Good morning, and a warm welcome to all of you here in Stockholm, and also to those following us on the webcast. I'm so pleased to see so many interested in Boliden's story. My name is Sophie Arnius, and I'm Head of Investor Relations, and today will also be your moderator. We have a full day ahead with us, starting with presentations from our executive management, before heading off to Kevitsa in Northern Finland to look around our newest mine and see what we are doing to achieve 9 million tons by 2020. Looking at the agenda, you can see there are two clear themes for this year's CMD. Firstly, in an increasingly volatile world, Boliden's consistent and balanced strategy has delivered one of the highest levels of total shareholder return in the industry over the last couple of years.
Secondly, with our strategy of embracing some of the smartest technologies available, we have achieved even higher levels of operational excellence across our mines and smelters. We firmly believe that the focus on technology, some of it controlled by smart tablets like this one, is important to stay competitive. Of course, there will be opportunities for you to ask questions, both from our audience here in Stockholm as well as via the web. Finally, a brief word on safety. If we need to evacuate, you have the emergency exits located behind you and also in that direction. Assembly point is just outside the entrance from Gävleg atan. Now, let's get started with a deeper look on how we are delivering value through operational excellence. It's a great pleasure to welcome our CEO and President, Lennart Evrell, onto stage. Please, Lennart.
Thank you. Welcome, everybody. Great pleasure to have you here. Last time we met, it was over a year ago. We had just been buying Kevitsa. $700 million paid, or we hadn't paid it at that time, but we had announced it. $700 million for a loss-maker. Copper was $4,500. Nickel was $8,500. Many were asking, "Are you sure this is a good deal?" We're going to visit Kevitsa obviously today or tomorrow, and we hope that you will like what we did with your money. You all know what Boliden is about, so just to take a short repeat. We are a base metals company. We are doing also precious metals, and they are very important because you're balancing sometimes the base metals. Mines and smelters, I will show on a later slide, are balancing each other very well.
Technology and responsibility we showed upstairs, and we think for a high-cost country and our profile, it's natural and important for us to take a leading role there. Our goal is to be a leader in our industry. We have chosen not to say shareholder value. We have chosen not to talk too much about different individual stakeholders. We are so dependent on shareholders, on employees, on politicians, on suppliers. We had a procurement conference yesterday with 200 people supplying us a lot of equipment, but also technology. We call it the cluster. This is very important. We would like to be good in value creation, environmental performance, and social responsibility. Thomas will take us through this later. The strategy, we sometimes say creep, walk, run, do the simple things first, is a fundamental. We are capital intense.
If we can train our crews to maximize, really excel in what we have, it's not a bad idea to grow or to spend the huge capital normally needed, because we're going to most probably excel also with new things. If we are saying the grass is greener on the other side, we're just doing so-so, and we spend SEK 1 billion on something, we're going for sure to be so-so also with new things. That is not the way to run a capital intense business. We take an enormous pride and responsibility in the huge capital we manage. My presentation will start about cycles. I think there are some new things. We spend a lot of time on thinking about the volatility of prices, and of course, that has a major impact. On cycles, we can start to look at the fundamentals on the demand side. Nothing new here.
Basically, base metals are used for growing growth or improved standard of living, basically in poorer countries. We see an acceleration when the wealth is going from extreme poverty up to SEK 5,000 per capita on the lower line. Then we see an acceleration in metal demand. In this case, it's kilo copper per capita. We also can see that when the standard of living is good, we don't need so much more infrastructure. It has already been built. The cities have been built, the trains and airports and whatever, the power systems, and therefore, we see a clear leveling off of the demand. This is the pattern and explains why if we look at today's development, the industrial production, you see the global, the world there. The world is good now. The demand for industry in general is good.
However, if we look at our two largest segments, it's construction. Well, the explosive expansion of infrastructure in China is leveling off and has an impact on the total construction market. If we look at the transport sector, which is the second-largest part of demand of base metals, we see low growth this year. Despite very good economy, our biggest segments are not growing as much as they should. Still, we are enjoying good metal prices. What is that then? Well, we think that technology is probably on the way to change this traditional pattern. Today, we know that new sort of energy systems, in a future, we're going to see electric cars. I think also the old world will start to drive growth of base metals. This has not been the case for 50 years. This is a new situation.
The old world will probably be more important going forward, also impacting the metal mix perhaps. That we invested in nickel, not a bad idea, considering nickel is about a third of a lithium battery. The other thirds are cobalt and lithium, and Mikael will talk a little bit about the cobalt we have in Finland. If we then look at the prices. We have the volatilities here the 10 past years, we see the minimum prices and the average for each of the years, you see the horizontal lines. They are showing the cost level of the industry. The higher line is a 90th percentiles, 90% are making a positive EBITDA and 10% negative EBITDA, the lowest line is 50th percentile. In other words, half the industry is going with EBITDA profit and half with EBITDA loss.
We can see that there has been a very strong correlation cycle after cycle. We can go 20, 30, 40 years, in particular in copper, where we have very long history. We can see that the turning points are typically there. That's where the mines are pulling out and are put in care and maintenance. When the prices are going very high after a number of years, investments, which are fueled, of course, by the high prices, will come in production. We suggest probably that these cycles will probably change. Probably also going forward, the supply side of the cyclicality is probably more important than the quite stable demand. What will happen with the future cycles? The traditional fundamentals in capital-intensity industry, like we're cyclical, no pricing power for the companies, commodities, that's the same. The future may be different.
We have longer lead times for expansions. That's very evident where we are. Permitting is our biggest issue and has been. We're really pumping the politicians in the countries we are that permitting have to be faster, more sort of understandable processes, and appeals have to be swifter and faster. Longer lead times for permitting, but also for the fact that capital-intensity is increasing. We spend even more money on automation and on capital-intense things. More capital, longer lead time, longer permitting, longer lead times. Price peak will probably, we suggest, therefore, probably be higher, and the times of high price will probably be longer. Certainly today, when the prices are good, we hope that it stays like this for quite some time. I think this is quite interesting.
On the other hand, the downside and the bottoms, the floors, will probably continue to be as they have always been. You take mines and smelters into care and maintenance. That's taking a couple of months. You have to plan for it for quite long times because the start and stop is costly. I think the downside will look the same as before, but the cycle will probably be longer. What do we do in a situation like this, or what will be the through-cycle sort of strategies? We have to have the dynamics in close to our hearts here. First of all, to correlate, to look at the negative correlations, to have precious metals balancing base metals, to have smelters balancing mines. All of these correlations we are looking at, even if they're small, we're careful.
What is energy normally doing in different times and so on? It's important to keep that in-house, to do streaming contracts and sell the gold because you get a better price-earnings ratio, I think is a small gain compared to the value of stability in this very volatile industry. Scenario planning. We work with floor prices. We work with stress tests. When we buy Kevitsa, for example, we see we could have been hedging some of the metals to ensure our financial stability, even in bad times. We didn't think it was necessary. With our planning model, we were strong enough, and we could absorb the $700 million. CapEx planning is something else, of course. Financial planning, how we work with the banks on the debt side. Dividend policy is very adapted. We never try to have a constant dividend. Many companies try.
We said at an early point, "No, we're not going to do that." Shareholders should support. In the bad times, everybody has to hold back. Bonus schemes, we have special clauses. When times are bad, it doesn't matter if we are performing well as management, no bonuses. Everything we do is to cover the downside, because that's where the value can be created. Our planning model is, of course, net present value. Very important, and that is always our number 1 metrics on what we do. Does it necessarily give the maximum value? No, not at all. It's a good first proxy. If we just go straight on the NPV, well, we lose the dynamics here, which I think is the big difference between, for example, us and some of the less successful companies.
Unrealistic capacity plans, holding capacity to the last moment, do it only when necessary and not a minute before is a bad idea. To do it when money is available, when we're strong, and have a chance to probably go for 6 months with very small development and pushbacks is a much better value creation over the cycles. Value destruction at recessions is a number 1 value parameter, I think, in this industry. We are all making money, making good value in the good times. Much of that value is destroyed in this industry in the bad times. Value destruction in bad times, very important. Stability. If we are doing this right, we can also be having a better visibility for shareholders. More people will understand what we're doing. What we are doing, smelters and mines, I think it is a great combination.
Some years back, or quite many years back, it was suggested to sell off the mines or the smelters, I think it's a bad idea. We have good synergies, for this reason also very good. Based on precious operational excellence, industry-adapted dividend policy, as I said. If we look at the past 10 years, we have smelters and mines here. Actually, of course, with China's growth, it has been a decade of mining, no doubt. Six of the 10 years, mines have been making a bigger profit than smelters. Three of the years, smelters have been having higher profits than mines. Last year it was same. If we leave that and go back to the strategy again. Well, creep, walk, run. I explained that in the beginning. That's really what we try to do. Don't expand until we're really good in what we're doing.
I think that the number 1 boulder or step, stable and efficient operations, it has to do with people and technology. We have seen upstairs how we apply modern technology, we think the mix with people or how the technology can be used with people. Here I have Garpenberg online. It is not to be online and have mobile solutions for me, obviously, but it is for the people to connect and be engaged and not needing management time. Solve things where we are and with the people most involved. Decentralized organizations is something that we have by tradition in Scandinavia. Many countries and many places, capital-intense companies also here, for that matter, are very top-heavy and top-down managed. They will never get the benefits of things like this compared to what we have.
Big data to the few who already have too much is not necessarily a good thing. How we do this is very much with what we call New Boliden Way, our lean management system. To the right, we work with technology and other things. It's a checklist of what we're doing in the different operations, 28 areas. We work with areas which are the most appropriate for the situation in the different places. To the left, we have more the people side of it, who we are, and we have similar to many companies. Let's have a look at the three in the middle, passion for improvement and personal commitment and value chain. Here, Jenny Forsberg is very passionate at work. I've been on meetings with her. She is really leading her operators in a way which is she is living the values.
Personal commitment. If you look at our new managers, I think the eyes there is a good symbol of what we mean with that. This is a very different one. Lego toys. A lot of people in the value chain discussing now how is modern technology going to impact. In the end of the day, the visibility, the visible flow, and down to earth with people in the middle. The technology is to support the people. This is a true picture of something. I don't even know where it is. Thomas, do you know where it is?
No.
Somewhere. They're working with a value chain and who is doing what and how. High tech, very traditional. As a result, excellence is always important, but in particular, immature. To excel with old equipment, this is the concentrator in Boliden. I think this is probably the best picture of value creation. Of course, there is the mix of making the least transparent of the least transparent industrial situations. It's an underground mine. To open up and create transparency here, it's a great move forward, and we're going to develop this for quite some time. The final thing I will talk about is Nickel Finland. We started 2010 to look at our strategy. We had an exclusive arrangement with a large nickel company, and it was not until 2015 we decided to build our own business on nickel.
It was followed by a new view on nickel for Boliden. The geology in Finland, it is very much nickel there. We had to develop this, we thought, and the continued development in the smelters were good. We bought Kevitsa. The synergies came in there, and the EBIT improvement compared in the period is SEK 1 billion, and we spent about $800 million, most of it on the acquisition, but also a lot on renovating Harjavalta. The acquisition in Kevitsa, we're obviously going there. We did the first year owning it. We did 13,000 tons of nickel and 26 copper, and we did an earnings of EUR 53 million compared to a year earlier when the mine was doing a minus or a loss of EUR 22. I think we are very proud of the development we have had. We are focusing on all the stakeholders.
We have been running excellence, and we have in total shareholder return. On one year, we're in the middle, but on three and five years, we are the leader in this peer group. With that, I will hand over to next presentation.
Yes. Thank you, Lennart.
Thank you.
As you know, corporate responsibility is part of our DNA across the organization. Our next speaker, Thomas Söderqvist, will describe more what we are doing within sustainability, especially focusing on the environmental side.
Thank you. Thank you, Sophie. I will focus on one aspect of our three pillars of sustainability, that is environment there. I would like to start first by saying a few words about the other pillars also. The social responsibility, what can possibly be more important to us than not to hurt or negatively affect the health of our employees? How are we doing on that? Well, the KPI, the key performance indicator that we're using there is called LTI, Lost Time Injury Frequency Rate. That is the number of accidents that occur in the operations that lead to a day off from work additional to the day when the accident happened, actually. We divide that by 1 million then to get a reasonable number of that. That's normally what is used around the world.
Our frequency is 7.7, a little bit marginally down from last year, actually. In Nordic conditions, that's kind of an average number, I would say. If you compare to peers like BHP and others around the world, it's actually not a good number. We have looked at what they're doing. Our solutions to attack that situation is to work on the culture of the organization, trying to get people more aware of the risks and be more engaged themselves. We also looked at others. What are they doing that we're not doing? We put on some pretty stringent, now mandatory things to be done in the next few months. Another pillar there is economy. How do we affect the society in the places, in the countries where we work? Actually, 1 employee in Boliden creates roughly 4 additional jobs.
Being a little bit more than 5,000 employees, we create something like 25,000 jobs in Sweden, Finland, Norway, and Ireland. 1.8 of those additional are contractors, suppliers working for us, and so on, and 2.2 are what is called induced jobs. That means that there's nurses needed, teachers needed to teach the children of our employees in Sodankylä, which we will pass tomorrow. That rates up to 2.2. Sodankylä is a good example, perhaps, because we are active in less densely populated area. You who follow us there will definitely sign on that one. We are a very important employer in these areas of the countries where we are.
I'm going to say that also that the vast majority of our employees actually live close to the operations. We checked that in Sweden. We found that together with LKAB and Lundin Mining, over 90% actually live very close. There is a myth saying that mining jobs don't create any local jobs. They're just fly in, fly out, and that's false actually in these countries. Over to environment. I've said something about metals being part of the solution, whether you want to solve and build the situation in many countries where you don't have a good infrastructure, where you have many poor people and so on. Or if you in countries like ours want to move towards a more sustainable environmental situation, metals are needed there. We are of course, also working on reducing our impact when producing those metals.
It's important to state though, that we want to have our own agenda when doing that. We don't want to be driven by authorities changing the permit limits for emissions or discharges or whatever it is. We want to run the operations as we see fit because nobody knows our operations better than we do. Some key performance indicators. Metal emissions are down 20% in the last 10 years. That's a mix between emissions to air and discharges to water, and I will get back to that in the next few slides. SO2 emissions are down 14%. CO2 intensity, and intensity in this case is ton CO2 emitted per ton metal produced. We're not improving there, and that's something that we will have to act upon.
When going back 10 years comparing to today, we can see that our environmental investments have increased, and our forecast is that they will continue to increase. We think it's very important that we find a way to evaluate those investments so that Boliden and the environment sort of gets a bang for the buck here. That we don't spend on something that actually has no positive effect on the environment. We start with metals to air. The first pie chart there is just kilograms of metal. The other one, we recalculated that with a formula into how toxic, what is the worst toxic material. You can see there, we should focus our efforts on arsenic and lead. I should say that also this is Did I disappear? It changed. We should focus on arsenic and lead, and this is a question about copper smelters. We are.
We just, last board meeting, a decision was taken about changing a filter at the Rönnskär smelter that will reduce the lead emissions to air. There will be more like that coming also in Harjavalta and Rönnskär. Over to water. You see that zinc is by the far the biggest metal that we discharge to water. But where we really should focus together with mercury then is arsenic, lead, and copper, because they are the ones who create the most toxicity in the recipients. Here's one case where we really focused on that. This is a new water treatment plant at the Rönnskär smelter. We invested SEK 150 million, reduced the metal emissions by 2.7 tons of metal equivalents per year. As you see, it was precisely those three that I mentioned, copper, lead, and arsenic.
SEK 58,000 per kilogram metal equivalent per year was sort of a efficiency of that investment. Compare that to the other one there, which is about 80 kilometers away from there. It's a mine. The mine water had to be cleaned before we send it out to the Skellefte River. SEK 35 million spent, only 70 kilos of metal equivalent, and it was basically zinc. It's SEK half a million per kilo of metal equivalent. By doing this on all these kind of investment, we are building up a knowledge about what is really a good environmental investment and what is not, so that we can hold a better dialogue with authorities. We want to discuss with other mining companies, of course, see if we can get them interested in this way of looking at it also. We're talking to certain consultants also. CO2 emissions.
Well, first of all, we look at two scopes. We get CO2 emissions in two ways. The first one is when we fill up a truck at Aitik and drives that truck, the diesel engine exhausts CO2. When we add coal and coke into a smelting process, that emits also CO2. The second one is when we plug in and we get electricity from the grid. Depending on which country it is and what profile that country have for producing their electricity, we get an emission factor that we calculate then. Like Norway has a lot of hydropower, very low emission factor. Sweden, a little bit higher, Finland even higher, Ireland is quite high. Quite high, I said, but not that high, to be frank. They have liquid natural gas. Other countries like Australia have mainly coal. That's way higher.
You can see here that the mines are quite competitive in that respect. What we're doing to decrease this now is, for instance, in Aitik we have taken a decision about putting it's called pantographs. You know what the train has on top to bring electricity down to drive the train. We're putting that on four trucks in Aitik, so when they go uphill towards the waste rock dump, they will go on electricity, and the diesel engine will idle. It's when they go uphill that they of course consume most diesel. In the underground mines, we're looking also to electrify. The strategy here is to electrify. For instance, we're already buying now from both our main suppliers, Atlas Copco and Sandvik, battery-driven drill rigs. Next year we're also going to test a battery-driven loader for underground purposes. There's actually no diesel engine on it.
Instead, where the diesel engine used to be, there's a big battery there. Batteries is important. I'll be back to that one. Looking at the smelters, you can see that CO2 emissions is basically a copper smelter issue. We are adding coal and coke to reduce this oxygen content in the melted material, and that is what creates the CO2 emissions. When looking forward, I'm sure Kerstin is going to talk about that later on, one of our challenges when it comes to the environment and smelters is to actually productify as much as possible. It's not like iron, where you send in iron pellets, and it's basically iron that you send in.
When you send in the concentrate, there's a lot of other metals, we want to have a sellable product of as much as possible, partly because of economic reasons, also to reduce waste from the operations. Some of the processes here are actually in contradiction to reducing CO2. We're looking at certain processes that actually could raise the CO2, then it's very important to be able to evaluate that also, what is best for the environment. We have a very strong position in recycling. We're part of the circular economy here. Electronics, we have one of the biggest smelters for electronic components at Rönnskär. Components from computers, mobile phones, et cetera. The metal content is recycled here. This is also a source for CO2, by the way.
It will continue being that, because these layers of plastic and metallics are so thin that you can't separate them before smelting, so they will emit some CO2. A place where we can separate plastic from the lead that is re-smelted there is at Bergsöe. We're right now investing in a separation plant that will separate the plastic from the lead of the car batteries or whatever we're melting there. That will give us a sellable product in form of plastics, and it will also reduce the CO2 emissions by 20%-25% from that smelter. Going forward, I am convinced we are considered one of the most sustainable mining companies. When we apply our MBV concept with the operational excellence also in this field, I am convinced that we will maintain or perhaps even enhance that situation. Thank you, Thomas.
Thank you, Thomas. We will open up for questions. Please wait for the microphone and then state your name and institution. We will also open up for questions from our audience via the web. Please post your question. Do we have any questions from the audience here in Stockholm? No questions. Yes, we have one question here.
Thank you very much. For that you talked about the synergies between smelters and mines. You have talked about that for several years, I think. Can you also quantify this time, how much all these synergies are? Is it only soft or is it also hard synergies?
We know we have a very clear grip on it. One of the better synergies is between Harjavalta and Kevitsa. We don't like to disclose them, because that is one of the numbers which will make sort of the contacts with different vendors of concentrates to us sort of more complicated. This is an area where we choose not to talk about them, but they are quite important, and I think that you will get a lot of examples of that in Kerstin's presentation. Not the numbers, though.
With regards to the synergies between Kevitsa and Harjavalta, have those synergies been realized in full?
Yes.
Okay, thanks.
Thank you. We also have one question from Jatinder. There is a microphone on the way.
Good morning. Jatinder Gill from Citi. On your strategy on mining and smelting, you're non-smelting currently at the moment. Do you see any value in full integration so that you're not exposed to a shortfall of any potential concentrate and also no exposure to TC market movements or market structure changes, which could be a potential outcome in the end?
No.
Do you feel the need to be more integrated on either of the commodities? Thank you.
No, we don't think so. Today, one of the reasons was in my presentation here when I'm looking at the balancing factors. Smelters are having bigger sales but smaller margins. If we have the same tonnage mining and smelting, the whole business will be totally weighted over to the mines, which are more capital intense, higher margin. If you want to have a balancing factor, you have to have a lot more smelting capacity than mining capacity. That is not the real reason. The real reason is it is very favorable for smelting to have a base load internal and to do what Kerstin will talk about, to be active in buying low-priced difficult material in the market. If you are only relying on external suppliers, that is a very risky business to be in because the low price is for a reason.
I think a base load with an opportunity to shop around, if you like. We do long-term contracts, that is, to us, a very ideal mix. Bigger smelter than miners, both for stability and for the business concept of the smelter. Favorable.
Thank you.
Yes, we have one question from Oskar Lindström. Let's see.
Oskar Lindström from Danske Bank. The decision to move into nickel, when was that taken, and could you consider other metals as well?
It came gradually. I think we are Finland and Sweden to a large extent. We didn't have mines in Finland at the time, and I think geologically it's probably a more favorable place to be mining, probably in Finland than in Sweden. We looked at Finland. In Finland there was copper, some gold, but everything included nickel. We didn't like nickel. It's not very visible or visibility is low, volatility is high. It's not a very attractive metal as such. For us, we said we have to start to like this metal because we're in it in Harjavalta, but only in this cooperation setup. If we want to do mining in Finland, we're going to be there.
Then we started to learn, and then we started to develop, and then gradually we decided to go separate with Harjavalta, and then we bought Kevitsa, and before then Kylylahti, both including nickel. That was kind of natural. Of course, we're going to look cobalt. There is cobalt in Finland, and we have it in our minds. This is nothing we're going to change the strategy on. It's a small but an interesting byproduct. I think we are going to stay with the metals we have today.
Thank you.
We have a question from the web, it's for Thomas. It's where will you prioritize your attention when it comes to sustainability going forward?
Well, our first, absolutely most important priority there is to reduce the number of people who are getting injured at our facilities. Absolutely, the biggest focus will be there. second to that, I think we need to reduce the emissions to air and CO2.
We have a question I see here from, if we can have a microphone to Johannes, please.
Hello, it's Johannes Krisellis here, Handelsbanken. You touched upon that you have some small volumes of cobalt, and I know from the production report that you have cobalt in Kevitsa, and the price have gone through the roof there on cobalt. Could you maybe say something about the profits from cobalt? Do you get full paid for cobalt in the payable terms at this point?
I think we leave that for Kerstin's and Mika's presentations. It's not a big thing right now with long-term prices. We have too expensive processes to deliver any profits. Today, starts to be somewhat interesting. Would it continue up? It will be interesting.
Just a second question, please. On the CapEx that you revealed today for 2018, maybe we'll go into the details later, is there anything new on that CapEx, some new growth CapEx? What's some details there, please?
You are asking the questions too early.
Okay.
Let's take it later.
We're coming back on that. Yeah.
Let's have a question then from Olof also.
Olof Grenmark, ABG Sundal Collier. You have a slide here with a strong position in recycling, and as you described, would it be possible to quantify what you mean by that versus your peers and maybe some kind of quantification what you earn from recycling as of today?
Well, when we built the plant, the Kaldo plant in Örnsköldsvik, it was the biggest in the world, we became the biggest recycler of electronics in the world. Now we are seeing one or two Japanese, we don't know exactly where they are. They have been growing to similar size as we are. On the profit, we're making good money. The rumors and the truth is that the value of metals in electronics is going down, we are paid To a large extent, a TC price for the process and free metals. We're having a very good business, which links together with the rest of our processes. It's good.
We have time for one more question. Daniel. We have a microphone on the way.
Good morning. Thanks very much. Daniel Major from UBS . Just one quick question on capital allocation. You mentioned briefly your metal exposure. There have been reports recently that industrial end users, for example, car firms or battery producers, are thinking about partnering up with mining firms on projects to secure volumes. Is this something which would be interesting for Boliden, or is this something you're discussing already?
Could be interesting. Yeah, could be interesting, I would say. If we have Volkswagen or people listening to our Capital Market Day, well yeah, absolutely. We have some, we could probably consider doing some kind of a deal there.
Thank you, Thomas and Lennart.
Thank you.
Continuing on the theme of operational excellence, our next speaker, Mikael Staffas, President of Boliden Mines, will now take us through a couple of examples where we're increasing capacity, and also how we're using our technical know-how to improve performance. Mikael, please.
Thank you, Sophie. It is also for me quite a difference standing here today than it was standing here 18 months ago when we had the last Capital Market Day. As Lennart pointed out, we had just made the acquisition of Kevitsa. We had not yet closed the deal. That was still two months out. We had just published, I think a month earlier, the fourth quarter result that was barely a break even for the business area mines in total. With that, the $700 million investment. Also, by the way, which we should not forget, and I'll come back to that, we're also taking on an investment that we knew was going to take more investment because Kevitsa was in early stages of its stripping, and we would have to take that on. It's of course a difference today.
I was going to say also that on top of that, we had a due diligence plan. We felt good about the due diligence plan, but a plan is only a plan. Today I feel much better about that plan has actually materialized. I'll come back to all of that, and a little bit more, today it feels much better. Today I will talk about basically two things. I will go through some of the things that we're doing generally and where we feel that we have our knowledge and where our knowledge makes a difference in what we're doing. Then I will go through all the individual assets that we have and talk about the different challenges and opportunities that we do have there. First, a little bit just reflecting on the year.
As I said, I feel much better standing here today than I did standing here 18 months ago. Maybe that's not so strange. We've had an extremely good year. We've had profits that are probably tripling what they were last year, the year before that, back in 2015, they were close to zero. That is, of course, very much due to favorable metal prices and terms that we can't really do much about, but of course, we can enjoy a sunny day just like everybody else can do. We have, though, where we do affect ourselves, we have been increasing production and increasing production in our main facilities in Aitik and now in Kevitsa, which is a large asset that we have and which we are proud of we've done.
Also, we do have high grades, this is something that I'll come back to towards the end because there's sort of flip sides of that. In this stage, today, it's been, of course, an advantage that we've been mining above the reserve average that we have in some of the major reserves or the major mines that we have, both in Aitik and in Garpenberg and in Kevitsa. Another thing that's been happening lately is linked to a little bit more volatility, I think that some of you have been a little bit surprised, both positively in Q2 and maybe negatively in Q3 regarding our profit level. What has happened is that maintenance, which is nothing new, we've always done maintenance, has started to become a bigger issue. Why is it becoming a bigger issue?
Well, when you have low prices and terms and you don't really make much money, then having a relining stop in the middle does not affect your EBIT so much because, one, you're having the relining stop. You continue to produce ore. You put the ore into storage, and you do that at a cost. When you don't have so much margin, that cost is similar to what you get for the finished product. Now when you have high prices and terms, then of course there's a big difference between the cost and the price you're achieving, then it's suddenly so much more important to get the product out. Then when you have a maintenance stop and building up ore inventory, that really shows in your P&L.
If we go through here, you can see through different quarters how the numbers of days that we stood for relining, which is the major planned maintenance that we do, how that changes between quarters. You can see there's not really this here. There's not really any seasonal pattern in it. It goes a bit up and down. It's also difficult for me to give you a good long-term guiding on how this will affect, because we always check. Even though we might have a budget to do a maintenance stop in June, we will check in May whether it can do it until July or until August, and then we will postpone. Sometimes we will take it earlier. That will vary over time, and we will not know exactly when this happens, but it will continue to vary.
As you can see here, the fact that we think we said to everybody, we had a very good run in Q2, where you could see that easily, we only had 11 day stop for relining. Then in Q3, we had 44 days relining altogether, was, by the way, affecting all the six units. Before you start doing too much math on this, I should also say that a day is not the same everywhere, so you can't really say that an average day costs something because they're different. It just gives you an indication. I'm also giving a little bit of a guidance for Q4, that Q4 should be more of an average. It's not going to be another Q2, it's not going to be another Q3, it'll be somewhere in the middle.
We will see how we go forward, whether we should start guiding a little bit more, but that will in that case be quarter by quarter, because long term, it will be more difficult to give guidance. Talk about what we do and what we feel that we do well. I think many of you have seen this exhibit before many times. It measures the productivity that we have going up the Y-axis and the size going to the X-axis, and it shows where Aitik is when you look in terms of open pit copper mines in the world, and it shows where Garpenberg is when you look at underground zinc mines in the world. Nothing new to many of you who've been around here. You see that these two assets, however you talk about it, they're world-class assets. We see that.
Everybody, or basically almost everybody around the world wants to come and visit these assets, which we are, to some extent happily to do, and to some extent maybe not so happy. It depends on who they are. The question is, why have we achieved this? Specifically, we have done very different things. What we have done in all things is that we've used our own engineering capability, and I'll take the Aitik example first. We've used our own engineering capability to do what is best for the particular asset that we have, the specific situation with the mineralogy and so on. If you take the Aitik example, what is characteristic here? Everybody knows we have low grade. That's a bad thing. We have a couple of good things as well.
We have an ore that is relatively easy to grind, and it can be grind relatively easily using autogenous grinding. That means that normally when people use autogenous grinding, and we'll talk more about that regarding Kevitsa, you typically need to do crushing in several stages because you need to make sure that you get the fraction sizes to fit for autogenous grinding. In Aitik, we are happy or lucky that we can do that in only 1 step crushing. That is not so easy, and as you can see, it's easy we can do that. It of course takes lots of detailed calculations to put that together. We do it in 1 step crushing, not in several stages, which means that we don't have to store ore anywhere. We just take it once into the crusher.
We can use very efficient conveyor systems because we don't have to move it around and we don't have to sort the ore or anything. By doing this, we've gotten a really low cost structure, how we handle this ore, by using that fundamental positive that we have. By getting the low cost, we also use another fundamental here, which is that there's lots of what you can call marginal ore that now can qualify as ore, which means that we get a lower stripping ratio. The stripping ratio is also low. That is not necessarily wouldn't have had to been there. Had we had a not such an efficient process, we would have had a higher cutoff, we would have much higher stripping ratio, and the whole fundamentals of the Aitik operation will be totally different. That's what we've done. We've done that.
It was think quite a lot of nerves in setting up the concentrator the way it is and the crushing system the way it is. You know that we've had issues with the crushers. I'll come back and talk about them. It hasn't been about the setup as such and how is to use the mineralization the best. It's been more mechanical issues regarding the crushers that we'll talk about. As this concept and as a setup, it has worked very well. In Garpenberg, which is the other case, we used other things that are fundamental. In Garpenberg, once again, the grades are not that great. They may be more average in terms of looking at zinc mines. We do have one advantage. The ore body is standing straight, standing straight up. We've used this advantage to put in a shaft very close to it.
By putting in the shaft very close to it and the way that we planned the mine around it, we managed to be at very short driving distances. By using the open stoping mining method, which is not unique, the way we twisted it is very well fit to this particular ore body. By using that, the short distances, getting it into the crusher system and getting it up, getting it into a mill, which is once again designed specifically for this. Once again, autogenous grinding fits very well with the crushing way that we're doing it there. We can actually do autogenous grinding there as well without having to have a second or third crusher.
We can do it only in one crusher step, which is something that maybe not everybody would dare to do when they set up a new mine, but we did it, and it's working very well. We have a more complicated mill as such, because here we have to separate into four different concentrates in order to get the full value out of the ore, as opposed to in Aitik, where we have used an even one more advantage. We're just doing it everything into one product and one concentrate and can then keep the cost down even further. That's a little bit underpinning what we're doing, and when we start to talk about Kevitsa, and we'll talk about it in a while, that's a mine that we did not design.
That's a mine that we have bought and we've inherited, but we're trying to do the best of it. There are other levers. They're not going to be copies of Aitik, nor copies of Garpenberg. We're using the specifics there, and I'll talk more about that once we come to talk about Kevitsa. What's the basis for this? The basis is that we feel that we have a strong technological know-how that we've built over many years. Maybe this is not in terms of what IP we can say that we have in terms of what we've built with our own R&D. That is not the main thing. The main thing is that we have a good understanding of what we need, we have a good understanding of what is available, and thus we can use it. How have we gotten there?
We used to put up similar slides to this one, where we talk about the cluster, the Scandinavian mining cluster as such. This cluster has been very good for us, and I think we have been good for the cluster as well. We have in Scandinavia, in mining and in mineralogy, very big world-leading institutions, and they have proven to be quite happy to spend their R&D money in our mines. We've been really good at giving them good chances. We've also worked very hard on making sure that we can be trustworthy, making sure that data from one company will not lead to their competitor, who might be in another Boliden mine doing similar type of setups. We worked around that to get this virtuous circle going where they get to develop products that we then can be an early adopter.
We can buy some of them early. Thomas gave some examples before about some of the products and some of the projects that we're doing where we feel we're early adapters. He spoke about that we're getting battery-powered vehicles in that's been partially developed in our mine. He spoke that we're right now together with some other guys doing trial tests around what we call trolley assist or electric trolleys. We're putting in four big Cat trucks with electricity take down, and we're having a 700-meter test line up one of the waste rock dumps, and we will see how that will going to work out. If that works out fine, we will see much more of that because it's an important part of cost saving as we go forward.
Lennart spoke about some of the examples we have more on the milling side, where we've gotten the information much closer to the operator. I will give another example just to sense what we're doing. Once again, this is not unique and it's not our IP, but just to have a sense of what can be done. Just to get the background of this, I often ask the question, what is the most thing that we produce in an underground mine that we take up to the surface? People start talking, and it takes a while. The true answer is air. The weight of the air that you take out from ventilation in an underground mine is typically much heavier than either the waste rock or the ore that you're taking up.
This is a big operation of ventilating a modern mine to keep the good working conditions down underground. What we've done here with ventilation on demand is smart ventilation. We know where everybody is, people. We know where all the machines that cause exhausts are, and we can then steer the ventilation to where it's needed and not everywhere. By taking where it's needed, we will save OpEx, and in this case, you can see that we saved 50% on the energy in Kankberg, which is a small mine, but we have to start somewhere.
In the longer run, you'll also save on investments because you don't need to do new ventilation shafts as often as you would otherwise, since we can be smarter about how we use ventilation and still having exactly the same air quality for the people underground who are the ones who are depending on having good air quality. Moving over and talking more about the specific things around the individual assets. As I do that, I will actually start talking about something that goes across all assets, which is a social license to operate. This has always been an important topic for all of us. We've been working on this topic for many years, and we're working even harder now because it is an area where we need to focus even more. How do we do this? We do have a strong in-house competence.
It doesn't mean that we don't use consultants. Yes, we use consultants as well, but mainly we have the in-house competence around this, and it's around the key areas, around environment, stakeholder contacts, and around permitting. Permitting is both an engineering, both an environmental part, but it's also a legal part around this, and we can manage these processes well in-house. We do have a good environmental performance. Thomas spoke a little bit about it before, and we can give many more examples. I feel that, as I usually say, we can be tested and we can be tried, and we are not ashamed of showing anything that we're doing. Feel very good about that. We're also spending some money taking care of history. One project that's been pretty well renowned is the Stekenjokk dam.
This is a mine that was decommissioned, I think, 30 years ago, where the old dam has proven to not be fully up to the standards we want it to. We have spent about SEK 100 million to revamp this dam up to a quality that should be standing there until the next ice age. That's, of course, what we want to have with all of our closed mine sites. As you also probably know, we have about 30 mine sites that we're responsible for, closed mine sites. These mine sites, some of them were decommissioned back in the '70s and back in the '80s with the technology that back then was considered to be good enough, and that we today know is not good enough, and that we need to work on and that we'll need to come back with.
Dialogue with stakeholder is very important. As you also know, we'll get to that in Aitik. We are right now moving two villages in Aitik. It's quite important for those villagers that live there that they have a good dialogue with us. This thing has been working, I would say, relatively well, even though we're not through the process yet. We need to continue working on it. We feel good about our dialogue and the dialogues that we do have, even though they're not always easy. Last point is something that Lennart already spoke about. The regulatory framework, especially in the Swedish context, is tricky right now. It is not as good as we would like it to be, and we're working together with some of our colleagues in the Swedish industry to see what we can do to improve the regulatory framework.
As you might know, there hasn't been a new mine commissioned in Sweden for the last 10 years, that's basically due to that the permitting process has come to a grinding halt, which is affecting us, for example, in the Laver project, where we are also now in an appeal circle with the government. Moving into the real assets, here's maybe what's interesting today, Garpenberg. Garpenberg, before my time and any time, has been nothing but a success. I think that the actual project itself, combined with the engineering and the way it was set up and the way it was ramped up has worked very well. Even in the bad times, if you include 2015 and forward, we've had a 35% return on capital employed in this operation, which I think is almost unheard of in a brand-new invested operation.
That one we feel very proud of. Today, we will announce that we are in the final stages of a feasibility study to take us to 3 million tons from the 2.6 that we've had last year or 2.5 that we actually promised. As I said, the feasibility study is finishing up, we are planning to reach the new design capacity by 2020. The next question comes, okay, what's the investment for this? There's a number up there, and people ask me, "Well, that's nothing. That's peanuts. It's SEK 60 million. What's SEK 60 million for?" Well, that's right. It's a very small amount that is needed to actually get the capacity up to handle 3 million tons in terms of the fixed installments, in terms of getting the concentrator geared up and getting the paste plant geared up, and other things.
Of course, when you increase production, all the sustaining CapEx will go pro rata. Of course, development, the underground mobile fleet and so on, including tailings and everything else, will grow proportional. There is no economies of scale in that. If anything, maybe a diseconomy of scale. Another question is, okay, why haven't you done this earlier? It is not so easy to get this planning right, and it is for two reasons. As I think many of you know, there are issues with rock mechanics and rock stability in the Garpenberg mine. By increasing and thus mining at more places at the same time, it does create some problems or some issues. We've been working through these, and before we said this, feel good that we can increase the production.
It is not self-evident, and it is in the planning of the underground mining, and that's where the challenges are around this expansion that we need to continue working on. There is also a challenge which is linked to grades. You can see here that we're now guiding for 4% zinc for next year. That's in line with previous guidance. There's nothing new there. Regarding the years after 2019 and so on, we will have to come back because, of course, once you start mining faster, we will get into the lower grades faster because the average in the reserve statement is, I think, 3.1. Of course, the faster you mine, the faster you will get down the grades. This we also need to work around how to handle that situation, which is not self-evident. Garpenberg needs a new environmental permit.
You know in the Swedish context, you get an environmental permit for 10 years at a time. We'll need a new environmental permit for the tailings facility, not for the actual operations, but for the tailings facility in 2020. That one will be going in later this year. We don't think that there should be any major issues in that permitting as we see it right now. Kevitsa. We acquired it and took it over on the 1st of June 2016. That's a year and a half back. We've been working hard on optimizing the situation here, and it's been optimizing around the autogenous grinding, even though the grinding itself has not really changed so much. It's been around how to handle the specificities with this ore type in order to get the right ore mixing. Here we do mix ores that we don't do in our other mines.
We do mix ore, and we have to mix ore here. There's not really any feasible way of getting around that. Also to get the fraction sizes right to optimize the actual grinding has been important, and putting the primary, secondary, and tertiary crushing right to get the right size distribution has been very important, and we've been quite successful in doing that. There's also a little bit of, if you want to call it luck, that we've been into softer ores than historically. That has helped us to come up. We have reached now a plateau that is about as far as you can get with the existing equipment, and we need to make an investment, as we always said, to get to the nine million tons.
We are also here in the final stages of the feasibility study to put in one more mill into the concentrator, with that get up to nine million tons. That has a preliminary CapEx of EUR 70 million, we'll talk much more about that as we are out traveling. The preliminary time for commissioning is in 2020 for this project. I spoke about the stripping, I spoke about the fact that we took on an investment when we bought Kevitsa. Just to be very clear, this is the mining plan. Hasn't changed ever since before. We are in years of very heavy stripping in Kevitsa, actually 2018, 2019, and 2020 are the heaviest stripping years that we have in the current mining plan. Then you see stripping goes down pretty strong after 2026.
Don't try to read anything in detail in here about exactly what is the plan or production. This is just put in as a reference that this is roughly nine million going then forward from 2020. It's more to put into consideration compared to the waste production that we have that we need to do. In Tara, this is not really new. We've spoken about this before. We want to prolong Tara. The first step in prolonging Tara is to get a improved or prolonged tailings facility to be able to put the tailings into. That investment, as has been announced before, is EUR 33 million. It still stands at the same. We've gotten the permit for it. We're on the way. We're slightly late in the start because we're waiting for the permit.
We're still on track to get it in place for mid 2019, which is when we need it, because that's when we're running out of the old tailings facility. With this, we have tailings capacity up to 2026. We don't quite, as of today, have enough ore to get us to 2026 in the existing mine, we're not too worried about that given the history of what we've been able to find. Of course, what is most interesting in Tara is that we're buying ourselves time to work on the Tara Deep. This is just a sense of where Tara Deep is compared to the present mine. The present mine, of course, is reddish and the magenta color, whatever you call it, is where we have the indications of Tara Deep.
Tara Deep has been published 10 million tons at higher grades than we have in the existing mine, however, deeper depth. What is important with Tara Deep is that it's open in every direction, so we don't know exactly how big it is. We are exploring a little bit on Tara Deep today, but not really that much because we're building the drift, and you see the drift being put into the exhibit out there. While putting in the drift will give us possibility to do exploration from underground, because given the depth of the deposit, the exploration from surface is very expensive, thus we're trying to be economizing on the amount of drilling we're doing from surface.
Once we get in the mid 2019, we will start getting up to where Tara Deep is, then we will be able to start doing exploration much more from underground, having a much better understanding of what the actual body looks like, the mineralization, what then hopefully will become an ore body, and how we can start making a project around this. That's still in days to come, but we feel very confident about this project as such. In Aitik, the big discussion in Aitik has long time been around crushers. What you see up here is, you can believe it's an open pit, it's actually what the hole that was dug to fit in the new crusher, just to have a sense of the size of things.
This is 1.5 million tons of waste that was taken away just for the hole to put the crusher in. That's a pretty decent size open pit for many other places. We are on track with this investment for somewhere in the summer of 2018 to have it commissioned and online. Once we get that online, we will have both a more stable infrastructure to be able to get a stable production to get the production up. Also we should be able to get some of our maintenance costs down as the present facilities have been sucking lots of maintenance out of us. The exact numbers are difficult to point out. If you look at this was the open pit as it was being dug. This is what it looks like today. It doesn't really look that much because it's all now into this open pit.
It's all been put in there. Just to have a sense of it's 74 meters high. This is a pretty big, tall building. It's just all, or most of it is underground. Just to have a sense of numbers. If you take the Friends Arena in Stockholm, for those who are from Stockholm, or just think of any big arena anywhere in the world. The cement that we have put in the crusher is basically 1.5 times the cement needed to build a big sports arena. If you think about the Globe Arena, which will be special, it's a circle ice hockey arena in Stockholm. The capacity that we have of crushing, just to get a sense of it, will fill the Globe Arena in six days, full of rock, crushed rock.
The reinforcement bars and the reinforcement that goes into concrete is equal to about 5,000 automobiles, just to have a sense of things. What you see here on this exhibit is then you see the top here coming up, which will be where the actual tipping points will be, where the trucks will unload into the crushers. Then you see the holes coming out of the ground. Down at the bottom is where the conveyor is going to come out with the crushed rock coming up this direction, and the entries on the middle, that's for maintenance, to be able to come in and do maintenance in an easy way. This is one of the fundamentals that we put into Aitik that we worked around to be able to get a better position. We like to talk about these big projects because they're fascinating.
We can talk about all these interesting numbers. Equally important, or even more important, are the projects that maybe do not attract such big headlines because they're a little bit more dull or a little bit more boring, and that's this. Just to have a sense of what you're seeing here, the grayish thing here is the existing tailings facility in Aitik. As part of the environmental permit, we shouldn't say it's because of the environmental permit, because we suggested this ourselves, we will start separating the tailings in Aitik into high sulfur and low sulfur. That is done by us voluntarily, because we do actually want to have this because it will make decommissioning of the low sulfur tailings cheaper, and we will only have to do the expensive covering of the high sulfur part.
By putting this into place, putting all these dams into place around this, it means moving electrical framework, it means moving a road that we have there. It's new dams, new water management, including all these things you see on the right there, new water facility. What you see down here, with the little line, is a new spillover, which has nothing to do with the fact that we're going up to 45 million tons, just the fact that we're continuing to operate and raising the tailings facility over the old spillway means that we need a new one. All these things together cost more than the crusher we just saw. We don't talk so much about it because we call it mine-sustaining. It's also one of the reasons why we are in a relatively intense mine-sustaining investment phase over the next couple of years.
Håkan will talk more about the exact numbers. Moving over to the Boliden area. Here in the Boliden area, as you all know, and it's been around for many years, the Maurliden mine is depleting. 2017 is the last year of full production. We will have some production still coming out in 2018 and also in 2019. In the Boliden area, we will not be able to fill that slack of the depleting Maurliden mine from the other three mines that we have. Which means that the mine production will go down with an estimate of about 200,000 tons per year for the next couple of years until we can find something else to replace those tons.
It's a little bit of a pity since the actual concentrator has been going so well for the last two years, and Lennart showed a picture of A smelter to take this that can recover the most of the cobalt into the next step of the process. As I said, this is something that we're working intensely on, and it could make a difference for Kylylahti, even though it might not be so big for Boliden. It could also make a difference for the availability of cobalt, which of course, is something that lots of people are looking into and where most everything today is found in the DRC, and this could be at least a small alternative source for cobalt. When we look into exploration in the Outokumpu area, we are continuing. We are focusing. Here you see the Kylylahti mine, and you see the old Outokumpu mine.
In the line in between there is where we're focusing a lot of our exploration. You see also up to the very left-hand corner, you see the Lokanlahti mill. Of course, we have exploration rights in the Lokanlahti mill, and we also have exploration rights in other parts of this area to be able to fill the mill going forward. Just one slide and one word on exploration. If you were to look at many of our colleagues, I think most of them have said that they're stepping up exploration by now. They also stepped it down quite a lot. I'm going to stay here and say that exploration is going to be roughly the same. We never really scaled back exploration, even in the tough years, because we know it's an important part of getting the future, to be able to work through the future.
We will continue there, and we don't really see any reason to extend exploration at this time. We will continue this investment of about half a billion SEK per year, even though it's from a financial point of view taken as an OpEx. The focus is also very similar to where we are. We're going to focus roughly two-thirds near mine, and the other last third or so, what we call field or sometimes should call near mill, because you can see here on the targets that we're looking at, we're never really far away from where we are, which means that if we were to find things there, it could be things that could be potentially trucked into an existing mill, for example, in Kylylahti, Lokanlahti, or for that matter, in the Boliden Area. Sophie is standing up there, so I understand it's time to summarize.
We've had a very strong 2017, and we feel very good about 2017. I have today also spoken about the Garpenberg three million ton feasibility study that we're finishing off and that we have good hopes that we will have it around in 2020. We also have potential. I spoke very quickly or briefly about Laver, which we still feel is a good potential, even though it's right now stuck in a legal mire that we can't really get through, but we're working on. We have Aitik 45 that is very well progressing according to plan. We have Tara Deep and the Rävliden in the Boliden Area, which are still very much online and we're working on, even though we don't have so much more new things to say. On the negative side, well, everybody knows, and you all know that we have been mining over reserve grade.
That, of course, means that you cannot do that trick forever. At some stage, we have to come down, and exactly how we come down, we are working on every day. Maurliden is depleting, also not any news about that, which means that we will not be able to run the concentrator in the Boliden Area full out for a couple of years. We have a high investment cycle. Håkan will talk more about the money and the effect on the balance sheet, but I will myself talk more about the fact that we're doing these things internally, many of our investments internally. It's also putting a strain on our own organization to make sure that we can handle these things and do them well. On the minus side, no exploration success in Kylylahti. I don't want to end on a minus, I'll end on a plus.
We have good technology potential. We feel very good about the developments, the Kevitsa integration has worked out very well. Thank you.
Thank you, Mikael. We will open up for a few questions to Mikael. Let's start with, we have from Alain Gabriel here.
Thank you. Alain Gabriel from Morgan Stanley. Mikael, three short questions, if I may, on Garpenberg. Firstly, on the grade profile post-expansion, you said you'd come back to that at a later stage. Can you give us a sense of magnitude of the dilution in the medium term? Is it 5%? Is it 20%? That's the first question.
Exactly what you mean, there's not really a dilution effect, of course, the grades will go down, how fast I will come back to.
Okay, fine. Second on the incremental maintenance at Garpenberg, should we take 2016 CapEx as a base and grow it by 20% as a good sense?
Yes. That makes sense. It should be pretty linear.
Yes. Thirdly, on the rock stability issues, do you mind giving us a bit more color on what is causing those? They seem to come back quite often, how should we think about those in the medium term?
Well, Garpenberg, it's a great mine in many sense, but it does have a negative part of it, and that is rock stability. It is affecting us in different ways. The typical way that it has happened is that when we are doing drifting, so when we're doing developments, we do tend to get problems sometimes, which means that we need to bolt much more than we should do. This slows us down, and in order to not lose production, we sometimes need to do the developments in different order than we had originally planned. That's one thing.
We've also had issues inside the ore, where sometimes the ore does not behave exactly the way we want to, and some of the stopes, we have not yet had to abandon any stope, but we've had to let some stopes wait until we have been able to put up the stability and rock fill and cement fill around certain areas before we can go in and take these stopes.
How are you thinking about the solution about those stability issues going forward?
I don't think there is an absolute solution to it. There is no silver bullet on how to handle this. It's going to be a day-to-day struggle to handle these things. As I said, up until today, we have not lost any stope.
Okay. Thank you.
The stability has been an issue since I have an interest in day one, yeah.
Yeah.
It's nothing new there.
I don't know if everybody heard that, but it's not a new issue. It's been around forever.
We have one more question from Liam.
Morning. It's Liam Fitzpatrick from Deutsche Bank. Couple of questions. Firstly, on Laver. Can you give us an idea of the current issues that you're facing and how you might overcome them? Any sort of steer on timing of that project. Secondly, in respect of the stripping CapEx throughout the business, can you give us an actual number for this year, 2018 and 2019?
For a start, with Laver, the challenges that follow, and just to be very brief, it used to be very easy. First you got a mining license. Mining license was built on proving that there was ore in the ground. You got an environmental permit, because once you knew that you had the right to the minerals, you could then spend the money to get the environmental permit, then you can start to mine. The challenge that has come into this are twofold. Number one, standalone. There's been a court case in Sweden where much more emphasis has been put on the environmental consequences already in the permitting of the mining license. Much earlier than the environmental permit. That's one thing. The second thing that comes into play here is Natura 2000, which is around the area. Not exactly Laver, but close to.
In order to be able to work there, we need to get a Natura 2000 permit. In order to get a permit, you need to do a very full environmental consequential analysis around that. The Swedish authorities have claimed that you should get that first. Even before you can apply for the mining license, you should get Natura 2000 permit. We have appealed that order because we say it's not really sensible anyway. We should get the mining license the way we've always gotten them, and then we'll deal with Natura 2000 together with environmental permits. That's the legal issue that's right now been in face of the Swedish government. Regarding the amount of stripping, I'm looking a little bit at Håkan. You'll come to that in your presentation, right?
Yes.
Yes. I'll leave that one to Håkan, and he will come back to that in detail.
We have time for one more question. Ola Södermark, if you can have a microphone. It's on the way. No, it's over there.
Ola Södermark, Kepler Cheuvreux. Just a follow-up on CapEx. Should we expect CapEx to peak next year, 2018? Can you tell us a little about the difference between the CapEx in mines and smelters?
I think that's an excellent question to leave to Håkan, because he will talk about both those issues after lunch.
Perfect. That was our final question from Michael for this turn. We will have a break. For you here in Stockholm, lunch is served upstairs. I encourage you to look at our exhibition, where my colleagues from Boliden Mines and Boliden Smelters are showing different technologies and processes on how we are improving our competitiveness. We will start here at 1:15 P.M. sharp, so please be back by then. Thank you. Welcome back. I hope you enjoyed the lunch. Now turning to the other part of our balanced strategy. I would like to introduce Kerstin Konradsson, President Boliden Smelters, to share specific examples on how we are maximizing value across our organization. Kerstin.
Thank you. We have, during the last years, managed to strengthen smelters' competitive position, and I'm very proud of where we are today. I feel very confident in the strategy we have, and my focus is to continue to strengthen and increase the competitiveness of our smelters. Which are the most important factors for smelters in order to create value? First of all, we need to have stable processes. Stability is always key. If we manage to have stable processes, then we can maximize the value from our existing operations, and we can maximize the value from our existing raw material feed. The second one is to strengthen our technical capabilities in order to take more different kinds of raw materials.
If we can open up and take more challenging raw materials, meaning raw materials that few other smelters can treat, then we can select the most profitable ones, and we can work even more in optimizing the value from the raw material mix. Have we been successful in doing this? I would say yes. If we take a look at Wood Mackenzie's cash margin curves, this is now 2012 compared to 2016. We can see that basically all smelters but Harjavalta, I will come back to Harjavalta, have managed to quite substantially improve their competitive position. If we look at Harjavalta, if we now would include a new nickel business model we have in Harjavalta, in this comparison, you will see that Harjavalta is a very competitive copper nickel smelter, which I will come back and prove to you later.
First, let me now try to explain why stability and technical capabilities are so important for smelters. Taking a look at the gross profit. Gross profit from smelters is built from treatment and refining charges, free metals, byproducts, and premiums. They are impacted by external and internal factors. The internal factors are the ones in the light blue column. They are the ones set by the market, and here we are just a price taker. My focus is on the internal components, because these are the ones where our performance can make a difference, and that's the one in the light gray. I've already talked about process stability, technical capabilities, and raw material mix. I should also add that the customer mix has an important for the premiums. Starting with process stability, what do we really mean?
First of all, it means that we need to have high availability of our equipment, and we need to have high capacity utilization. It also means that we need to have a process in balance. We sometimes talk about this. What does that mean? If I would put it very simple and say the material we feed into the smelter must come out as products. If we have an unbalanced system, the feed doesn't come out as products, they stay as intermediates, building up stocks. This is creating big problems. If we can manage all this, have the stability, then high feed, high production will contribute to high treatment and refining charges. Good recoveries will contribute to high free metals, and we will have revenues coming from the byproducts.
I will come back to later why technical stability is so important, and also I will come back to how we work on optimizing the raw material mix. First, I would like to give you some examples on how we have worked with stability. Moving into copper and starting with Harjavalta. Harjavalta, five, six years ago, had big stability problems. They never fed what they had in the plants. Also they built up intermediate stocks. What we did was that we started quite an intense and very well-organized program working on the availability. We improved the maintenance planning, we replaced old equipment, and we also worked on the process balance. We looked at the feed and how we could optimize it.
Actually, as a result, you can see on the left side that we have managed to increase feed in Harjavalta, giving more treatment charges. Also to the right, you see that we have managed to increase the value of free metals coming out. In order to make this comparable now, the free metals are based on the metal value now end of September. This is really showing the underlying improvement in Harjavalta. The big jump you see in 2016, that's of course related to the new nickel business model we took in operation, not only coming from copper. If we look at Rönnskär, slightly different. You can see that the feed has been more stable, but I guess most of you remember the problems we had in 2013 when we ran into an unbalanced system. We started an improvement program in 2014.
We closed that in 2016. The main target of that program was to address this problem of unbalance, but also to work on reducing costs. At the end of last year, we reported an EBIT improvement of SEK 275 million, which was in line with our plans. You can also see that 2016 compared to 2012, we have also managed to increase the value coming from free metals. This is copper smelters. Contrary to copper smelters, we have this year reported a lot about production disturbances in our zinc smelters, and especially in Kokkola. To elaborate a bit on the problems in Kokkola, first of all, I would like to say that this is a problem isolated to the cell house. It's a very complex problem. It has consisted of many small, some bigger, different problems, all together adding and creating a big problem.
Secondly, I would like to say that this is a problem that was hidden to us for some time because we had other problems in Kokkola. We had a reactor breakdown. We had a reactor fire breakdown. We had a fire in the cell house. Actually this took away our focus from the cell house. Unfortunately, it took some time before we started to see the problems. About one year ago, we reported problems in the cell house. This graph shows the capacity utilization of the cell house, and you see the level of 100%. This is if we have full operation, no maintenance stops, no nothing, then that's the level where we should be. Of course, there are natural variances sort of related to these stops. What you can see, especially in the second quarter this year, then the problems escalated.
We saw that in terms of having poor physical quality of the zinc, we had low current efficiency, we had to reduce production quite dramatically. The question then, what have we done? Well, we have done a lot of things. We have worked on the mechanical equipment. We have improved plant maintenance. We have improved procedures. We have replaced old worn equipment. I would also say that we have done very extensive research work. This is a chemically very complicated process, we have used internal expertise and external expertise. I dare to say that today we know much more about the process of a cell house than we did some time ago. I would also like to say going forward then, because I guess your question is the problem solved or what can we expect?
If you look at the graph, you see end of Q3, that's actually mid-September. Since then, this is now two months later, we have had very stable production. Will this hold? Well, we are very positive. I should say, however, that there are some still unknown factors to us, there are still some activities remaining to be put in place. I spoke to our general manager, Janne Moilanen this morning, he confirms that we are still on this good level. We are positive about Kokkola. Going into Odda, because here we have had a big maintenance shutdown in Q4. We have replaced, we call it the dome of the roaster. It's the roof, actually. It was original going back more than 40 years in time, so it was really due for replacement. I'm happy to say that everything has went according to plan.
We have started up production, we are now running at full speed, CapEx, time-wise, everything on plan. Coming back to technical capabilities and raw material mix. We quite often talk about complex raw materials. What do we mean with that? Well, a complex raw material is raw material that very few smelters can treat, therefore it's quite difficult to put on the market. The reasons is that it normally contains difficult elements, could be impurities, but it could also be that the physical properties as such are difficult for a smelter to treat. They are often traded at the market at a higher gross profit. The alternative to a complex raw material is something we call a liquid raw material, because that's something you can always put on the market, any smelter can treat it.
If you look on the right side, you see the typical components of a gross profit for a liquid material. You have the benchmark TCs, some small penalty and free metals. On a complex raw material, they are often traded at higher treatment charges. One example has been the copper concentrates containing arsenic, for instance. The penalty element is also quite often high due to impurities, could be mercury. The free metal part is also quite often big. It could be low due to lower payable contents. One example here that we use is copper concentrates contain quite often nickel, not all smelters can handle nickel. Nickel used to be a penalty, today it's a free metal. Whatever nickel I can extract in my copper smelter counts as a free metal.
If we now compare the gross profit for a complex raw material and for a liquid raw material, we see that there is a profit margin. Of course, we should remember that treating a complex raw material often comes with a higher cost, because you need to have more process steps, and most likely you also need to do more maintenance. These things we take into consideration when we do the modeling, because we do model this, and we do calculate which is the most profitable feed. In the end, we will come to a net margin. I will say this principle only applies in a long market when concentrates are available, because in a short market, everyone fights to fill the smelters, and then we are prepared to pay also for the complex ones.
I will try to show you now how we work on this more practically. Taking a look at the picture on the right side, this shows. Prices and terms, they are driven by the demand situation, demand supply situation for metals and concentrates. The picture indicates the normal business cycle and how it favors smelters and mines. If we just now look at the concentrate part, which is the horizontal axis, and if we would start looking at copper, you see that copper in 2012, we had a deficit. There was a shortage of concentrate. My focus was to fill the smelters. Now during the last years, and also even this year, there is still an oversupply, meaning that I can select from a broader range, and I can pick the most profitable ones, and I can combine an optimized feed mix.
If we now look at the left side graph, this indicates our numbers, and this is now, I would say, the difference between the gross profit of our feed versus a liquid feed. Here we have also taken the specific costs in consideration. This is more the net margin, you could say. We can see that going from 2012 to 2016, we have managed to increase the value coming from copper concentrates. Of course, this is due to the market, but it's also due to our technical capabilities of taking a broader range of concentrates. Looking at zinc, it's the opposite. You see that in 2012, we had more or less balance, and today we are in a clear deficit, and we can see that the curve is, well, the reversed one.
Still, I would say that thanks to our technical capabilities, we have still managed to keep this on a fairly high level. We believe that working with raw materials creates some clear advantages. If we can combine the strong technical capabilities with having very good waste solutions, we can create very competitive smelters. I will give you two examples, and then I will come back to why the broad range of smelters can add even more value. My first example is Rönnskär. If we take a look at Rönnskär, we have some unique technical capabilities. We have the fuming furnace. Not very many copper smelters have a fuming furnace. The main benefit is that we can take in different kinds of raw materials, primaries and secondaries containing zinc, and we can take out the value from that.
We have the lead Kaldo, which is dedicated to treating lead concentrates. We have the e-Kaldo dedicated totally to recycling electronics. We have the roasting furnace, which is very good in terms of taking out impurities like arsenic, antimony, and some other difficult stuff. We are building the deep underground repository, which is expensive, I must say, but also very exciting. I hope you took the opportunity to look at it in the exhibition during lunch. Actually, where we are today, we have finalized this is actually building a mine under Rönnskär. We have now finalized the ramp, so we are now at a level about 300 meters below surface level. Now we start a process to build the storage rooms. This will be in operation in 2019. What's so good about this? Well, several things.
First of all, we have technical capabilities to take care of impurities. When we have done that, we don't need to send any hazardous waste by transports somewhere else. We actually just take it downstairs. This offers a unique I would say that our suppliers, especially the ones that sits on these more complicated raw materials, they see this as a clear benefit. We become a preferred customer because they feel that their raw material is safe in our hands. They know where it ends up. What does it give Rönnskär as such? Well, if we look at Rönnskär, it's, I would say, a medium-sized copper smelter. We don't really have any big economy of scales. It's also, you have seen it before, it's a very sort of expensive, high-cost smelter. We were on the 93rd percentile from a cost perspective.
Giving all the additional value we can get from the process, we actually managed to move the cash margin position to the 18th percentile. My second example is Odda. Odda is slightly different. Here I would say that we have two different process routes for the concentrate. We have the direct leaching process. That's very suitable for instance, fine grain material. The roaster doesn't like fine grain material, but the direct leaching does. On the other hand, the roaster is very good in taking care of, for instance, chlorides and fluorides. What we can do with the raw material mix is that we can direct it between these two process routes and try to make the best out of it.
We also have, and this we have had now for many years, those of you who followed us to Odda last Capital Market Days, you actually had the opportunity to go into the mountain caverns, which you can see on the right side. They are located in the mountain on the left of Odda. What we do is that the waste, the jarosite, the sulfur, and we also even have special chambers for mercury, we bring into safe storage into the mountains. Another thing with Odda is that we are located in Norway. I think Thomas spoke about this. What's so good about that? Well, zinc smelters are very electricity consumers. They are very big in consuming electricity. Norway is producing their electricity from hydropower, meaning that our carbon dioxide footprint in Odda is extremely low.
Once again, looking at the conclusion from this, well, Odda is also a medium-sized zinc smelters. They don't have, and that's a problem, but they don't have so many byproducts besides zinc, they need to compete with cost. That's what they have been doing now in the P100 Program, in the expansion, the P200 Program, and they have been very successful in doing this. The low cost helps them to stay at a cash margin position of about 44th or mid percentile. Coming back to then, why is it so good to have a broad range of smelters? This is two smelters isolated. I have five. What happens when I combine them? Well, first of all, I have talked about the raw material part, what goes into the system, and I have talked about how we work on optimizing the feed mix.
Actually, what this gives me is not only the optimization for one smelter, but I can actually access the total raw material portfolio for all the five. I can, depending on the situation, actually also redirect raw materials. To some extent, I can also work on trying to reduce and minimize stock levels. That's one thing. I have also talked about the value of extracting free metals and byproducts, and we do that by reprocessing the residues that each and every smelters produce. A lot of this is done internally. For instance, in Rönnskär, we have a lot of internal waste streams. This picture also illustrates that we send different materials between the smelters. I can give you a few examples. One is the silver concentrate we produce in Kokkola. We have been selling that externally.
Now, starting next year, we will reprocess it in Rönnskär and refine it into a final silver product. Another example is that some of the zinc concentrates, they contain copper. That's an example. Both Odda and Kokkola, they can extract copper as an intermediate. We call it copper cement, which we send to Rönnskär and Harjavalta. They remelt it, they refine it, and in the end, it comes out as refined copper product. There are many, many more examples of how we work on reprocessing the internal waste streams. All in all, I think Mika spoke about they producing 10 different elements. In this system, we actually take out almost 20. The third one is, this is something Thomas spoke about from the sustainable point of view, waste. Why is reduction of waste so important?
Well, of course, one thing is that it contributes to our CR perspective or CR strategy. I think personally that this is a way for us to contribute to a resource-efficient world. That's great. Of course, there are other reasons as well. If we can extract more value before we put it into waste, we will increase our gross profit. If we can reduce the volume of waste we need to deposit, we will save costs. There are many good reasons for us to focus on the reduction of waste. I will say, I was very happy when I saw this one, that our strategy has actually contributed to quite a substantial increase of our gross profit during the last years. Going from SEK 7.3 billion in 2012 to SEK 9.4 billion in 2016. That's an increase of 30%.
Of course, you could argue and you could say that, well, market terms have improved and so on, and that's true. Actually, I would claim that a major part of this comes from our improvements, our internal performance. What's behind this? I have talked about some of the activities that we have already accomplished. I will come back to two of them to give you some more details. I will talk about expansion in Odda, and I will talk about the new nickel business model in Harjavalta. Just for your indication, we do have ongoing activities that we strongly believe will be very important for us in continuing this journey. Of course, there are more ideas, but these are the ones that we have decided. Starting with Odda.
This is very much in line with what I said before, improving the cost competitiveness of Odda by expanding economy of scale. This was an investment of SEK 350 million, and I'm very happy to say that we were on plan, both on CapEx and in terms of putting the capacity in place. We reached it in the second quarter this year. Unfortunately, due to all the problems we have had with other parts of production, we have not been able to utilize this new capacity. Now, after starting up the roaster, our target is to, as quick as possible, be back on the 200,000 tons annual pace. My second example is, I would say, a really great one. First of all, it's several things.
I talked before about the copper, the development in stability in copper, you can see same graph here, how we have managed to increase the copper feed. We have the nickel part, you know that up until mid-2015, we were doing tolling. Now we turned it into our own business model, we are in charge of our own raw material portfolio, we sell the mat to customers. You can actually see here that from 2015, the feed of nickel has increased. That is actually due to the fact that now when we have everything under our own control, we can work more on optimizing the processes. Of course, the new nickel business model also gives us a different value. All in all, it looks very impressive. We have doubled the earnings in the EBIT in Harjavalta during the last years.
Some related to prices and terms, very much related to these improvements. What does it all mean in terms of profit and return? Looking at this five-year period, you can see that there is quite a dramatic stepwise improvement. 2014, I should say that terms started to be more in favor of smelters than they had been before. Still, going back to the gross profit development and all the other things I have showed you, I would like to claim that a major part of this improvement comes from all our activities. To sum up, improving process stability, strengthening our technical capabilities, and optimizing our raw material mix, they have been the key success factors in order for us to improve smelters' competitive position. Thank you.
Thank you, Kerstin. We will now open up for questions. Let's start with Daniel here. We have a microphone hopefully on the way. Yes.
Thanks. It's Dan Major from UBS. We've sort of seen this presentation and running us through the drivers of kind of what impacts profitability in the smelting business before, it remains quite a difficult business, I think, for most of us to model. Can you kind of give us a sense, I guess, you said a lot of the driver of improvement in profitability has been internal. Assuming external parameters remain constant, do you think you can still increase margins and increase profitability in the business by internal drivers?
Yes.
Can you give us a sense of the magnitude of that?
No.
Okay.
All right, thanks.
I think also Chris and Jenna. Yeah.
Okay. Thank you very much. Thanks, Kerstin. A few follow-ups here. First, on the free metals, you mentioned that you have seen a pretty good trend over the last few years.
Do you expect the trend on free metals to continue, or was 2016 an unusually good year?
No. I gave some examples. For instance, reprocessing the silver concentrate in Rönnskär. It was on the slide, we are opening up the nickel capacity and copper concentrate in Harjavalta. We do take some small steps in order to continue to increase the level of free metals.
Right. On complex materials, do you see that trend also continuing going forward? On the competition side, do you expect to see tougher competition?
I see the trend continuing. Yes, I see that many smelters have a similar strategy as ours.
Okay, finally from me, I was really happy to see that you have made a lot of improvements here in Q4. Is Odda the smelter that you see biggest improvement potential from the current run rate into 2018? Is it someone else smelter?
I would say that we see potential in all smelters.
All right. Thank you very much.
We have a question here also.
Hello. Hi. Thanks for having us here today. It's Olivia Du from Merrill Lynch. A real quick one. A few years back, you mentioned that your net exposure in smelter is probably like 75% zinc and 25% copper. Does that still remain constant? Sorry if I missed that answer previously. Second thing is, could you give us a bit more guidance on TCRC going to next year? Thank you.
Yes. Well, first of all, we get about 70% of the zinc internally and 30% copper. I'm not sure if that was what you said, the rest will go out on the buy on the market. Regarding TCs going forward, I think that's an ongoing discussion, and you will get a different answer coming from Mikael than from me because we are in the process of negotiating. I would say that what I see is that the sentiment for copper is very good. There is still oversupply. I don't see a big reduction. Maybe some, but basically I would expect to have it the same level. Zinc is slightly different because there is clearly a deficit now. We see that there are a lot of new mine projects coming on stream, and there is also idle capacity.
I would say that depending on when the benchmark is set, that will have a big impact on the outcome. Normally, the benchmark for zinc is set during the spring.
That's March.
Sorry?
Is around March, the benchmark.
Yes. Around March. Yes. A final question here from Johannes.
It's Johannes, Handelsbanken here. I'm just curious, what do you hear and see when it comes to smelting closures in China? Because we hear this in other industries like steel, like in aluminum. Is the same thing going on the smelter side in China, according to your knowledge?
Well, I've not heard much about closures. For instance, if you look at zinc smelters, you have very many small zinc smelters below 100,000 tons of capacity. With the same rationale as they closed down the small steel mills, I think that they should be closed down and replaced by bigger and more modern one. We don't see that yet. Thank you, Kerstin.
Thank you.
Healthy cash flows and stable earnings are a key part of our value creation story. Now our CFO, Håkan Gabrielsson, will summarize on how we will continue to deliver shareholder value. Please, Håkan.
Thank you, Sophie. First of all, it's a pleasure to be here, and I am happy that so many of you could show up. It's my first Capital Markets Day for Boliden. One and a half years ago in this building, this room, I had roughly the same status as Kevitsa. Announced, but not yet the property of Boliden. I am going to cover three areas in the next 10 minutes or so. One is the financial position and our current performance. Second, a few words about our financial targets. Finally, some facts that will help you model next year's results. Let's start with cash flow. We are currently running at SEK 6.5 billion free cash flow. This is done rolling four quarters. If we take out the CapEx, we have SEK 11 billion cash flow from operating activities.
As you can see here, it's a very positive trend over the last five years. In the beginning of the period, we had heavy investments in Garpenberg, an investment that's proved to be well-timed and that had contributed a lot. Following that, we had a couple of years with healthy cash flow on stable levels in spite of fairly challenging market conditions. Over the last year, we've had, in fact, a sharp increase in the cash flow since Q3 of last year. Of course, strong cash flow also has an impact on the balance sheet. At this meeting, as both Lennart and Mikael has commented, this meeting last time, Kevitsa was just about to be acquired. We were at 21% gearing net debt to equity, and immediately after the acquisition, we increased to 45%. A quite steep increase in a difficult market.
At that time, we said that the top priority was deleveraging, and I am happy to be here today and say that we have actually delivered on that. We are down to a gearing which is lower than when we started. From that perspective, you could say that the Kevitsa acquisition from a financial perspective is sort of paid. We have a solid balance sheet, we also have a solid financing in place. We have SEK 13.5 billion committed credit facilities, out of which roughly SEK 6 billion are utilized. We have a strong payment capacity. We have a duration where most of the maturities happen 2019 to 2021, and we have a really strong interest rate. Financially, in just a couple of words, we are in good shape. I would, however, also like to look a bit on some of our peers and compare Boliden.
That goes back to what Lennart talked about, the strategy with low volatility, low risk, and preparing for the downturn. This is a bit of a busy slide, the vertical lines represent the span of return on capital over the last five years. At the top, you have the best year, at the bottom, the worst year, and in the middle, you have the average. The gray shaded area behind is the total return over the same five years. There are two areas where I would like to draw your attention to in this sense, the first one is the size of the span. Boliden is actually the smallest span between the best and the worst among all the peers over these five years, meaning we have a clearly lower volatility than the average in this industry.
The second, which is perhaps even more important, is if you look at what it looks like the worst year. The lower part of that chart. Boliden is actually better off during the worst years than almost all other peers. Of course, this comes back partially to our asset base with smelters and mines, precious metal, base metals, not streaming, et cetera. I would also say that it's attributable to the focus and the strategy that we have in the company. We do focus on the next downturn. We strive always for a low volatility and for a low risk. I think that is also one of the explanations to the good return on the share that we have had over the last years. Moving over to financial targets. They've been around for quite some time.
They've served us well, and we confirm that it's the same targets that they are still valid. Return on investments, at least 10% in real terms. Net debt to equity, 20% in a good business cycle, and we have a fixed payout ratio of a third of the net profit in dividend. These are there to manage cycles and to create value over business cycle in this volatile industry. Moving over to the capital allocation side. We summed it up in one picture here. Firstly, obviously, with the cash flow from operation, the first thing we do is we pay for the maintenance CapEx to continue producing at the current levels, and we pay for our fixed annual dividends according to the one-third of the net profit payout. The rest, that's basically a decision of finding the right balance between capital structure, acquisitions, and CapEx.
Just a few words on each one of these three boxes. Acquisitions, we want to do them when the valuations are attractive. We want to do them when the right assets are out on the market. This is no news to you. I think Kevitsa is a good example of that. For those two reasons, I believe that the likelihood of a major acquisitions in the very near future is probably quite low. Regarding CapEx, we have not changed the decision criterias for CapEx just because we happen to have a stronger balance sheet. We stick to the same decision criterias. We don't spend more money because we have cash. It's perhaps obvious. The decision to go into larger growth projects is more a function of when the opportunity arise and when the organization in question is ready for such a big investment.
You've seen that we talked about the total CapEx of just over SEK 6 billion for next year. I will come back to that shortly. Finally, adjusting capital structure. So far, at least since I joined the company, the main focus on adjusting capital structure has been to reduce leverage. Starting from 45%, working our way down quarter by quarter. Finally, a month ago, we reached a 20% level that we've been striving for. Any further adjustments on capital is not a topic for this Capital Markets Day, and if that should be the case, we will have to come back at a later stage. All in all, we talked about the shareholder return. I cannot stop myself from showing it one more time. This is, of course, a picture that a CFO loves. We've had a good growth in dividend payouts year by year since 2013.
The total shareholder return, we've outperformed the world index, the Stockholm OMX30 index, and the Global Mining index over the last five years. As you saw from Lennart's presentation earlier on, this is also true if you pick some other time span. It's a really strong return over this period. Moving on to CapEx. Mikael got quite a few questions that he deferred to me, and I'll see what I can do to answer them. Our CapEx plan is slightly above SEK 6 billion for 2018. We had a guiding for 2017, which was just below SEK 6 billion, so roughly the same level. We reduced it to SEK 5.5 billion and some is pushed into 2018. The main increase is in maintenance CapEx, where we move from SEK 3.5 billion-SEK 4 billion. In maintenance CapEx, the big part is stripping in Kevitsa and in Aitik.
Mikael showed that we will have a period of high stripping costs in Aitik or in Kevitsa for the coming two years. That is also something that will have an impact on years to come, even if we don't guide for this at this time. In addition to the maintenance CapEx, we had three big projects that we talked about at the Capital Markets Day a year ago. It's the surface crusher in Aitik, it's the sulfuric acid plant in Harjavalta, and it's a deep underground repository in Rönnskär. Altogether, these three add up to roughly SEK 1 billion in 2018. Growth CapEx is smaller numbers. We had something in Kevitsa, which Mikael talked about, EUR 70 million over two, three years. We have a smaller amount in Garpenberg. That's the main areas of growth in the CapEx.
The remainder is debottlenecking, margin enhancement, some smaller environmental investments. Just one more word around maintenance CapEx. The big part there is mine development work, stripping, tailings dam, and the replacement equipment is a smaller part. 80% is mines, and out of those 80%, 60 percentage points is the mine development stripping and the tailings, and 20% is smelters. Maintenance shutdowns. We had a year, 2017, with extensive maintenance shutdowns, SEK 450 million in EBIT impact. The good news is that 2018 is going to be lower, SEK 200 million. EBIT impact here means primarily lost revenue due to production stop, but also a part of maintenance cost. Finally, internal profits. Perhaps a bit more technical part, but that is an item that has had a significant impact on a few quarters during last year. It does so when prices are good.
Essentially, this is a matter of timing for revenue recognition. It doesn't have any impact on the long-term cash generation, but it does have an impact on short-term quarterly results. Just to try to give an order of magnitude, a 10% increase in metal prices will lead to a one-off effect negative of SEK 180 million on EBIT. It's substantial amounts. 10% change in the internal inventory is a smaller impact, negative of SEK 80 million. This is then assuming current prices and average inventory levels. That's to give an order of magnitude what you should be looking for. However, I do need to emphasize that the mix effect is significant, so it's not easy to model depending on whether we have the inventories in finished metals or in concentrate and the level of precious metals. This is at least an order of magnitude.
As a summary, financially, we're in good shape. Good cash flow, good balance sheet, stable financing, and our strategy and financial targets remain firm. With that, Sophie, questions?
Yes. Do we have any questions? Yes, we have one from Conor. Ilona is on the way with a microphone.
Hi. Conor Rowley from Credit Suisse. I'm just looking at one of your financial targets of net debt to equity below 20%.
This used to be, if I remember correctly, a lower threshold. If it's now a sort of a ceiling target, where would you want to see net debt? In the absence of any further acquisitions, where would you want to see net debt go before we saw further dividends above the third of net profit?
Well, that is sort of the level we want to achieve, 20%. Of course, with the current cash flow, we will continue to work our way further down, given the CapEx guidance and so on. Whether the board and the AGM wants to take a decision to handle the cash, that's basically a decision for them. We don't have an operational need to go lower than 20%, if that answers your question.
Okay.
One question also from Alain.
Hi. Alain Gabriel from Morgan Stanley. If I may go back to the CapEx guidance for 2018 and beyond. There looks to be a step change in your maintenance CapEx from SEK 3.5 billion-SEK 4 billion.
Yes.
You highlighted for the next couple of years, we're probably going to be at the same level. If you look at the strip ratio slide that Mikael has shown, it looks like stripping ratios are going to be higher until the early 2020s or 2023 or so. Is it fair to assume SEK 4 billion as a normal run rate ex Garpenberg going forward?
I think if you look closely on Mikael's slides, you can see exactly which years that are the peak. I think we're talking about this year, next year, and to some extent the year after that. During that period, I think that level of stripping is reasonable. Stripping and rock development makes up roughly 60% of the total maintenance CapEx. How we time the pure replacement of equipment, that's typically not anything we need to do one specific year. We cannot wait too long, because then we put the business at risk. For sure, the stripping will remain on a high level for this year, next year, and the following year.
Okay. Thank you.
We have one question here from Daniel Major. You can over to him.
Hi. Daniel Major from UBS.
Hi.
A follow-up question on your CapEx guidance.
If you look back at the last few years, you've consistently underspent versus guidance, and you've explained in the past that's in part the deferral into the following year. If I take your guidance for 2018, is there any reason to believe that you will not be able to do the same again, in 2018? Actually SEK 6 billion is SEK 5.5.
Looks like you're going to say something. In fact, it is a critical area for us to keep the pace in the stripping and the rock development. If we don't, it risks at least having a negative impact on the production. We've been working hard with the priorities for this year. I do think that for sure we will do our utmost to spend the money that we have said. This is not sort of a wish list. This is something that we really need to do to keep the production going.
SEK 6 billion is SEK 6 billion.
It is, it is.
Okay, thanks.
We also have a question from Liam in the back there.
Just on the CapEx, on the environmental side, we were told earlier that spend has been going up over the last 10 years, it's going to continue to go up. Within your CapEx numbers, can you break out the amount that relates to environmental spend? Do you have any sort of idea on the sort of growth rate we could see in that over the next three, four years?
I think if you look at that as a long-term average, it might be right. However, in the 2018 numbers, we have two very significant projects that are related to environmental performance. One is the sulfuric acid plant, and the other one is the deep underground repository. They are two of the three constituting that SEK 1 billion in this year only. These are huge investments. It's not necessarily so that we're going to launch a new one of that size every year. I think it's fair to say that over time, we have seen an increased focus on environmental aspects, and I think we'll see that across the industry. It's not unlikely that that's going to continue, although I think that we've probably taken the biggest step in that increase.
Thank you.
Yeah.
That was our last question for Håkan. Thank you so much, Håkan.
Thank you.
Before Lennart sums up, I just want to give you some practical information. I'm so pleased to see so many of you joining us to Kevitsa. Besides the guided tour, we will also look at what we have achieved so far and also the route to 9 million tons, as Mikael mentioned. The bus departs from the corner of Grev Turegatan and Linnégatan. You have received a map, those of you who are going to Kevitsa. I also have my colleagues helping you, so please look for them at the entrance. Also please note that it's not possible to check in directly at the airport. You check in at this bus. Lennart, please go ahead.
Okay. On the way to Kevitsa or before we leave, I think we have conveyed a number of messages today. The company is in good shape. We have outperformed the industry, thanks to many of the technology changes we have done, and other things. We have enjoyed similar prices as our competition. We have had some luck with currencies. All in all, I would say that currencies and terms or currencies and metal prices have been similar compared to the bulk or the majority of competition. The strategy remains intact. It has been successful. We think it's fundamentally important to excel with what you have before you buy new things. New things in this industry is very expensive. When we excel with what we have, we tend to excel also with the new stuff. Selective acquisitions is high risk.
We should do them, but we should be very careful. Today, from Kerstin's presentation, you have given a lot of information so someone can backtrack the synergies we had with Kevitsa. Good deal there. I spoke about the cycles. I think it is quite interesting or compelling. Everything in the world, it doesn't matter where you are, permitting is taking longer time, capital intensity is increasing, bigger investments takes bigger time or longer time to decide on because people get nervous, and obviously they take longer time to build. Therefore, the cycles may be longer. In the case of copper, zinc, and nickel with a similar demand pattern, they're ending up in different sides of the prices at this point, which is evidence of the supply cycles being so fundamental for the development for us going forward, much more so than the demand.
People and technology is very much what Mikael and Kerstin have been talking about. Growth of Aitik to 45 million tons, growth of Garpenberg to 9, growing Kevitsa to 3, and Kevitsa to 9. Hopefully, with a bit of luck on cobalt, maybe we can do something with Kylylahti. Tara was going to deplete now. We are seeing a quite clear avenue or road to 2023, quite likely to 2026, and then we have Tara Deep for a longer life. I think that's exciting. On the smelters, and some of that comes with lower grades, which is normal. Grades variations or grades are varying around the average. On the smelters, doubling the profit in Harjavalta, part of that being due to a strategic move in a new method. Odda, 200,000.
We're not there because we had bad luck, I would say, with something which broke down right at the ramping up. We're hopefully having that behind us and we're going forward now. The biggest and most stable smelter we have is Kokkola. You saw the bumpy road there, and we probably lost 10%-15% production in that period. Cross fingers. It's too early to say that we're through it, because you have seen the bumps have been coming a bit time to time during this period. We think we're done. We hope that we're done by now. Of course, the ultimate result is what we can do in terms of total shareholder return.
We looked at this one, probably just as important was the volatility of return on capital employed that Håkan showed, and the fact that if you triangulate that, high returns on shareholder and less volatile than the business in general. I think that is making the goal for us to be an admired company, to create a great business, or however we face it. This is what we have tried to accomplish. Touch wood, so far, we're quite happy where we are. We're actually very proud. We're actually very proud. I think that concludes the presentation. If we have time for a few questions, otherwise, or what's the time plan?
I think we should end.
Wasn't it half past?
Yes.
Sophie, I want to ask you.
Okay. One question.
Come out. A few questions.
Who dares to say I have one question? We have Amos. We have a logistic problem because we have no microphones. We have one on the way. No? Yes, we have one on the way. Because my colleagues handling the microphones are helping you to the buses.
Did I mess the program? I apologize.
Yes. As always, Lennart.
I always mess the program.
As always.
I do apologize.
Thanks. It's just really a philosophical question. Do you think a 10% IRR is high enough in your investments?
Most of our investments are much higher or IRR than 10%. As a threshold, it may be a good guidance, what we don't like to do. In reality, in the school book probably you ranked all the investment opportunities from high to low, and then you cut something in between, and then you try to do everything over 10% in this case. Of course, that's not how we do it. We do it for a lot of other reasons. Sometimes it's combined with environment, sometimes it's a very long term, and we know that the IRR, as we can see it now, is probably not that great, but it's something which is really fundamental for the long-term success. Something is debottlenecking, normally rather 20% or 30% IRR. I'm not sure that that is a very, very important number.
I think we give it as a guidance that below that level we don't like. Maybe we should increase it, by the way. I don't know.
Thank you. Thank you so much for joining us today, and also for those who have watched via the webcast. For those that is now going to Kevitsa, please find my colleagues that will help you to the buses, and hopefully you will really enjoy this site visit. Many thanks.