Welcome to everyone here in Stockholm for Boliden's 2016 CMD and also to those joining us live via webcast. My name is Sophie Jarnius, and I'm Head of Investor Relations and will also be your moderator today. We have a full program ahead of us with participation from our executive management team. There will be opportunities to ask questions throughout the event. Safety is a top priority for us here at Boulliden.
So please note that the emergency exits are located behind you and also in that direction. When we last met here in November 2014, our world looked very different. Coffee prices were at almost $7,000 per ton, zinc at 2,200. Our sector has experienced some challenging months since then, to say the least. I hope that after today, when our management has talked through their strategies on continuing to deliver strong and stable performance that you will find Boliden to be well positioned in this market.
We believe we have a strong message which differentiate us from our peers. Our CEO and President, Lena Tebrel, will now outline his plan for Bouiden for the coming years. And importantly, how the recently announced acquisition Kevitsa fits into that plan. Lennart, please go ahead.
Thank you. Very warm welcome to you all. It's amazing times in our sector, certainly. Bullieden is delivering strong performance at a time when most comparable companies are in big crisis. The theme of today is and tomorrow is stability.
I think that the most important what we can do in order to generate good values for shareholders and prosperous or a stable sort of long lasting success is to work on the organic growth story. The journalist was just asking me, Lennart, with Kevitsa and Kirillakti before that, are you changing your strategy? And I said, no. What we are doing is to buy and make sure that we have the geological conditions for continuing our technology and our development, which is essentially organic growth. We are today going to talk and Sjostin will talk about the smelters and why we work with complex materials.
We can get better prices, better margins if we buy complex materials. And we are well equipped because we have been in complex materials since ever. We are doing also investments, the silver recovery in Finland. The nickel strategy that we changed last year was the first step in a new nickel strategy where Kevits obviously comes in. And the investments in the run share where process development is continuing on the 3rd year of this action plan and the debottlenecking programs we do at Oda, which we will see tomorrow.
In mines, of course, if there is a weak spot that you are have been seeing or feeling over the recent years, it has been the lack of availability of some of the equipment at Aitik. Mikael is going to take us through why we have spent some more time in trying to delay some investments, make a focus change here from volume to availability of the equipment because it is the lack of availability that has sometimes created some problems in Aitik. Mikael is also going to talk about technology development, which is certainly the foundation for organic development. And we are going to and I'm going to give some additional ideas on why we bought Kevitsa and allow for a Q and A on that one towards the end. If we look at our profile, we are in the Nordic countries, a low risk area, and all our units are quite close together.
Many other companies have the assets spread around the world. It's in an area where copper, nickel, zinc is available. But the more east you go on this map, the more nickel you find. And with a new with a more focus on Finland, it's natural that we expand our strategy in nickel. We have world class productivity in several assets and in certainly, Garpenberg and Aitik having the highest productivity in the world.
And we have a balanced mix of metals with base metals and precious. If we look at the focus in parallel with the organic growth, of course, safety and environmental performance is a foundation of everything. We do not believe that environmental performance or safety is in contradiction to stable production and low cost. On the contrary, by driving the safety issues and aspects of the industry or of us and the environmental performance, limits reduces the risk of untanned stops. And we think that, that is a way to further enhance the corporate culture and the productivity development.
The strategy for value creation is the integrated business model. This year, we are or in 2015, we have been earning most of the money in the smelters and less in the mines. In the years or during the years before that, we were typically earning more in the mines and less in the smelters. We think it is a good balance over the cycles, but we have significant synergies between the two as well. For example, in the case of Kevitsa, I will talk about that.
We think that operational development step by step is important. We think that the technical development and execution is vital. And finally, the corporate responsibility in a broader sense is very important for us. As an example of the long term development, we can look at the total shareholder return on 1, 3, 5 in 10 years. Of course, with the latest decline in the metal markets, it's on an absolute scale, not very good numbers in the most recent times there.
But we are outcompeting our industry in okay, what about the most recent development? So let's have a look at 2015 and what we have accomplished there. Well, first of all, we finalized the Garpenberg investment. I think Garpenberg is if anything is making me proud, it is this project. We did SEK1.4 billion in EBIT last year, which was the 1st year of operation after the SEK3.9 billion in investment.
We acquired Kule Lacti in Finland. We took a very big strategic step in Harjavalta, the copper nickel smelter where we before regarded nickel as a byproduct, we did for someone else. But now we brought it in to a family as one of our main products. And what we have done or presented last week, of course, is another step in the nickel development. ODA expansion, it's ahead of plan.
So we Sjosten will tell that we are probably going to be in full speed earlier than we previously announced. And basically, we're very proud of the development in Oda in general, where we also have several steps coming after each other. The action plan in Ronnskar has been going for a while now, and Kjellstein will talk about an update there. It's on plan. Now I think the weak spot here is the production issues we had impacting Aitik's stability.
And certainly, we are going to do something serious about stability in Aitik now. Mikael will talk about that. And what about the short term development? And I said that we are quite pleased with the development. Well, it certainly didn't come from metal prices.
We see the zinc prices and copper prices in the quarters of last year. Was hovering zinc on a rather stable level before we came into 2015, but then it was down and down and down and down, and it continued into the beginning of this year when it started to look really ugly for this industry. Since we have seen an uptick in nickel in zinc, as we have predicted. Nickel sorry, zinc has the best fundamentals and should, in a better environment, be the first to recover. Copper has been going down on a more long term scale and continued also down into very low level in early or in January, but has also recovered.
So basically, it's not the zinc prices or copper prices that has created the results, which you can see here. We have revenues going up from the previous year, 2015. We had earnings on all the different levels improving. Also cash flow was considerably higher 2015 versus the year before. And we reduced the leverage or the debt equity from 35% to 23%.
And what happened here? Well, if it wasn't prices, it must have been something else. Well, the terms for smelters after following in time of too big investment in mine capacity in the world, the terms for smelters improved and the business model enjoyed the advantages there. But we also had this phenomenal project, Jarpenberg, with a big profit. And of course, we had luck with currencies.
And when it comes to currencies, we share that luck with most of the comparable companies. The whole zinc world and copper world, where they are on the global map, have similar positive currency movements as we have had. If we from the short term go to the longer term development, what are we trying to accomplish in this company? Well, first of all, we are convinced that the metals have a very good future. About half or almost half the world are on the standard of living below the level where China started to drive the commodity sector.
So I think the long term perspective is very, very nice, even though the short term is a bit more gloomy with the results and the news flow from China. Let's have a look at the most fundamental factor first, the metal prices. Copper and zinc, The line diagram at the bottom are indicating or are showing the cost level of the mines in zinc and copper. They are on the 50th or the 90th, 75th and 50th percentile of cost level. So this graph is when the price is here, 50% of the mines in the world are EBITDA negative and 50% are EBITDA positive.
On the upper line, 25% are negative and 75% positive. So we can see that the cost level has been continuing on a quite flat level in zinc, but we have seen quite big increases in copper. This is relating primarily to energy prices and currencies. The vertical lines are the volatilities, the maximum and minimum and average price for each of the years. We know that when the price is sort of leaving higher than the cash cost curves, it's huge swings in volatility.
But the good thing is the volatility is low when you are when we are at prices close to the cash cost levels. And therefore, we have taken that as a very strong strategic fundamental to look at where do we believe that the floor prices will be next time it's going down. And we are simulating worst case scenarios, and we have financial sort of targets to be well equipped with a strong balance sheet once we are into that those difficult periods, both for our own sort of stability as a company, but also to have some room for taking steps like, for example, Iqalitsa. Many people are asking us, okay, have we seen the worst behind us now since the prices have come up a little bit? And I think it is much too early to have any much of an opinion about that.
The opinion we have is that in any case, we are in the low areas. I don't think it's going to be so much worse. But will we stay on this level for a long time? Or is the worst behind us? I think we should avoid to be too sure on that one.
Step by step development. We are in Sweden. Sweden is an engineering country with a lot of world class industries like Ericsson or Volvo or whatever. We have a tradition of engineering, of technology and productivity. We think for us, it's a natural thing to drive the organic growth.
We do the simple things first, and then we take the bigger projects. And if we are feeling that we have a good self confidence and we are well equipped for it, we can also do acquisitions, which are always bigger money, bigger risks, more unknowns. So we should be sure that we have sort of tapped the opportunities on the simpler things before we take those steps. And the organic growth or the step by step is based very much on technology. Mikael again will talk about what we do in different areas, and we have some leading designs and leading inventions, which are used by smelters and mines across the world.
When we are traveling there, we it's very nice to see that was one was invented in Buliden Mill sometime. And this is an autocompo flash smelter and so on and so forth. And together with that is also the project management capability. The big money this is a CapEx intense industry. Value driver in itself.
I think we have demonstrated this several times. And if we have a look sorry, if we have a look at the big projects we have done in the past years, they have all been on time and all except for the first and the biggest of them all was Ipic 36, where we had a 20% cost or CapEx overrun. But I think this is something we are feeling quite pleased about. And the result of it is high productivity. This is showing the global mines of zinc to the left and copper to the right.
The further out to the right you are, the bigger you are and the further up you are, the higher productivity there is. And we have the number one productivity zinc mine and the number one productivity copper mine in the world. And we can also show it in a different way. This is the mines 2015 10 years earlier. And certainly, we have marked GARPON DIE the journey from in 10 years in competitive position is huge, thanks to the geology or the exploration results and the investment.
In copper, we have taken Aitik from over half of the curve to the bottom quartile as well. And if we continue with the smelters and do a similar, there we normally don't compare with cash cost, but cash margin because of all the byproducts and the complexity of the revenue model. If we look at Coca Cola and Oda, they have moved left, not in an extreme way. But I think Oda was going in the meantime further and further on the right. So if that was a position 10 years ago, the direction was in the bad direction.
Now we are here, and you will see tomorrow that we are on the track of the opposite direction. In copper, it's amazing. The changes we have done in, for example, the nickel strategy in Harjiawalta and, for example, the latest process changes and recycling and the whole sort of strategy of Harjavalta and Ronnshev, very cool developments. Finally, to say something about M and A strategy. Are we changing our strategy?
No, not at all. We have said that we want to have the financial ability to do something, to do a bold move, to get a bigger geology, to be able to develop new cases like Arpanberg and Aitik over time. And the best geology in this part of the world is actually Finnish Lapland. It has been full of exploration companies and it was occupied when we started to put our eyes on Finland. So it was not much to do there.
We bought Otukompo area 2015. And now the declining prices, we say good timing. Well, the best of that timing is that Kevitsa came for sale. In addition, of course, the price is lower when we bought it than it had been a year earlier. Let's look what we have sort of expressed to the market what we are looking for.
We are looking at producing mines and projects. Kevitsa is a producing mine, obviously, but it's also very early stage in a virgin territory. So we can also look at it as a basis for projects. It's copper and zinc. Well, it was not copper and zinc, it was copper and nickel.
It's about equal sizes, 20% or 40% copper, 40% nickel of the revenues and 20% PGMs. But it's base metals with byproducts. Well, it's almost perfect fit there too. Synergies, I can guarantee you, there isn't a mine in the world with greater synergies than this one. And we look for midsize.
We don't want to buy a mine which is suddenly dominating. So we have this new thing with capital raised in the market, multibillion dollar and then the future of Bouleydon is this whatever we bought and the rest. Kevitsa comes in as a fair sized asset in parallel with the other big assets we have. It's not the biggest. It's not certainly not the smallest.
It's one in the focus area. So by size, I think it is very good. And let me now show a beautiful picture. I mean, it is looking nice. It's a concentrator where we know all the equipment we produce or we don't own it yet.
So if the deal comes or is realized, we are going to produce 2 concentrates here compared to 3 in Garpenberg, only 1 in Aitik. We have the same kind of mills. We have the same kind of flotation cells. We have a mine with the same kind of haulage trucks and rail equipment. When we came over there with big due diligence teams, well, we recognize everything and it's on core distance from where we are.
We paid $700,000,000 for it. That's a lot of money and it's making loss now. So of course, I mean, someone is suggesting, didn't you pay up too much? Yes. If the price would continue on this level, it's not a good deal.
But if the consensus prices or if we think that we are in a cyclical industry, we are convinced that the modeling we are doing is a good deal. We have bank facilities committed for it, and we don't own it. We have the normal conditions for closing the deal. So it's excellent operational and geographical fit. I guarantee it.
We recognize most here. But it's also interesting copper concentrates, which over time, we buy today ballpark 50% of Kvitsa's production right now. Kvitsa will increase in capacity. And over time, I think we will take over. We will see that, but they don't have long term contracts.
So by the time they expire, we will move them in house. So we will get an addition of very attractive copper concentrates. And certainly, we get a nickel concentrate, which is very attractive because in nickel, when we created this new strategy, it is still an anomaly. We don't have a base feed in nickel as we have in zinc and copper until now. And then we get a very valuable base load.
The maximum potential is about 40% of Harjavalta, which over time could be sourced here. We are talking about timing. We are not suggesting that we know that the metal markets are not going to get worse than they are. We think we are somewhere at the bottom. And then it's more upside than downside.
But when we talk about good timing, it's not exactly that one we refer to. It is the fact that we have built Garfonberg. We're finished. It's ramped up. And we would like to have new things to put our arms around and put our technology into.
And I'm not suggesting that we are going in to tell First Quantum or Kevitsa how to operate this mine, but we have a very good crew eager to share idea and learn from First Quantum and give in other areas. So that concludes my presentation, and we are ready for some questions regarding, well, what I said and about Kevitsa.
Yes. Before we open up for questions, may I just remind you to wait for the microphone and also sort of state your name and institution? And since we are webcasting this CMD Live, we will also be accepting questions from the web. So please post your questions. Should we start with Olof Gjernmarck?
We have a microphone on the way.
Olof Drian Mark, ABG Sundal Collier. You provided us today with CapEx forecast for both this year and next year, and they will go up in 2017. Could you please give us some explanation? Is that related to the coming Kevitsa acquisition? That's not an okay question now because we're going to have a financial section later on.
So can we move that forward a bit? Okay.
Thank you. Gustav Sandstrom, Danske Bank Markets. You have previously stated that you're not willing to take a bet on metal prices. You haven't really been willing to hedge prices when they've been high. You've had great margins.
Now you buy a mine, which you state is not making profits in current metal price scenario, meaning you actually take a bet on metal prices. Is this a change of strategy from your part? And will we then should we then expect you to hedge prices if we
have a recovery? I think you should look at it this way. When we took €3,900,000,000 in Garpenberg, we simulated the floor prices really ugly metal price scenarios, which could occur later on. We said that our balance sheet is not really strong enough to give us a safety margin we wish. Therefore, we put a hedge in place.
So we're doing that simultaneously. Now we buy Kevitsa. We have a balance sheet, which we think is strong enough in the simulations we're doing, and therefore, we don't need a hedge. So the hedge policy is normally we don't take hedges, but we do in rare cases when we need to support the balance sheet or the stability of the company if the worst price scenarios would come. This time, we are our simulations indicate that we're okay without the hedge, and therefore, we don't do it.
So no, not a change in strategy.
Any more questions? Daniel? Anna is next. Thank you, Anna.
It's Daniel Major from UBS. Can
I try
and look for a little bit more detail on the sort of potential synergies at sort of Covista? And I guess how much of your decision to move into the transaction was based on your expectation of your ability to deliver synergies. I think you said on the call after the acquisition that it met a 10% hurdle rate target based on consensus commodity price forecast. Obviously, they're materially higher than spot and how much of the decision was based on the ability to deliver synergies firstly? And then secondly, where the main area of synergies you feel are I appreciate you might be able to give an absolute number, but is that technology?
Is it productivity? Is it the interaction with the
smelters? First of all, the synergies in technology and our concept of what can be done is based on we have been having a lot of engineers meeting from both sides. And we think we recognize a lot of the issues that Kevitsa is dealing with. They have not been following their ramp up plan. And if we have the solution to it, well, I don't know that, but we certainly have more people and we have some of the areas I think we are very well equipped and we have a lot of knowledge in.
So a lot of synergies which are kind of loose, which are kind of not the hard synergies that one would probably wish. We think that we together can follow a ramping up plan as planned. So that's the first thing. Number 2, I think that we have some hard synergies in logistics. We have wanted and suggested to buy more from Kevitsa, but Kevitsa is putting half the eggs in one basket called Bulid and the other half is in other companies' baskets.
Now as an internal, we can take 100% internally over time. It's not going to be overnight because there are contracts
in place, but they're not
very long term. And then I would say that we have the materials we talk about here, they are very good. We have a Harjavalta smelter, which is copper nickel for a reason. This is the geology of this Nordic region. I mean, Harjavalta is built for things situations or for materials like that.
And so I think that we would not like to go into terms or details here, and we have decided not to do. But I can say they are very good materials for us, and we can get more of it. And it's also true that we have been looking, okay, if we don't buy it, someone else is buying it. And then we lose some of the materials, which we appreciate very much. So you can say it's an additional synergy coming in, but we could also lose if someone else.
But the calculation is basically without synergies, else and that we think that we can support in making the plan and with long term prices sort of that's justifying the deal. And the other side is we check it versus low price scenarios where the deal is not going to be good, will that sort of drag out for long, long times. But it's not a dangerous acquisitions even in those scenarios. So we are stable as a firm. And if the consensus happens, we are happy.
And if it wouldn't happen, okay, it's not a catastrophe, but it's
so. So sorry to just to interpret that, you're happy with the returns of the deal regardless of synergies and the majority of the synergy is probably with the smelting business.
Is that Happy with it. When you buy an acquisition, you don't get IRR of 20%. You don't do that. You get acceptable margins returns for the acquisition, yes. And the majority
of the synergy is probably with smelting more than operational.
Could be. Okay. Thanks.
Do we have any further questions? Ula Sodermaierke.
Ula Sodermaierke, Swedbank.
If I put
your question in another way and don't ask about synergies, but ask about potential operation cost improvements when the mine is running at design capacity? If you manage to ramp it up to design capacity, what kind of improvements can you see cost per tonne? We don't own the mine and we don't have a plan. We have ideas and we are not going to sort of speculate about ideas. We have a concept and we have a deal calculation or an acquisition calculation, of course.
But we are not the owners of it. We have done a due diligence. We have had crowds of people there, for short times discussing, and we think that we understand what the situation is. But the plans will be when we think we are going to next Capital Market Day, we'll build a big plan for Kevitsa or what do you think?
We'll see. I mean, we will first, we need to take over and then we will start working on the plans. We'll get back to you once we have something
expect any problems with the competition authorities?
Well, you should always have respect for them. They have their own power, but we don't really see that. I mean, we are in a relative market scale, we are small, still small.
No, we don't think so.
The next question is from Johannes here. Yes.
Johannes, Gunnar Solis, Handelsbanken here. On Kevitsa, when you did your valuation, did you base the valuation on the sort of the reserves in place, in other words, 20 year operations? Or did you
take any value for the resources beyond that? No. I think just to be on the valuation, we have used the consensus price deck, which you can argue if that's the question or not. The consensus price deck is our valuation of Kevitsa stand alone for the existing reserves. So we have not put any value on the resources additional to that, potential extensions, potential in the we're also getting some exploration licenses connected to this.
We have not put any value to that, and we have not put any value to synergies.
Okay. And also a question, I mean, Werner, you mentioned that there might be sort of negative synergies involved if someone else would buy a Kevitsa. Could you sort of indicate how much interest there was in the sort of in the final period of the bid process among others, whether a handful or?
We have had tough negotiations and it wasn't it certainly didn't feel as if we were the sole bidder. No, it was a competitive bidding, but we have no comments on who else was there.
But you can confirm it was sort of international interest in Kevitsen.
I don't think it is up to us to have an opinion about it. And the
next question is from Christian Kopfer.
Christian Kopfel, Nordea. Just coming back to the synergy discussion once again. Will you come back on this topic a little bit more mentioning what kind of figure or range in terms of revenue cost synergies in this deal? Because I think it's quite imperative for the market to understand the value add given that the synergy is quite important thing in this.
And of course, we will. But we are not going to do it before we know what we're talking about. And we have ideas. But it's not our style to go out and speculate that it's going to be a little bit that. But on the other hand, be careful because we don't know.
No, guys, we have bought a mine. We think the deal is good, and we do it with a time in which we think. And we have it we do it from a position of strength. So we think we have grounded the deal in a good way. And once we are ready, we have put our arms around it, absolutely, we are going to talk about it.
It is very important for the market where we are spending SEK6 billion. Sure. That's fair enough. Thanks, Chris.
And this has to be our last question. Thank you, Leonard. So Michael, now the stage is yours as President, Boliden Mainz.
Thank you. Thank you. Do I do like that? Yes, I do like that. It's good to be here.
It's good to be here. I've seen most of you before, but in a different role. And now I'm standing here as the Head of Mines. I've gotten several questions, why did you ever decide to change job? And I kind of made a comment that if you look at my educational background and also look into what I've done previously without with exception for the last 10 years, I think this job is right in line with what I've always done before and what I've always wanted to do.
Then you can say that I've had a 10 year of being CFO in the meantime while preparing for something else. I'm extremely happy to have Hakan here and to have Hakan around and to take beer around as of April 1. It has been slightly stressful to carry these 2 jobs now for almost 9 months. Having said that, I will now talk about mines. I will come back as CFO a little bit later and talk about that.
In mines, there are 2 things that are important to us. We're working operational excellence, and we've done that. And I will give you examples around what we've done in operational excellence. And then we're going to talk about profitable growth. And I will talk about examples of what we have done to achieve profitable growth.
On the operational side, there are 4 areas that we'll talk, and I will have examples for all these four areas when we go through around what they are. But the areas are production control, what we've done in production control in order to be able to achieve more productivity, what we have done and doing and planning to do in mine automation going forward, What we have done and what we're planning to do also, to some extent, on the mineral process development and also what we're doing and continue to do and will continue to do on preventive maintenance in order to achieve higher reliability and thus higher productivity. So I will now go through all of these for a little bit more detail and give some examples. The first example here is around planning and what we can achieve through planning. The chart that you have behind me here, there's a little bit of through the left here, there's a little bit of a background.
It could look like almost like an internal decorator has done something. But that's not really where it is. This is an overview of one of our mines. This is the Kristinib mine that we have. And just part of it, Kristinib mine is a 75 year old mine that has built on and on and on, has a logistics system that is quite big and quite large around that.
And one of the biggest difficulties in running an operation like that is that you don't really have control of different pieces. And in mining, as with many other operations, there is always something that could go wrong, take a longer time. And when you don't have full control, what happens is that if one piece of operation takes longer time than it was expected and the next guy is waiting behind to do the next operation, he has to stand in line waiting for the first one to get finished because it cannot really be replanned. Now what we worked with in case in the Bay first, but we've eventually rolled out to all of our mines, is to use the fact that we can now, through the positioning system, know where everybody is. And you can see that the different parts here, this is people here.
That is the blue one. There isn't some equipment in different phases working. So the one who's sitting in the control room actually know where everybody is. And on top of that, gets information if some operation is delayed for some reason and can then replan. And this the effect of this just getting the useful hours out of the equipment, you can see here with the lighter time coming on top of the other parts.
So this is the effective time you get through that. What you also see here, by the way, and I'll come back to that, just if you wanted what this is. Well, this is a typical for our underground mine, a typical useful time we get. And you have big times in between when we blast or when we have shift change or lunch periods and so on, where you don't really get productive time and you that you have less productive time coming out of the mine. So even if we say that we have a 20 fourseven operation, it doesn't mean there's always operation going on in all parts of the mine.
Coming back to the planning, what have we done? It is not that sophisticated. It's a normal planning tool that you have with all the operations lined out. The thing is that now when we have information about what everybody is doing and where we're going in the operations, we can very quickly replan. We can send the piece of equipment to another phase to be able to use it productively throughout a time and not lose out 1 at a time.
And here you see once this was introduced and we had the infrastructure in place and we ran the product around it, you can see very quickly this is the scale here is about the productivity, how much productive time you get out. You can see that very quickly, you had a jump. Only in a couple of weeks, you can see this 10% to 20% increase in useful time of the equipment, and it kept on working that way going forward. Another way of achieving greater transparency and greater productivity is around this tool that we have here, which is around in the mines and in the concentrators to be able to have full control of the concentrator in one mobile device. And you can see this if you go out now when you have a break, we have a sample out there and you can see how this works, but we actually can get all the information how the concentrators working into this unit.
This means that the operator can actually leave the control room, go out into the operations. He can work on whatever maintenance he's doing. He can get all the documentation as needed for this particular pump. You'll find everything out coming out into the device around that. There will also be a transparency so that everybody who works can look into this and have the same basis of information no matter where you are.
You can even extend this that somebody who's going into a shift and start working can already, an hour or 2 before when he wakes up in the morning, go in and look into how the concentrator is doing, being prepared for what the day will be like, if it's going to be a normal day or a day lots of special things, where there have been some problems in the shift before. We can even use this one so that we can run the actual concentrator from a device like this so that the operator can bring it into the operation, can stand by the pump, turn it off, look at it, turn it on again, see whether you can get a sense of what the problem is. So we're working on this that we will get on. And as I said, we do use the opportunity to look into the exhibition upstairs about we're doing that. Now the next thing is we talked about we have all these ups and downs where we don't have any productive time in the mine.
What are we doing about that? Well, what we're doing about that is, of course, trying to fill it in. And we try to fill in this productive time or get this time productive in between shifts and while we're blasting. It's especially a question of getting loading and drilling operation to be continuous and autonomous around that. We worked on that.
It is now rolled out to almost all of our mines in some to some extent, so that we have the basis for doing this. Also here, we have an exhibition upstairs for you at the lunchtime to see how we're working on this. You can see in Garpenberg how this is done, how you load into the loader and then how the loader drives by itself and so they are floating point. And that can happen all by itself or by an operator sitting on surface doing this, especially at this critical time period when you cannot be in the mine. And by doing this, of course, also you can improve safety if you get this right.
And you can get up to 50% additional time available in the mine to certain activities by working on this way. I talked about Garpenberg in the example. We started already back in 2011 with the Garpenberg example. We now have roughly 18% of current of loading is now done autonomous. The ambition is to get to 80% by 2019, an ambitious target that we think we're going to be able to achieve.
We have VLAN is, of course, a basis for this that you can have the information all the time where you are, and you can have the remote control. We have that installed now more or less in all our mines, and we're running out this program throughout the mines that we have. The next area after this that we also talked about is the mineral process development. Mineral process development is where we're trying to achieve improvements either to get better yields, to get out more metal or for environmental purposes, to get better environmental footprint from what we're doing. And in the mill and in this process, we have lots of prior history.
We worked with autogenous grinding. That was very early. Then we worked with the Fenton reactors around the water treatment. We worked with the Kankberg, where we have lots of intellectual property to get tellurium out of this mixed gold tellurium mineral and also get more gold at the same time. We looked at nitrogen removal.
And I have an example here, which is in Tara, where we worked on antimony removal that I'll come to in a moment. But I will also here also give the heads up to everybody used to lunchtime, go up and look there. We have a small exhibition what we do in Next Step. That is more about using bacteria for some water cleaning activities that we're working on. We were also developing some intellectual property around that.
But here, I'll just give you an example in Tara, where we reduced the antimony emissions by 50%. We've done that without having to jeopardize any of the production. So the production has been stable, very low CapEx and OpEx solution that was very much tailored, fitted to the situation in Tara. We've done that with chemical precipitation. And it was a fast development, and we managed to get this one in place very quickly.
And this is also one of the things that we are quite proud of. Having our own engineering department, we can do these kind of things that are linked to the operations that we have. Preventive maintenance and the importance of that. I'm going to give you an example, and I'm going to give you an example from Aitik. Some of you may say, okay, Aitik, you haven't had that well of a stability in Aitik recently.
And that's true, but it's not true for all of Aitik. Aitik is actually working very hard on certain areas and have been quite successful in these areas. And we have here showing the example of the availability of our shovels. And you can see the availability has in the last 4 years gone from less than 80% to close to 90% availability. At the same time, meantime, between failure has also gone up at the same pace that these things are linked together.
And this is one example of where we've been working on preventive maintenance schemes to get better availability in our equipment. There are more examples like that. Somebody is calling. With that, I will now move over from the operational efficiency and start talking about the growth and what we're doing to grow. And of course, the basis for growth is to have ore.
If you don't have ore, it's difficult to grow. Here, we're taking a 10 year view just to have a sense of what has happened over these 10 years. And you can see that in Aitik, we have both been very successful in growing the ore reserves in the Budin area, very successful in Garpenberg, very successful. We are in those three operations in line with or above where we wanted where we want to be in terms of having enough resources or enough time to be able to plan well. Kennedakti is not quite that way, and I'll come back a little bit with that.
That's even though we didn't own it before, but 4 years, a little bit on the short time. On tire, well, it is it was 6 years 10 years ago, and it's 6 years today. It's been able to hang on a year by year basis all the time, and we'll continue to work on that. I'll talk a little bit about it as we come into the next slide. But so this is the 10 year horizon.
If you just look at the last year, we're also quite happy. I have asked some of the older geologists who've been around or our mine guys who's been around for maybe 30 years and give a kind of put 2015 in a context. Was this how good was this year? And I got the answer that, well, maybe it's not the best year, but it is clearly maybe a top 3. We had quite a lot of success in the year.
We increased the reserves in Aitik. We increased reserves in Garpenberg and in Tara in a pretty good way. And we have 2 new mineral resources in place that we're quite happy about, and we're quite ambitious around getting these ones into production. It is the Rebleiden in the Boliden area, close to the Cristina Berremain, the one you saw behind there a little while ago, which is proving to be very nice satellite deposit, and we hope it's going to prove to be very nice satellite deposit. And we have now done an outside Aitik, which is quite different from Aitik.
The only thing that's common is that it's 15 kilometers away, but it's actually an underground deposit with very high grade ores as opposed to Aitik, very low grade ore. And it fits we think or at least we're planning, it's going to fit very well into the general mix in Aitik. And we hopefully will get this one well timed in planning. Now everything is not perfect. Everything looks fine.
In Autocompo field, we've had some disappointments during the year where we have basically not found any new ore and therefore depleted the ore base with about a year from production in Kyulakhti. We will increase the emphasize on the on this area and emphasize the exploration in Otokounmpo during next year or during this year. In Tara, we were very successful actually. We got quite a lot of good results last year, but we will continue and actually spend quite a lot of focus on Tara. Tara is an interesting mine in a sense because I've always said to everybody that whatever number you see on Tara, it's never been end of stuff in the ground.
There is more stuff in the ground in Tara. It's always been a question on at what cost can you get it up. Tar is a high cost mine. And as we go deeper, it tends to get slightly costlier. And is it then profitable or not?
But we hope and we think that we should be able to at least give it a good shot and see what we can find and whether we can move on and keep Tara going further. Now let me add already spoke about Garpenberg, but I cannot resist also spending some time on Garpenberg in my presentation. This is a ramp up of Garpenberg. You've seen it before. The ore production and therefore, the total production in Gothenburg was up to speed by the end of the year, which means that we completed the ramp up on time.
We have completed the whole project on budget. And you've also seen that we've also proven very early that the mill itself can do much more. This is when we had the ore stockpile to work out, so we could have more mill ton. Now we don't have any ore stockpile any longer. So we have to have the mine or say the mine is the limiting factor.
And as soon as we can work on that one, we will have a good position going forward. Now let me move into IPIC, which I think is the essence of this discussion going forward. Let me first repeat what we said when we talked about Itik about 2 years ago. What we said about Itik that we want to expand Itik, and Itik was going to have 2 phases in expanding: the Phase 1 that we were pretty detailed about and the Phase 2 that we were a bit more shady about, mainly because we ourselves didn't really know exactly what Phase 2 would really entail. Now after we started with this, we relatively quickly came to the realization that also part of Phase I, meaning the surface crusher was also a little bit premature.
There were questions around what exactly to do from an engineering point of view, whether the positioning we had chosen was exactly the right one, whether the setup was the right one. And it was clear that it was also linked to other pieces. So what we can say today, just to have a sense of this, is that the other pieces that we did announce, the crusher reinforcement, the water pumping in the electrical substations, they've been done. That was roughly €200,000,000 out of the €400,000,000 done, finished, clear. We did not start the surface crusher.
We also said that eventually there will be an in pit crusher with conveyor systems. We said that there will be needed water treatment system and there will be needed different sulfurization. I'd say we were a little bit vague around that. So what have we done since? Well, number 1, we did get the new environmental permit now in the first quarter.
That's been important because as long as you don't have the permit for clear, you are reluctant to really make a big decision because it can get impacted by the eventual ruling. Now the ruling came out and was in line with what we had expected. It was not a big surprise as such, But before you really have it, you cannot really be secure. In the meantime, we have worked on the mine plan and mine optimization. And we're quite happy to stand there and say that we have done the thing that's usually not so easy to do.
We have both extended mine life of mine, and we have increased the grade, the grade from 0.22 to 0.23, and we have increased the life of mine, as you've seen on previous pictures. And we are now up to, I think, 2,044 in terms of reserve life. We have also worked on the crusher setup during this time. What is the idea crusher setup? What do you really need?
How can you work around this. And what we've come to the conclusion is that we need to have a surface crusher, but the surface crusher needs to have an even more higher reliability and a higher availability than we had thought about before. So I'll come back to that because it will be the workhorse. By doing that, we can postpone the in pit crusher. We will still need to redo the input crusher at some time.
It's not going to go on forever, but we can postpone it well into the '20s, something through 'twenty, 'twenty one, 'twenty two and 'twenty three. We'll get back to that. But into the '20s, the decision about it. In the meantime, desulfurization has also we've also been able to put that one out because of what we've been able to do in terms of optimizing how we work in the tailings facility. That one might have to be done also after 'twenty or later.
It's a little bit unclear exactly if it's ever been needed. We will have to look into that development going forward. But at least for now, we can take that one out. That also means that we can now be a little bit more explicit around our guidance on grades. I think the 0 point 21 for 2016, we've guided already before.
And we've said before that we're going to be over the average grade for 'seventeen, 'eighteen and 'nineteen. That we said before, but now the bar is a little bit higher because the bar is 23 and not 22. And we will be above those. So we will be in the 2022 24, 2025 region around those times. And with this, the ramp up to 45 is delayed, which is very clear that we're doing this thing and we're now been postponing and we're now aiming to get there in 2020.
Now what is this new surface crusher? Well, what is new with its surface crusher is that it's a double crusher. You can see here a point is it's one control area, but it's 1 crusher here and 1 crusher here. Why do we have a double crusher in here? Well, it's not to operate at the same time because actually the logistics system going out will only allow you to run the 2 crushers in parallel for a very short time, like an hour or so.
So it's to make sure that you always have 1 crusher available. This is the same setup that we have for the 165 crusher in IT today, which is a double crusher, which has a very high availability and reliability exactly because of this. You can always have one working while you're doing maintenance on the other one or doing some repair or clearing up. So they always have more or less 100% availability, and that's important. We've also spent quite some time the other problem with existing setup is that we don't have enough facilities and enough ease of doing maintenance, which is why maintenance has become so expensive.
And we have here also made sure that we have worked on the maintenance ability around this setup to make sure that we can maintain this crusher in a cost efficient way and in a good way. So that's the new thing around the crusher setup. It's a double crusher. With the double crusher, we have the availability as high as we do. Because of that, we can schedule more on the surface crusher than we did before.
Because of that, we can also work with live with the input crushers longer than we have. We've been able to plan around the pit crushers so that we don't blow them away too early, but rather work on the pit designs that we can keep the present positions longer than we had thought before. That, I think, is the summary in essence. So what is the impact of this? Well, the impact is higher availability.
The impact is higher visibility in production. And by visibility, in this case, it's not about knowing where everybody is in the mine, but it's about being able to plan. Because one of the big headaches in Aitik is that with a constant breakdown of pressures, you have a constant replanning going on in an area where you don't really want to replan. The blasting schedules and so on gets interrupted with a constant replanning due to the fact that we've had poor availability on 2 out of the 3 crushers. The remaining CapEx for this going forward now is SEK1 1,000,000,000, which means that the total project runs up at about SEK 1,200,000,000 altogether.
That is the crusher being the main thing, but we still need to do water treatment that we already said before that we need to do. That is part of this plan. It's going to happen at the same time schedule. And we also have power supply that needs to be adjusted to fit as well. That's all within this plan.
And it works around then a installation time line of 'sixteen and 'seventeen and a commissioning in 'eighteen around us. With that, I am willing to take questions. Here comes the first one.
So I assume we have questions for Michael. Let's start with Sasha here.
Thank you, Sophie. Michael, two questions, if I may. Number 1, are you able to quantify the benefits of automation in terms of decrease in operating costs or ideally return on capital?
No. Not at this stage, not standing here. But over time, it will, of course, head that way. But I'm not able to quantify it at this stage.
So when do you think we'll we might have a sense?
We will over time as we get our plans right, we will give you some sense, but it will come later. But this is what we're working on.
Okay. And second, could you potentially outline the trajectory of tonnage ramp up at Aitik between this year 2020? So what's the tonnage likely going to be in 2017, 2018 2019?
Well, this is also a difficult question. And of course, for 'seventeen for 'sixteen and 'seventeen, we will not have a new crusher in place, which means that we're standing with our old crushers. With the present crushers, in 'fifteen, we managed to do is 36%. Now that you can say that we had some bad luck or whatever, but still, it's tough to get much higher than that even though we have done 39% because we did 39% in 2014%. But I think as long as we don't have the new crusher in place, we will be in those kind of regions, 36% to 39% type of region.
It will be difficult. And then we have 'eighteen as the commissioning year, hopefully, some ramp up. And there's a ramp up in 'nineteen, and we should be there in 'twenty. I think I was vague enough, right?
I believe we have a question from Johannes.
Yes. I'm interested to hear about the capacity when the new crushers are installed. What's the capacity in the crushing system?
Well, this is also this is a very good question. It's also very difficult to answer because capacity in the crushing system is actually pretty good. But the problem is, of course, that you cannot always also put it this way, it is difficult to talk about capacity in the crushing system because it depends on exactly where you're mining and how you're blasting. And you don't want to always go to the crusher that's available. You want to go to the closest crusher.
With this setup that we're having, we feel comfortable about reaching with this workhorse crusher on the surface, we feel comfortable reaching 45 without having to replace the in pit crushers as such. They will need to be replaced anyway because they will need to be blasted away or they need to move position, But we should be able to read 45%. And that's, by the way, the limit of our permit anyway and also the limit of what other systems around can handle. So 45% is kind of where
we start reaching lots of other bottlenecks. And you touched upon the grades there. You said 0.24%, 0.25%. Is that what we should sort of expect then put in the modeling.
We have a question from Chris.
Can we just get a bit more information on Kurelati? I mean, we had a decent change in the resources, but not the reserves there. Can you give us more color on I mean, should we be expecting decent reserve bump this year with an increase in drilling density or something like that? Is that the issue? Or is it geological constraints we don't quite understand yet?
And also on Garpenberg, not too bad, obviously, doing fantastic well there. But the soft growing conditions you've been experiencing recently, have we had a much change in the mine plan there?
If I start with the second one, the answer is no. Garpenberg is an area that is great for all kind of things, but you're pointing to the weak point. We do have this soft mountain or mountain that tends to crack. And there's been that over time. And I think we will have certain events like this also going forward.
We have not changed the mine plan. We have, to some extent, learned a little bit about what happened in December. And we're chasing not the mine plan, but some of the operational practices around exactly how we backfill. But not any change really in mining plan going forward. If I then move to the other question about Kirillati, you're right that we've had some resources coming through.
And that's, of course, the kind of to some extent, the good news. It is, however, clear that those resources, yes, we can hopefully upgrade some of them to reserves, but we will also need to find new reserves. There has been an idea about where there should be a continuation of the main ore body in Kirillaki right now, and it's not really behaving the way that we hope. It's not quite where we had hoped it to be.
The next question is from Alain.
Alan Gabriel at Morgan Stanley. My question is on the CapEx.
It's a twofold. Do you mind giving us
a granularity on the CapEx, 'sixteen, 'seventeen, 'eighteen in the mining business between maintenance and growth? And the second question is post 2020, how much do you expect to spend on the in pit crusher and the potential expansion of
the tailings or the new tailings?
Lots of difficult questions. Let me say that if you start in the other tailings is a totally separate discussion, which we're having lots of discussions on whether we will survive on one tailing dam or whether we will need a second one. This is going to be the main showpiece for the 2025 application for the renewed environmental permit for the next 10 years to 2,035. That will have implications of all kind of sorts, both in terms of CapEx, but also in terms of reclamation cost and so on. I'm not willing to guide anything on that.
Now the cost for the in pit crusher, I'm also not willing to guide upon because the ambition is that we could that we can do that in somewhat of a cost efficient way. But I think we're so far down, and we are also kind of honest that we have not exactly planned where this input crusher will be. The base plan is that it will be 1 as opposed to 2. We have 2 now. We will go to 1.
We have some ideas about how we will existing try to connect it to the existing conveyor system to minimize the cost of additional conveyor system, but we will need additional conveyor system of some kind. But exactly how much and exactly when is too early to tell. Then you had a very difficult question about giving a sense of investments in the mining business for the next few years. I will not do that. I will talk about investment for the whole group when I come back in my next capacity after lunch, And I'll talk and give a little light on that as a whole group.
I will not do that for the mining business.
Any further questions? Shatinder or and then Christian afterwards.
Jatin Dubhail from Citigroup. Two questions. Does Kilia Acti still fit in your portfolio assuming you get Kaditsa? Given it's a smaller mine, is it worth running it just cash and shut it down if you don't get much success? And how much is the cash closure cost if you were to take that route?
And secondly, you had a 25% cost improvement on Garpenberg with the expansion in place. Now you're running at full capacity. Do you still stand by the same guidance? Or do you have more visibility given how currency has moved and you have ramped up to full capacity?
If you start with the second one, I think we've always talked about that cost reduction in local currencies in Swedish krona. So the dollar will have done its own thing on it. Now it's always difficult to actually reconnect what is exactly the baseline, and we also said that you reconnect it for corrected for inflation. We've done some post calculations. And I would say that the answer is we are close to the 25%, maybe not quite there, but we're close to 25%, so we're close to reaching the OpEx levels that we wanted to reach that we had in our plans when we're talking local currency.
Now regarding QLLIFTIM, there are all kind of alternative plans around that, but I think that we are not quite yet ready to discuss exactly how to close it down. It's obvious that if we don't find more ore, we will have to close it down. It is a compared to other sites, a relatively cheap restoration cost, but yes, there will be some cost of restoration in there as well. But we're not quite ready to go that path yet. We're still working on trying to find more ore.
And then we have a question from Christian there.
Christian from Maria again. Just a follow-up on Itik. If you are successful in the process stability mission, so to speak, how much do you expect the unit I assume that you will be that you can take down operating cost in that mind.
Yes. And we have here and now you're going to like this because it's going to be very difficult for you to model. But I will say what I'll say anyway, we have not changed the guidance that we had from last time. But we said that IT 45 should bring down operating cost 10%. Now you're going to say compared to what?
And I'm going to say that was compared to the plan that we had before because it is very difficult to give it compared to something else because the operating costs will vary over time with where you are in the mine. So it's difficult to pick particular years around that. But I would say that the OpEx guidance has not changed.
Yes. But I guess 2015 was not the best year for I think. So I guess, costs I mean,
We should still be able to get the costs down, yes, because especially cost per ton. Even though the cost was actually pretty good in IT because we've, in parallel, been running a cost cutting program there, which has worked relatively well. So but cost per ton was not so good. And especially if you take cost per ton of copper with the low grades that we had, it was not so good. So we should improve, but I will not give you any number.
And the last question comes from Gustaf.
Yes. Gustaf Sainz from Danske Bank. You had a slide there showing the capacity of the new crusher of 8,000 tonnes per hour. Does that assume 100% availability? And if so, what's maybe a more prudent guidance for availability?
You can put it this way, that 8,000 tons per hour, that gives you if you multiply that by 24,000,000, you will get much more than the both the conveyor system and the mill can swallow. So I think the 8,000 per hour is put there on purpose. It's supposed to be able to be there. You're supposed to be able to run that, but you don't have to run it all the time.
Okay. Thank you. That was our last question for this Q and A session. Thank
you.
When we are on the road meeting investors, we frequently get asked how we can optimize the raw material mix for our smelters. So our next speaker, Sachin Konrad Sohn, President of Volida Smelters, will now discuss this even further.
Thank you. And first of all, I must say that I'm very, very proud to be here today to be able to present the good results our smelter teams have delivered in, I will say, quite a difficult year despite the fact that maybe the terms have been in favor of Smonta's. And then, of course, I expect some of you to ask the question, okay, will this be sustainable? And my job today is to show how we are planning to continue to deliver operational performance and thereby stable and good results. So coming to our strategy, it's based on 3 prioritized areas.
And the first priority is to improve our operational efficiency. And I mean, this is the base for any smelter unit. It's about having stable processes, high recoveries and low cost. 2 very good examples of this, which I will come back to, is the Oda expansion and the successful improvement program in Rancher. The second priority, increased flexibility.
Well, what's that? Well, for us, it means that we need to have the capability to treat difficult materials containing impurities but also to be good in extracting the valuables we have in the raw materials coming into the smelters. And on top of this, we also need to make sure that we have sustainable waste solutions. So I will come back to later, to say the challenges and potentials of working with complex raw materials, And I also will come back with an update on the progress of our building our deep deposit in Ranke. The third priority is to further increase our gross profit by increasing our metal or byproduct production.
And here, I'm personally very pleased about the good development we have had now in Harjavalta with the new Nikkei business model and on top of that, the perfect fit now with our acquisition of Kvitsa. So Lena showed early this morning how smelters have progressed on the zinc cashmodding curve. Going back 10 years ago, we had we were quite poorly positioned far to the left. And today, I think we are fairly well positioned. But when you look at this, you see a clear difference between zinc and copper.
And this is despite the fact of all the good cost improvements we have done in Oda, you see that we are still in the middle. And you might ask the questions why. And I would say that the main reasons is that we have the byproducts coming out from our zinc smelters have a lower value compared to what we get from the copper smelters. And also the free metals, we have less free metals, less valuable free metals. Whereas on the copper side and you will see this more when I come back talking about flexibility and the importance of having a good raw material mix.
So now let's take a look at one of the first examples of improving operational efficiency, Oda. Oda has done a great job. You know about the P100 program, and now we have a very successful debottlenecking project ongoing in Oda. We started up late 2014. It was the last CMD we announced this.
And this is also a project I'm very happy about because not only are we having a forecast of keeping the CapEx, but we are actually ahead of time plan. So what we have communicated before is full capacity end of next year, and now we plan to have full capacity Q2 next year. And tomorrow, I know many of you will join us to the site visit in Ota, and you will be able to see all the things we are doing with your own eyes. So what are we doing? Well, I could say it's a debottlenecking of basically 3 major production processes.
The first one is the cell house. And you should know that normally when you design a zinc smelter, the cell house is the main bottleneck. Now we actually have a very good possibility because we happen to have an old cellhouse from 2013 that we now will take back into operation. So of course, the question is why did we close it down in 2013? Well, what we did at that time was that we did a modernization of the newer cell house.
We installed more transformer capacity, and we re spaced the new cellhouse. And re spacing mean that we sort of densify the cell house. So we put the cathodes closer to each other like this, meaning that we actually got space to put in even more cathodes. And by that, we can could increase production and also productivity. And this is, of course, something we also will do now when we modernize the old cell house.
So this is a very important part. The second one is, of course, we need to have feed to feed a cell house, and that we will do by installing 2 new direct leach reactors. And this is good to know, but this is a very CapEx efficient way of increasing feed production because the alternative would be the more conventional roasting asset plant technology, which is more CapEx intense. And then of course, we also need to increase the capacity of the leaching and purification. So that was Oda, and I'm really looking forward to the visit tomorrow.
The other example is Rongeren. And here you know that Ronkal is we talk about complex material. I will come back to that quite frequently. Roanoke is a very good example of what could go wrong if you don't really manage the increase of complex feed. And just a short recap or summary of what is the problem in Encore.
Well, it started it emerged at a time when we ramped up the feed of electronics, when we took the new Ekalte facility into operation. And what we actually did was that we put in more impurities to the process than we had capacity. So you can say that we choked the system. And the consequence of that was that the process got into unbalance. And as a result, we started to build up big stockpiles of intermediate material, material that sooner or later needs to go back to the process, but then you just add on more impurities.
So you end up in a sort of never ending problem. I could also say that one other thing that happened was that we discovered that the cost had escalated. So what we did was that we started up a 3 year improvement program in 2014 with the target to reduce cost and get back to process balance. And we said that end of 'sixteen, we should have an EBIT impact or EBIT effect of SEK 275,000,000. And end of last year, we have actually reached already 200, which is well in line or maybe even better than our plans.
So now remaining, the 75 for this year. So what will we do to manage that? Well, I would say that once again, it's all about managing impurities. And we can do that in different ways. First of all, if we take the intermediates, what we do is that we can now work with our raw material mix.
We make sure that we buy in raw materials that are low on the critical impurities. That will sort of free up capacity from the existing capacity that we can use to feed in the intermediates so we can reduce the SOX. So that's one thing. The second thing is that, well, we have this capacity and meaning that we realized it's not good enough to plan on a monthly or weekly basis. We actually need to plan the FEED on a sort of hourly basis so we don't miss out the opportunities.
And of course, all the time not to exceed again and end up in the same problem we have had. Then there is a third one, and that is, well, can we do something to even open up and increase the capacity more? And here, we have 2 great examples that we have done. 1 is together between smelters and mines. I don't know if you know, but the slag produced at Remger, we send to the concentrator in the Voliden area, and we get the valuables back and we put them in the process and the waste go to the tailing ponds.
And some good work now done have actually opened up 80,000 more capacity 80,000 tonnes or more slag capacity. So that's a very good outlet for us. Another good example of things we have done is that we have had issues with availability of the converters, and those are quite critical in the smelter process. And by improving the quality of the bricks, I would say especially, we have now managed to increase the availability so we can take in more metal or more material. So moving on to our 2nd priority, to increase flexibility.
And here, I would like just again to sort of highlight the importance of having the right raw materials. In order to do that, I just thought we could simply look you know this, but simply remind you of the gross profit drivers and the ones to the left. And what actually the conclusion is that whether it's treatment charges, refinement charges, free metals or byproducts, they all are dependent on the raw material mix. So the outcome in gross profit is very much dependent on the raw material mix. And if you're a smelter, you can have different strategies.
One strategy could be to only treat clean concentrates. That's quite an easy strategy, I would say. But then you can only compete on cost. The other strategy you could have is to treat clean and complex concentrates in a combination. And then you can actually add your technical capability as a competitive advantage.
And this is very much what we believe in, and this is very much the strategy we have had, as Leonard said, already from the time we started up Brancoy. So but we should also remember and I would come back to this again, but there are and this, of course, this strategy only works if you have some unique competencies or capabilities. But this I will come back to. But this is also very much in line with what the trends we see in the market because what happens and this is more on the copper concentrates than on the zinc. What we see now is that more and more sort of complex material, dirty material come to the market.
And if we have the capability to treat these materials, we will actually open up a much bigger market for us to choose between when we buy the concentrates. And they could also add profit. But just the fact to have more concentrates to choose between is very important for us. What we see here is just looking at this is from CRU, but to see what arsenic is the biggest one by far. And this is also the one that have had a sort of highest growth during the last years.
Then you have Fluorine, Chlorine. They are maybe not really well, they are a problem in the smelter because they cause corrosion. So they cause wear of the smelter. But then you have mercury, antimony. All this stuff, you need to be able to take care of.
But also very interesting, zinc. Zinc is, for most copper smelters, an impurity. But here, we have a unique capability. We have our fuming furnace in Dunkerque. We can actually take out some of the valuable zinc in Dankar.
So remember, it could be an impurity, but it could equally be valuable. So this is our strategy, maximizing the intake of impurities and valuables but sort of still be on the road and not exceeding the limits. And then you can ask, okay, what are you doing to make sure that the Ronge thing doesn't happen again? And well, then it's very important to understand and analyze what you take into your system. So the value drivers, they are the normal gross profit drivers.
But on top of that, we also have penalties. So what we do for each and every concentrate, we look at all the gross profit drivers, including penalties, and then we deduct the specific costs that are related to that raw material. So if we have extra cost, for instance, to take care of arsenic, that's deducted from this. So then we can rank all the concentrates. And this is what we have done.
And what you see here is actually the final optimized raw material portfolio for 1 of our copper smelters. And you can see that there is quite a wide range. To the left side, we have a concentrate that is very profitable, and we actually bring in quite a big volume. Left of that, we have some very profitable but very small volumes. And the reason is, of course, that they have started to hit different bottlenecks in the process.
And then we fill up. And interestingly, you can see that actually the gap between the most profitable and the least profitable is actually a factor, too. So it's a huge spread. And then we get the average. And of course, what we constantly drive to do is, of course, to lift the average.
And then I guess that someone later will ask, okay, how much will you be able to lift that average? But and that's, of course, very hard to say. But if we talk about if we come back now to Rangal and we say that what I said that we are right now sort of stealing or borrowing capacity, impurity capacity to so we can take back the intermediates. Once we have done that, we will actually get that capacity back so we can put in more complex impurity containing material. And then you can ask, okay, but if you have handled all these problems, how successful have you now been?
If this is part of the strategy, what have you achieved? And actually, I think we have achieved quite a lot. This curve to the right here is indexed, but it's a development since 2010. And we have actually had this is on copper. I said before, it's more complex materials available on copper.
So we have actually had a CAGR of 12% during this short time period. And this is something we expect to continue. Of course, it depends on the market situation. It depends on our ability. But given the fact what I said that we assume we'll open up more capacity in Draenkoye, That will definitely give some potentials to continue.
We do have complex materials on zinc as well, but the market is slightly different. So the complex materials on zinc, they are quite often secondary materials and their availability is not the same as all the dirty copper concentrates coming to the market. And the profitability is not really the same either. So here we have in the same time period, we have been stable and but on a good level. And this is what I where I expect us to be also in the future, stable but good level.
So a part of this flexibility strategy is, of course, also if we bring in all these materials, we need to make sure that we can take care of them in a sustainable way. And this is a responsibility we are very happy to take. But of course, it requires quite a lot of us from us. And I think this one, I think I've talked about last time. What we are doing now is something quite unique in Sweden.
We are building a deep deposit below the Rangkoy smelter. We started 2014. The estimated CapEx is SEK 650,000,000, so it's quite an expensive one. But there are many benefits. So first of all, we know that we have a final storage for the materials.
So it's a very good sustainable solution as we see it. On top of that, since it's actually below the smelter of Ranke, we don't need to have any transportation of hazardous goods on the roads. So we just the ramp is actually on the area. So we just take it down. It will for you to understand, we intend to go somewhere 350 meters below Draugrassmeltner.
Now this is not totally new for us because in Ota, we also have deep deposits in the mountains. And this is something you will be able to see with your own eyes next week. And I will say that with the experience we have in Oda and with the experience we have in building mines, I think that we are very well equipped to do this in a very safe way. So the 3rd priority, to maximize metal and byproduct production. Well, here, once again, I'm very, very excited about this new nickel business model.
And there are many things in this. First of all, by doing this now, we get a business model for nickel that is have sort of the same principles as the ones we have for copper and zinc. So we will have a business that is based on having a treatment charge, getting free metals. Compared to before when we got the tolling fee. So that's one thing.
The other thing is now we are the ones buying the concentrates, so we can optimize once again, we can optimize our raw material feed in a way that we were not able to do before. And actually, if you look at the results from last year, we had a feed of almost 20% higher nickel concentrate than the year before. And this is partly as a result of us being able to choose the concentrates. And also, this is fun for us because now we also have a new product. So we have nickel that we sell in matte, and we had a good production during the autumn last year.
So of course, I had some questions before, and that is how does Kevitsa fit into this? And it fits perfectly, I
would say.
Right, Miguel? You will be our best supplier. Well, I said before, it's very, very important. It's not necessary, but it's very important for a smelter to have a stable baseload. So you get the stability.
You know what you have. And then you can add on things that fits with your stable baseload. And now we will get that for nickel. And maybe it's even more important to have that on nickel than it is to have on copper and zinc because you know that nickel is a liquid market. It's much more difficult than copper and zinc.
So we are very happy to actually be able to have a baseload. Already today, you see, we're bringing Kevitsa. But depending on how we agree and so on, what happens in the future, it could be as much as 40% of the total feed to Harjavalta. Then you should also remember that Kvitsa is also a copper mine, and they have a very good copper concentrate. We like it if we use it today.
And so it could also be baseload on the copper side. And you know this, but Halleywalta is closely located to Kevitsa. So mean, of course, obviously, one of the synergies is having the benefit of the logistics, in this case, costs for transportation and from my perspective, to have the reliable short term delivery. So we are very happy about this. Coming to my last example, and that is increasing our silver recovery in Coccola, increasing the byproduct of silver in Coccola.
And here, we actually reached the design capacity in the Q2 last year. Then I know that we have communicated that we have some process instability problems in Coca Cola. They are in the main sink flow. I think right now, we have them fairly under control. Anyhow, we have taken the decision to prioritize zinc production before silver because of the higher profitability.
We could revisit that, but right now, that's the decision. And at the same time, we are working very intensely to develop the processes and make them more robust. I could also say that right now, talking about market trends, right now, silver content in the concentrate is quite low. So that's also contributing to the lower outcome. So coming back to the question, well, the outlook going forward is, I will say, the prices and tariffs, they will be more challenging.
But I'm convinced that with the strategy we have to improve operational efficiency, increase flexibility and maximize the outcome of metal and byproduct production, I'm convinced that we will continue to deliver solid earnings from Smedes.
Thank you, Chastain. So let's open up for questions for on the smelting side. Should we start with Daniel?
Hi. It's Daniel Major from UBS.
I think when we're sort
of looking at this business and sort of trying to model the earnings and the margins going forward, We obviously saw a substantial increase in earnings and margin in 2015. I guess there was a combination of external factors, the currency, etcetera. But it would be great if you could give us a sense of how much of that margin improvement was driven by internal factors and how much by the changes in the external terms? And therefore, I guess as a consequence, how much of that improvement you think could be maintained going forward if we get a normalization of treatment charges by product prices, premier, etcetera, as we're sort of seeing in the market at the moment?
Okay. No, I mean, obviously, we have benefited from currency and prices and terms. I don't really I can't really answer your question how much have come from the different contributors. But I would say that we will continue to deliver the operational results sort of in the same pace? Or given all the activities we have, the target is, of course, to continue to improve that even further.
So would you think that you if you look at the margins achieved by the business, say, between 20,0820 13, would you say you're in a position to deliver a structurally higher margin going forward as a result of the internal improvements you've made to the business?
I would say so. I mean, a lot of things have happened since 2013, and we have new we have the Icalda. We are expanding Alta. We have the new Nike business model in Harjavalta. So we have a lot of things that have happened lately.
Okay. Thanks.
And we have a question. Yes, we can we start with Amos, and then we have Philip.
It's Amos Fletcher from Barclays. A couple of questions. Firstly, I was wondering how long did the 3rd party offtake contracts last at Kivitsa? And then my second question is just with respect to Ronnska. And you're saying that as time goes on, you'll be able to accept more of the complex feeds.
Is it really once the deep deposit is completed that we'll be able to see that sort of reflected in the margin performance of the business?
The first one is maybe more suitable for Mikael or something we can come back to once we have finalized the acquisition. The second one is, well, no, not all improvements are related to having the deep deposit in place. So some of the improvements we should be able to deliver already before 2019.
Michael, do you want to comment on the question regarding the Kevitsa?
Excuse me, I have to repeat it. I was
Is this of the length of the 3rd party optic or contracts?
There is none that is more than 3 years. So there is a portfolio, but none is more than 3 years.
And then we have Philip.
Philip Ngard, ABN AMRO. A few questions on Rinska. I don't know if you've disclosed it before, but how long would it take before you have worked through your intermediary stock? And what is the working capital release that's associated with that as well? And I was also wondering if you could indicate what the mix of complex and clean concentrates is at the moment and what it will be once you have more room to take in complex material and what the potential maybe is even beyond that?
Okay.
So the first question was?
Intermediate stock, how long it would take before Okay.
I mean the improvement program is 3 years. So the original plan was to sort of be in balance end of 2016 or early 'seventeen. Maybe that has been a little bit too optimistic, but we will definitely deliver the €275,000,000 this year, meaning that if we still have some stocks, that could maybe be an upside also of 'seventeen, 'eighteen. But the plan is to treat most of the intermediates already this year. And the second one was
Yes, the working capital release. Is that directly the working capital release?
Yes. And that is something we had communicated before. And of course, that's dependent on the metal prices. But I think Sofia have communicated
Of the intermediates restocking has, we did that already 2014 and also into 2015. So most of that has been done and seen in the cash flow, I would say.
And also, of course, all the intermediates are not equal. So some are high valuable metals and some are lower valuable metals. And then you wanted to have an indication. That's why I indexed it.
Do we have any more questions in the room here? Yes, we have one more.
Thanks. Christiania from Nordea. Just a quick one. You had a I understood that in Q4, you had to send quite a lot of volumes on sulfuric acid overseas. Has that situation improved in Q1?
Or are you still in that?
Yes. I would say that Sandvik asset market is still fairly tough, but it's not as tough as it was some years ago. So I think there is quite a big demand in Europe. They are still overseas. And so but I think it's not a great market, but it's not bad either.
What effect in Q4, was that more of a temporary one or right? And then finally, on the €75,000,000 that is run rate, I guess, that should be achieved by the end of 2016, right?
Yes.
Right.
Okay.
Oscar Lindstrom from Danske Bank. Your ability to handle complex materials in Rundskaar, how unique is that? And is it difficult or would it be difficult for others to replicate? If you could say, is it how much of it is based on the technical setup, which you have at Reneshare? And can you say that it's to a certain extent, based on the know how of the personnel and the organization?
Yes. Of course, a combination of both. But I mean, some of the unique equipment we have, we have the e Caldo. That's the biggest recycling of electronics in the world. We have the fuming furnace, which is good for taking care of zinc.
And
we
have the ROS technology, which is one of the few in the world, which is very good for, for instance, to take out arsenic. So we have quite some equipment. And then of course, it's about experience. And Draenkar is a very complex process with materials going back and forth between the different processes. So it's a lot about people as well.
Difficult to replicate, maybe.
Yes.
We will take the last question from our web audience. And it is, you mentioned that the ODA expansion is slightly ahead of timetable. Why is that?
Yes. Well, I would say, other project, I was with the project from the very beginning. And what we did, we did a very extensive pre feasibility study. I think we spent some NOK 10,000,000 and a lot of months to prepare the project. And I think that has been absolutely one of the key success factors.
And also we have some of the key suppliers participating already in that pre feasibility study. We have also been lucky to bring in good people, both internally but also externally. And a lot of these people were on-site in 2,004 when we did the last expansion. So they know Oda very well. I think those are the main sort of key success factors.
Thank you,
And we will now welcome back Michael Staffas back on stage, but now in role as CFO. Michael? Oops. I leave it to you.
I thought I was running the show. Here we go. Yes, now I put on my other hat, and I will conclude a little bit remarks as the CFO as well on today's and talk a little bit about the financials, what they look like going forward. Just I have not really the setup here that I want to have, but I think I'm fine anyway. If you then start looking at 2015, we did have a strong performance.
We talked about this before. We had an EBITDA that went up in a year where most people, it went down. We had an EBIT, excluding the process inventory evaluation, that went up. It went up a little bit for mines. It went up a lot for smelters, and it went up for the group.
And we had a year where we had our balance sheet strengthened and the debt to equity ratio came down to 23% with a strong cash flow in 1 year. Then now it looks better here again. Good guys. And then when you start looking into what would have been with Kevitsa, what would the Kevitsa performance have been? Well, we have issued this one before just to have a sense of what would it have been like had we bought Kevitsa on January 1, 2015, and had it in for the whole year.
Well, Kevitsa did not have much of an EBITDA during 2015. In a year with such low nickel prices, Kevitsa does not produce much of an EBITDA. It would have contributed a little bit positively. And on EBIT, Kevitsa had a 0 EBIT basically. So it would have not contributed anything.
And the gearing ratio or net debt to equity would have been up to 45% or a little bit more. These are numbers that you all know, and I just reiterate again, the purchase of Kevisa was not done in order to get a short term kick on the earnings. This is a long term project that is going is under ramp up where grades will improve, volumes will improve and it's a long term asset and also nickel prices should come up according to the consensus numbers. Now the cash flow generation, as we said, was quite healthy during 2015. It was up.
And why was it up? Well, it was up because of the Garpenberg expansion that gave a positive contribution. It was also up or no, I should say rather not down because of the bullion mixture of businesses where we are not so dependent on the income of one particular asset or one particular commodity or the exchange rates because when you mix this all in, it becomes actually pretty stable. Now going forward, we have guided now from today, what we already before guided to have, that we will be slightly short of €4,000,000,000 for 2016. Now we are guiding for €4,500,000,000 for 20.15 'sixteen, sorry.
Now I'm getting all the numbers wrong. For 2017, €4,500,000,000 Why is it coming up? Well, there are things that are coming in now that was not really in the plans before or that come in but you knew about before. We have the environmental program in Rundsjoar we've spoken about that starts kicking in, in 'seventeen. We have the Harjavalta sulfuric acid plant that starts kicking in.
We have the Aitik investment that kicks in pretty much in 2017 that we just spoke about in my earlier presentation. All these things come And on top of that, we have been, for the last year, investing quite a lot less than guided for. And why have we invested less than guided for? Well, it's not that we've been able to figure out a way how to not invest. We have pushed things further out, and there's a limit to how long you can do a trick, and we're getting some of that stuff back again.
It's also important to point out that these numbers are without Kevitsa in them. We will come back with the guidance on Kevitsa once we own that asset. I spoke about the generally, the stability that we have, and I just want to reiterate this again. When you look at this chart here, you look to the left, you can get extremely nervous because you can see how strong our sensitivity is to different metal prices, how strong it is to different currencies and to the TCs. And then somebody starts adding these together and say, Oh, this is an extremely volatile company.
Oh, my Jesus, it's going to go up and down, and it's going to be solved all the time. In reality, there always has been, and we can have a long discussion why it's likely to continue to be, but it's always been a very healthy negative correlation between certain of these aspects. And if you look to the right in this chart up here, you can see the metal price and TC index. This is the bullion mix of metals and TC all put in together. That's the grayish scale that you see there.
And then you take the Boliden currency basket and you index that, and you put that in as the blue index. You can see already here just visually that they are negatively correlated. When one goes up, the other one tends to go down. It's been the truth historically and it's most likely continued to be the truth going forward, which means that when you look at Boulliden overall, it is much more stable than you can first be led to think just looking at the sensitivities on the different aspects. Now once a year or so or I shouldn't say once a year, but we have done it once before and now we're doing it again.
We're actually providing some guidance on how this splits between the different business units. We don't always do this because we don't want to be too explicit around exactly what's happening in different parts. But it's good to have this as an educational tool. And here, you can also see how the different business models work. And I think you know that we have a high sensitivity on zinc, which comes from mines, but also quite a lot of smelters because in the zinc business model, the smelters actually take quite pretty big risk on the zinc price with the price participation that's in place.
Now if you look instead of copper, then you see that it is also relatively big for the group. This is almost all in the mines, whereas the smelters take a relatively small part of the risk of the copper price because the business model just works differently. You can also then here see clearly that when TC is very good for the group, when the copper TC goes up, that is very good for the smelters, the mines pays part of this. For zinc, it's also good for the group. Here, we're much more balanced.
It's good for the smelters, but the mines pay is a large part of that because we are more integrated. And when it comes to lead, we're actually negative because we're long lead mining. So we're mining more lead than we are smelting. And therefore, yes, an increase will gain for the smelters, but the mines would lose more and the whole group would lose on such a change. Another thing that is important that we also guide for always afterwards in hindsight, and we just had an annual report out for 2015, are the planning prices.
Our planning prices and planning assumptions are vital for lots of things we do. They are the basis for the mineral reserve statement. They are the basis for all the investments that we do. They're also the basis for impairment tests that we do. So they go through the of the whole business.
And we only have one set of long term assumption that we are using 30. Now somebody might be very quick and answer your question, you did use this for Kevitsa. And the answer is no. When we come to certain areas, we do not always use these prices and terms because for Kevitsa, I told you that we used the consensus prices and terms, which are not necessarily our own long term. Now we have reviewed our pricing terms that we do once a year.
So this is just to give you a sense of how we are planning for a year going forward. And the bottom line to all of you is there is no big change. We have reduced our assumptions down on metal prices because we were slightly high compared to where other institutional consensus are lying. On the other hand, we have also adjusted the currencies in the opposite direction because of also where the present situation and where other consensus numbers are lying. And therefore, when you do all this math and you add it all up, and I'm sure you're to put all into your models, it is roughly the same.
So that's no big difference in terms of our planning assumptions going forward. Finally, I would just like to reiterate something that you all know and just to reiterate that this has not changed. We have not changed anything here. Our dividend policy, onethree payout ratio stays. The fact that the payout ratio stays means that we have risen dividends in a year like this when everybody else is cutting them down, we have higher dividends.
But the policy is the same and stands. Return on investments, 10% or above, going through all that we are working for when we're looking for this. This is, by the way, a real number. So it normally becomes slightly bigger depending on what you think about inflation going forward. And we have a balance sheet target of a 20% gearing at the end of a good cycle, and our concern was at the end of good cycle.
I usually put it a little bit in a different way. We have a point that we if we are either at 20% or we have a good plan to get to 20%. And then comes the question, okay, what about now then when you're up to 45%. Do you have a good plan to get to 20% when you're going to get there? And the answer is, well, exactly when we're going to get that, we don't know because it depends on metal prices and so on going forward.
But it looks fairly good and fairly strong going forward given the general cash flow profile that we have going forward. With that, I'll open up to questions from you.
We have one question from Amos Icy.
Hi. Excuse me, Amos Icy from Barclays. You just mentioned that you've been, if not, undercapitalizing the business in recent years, but deferring capital that you've been putting in. Which areas of the business specifically would that relate to?
Well, I think that compared to what we have guided for, the environmental program at Rundskaya is slightly later than we had first guided for. We have the whole thing about the crusher in Aitik is later than what we had guided for originally when we set up the Aitik 45 plan. And then there are certain bits and pieces everywhere where we have been prudent or have been cutting down in on CapEx or postponing CapEx is a better word. Those will be the main areas. Thanks.
And then I have one more follow-up, just with respect to cost guidance, from a lot of your peers, we've been seeing guidance for some quite big cost deflation coming through. Is there anything specific that you could give with respect to guidance for Boledin over the coming year?
I suppose it depends a little bit on what currency you're looking in. But I would say, if we look at local currency, I would say the best estimate for us is that we are around 0. We do have some cost deflation on some equipment and some materials, but we do live with a salary inflation even though it's under control in our jurisdictions and with the typical collective bargaining that would be slightly more expensive. So we will say that a zero inflation is a pretty good assessment for the whole in local currency.
Ula Sodermaierzbank. Is it possible to quantify how much of the CapEx of €4,500,000,000 is kind of postponed or CapEx from previous years?
It's a little bit of a difficult one because, yes, there is some part of that which is postponed from previous years, but we're also postponing something more out. So the net might not be so big. But I will just give you a sense just to get an order of magnitude. Originally, we guided 2015 at €4,500,000 It ended up at €3,600,000 Those €900,000,000 did not disappear. They will reappear at some stage.
And a large chunk of that might be in this number in this guidance, but something else has been postponed further out. So the net number will be smaller. I will not be more specific on that. Okay.
Thank you.
Thanks. Christian Johan from Mondria. Then just one more follow-up on the CapEx. Could you also indicate, Stefan, a little bit what are the CapEx approximately? I don't need exact numbers, but ballpark for Harjavalta, Ronnkar and A45 for 2017.
Well, for those individual pieces that we've talked about, they remain the same. We said it's roughly €1,000,000,000 for the sulfuric acid plant in Harjavalta and those things linked to that. It's roughly €1,000,000,000 linked to Rundshall and the environmental permit that we got, I think, 2 years back. It you just saw here is roughly €1,000,000,000 in Aitik. 1,000,000,000 Sir?
It's diesel. No, no. These are numbers okay. Now these are numbers for those parts. How much of that so your question was how much of that will fall into 2017.
2017. Onethree of Haria Alta and onethree of Earnshare and
I think Haria Alta and Earnshare are the big pieces here. 2
thirds
of the Yes. Then you have I think later stage, but that's mainly 16.
And the sustainable CapEx, is there still around €2,600,000,000 or €2,500,000,000
is what we've said, and we haven't changed that.
Right. Okay.
Jean Guillaume Peladan, Sycamore Asset Management. Two questions, short term and long term. On the short term, what do you see about the increase or decrease of volumes on the customer side in your end market industry, automotive construction? And the second question is a more long term and strategy one. There is a slow phenomenon that we call energy and ecological transitions, especially in Europe.
Europe is even heading this transformation. And do you think you will be positively or negatively impacted by this transformation, meaning more renewable energy, more recycling, etcetera?
Good couple of questions. Let me just quickly, number 1, on the metal sales. Number 1, we should be aware that we have metal sales, which is basically all in Europe, even though we are impacted by prices, which is a global demand and global supply. But what we're seeing in Europe from our customers, we don't see a big mix. We haven't changed.
We see a good stable demand for our products. Whether that is that they are substituting some imports from outside Europe or not, we don't have very good clarity on that. But for us, it's a relatively good and stable market as far as we can see. Now comes to your second question, okay, what will happen to these metals in the transformation of the economy? I think there are many people that can answer that one more detail than we can, but just have a sense.
Copper is crucial for any kind of renewable energy, and it will renewable energy will drive more copper. Renewable energy will drive more tellurium, which might be a very small product for us, but we like that. The usage of zinc should increase with a sustainable lifestyle or sustainability, not so much in Europe but in other parts of the world, as corrosion protection is a very sustainable way of not having to produce as much steel. So we think generally this should be relatively fine. Nickel also relatively fine, but that's more linked to that the consumer economics are catching up in places like China.
That's when you start using more stainless steel when you get into more higher income levels. So it feels relatively good, and we are strong in recycling. So however you look at the business cycle going forward in Recycling Metals, we have a strong position. So I would say that we are well placed for that development.
Thank you, Michael. That was our last question. And with that, Leonard, the stage is yours.
I guess we are all here for talking value creation. And in a cyclical industry like ours, of course, value creation can be accomplished in many different ways. The big headlines are often by the more speculative strategies. So buying something very big, leverage the balance sheet and hope for a better time on metals. That speculation driven values or those are the big headlines and they are immensely big at times.
But of course, over the cycles, they normally don't work very well. In the end of the day, you fail and you go somewhere else. We are a completely different animal altogether. We are not a company of 10 or 11 assets. We are a group where we have synergies between the units.
We are building on organic growth. We are developing technology. We are doing a lot of things in order to accomplish a better and better and better company. What we call it new bulled and way, the Toyota production system in our version. And that embraces, of course, a lot of technology, how we produce or build different projects, but it's also about organization development, how we interact, how we make flat organizations.
We don't centralize as much as traditionally capital intense companies tend to do. We like entrepreneurship. We like to have very strict and very clear sort of guidelines and rules, but we also like people to take initiatives. Many of the best things this company has done of all kinds have been created out there without any top management being understanding what going on. We realize it afterwards, and we can talk on conferences how clever we are.
But it's really the proof of high quality company in our opinion. The other one is strategic positioning. Strategic positions, they don't just happen. They are a result of us trying to figure out things like this, renewable energy or what is going to happen with the new copper mines in South America. Will they contain more arsenic or what will happen?
We try and on the question, can someone copy what we are doing? And I think you need money for it and you need time to develop your competence to copy. But we are not going to be there at that time. We are going to look for other things now. We look at leaching instead of or as a complement of what we're doing.
Our units are becoming more and more complicated. We have even difficulties to understand what we are doing because they are so complicated. That sometimes creates a little bit of less transparency when we talk. But in the end of the day, we are delivering good results with a decentralized organization. And then finally, if we are not in a speculative business, timing is still a factor, no doubt.
We have been lucky with starting Garpenberg at a time when zinc was good. We were lucky with Aitik to come to the market with new copper capacity at a time when copper went up. Of course, it's nothing. We don't have the crystal ball that no one else has. But there are a few things.
The timing of Kevitsa, we don't know if it is good in terms of metal price timing, but we are pretty convinced it's a good thing because we're ready with Garpenberg, and we need a new good geological area to put our brains on. And so timing is an unknown. It's very critical, and we try to avoid a few things because you can also destruct value. If you take the big bets and you don't take the hedge programs, if your balance sheet is a little bit too slim, you should make sure that you can live through the troughs. We don't know exactly what combination of currencies and metal prices we're going to see.
But we are on a yearly drill or a yearly exercise. We are putting in on our in our systems, worst case scenarios. Every year we do it. And we don't do it because we are carried away and we are falling in love with a Kevitsa or a Gartner project or something. We do it every year.
We're looking at cash cost curves. We're looking at a number of things. And we say, okay, these are scenarios where we want to be able to be going through without selling sort of distressed selling out assets at stupid value destruction or doing big impairments or having landing in the hands of the banks. So we are trying to put our eyes on next trough. We want to be in a position where our stabilities and things are playing together.
The times are difficult right now, and we don't have the crystal balls, but we are trying to be as smart as we can be in order to avoid the bad risk scenarios. The bus is leaving, so I have to stop here. I could, of course, talk for a long lot longer. I would just say a last word, and that is our team here. I think we have a great team.
We have not had big personnel turnover, and we have a lot of good people in the different units and in different parts of the group. I'm a very proud CEO of this company. Let's go to Oda. Thank you.