Hello, everybody, and welcome to this outside presentation of our 2nd quarterly results from live from Gartner in a beautiful sunny weather here in Sweden. And as usual, Lennart and Mikael will present the results and then we will follow-up with a Q and A session. So with that, welcome and Leonhard please.
Okay. Good afternoon. A very special quarter it has been and we have had seen metal prices declining. We have had the largest maintenance shutdowns in our smelters of all times. At the same time, we have large investments going on here in Gothenburg, where we are today with the board and we are visiting the site and the project which is on plan.
If we summarize the quarter, we had revenues of SEK 8,000,000,000 as compared to SEK 10,300,000,000 that is influenced of course by prices, but also by the shutdowns in the smelters. We had earnings before interest and tax and before process inventory revaluation of EUR 370,000,000 compared to EUR 9.56,000,000 a year ago. It includes the maintenance shutdowns with a value of about SEK 300,000,000 and of course the effect of lower prices. We had cash flow of minus SEK 1,500,000,000 almost, which is a big number, which is might be astonishing to some, but it's well in line with the things we're doing, the maintenance shutdown, the ongoing investments in Rhein in Garpenberg here and some adjustments or changes in the working capital. We have also paid dividend in the quarter, which has an additional impact on the net debt.
And we have paid a one off tax for diesel fuel, which is well covered in our report. So all in all, lower metal prices, good mine production, extensive maintenance stops and the high CapEx are the main points of the agenda or of this quarter. And our projects expansion projects are on plan. The general market, if we look at all of the slides we have, I would say that we have a fundamental market which is not bad. The industrial production is rather flat with good growth in China, with negative growth in Europe still and with reasonable development in the U.
S. And we have positive GDP or industrial production growth in the world. The construction market is also quite flat. Rip is basically indicating the same thing. China is good.
The U. S. Is flat on a quite good level and Europe is negative. The car industry is slightly different where at least the German car industry is on positive year on year growth. But else on that, I would say that all the driving factors for the global demand of base metals remain relatively the same as compared to previous quarters.
The metal prices have had a different development and certainly for precious metals and copper. But if we start with zinc on slide 7, as you can see in the quarter, the zinc prices have been stable. Also over the longer term, we see a relatively flat level on zinc and level where a lot of companies are not earning basically good profits on this level, but at least it's not going down or not much going down. We can also see that the official inventories of LME in Shanghai has been going down. All of this, I think, is matching the global picture that zinc is more tight than copper, we see on 2 slides ahead.
If you look at yes. And on copper, we have seen a decline from the top 2011 in the earlier parts and we have seen the copper prices going down step by step. It was lower in Q2 than in Q1. And we have seen a decline in the second quarter and the start of the Q3. The reason for the decline here is more the uncertainty about the long term development of China and its impact on base metals market and the new projects in copper, which many of them are planned to be in production now and in the following years.
TCs and premiums for both zinc and copper are reasonably in line. If you look at the have been discussions whether there is congestions around LME stocks, which has a contributing factor to the scarceness of or apparent scarceness of the metal in the market. More dramatic is gold and silver. Gold is down, which is well well, we have all read it about it in the press. But silver is to us the most dramatic metal from the peak, which was very high and very, very short.
But if you look at the peak, the silver prices are down 60%, which is having a major impact or a quite big impact on Boliden's financial performance. Also gold is down quite a lot. And lead, which is the 3rd metal on Slide 11, is more stable than even zinc. And here, we have had a positive development. If we go into the business areas and we start with mines, we had earnings of EUR 376,000,000 compared to EUR 7.30 a year ago and 427 in the Q1.
If you look at the price impact of our mines, it's much more than that. So we have had a good production month in the quarter. It was good in Garpen Bay. It was certainly good in Aitik where we had record all time highs with a pace of 38,500,000 tons per year. We had also in addition to the price impact on the ongoing business, we had, of course, a big impact on process inventory revaluation in the smelters and we had a final pricing adjustment in the mines.
Cost of development is reasonable. I think we have had a lot of or we have had cost for the maintenance shutdowns. But else on that, I would say that we have a very modest cost increase in general. If we look at the copper production on Slide 15, we can see the good mine production on the light colored bar and we can see the line diagram which is an impact or impacted both by high production volume in the mine, but also better grades than we have seen. So now we have been a bit higher than the 0.20 where we have where we are basically this year and next.
On the zinc side, similar development, reasonably good month of production and slightly higher grades in the month. If we turn to the smelters, earnings before interest and tax were minus €30,000,000 but that includes the €300,000,000 which we had informed about, which actually turned out to be a little over SEK 300,000,000. We had SEK 2 98,000,000 in the Q1, so less EUR 300,000,000 for maintenance. We arrived at about 0 result. And last year, we did 251 plus again take away the effect of maintenance shutdowns of 300 years this year and another or 100, which we also had in the previous year.
Together with the CapEx or the maintenance shutdowns, we also run a number of CapEx projects in the smelter. First of all, for the maintenance itself, some of the things we do in maintenance is capitalized and written off over time and regard as CapEx. But we also do some debottlenecking projects where we install different kind of equipment at a time when we are in any way standing still for the maintenance. And of course, we also are in a hectic period for the silver recovery project in our copper icing smelter in Finland, Kokolavings. So all in all, we don't only have the maintenance shutdown.
We also have in addition quite a lot of investments going in. Silver project in Kokola is on plan. The production is low in the copper smelter where both and Harjavalta were standing still for parts of the quarter. In zinc, Kokkola had a small maintenance shutdown. Oda had a major one where we also invested in re spacing in the cell house and a couple of other longer term improvements as part of the improvement plan there.
So all in all, I would say that production is entirely a result of the actions we have informed about around the maintenance. And with that, I hand over to you, Mikael, and you take the financials.
Thank you, Lennart. Well, it's been an interesting quarter also in terms of financials. And as you've probably seen most of the numbers lots of changes and we'll come into them as we speak on here. The revenues went down and I think that's quite natural both with the maintenance stops and with the lower metal prices. The earnings before profit or inventory valuation were at 3.70, which is a good level given the circumstances.
We've talked about investments and you see here that the investments were SEK 1,500,000,000 which is a high number but not extraordinarily high. You can see it's a little bit higher than the roughly SEK 1,000,000,000 that we've been running in the last year or the last few quarters over the last year. The free cash flow of minus 1,477,000,000 I'll come back to and talk a bit more in detail. As you can also see on the bottom here with the negative cash flow, our net debt is also up and I'll talk more about that as well. If you start looking at the analysis and analysis now comparing 1st to the Q1 of this year, you see that the volume effect is positive and that might be surprising given the high maintenance stop.
But the mine production has been so good that it's also outweighing the negative volume effects coming from the maintenance stops in the smelters. And that positive number of 314 is then weighted against the 4 18 in terms of negative price and terms. And we all know about this that we have a negative impact from the prices. At the same time, we also know that we have hedges here that has helped us somewhat. The costs are minus €153,000,000 in this comparison, but that's still also relatively a good number.
We have as we've communicated €300,000,000 of effect from the maintenance stops of EBIT and out of that roughly a third of €100,000,000 is on the cost side. So therefore, out of the €153,000,000 is linked to the maintenance stops and the other 53 is easily explained by the increased production. So we're doing well in terms of keeping the costs under control in this quarter. Then also of course we don't have the one off effect that we had in Tara last quarter which is here in the adjustment. If you compare it to last year, the volume is pretty stable, which is also thanks to the relatively good mine production because the maintenance stops were heavier this year than they were last year.
The price and terms are negative. Also the currency effect is pretty strongly negative if you compare it year on year. The costs are €95,000,000 higher. But once again our maintenance costs were much higher this year, which means that in terms of the costs year on year for the ongoing production, we're seeing a quite modest inflation level. Depreciation are higher, mainly due to commission projects and reclamation that are increasing the depreciation.
Looking at the cash flow, where does the CAD 1 point 5,000,000,000 come from and where's the background? Well, you can see here that of course lower earnings plays into this. We have a change in working capital, which is also negative, slightly negative. There's a big change as always between the different areas with actually lower inventories, but higher or let's say lower payables, which gives a negative cash flow effect there. We also have a high tax paid item this quarter.
Tax paid item is also erratic. But in our case coming going down the preliminary taxes that you paid to the Swedish tax authorities tend to be linked to last year's profit. It takes a while to adjust and therefore we're high on taxes paid. What you don't see explicitly here, but it was in the number and comes actually into the receivables is the €173,000,000 of the Aitik diesel tax that we had paid, but not costed for in this quarter. The capital structure, this exhibit is here every quarter a normal not so interesting not much change, but this quarter is quite a significant change.
And net debt is up from €6,200,000,000 to €9,000,000,000 That's of course due to the negative cash flow and due to the big dividend that was paid out in May. The gearing therefore corresponded is up from 27% to 41%. The net payment capacity which is the mirror of this is down from SEK 8,800,000,000 to SEK 6,200,000,000 but still on a quite satisfactory level as we always knew we're going to have this quarter and we had planned for it. What is also quite significant is the lowering of the average interest rate from 2.7% to 1.8%, which is due to a number of effects. But the main one is that we're rolling off old fixed interest rate swaps that we had and that we have managed to play well in finding the short term duration credits for to get a lower cost.
So with that, Leonard, I give it back to you to summarize.
On this slide, we see the project update. And as you have seen in the report, we are on plan. Behind us, we see the main frame of or head frame of Garpenberg. This is industrial area, which we are going to leave when the new project is in operation and we are commissioning that in the first half of next year. We are here to show the board the underground installations where they are right now when we do the presentation here and then we will join them at the industrial area and our new concentrator which we are currently building.
The project is going fine. We have had our issues and I can always say that as of now, we are on CapEx and we are on time. And we are quite pleased with the development of the project so far. Aitik, we did production in the pace of 38,500,000 tonnes. And so I think that confirms that we are on the way to produce 36,000,000 tons a year next year.
We had a low first quarter. We had a very good second quarter as we present now. So I think that's encouraging. Cancpe is on plan and it's going well. The tellurium leaching plant is in production in full production so that goes well.
The silver recovery project will start coming up after the half year of next year and it's also on plan. We are also working with the feasibility to expand Aitik to a higher level. We call it Aitik 45 to take the ore production from 36,000,000 to 45,000,000 tons. And we're working on that feasibility. And I'm sure we get a question of when will we decide on this.
And I think that maybe towards the end of the year or beginning of next year. But we have quite a lot of calculations to do to see which is the most optimal mine plan given changes in metal prices and whatever. We work with a larger conceptual study and we have no news on that one. We're working hard on it and we will continue to do so. And when the timing of that one it is, I don't know because it's only a conceptual study so far.
The summary. The metals market are uncertain. And even if the general macro is looking reasonably stable, I would say the volatility in copper and copper is driving much of the sentiment is unclear because of new output coming out and uncertainties on China. The metal prices have been going down. Will they continue down or up?
We don't know of course. We know that they could go down further from this point, but we have no evidence of that happening. So we have no opinion about that right now. The precious metals have had a sharp decline, which has a significant impact on the Buliden area and has the silver itself has a quite big impact on our performance as you have seen this quarter. We have a strong Swedish krona even it has not moved from the level in the Q2.
It has actually turned a little bit weaker. If we turn to Aitik or to Ulliden, we continue to be in low grades throughout this year and 2014. Had very good production this quarter, but don't take too much of that as a reason that we're going to be 38 1,000,000 tons every quarter. I don't think that's either possible or a good assumption. The maintenance stops in the second quarter were the largest we have ever seen.
We are not going to have as high as this one in the foreseeable future. I think the guiding of €200,000,000 as a good yearly average is applying also going forward. So it was uniquely high in this year. Runds share, we have some stability issues. I think we have arms around it.
But it's not something which we'll go over in the next quarter. And it was nothing new this quarter when additionally we had the maintenance shutdown. So we have our issues there which we worked with. We will have be prudent on cost development. We will be very careful in taking on new costly things whatever they might be.
We're going to postpone some CapEx projects. But nothing of this is going to be major items and that's the level we are right now. And of course preparing us for more difficult times would they occur. We have had hedge programs since we decided on the Gatber project. They expire in the end of or expired on the end of June.
So from now on, we exposed to lower prices and we are also exposed or can benefit if the prices are going higher. But we should be aware that we have been winning or saving some cost or getting a better price, thanks to the hedges in the previous periods. The expansion projects are on plan as I said and it's exciting to see if we can now maintain the pace and start that up as planned in Garpenberg and we certainly hope so. In the Q3 finally, we had one little maintenance stop with an EBIT impact valued at about €25,000,000 and that is in Daiso. And that concludes our presentation.
And well, if we had anything forward looking statements and others, we you should look at the disclaimer here. And with that, we are prepared for a Q and A session. So please go ahead.
We have a question from Owen Skerritt from Goldman Sachs. Please go ahead.
Hi, Lennart. Hi, team. Looks like a nice day in Garstenberg. I guess you're not going to be doing an outdoor presentation in Aitik this winter. I just had a quick question, I mean, regarding Aitik's EUR 95,000,000,000 You've talked before about sequencing CapEx.
Would you think about giving yourself a bit of sort of breathing space for free cash flow before going ahead with the CapEx? Or the CapEx is low enough to mean that you could just proceed straight into that in potentially 2014, 20 15? Thank
you. I think for the CapEx guidance, I will hand it over to you Mikael. But before we do that, in the context of I-eighty 45 as we have seen before said before, it's not a major CapEx program. It is process or the logistics and the material handling equipment. But it's not a huge CapEx program in relation to the returns.
What it is, it's a decision point to decide on what is the mine plan, what is a cutoff on when we continue to mine and what are the environmental impacts. We are going to fill our dams sooner. That will give an investment maybe 10 years from now. But that needs to be factored in and we have to apply for permits. So there are some much quite big questions, but they are not related to CapEx basically.
With the CapEx guidance, Mikael?
Yes. I will just reiterate, we don't have a new CapEx guidance as such. We are prudent on CapEx and making sure we're staying where we are. We're guided for between €4,000,000,000 and €5,000,000,000 in 2013, maybe towards the upper end of that range and that still holds. And for next year, €5,000,000,000 probably towards the lower end of that range and that still also holds right now for you as a guidance.
That's great. Thank you.
Next question comes from Mr. Luc Perce from Exane. Please go ahead.
Yes. Hi, gentlemen. Maybe a follow-up question on CapEx. If you could perhaps quantify the maintenance CapEx you would have in mind going forward whether this increased maintenance CapEx for Q2 is one off and related to the huge maintenance work you've been doing at your operations and therefore trying to understand what is the underlying figure there? And secondly with regards to hedging which you referred to at the end of the presentation, I guess that with your program coming wondering whether you would be inclined to consider new hedging or would you await for commissioning or starting up new projects in order to do so?
Thank you.
Well, the hedging, of course, when it's expiring and the gold is remaining, you can do your math and analysis or analysis from the report that you have. And bear in mind that we have been earning about EUR 300,000,000 the previous year and the year before and we have had a good profit in the first half, which is well described in the material. If we consider to do additional hedge programs, I can say that, no, I think that we have dimensioned our balance sheet and our financial structure to take to be robust and for periods when we expose our balance sheet quite well. So I think we're very well planned for situations like this and worse. So no, the answer short answer is we are not considering new hedges.
And if we would, it would probably be in the context of new big spend programs CapEx programs. And when it comes to
yes, the maintenance CapEx. Yes, maintenance CapEx, we have guided before that if you go back a little while, we always guided it was slightly less than SEK 2,000,000,000 a year for maintenance CapEx. Now with the IFRIC 2020 change of accounting principles that we have from this year that adds some €300,000,000 or €400,000,000 of CapEx in the way that we report even though it doesn't change anything in reality. So now the maintenance CapEx guidance is somewhere a little bit more than €2,000,000,000 a year. And that one is relatively firm.
Of course, it's little bit higher this year and because of the longer maintenance stops, but it doesn't vary that much between the years. And you should use that number a little bit more than €2,000,000,000 per year.
Thank you. Next question comes from Mr. Gustav Sandstrom from Erik Bessner Bank. Please go ahead.
Thank you, operator. Question regarding Iclick. Given that the tonnage was more or less in line on a year on year basis, is the Q3 tonnage also likely to be pretty flat on a year on year basis? Or is Q2 a better proxy for Q3?
Well, it's going well. That's all I can say. And I think that if we guide for 36,000,000 or the plan, we don't guide at all. We don't have forecast like that production forecast. But the plan was to be on 36,000,000 tons per year next year and we were on 34,000,000 last year.
And I have said, if you go from 30 4% to 36%, you will probably end up 35% or something. I mean, fact is that we have a good capacity when everything is going well, but we have big realinings. We have things that we have to do and we don't have a mine with a capacity to run 38,000,000 tons. So I think that you should look at a rolling 12 curve or rolling 4 quarters or something and saying that we are on a positive spin. But I wouldn't factor in that it's a dramatic it's not a too dramatic number.
We had a bad first quarter. We had a good second quarter. And I think we are on a basically a not dramatic, but positive direction.
All right. Fair enough. And a question regarding your reserves. How would your reserves be affected if you change your long term price estimates to the current spot price at current margin?
I don't know. We don't I think we don't try to simulate that, but you can say that our the current prices are still above the long term prices in copper around there. They are below in zinc. So I cannot say what that would mean, but I'm not huge difference. I don't think it would.
And we are not in any case changing the reserves for the spot price. We are looking at what are the long term production plan that we stick to. And we do that in the ups and downs. We can vary and adjust a little bit on the short term. But basically, it is a shape of a big open pit, if we take Aitik where the question is most relevant.
But I don't think it's not a very relevant question. The answer to it is probably not a big deal. And we're not going to change our production plan for anything else than a change in the long term price. And if we do that, a small change. I think that answers your concern or your question really.
All right. And finally for me, given the recent developments in the M and A space and what seems to be a situation turning more and more into a buyer's market, does it still make sense to go for a big organic project like Lava? Or would you consider instead going out on the market and grab something?
I think we have said all the time that we are quite active in looking at alternatives. And as you're rightly saying, there are the general price level has been going down. And I think it's much more of a buyer's market. Of course, our muscle has been is not as great as it used to be, but that's too fuse for everybody else too. We are looking at alternatives external projects and we are going to match Lager for example to alternatives.
So yes, we look at external or acquisition opportunities.
Great. That's all for me. Thank you.
The Next question comes from Mr. Julien Bier from SEBier. Please go ahead.
Thank you very much, operator. Gentlemen, good afternoon. I have three questions for you. Firstly, on the IT expansion, if the Board approves that expansion early 2014 and given the limited investment requirement, could that mean that you could already sustain higher rates from the mine early 2015?
What would happen is, I think that what it would mean is that we are going to the immediate impact is a new crusher in the system. We need a new crusher in the system in order to go higher than we are right now. We need to speed a bit the pushback in order to open up mining areas, which are sort of corresponding to this higher level. I think we perhaps could look at a gradual increase from the 36% level. Perhaps.
But that is to go too far. I think that we refrain from we're careful in giving guidance of that kind. I think that would we take the decision, we will invest and we will then look at what is the more likely ramping up can from 36 to 45 and that is going to take quite a while before we hit the 45 level. Okay.
I think that's a clear answer. Thank you. Going on to Garpenberg. Now you're within a year twenty fourteen?
We will save that to Capital Markets Day in the fall to be more precise on the ramp up plan. What the basic concept is, is to have the production starting in the first half of the year. And what we do in a typical start up here is that the constant oh, you can't see it from here, but it's 3 kilometers in that direction behind us. What we do is we start to run the entire process plant with water first. Then we run it with waste truck to try out and do buy offs with different suppliers.
And we're going to run low grade ore in that the new concentrate overproduction in well, over production in well around the period of maybe Q3 or something next year. That's the main plan. But we will give a lot more detail when we come to the Capital Market Day in the fall.
Okay. Great. And then finally, did you that there were some costs in addition to the DKK 305,000,000 maintenance costs which did impact the Q2 smelter profits negatively? Lately?
No. I don't think so. Did I? No. I don't think so.
No.
Okay. I misunderstood.
But what I said that in together when we do a maintenance shutdown, it has a combined effect of cost and lost production €305,000,000 But at the same time, we do the maintenance. We also put in or install a number of debottlenecking investments. So also we have an investment sort of peak around the maintenance shutdown, which has nothing to do with the maintenance, but we just take the opportunity of being closed to install equipment. Okay. So the debottlenecking
is actually a capitalized investment?
Yeah, yeah, absolutely. Those definitely investments.
That's part of the €1,500,000,000 and the reason why that €1,500,000,000 is so high. It's not just maintenance CapEx.
Got it. Thanks very much, gentlemen.
The next question comes from Mr. Daniel Yuan from Bank of America. Please go ahead.
Yes. Good afternoon, guys. A few questions, if I may. Firstly, would you mind just making some comments on what you're seeing kind of in the scrap market, both the traditional scrap and e scrap? And whether how your margins in treating scrap compared to treating concentrates in your smelting business?
And then
secondly, just going back to your increase in gearing over the quarter, if that sort of situation continues for the rest of the year, how would you be thinking about the dividend for 2013? Thank you.
On dividend, I think that's the easiest part. We have a quite firm statement in how we see look at dividends. We look at 1 third of net profit and we don't have a lot of ifs and buts in that. So I think that's for your purpose, I think you should do your estimations of the net profit and take a third in dividends. And I think that's a good guidance and quite clear.
I think what was the first question? It was
East graph.
Yes, the East graph market. I think the general picture is the following. In a business cycle where people tend to in Europe, we take electronic scrap primarily from Europe, where we see consumers being strained with a low economy and more unemployment and so on. People tend to buy fewer computers, fewer cell phones than they did before. And if they're buying less, they are returning less.
So the availability is slightly lower. The other trend we can see is that electronics tend to contain less of the precious metals if that is copper or gold, which is well in the plan. So this is absolutely factored in, in our investments. And most of that metal is payable in any case. I think the combined effect is that we have plenty of material or plenty we have material enough for our production.
We see the quality of material deteriorating slightly without being dramatic. And I think that our competitive position if anything improves compared to other people doing electronics recycling. So I think we are okay there. On the process, I think that and the return of the electronics turn scrap is going as planned and it's going well. It has side effects, which might have an impact on the copper flow because our instability or stability issues in Russia to a degree has something to do with the much larger volume of electronics scrap sort of flow coming.
Perhaps. But we are this is nothing we think is of any concern longer term. But we have a bit of an adjustment to do and maybe the impact is there. But we're a bit unclear ourselves why we have this instability in the copper process.
Okay. And you are are you able to kind of give any color of thought on how currently your margins compare in the scrap versus your traditional smelting business?
The margins in the copper business, copper smelting is if anything improving and we are not giving guidance that is confidential. It's information which we don't exhibit. But basically the copper if anything is probably improving. So therefore in relative it's so I don't comment on that basically.
Okay. No worries. And sorry just to go back to the dividend question. I guess the question was more, is there a level of gearing in which where you think about kind of deviating from your 1 third payout and kind of cutting the dividend more, let's say, if gearing because it's up to a certain level?
I think basically no. But of course, in the end of the day, there are levels where we would probably take a different direction. Dividend policy to different scenarios. So I wouldn't think so.
Okay. Thank you very much.
The next question comes from Mr. Helene Gabriel from Morgan Stanley. Please My question is on the rancher smelter and the stability issues that you have highlighted. Are you able to elaborate more on those issues and maybe quantify the potential impact in Q3 and Q4?
Thank you.
I think you should look at the past quarters and say that we don't have any immediate improvement in the plans. Maybe a negative impact to some extent, but we shouldn't. Now we talk a lot about this. It's something which is of concern to us at a time when basically most other production units are going well. So I think maybe be a bit prudent, but take your starting point from the past couple of quarters.
Okay. Thank you.
Next question comes from Jochen Alberg from Kepler. Please go
ahead. Yes. Hello. I have some questions here. On the mining side, if we look on the cost development quarter on quarter, I see of course that you have some what higher volumes etcetera.
But if you look it's around EUR 200,000,000 depreciations are up EUR 50,000,000 about. So still then we have around €150,000,000 delta. And I wonder how much of that is an effect of the lower gold and silver prices in terms of the cash cost effect? Do you think you can quantify that a bit?
I don't think it has to do with the silver and gold price. It has to do with the depreciation you can take Mikael first.
Well, I think you put it clearly depreciation and if you compare quarter on quarter, it is simply a production effect. With a higher production, you get higher depreciation as we depreciate over ore tons. So that one is the easy one. And then in terms of the rest of the cost development, we have had in mines, we typically never comment too much on maintenance because there is relatively even spread over the year. But we have had some maintenance costs, which are a little bit higher in the mining area also in Q2 than normally.
But we wouldn't make too much out of this. Basically all easily computed from the increased production?
We have a continued cost increase, but it's not big right now. That's how we sense it, yes.
Okay. So if we go into Q3, Q4 both depreciation levels and full costs should be quite stable then?
Yes. Yes.
Okay. Okay. Thank you. And another one, if we look a little bit on the smelter side, given that you are one of the largest players here in this area. And if we say that the consensus side is relatively correct on new mine supply coming out in the markets for the next 2, 3 years, how would you see the TCRC markets general developing?
And have you seen anything more positives recently in the talks with long term clients?
I think the tendency is quite clear and that is if anything there are more mines coming with copper concentrates to the copper smelters than we have we used to have. So a better lighter market for an improved market perhaps for copper smelter and the opposite for zinc smelter if anything. But I think this is well, I'm careful in giving very precise tendency.
Okay. Perfect. That's all for me. Thank you.
The next question comes from Mr. Rob Clifford from Deutsche Bank. Please go ahead.
Hi, yes. Hi, Michael. Two one question for each of you. Just on the debt, looking down the barrel of €9,000,000,000 of debt, what level of debt or gearing are you comfortable with? And you talked a bit about cutting some of your capital projects.
So I take that to mean you're not comfortable with the current levels. I need to get it down. So what actions? Could you go into a bit more detail about the actions you could take to control that? And second, the comment about the market's actually looking okay, but the prices being negative.
When you talk about the market's looking okay, what are you seeing in terms of your customer behaviors? Previously, you talked about them squeezing you on byproduct credits or looking to source metal from Europe from you guys because you're local? Are you seeing changes from your customers with regards to the markets?
On the gearing, we I mean, we have had a quite big increase in the gearing. But of course, if you invest a lot and when you close your smelters to the extent we have done, which is absolutely in line with the plans and everything and we do it at this time. We are comfortable with the level of gearing we have right now. And the question where we are not comfortable, I don't know, but we feel comfortable with the outlook in the market, the plans we have and the level we are right now. So that's reasonably okay.
The second question on customers. I am studying very carefully. I'm giving guidance what is what do we see with our industrial customers. I cannot see that I'm seeing a much different picture in the demand from the customers or on the credit situations or anything from the past. However, at a time when we have lower output from our smelters of core puts, we are it's for us a lower visibility this quarter because we've shipped less than we normally have.
So also our numbers are a little bit tricky to sort of draw very clear conclusions on. But I'm not seeing any increased risk as far as I can see. Okay. Thanks. Thanks for that.
Next question comes from Mr. Torsten Simerman from HSBC. Please go ahead.
Hey, good afternoon. I have three questions please. The first one is on the sulfuric acid market. You indicated that the market is a bit troubled at the moment and you have shipped overseas. So I just wonder given that there is some maintenance shutdowns, why is the market so bad in Europe?
And why are you going overseas? Is the market a bit blocked? Or what's the reason for that? My second question would be on the concentrate market, similar line of reasoning. So the numbers that you have shown is basically the Continental market is balanced at the moment.
However, we have a lot of maintenance shutdowns in the quarter. So is the implication really that the market is still quite a bit tight? Would that be correct? And the third question is on your grades. Seeing that all grades moved up in tandem in basically all mines, did you high grade during the quarter?
Those are my questions.
Did we go out with a general order of high grading when we did all the maintenance shutdown? The answer is no. We are well aware that we have a sort of a strain in the cash flow. So we have been pushing a little bit on deliveries on the bits and pieces. But tie grading, no absolutely not.
It's more of coincidental. And in Garpenberg, we are working different parts. And when we build the new mine, we cannot plan exactly which part of the mining areas we're working with because we sometimes have to change. When it comes to the sulfuric acid, I the change you see in our sulfur sales is more related to a couple of customers we have. 1 of maybe or some of them being on temporary shutdowns, some of them are more long term and we have to move the sulfuric acid further away.
So partly probably a little bit of a timing effect, but also some longer term impact where we have to move the asset a bit further from home and we pay the transport. And here
you can also comment quickly. You know that the Pulp and Paper industry takes maintenance stops roughly the same time we do. So we normally have a relatively balanced situation with our customers. So the fact that we had maintenance stop doesn't really doesn't change the balance normally.
The next question comes from Mr. Johannes Kanzilios from ABG. Please go ahead.
Yes. Hello, gentlemen. Johannes Kanzilius here. A few questions from my side, but if I can get a little bit more color on what happened in Aitik in Q2 here. We talked about that.
But can you explain if you had sort of very high production all 3 months or if you had one super month or so? And is that something you can comment, Lennart?
3 super months. Right. No. We don't know
if they are super months. I think that we have a level where we do produce in this level if we have very little sort of issues happening and where no specific realigning or something. This is a level you can say that if you draw a graph, we can see that this is a level where we can be. But we have to have the maintenance and we have some interruptions. So I think that we are gradually going to reduce the number of incidents and then we are approaching 36 and some quarters are probably going to be 38.
This is the 2nd time we are on this level. We were here a year ago.
Yes. Also on Aitik, did you produce from the satellite deposit during the quarter?
Yes, we do. Yes.
Right. And that's the plan to run the satellite deposit meanwhile you're producing in the big pit, right?
Yes, we do both. But we did a little bit less in the satellite, which has lower grade, which is the reason why the average grade was a little bit higher. So we had a little bit of an exchange.
Okay. And then I'm curious about what's happening in the exploration side in Bouddeden right now. I understand you have taken down activity a little bit. Can you explain that and what we can expect going forward? And how the budget has changed here going forward?
Yes. I mean basically as with everything we do, we sort of prioritize and we say the most important highest up and the least important further down. What we have done is to adjust a little bit the drilling program because drilling we have had very good results as we have seen in the past couple of years. And some of the drilling we are working on right now is very long term and has very, very little impact on the profits in the next several years. And therefore, we're slowing down a little bit.
We do more of desk work with analyzing and planning. And we have an easy task to take back more exploration at a later time when we feel more sort of relaxed about metal pricing and we don't have the big investments and whatever else. So nothing dramatic at all. We are holding back a little bit. We're balancing and preparing for things if they turn more difficult.
Yes. But we will do we see in the numbers you think? Or is it negligible?
What should I say? We are in the order of €300,000,000 €350,000,000 a year. It's small or maybe €50,000,000 on a year or something. I don't know really. But it's in the big picture not a big number, no.
Okay. That's all for me. Thank you very much now.
Next question comes from Mr. Daniel Louhan from Bank of America. Please go ahead.
Yeah. Hi, guys. So just one more quick question for me.
The remainder of the CapEx
that we spent this year, is that going to be fairly evenly split over Q4? Or is there some difference between the two quarters?
From a high level, it's going to be relatively even. I can't tell you more exact. I don't have the exact numbers, but it's roughly even.
Okay. Great. Thank you.
There are no further questions at this time. Please go ahead speakers.
Okay. So there is one through the e mail. So actually five questions from Thorsten Fischer from Natura Finance and they're all related to Roncaller and Secondary Materials. The first question is could you give some color on the continuous stability increases in Roncall? And I think we basically have covered that already.
The second question is how much e scrap was refined in Q2 2013? And that is actually in the report on page 26. It was a little bit more than 27,000 tonnes, a little bit up from Q1 this year? 3rd question, how much input material e scrap is secured compared to your production capacity for 120,000 tons?
We have several 2 year contracts and we don't have very long, long I mean like 5 or 10 year contracts in electronic scrap. But we are okay with availability of scrap in I think the next 12 months or 18 months or something. So we don't have any volume issue coming up very soon in any case. And we don't think we will further down the road either, but we're reasonably secured in the near term in any case.
Question number 4. Could you give some information on the quality of your input material? And do you think this quality might deteriorate in the future?
Tendency of And I think that in all in all, there is a tendency of lower quality also for us. But I think we have a better ability than many to treat the material which is in the market right now perhaps. We think so. We're not sure, but we think so.
And the last and 5th question is related to that, but has more to do with what is Boliren's expectations for the supply in terms of if it's getting more difficult to source high quality scrap and what's the pricing
trends in scrap? This is hypothetical questions. I think lower quality material is something that we are good at. So I think if anything we our competitive position as I said before I think should not deteriorate but rather the opposite. But I have no other comments to it at this point.
Yes. That was all the emailed questions.
So in that case, if we conclude today's conference, we have had a very special quarter with the biggest maintenance shutdown ever in the middle of the 2nd largest investment program we have ever done and that in a market with declining prices. So of course, it's a bit dramatic. But I think on the other hand that we are we have structured the company for not only being good in the good times, but also be reasonably robust in the lower periods. The good thing here is that we have very strong production numbers that all of the smelters are back in production again. So and that all the projects or the silver project in the zinc smelter in Finland, Kokola and where we are right now in Garp Bay are moving on as planned.
Thank you very much. And from us, we wish you a good summer. Thank you.
Yeah. Thank you and have a good summer.