Good morning, and a warm welcome to the presentation of Bouhilden's Q4 2015 Result. Our CEO and President, Lena Tevren, together with our CFO, Mikael Staffas, will comment on the Q4 results. After their presentations, there will be an opportunity to ask questions, both from our audience here in Stockholm as well as from the telephone conference. And with that said, I hand over to Lennart.
Good morning, everybody. Last time we met, it was after Q3. It was joy. This time, we are coming in slightly below your expectations and our expectations. I think that we are a bit disappointed with the performance in Aitik, but we're very happy about the results from exploration.
And therefore, all in all, I think that we can have mixed feelings, but I think Buliden is demonstrating strength, and we have a job to do in Aitik. If we look at the development, Revenues are were 9.6 Revenues were SEK9.6 billion, so they were still a little bit ahead of last year, and earnings were half of the previous year. Earnings or cash flow was positive, but by a little and down from the previous year. And metal prices and slower or less favorable currencies are explaining most of the deviations here. The copper feed and production in both the smelters and the mines were good compared to Q3, but that's also partly a seasonality effect.
We had some number of onetime items. But I would say that even though they are negative, they don't change the big picture. I think that it's both pluses and minuses. So the group results are representative. On the full year, euros 40,000,000,000 in sales versus €36,000,000 a year earlier and earnings before interest and tax, which are SEK 4,000,000,000 as compared to SEK 2,600,000,000 is, of course, a very strong year given the raw material industry in general, and we are extremely pleased with it.
The free cash flow of +2.6 €1,000,000,000 is in contrast with the general industry or in our industry in a big way. The metal prices have been going negative in the end here, but we have had very favorable currencies if you look at the full year and compare to the previous year, obviously. The big news on profits, apart from conditions is the ramping up of Gatenbach. It has been a great success. We are on a full year disclosing all the units.
And as you can see later on, it's a very strong performance from Garpenberg. We also have effects of the full year on the acquired mine in Finland, Kuglarakti. And we proposed onethree of net profits in dividend, in line with our policy, and that's 3.25, which is a little bit over 1 third. In the market, I think you are you who follow Boulliden and raw materials, you're well aware of the general situation. China was driving this, and the difficulties in China is, of course, lowering the demand compared to expectations.
But I would still point out that we see positive growth numbers for base metals despite the general much softer or negative development or softer development in China and in the world. So I think that we do not see a dramatic negative or something, but it's a slower growth. But that is coming in parallel with several years of very
high profits and big investments
in expansions. And the balance is lower demand or lower demand growth means that the lower demand or lower demand growth means that sentiments are going down and stocks are, in many cases, increasing and the pressure on these volatile prices are have been very dramatic. On the TC and the smelters, which are, of course, the big contribution of profits nowadays, We see copper being oversupplied in copper cans will or they enjoy from many, many mines wanting to sell the can to the smelters and good terms there. In zinc, it's more pressure on the zinc thesis. And so on copper smelters, it looks good.
In zinc smelters, it looks good, but not quite as good as for the copper side. If we look at I think most of us are wondering, are we going to see this metal price decline continuing? Or is this are we at the bottom or floors or where are we? These are 2 diagrams. As you can see here, it's on zinc to the left and copper to the right.
We have the lines which are representing the cost level of the industry. You can see on the upper line, the 90th percentile and the 2 below are on the 75th and the 50th percentile. So at the 50th, for example, half the mines in the world are doing EBITDA plus and half are doing EBITDA loss when the price is hitting the line. We can see that we are around the 90th percentile, and these are not quite updated. And in particular, in zinc, we have seen an improved price situation in since the end of January when the graph is where the graph is updated to.
But if we look at long term development, we can see that if we are or if someone is asking what's the lowest possible level for zinc, I would say that there is still room for decline. And it's probably not going to happen because the macro of zinc is short supply, and therefore, it can be expected to not go down to the lowest possible levels. So I would say we are somewhere on the low side of zinc. In copper, we are already on the levels where the historic lows have been. So I would say that if the world is not behaving in a very different way this time compared to history, we are at the low points.
Individual days can probably be slightly lower, but I would say that in historic terms versus cash cost, we are low now. If we look at the currencies, which has been so positive to us. On the left side, we have the index of the metal prices in dollars, and we have the sort of the mix of currencies we have versus the dollar. And the darker line is a currency impact and the lighter blue line is the metal prices, and they are going up the same direction as you saw also in after Q3. So there, if we add the two curves together, you have the yellow line or the diagram to the right.
And we can see periods in 2011 when it peaked, and we saw also in the beginning of this year that we had very favorable combined terms. And we are today at a level which is sort of not dramatic. When we talk about currencies, it's also important to note that the advantage we have with a weak Swedish krona to the dollar is shared with most countries, most currencies in raw materials. And if we look at the copper groups of countries, they have had a similar soft currency compared to the dollar. And if you look at the zinc nations or currencies, even more so.
So I would say that in our competitive the currency development has not changed our competitive position a lot. Basically, we are from that parameter on the same level. The zinc price itself, if we blow it up, we can see the longer term trends here. We know that zinc held up very good compared to basically most well, all raw materials or almost all raw materials. But it has been sort of influenced by the general sentiment.
Raw materials, bad news, everybody is selling, and it's putting pressure on it. I think that we have seen in line with what we have also said many times that zinc is probably the metal which will come back soonest or sooner of the different metals. And I think in the volatilities we have seen, the short volatilities, the zinc has been popping up stronger than most other. And actually, we are right now. But still, it's negative development.
Copper is more negative and has been going down also in the beginning of this year, as you can see on the blow up to the right here. The precious metals are down. Lead is apart from zinc or probably the only one even beating zinc when it comes to stability. This we have pointed out for a year or 2 that the start stop functions in cars, the big car sales in China and so on has been supporting battery sales. And lead is a good commodity.
And with that, I hand over to not CFO, but President of Business Area Mines. Having him here, it's good that you take that presentation.
Thank you, Leonard. Thank you. And I'll keep the 2 hats on for this presentation, and I'll come back to as the CFO a little bit later as well. I started looking at the mines. We've had a result that is not quite satisfactory during the quarter.
And it is Aitik that I think is below most of your the Q3 that we had problems with the crushers in Aitik, and that the Q3 that we had problems with the crushers in Aitik and that was likely to spill over into Q4. That did spill over into Q4 and it spilled over more than we ourselves expected. So we've had issues all along in Aitik during the quarter that has hampered down. Apart from that, as we've also said, we have the issue that Mauriden mine in the Buliden area is out of commission, has been out of commission. That was in a way planned for, but that means that you have very little flexibility when small things happen as they always do.
And therefore, the Boliden area has not been able to quite keep up the volumes as it should do because of that. Apart from that, with those kind of 2 negative sides, we've had a very positive development in Tara. You could argue from lower levels, but we do have a positive development in Tara. And Tara has been doing better in Q4 than for quite a long time in terms of volumes. We have a still a positive development in Kyrolakti.
The production is going very well. And in Garpenberg, saving the best to the last, we have come up to the 2.5 1,000,000 tonne pace. By the end of the year, the ramp up is full. And I'll show you very briefly or very shortly, I'll show you the result for the individual units. And it's clear that Garpenberg is now the star mine that we have with our present prices and terms.
So that is mines. And I think I've commented around these comments that you've seen here. If you then start looking at for mines for the full year, and it now becomes obvious when you see this that we're making most of our money or you can argue all of our money in Garpenberg. The rest of the mines add up to pay for exploration, if you want to be blunt. Garpenberg has been a success throughout the year with very stable high production according to the ramp up curve and compared to the others relatively good prices and terms.
Aitik has been struggling both technically and operationally. Now the number that you see here, the 1.83 is not quite as bad as it is because we have the one off in Aitik, but it's around €400,000,000 pace for the year, which is, of course, not at all satisfactory given the Aitik mine. And we'll come back at the Capital Market Days around how we're dealing with the Aitik situation in general. It's also important to point out Tara. You see Tara is pulling a profit here.
But if you take out the one off on pensions there, it did make a loss for the whole year. But it's clearly positive EBITDA. And also during Q4, with the price and terms hitting the low, Tara was still pulling out a positive EBITDA. Now if that was a general relatively bad production in the quarter, we also have some very good news. And the good news is the annual update on mineral reserves and mineral resources that we present this time every year.
Being fairly new into the position, I had a question and asked around how would our jollies compare this year to previous year. And it is clear that this if it's not the best year, it's one of the best years that we've had in the last 15 years in terms of exploration. And that also shows in the numbers. And let me just quickly go through them as a sum up. I mean, we have a positive development in terms of mineral reserves that are up in Aitik, Aitik, Aitik, and Tara.
We have a higher reserve grade for copper in Aitik, which is important. And we've been working very hard in our optimization to get this. It might not look much to go from 0.22 to 0.23, but it is a significant 5% increase in the grade, which will make a difference going forward. There are lower grades in Garpenberg and Tara, but it's not lower grades than what we had there historically. It's the added tons that are slightly lower grades than the historic ones.
But especially in Garpenberg, where we're making so much money, additional resources do make it into the reserves. We also have 2 new satellites position that we will introduce. We have Nauternen, which is close to Aitik. Compared to big Aitik, it's relatively small resource, but it's high grade and it fits well into the profile and production going forward. And we are quite hopeful that we can turn this into a mine in say 5 to 10 years.
Vrebleiden, which is in the Buliden area, very close to the Kristinberg mine, is another positive development that we're looking into. It's also close to existing infrastructure and a relatively well and high grade deposit for the Buliden area, and it's also looking very good there. I should also say that we do have one piece of bad news in this sense that we don't have any additions for Curulati. That was, of course, one of the reasons we bought it, that we wanted to have positive exploration results. We did not really get started well until half the year.
That's one reason, but we haven't had any luck. We haven't struck anything big in the 6 months that's been going on. So if you look into the video layers and here you can see it graphically, you see the bar which is the darker blue here on Aitik. You can see that the reserves are going up. You can also see how big the reserves are compared to the production.
The black line is 10 times annual production. And we have a 27 year reserve life. And then you can see lots of resources that could potentially be transformed. And here you also see Nautern at the 16,000,000 tons is relatively small resources, will be underground. It's 15 kilometers away from Aitik.
But at 1.4 copper, it is, of course, much richer than the other Aitik ore, and it looks quite promising from that point of view. In the Boliden area, you can see that we have a very flat and stable development. We have just shy of 10 years of reserve life there as well, and it's relatively flat. So we find as much new as we produce in a year. And on top of that, you see the big jump in mineral resources, which is the Revliden deposit that has been added to there, which also looks promising for the future.
And then going to Garpenberg, you once again see here that despite that we've increased production and we're taking out 2,500,000 tons per year, we still have an increase in the reserves. However, the slightly lower average grades and those average base is partially because we've been producing over the average grade and that the additional tons are coming towards the end are slightly lower grade. But you also see a very high increase in the resources. And once again, it's proven that there are resources around in Garfin Bay. These are also at lower grades, but it looks also very promising for the long term in our most profitable mine.
You also see at Kyuralaki the negative. You see the step down from the resources that were presented a year ago, and that's basically 1 year is a very good production that is taking its toll on the reserves. And finally, Tara. Tara that has been for many years around this 5, 6, 7 year reserve life. We now have a 6 year reserve life in Tara.
That is proven and we have increased the reserves compared to last year. So with that, I'll give it back to you, Leonard, to talk about smelters.
I think smelters continue to demonstrate very strong performance. The exceptional or the good one is Harjavalta, where we have very strong performance and the rest is doing good. If we look at the numbers, earnings before interest and tax and before the profit or process inventory revaluation was CHF583. It's down from the previous year. But if you look in your notes or remember what I said, we had one someone said or we were asked is this a normalized year or is this something special with Q4?
And I said, yes, it's something special. Everything is going wonderful. So this is not the new normal. This is quite exceptional period. And Q4 was up to our plans, and we are happy with the performance.
CapEx were €496,000,000 We are spending on a quarter, but we are spending more money on maintaining these very profitable smelters right now. We have held them back a little bit over many years when we focused our CapEx on the mines. All in all, we are reducing CapEx. We are taking it very easy right now, and we are prudent. But the tendency is that we the return on better maintenance is strong.
We don't like these profitable units to have interruptions or unplanned stops. The volumes were higher than Q4, and the terms were higher volume and lower terms. Of course, the impact of falling prices is impacting the free metals, but it's also impacting the zinc thesis. Compared to the previous year, as I said, it's more strong last year than anything else or it is that. We had some internal profit eliminations where the accountings were changed.
So it's a onetime effect of minus €60,000,000 in the Smelters business area. If we go through unit by unit, well, look at the yellow bars compared to the light blue bars and
the total, I think
it speaks for itself. Where feed has been good in copper, where the combined copper and nickel capacity is giving us we can buy profitable products and process it when we produce copper. We get some nickel and we can produce copper smelter is particular suited to the markets right now. We also changed the strategy on nickel to do the nickel smelting in our own books. And it is not the reason for the exceptional result, but it's adding.
So the profit or the strategic move there was good and is going according to plan. Little Bergs has had some issues, not a big deal, but is probably the negative there. And with that, I hand over this time to CFO, Mr. Staffas. Right?
Thank you. Let's briefly go through the financials. If we start with the first slide, I think you've all seen these numbers, and they're not new to you, at least they were new a couple of hours ago, but you've seen them now. The profit excluding profit revaluation just shy of €600,000,000 the cash flow around 0 this quarter. Now if we start looking into the bridges and see where this comes from, and we'd start with comparing against Q3, the previous quarter.
The volume is up. We've had higher smelter feed and the mine production is up during these quarters. Prices and terms are down, mainly lower metal prices, but also some lower smelter terms taking into account the total mixture of smelter terms. We have seasonally higher costs that we always have when we compare Q4 to Q3 because it's mainly a way of seasonally low cost in Q3, but also the higher mine production has contributed a little bit to the higher cost. And then we have some items affecting comparability that I think we've spoken about of €45,000,000 That's the comparison with last quarter.
If we now compare against last year, we have a slightly lower production than we had a year ago in terms of volume. This is mainly smelter feed that is slightly lower. And as Leonard pointed out before, this is not so much that we're producing bad this time around. We just had a very, very good Q4 for the smelters last year that we're comparing with. The prices and terms are lower.
And this is, of course, mainly the lower metal prices are driving this down. We're getting some help on the U. S. Dollar, but it's not helping enough to get into positive territory. Costs year on year are slightly up.
But this if you look at this number and look at some kind of internal inflation, you will figure out that we are very close to 0 in the way that we can handle our own inflation. So compared to last year, that's relatively strong. We didn't have any one offs last So of course, the minus €45,000,000 comes there as well in the explanation. Looking over to the cash flow. Cash flow €36,000,000 or close to 0.
We have invested quite a lot in the quarter. So the investments in the quarter were €1,200,000,000 which is higher than it's been in previous quarters. This is a normal seasonal effect. We tend to always have higher investments in Q4. It's a good investment for doing especially mine development that we tend to work on in that quarter.
We do have that. We also regarding tax pay, which I think we had a discussion over the last few quarters. Now this quarter you see a much more normal tax paid in line with the tax charge that we have on the P and L. Finally, on the balance sheet. Balance sheet has also strengthened somewhat.
It is now down to 23% net gearing at the end of the quarter. With that, Lennart well, sorry, I should just comment very quickly on the full year first before I give it back to you, Leonard. On the full year, you see that we have now the €4,000,000,000 in profit and we have a cash flow of €2,500,000,000 So we are both pleased for the full year with the profit and with the cash flow. Looking for the full year, we've had a very good volume development compared to €14,000,000,000 with €1,000,000,000 plus in effect on the volume side. Prices and terms were also helping us if you compare 2015 to 2014, especially the currencies that helped us quite a lot in that comparison.
So that's been the 2 main drivers of the much stronger performance in 2015 compared to 2014. So now, Lennart, now I'll get it back to you.
The markets are volatile, and the swings in Boliden are dramatic. The decline in mines is dramatic. The ups in smelters is equally dramatic. If we go into the units, when we've on full year look at the individual units, I think that Garpenberg sticks out in a big way. It's despite the fact that most mines in the world are struggling, we're making a big profit there.
If we look at the Aitik, it looks like a very low level of profit, but Aitik is hit by €200,000,000 in a one off that we took the charge of the diesel tax this quarter. So the underlying result is €200,000,000 better. And the little profit we do in Tara is on the other hand €200,000,000 worse because it's including a positive of about the same about €200,000,000 So it's doing a negative €100,000,000 in EBIT. Tara is doing clear EBITDA plus also and EBITDA a little plus in Q4. But I think the mines are having a problem.
We have a good result in Garpenberg. Aitik is better than it looks, and Aitik is not performing well. And I think if there is one bad news, it is Aitik. Turning to smelters. I think the general picture is very good.
It's great to have mines and smelters together. And Harjavalta is sticking out clearly there. To have base metals and precious metals, we are talking about often that in very bad times, the precious metals tend to go up, where the general economy is pushing the base metals down. We haven't really seen that or surprisingly little of it. But I think we see it now lately in the recent periods.
We have seen that tendency. And I think that if the markets are really going sour, if it becomes worse and more bad news in the general economy. So I think that we will see or I hope that we will see the pressures supporting our business. High productivity, always important. We are driving technology in our industry, and we have continued to do so in Garpenberg and elsewhere.
If we go forward here and what have we said, which we like you to bring to your models and expectations going forward. We always have this slide. Well, first of all, we do a grade guiding in Aitik, 0.21 for 2016. We are also saying that Q1 and Q4 are more often or sometimes hit by weather. January was very cold in Aitik, and the year didn't start fantastic.
So it will perhaps be some winter conditions sort of in the Q1 when we arrive at that one. Garpenberg grades as demonstrated here or shown here. And we had some rock conditions in Garpenberg in the end of December, which will, we think, not hamper the volume. There are some stops where we cannot mine as planned. So we have to now quickly redirect our production in Q1 or end of December and into Q1, which and today, I think it is true, unless you have very recent news, that we think we will make the volume, but we have to do stopes with slightly lower grades.
Not too dramatic, but it's still something we know by now, so we are informed about that. We are going to manage cost. We're going to manage CapEx. We continue to be careful with what we're spending. We are coming out in 2015 lower than guided on CapEx.
Some of that is moved into 2016. And if the present conditions prevail, we are going to do without sort of we hope that we are not forced to do too dramatic changes, but we are going to push CapEx also out of 2016. So what comes over the spillover from 'fifteen, we hope to spillover as well. And the smelters maintenance shutdowns are as exhibited here. It's about 200 plus €200,000,000 in Q2, a little bit more and a little less in Q3 sorry, below €200, €165,000,000 in Q2 and €50,000,000 in Q3, sorry.
And on the benchmarks, we have got the benchmark levels for copper, and it's 97,000,000 compared to 107,000,000. So it's down, but it's on a healthy level. Zinc is not closed yet or we don't know, but it has price participation. So I think it's much more depending on the zinc price. And that concludes our presentation for today.
This is the final slide. You are invited to our Capital Market Day. We are going to do an ODA visit, And we do some general presentations in Stockholm before we fly out to Norway. And if we said something forward looking, we probably expressed ourselves wrong and read this. And with that, we conclude the presentation for this time.
Maybe the last remark. I forget the most important exploration. We had very good news. And I would like to just underline what Mikael said. We have got additions in Aitik and Garpenberg, the two mines which are generating big profits.
We have also new discoveries or new deposits, Nautanen, high grade, which is quite important for the life of mine plan in Aitik, where we can fill up next pushback, where we again will start at the top of the pits, which will naturally, and we talk now, somewhere behind 2020 or something. So if we are lucky and that we can develop these deposits, maybe a good, quite valuable and value enhancing thing. With that, I close our presentation. We are prepared for your questions.
Yes. And we will start with questions from our audience here in Stockholm. Do we have any questions? Yes.
Jan Marburg, Kepler Cheuvreux. On Aitik, you said that Q1 will be seasonally weak as usual. Do you have any indication of how we should look at the gradual ramp up towards 45,000,000 tonnes? Will it be happening in 2016? Or is it more in 2017?
Well, as I said, we will come back to this in the Capital Market Day regarding what we're doing and what the action plan will be I think going forward. So we have no new guidance at this stage. Okay.
And in Tara, you are doing cost savings, but at the same time, the mine is getting deeper and you see costs go up when you go deeper. Do you think the net effect will still be that you get costs down? Or will you be rather stable in costs?
Depends upon when you put your basis. But overall, Tara is reducing costs, and it has done. Now going forward, it will continue to go deeper and the costs are going up a little bit. But overall, it's going down. If you take the baseline 2 years ago, it's going down.
And just the last one on Garpenberg. You guided for 4.5% of zinc grades in 2016 2017 and then the real service, 3.9%. Will you gradually go towards that after 2017? Or do you have any indication of the mine plan?
I think it's only prudent for you to use the 3 0.9%, which is the average. Exactly how that will happen, we don't really know. But of course, there's always a tendency that you want to take the better parts early, but you should take a flat line after that. Thank you.
Ulla Sarma, Swedbank.
I have to come back to Aitik. Is it can you say anything or kind of saying that you're going to talk more about Aitik at the Capital Markets Day. But can you say everything how you are going to improve the profitability? Because when money is looking at the bridge you showed, the costs increased kind of quite significantly quarter over quarter, but the volumes were not so much up.
I don't the costs are up, but that's not so much related to Aitik maybe. So that's more related to other things, including the seasonal effects. So there's not really a cost issue in Aitik. I mean, the issue in Aitik, as you know, when everybody's been around for a while now, it's the stability of the crushers that comes back and haunt us. We have announced story 2 years ago that we were going to do something about the crushers.
But for different reasons, we have stalled that development because we've been working with the mine plan, of which this development of 0.22 to 0.23 is a very important part, what we're doing in doing
the reoptimization. We've been working optimization of where to put the crushers
and what kind of Okay
Okay. And exploration, the budget for this year compared to last year? Similar.
Any more questions?
It's Julian Bidde from SEB. You're leaving somewhat of a cliffhanger when it comes to your CapEx and Aitik Investments until the CMD. I think all mining companies in the world have been very aggressive on cutting CapEx to reflect market conditions. Let's take a scenario where I know absolutely nothing about your previous guidance for CapEx. What are we looking at in 2016 as new CapEx?
What's the rollover from 2015? And how much is variable depending on how prices develop?
You can take the more detailed sort of financial number wise comment on it. I think if you have no idea of or if you are a newcomer and we take the general We have spent a lot of money in expansions for several years. When we did that, we held back maintenance. We have had good profit generation and we have a strong balance sheet today. Unlike this industry, we have the strengths, the financial strengths, positive cash flows, positive results.
And we are really, really hoping that we are not sort of we don't have to do what many other companies are doing, big deviations, which are always related to destruction of values. You have invested, you have to stop invest. The capital already done is now standing idle until a sunny day or something. Or you have to sort of do stupid stops where you take risk on both environment, people, profit and whatever. I think we are in an extremely favorable situation where we are going to we are not naive about the severity of the market conditions.
We are going to save. We're going to reduce. And we are going to make sure that we don't destroy the fixed assets or the assets we have. So we think that we will be milder in our reactions than many others, which I think is extremely positive for the value of our company. That's a general picture.
Then mines are having more of a profit decline right now or a profit decline and smelters are going up. Well, when we did the big Garpenberg and so on, we held back the not very profitable smelters maintenance, not in a stupid way. We had a discussion on the board meeting yesterday and we said that they are well maintained, but there are things where we can probably increase the uptime, the availability of some equipment and reduce the risk for unplanned stops. And we're going to prioritize slightly more there and slightly less in the mines. So it's a tendency from mines to smelters, tendency that the total is held back, but not in a too dramatic way.
That is a general picture.
I can just to put some I agree and I just have a sense of number. I mean, we said many times that EUR 2,500,000,000 is roughly what is our investments that we need to do, which is in the unavoidable part of it. It's just an ongoing CapEx. And those you cannot really do much about because there's lots about development in the mines and you cannot really stop developing because then you will stop producing. So that's around €2,500,000,000 Now we're guiding slightly shy of €4,000,000 What's the difference?
Well, the difference is and then I said we've guided for a couple of these items before. There is roughly €1,000,000,000 in Rundshall and roughly €1,000,000,000 in Harjavalt that needs to be invested over a couple of years in terms of the environmental programs that are going on in those two units. And then you can take that those 2 and divide it by whatever number, €4,000,000 for example, you get €500,000,000 or so that comes out in this year. And then you have the tail end of the Oda investment that's coming in, in the year coming forward. And then there are other smaller bits and pieces that are in there and that adds up to the 3.5 sorry, the shy of 4.
Also to shed a bit light, I mean, we guided a year ago when we started with 2015, we were at 4.5. We ended up at kind of €3,500,000,000 before we got to the end of it. So it's €1,000,000,000 there that we have taken out. Is that taken out forever? No, in some way it's going to push back.
But we think that we can handle it for the time being without having to take it back. That's basically I think where we're standing on investments.
Could you just remind what the €1,000,000,000 refers to, which wasn't spent in 2015?
Well, I mean, a large part of that is, of course, that we have not started building a crusher in Aitik. That's a large chunk of it. There is the run share environmental program has not started off spending the €1,000,000,000 the way that we initially thought it would start spending its €1,000,000,000 The ODA is not really later than what we said, but to some extent we have pushed some of the investments in the ODA to P200 to P260 and so on. So there are various pieces of that.
Okay, great. Well, we'll wait the Capital Markets Day, obviously, but it looked like you have at least got the appeal court heading to support you should you decide to make the investment to maintain €45,000,000 Last question from me. You're saying that or sorry, we know that the copper TC benchmark for 2016 is down about 10% year on year, but you described the outlook as good for that and less good for zinc. Does that mean you're expecting the zinc benchmark to be down more than 10% year on year?
I don't want to speculate about it. It's better we wait for the benchmark. Everybody can follow what's happening there. I think maybe one comment on the copper side, 10%, it's a pretty significant number. And in some years back, the free metals was a bigger value than the TC and the premium was also very important today.
The TC is an important part. It is the largest individual chunk of the gross profit of the smelters. So when that goes down, it's significant. But at the same time, maybe I can indicate some slight sort of positive to it because our ability to work with sort of complex materials are playing in here. So benchmark is benchmark.
We have said many times that coppercon is less and less of a commodity. So the benchmark is more of a reference value and all individual contracts are quite a lot deviating from the middle there. So maybe yes, I think we're going to see a negative. But I think we're playing our cards well, and I think we're going to be reasonably happy despite. Thank you very much.
Okay. Let's start with the questions from our audience via the telephone conference.
Thank Our first question comes from Alan Gabriel of Morgan Stanley. Go ahead. Your line is open.
Good morning, ladies and gentlemen. Just two questions from my side. Well, the first question is on the cash flow statement. Miguel, you alluded before that the cash tax is going to catch up with the P and L tax sometime maybe in Q4, and we haven't seen that happen. How do you see that evolving going into 2016?
Okay. Well, we haven't we've seen the slide stopping, but we haven't seen the rollback as of yet. I mean, this is a relatively complicated equation back and forth, and I don't really have a good guidance for you apart from that eventually you're going to have to pay this tax, but I cannot give you any guidance for 2016 really.
Fine, fine. Thank you. And the second question is basically on the trends that we are seeing in the smelting business, the market trends that those that we cannot really track on the screens include the scrap margins and the sulfuric acid prices. What are you seeing with those trends going to 2016? You can just give some comments, qualitative comments would be fine.
Thank you very much.
Grap markets are slightly more low or clearly more local than the metal price in or the benchmarks and the metal price. And sulfuric acid is also a more local market. We see a negative development, but we are not expressing it as the biggest concern. I think we are reasonably comfortable with the development. It's not something I would point out as something hampering our production or something like that.
Okay. Thank you.
Thank you. Our next question comes from Gustav of Gdanskobank. Go ahead sir. Your line is open.
Thank you. Good morning. So I have a question regarding Tara. I realize that Bolivin is a rather small player in the middle markets at large. But Tara is indeed quite a substantial player in the zinc market.
And given the short mine life and what one might say are lackluster margins, would you ever consider to take a top down perspective on the implications of a mouthful of Tara and protect those earnings for a better day?
Can I talk about mines? Mine, we can yes, you can take it. You can take it.
I mean, in looking into shutting down and mothballing an operation like Tara, there will be lots of consideration going in. But it's going to be difficult to put a value on whatever is what. The biggest chunk is always Tara's own profitability. I think it's also important to you know from a legal point of view, if you were to put Tara in the care and maintenance for any other reason than its own bad profitability, you risk losing the mining license. So that always has to be the main reason for putting anything into a mud balling.
All right. Thank you. Thank you. Our next question comes from Liam Fitzpatrick of Credit Suisse. Go ahead.
Sir, your line is open.
Morning. Two questions from me. Firstly, on M and A. I'm not expecting you to make any comments about what you may be looking at. But in terms of the balance sheet and potential funding, you're getting close to the lower limit that you mentioned or that you've given of around 20%.
If you were to do anything, is there an upper threshold that you wouldn't want to go through? And secondly, just on the smelters, given what we know about TCs in both the zinc and copper, are you able to give sort of, I guess, a percentage range of what 2016 EBIT could look compared to 2015?
On the acquisitions, we continue to look. We have a strong balance sheet and are in good control, where most of the companies for example, look at something which is half invested and we would pay, say, dollars 1,000,000,000 for something and have to invest another €1,000,000,000 before we get it up and running, that's clearly nothing we would consider at this time. If it is spending, €1,000,000,000 is a lot, but a big number. And we have something which is very cash positive even at these prices, then of course, it's a different story. So there is no I cannot indicate what our levels or sort of acceptable levels would be.
It depends entirely on what we are looking for. And we are looking. There isn't a lot of things which we are excited about out there, but of course we follow quite many. We do our evaluations, and we are going to really live, as we are saying, we don't need to buy anything. Therefore, we are not going to just pushing ourselves that we have to buy because it got to be good because the prices are low.
No, the prices are low because it's an uncertain future. And therefore, we have to continue to be prudent. But we are looking, and we would like to buy something if we find the right thing. And if we don't, well, no problem. And then it
was the number On the gearing side, what we have said publicly is that we are very uncomfortable going over 60, which means that at any kind of situation, we are doing simulations and simulation including floor prices and very tough conditions. And we would like to stay under €60,000,000 at all those situations. Everything got very quiet. Yes.
That's fine. Just my second question, just on the smelting business, if you're willing to give us sort of perhaps a percentage decline range that 'sixteen could look like versus 'fifteen?
No, we don't do that. We don't give forecasts or we don't give the percent of what? What did you ask for,
Paul? Just in terms of, I mean, EBIT for the year. Okay.
Yes. No, no, we can't do that. That's a function. I think we have a stable business. We are demonstrating the sensitivities.
As of now, you have all the elements to plug in the market scenarios you think should or you believe in, and then you can understand where we would end up. So I think that we are not disclosing anything more than that, and it wouldn't be prudent to do so.
Okay. Thank you.
Okay. Our next question comes from Robert If you have your own phone muted, you will need to unmute that there.
Yes. Two questions from my side. In the smelters, there was some negatives in the quarter on raw materials mix and byproducts and sulfuric acid, customary mix and metal premiums. Would you say any of those negatives are likely to reverse in Q1? Or is there sort of a trend in this?
I think there is a bit of trend. The byproducts have price pressure. The thesis are what we said. So sure, there are some negatives in the market terms. And they should be well, depends on what you expect.
But I think that the tendency is, if anything, negative. But what I'm saying at the same time is we are earning a lot of money in the smelters. And I think that in copper, it looks good. In zinc, it looks a little bit more tricky. But all in all, it's looking good.
So maybe a negative trend or a negative trend on several lines that's from the market. And then what we are doing. We have the Oda 200, which is a profitable investment, which is working and or going on according to plan. And we have the improvements going on in Johan Sverdrup. And as you rightly said, unlike last year, everything did not work perfect this time.
We have some disturbances in Coca Cola, a big profit generator. We have some disturbances in Rundsje. And so I would say it's more of a normal quarter. It could be that we should do a little bit better, but I think that gives some flavor on the disturbances.
Perfect. And then on Aitik, you've listed that reserve grade of 2.23 and guided for 0.21 in 2016. So my question is, does this change reserve average grade? Does it influence your expectations for 2017? Previously, you sort of guided to grade slightly above the average in 2017.
Does this change with the update of the average to 0.23?
No, I think that guidance still holds.
I think on in Aitik, I think what you see here, we are pushing the crusher. We have problems with the crusher and we produce little. We are having exploration results. We increase the average grade. We have found Nauternen.
I mean, it gives some of the elements which we are working on. It's not a new picture at all, but we are adjusting the picture and we have to take the new data points here before we optimize and decide which optimization we are doing. And not least the copper price outlook is tougher. So there are new elements, which makes us sort of take a new grip and see what we how we maximize. And some and one of the elements obviously is the exploration results, grade and so on and so.
Some different elements.
Yes. But you'd still then expect a higher than average grade in 2017? Yes.
Yes.
So that's good. Thanks.
Those are my questions. Thank you. Our next question comes from Daniel of UBS. Go ahead, sir. Your line is open.
Hi, there. Yes, couple of questions from me. Firstly, at Garfin Bay, you've obviously given the grade guidance for the full year at 4.5%, but indicated that grades will be weaker in the Q1. Can you give us any more color on the kind of grade profile you would expect Q1 and then sort of through the rest of the year to get to that full year guidance? Second question on working capital.
As you flagged, you had a negative sort of working capital at at the sort of level that's sustainable in terms of working capital sort of across the two businesses? And the third question is on impairments. I'm assuming you went through a round of impairment testing at these results. Can you give us any indication on the inputs of use for that? Or do we have to wait for the Capital Markets Day for that?
Let me take Three questions to you, Mikael.
Three questions to me. Garpenberg, regarding grades, everybody who follows us knows that we do have a somewhat of an erratic running on grades anyway. So we have decided not to give any numbers, but it will most likely be lower from for Q1 exactly as Lennard said, we have had some cave ins in some stopes that were high grade stopes and we have to replace them lower grade stopes. But this is part of the Garpenberg reality actually that we always have these things and we have the negative with Garpenberg is that the stability of the rock is not the greatest and we are constantly replanning around those kind of situations. I cannot give more details on that.
I can add what we didn't do now, we will do later. So the NPV is just a marginal effect of the value. I mean, the ore is there, so Yes, that's
right. Regarding working capital, our working capital is also very erratic, as you know. It goes up and down. It's difficult to have a good level. But the level that we've had now in the end of Q4, I would say, is a normal level roughly.
But it can vary both up and down from that level. And we are clearly now higher than, for example, we were at the end of Q2 when we were at very low working capital levels. Regarding impairment, impairment, of course, a reality for all countries or all companies, every company and especially coming towards the end of a fiscal year. We've been working around that. I think that the main discussions regarding impairment, I would say there have been too many discussions actually, but it is Tara that will be the one that with the even though it's a positive EBITDA, it might not be a very big positive EBITDA.
That has been the most discussions, but we feel very comfortable about the value that we have on tar in our books.
And we extend the life of mine or their reserves. So that's going in a positive direction too. Yes.
Can you remind us what the book value of tariffs?
SEK 1,500,000,000 This is a rough number. I think it's around SEK 1,500,000,000. I could get back to that.
Thanks so much.
Our next question comes from Olav of ABG.
Open. Olav Kiermaier from ABG Sundal Collier. Coming back to zinc treatment charges, you didn't want to give us any figures, but you said that the trend was heading downwards, but not as much as in copper. Was that the correct conclusion?
Copper, we have the benchmark and you saw it on the previous slide. What I indicated is that maybe we have a slight plus on that because of our ability to buy some high margin stuff with the capabilities we have. Zinc is going more negative, we believe, than copper because it's price or the escalators or deescalators, the price clauses in the TC terms. It's a fixed plus variable with a price. And with low zinc prices, zinc TCs are going down.
And it's a fundamental for it too, and that is that it's not a very liquid or it's not an oversupplied zinc concentrate market, which is a negative for the TC. Whereas in copper, it is an oversupplied copper TC market and therefore a lot of mines want to sell their product, which improves the possibilities for the smelters. So that's sort of explaining what I said before or repeating what I said before.
Thank you. That's clear. And also when will we get more info regarding these zinc treatment charges? When will we know, so to say?
At the Capital Market Day, I think. No, it's going to clear in the near future, I would say. We don't know, but soon, I think.
We are not part of that timetable, so we don't really know. But it's typically announced somewhere in March. But and it is announced not by us, but by the big companies that are sitting at the table.
Sure, sure.
Thank you very much. That's all. Thank you. Our next question comes from Philippe of ABN AMRO. Go ahead, sir.
Your line is open. Yes, good morning. This is Philippe McGoeck from ABN AMRO. I have just one follow-up question or a question on a question earlier asked. It's about the smelted TCs again.
And Leonard, you indicated that you expect business that can offset some of the negative market effects by taking in more complex materials. I was just wondering why that hasn't why you haven't taken that opportunity in Q4 because you indicated that the change in raw material mix also resulted in lower treatment charges. So is that does it have to do with your feed book? Does it take a while before you can change that? I was just wondering if you could give some more explanation on that.
No, we had it in Q4. We had it in the year and we have had it for many years. So that is true now and it has been in the past. With improvement in run share, it's going to improve our abilities over time. I think the particular case is that we are not locked with 1 individual supplier on copper and nickel feeds.
And that combination, that opened up in the second half of twenty fifteen and will continue. And then of course, individual quarters will go up and down because we are doing batch production. And sometimes we're processing high margin stuff and sometimes lower margin stuff. So but I think it's nothing new that is coming dramatic from Q1 or something. It's something which is improving our position and has been doing so, even though the strategy we have is to positioning ourselves better and better to the sort of less standard qualities.
Okay. Okay. Thanks a lot.
Thank you. And our next question comes from Christopher Warshall, Foresso. Go ahead sir. Your line is open.
Good morning, gents. Just a couple of questions from me. Looking at Aitik and the Northland resource, is that covered within your current environmental permitting? Or is that something you'd have to do? And looking at trying to get that within into production within 5 years is something you'd have to accelerate?
And just a follow-up on Hejivalta and the nickel processing that is in house. Mean, I know you can't give us much definition on terms, but could you give us an indication of sort of profit margin or how the market processing nickel concentrates changed since you took that operation in house? Thanks.
I'll start with Nauttan, and I did say 5 years. It's good that you asked the question because that's it's not going to happen that quickly. Yes, we do need a separate environmental permit for it. So we do not have an environmental permit. And it's probably not going to be it's more like we could start the product maybe in 5 years and
we could have it in production 3 years later or so. And it's the first time we publish it and it's mineral resource. So there are ifs and buts, but we have a good knowledge of the mineralization as such. The viability of it, we are quite a bit before we can be precise on that. Nickel?
Nickel, yes. Obviously, we cannot disclose the individual sort of suppliers or margins. What we can say though is that when we changed the nickel strategy, we saw a need for Hariavalta in the market of selling the product nickel mat, the nickel containing value add material and that several nickel mines were looking for a partner. And we saw this as a business opportunity. We had to invest in working capital.
But against that, we saw a better margin opportunity. I think it has played out well. In addition, we have also been having very good control of the process. When you change suppliers and we have been working with the same for a long, long time, of course, there are some uncertainties on that, but it has gone very well. So the processing is going well.
The margins are improving. The capital is the price for it. I think all in all, we are doing something clever with a bit of luck and a bit of luck with timing and everything. Nickel is not a great place to be these days, but what we are doing is actually very, very good.
Thank
you. That was our final question, and we thank you for joining us today and hope to see you at our CMD on 16th to 17th March, starting here in Stockholm and then going to our zinc smelter, Oda. Thank you.
Thank you very much. Thank you.