A warm welcome to this, the 1st quarterly presentation for the year 2013 from Boliden. As usual, we have 2 presenters, Lana Tebrell, our CEO and Mikael Staffas, CFO of Bulliren. The whole event is planned to take about or not more than an hour because we also have an AGM here today. So we have to leave this conference at 2:30. But with that, I hand over to Lennart.
Please. Okay. Welcome to the presentation of
the Q1. As Frans said, it's the first of this year. And in 2013, we don't have any new investments starting up, and we are not in really any very, very big change over the year. But it's in a bit an in between year, which we have really carefully communicated to the market. We are on low grades.
We have winter conditions in the early parts of the year in the open pits exposed to Arctic conditions. So basically, the development on the financial terms are in line with the guidance we have been giving previously. Revenues were SEK 9,200,000,000 compared to SEK 10 point 3,000,000,000 the previous year. And earnings before interest and tax, excluding the process inventory revaluation, was SEK 751 compared to SEK 1.258 a year earlier. The cash flow was negative, which is a result that we are still we are in very hectic investment programs, in particular, Garpenberg.
And obviously, we have lower earnings from the previous line. We had in the result a positive one or unusual item, a one off effect of SEK 171,000,000, which we will explain later on. In the operations, I think that we are happy with the development in the smelters. We are slightly disappointed with the mines, even though most of the decline is in the guidance we have been giving previously. The cost level has been maintained after several years of high cost inflation.
We have had a couple of quarters with lower cost increases. And we have higher depreciations in the mines, which is a quite big number, and we will come back to that later. The projects are on plan, and in particular, Garpenberg is very exciting right now. More on that later. The market outlook is uncertain.
I'd say that the industrial production in the world is not very dramatic. Most of the curves are looking or trending or not trending, but they are on a lower growth level or on a bigger negative level when it comes to Europe. Not too dramatic, but the world industrial growth is trending down. You see the yellow curve here in the Q1 is going down. We are mostly exposed or dependent on the construction activity and automotive activity in the world.
And if we look at the U. S, it's on a healthy growth path, but lower than in previous quarters. And the year on year numbers are good, but they are on relatively low levels still. China, rather flat on high growth levels. And as we can see, Europe is on negative but had a better situation in Q1 situation.
In the Automotive, negative growth in Europe, positive in the U. S, but lower growth than previously. And China turning up after 2,009, 2010 with very, very strong growth. It has been more or less of a flat development, but it's on a positive move there. The metal prices have been reflecting partly the general economies.
In zinc, supported by the general sentiment that there is a risk of shortage, has held up better, and we will see that also in the fundamental numbers. We have a decline. And if you see on the bottom right here, we have after the Q1 or in April here, we've seen a gradual continuation of a lower price. But it's still not lower than the load point in Q4. So not very dramatic development in zinc.
Premiums have been holding up well. They are on a good level. This is are improving as a result of the benchmark negotiations. Copper is more dramatic. The most dramatic is, of course, the inventory, the bottom part of the chart here where you see the gray areas peaking very dramatically in a short period of time.
And I would say that this is very difficult to understand. The transparency is not good. There are beliefs that this is a moving of inventories. And despite the high levels of or high much higher and much or very fast increase in inventory levels, there is still not a huge sort of oversupply in the market. It's not easy to buy proper concentrates, for example, when we close Rundshall for maintenance shutdown.
So the whole picture is not very transparent for the market or from us as both the seller and the buyer concentrates in the market. The price is a reflection of that sharp spike in inventories, and copper prices are far below the bottom in Q4 if you compare with the zinc situation. So quite negative copper price development in the quarter and also after the quarter end. This is increased and spot this is are on good level. Metal premiums are not very dramatic, nothing much to say about.
On the other of Boulliden's main metals, gold is going down, as we know. Silver, the same, but lead is like zinc. And a lot of the lead in the world is coming as a byproduct from zinc mines. Lead has held up very well, and it's one of our favorites. And I think we have said that in several quarterly reports previously that we like zinc and the market fundamentals are looking favorable there.
This is a picture which is showing in somewhat more details. It's from CRU. And you can look at on the top here, we have copper and zinc metal demand, 4.5percent4.1percentplus or zinc and copper demand increase year on year. It's similar situations when it comes to the demand. Metal production, on the other hand, is very different, 4.4% up in copper, which is slightly more than the demand and zinc only 1.4% growth.
If you look at the previous quarters, you see a pattern here, which is in line with what we have said before about the fundamentals, tightness in zinc and zinc and a risk for big supply in copper. If we look where the copper is coming from, from the mines, you have the concentrate or mine production at the bottom and you see a similar picture there. So I think our view on the metal markets that we have been talking about for at least 1 or 2 years, it's here now. If we go through our operations, mines, dollars 4.27 in earnings compared to $8.42 but that includes the one off of $1.71 Gold production is a particular where the lower grades in Aitik, which was well communicated, was followed by lower grades in gold. But there, we haven't guided in particularly the gold grades, and they have fallen more than the copper grades.
So this is probably one of the reasons why we have disappointed the market. So production has been relatively good, but it's grades in Aitik and Buliden area and in Buliden, it's mix. Depreciation are higher. Depreciations are higher. Tara, positive.
One off, as explained there, projects on plan. To blow up a bit the result, I do this in mines because I think you are interested in that. Lower mine production is primarily grade, not ore tonnage, or it's entirely grade, not ore tonnage. We have lower precious metals prices. We have lower hedge result, and we have a negative TC impact adding up to minus €59,000,000 And we compare here Q1 with Q4 of 2012.
The dollar Swedish kroner exchange rate difference is well known. We have cost, which is minus €39,000,000 So we have a cost increase, but comparing with historic increase, this is a low, and we have maintained the cost well here. Depreciations, we will talk about that later. But basically, the commissioning we have done. And in Q4, we had an exceptional low level of depreciation at the year end where we have overdepreciated in a couple of places.
So if you look year on year, it's an easier understanding of the depreciation. And then we have the one off. If you look at the production, as we can see here, the ore tonnage, if you look at the light yellow bars, it's on the level of last year. Winter conditions are basically every winter sort of playing in here. And we can see it on all the Q1 bars in light yellow that is lower than the average for other quarters.
We see that the metal content, the line diagram is going down great again, as I said. On zinc, we had not a fantastic quarter in oil production, but it was better than Q4, a little in Q Less and then a couple of quarters earlier. We had warned for lower grades in Garpenberg and Tara, and we had a little better grades here. But still, we are on lower than reserve grades in Garpen. In the Smelters, basically good news, euros 298,000,000 in result or profit before interest and tax and before without revaluation of the process inventory compared to EUR 360,000,000, so a little down.
So EUR 202,000,000 in Q4, so it's a very big investment or improvement from Q4. CapEx $2.13,000,000 it's down from a year before when we had the final payments of some of the electronic scrap recycling payments to do. Kokola silver plant is on plan, and we have very important here, we have SEK 300,000,000 in profit impact in the maintenance shutdowns we have in this quarter. Is running at very, very low speed right now, and we have some big, big equipment which has been taken apart in order to remake them or maintain them. The production, as you can see here, not a very dramatic, slightly lower metal production than before, but a good level of feed.
And in the zinc, we have a higher level of feed. In Q4, we had the Oda leaching reactor breakdown, and we're moving on in a good way. So not too much to say here. And then we turn over to you Mikael on the financials, please.
Thank you, Lennart. On the financials, you've seen these numbers and you've seen them before. Lennart just talked about them, the EUR 751 of EBIT, excluding process inventory revaluation. You also see here that the investment level is kept on a level of around SEK 1,000,000,000 per quarter, which is in line what we've had in previous years, but not quite as high as it was when we had a big very strong or high investment quarter in Q4. And the cash flow, the free cash flow has been negative in the quarter due to both the utility low income and also due to high investments.
And start looking at analysis, how does it break down? Well, some of these things just seem to run up. And let me just restate some of them and also take a look at last year. But if you start looking first at Q4 and look at the whole group, it is a lower mine production that shines out with minus EUR 33,000,000. Prices and terms combined with the currency effect is slightly negative compared to the last quarter, not a lot.
The costs are very much in line. It's a very small change. Depreciation is up. Leonard said we're going to come back to that. And it's basically new commission projects.
And comparing to Q4, we had unusually low depreciation in Q4 because of corrections for higher depreciations early in the previous quarters last year. And then we have the one off of EUR 1.71 1. If we compare with last year, well here, of course, you can see that we have a dramatically worse terms and conditions and also currency effect. And those 2 together would add up to more than EUR 300,000,000 on a quarterly effect. Also, the volume is sharply down from a year ago, and this is primarily the grades as we were a year ago in very relative to today, very favorable grades, both in Garpenberg and in Aitik.
Costs, euros 73,000,000 corresponding to an inflation or a cost increase of roughly 3%. We have an inflation level of less than 2%, and we have slightly higher volumes, and we have more operations than we had a year ago than we're making up for that last percent. Depreciation, this EUR 72,000,000 is very clearly an effect of commission projects. There's also one piece, it's not too big, but I think it's about EUR 8,000,000. As you remember, in Q4, we increased our provisions for reclamation costs and put that both as a liability and as an asset.
And we're now starting to depreciate on that asset as roughly SEK 8,000,000 per quarter. And then you have the one off effect again. Looking at the cash flow. As you've seen before, minus SEK 220,000,000 free cash flow in the quarter, combined of a somewhat increased working capital of EUR 300,000,000 and then the investments of EUR 1,000,000,000 that puts us into a situation with negative cash flow. On the capital structure, though, it's a relatively healthy position.
It's a the gearing has actually in the quarter gone down by 1 percentage point from 28% to 27% and also the net debt went down in the period. So it's the balance sheet is very healthy at this point. Now changes in accounting principles. Some of you might have been looking at your old numbers for Q4 and wonder why you can't find certain numbers, but we, of course, we have restated the numbers. There are 2 accounting principle changes that we have in our numbers.
We have the IFRIC 20 deferred stripping. The main difference with the IFRIC 20 compared to how we have been accounting before is that we are calculating our per pushback and not for the mine internal as a whole. And when we did that before, there was a netting. So we were doing investment in 1 pushback and taking more out of another pushback that was netted. In the new accounting principle, there is no netting in that stage.
You have to depreciate the old pushback that you're now mining from. At the same time, you have to calculate the investment on the new pushback that you're working on that you're going to produce in the future. And that has a relatively big effect. If you're talking on motor manctues, it could be up roughly SEK 80,000,000 difference as a higher as a lower cost first because you activate that cost and then it comes back as a higher depreciation. The total cost and the total EBIT impact is close to 0.
So but it also becomes as a higher investment coming out as an investment part as well. And 2012 has been restated. And then we have, as everybody else, IAS 19 deferred benefits defined benefit pensions. The corridor message has been discontinued, which has had impacts on our balance sheet when the off balance post that we had in the corridor of pension liabilities is now fully in the balance sheet. With that, Lennart, I will give it back to you to take and put in a project update to us.
This is a picture we have been looking at many times before. I'd say that I think when we were on 38,000,000 tons pace in Q2 and close or at least over 36,000,000 in Q3, everybody said we are on €36,000,000 And we said no, we are not on €36,000,000 We're going to be there by 2014. We have the pushbacks. We have a lot of waste rock. We have a lot of things to cope with.
We demonstrated high capacity, but we informed everybody that we are going in the direction of the plan. Q1 was 33,000,000 tons. I think we are spot on basically the expansion plans. We could have been a little bit better without some of the freezing conditions and whatever. But basically, we are following the plan on Aitik.
Electronics Recycling is going as planned. Nothing new on that. It started well last year. It has been continuing through, and we see good results in smelters and it's part of it. It's coming from there.
The Cangpay mine started well and actually ahead of plan. We have had some issues in the leaching. We have long lead times because all the ore is going through leaching instead of some of the gold coming with coppercon and whatever. So we have some I wouldn't call it struggles, but we have some running in or ramping up, I shouldn't say, but slight delays perhaps, but it's going well. And this is smaller.
We have the mine is operating well, and we are in full production as we speak now. Some of the gold is sitting in Ronshaer. Also in Ronshaer, we have long lead times when we process the gold. So it's a process when you ramp up a gold mine like this. The zinc smelter in Kokola with the silver projects, it's going on plan.
It's a big building. It's was there looking at it on-site. It's and yet it's an impressive one, and it's well underway. And the big one is, of course, Garpenberg where we have been going through some very significant milestones recently. We are done with the race boring of the ore hoist.
And that is the part of the Gripenberg problem that we have several times been sort of saying, if we have an issue on this project, this is probably where it could end up. We have replanned. We have been doing excellent work with the issues we have had there. We are on plan. We are on time, and we are through one of the more risky parts in building 1200 meter deep underground mine project.
So we are having a we had a project meeting, which was very convincing the other day. So, so far, so good. The future projects on further expansions of Aitik. We are working on the feasibility studies. We do not have anything new to say about that, Alstom, that we're working on it.
And Lava, it's the same there. We are continuing to drill, and we're continuing plan, and we're continuing now we're not drilling for new ore, but we are sterilizing different parts. We want to know that we're not putting a plant right on top of every rich ore or things like that. And of course, permitting and environmental or permitting issues are basically taking most of the time. It's a long term project, and we are still in early days there.
Summarizing this quarter. Good development in the Smelters, not very good in the mines. Most of the weak result or weaker result in the mines have been well communicated in terms of lower grades, probably a surprise that the gold is going down more than copper. But else on that, I think a few things here and a few things there, and most of them are negative and not this plus here and a minus there. So smaller issues, but not too dramatic, I should say.
Boliden area mix change is a complicated one for you to you probably think it is a very difficult and poor visibility. And I think it is because we have 5 mines with distinct different kind of ores. And on top of that, we have the processing of slags from Ronnshear. So you can say that we have 6 very different materials going in through 3 different lines in 1 concentrator. It is going up and down depending on what we do.
We have been had pushed or we have pushed Kristina Marry, the zinc mine, more than we had planned. And therefore, we are in lower grade areas than we have planned. So also in our own planning, we are slightly low because of that. The other one is, of course, the maintenance stops, SEK 325,000,000 this year. It's normally about SEK 200,000,000.
So it's a big year when it comes to maintenance shutdowns. And what is more dramatic is that almost entirely or almost all of it, dollars 300,000,000 are in the Q2. So it's a big minus hitting our P and L in the second quarter. When it comes to the market, I would say that there is uncertainties. I wouldn't say that there are very big problems in the market in general, the fundamental demand and industrial demand.
Metal prices have been going down quite dramatic when it comes to copper, copper and gold. You can be surprised, and we are, I think, all a bit surprised why now and why so steep. But I think part of the explanation can also be seen in that we have said that we are slightly surprised that it's holding up so well, we have said, for a couple of quarters now. So I don't know if it is now that is low or if it is before that was high. But why did it happen now?
I think it has to do with stocks and inventory movements more than anything that is triggering the change now. Swedish krona, big problem for our big, but it's unlike previous soft markets where we have had help from the Swedish krona, we have the opposite now. And that is a different from a difference from us. And I can I have nothing to say more than that this is hitting us? So soft in mines, good in smelters, little less good than we had hoped for, but most of the picture is, I hope, well known to the market.
Thank you very much.
Thank you, Lennart. And before we hop into the telephone conference and the participants, I know there are questions there. If we should just check-in the room here if we have any questions. Start off with Gustafsson.
Thanks. Gustaf Sandstrom, Erik Pensabank. Just
to start off, If we
are to find ourselves in a situation where metal prices do not level out but continue to slip, what sort of actions can you take to protect cash flow and your balance sheet?
On short term, what is really impacting our financial position or strength is CapEx and inventory changes. We are we have been stepping up the alert level in the company, both on the balance sheet and on the P and L. So we are trying to move or at least sort of delay smaller investments. And smaller investments and many add up to a lot of money. Of course, we are not changing the Garpenberg project.
Of course, we are not changing the silver project. The main things which are going we don't touch some small and unfortunately, the maintenance shutdowns have been ordered EUR 300,000,000. You don't buy that 1 week and sort of do it the other. It's long lead time items. So that was also committed quite a while ago.
But on new smaller CapEx, we're delaying. And then we look at inventories, payables, receivables, all the working capital side. That's one thing. The other one we're looking at is, of course, our exploration activities. We are basically continuing but holding a little bit of care on the cost side there.
We have put in a general cost sort of cost management program, nothing dramatic. We have done some things in Tara, and that is in particular. But we are holding we are refraining from spending money we don't necessarily need to do by now. And what else what do I forget now? Working capital, CapEx, yes, basically, I think I cover that.
So we have a program without calling it sort of an action program. We have a conservative look at CapEx and cost at this point in the group line.
Great. And regarding Tara, could you shed some light on what's the development there for the past 3 months with the managerial changes and everything?
Yes. We had a management change in the beginning of the year. And when that happened, we recruited someone. We had to which was not good, and we had to discontinue that employment. Jan Wolfstrom, the Business Area Director, he is he took the acting director position because we couldn't change because we were right in the midst of negotiation and negotiations or union negotiations and managing a program there.
It was absolutely the right thing to do. I think Jean has had a chance to dig into issues that he would not otherwise not have had. We have had a continuation of the working there. We did not restart the recruiting process in the middle of it, but we are starting it I mean, it's regretful. It was rather dramatic when it when this happened on top of cost reductions.
But I think we did the right thing. And basically, I think we never lost control at all. We had it in good control. So less dramatic than it seemed. It was scary, I think.
But it managed well. So under control.
We have another question here.
Thank you. Christian Kopf, Nordea. Firstly, a follow-up on the previous question here on what you could use to handle a more tough macro environment. You didn't mention anything then that's about potentially going into more higher grade areas. I guess maybe that's tough to do or what
do you see? We can do that. And we have if it is going down sort of if it is continuing down to 1500 for zinc and 6000 for copper or something like then of course, we are going to take more other measures. We will consider care and maintenance situations in some units. We will definitely go after cost harder, and we are going to do a number of things.
So we have sort of a contingency plan, but it's not really we are now just being conservative and going out to everybody, hey, guys, take it easy now. No small bits and pieces good to have kind of investments. It's nothing. We don't do that. And we have raised the level of approvals of everything, both cost and CapEx is up to 1 or 2 levels up in the organization to sign off.
So we're holding off here to some degree. Thanks. And
you mentioned that you are enjoying slightly higher TCs. Would that also mean that you will have a continuous positive impact from the higher TCs during the course of this year? Or have you felt the impact already for the full year, so to speak?
In copper smelters, there is a flat TC, as you know. But we have we're very dependent on free metals, and metal prices are going down. So the net effect of the gross profit of the smelters are still sort of exposed to the general market. The TCs are good, but the rest is negative. But at least we no, but all the parameters are calculating or calculated by all of you, and I think you calculated approximately right.
When it comes to zinc, we don't have much by product. We have lesser or lesser by products, but there we have a price participation. So the total of the TSYS are moving with the metal prices. So I think the smelters are negatively affected by the present sort of market conditions in general, but in general not so much when it comes to well, if you look at mines and smelters in so mixed picture basically between mines and smelters.
Sure. And on gold volumes, you mentioned that you maybe come down a little bit more than you previously thought. Are you ramping up gold volumes continuously now as you're ramping up Cankipar? Or should it be very volatile going forward?
The gold will be impacted by a few different things. First of all, it's deposits in Rehansturm and Klebe. In Klebe, it's down. It's gone basically, the bigger deposit we have there. Rehanstrom is up and down and will continue.
We are a little bit low there, but that should be improving. Cancun will increase over time. And Aitik is on low grades through 2014 and beyond. So over time, gold should increase. I'm not suggesting it's happening next quarter, but it's sort of it's going to 2 to 4, yes.
Thanks.
And then finally for me, on the D and A charges, is the Q1 level also representative for the next couple of quarters? On depreciation and amortization?
Yes. It should be relatively well positioned for future quarters as well.
Could I add one thing? But you it's very important when you look at the depreciation numbers that you also look at the reduction of cost when we invest. So EBITDA will increase. The increased depreciation will not have or the EBIT will not be affected, higher depreciation, lower cost. So on EBIT, little change on EBITDA, a very positive change.
Okay. Just to follow-up on the grades and the coming quarters. Should we expect grades in Aitik at current low levels? Or should they improve slightly?
We should. We are around 0.20. And if that is 0.19 or if it is 0.21, I don't know honestly. I think we are within the margins that we know. So we follow the guidance we have given.
I think that's the answer.
Okay. And when it comes to Rundshall and maintenance stops there, after maintenance stop, can we expect an improved profitability in the smelter's area? The smelters were very good now, but
I'm refraining from giving forecasts of what is it going to be. You can say that if we are very successful, what will it be? And if we are less, will it be delayed and whatever? I think that the base case maintenance shutdown is just maintaining the equipment, and it's the same before and after. That's sort of the base case.
In Droneshare, we have had a little or not so good process stability. And would this include an improvement in the process stability? It could be a slight improvement after.
Okay. Because if one is calculating backwards with the E scrap probability that you announced and so on, the probability for the other part of the plant couldn't be so good right now.
No, absolutely. Rona share is the business, except for the electronics scrap, is not developing very strong. So you're right there.
Thank you. All right. I know we have some questions from the participants on the telephone conference. So operator, if you could start ticking off the list, please.
We have a question from Mr. Oscar Lindstrom from Danske Bank. Please go ahead.
Yes. Good afternoon, gentlemen. I have three questions actually. The first one relates to the Q1 Aitik maintenance stop, which I think you described as a little bit complicated. What was the sort of the nature of these complications?
And is that something which should impact the remaining quarters of the year? The second question, you almost referred to sort of an informal cost reduction program. Would you be able to add any numbers or quantify that informal call? What is your cost reduction potential as you see it now? And then the final question, just also coming back to this Q2 maintenance stop on the smelter side.
Beyond the SEK 300,000,000 negative effect, is there a significant risk for complications? This is a difficult maintenance stop that we sort of need to worry about? Or is it more just this €300,000,000 krona effect? So those were the three questions.
Number 1, the IT maintenance, so it's normally we don't talk much about it. It's a realigning of the rubber parts of 1 of the big mills, and we do that every 9 months. And we have several mills. So this is happening, several times a year. And we have an ore storage, which is good for 2 days.
A typical relining is taking 4. We run one line full speed. We stop one and of the 4 days, we have ore for sort of running through the other. So this is timed and basically over a quarter, it's marginal. Now this time, it was different because we had these ice problems and we couldn't get the we had the ore in the ore storage, but we couldn't get it out of there.
The problem is that if I couldn't draw well, if you have a hole under the storage and you take the ore out of there, you have a V like an open pit. The ore is falling down in that hole. But if everything is freezing, you get more and steeper and steeper angles, and suddenly, you have like a pipe. And if you then stop for whatever reason and you have ore all over the place and you start to take from the bottom, well, then you it doesn't come down. It's building like well, it's clogged and you don't get out of there.
We also have some mechanical things in our concentrator. It has been, as you have seen or we have said many times, it's going like a clockwork. It's unbelievable. But here, we had 1 hydraulic pipe breaking, has never happened before, very unusual. It's a material defect, difficult to repair, took a couple of days.
We had a few other things happening, similar things, big mechanical part at the out the exit of 1 of the mills, which collapsed. Things like you don't have we don't have any action plans. We haven't seen it happening. But it was a couple of bad lucks, I would say. And your final point was, should we expect anything beyond?
No, I don't think so. I think we have a winter situation, which is slightly lower, 33,000,000 tons. It's on the way up. No, I don't think it is we would have been very happy had it been 34,000,000 tons or something. And it could have been if we hadn't had these complications and icing and whatever as a pace.
So no, I don't think you should change your future plans because of this. The other one was cost reductions. The big cost reduction we are or the cost reduction we're doing in Tara is in Tara. And that is basically to balance the deeper depth or the greater depth and the smaller rooms we're working on. So basically, we do reduce costs, but we do that only up to balance.
So unfortunately, I don't think you should factor in a profit improvement from that. And the other cost reductions is really more of a I don't think it is a big number, but we are doing what is necessary to prepare if the prices are continuing down. And then we have more that we can do. But basically, that's my answer on your second question. And then the third was on risk of the maintenance shutdown or the maintenance jobs in the smelters.
Absolutely. If you tear apart big equipment, of course, there are risks. Are those any risks that you should factor in or put something on? No, I think we have put the realistic number on the €300,000,000 in the previous years, the normal maintenance stop side. I think we basically, as far as I can remember, we have just said afterwards that, okay, we said it had an impact, which was what we said.
So no, I wouldn't recommend you to be optimistic or pessimistic. Take the numbers and then of course maybe it can go a bit better, maybe it can go a bit worse, maybe it can be some kind of unexpected things, but we're not too nervous about
Okay. Well, thank you for very clear answers. Just finally, the stop, what dates is it taking place, the Q2 stop?
It's happening now. We actually started on the very first days. I think some of if you went up to Rundshaer, as an example, sort of the last week of March, you would have seen that, oops, what is happening here? Production was still going, but we were building a lot of things. It's big, big, big construction site.
So we started in the early days of April.
All right. Thank you.
I have Altais on, they are doing it right now. They are slightly later. Coca Cola is working now. I don't recall, but everything is basically happening at the same time.
All right. Thank you.
Our next question comes from Mr. Fredrik Agarwal from Handelsbanken. Please go ahead.
Thank you very much. Hi. Yes, I have a question on the head grades in Garpenberg and Tara. In Q4, you reached what appears to be very low levels or bottom levels. And in Q1, zinc grades have risen in both mines.
And in Q4, in connection with the Q4 report, you said that this was likely to linger for another 2 quarters or so. Could you give any updated guidance on what to expect here on grades in the coming sort of 1 or 2 quarters?
I think that you catch it right. So here, we have a slightly better situation than we probably guided for slightly. But no, I think we have said that when we build in Garpenberg, we are going to have certain disturbances and sometimes we have to rework. And I think the main thing is we should you should look at the average for the year and go for our previous guidance. And I think that's as good as we can say.
Can you just repeat the previous guidance, please, just so
Do you have that, Frans?
So just so I'm clear on the numbers or whatever you said before.
Yes. Well, when you look at Garpenberg, it should be at around 5% to slightly above that for the year as it looks now. I'm talking 2013 on average.
The ore grade is 5.5%, the reserve under grade, right? Or what is it?
The reserve grade is 5.1. 5.1, okay. So we're We should be around that level for the full year with some quarterly variations to that.
Yes, sure. And Tara, then you're now at 7.3 Zinc.
Yes, close to 7, I would say, for the year. Okay. Thank you very much.
That's all for me.
Our next question comes from Mr. Julien Baer from Ernst Schiller. Please go ahead.
Good afternoon, everyone. On the Aitik, the big thing that surprised me was the gold. Did I hear you say that you expect low Q1 Aitik gold until 2015?
1st of all, in the first sort of approach, you should look at a proportional change in copper and gold. Not that gold is independent, not that gold is not influenced by lower grades, but that they are sort of varying in a similar path. But that's only partly true because, first of all, we are in the open pit. We are drilling. We are making the reserves and the calculations on quite big distances and interpolations between holes.
And gold can be tricky. We think we're very accurate when it comes to the average. But for shorter time periods, it can vary and it hasn't been so in the past. Sometimes we have sort of gold helping us and sometimes the other way around. And now we are the other way around.
So but basically, I think you should factor in a proportional development.
Okay. So Q1 gold output was down 30% sequentially. Copper was 15%. Should we therefore expect the gold to catch up some speed going forward?
I would think so. I think when it's happening and exactly how, I'm not able to tell. But it's an unusual low copper gold situation.
Okay. On Kinkberg, you've outlined the somewhat previously guided complicated lead time to go from production at the mine to final product output at Rundshare. Given that long lead time, should we expect sometime this year, we suddenly see an increase in gold appearing even though the actual production happened some time ago?
We should see an improvement in the gold shipments going forward, yes.
Would you know when how long that might be from mine production to output at Canva?
I'm not sure. No, I'm not able to tell. But it's quite lengthy. And yes, no, I cannot say.
Okay. My final question.
Can I
just go back to the monthly issue of total cost savings? I'm sorry if I drifted away at one point when you were quantifying those savings. Could you just say how much you expect to save cost wise at Tara in 2013 versus
2012? We quantified the number. What I think anyone can Variable pays have been declined. We have reduced or are reducing from 700 to 650 people. We have basically maintained several of the cost or lowered some of the products we're buying.
We some cost increases on a few. So the total package is maybe half the I don't have the exact number, but maybe half of the savings is in the headcount reduction, maybe a little more. And the other part is on other cost items. But against that, again, stands the smaller or the smaller rooms for mining and the further distances we are in going forward.
Okay. On depreciation, I think Mikael indicated that the depreciation level will be more or less flat going forward. Can I ask specifically for mining? Would the DKK 459,000,000 of depreciation in Q1 be the typical run rate for mining sector going forward?
Off the top of my head, I will say yes. But if we take some more questions, I'll look it up in more detail. But it should be relatively stable.
Okay. So I'm just doing the calculation here, Lynette, where you said that cost savings would balance increased depreciation. And it seems to me that depreciation is up somewhere between DKK 50,000,000 and DKK 100,000,000 a quarter in mining.
What I was saying is that the change in accounting principles, there we have from the principal change, we have higher depreciations, which is balanced quite exactly 1 to 1 to lower cost because the investment is crediting the cost side. So it's a reflection of big investment programs we have done previously as well. So I'm not suggesting that everything is balancing.
Okay. Thanks very much.
Having checked the numbers, I will say it again that you can expect mining depreciation to be quite stable the rest of the year.
Any more questions from any participants on the telephone line?
We have one more question from Mr. Thorsten Sverman from HSBC. Please go ahead.
Good afternoon, gentlemen. I have two questions actually. The first one is regarding your hedges. Your hedge volumes seem to have halved over the quarter. So the question is, will you run out of hedges after the next quarter?
Or will the remaining hedges be distributed over the remaining year? And the other question would actually be regarding Bolin Aero mines because milled ore was up, the head grades were up, but gold production was actually down. So the question is, in the leach process in Cangenberg, is that creating a lot of problems? Are you losing a lot of metal there at the moment? Is that the answer?
Or why is production actually down?
On the first one, the base metals hedges are expiring after the Q2. And then we have gold hedges, which are continuing according to our sort of what we published. So most of the hedges are expiring now. On the gold, we have the leaching starting and we have starting up there. So I think that we are going to see both recoveries, grades and everything be stable maybe 6, 9 months from now.
At this point, we are ramping up. And basically, I would say that we have a degree of uncertainty in the beginning, which is totally normal. So I think it is quite in line with expectations what our expectations.
Okay. Thank you.
We have one more question from Mr. Johannes Glopsselius from ABG Stockholm. Please go ahead.
Yes. Hello, gentlemen. Johannes Glopzelius here. I have a question, let's say, on the mines specifically, where you're showing us the earnings bridge year over year and quarter over quarter. You highlight to us that the costs are up €49,000,000 versus year over year and €39,000,000 versus last quarter.
Can you shed some light on which type of cost? And if you perhaps can highlight which mines do we see this? And did I understand you're right, Lennart, that you foresee sort of flat cost inflation going forward?
The reason we showed the bridge was to convey to you that we had little cost increase, not that your interpretation that we have much increase. But in any case, I do not have the precise answer where it's coming from. It's probably more action oriented where we do maintenance or whatever. I think some of it is related to what we have done in Aitik from the top of my head. I do not think that the analysis of why was it 45% on a year on year and 39% or whatever you said in sequential.
The point is really we are into a lower cost increase period. That's how we see it.
Yes, sure. Sure. I understand small numbers, but if you would have expected, for instance, falling costs over the comparison period, then it, of course, makes a difference.
Yes, sure. Okay. Well, I hear what you're saying. But basically, we are reasonably happy with the levels now, and we see low inflation going forward.
Sure. And when you discuss currency impact, because you're showing us the difference, the delta with metal prices and terms. Is that the dollar impact? And then you do the Swedish krona impact on an isolated basis, if you see what I mean? Or how should I view this?
Yes.
Okay. That's very good. Very clear.
So the cost is not if you look at cost, it's in local currencies change. So the gain on currencies is not on that line. It's coming on the currency effects, right?
Yes. Okay.
There are 2 different things here, but the currency effect is both of those. It's both the costs are in local currency and then the currency effect is in the currency line. And the prices and terms effect is in dollars and also corrected for any currency line.
Then on Garpenberg, have you passed any important milestones for that project? You're guiding us that the project is under good control, as I understand. Can you just shed some light you have sort of passed any milestones on the project?
1 of the biggest we have. We're done with the ore shaft, and that is one where we have had some difficult technical issues with race boring equipment and a lot of replanning and a lot I would be happy to explain how very, very good we have sort of managed quite difficult situations. We're done with the race boring. We are now doing some increases in diameter from a platform, which is just trimming the shaft, and we're soon starting to assemble or install the guides and well, the equipment for the hoist machineries. And we are installing a lot of equipment in underground.
We have the building for the concentrators. It's up. It's from the outside, the building is ready. We're installing a lot of equipment in there. We are delivering the secondary mills from Aitik.
We have secondhand mills from Aitik. What was left when we invested the Aitik 36 it's going into that plant. And the transportation is only that. It's a big project. It's done.
We have the different sections fascinating place to go now. So we have passed several very important milestones, and we reiterate that we're on plan. So that's good. That feels really good.
Okay. Thanks a lot for the update.
Thank you.
All right, everybody. It's time to close this webcast. Any final remarks, Lennart, before we leave the room?
Good smelters, not so good mines, most of it was guided for. And then if you have some good news and some bad news, I think we are a bit lacking the small bits and pieces going in the right direction. So basically as planned, but with a number of smaller negative issues on the minesets, basically making up for it. And we're excited about the market, how metal price started out in going forward. Thank you.
Thank you. See you in 3 months.
Thank you.