typically only changes once per year, and it has to be pretty big changes for it to go to six months change. Secondly, we are also working partially with some of our suppliers on the block model, which means that we get an average for several years. The spot levels only impact marginally. We're maybe buying 10% or so of our concentrates on spot terms.
Okay, thank you.
Thank you. Our next question comes from line of Liam Fitzpatrick from Deutsche Bank. Please go ahead. Your line is now open.
Morning. Two questions. Firstly, just on the growth CapEx for 2019, of about SEK 3.5-4 SEK billion . Can you just remind us which of the key projects within that will largely be complete by the end of 2019 or early 2020? The truck fleet comes to mind, but interested if there's anything else outside of that. Secondly, just in terms of Kevitsa grades, there's a dip in 2019. Should we assume a rebound in 2020?
If I start with the second one, unless you get anything other set thing for us, you should Oops! I've got some strange net sound here. You should calculate on getting the reserve average for 2020, which means then a slight rebound. Regarding the big growth projects, there are a couple ones which are a little bit tapering off. To some extent, the trucks, but the trucks are also coming into 2020. We have some other ones of the ongoing projects related to the expansions of both Aitik and related to the expansion of Kevitsa that are coming more to an end, whereas others are flowing over. I think for more details, we will ask you to come to the Capital Markets Day. Now it was all quiet.
Operator, do we have any more questions?
The next question comes from Luke Nelson from JP Morgan. Please go ahead. Your line is now open.
Morning, guys. My first question is just on the dividend. Granted the 20% target's obviously now adjusted for the reclamation liabilities. On my working, that gets you to pro forma gearing around that 20% level. Going back to last year, I think you were willing to take that to 24%. The question is, how should we be thinking about the payment going forward? Is it something that you'll be more closely aligned with that 20% gearing, or is the lower level of payouts on a pro forma basis something around expectations on grade, CapEx or macro outlook? Secondly, just on working capital. Obviously, you mentioned a strong release. Just any indications on how you expect that to progress into Q1 and over 2019. Thank you.
If I can start with the first one. We heard you very poorly, I think you said that last year we were actually going slightly higher than 20% with the old gearing target ratio, if you compare to the balance sheet December 31st, this year we're not really overdoing it. With the new way of measuring, we're maybe at 21%. The answer is that the reason last year was that We saw already in February when we made the recommendation, we already saw that we had a very strong cash flow in Q1. That also then eventually materialized because we were halfway through. That was last year with very high prices and terms and a very good earnings pace.
With the present prices and terms and with the lower grades and everything else, we don't really see that, so we have stuck to the balance sheet out of December 31st. That's that. There was working capital, you can take that, Håkan.
Yeah, working capital. As I mentioned, we had a good development of working capital in Q4 now. That means that inventory levels and working capital in general is lower than average. I think you should expect a rebound in Q1. That's also our typical seasonal pattern that we're typically stronger in Q4 and a bit less so in Q1.
Okay, thank you. Just one final follow-up, if I may, just to begin on the CapEx question. Just trying to get an idea of the potential bridge for 2020 relative to 2019. Can you give a bit more of a granularity of how much of those projects around the trucks and the tailings, which I think is around SEK 2 billion , how much of that will fall into 2020? Then also any indications around project spends that aren't unapproved at the moment. Tara Deep, Boliden Area, anything to do with cobalt, any sort of high-level views on how much capital might be required for those projects. Thank you.
I'm sorry, Luke, I think I'll have to disappoint you on those questions. Number one, regarding new projects, we will not announce anything until we're really there. Some of them we've spoken about with the Rävliden and Tara Deep, but they're still quite a far way out before they will come to any kind of meaningful investment levels. Regarding others, we don't have anything to say right now. Then regarding the profile of individual projects, I will repeat what I said before, we will not go into details here. We will save that for the Capital Markets Day.
Okay, thank you.
Thank you. Our next question comes from line of Amos Fletcher from Barclays. Please go ahead. Your line is now open.
Yeah, morning, gentlemen. I just wanted to ask a quick follow-up on the reclamation liability. You were saying that the liability will increase by SEK 100 million each year going forward. That suggests that you aren't paying out a meaningful amount at the moment. My question is, firstly, when will you start paying out meaningful cash for reclamation? Secondly, what sort of numbers should we assume each year, say over the next five years? Thanks.
Regarding meaningful payments of reclamation, they're pretty far out. The vast majority of our reclamation is linked to the Aitik mine, and the Aitik mine still has 25 years life of mine left, even though there will be some reclamation activities done in parallel that is not coming in the next few years. There are some, if you look into the balance sheet, I think we have about SEK 100 million or so of activities planned for the next 12 months, if you look at what's short and what's long out of this reclamation debt. Yes, we're doing activities all the time, but as we said, this debt is likely to increase for the next foreseeable future. As you know, the gross debt today is about SEK 4 billion.
The net debt is about SEK 1.7 billion, which is in line with the Aitik is the biggest one, has 25 years left, and is then building up to the total.
Okay.
Sorry, maybe I should also add that we are publishing the amounts for the net reclamation liability in the report on page 17. We can track it quarter by quarter and see the trends. As Mikael said, we have increased SEK 100 million compared to last year, and that's roughly the expectation going forward.
Great. Just one quick follow-up I was going to ask, are you tempted to hedge any of your Swedish krona exposure at current levels?
No. Sorry for answering so very quickly, but number one, we have a very clear thing that if we're going to hedge, we will hedge both metal and currency exposure at the same time. Just hedging one leg will always get you into trouble. Secondly, will we do that? No, normally not really. We only do those kind of strategic hedges when we feel that the balance sheet is under very big constraint. Even though we have a very big investment year in 2019, it is not of that kind of level that it's jeopardizing the integrity of the company, and therefore, we're unlikely to do strategic hedges because of the investments that we're doing right now.
Okay. Very clear. Thank you.
Thank you. As there appear to be no further questions, I return the conference to you.
Well said.
Well, ladies and gentlemen, thanks for joining us. That concludes our Q4 and full year 2018 presentation. Once again, if you haven't signed up for our Capital Markets Day, please do so. You're more than welcome. Thank you very much.