Good morning, and a warm welcome to Boliden's Q1 2016 Earnings Call. My name is Sophie Jarnios, and I'm Head of Investor Relations. We are sending live from Herlevti today. We will also have our AGM here later today. We'll try to limit this call to 1 hour.
Today's presenters are our CEO and President, Lena Tevrel and also our new CFO, Joakim Gabrielsson, who joined us 1st April. There will be an opportunity to ask questions after their presentations. Lennart, please.
Thank you and good morning. Strong production, a good result and we are pleased with what has happened in the Q1. The detail is that we have arrived at 21% gearing, which is relates to our target of 20%, which is a financial strength, which would enable us to make an acquisition even at bad times, which coincides with the acquisition of Kevitsa. If we take us through some of the details of the quarters, revenues are severely hit by lower metal prices, SEK8.8 billion compared to SEK10.4 a year ago. And earnings as a result of higher production and good cost related development is €769,000,000 in the quarter compared to just over €1,000,000,000 a year ago.
The free cash flow was €210,000,000 and then the Q1 is now a bit weak, where we are building normally inventories and working capital and we have somewhat lower production for weather reasons. The smelters did particularly well. All of our smelters are delivering good results and have had stable production in the quarter. Metal prices are significantly lower. And if you compare with the previous quarter with Q4, we see that the term or metal prices have been going up.
But at the same time, currencies have gone the other way around. And basically the strong result compared to Q4 is a result of lower cost. The global market is sliding or going sideways, I would say. I don't think we have major bad news, but we don't have major good news. The global construction industry, the most important segment for base metals have been developing reasonably well, whereas automotive sector or automotive or transportation sector has been slightly negative.
What is driving the market right now are news on or what is driving is news on closure of mines. In zinc, we have a fundamental positive picture with few new mines being built and low production in the quarter. In copper, we have seen the gradual sort of startup of many mining projects and therefore it's a more supplied market, but it's in reasonable balance also here. The nickel market is new to us. We're following the new strategy for nickel and we're, of course, going to be increasingly interested in that metal following the Kevitsa acquisition.
Here the inventories are very high, but production is lower than demand. If we look at the zinc prices, first of all, the long term curve is very, very stable. Some years back, we were forecasting very high zinc prices. Instead, we have got a flat development, whereas more or less all other commodities have been going down. And with a bit of good news in the quarter, we see on the blow up to the right that the zinc price has responded positively.
Copper, however, the long term curve is continuing slide downwards. We are down on the cash cost curves or cash cost support levels. And short term, we have also in copper seen a positive price development. Nickel is similar to copper even though it's more volatile metal and the swings from peak to troughs are more dramatic, but basically the long term slide can also be seen here. And we see on the blow up to the right that also nickel has responded positively.
Gold is one of the metals together with zinc, which has the best development, but actually silver is the very best, where we see the longer term very dramatic negative. But if you blow up the latest development, it has been a good start of the year. As I said, currencies have now in the Q1 improvement on metal prices, currencies have softened or Boliden's currency portfolio have softened and gone the other way around. And again, we have with the country mix or currency mix and the metal mix, we see a balance in the different commodities and currencies and the weighted index of both currencies and metal prices can be seen to the right and we see the Q1 improvement, the little positive to the far right of the curve. I mentioned that metal prices are down on the cash cost curves.
To the left, we see zinc and to the right, copper. The 3 horizontal lines are representing the cash cost of the industry, the average of the 90th percentile on the upper curve and the 50th on the lower curve. And we can see the volatility of prices. As we can see, we are not down on the lowest levels compared to cash cost, but we are on low levels. And we think that it's too early to say that the recent uptick is a new trend, but we think it is rather a volatility around the price floors.
And we would need to see more fundamental news on the demand side before we would believe in any stronger upward trend. If we go to the business areas and start with the mines. Earnings are, of course, hard hit by lower metal prices. Earnings are down to half of a year ago and CapEx is slightly lower. So continue to have a reasonable or quite strong or big CapEx spend.
We see the trend line going down. We were in Q4 on just marginal positive results. And compared to that, of course, we're quite pleased with the EUR240,000,000 even if it is not a very big number. Production was good. The seasonality lows in Aitik were, I think, expected by you and certainly not a surprise to us.
Gartenberg was doing the 2,500,000 ton pace, the full capacity of the project, which was finalized last year. And the rest I think I covered in my initial comments. On production, we see the milled ore production, the throughput on the bars and the metal content on the line. As we can see, we are up on a quite good level on copper, even though it's a seasonal low there. In zinc, we have seen good production in all the zinc mines.
Tara has had strong development with new developments and a good sort of the organization well in balance after the reductions we have done and other adjustments, other action plans. Also worth to note is that Buliden area has delivered a lot of zinc in the quarter and has had a very good result. On the smelter side, across the board, good production. I think the headline for the report is good production in the smelters and stable processes and that's certainly true. We have a result of $655,000,000 compared to $680,000,000 a year ago and $580,000,000 in the last quarter of last year.
We have improved process stability, action plans in Rundshire is paying off. Koccola is doing fine. Odda is somewhat weak. And the nickel strategy for Harajavalta is doing very fine. Also Baixo had a reasonable quarter.
We have higher costs than last year, which is mainly volume related. The good market terms are there, but even though it's slightly lower than last year and we are going to see the impact of slightly lower treatment charges, more or full effect in the Q2. We saw in the beginning of the year that we still had stocks and inventories purchased at the previous years, slightly better terms. In copper and zinc production, we can see it in a similar way, good throughput in the copper smelters and in the zinc smelters and good metal content, basically a flat development, but with more complex materials and some more better margin processing. And with that, I would like you, Hakan, to do your first financial presentation.
Welcome.
Thank you, Lennart. So I'd like to start by giving a brief overview of the Q1 financials that we just published. So looking then at the first slide, EBIT excluding process inventory valuations reached SEK769 million. Now this was a quarter with good profit levels in smelters. It was also a quarter with a nice improvement in mines compared to Q4.
Further down on the slide, free cash flow increased this quarter to just over SEK200 1,000,000. If we then move over to the next slide, I go into a bit more detail where the result came from. So this is a comparison of this quarter with Q4 of last year. Metal prices improved over the quarter and even if a dollar is weaker, we have a net positive impact of close to SEK60 1,000,000, primarily it's zinc. But in general it was a good development.
As Leonard also mentioned, the effect of new treatment charges for 2016 doesn't kick in fully in Q1. When it comes to volume, we have a negative impact of roughly SEK40 1,000,000. There are a few different things in there. AIPIC has often a seasonally lower production in the winter months and this was the case also this year, especially January saw cold weather and production was slightly hampered. We have also guided for slightly lower grade in Garpenberg in the Q1 due to some rock stability issues that we had towards the later part of 2015 that is also in these numbers.
And then finally there is a slightly lower volume of free metals in the smelter side. Cost control in the business has been good and process stability has also been good and that shows us a positive impact on the cost line. In addition to that, there is a volume element with slightly lower volumes that gives slightly lower costs. And then also in Q4 of last year we had SEK40 1,000,000 of reclamation costs that comes in as positive on this slide. All in all, it gives a net improvement of just over €170,000,000 compared to Q4.
Continuing then to the comparison of Q1 versus Q1. As you can see here, the main impact is that of lower metal prices that has had a negative impact of over SEK 600,000,000 on the income statement. Roughly half of that have been compensated though by higher volumes. So we've had good production both in smelters and in mines. And if we add back the positive impact of that good production and some variable costs related to that, we have been able to compensate for roughly half of the drop in prices leaving a net deterioration of just over SEK300 1,000,000 compared to Q1 last year.
Moving on then to cash flow, The cash flow, the free cash flow has improved to just over €200,000,000 which is a good improvement compared to both Q1 and Q4 of last year. I think there are 2 main points I'd like to highlight on this slide. Comparing with Q4, we have had lower CapEx. That is often the case seasonally that we have a bit higher CapEx in Q4 than in Q1. Comparing Q1 over Q1 last year, we have a better development of working capital that has helped us this year.
And those two items together with variations of profits that I talked about just recently explains the improvement in cash flow. Finally moving on to the last slide, looking at the graph on the right hand side of the slide, we can see that we have an almost 3 years period of gradually strengthening the balance sheet. We are now down to 21% gearing, which is close to the target of 20% that Len had mentioned. And it just confirms that the timing from our perspective of the Kevitsa acquisitions is very, very good. So with that, I hand back to Lennart.
Thank you, Hakan. To conclude and see where what's in the information we have given and going forward. First of all, Aitik will have a copper grade of 0.21% in 2016, which we have informed about. The Garpenberg will have grades of around 4% zinc and 120 gram per ton of silver. I think the cost action plans are going well.
So I think that's within the guidance we have given before. On CapEx guidance, we have seen said that we're going to be slightly below €4,000,000,000 in the full year of 2016 and slightly above that 2017 with the investments that we are gradually taking on now. In particular, we are investing a little bit more on in the smelters since we are earning a lot of money there and we have held back a bit the investments in the smelters during the years when we have expanded the mines. The planned shutdowns will have an EBIT impact in the smelters in the second quarter of about SEK 165 1,000,000 and they relate to Harrievaalta, Kokol and Ronnshare mainly and SEK 50,000,000 in Q3. The summary of this quarter is, again, we are enjoying the effect of a strategic position.
We are in mines and smelters, and they are going, as we evidently see, in different cycles. Today, we're earning most of the money in the smelters. Few years back, it was most of the money in the mines. We have base metals and precious metals. Today, the gold prices are going up, silver I mentioned, whereas nickel and copper are having difficult times and zinc also is quite positive.
Productivity, we have developed with our organic strategy, which has been more focused on developing our existing units rather than buying new things and justifying with a lot of tons of metals or something else. We are less ton focused and more profit and cash flow focused. Solid performance in the smelters, in all of the smelters, but also good production in the mines considering the slightly weaker seasonality. We have seen significantly lower prices compared to last year. And compared to the previous quarter, we have seen an uptick in prices, but which have been compensated or on the other hand, the currencies have been going the other way.
So taken together, a rather flat development from the previous quarter where we instead have had cost reductions. The Kevitsa acquisition was announced on the 10th March, not much more to say about it. We have had some initial contacts and discussions. We are looking at basically two things for Kevitsa to be a very good deal for us. We would need to have better nickel prices.
We think we are somewhere low. We don't know when it will happen, but we think it will happen eventually. The other side of the coin is, of course, what we can do ourselves. And we think there are improvements and the synergies are very good. We know all the equipment, all the processes, we know how to mine an open pit in the Arctic climate and so on.
We got the approvals from relevant or from the competition authorities. So that condition is passed. And we think that the closure of the deal or the paying and delivery of the deal will be on the 1st June or maybe 1st July, but the target is 1st June. And that concludes our presentation. Again, we are happy and with the result and development of Boliden, and we are prepared to take your questions.
Yes. Thank you, Lennart and also Hakan. We will now open up for questions. So operator, please go ahead.
We have a question from Alan Gabel from Morgan Stanley.
Just two quick questions on the cash flow side. So firstly, on the spending, the investments in Q1, the run rate appears to be far below the guidance for the full year. I guess there's some seasonality in that. Do we need to read much more into the spending of the during the quarter? Are you potentially signaling that we might come in below your guidance?
The second question is the cash tax during the Q1 continues to be below what we have seen in terms of the P and L tax. And this is also recurrent that we have seen in 2015 as well. Do you expect any reversal on the cash tax payments anytime soon? Thank you.
Okay. So we have given a guidance on the CapEx for the full year 'sixteen of just below SEK4 1,000,000,000 and that is a guiding that still holds. There is one element of seasonality in this, but there is also a few bigger investments that kicks in a bit more during the later part of the year. We talk about crushers in Aitik and some environmental investments in Wernheim. So the CapEx guiding of €4,000,000,000 holes.
And the second question I think was about taxes, right? And there is a timing effect there with preliminary taxes compared to final taxes and we will catch up over the next four quarters, so that the tax on the P and L and the cash flow statements even out.
Thank you.
Our next question comes from Philip Negoti from Avian Emerald. Please go ahead. Your line is open.
Yes. Good morning. Philippe Nigotu from ABN Emerald. I have a few questions. First of all, on the TCs that you indicated, they're not fully in the numbers yet.
For the mines, you do indicate that they benefited from the new terms. I'm just wondering, could you indicate to what extent the new TCs are in the numbers for the quarter? Is it for them, did they start in March? Could you give any guidance on that for both the Smotis and the Mining division? And then the other question I have is on Rinshka.
You indicate that due to the raw material mix, you had a bit of lower silver production, I believe. I was just wondering, are you flexible to maybe take to increase or change your raw material mix to maybe target a higher silver production for Q2, how flexible are you in that given also the sharp increase in silver price? Are you looking at that? And how much flexibility do you have in that? Those are my questions.
Yes. On the timing of thesis, you can say that probably twothree of the quarter was with old TCs and onethree is with new TC. And it has a full impact on the smelters obviously and in copper we are more sensitive to the TC terms than we are on zinc, where we basically have an equal plus and an equal or plus and minus in smelters and minus since we have approximately similar volumes. But in copper TC, lower terms will have a stronger impact in going forward. Count twothree of the Q1 was on old terms and onethree on the new terms.
When it comes to the mix and silver, I would say that the main thing with complex materials, what we try to do and our flexibility, we try and we are really this is a focal point for us to maximize the gross profit by taking difficult materials. That is coming through as increased TC. So the general terms of standard TC or copper and standard, certainly on copper but also on zinc. But in copper, we have a very large variation from different suppliers and different quantities. Free metals of silver, free metals of gold, free metals of nickel and zinc and copper depending on what you're looking at are coming in as vital elements.
So the visibility for you is not great here. We are working on complex materials. We are going to see variation. As you can see, if you follow the numbers, they are not swinging widely. But obviously, the standard thesis are just giving a piece of it.
The free metal piece you have information on before is you can apply a new metal price, but you don't know how much we are doing. So the metal mix performance is something we are pushing to increase the margins. Visibility is not fantastic, unfortunately.
Okay. But you do take obviously, I assume you do take into account the metal price as they are to probably optimize it as much as possible
if you so? No, I would say, of course, with a different metal price, the attraction of different concentrates will differ. But we are it's long transportation, it's long distances. And it's more to look at what are our smelters, what kind of bottlenecks do we have for different impurities. And if we are maximizing sort of our or maximizing the pre calculated gross profit against the mix of materials and the bottlenecks we have, That's the optimization game we're playing.
And it's very complex. And it's long term, I would say, maybe on 6, 9 months, what we can do on purchasing and feeding in and trying to maximize this value. It's a very, very sort of important part of the Smarter business.
Okay. Thank you. Very clear.
Our next question comes from Liam Fitzpatrick from Credit Suisse. Please go ahead. Your line is open.
Good morning, everyone. Three questions. Firstly, just on Tara. So the throughput was, I think, the best we've seen in the last 2 years or so. So can you just comment on how sustainable that volume improvement and cost improvement is through the rest of this year?
Secondly, just on Kevitsa, can you give us a bit of guidance on when you'll be able to guide us on volumes, costs, synergies, etcetera? And lastly, just on 3rd party zinc concentrate supply, Do you foresee any issues in securing supply? Are you confident that you're sufficiently supplied through this year and into 2017? Thank you.
On the first one on Tara, I think we should probably be a bit prudent here. We had a very strong quarter. I think fundamentally, we are going to be on this level. But it's not a good idea to extrapolate and think that we're going to take additional steps upwards. I think you should have a degree of prudence here, but basically I think it is fundamental improvements behind the strong Q1.
On number 2, on Keritsa and when we are going to give guidance, I think it will work something like this. Suppose now that we are coming in, in the summer, we have formed our teams internally now. We have put project leaders similar to what we do in other big projects. We are staffing up quite big org chart with what we can do and here is to give and take. We are also very eager to learn from what First Quantum have done very well.
So we are also going to have a strong listening sort of exercise and learning exercise. But if you look at the Kvitsa in particular, I think that this team will work probably in the 1st 6 months and probably some kind of idea, of a concept towards the end of the year is probably a first indication. And then of course, as we are going to follow and own the mine, we're going to have comments on the actual development. And the third question is the zinc supply to our smelters and we are okay there.
Could I just on the concentrate supply. So is it fair to say that you weren't taking any supply from some of these major closures that we've seen over the last 3, 4 months?
No. We are well supplied with long term contracts and some spot volumes, which may be at some sort of less attractive terms probably, but I see little risk. This is not a major issue for you or for us.
Our next question comes from Daniel Mehta from UBS. Please go ahead. Your line is open.
Hi, there. Three questions from me. Firstly, an operational question at Garpen Bay. You obviously flagged the issues of rock instability at the end of the 4th quarter, but your grade achieved in Q1 was actually pretty close to what you're guiding for the full year. Is that a better performance than you'd expected?
And therefore, should we be thinking of some upside risk to that guidance in terms of grades? Second question, just to follow-up on Alain's question on tax. You paid about SEK440,000,000 less actual cash tax payments versus in the P and L in 2015. In 2016, are you expecting to catch up, meaning your cash tax be in line with the P and L tax or catch up the deficit that you didn't pay last year? And then the third question, again, on the balance sheet.
You've got a bridging loan facility in for the acquisition. What's your preferred sort of route for refinancing that facility?
Okay. On Garpenberg instability, I think we are it's a bit of psychology, I have to admit, in Garpenberg. We are so focused on delivering everything according to plan and the whole culture here is we are going to deliver what we have said. So I think we were probably a little bit overly prudent on that guidance. But basically, the story, of course, was correct.
We had a collapse or a rock fall in one of those large stops. We had to back out from that and the other one was lower grade. But then we probably have been taking some higher grades in order to reduce the impact. And I think we have just done a good job. And the other 2, cash and tax questions, if you can take those.
Okay. So first the question about tax. I mean, the way it works is that we pay preliminary tax over the year and then it's regulated in retrospect. So we will certainly catch up the difference from 2015. The outcome of the 2016 tax payment, it depends on how the profit moves and what happens.
So it is a bit complex to predict, but I can confirm at least that we will catch up to 2015 numbers. When it comes to replacing the bridge financing for Kevitsa, it's something that we are looking at and we are investigating different options and we have nothing more to communicate at this point around that, but we will come back as soon as we have something in place.
Okay. Thanks so much.
Our next question comes from Frank Lanoue from Deutsche Bank.
Three ones for me, please. The first one on working capital. So I understand you're building up inventories as you usually do at this time of the year. But just seeing your receivables, which have been going up as well, how shall we think about that moving forward? When shall we expect or do you expect any release of receivables in the next few quarters?
So that's the first one. And the second question on Gattenberg, I know that you are trying to automate the process of the mine. So just kind of can you please provide us with an update? I think you're targeting an 80% automation. And how far can you go this year?
And what savings potential savings can you realize in that extent? And the last question on Kiliati, if you can just give us an update on your outlook at the mine?
At Aitik?
At Kililakti. Kililakti,
I'm sorry, the Finnish pronunciation. Okay, I follow that. If you start with the receivables, when do we get paid?
So that's a good question. So working capital, it moves quite a lot over the year. And as you say, we generally have a buildup of working capital in the Q1. At the current state, working capital is a bit on the high side. It's not extreme, but a bit over average for a year.
So we expect some positive cash flow from that during the later part of the year. It's difficult to quantify, but typically Q4 or sorry Q1 is not the best quarter when it comes to working capital.
On automation in Garpenberg, I think you should look at it. We have the highest productivity in the world in Garpenberg. And we wouldn't be there if we don't continue to push automation and productivity all the time. I think what you are going to see in Gripenberg is that and we see it also in IT for open pit application that we have a lot of suppliers, we have a lot of business partners who are testing out new equipment in our minds. And we have been raising our hands and said, we are prepared to take the technical risks together with you and push the limits and productivity forward.
It's natural for us to do because we are in a mining cluster here in Scandinavia with some of the big names like Atlas CopCor, Metz or Sandvik or ABB or whoever and global leaders. So they have a very strong interest. They often have their R and D base here and we have high cost, high environmental demands and a lot of other things. And we are taking the steps and lead here. What it will mean in Garpenberg particularly is that we are going to take steps forward.
I don't see any dramatic sort of quantum leaps here and that we suddenly are reducing headcount or cost or something like that, we are going to continue the continuous improvement kind of development. I think on the other hand that we may see improvements in other mines following Garpenberg's leading position in automation. We are seeing some similar things. We started to new technology with GPS like positioning, increasing the way in the Bulidin area. Now that is moved to Garpenberg instead and to all the other underground mines in Tara.
We are having a very precise positioning of everything, which is a fundamental for automation and for safety in the mines. So I don't think that we would like to sort of guide that we are going to take step functions. It's not going to be that development. This is continuous improvement in our mines and we have similar programs for the smelters. When it comes to Kyulakti, very strong production.
We are extremely pleased with the development the concentrator plant. We are extremely pleased with the mining and everything has developed very, very well and the sequencing and everything is going as planned. The weak side is the exploration where we had hoped with a yearly update of reserves and resources to have good news. But as we informed on the previous quarter, we are seeing the mine to the depth and there seem to be some kind of we believe there is some kind of slide and we don't know exactly which direction. So we are looking for the continuation of this deposit to the depth, but we don't have it yet.
So this is a disappointment.
Okay. Thank you.
Our next question comes from Christian Kopfel from Nordea. Please go ahead. Your line is open.
Thanks for that, operator. Just a few follow ups for me on Fekjon costs in the mines. You obviously delivered a better result this quarter than the last quarter, but still, as you also mentioned, maybe not that happy with the profitability in the mines. And we have seen from other companies in the sector, they are continuously working with taking down OpEx on the mine side. How are you proceeding with that from now on in terms of operational expenditures?
I think it is important to say, we were not we have not been in a crisis mode in Boliden. With a continuous improvement program with the new Boliden way with what we have done over the years, we have been in good cost positions and we have not been forced to do very dramatic changes, which are, in my opinion, almost always value destroying. We are working on continuous improvements. And on the cost side, we have a very successful procurement activity where we are we were on the board meeting yesterday talking about the results of procurement and it's going very well. We have an inflation in or deflation in the group, which is on maybe 1% today, which is good, very good considering that we have imported inflation with the weaker currency, if you compare it with a year ago or with a stronger dollar to the Swedish krona and to the euro.
So I would say that we are developing the cost side positively. We are doing our programs like Tara. We go from 700 to 600 people and things like that. But basically, we are continuing more on a continuous improvement rather than to do very dramatic sort of steps.
Regarding what you said on group cost deflation of approximately 1%, does that mean that the underlying cost deflation is a little bit higher than that then?
Well, it's again, you have to keep track. If you compare in our industry, you have to keep track of what are they what currencies are they talking about. Some of the big cost reductions are for companies in weak currency markets like Sweden, but doing the accounts in U. S. Dollars, of course, you have a huge cost reduction, which is just a currency effect.
I think that we have we think that we have a very good cost reduction development and it is including several quite big cost increases, some of them being tax related or tax related on fuel and sulfur for transportation fuel and so on. So we have many cost items which are going up, which we can't do much about, but against which we have a very favorable cost picture in general, I would say.
And finally for me, on the sensitivities that you provide each quarter, when do you think you will include the nickel sensitivity in the bridge?
When we are in the nickel, you can say that we are already in Harjavalta, but as soon as we have Kevitsa in the group, we have a significant smelter is a mixed picture. So the metal sensitivity is not that great and it's still quite small metal compared to copper and zinc. But when we have Kevits in the picture or in house, we are going to do it from day 1 basically.
Thank you very much.
Our next question comes from Ola Sodermaier from
Swedbank.
A follow-up question on Aitik. Can we expect a normal seasonal pattern production wise in Aitik over the coming quarters that is going to be quite up ticking or milled in Q2?
I think you should model the normal seasonality, yes. I think that we are put out a caution here that we have low availability, which means that we are probably more volatile in the next 7, 6 quarters or so than we have been in the past 2, 3 years because we do have a lot of sort of wear in some of the structures of the crushers. So slightly more volatile, but I think the guiding is good what you're doing. If I would recommend our analysts is to go on a normal seasonality, absolutely.
Okay. Thank you. That's all.
Our next question comes from Olof Gleim Maag from ABG.
You mentioned a new nickel business model, which is part of your success in smelting business in Q1. You've talked about this one in the past, but could you please repeat what's that about and possibly also quantify that effect?
We have been in Harjavalta. First of all, Finland, the more east you go towards Norils nickel in Russia and the further you are from zinc copper in Sweden, when you're going East, it's coming more nickel in the copper and over in Russia, it's pure nickel. Because of that, it's very natural that our copper smelter in Finland has since many, many years also a nickel smelting side. And so it's a copper and nickel smelter in Harjavalt. We have until the well, mid last year had an exclusive cooperation with Norilsk Nickel.
And we have been toll smelting for them. It means that Norilsk owned the concentrates delivered to us. They owned the metal and we delivered the nickel back mat to Norilsk and they owned the material through that whole process and we did the smelting against the fee, so called the tolling fee. From the 1st July of last year, we have adopted we have a business model which is identical with the other smelters. We are buying concentrates in the market.
We're selling the nickel product to the market. And we have discontinued this cooperation, long term cooperation with Norelska as we had it. So the impact of that is that we own the inventory and nickel is expensive and therefore it's about what did we guide, 500,000,000 or 300,000,000 as a result of us carrying the inventory. And we have the margin, which is higher when we own sort of the business entirely ourselves. And so now we are having from 1st July, we have the smelter business model identical to what we are doing with copper and zinc.
But we had as a group an anomaly because we had 0 internal feed from mines. And with the Kevista acquisition, apart from all the other synergies and reasons for that acquisition, we will have a good internal supply also of nickel. So over the sort of 12, 18, 24 months from beginning of or middle of last year until the integration of Kevitsa, we have added fully a new metal even though the metal has been in the portfolio as a tall business since many, many years. I think this is a very nice organic step by step development into a new main metal.
And is it possible to quantify the Q1 effect from all of this?
Absolutely, but we refrain from doing it because we are we nickel is not a very liquid market. And therefore, we are somewhat cautious in giving too much information for commercial reasons. But it's a good deal and we are successful in it. It's contributing to the Harjavalta strong results. It's not making the result, but it's a nice contribution for Harjavalta.
It's also a nice little contribution to the smelters and to the group.
Our next question comes from Jan Malberg from Kepler Cheuvreux. Please go ahead. Your line is open.
Thank you. Just first question on the metal price and terms on the Mines division. You had SEK 100,000,000, so positive effect. Can you say it to any month after month of arrival effect included in that?
Let's see. Do you, Sofia, have the Myanmar effects? I think it is relatively modest right now or do you have it?
It's relatively modest. There is something in there, but it's relatively modest.
Okay. And on Aitik, you talked a bit about the volumes for this year. I think you indicated that you will be at around 36,000,000 to 39,000,000 for the next couple of transactions for the 'seventeen. Is this still the view from your point?
Your line is a bit poor quality. But I think the guidance on Aitik, what have we said there, Sofine?
Yeah. We have no specific guidance when it comes to mill tonnage for Aitik. It's only grade wise for 2016 'seventeen.
Okay. And then just lastly on Kevitsa first quantum, we have a new technical report. Do you think that the grade guidance, volume guidance that we're in this in there is fair to use in our estimates for Kevitsa going forward?
We don't have any other well, in the due diligence, we were going through the database there, and we believe it's good quality. And the technical report that came after is really what we had in the due diligence. So yeah, I know that they are slightly low in Q1 for reasons, I don't know. But I think the mineralization, we have good control of.
Okay. And then just last on Bolin area. I know that generally volatile both throughput and grades there, but was there any structural change in the higher throughput this quarter or was it just a typical effect?
I can refer back to the Board meeting of yesterday. It's interesting where we have been sort of very, very much talking about the Garpenberg and the success of that project. Behind that project, we closed down the previous the previous concentrator in Garpenberg. And we took some of the used equipment and moved it up and replaced some old stuff in the Buliden area. So we have upgraded the quality of Buliden gradually.
It's not changing the world, we have not been changing the nominal capacity, but the process stability have been improving. And I think that part of this may be there for to stay. I certainly hope so. But then again, we have 4 mines supplying 1 concentrator and it's the campaigns because we are doing batch production coming from Marlin and sometimes Krieberg one at times and Kankbergen and Rheinstrand. So depending on what mine we are processing, it can differ quite a bit.
Now we are trying to even that out so we don't have big swings in the quarters, but fundamentals are quite volatile with the difference in materials we are processing.
We have a question from Johannes Grancilis from Handelsbanken. Please go ahead. Your line is open.
Yes. Hi, everyone. Most of my questions have already been answered, but a few ones left. The interest rate here is very low in Q1, 1.3 percent, I believe, or something. How should we view the interest cost here going forward?
And then how are you taking on slightly more depth here because of the Kevitsa deal?
Okay. The interest rate, I think you should model with a slight increase when it to following the Kevits acquisition. Since we're still working on the check out financing, we cannot give an exact guidance, but typically we will have a slightly higher interest cost.
So nothing materially higher anyway?
Nothing materially higher.
Good. There has been some major movements obviously on the FX here. When you bought Kewitza here a few weeks ago, did you fix the dollar SEK ratio in that transaction already done when you did the transaction of SEK712 1,000,000 or how should we view that?
That is nothing we have disclosed. We have obviously, that is something that has been on our agenda and we have not disclosed how we handle that.
I think we can do. I think we actually can do. I mean, we have we are exchanging the currencies gradual from the point when we agreed to buy. Of course, there are risks that something comes up and it's not finalized. But we are we have a fixed part of that exchange or currency so far and we're going to continue sort of gradually to do it.
So what you will see in the end of the day is some kind of sort of averaging out in the period, and you will be approximately right.
Okay, okay.
Good to know. And the final question is on the P and L items here in Q1, there's a pretty high number, internal profit eliminations, euros 100,000,000 euros That is usually up also when metal prices moves up. But is it fair to say that a large part of this negative 100,000,000 will be reversed in the second quarter, everything else equal?
The metal price effect will stay as long as the metal price will stay there, but the inventory movement will we have an increased inventory. And if for example, the previous year is repeating itself, we're going to probably tap out some of that working capital towards the end of the year or in the following months. But I think basically it is a seasonal low in December. So the modeling is sort of on this level and then probably a slightly better development in the end.
But the internal profit, the minus SEK100 1,000,000 that you referred to, that's mainly relating to higher metal prices in Q1?
Yes. And since metal prices is up here in Q2, about the same magnitude perhaps we should see maybe another minus 100 and then it
metal prices stabilize.
Yes. And we're not longing to the days when that will be a return, you see.
Our next question comes from Chris Wells from Pareto. Please go ahead. Your line is open.
Good morning, Jones. Good morning to you, Sophie, too. Just a quick follow-up question on the smelters. Good stability. Can you give us an indication of an indication of the stability we've seen in Q2 so far?
And also then, can we get a bit of a split on which smelters we're going to see maintenance on this quarter, please?
On guidance on stability, we I don't think we don't have much to say. I think the sponsors are running well and that's the situation we have. So basically no news or good news. We are on a good level and no new information on it. On the maintenance shutdowns, it's €165,000,000 in EBIT effect in the Q2 and it's Harjavalta, Kokola and Red Share basically.
And then we have a little more in Q3 basically order. All of that is in the presentations or in the report.
Brilliant. Thanks.
There are no further questions at this time. Please go ahead, speakers.
Thank you. Thank you so much for joining us today. Our Q2 report will be published on 19th July. Thank you.
Thank you.