2016 Earnings Call. My name is Sophie Jarnius, and I'm Head of Investor Relations here at Boliden. Our CEO and President, Lena Tivrell, will run our audience here in Stockholm as well as via the telephone conference. Solana, please.
We are very pleased with the results. And again, it's a result of the strategic positioning with mines and smelters. For copper, it's difficult for nickel. Zinc has been improving quite a bit. And if there is a very good position, it is to be in mines and smelters.
And at this time, we're
SEK 1,300,000,000, not including the process inventory revaluation, which is up from SEK 1,000,000,000 a year before. And we are very pleased with that level. It has been a result of improved market terms, not so much on currency this time, but more on metal prices. And the mines have excelled in several areas. And I think it is impressive given that Aitik, some disturbances in the zinc smelters and we had maintenance shutdowns in Q3 as well as the previous Q3, but it's minor compared to the previous quarter.
The cash flow was not very good, and it's due to sort of variations, which are of a quite normal nature. We're saying slow demand growth, and you should probably more look at growth than slow because many commodities are seeing a negative growth in the global opening mines and the impact on copper where the big wave of investments that resulted in new mines a few years ago and continues to increase the supply, continued risk for copper price. The nickel side is very depressed even though we have seen some recovery from extremely low level of zinc here. And next slide will be copper, and you can compare the flat period over most of this diagram for zinc and then a decline and then a quick recovery up to the reasonable levels we have seen for some years. If we compare that with the copper, we can see a long decline instead of those of you who are studying very long term or very old traditional patterns, see that zinc and copper are sort of moving very few new zinc mines having been built.
Nickel. I read sometimes, well, wow, it's a very strong recovery for nickel price. Yes, that's true. You can see it there on the very bottom down. There is a nice recovery.
But I tell you, it's very shaded area behind, which are going down. And fact of the matter is demand for nickel is quite strong. Supply for nickel is quite weak, but there is a huge inventory having been built up over the past years. If we this is a somewhat busy slide, but what it's showing is the lines are showing cost level, the cash cost average for the industry or cash cost for the industry, the SEK 90,000,000 at a profit on the yellow line. On the red line to the bottom, it's half are going with EBITDA loss and half with EBITDA profit.
And the vertical lines are showing the up, the highest price, the lowest price for the different years and the average with the triangle. As we can see, now we are at 2,300 or €2,000,000 on low levels. No doubt, we can see lower copper prices on very short times. But as an average, it's very depressed price in copper. In nickel, well, it speaks for itself.
I say below 10,000 are impossible levels for nickel. And we were there. We paid actually Kevitsa a day when the nickel was 8,500. Euros Not a good night sleep, but we are above 10,000, which is a miserable level, but better than that. Gold and silver have developed well.
This portfolio development, the currency positions on the darker blue on the left diagram. We have the sorry, on the lighter currencies on the darker side and metal prices on the light blue line. As we can see, we have had a quite stable currency situation for some time and the later, what we say now, improved terms are coming basically from metal prices. I would like also to say something here. We had a Board meeting yesterday.
And as I do time to time, I show a diagram with all the nations had supplying copper. We are right on the middle. So we have a favorable currency development, which is not changing our competitive position. It's exactly or almost exactly, it's a say above or better than the average for the copper industry. In zinc, it's we are better than the average because a lot of zinc is coming from China and China is linked to the U.
S. Dollar. So there we are slightly better than the global average. And in nickel, it's also there we are in Finland with Kevitsa and we are also there right in the middle of the total of the 2 is the yellow line here, so the weighted average of currencies and terms to the right, good development. In mines, earnings SEK 800,000,000 and a little more compared to SEK 260,000,000 a year ago.
And we had 600,000,000 in Q2. What is encouraging here, I'd say this Garpenberg is continuing to excel. It's a phenomenal investment to do zinc and silver with its timing. And the mine is really a good mine regardless. I mean, it's an almost perfect project at a good timing.
But we have some other good news, and I would put my finger on Kevitsa, which is doing a good profit at this miserable time for nickel. Now it's a slightly light or soft ore, which is processed quite easily compared to the average in the mine. So there are a couple of sort of good things with the period. But I think all in all, you see a very encouraging development. The other one is Tara, where we have had a good development over the past sort of several quarters with a year or 2 years ago, we reduced manning, we had difficulties to hold up the volumes, but now we have a good development right now.
If we look at the throughput, the mill throughput on the bars and the metal content on the lines. We have to the in the copper and in the copper we have with and without or a pro form a, the lighter colored top line there. But as we can see, the throughput is probably nothing to write home about. In copper, it's a normal kind of throughput, but grades are improving and mix is improving. So the average grade is improving.
The content of metal is increasing, both pro form a and as reported. In zinc, it's a bit the difference. We have slightly lower grades, but very good throughput. And therefore, the bar is high and the metal content is the best quarter ever for Kevitsa. I think we the team in Kevitsa have been welcomed in integration teams.
I think the cooperation is going well and basically we are feeling good about the situation here. In Smelters, I would say the quarter has been sort of not so special. It's not bad. CapEx was $280,000,000 in line with or slightly lower than last year. We had improved market terms with the zinc TC following the zinc price up because we have the zinc escalators.
We have some disturbances in Kokola and in Oda and or at all. It's not good, it's not bad, but it's if anything, it's a little bit on the low side. We have high inventories, and that is due to a lot of mine. The mines have been producing very well. We have some disruptions in the smelters and obviously the inventories are piling up, which has to put in the plants.
So not so much to say about this. I think the positive note is OdaP 200 where we are.
So let's dive into the financials straight ahead with the financial summary on the first slide. I'm sure you've seen in the report that we have an EBIT, excluding process inventory revaluations, of SEK 1,300,000,000, which is a number that we're happy with. And I think you have to go back a few years to find a similar level in a quarter. That is roughly SEK 250,000,000 better than Q3 of last year, and it's just about SEK400 1,000,000 better than the previous quarter, Q2. You also know that we acquired Kevitsa in Ird.
We'll come back to that a bit more in when we talk about the EBIT bridges. I also want to highlight that process inventory valuation was positive in the month or in the quarter, leading up to an EBIT of just above SEK 1,500,000,000. Investments, capital expenditure was just over SEK 1,000,000,000 and free cash flow was low at SEK 91,000,000, as Lennart mentioned. I'll come back to that as well. So if we then move on to the analysis of the changes in EBIT between the quarters and then starting by comparing Q3 this quarter with Q3's primarily improved zinc prices of roughly SEK0.5 billion.
Volumes were positive, SEK 164,000,000 up. And that behind that, there is a slightly mixed picture. As Lennart mentioned, there are some nice good performance in mines with higher mill volumes in most of the mines and some production disturbances in smelters that has a negative impact also with lower free metals. Costs were up compared to last year. In mines, it's volume related.
In smelters, it's partially related to the production because they have been moving up and down a bit. Looking at the depreciation for Kevitsa, it's SEK 139,000,000 in the quarter. And for modeling and so on, that's a level I would use going forward. Comparing this quarter with Q2, the previous quarter, again pro form a with Kevitsa fully included in both, we have a positive deviation of SEK433 1,000,000. Volumes are negative.
We had less favorable ore mix in the Buliden area, which we guided for in the previous quarter. And due to the stockpiling up that Levitt mentioned, largely zinc, costs were lower, with almost SEK 300,000,000 compared to the previous quarter. There is a seasonality in this. During the later part of the summer, we do have lower costs typically. We also had less maintenance in smelters in the Q3 compared to the Q2.
And finally, we took in I think you might remember that we had some positive one offs last quarter as well with pensions in Tara. And putting that back, it adds up to a positive improvement of just over SEK 400,000,000. Free cash flow is at a fairly low level of SEK91 1,000,000. And on this slide, you immediately see where the cash flow where the cash is tied up, and that's in working capital with just over SEK 1,100,000,000 tied up during the quarter. That is roughly onethree of that roughly is price and the rest is volume related.
And as you see also, it's primarily inventories. Well, we've had a very good production, the volatile situation in Aitik, where we've built some safety stock in Ramshir to guarantee good processes at that smelter. And then on top of that, there is some normal fluctuations that we see in every quarter. So if we ended Q2 with inventory levels that were below average, we are now above average. And that leads to a balance sheet looking like this with the gearing improving from 43% to fully stable as well with 1.2%.
So with that, I hand over to Lennart for some concluding remarks.
I sometimes talk about quality of earnings. And I think sometimes you get a result which is somewhat odd. You'll probably land where you should, but in a somewhat unexpected way. I think the quality of earnings are great right now. I think the investments we have done is paying.
I think the problems we talk about are well communicated before. I think that basically we have very few surprises. And when I say this, touch wood. But I think that we are in a stable situation. We have instability where we know we have instability.
We have stability in most of the places as we should. I think if we conclude and see where is this company going. First of all, we are in this strategic positioning with mines and smelters, base metals and precious. And I think we have invested now in slightly broader precious metals into the group as a result of Kevitsa, but also the strategy in smelters with more complex materials. So we are sort of dividing our portfolio over time slightly wider.
Right now, it's a good place to be in copper smelting. It's a good time place to be in zinc mining. Another time, it's the other way around. And I think that is our strength. We have not been going down as much as industry in general.
And this is very much the strategy of this company. We try to be less volatile than the industry as a whole. Good for zinc. It's risky for copper still. I think for TCs, it's looking good for copper.
It's slightly more it's going to probably be a good place to be also in zinc smelting. Aitik has volatile production. As you know, we have 3 places, 3 positions of crushing in the pit in this huge pit. And when something is down for repair or maintenance, we have to go to where the stations are open. We try to blast, so we have ore available in several positions.
And with an uncertainty of which crusher we will have to go to, we will pick ore from different places, and we don't necessarily plan that in advance. It means that the volume deeper in the pit, and therefore, we are guiding for better grades going forward. That's what I think. Garpenberg is some people are asking, are we going to get better? But we are this is an unbelievable work.
Garpenberg is delivering very strong results. And the good things here in apart from those, which are well known from before, so no news on the 2 big ones, are of course, Kevitsa and Tara. Both of them are Tara has been on a breakeven kind of situation. Tara is doing a good result now. Higher production volume, better prices.
Kevitsa, I think the average in the market the expectation is, well, hope they are not making a loss kind of in sections where the ore is softer than the average. But still, it's a good development. In smelters, we are we had a period of very big shutdowns and the quarter to quarter is having a big impact on that. We continue to have some disturbances in Kokola. We are also there.
We have been talking about this before. We installed some new equipment with certain advantages or with a number of negative impact. On Oda, as I said, we are well ahead of plan for the ramping up of or for the start up of the P200. And we actually did some test runs in already in Q3. And it's going to be exciting to see Q4, Q1, Q2 how it's going, but we are ahead of plan.
On the CapEx guiding, we are as we have said before, we are putting in more money in the smelters. We earn a lot of money in the smelters, and it's more rewarding or is it better returns to maintain and keep high productivity and high availability in the smelters when we earn a lot of money and during the times when profits were low. And the guiding for next year is SEK 5,000,000,000 where, among other things, the big crusher project in Aitik will take most of the capital payouts. And I think with that, Sophie, are you taking over to the with the Q and A?
Yes. Thank you, Lennart and Hakan. We will now open up for questions and we will
Olof Kjellmarck, ABG. So Dal Collier. Congratulations on a strong result. Regarding Kevitsa, you said that depreciation was unusually in the quarter, but you didn't really explain why. Is the new depreciation level that you're guiding for a reflection of the CapEx?
What we said is that looking back at the pro form a periods, while it was before it was acquired by us, we can just see that the depreciation levels have moved a bit between the quarters. Looking at full year figures at that time, current stripping and the current investments. So I should plan for this level going forward.
You also said that the softer ore had a positive effect in that mining during the quarter as well as in Aitik. Is it possible to quantify somehow in terms of cost per tonne or so?
We have owned it for 4 months. So no, we have no chance to or no, I don't want to comment on it. It's only that as you see, it's all time high. It is going very, very well. And we know that part of the explanation for it is softer ore than the average in the mine.
What kind of CapEx do you expect to put into CapEx into Kevitsa to get it up to your standard?
We are going to inform some time. I think we are going to do it in together with the Q4. Most of equipment is fairly new and so it's well invested. It's not going to be a lot. The big investment is in the pushbacks.
The geometry of this mine is giving a lot of stripping in the first sort of 5, 10 years. And but it will ease a little bit as the years are going on. And that's a big number. That's a big item. Thanks.
Ulla, so the market spread the prices then, currency?
Well, given the present prices is absolutely an important sort of no one is misunderstanding what I'm going to say now. The nickel price is impossible to predict. I think it has a limited downside and a better upside, obviously, but that remains to be seen. I think that we are a bit on a better than normal everything equal. But then we hope to improve certain things.
So of course, over time, we hope to see bigger production, but more on that after Q4. The soft ore was a contributing factor, which you cannot plan to continue.
And I have to ask about Aitik as well. 9,000,000 tonnes in throughput, Is it on the low side of your guidance? What should we expect in coming quarters?
I said it cannot be below 9,000,000 or so. That's the worst case scenario. We are doing it for. When the visibility is low, the visibility is low. I think this is probably a level which you can probably count on.
Okay. Thank
you. Hello. It's Johannes Grunsel here, Handelsbanken. So my first question is on Aitik and your, well, guidance or guidance reiteration, 0.21 for this year is only 1 quarter left for the year. Should we be thinking like 0.19, 0.20 in terms of copper grade in the Q4?
Or can you help me there, please?
We have to be
In 21 for this year. And then we said 0.25, 2017 to 2019.
Right.
And we have also said volatility on this number. So it's a hard one to
Yes. But since again, since you have 9 months as an actual grade.
Yes. So somewhere, this lower period that adds up to the this year's guidance is there somewhere. So it's going to be mined. Is that going to sort of take something from the 0.25% or is it going to we have a volatility between the quarters here.
And then I have a question on the disturbances in the zinc smelters in the quarter. Is it possible to get a number on the impact of those?
On what?
Of the production disturbances like in Oda and Kokola. You weren't completely happy with it, it appears. At least you're mentioning it in the report, so it must be a negative effect of it compared to budgets.
Yes. Alist, probably yourself have modeled something slightly higher, and you should probably have done that. So your models, your analysis as an average are probably right. We have under delivered a bit on this, not a big way, but some.
And then my final question is on ODAP P200. How should we be thinking about that for Q4, Q1 next year, etcetera? How much could we expect the positive impact to be from this?
We have been through many quarters where we are some years before we start up major projects. And we're always saying on the 1st June or something like that, we start and then we're stand because the startup is always a period of start, stop adjusting. So when you are in it, we are we started the test runs. We will continue with the test runs. If everything goes fine, we are going to be a lot before plan.
But that's not what we're telling. We're saying that we are ahead of plan and it's looking good. In the second half of next year, it's definitely going to be producing probably before.
Thank you.
Do we have any more questions from Janmar?
It was
a fairly small number.
Okay. And then you mentioned on Aitik, the higher grades that you're going deeper in the pit. Is that any effect on the costs looking into 'seventeen, 'nineteen? Or is it kind of flattish on that? No.
And on Kyrlaqti, you have gradually increased the production in the last few quarters. Is the 200,000 tonnes levels sustainable? Or is the one off this quarter?
Kirlikti, the big news there is the update of the reserves. And with the present reserves, as you know, it's short life of mine, and we are going to come to an end of this mine unless we find
Okay. Operator, do we have any questions from our audience via the telephone conference?
We have the first question from the line of Alan Gabriel from Morgan Stanley. Please go ahead. Your line
And would you be comfortable in saying that they are now far behind us? And the second question is on your zinc exposure. Given where zinc prices are at the moment, it's surprising most people to the upside. What options do you have within your portfolio to just capitalize on those higher zinc prices in terms of expansions, life of mine extensions or life of mine changes? Thank you.
The first question on disruptions. We installed some leaching equipment in Kokola some year and a half ago. And we have had certain disruptions, difficulties with the silver recovery and this hot acid leaching equipment. It's not a major thing. It's not a major thing.
And I really want to stress that this is not a big thing. But hadn't we had that, it would have been probably a very good sync up. What could we do about that? Well, have a look at what we already did. It's a super thing.
We invested in Garpenberg. We have better production than and for a long time in Tara. So and we have P200 with zinc escalators in the smelting coming. So we are doing everything to be on this wave of a positive macro on zinc. Could we extend the life of Tara?
That is a big question. And I would say probably not because we have a tailings dam, which is full and without to fail a little bit higher and do a little bit more and find whatever we can. But I have no news on this one. And of course, Tara's life of mine is coming towards its end.
Thank you, Ernest.
I would say, of course, there will be the answer to your question lie in the big investments we have already been through or in the case of P200 is ahead of us. And the rest is really the reserve and resource update after Q4.
Understood. Thanks.
The next question comes from the line of Philippe Nergato from ABM AMRO. Please go ahead.
My first one is on Garpenberg. And I was wondering, you were guiding for the silver grade to be at 120 grams per ton until the end of 2016. I was wondering if you could give also some maybe if you're willing to give some guidance on how it will look in 2017. Will it be largely in line with the average reserve grades? And then on Kevitsa and Boliden area, you already touched upon the soft ore.
Is that something that we'll still see in Q1?
Okay. Silver in Garpenberg, you have the guidance there, right?
Yes. So it's 120 gram per tonne for until 2017. So it includes also 2017. And zinc is 4.5, we have said. And I can also perhaps answer with Tara also the great question there.
Well, we have said the zinc rate, we plan for that to be lower than what we had now had in Q3, and that was 6.0%. So something a bit lower than that. And
on the store,
We are in a period in Boliden area. We are in a period we have one concentrator where we get feed from 4 different mines. One of them is an ore which are undergrade and undermine and high grade. The mix here is means that when we do Marlyden, the open pit, we get a lot of throughput, but not so much metal. When we reduce in Marlyden, the throughput goes down because it's harder ore, but we produce more metal.
And that's why Boliden is not so easy to estimate for you. We have said before, well, the good news, it's a very small area, so it doesn't impact that much. Well, today, it is impacting quite a bit because we are making a lot of good results there. But this is a situation behind the guidance on when we talk about Boulliden sort of soft ore, it means more of the open pit?
Sorry. I didn't hear the question. Could you repeat that?
So that will be something that we'll still see in Q4 as well, the lower grade but with easier to mill or that was in Q4 as well and possibly the start of 2017?
I would say for the Boliden area that was for Q3, you can say more or less isolated. That was due to us having a more extensive maintenance shutdown in Rehanstrom and then also then replacing Rehanstrom or with Maurylid and Or. We have
normalized in Q4. Yes.
Okay. Okay. Thanks.
The next question comes from the line of Frank Engano from Deutsche Bank. Please go ahead. Your line is now open.
Good morning, gents. Good morning, Sophie. Thanks for taking my questions. 3 for me, please. The first one is on the premium market.
So I've seen you have a negative contribution of the premiums. And what's your sort of outlook for the rest of the year and as we go into 2017 on the premium side? The second question is on working capital. So I suppose the big the negative impact mainly came from inventories, but how should we think about the working capital cycle as we move on into Q4 and the Q1 of the year? Do you expect any receivable or payable collections that could help to get back to sort of normalized levels?
And just another follow-up on Kevitsa. The soft ore, do you expect it to last longer into Q4 as well?
On premium, I would say that spot premiums is in line with the macro description we have. It's low premiums in copper and it's better in zinc, which is probably an indication of the price sentiment. But it's also a lot of seasonality and summer shutdowns and inventory movements in the market and so on in smaller in the European markets and so on. So hard to say, but that's the general picture. And then it was a balance sheet thing, right?
On the working capital, as I said, we are clearly above average levels in inventory, and we have fairly big fluctuations between quarters. But over time, we should work our way down.
And when it comes to the soft ore in Kevitsa, I mean, when I'm saying that we have soft ore looking forward, be careful we have soft ore, it means that it's probably not going to continue in exactly this.
Yes. Good day, gentlemen. First off, just following up on this inventory or working capital question with the inventory being the main driver now during this quarter. To what extent is this sort of an isolated situation for this quarter? And to what extent is it more structural relating to the unstable production at Aitik?
For a change, I take the balance sheet question. Can I?
Yes, please go ahead.
The answer is short.
Fairly soon then. Second question is on Aitik and the you have your guidance there for higher grades starting in 2017 and then going on until 20 19. How steep and how clear cut should we expect the move into higher grade areas to be?
We're funny people because we're trying to keep it as stable as possible, but it doesn't seem to be stable. It's with the mine plan we have, we're going into the higher grades and hubs we are going to have several years of high grades. And once we have depleted the lower parts of the pit, we're going to start up again or higher up with lower grades. But that is a pattern we have and any more detailed guidance we haven't given and we don't intend to give either because of the volatilities we have been talking about.
All right. And finally, also on Aitik, if you could perhaps elaborate a little bit more on the crusher situation and especially the investment, because I understand you're going to be making the investment next year and then we should expect them to be up and running 2018. Is that correct?
On the bulk of it, right now, if you go up to Aitik, there is a huge construction, huge building project. I think right now, the concrete and it's going up. So the walls and the fundamentals of the big machinery is going to be done pretty much before the winter comes. And then we will have some ceiling, and we can start continuing to work for the mechanical installations. And the mechanical installations will the bulk of it will be delivered next year and the bulk of the payments will be sort of with the investments or with the deliveries and sort of installation on-site.
Then we have a long period of installing all the piping and electricity and everything else. And then we have sort of a ramping up. And mid of 2018, we're going to be in production.
All right. Thank you very much. Those were my questions.
The next question comes from the line of Jason Fairclough from Bank of America Merrill Lynch. Please go ahead. Your line is now open.
Good morning. Leonard, I've got 2 questions for you and let me just do one at a time. The first one, this hockey team you support, Collefteo, I understand they're running 9th right now in the Swedish league. And I'm just wondering, do you think you should be switching your sponsorship to Malmo next year?
It's Parq. My our strategy is to be sort of diversified. So to get or to hedge a bit our total consolidated result, including sports. We are not going to change our sponsorship. It's a great team.
Okay. All right. That's good to hear. Look, the other question for you is on M and A. I'm just wondering, do you have to wait to bed down Kevitsa before you can think about more M and A?
And in particular
I think that we have been we are prudent in taking on a lot of acquisitions. We bought Kielylahti 2 years ago. We bought Kevitsa now and or a year ago and a little, and now we bought Kevitsa. I don't think you plan this way. I think you should more say that Bulid and they are the kind of people they're not buying when the metal prices are high.
So they are but then we have also said, which is the most important, we have a capacity in the financing or a financial capacity and a people capacity. We are pretty busy now with Kevitsa. We are pretty busy with all the other projects. And I think that we are not exactly driving acquisition, the acquisition track very, very hard. But we are there.
We are active. We are keeping our eyes on everything that would be of interest for us. And then I don't comment on any specifics.
Okay. Thank you very much. Sorry, Haagen.
The next question comes from the line of Fraser Jamieson from JPMorgan. Please go ahead. Your line is now open.
Hi, thanks for taking the questions. Dollars a tonne, so a very big relative to the benchmark rates this year. I was just wondering if you can maybe give us some context around your conversations with customers, etcetera, and how you're thinking about the benchmark rate. Just wondering to what extent you have been able to start moving material through your own internal smelters and to what extent the performance of the Kevitsa material through Harjavalta has surprised you either positively or negatively. We've obviously talked about the mining side having been a bit better than expected.
So just some context on the performance through the smelting side of the business would be great.
On TC, I think that would I have very detailed information from our negotiations, I wouldn't And I think zinc TC is very interesting. Is that an indication of pressure on it? In a way, yes, but I certainly don't believe that is or I don't think at all that is an indication of where they're going to land. I am actually quite convinced it's no way near. But I think there might be an indication.
And I said right in the beginning that there is some risk on the zinc TC. However, the price escalation will or escalators will continue. So with a good price environment for zinc, I think the zinc sort of realized together with the price factor will be reasonable. When it comes to Kevitsa and Harjavalta, as time goes on and I don't have more information today than what we had before. We are going we have about half of Kevitsa's feed going to Harjavalta today or the copper is also going to run share or to a combine.
And that will over time go up to 100%, and it's going to take a couple of years before we're there. And when it comes to the processing, no, I there are no news on that.
Okay. Thank you.
The next question comes from the line of Robert Creddin from Carnegie. Please go ahead. Your line is now open.
Yes. Hi, Robert Keredien from Carnegie. I just have one question on Aitik. I mean, the guidance is now 4.25% grade for 2017 to 2019. That's, of course, in line with what you said before, but it's more precise, right, I think before you said that the grade would be above the average of 0.23%.
So my question is, are you more confident on the grade and grade development now versus before? Has anything changed, sort of positive or negative? Or is it just a way for you to be more precise?
No. I think that we have a very good control of the grades in the pit. What is happening is, of course, every year you have the long term sort of mine plan where you are going to mine at each time. Now this picture has changed because of the volatilities or the low availability of equipment we spoke about. Of course, when we have mined out something, we, of course, are slightly more precise when we are coming closer to the period of mining.
So no, I think there are no nearly the averages over time and the individual quarters will move around quite a bit, I'm afraid.
Okay. Thanks.
The next question comes from the line of Christian Kopra from Nordea. Please go ahead. Your line is now open.
All right. Thanks, operator. Good morning, everyone. First, just a quick follow-up on Itik again on the grade. You have previously have said that the underlying, say, call it, uncertainty of the grade is plusminus10% on Aitik.
Is that still relevant for the following 3 years?
It's probably higher, if I would say anything. If you talk about the short term volatilities, if it is on a yearly level, I think that's fine. But on a quarter by quarter, it's probably higher. I'm just taking it from the top of my head, but I would think so.
Okay. But if you're talking the 3 year period as such, if you look at in that context. I think
that's fine if you do your NPVs and so the valuation or the value there, the net present value, I think absolutely, that's fine.
All right. On Garpenberg, you have been producing above the nameplate capacity for a couple of quarters now. Does that mean that you expect milled volumes in Gatlinburg to come down during the next couple of quarters?
We have been we have had but who knows. I mean, the more quarters we're delivering, the better it becomes. But the guidance has not changed.
So do you guide for 2,500,000 tonnes for 2017?
Yes, absolutely.
Right. Okay. And then finally, for Q3, if so I understand this correctly, were there any one off, call it one off items in Q3?
No, there were no material one off items. Earnings, it's no surprises there basically.
All right. Okay. Okay. Thank you very much.
The next question comes from the line of Jitsind Dagold from Citigroup. Please go ahead. Your line is now open.
Hi, good morning. Two questions, please. Firstly, just on concentrate availability on the zinc side and TC realization to procure material, especially at benchmark terms? And secondly, just on taxes. For the current year, there's about SEK 100,000,000 underpayment, and there was over SEK 400,000,000 underpayment in 2015 as well.
Do you have more visibility on time line into the Q4 and potentially into early 2017 as well when this cash payment is expected? Thank you.
Well, I know that this is most of what we're doing is on benchmark. We have long term or sort of industrial customers with yearly agreements or long term agreements, which are sort of revised yearly. So therefore, the impact on the spot terms are limited. But we do have a because we don't want to be overhead, we don't want to sit there with we always have a slight little tranche of open metal to the spot market. So we have some impact on it, but it's not by a lot.
And then the balance sheet question.
Yes. On taxes, on the income statement, we have firstly taxes relating to this year and then we have deferred taxes. And on the payments, there are preliminary payments and final payments. So the only thing I can say is that over time, it will even out. But I think it's I don't want to
Can they be below income statement level for the whole year?
They could be, but they will catch up over time.
As there are no further questions at this point, I'll hand the conference back to the speakers.
All right. Well, we're happy with what happened with what happens at a time with very exposed or very If we are have a good time, it's going to be very, very nice. But it seems like the inventories are very long or very big. So it's I will or should probably finish by saying that the quarter was very good. We have some slightly big or positive surprises, some slightly negative surprises.
But basically, it's a very, very normal. It's a very typical and quality of earnings. It is what you see. And with those words, thank you very much for attending, and thank you