Hello, everybody, and a warm welcome to this, the 4th quarterly presentation for Boliden 2012. Today's presenters, Lana Tibrell and Michael Staffas will try to shed some light on what has happened in the last quarter. And after the presentation, which will last for about 30 minutes, there will as usual be time to ask questions. So please, Natt.
Thank you. Well, the quarter was not one of our better ones. I think that when you study the report of today, I think you see that most of the items which are behind a low production volume are basically known. I think maybe surprising to the level or to the extent that they have reduced previous quarter's performance, but I think it recognized most of them. And they are based on the mining business is working sometimes in high grade areas and sometimes on lower grade areas.
It was expected that we would go into the lower grades in Garpenberg and that we are on lower grades in Aitik. But on top of that, we have a few items and some of them were probably not known and expected by any one of you. If we look at the first line here, revenues they ended up ended at SEK 40,000,000,000 which is flat to last year and earnings were SEK 3,900,000,000 compared to 2 SEK 5,000,000,000 a year earlier and including the inventory revaluation you have it on the other line there. The free cash flow was good. In spite of the fact that we are in very intense time in CapEx both the Cancpere project.
We have some ongoing on different sides of both Bure or the Randscar and Aitik. But basically, of course, it's a matter of Garpenberg, which is really in the midst of heavy investment program. We had a tax effect, which you Mikael will talk about later, which is a one off €400,000,000 plus. We have proposed a dividend of flat to last year. And I got a journalist question, why do we propose that?
Well, it's because it's a third of our net profit, which is the policy we have. We have today also published the mineral resource and reserve upgrade or update, which we do once a year. And this is probably the strong point of the reports of today. We have very good developments, and I will show you more about that in a moment. The Q4, which is adding up to the full year had earnings before interest and tax and without the process inventory revaluation of $8.18 which was of course a negative surprise to many because of the relatively low production.
Free cash flow was €110,000,000 positive compared to €500,000,000 negative and the rest is basically the production, but also margins following low prices on some of the smaller metals and byproducts. And it's adding up to quite a big minus, which is only known if you do the assumptions on the PDMs, the OPMs as we also call them, the smaller metals, which have had very substantial reductions compared to the year before. Projects are on plan. We continue to say that Garpenberg is on plan. We said at the Capital Day that it's on plan.
We have some issues, but we are within both capital and time and that remains the case. If we then turn to the global market, I think that we read about while there are improvements going on in the market, I think that if someone do we have any information which is opposing to a better market? No, we probably don't if we look at our invoicing and our orders and what's happening in our markets. But basically, it's a very flat level. I hope that we are going to something better, but I think flat is the best picture here.
We see China, which is turning up a little bit. We see the rest of the world looking very much as it has been before. The euro land on negative growth in industrial production and if anything with a negative trend. Construction also very flat compared to what we have seen before. And we dive into construction and cars because those are the 2 end user segments for copper and zinc our 2 main metals which are the most important.
What is important, of course, is to say that China is on a very good level, but on a flat. U. S. A. Have been going on going for an improvement, but are plateauing on this level and Europe is negative.
On the car production, we have the quarterly development to the left and the yearly development to the right. And if anything, it's going negative slightly even in Q4 compared to the previous quarters. So flat is probably the best way to describe also the car industry or perhaps even negative on the quarterly development. Zinc prices also here flat development. I think you Mikael will tell a little about the year end effect or month or quarter end effects on what it was in the beginning and final pricing.
Even if it looks like a little bit improvement, we have negative price effects because of the MAMA effects or the final pricing effects, but very flat. On zinc, we see the shaded area behind with very big inventories and increasing inventories. I think the reason why zinc prices are holding up is because of the anticipated shortage in the zinc market with few new mines and several mines going to deplete in the coming years. Sorry. On treatment charge, we see also here a flat on the term values and we see the spot line coming up on the bottom there.
There are some very preliminary numbers on new benchmarks and it looks like they are up from the current levels here. Premiums are nothing much to talk about. It's if anything a positive development. Oops, sorry. In on copper, more of a well, you can see something different.
Well, first of all, it's flat if you look at the last several quarters, but we can see that the inventories, the shaded line at the bottom are much better than for zinc. But also here, we have seen an increase in the official inventories. I think also here are for both metals in anticipation of perhaps an improved general global economy is supporting the bottom of the floor or of the prices here. On TCs, similar here. We have seen some of the initial talks and maybe the TCs are going to be higher than this.
We have seen some preliminary TCs or benchmark negotiations and some information from it, which are suggesting higher TC than what we had 2012. On premiums, as you can see, there is well, maybe not so much to say about that fairly flat. Gold, silver and lead. Gold has been holding up well. Sometimes we say that there is a balancing effect.
When the other metals are going one way, gold is supporting. As of now, the price trends have been very flat. That's also true for gold and silver. Lead is probably the one which has been surprising many with an increased car production in China with start stop functions in the West, which is driving slightly bigger batteries and the difficulties to start up lead production anywhere whether it's smelters or mines or holding back supply. So I think I have said that for several quarters that we are quite excited about the outlook for lead.
The market situation on the demand supply balances, they are a little or contradicting to the official inventory levels. And if anything, what needs to be said is that the quarterly numbers are sometimes adjusted afterwards. And I think that some of them are a little bit strange. What we read here is a very flat concentrate supply and metals demand which is up. And we see copper demand being flat or even a bit negative from negative numbers from China.
But I'm not sure that will be the case when we see an update on Q4 numbers later on. If we from the market go to the production, starting with the mines, We did SEK 500,000,000 compared to SEK 600,000,000 the previous year in earnings. And we had €800,000,000 in Q3. So that is a quite steep decline. And we can see it here that it's a big drop in earnings.
Garpenberg in lower grade areas. And we have said for many times now or for a long time that we have been mining over the grade average or average grade in the reserve and that cannot go on. And now we are on lower grades and we will continue to be in lower grade areas for some time going forward. We had a low production in Tara, which is having a lower impact, but still an impact. And with the lower production, the unit cost is well, the cost is the same and on lower volumes, so the unit cost is increasing.
And we are therefore negotiating with the unions and see if we can reduce costs both for labor and for different materials. So Tara is under in negotiation mode right now. Aitik, we had we are on low grade areas, but we had some disturbances in Q4. In the beginning of the quarter or at the time of the Capital Market Day when we many of us met, we had a smaller maintenance program going. And some of we had some spare parts, which didn't fit into the machinery there.
And therefore, we had to remachine or change some other things. So that was putting a lot of more time for that maintenance than planned. So the Q4 well, what was that? It was in October time. It was a longer stop than we had planned.
In December, we had a gearbox, which broke down. It was planned. We knew that we had some problems with it and it was planned to be done in January. But it happened. It collapsed and this breakdown was taking also much more time than it should have done had we had it as planned in January.
Buliden, just to remind, we are in an ore exchange situation there. We are going to replace that with zinc. And we saw that happening in Q4. And else on that the projects predominantly or first of all the GAPMA project is on plan and we had CapEx of SEK 1,000,000,000 compared to SEK 800,000,000 a year earlier. And the full year results, we publish them once a year.
And here are the developments, which I think you will in your analysis will show what happened with terms, which are the most important factor here. In production, we see copper production going down for the reasons I said both lower in Boliden, which is small, but still it's an addition to the decline. And then we had the difficulties with the maintenance and the breakdown in December. In zinc, it's a quite dramatic effect both of Tara, but the most of it is from Garpenberg. The good news from today's news flow is definitely the mineral resources.
We have increased the resources in all mines. We have continued reserve increase in Geppenberg and Boliden area, which is very good. Resource increase in Aitik, which is huge in tonnage, but with low average grade. So it's low grade areas we're adding to the mineral resources. We have also the new 2 new deposits.
One of them you know from before, Laven, which is like 690,000,000 tonnes. And the new one, which we bring to the resource status today is roughly 4,500,000 tonnes with high grades in complex ore in copper, zinc, lead and precious. Rockliden also contains arsenic and some difficult materials. So we it's not an entirely simple metallurgical deposit, but it's quite big and it's very rich. Exploration in the year was accelerating from the year before, primarily because of lava and that we had a very intense drilling program to define lava as mineral resource.
If we look at the graphs here, this is what we normally show. The solid line is representing 10 years of production at current rate. And if we look at the reserves, we have if the dark line is hitting the line then we have 10 year of reserve life. And as we can see, we don't have exactly 10 years in reserve life in Boleden. But if we just assume that some of the resources can be moved into reserves at a later stage, we have easy more than 10 years life in Buliden area.
Aitik is way over. And as you can see, we had very good additions in Mineral Resources, the light blue bar in Aitik. Garpenberg fairly flat. We have spent most of our time in lager and in the places where we see new growth opportunities. We are going to spend more time in Garpenberg as we now start to accelerate production.
But it's we are holding the reserve resource levels basically improving a little. And Tara, we are adding, so it's not quite 1 year of reduction for each year of production. But we are still seeing that we are sort of depleting Tara gradually. And those charts are not taking into account Lager or Rotliden. In Smelters, we had earnings of €191,000,000 which is down from €326,000,000 a year before and then almost €300,000,000 in Q3.
Rundshall had some production stability problems and we have to exchange a few parts and things. I wouldn't say it's very material or very much, but it was clearly that the low result of smelters to an extent came from Rundsen. The other one obviously is Oda where we had this collapse of a leaching tank or a leaching reactor. We said it was very new when we had the Capital Market Day. We thought it would be a cost or a consequence of SEK 30,000,000.
We are now ready with it. It's up production or production is back again. We're going to have some lower production in the first half of the year, but it's marginal impact. And the bottom line is not 30, but 40. So that we were a little bit too optimistic on that one.
Costs are a little higher than Q3 for basically seasonality reasons primarily and in line with Q4 of last year. CapEx $277,000,000 which is a lot down from the previous year when or last year when we were in the final stage of the electronics recycling. Coca Cola silver recovery project will be in production next year. And the full year profits for the smelters are looking like this. So basically a breakeven level in Oda, a little decline in Baixo short of battery feed, which is slightly better now and then a fairly flat development in general with a good development in Harjavalta.
Production in Q4 was good. So the profit problem in the copper smelters were not coming from volume. It was coming from margins on these byproducts as we said. Zinc, a very flat metal production and lower feed than in Q3, which was very strong. And with that Mikael, please?
Thank you, Lennart. I will take you through some of the financial numbers here. First, just a summary of the financial numbers. You've seen these numbers and you've seen them before the $8.18 EBIT excluding process inventory valuation for the quarter. A high investment level as Lennar has already alluded to of close to €1,400,000,000 for the quarter.
Despite this despite the relatively low earning and the high investment, we still had a free cash flow that was positive of about €110,000,000 dollars And the earnings per share was quite good, but I'll come to that in a little while, but half of that comes from the non cash one off item related to the lowering of the Swedish income tax. The net debt is down at 25%. If we then start looking to our numbers and we start comparing sequentially, the first number that jumps out on you here is the lower production in the mines that gives a negative volume effect of $280,000,000 in the quarter compared to the previous quarter. We also have some negative development of prices and terms and some of you might be a little bit surprised at that because there were stable prices or actually slightly higher prices, but that was on average. And when you start looking into detail in the graphs that Leno showed you earlier, you see that we had lower prices in the beginning of the quarter, which affected the negative the MAAMA or the month after month pricing effect from Q3 that came in as a negative.
Then there's also a small effect in this one, but it comes bigger than this comparison that we do have a sliding scale in terms of several byproducts of the smaller metals and the sulfuric acid that we're selling. The costs, it looks like a big number 194. This is mainly a seasonal effect. There is some shift from open pit to underground mining that comes in here. But in general, we do not have a big cost inflation situation and we will see that when we compare year on year in a little while.
Depreciation looks good, but then of course you remember that we had a one off depreciation in Tara in Q3 of SEK 79,000,000 If you then start comparing to last year, you see that we have a negative volume effect of 135,000,000. And of course, when you compare to last year, when KanKeeper was not in operation yet and nor was the new electronic recycling in Rundsherr, of course, is a big disappointment with a minus 135, but it's all in line with the numbers and the actions that Lennar has talked about before. Prices and terms are also negative year on year. And here is very much the byproducts and the smelters that are contributing since the main metals are relatively flat and it is in this time frame a relatively sharp decline in several of these byproducts. Otherwise relatively small effect, you can see a negative effect of 90 at costs, which is given that we now have a bigger operation actually a relatively flat cost development over last year, which we're happy about.
Depreciation is increasing $44,000,000 that's linked to the investments and very much in line with the plans. Then there is a positive from others. But as you remember, we had a SEK 125 1,000,000 one off for reclamation work at closed mines last year and we do not have similar to that as a P and L effect this year. I'll come a little while and talk about what we have this year which is a balance sheet effect. Otherwise on Financial Development looking at the whole year, you've seen some of these numbers already.
The revenue is €40,000,000,000 We have a problem with the comparison here. You can see here, but we'll fix this presentation as we go on. Otherwise, if you look at the whole year, we have investments of €4,200,000,000 and we have a relatively strong cash flow of €1,400,000,000 despite this situation. If you look into the cash flow, I learned a little bit a couple of times. We do have a good cash flow situation for the year despite the slightly disappointing earnings and we have been able to reduce the working capital.
Altogether, we've gotten $320,000,000 out of that, which is contributing to the $1,300,000,000 of free cash flow for the year. And this all comes into the capital structure. We have a net gearing, which is I suppose the most important number looking into this exhibit of 25% coming to the end of the year, which is lower than it was last year and clearly within a comfort range from the goals that we've set up. Otherwise, I don't think there's much share to discuss we have. For those who are interested, you know all the details about our interest rates around 3.1 percent the way they're working out right now and an interest duration of a little bit less than a year.
There's some special effects that most of you will be aware of that we had in Q4. We do have the lowering of the Swedish corporate tax rate from 26.3% to 22%. This is a non cash item and the deferred it affects the deferred taxes and it does have a positive impact on the P and L and on the earnings per share and it was 415,000,000 the total effect. Future reclamation cost in operating mines in Sweden. We have done a review and an overview of all the estimated future reclamation costs.
There is an increase of SEK 538,000,000 and this is linked not just to big new estimates, but also the fact that there are to some extent tougher regulation regarding how much participation that will be allowed in the future once these mines shut down. They don't have any effect on the profit and loss statement or on cash flow for 2012. Starting 20 13, they will increase the depreciation of roughly SEK 30,000,000 and the financial costs every year the revaluation comes about SEK 10,000,000. We have then also announced that today you can call it an embarrassment. We have used the wrong diesel for a long period in Aitik.
We found this out ourselves in the in about October. We've been working together with the tax authorities. We as Bulid have not gained anything from doing this, but we have clearly done an administrative wrong thing. The authorities tax authorities have said that they intend to impose a tax liability of SEK 212,000,000 plus interest. We have not done any provision for this in our numbers.
We are quite bullish that we will win this in the end because we haven't had any gain from it and it's clearly not proportional in any way that we should be charged with this tax since we have not gained anything. And we have we feel that we have paid the tax that we are intended to pay for operating the trucks in Aitik. With that, I will leave it to you Leonard for the project update. Yes.
I think on plan, we said very clearly it was very, very strong production in the middle of the year and we said that hold your horses here. It's not going to be an indication that we are ahead of plan. It's just confirming that we are on plan and we reiterate that now. It's going well. We had some a bit messy situation in Q4.
We have a winter period, which we have said before is tricky with a lot of snow and ice and minus 40 degrees and that. But I think we are confident and it's going basically well. And some of the changes we have done here are for the better over time. Ronsher Recycling is running at full capacity. Kankberg, the mine started early as you know in the spring of this year.
And if we look at the updates of the mineral resources, we have some very good developments in the Krankeberg resources. Gold leaching started and gold is the main product that went is going well. And we have the tellurium in a trimming in period. We have had some minor issues with it and we hope that's going well. The silver recovery project in Kokola is developing on plan and it's really in the midst of being constructed now.
I was there a couple of weeks back and it's again everything what we are doing. If you spend big money, you get big things and it's true here too. It's a big silver recovery plant. Garpenberg is of course the big project for us. We had some difficulties with the mine hoist, well, with sinking the shaft there.
And we had to replan and doing And since we did that, it has been going really well. So we are again saying that there's no change. We are on plan. Start up in the first half of twenty fourteen and full production 2015. We work on the feasibility of ITIG 45, which is well, we work on it.
And the Lava Conceptual Study, we are also working on. And as I said, we have been doing a lot of drilling in the year in order to prepare for that. The summary would then be that, well the macro is flat I would say maybe somewhat better, but the uncertainty remains and metal prices are volatile in its nature. So it's hard to say where they are going, but with a bit of luck it's going positive. Metal prices have been stable with the exception of the byproducts, which are less visible for you or transparent to you.
And they have really been giving some fairly big minus in the quarter. Operations, we are going to continue to operate low grades up on the sides of the pit in Nitik. We are not going to mine forever over the reserve average, but we are now for a period going to be lower. We have a mix change in Buliden area where Cancpai will start, which is good. Against that stance that we have a Maurylideen Ostra, which is Maurylideen East, which is basically copper open pit, small one, which is going to deplete and we take back the lost copper in more zinc in from Kristine Berg.
As you know, we have the bottleneck of the whole bullet now is a mill. And so we can choose the volume is there. We cannot do more than what we have in capacity, but we can choose to feed it from different places. We have a shift from open pit in this context to underground, which is higher cost. Cost programs going on in Oda continuing and it's going really well.
In Tara, there was an article in dependent on metal dependent on metal prices. We have projects the projects on plan. I already said Improved mineral reserves and resources, I said that. And the maintenance stops 2013 are should not be missed that we have very big maintenance stops and they are sort of most of them almost all of them in the second quarter. So that will be heavy in terms of maintenance shutdowns.
And with that, we conclude our presentation and prepare to take your questions. Thank you.
Thank you. And I think we start opening up the question session here in the room. Anyone?
Thank you. So I have some questions. Joakim Malberg, Schibreux. And if you start with the provisional pricing, you're talking about the negative effect in Q3 and then you rebound or it was positive in Q3 and then it rebound in Q4. Could you give some more flavor of how much it could have said to be fluctuating between the quarters?
You are the expert on end of quarter effects?
End of quarter. It's a couple of tens of 1,000,000.
Okay. And then if we go to Garpenberg and the lower grades you see there for H1, is it the same level as you have now in Q4? Or do you have even lower grades going in there?
Not lower. I hope not. But it's probably going to be in around where we are now for say 6 months.
And then also one on the depreciation because on the side you had from €400,000,000 €279,000,000 on the mines and then you had talking about €79,000,000 or €74,000,000 in Tara. But then you had then the effect is still €121,000,000 euros So the run rate going into Q1 is that more around 320,000,000, 350,000 or what should we calculate approximately?
Yes. You should calculate that run rate. The reason why I'm slightly hesitating my answer is that once you start reading the annual report which will be out in a few weeks, you will also read that there is a new accounting principle coming into the new year for the waste rock balance sheet treatment that will also lead to higher depreciation, but also the lower operating costs. So you might see higher depreciation, but that will be offset by lower costs. But you can read more about this when you get the annual report in a couple of weeks.
Okay. Thank you. The run rate otherwise shouldn't differ too much. But these changes you have to keep well be careful with it so you understand it right. Yes.
That's good. And the last one on have you sent in the permits for Aitik expansions on the tailings, etcetera or?
For 45? Yes. We it's a sequence of events there. For the new tailings, no, absolutely not. It's going to take quite a long time before that's ready.
Okay.
But the application has been submitted.
Yes. Okay. Thank you very much.
Gustav Sandstrom, Erikkens Bank. Could you give any guidance of the CapEx going forward into 2014, 2015?
For 2020 I won't say anything about 2015. But for 2014, we're likely to stay around the level we have now for so likely to be stable.
Great. And also in a time line perspective, when should we expect some more news regarding Lava and the Aitik 45
expansion? We have not disclosed any firmer or more firm time lines. Could you say what do we normally answer to it? 1st of all, it depends on a lot of things. We are in drilling and we are working on a lot of plans.
So we don't know ourselves how we will sequence it. Do we what do we answer normally when we get the question? We are not really
Sometime this year, but probably after than more likely after than before the summer I would say.
And that goes for both Lager and Altik Fulfide?
I would say so, yes.
Great. And also regarding Rocklea then could you give us a little bit more flavor where you are in that process? How much more drilling is needed in order to possibly make it into reserves? And what sort of difficulties are you expecting with the antimony?
With Roklid and it's more a case like you remember we had kankbay in our resource tables for many years. It was called Okkola deposit at the time and before we finally decided to go forward and build a mine there. And it was not a drilling breakthrough. It was a metallurgical breakthrough. So what we are doing right now, which I don't think is a secret, is a lot of R and D programs in how to deal with the metallurgical process there.
So it has less to do with geology. It has more to do with metallurgical process development. And when and if that will be feasible or economical, I don't know. I even less know about that. But we put it as mineral resource, which is still a little of an indication that we are hopeful that one day we will make it have it economical.
And it's high grade, so it's serious mining. It could be eventually.
Great. Also regarding Tara, could you give us a little bit more flavor on the labor dispute and where you are currently and if there has been any discussions regarding strikes or something like that?
Yes. I wouldn't call it a labor dispute. It's a very friendly and straight discussion with our unions that we have where Tara is going to greater depth or deeper levels and further away. Distances are increasing. Grades are probably holding up a little lower, but it's more that the stopes are smaller.
And we need to get to lower cost in order to justify additional exploration. And we are quite an intense period intense, but we are working hard on exploration. And it has happened more than once for Boliden that we discover some extensions at sort of later stage on mine. So we are working hard on extensions. But they are not going to be as we think right around the surface.
They are probably going to be deep down. And therefore, in order to make them economical, we in any way would need a more favorable cost position than we have right now.
Great. And finally, if to say that you would close Antara, could you still motivate to keep Oda open?
That depends on the market terms of course, but we think so yes. Great. Thanks.
Okay. Can we Cezanne? If we can cut in with if we have any questions from the participants on the phone conference. Operator? Yes.
You have one question from the line of Robert Clifford. Please ask your question.
Yes. Good afternoon, gents. I just got three questions. Firstly, on Aitik, you've given guidance. You're on track for this year.
But the ongoing production issues you had in the Q4, is there any impact on the Q1 from those? That's the first question. The second one is just on Kankberg. How much of the gold and silver you produced this quarter came from Kankberg out of the Boling area numbers if you can split that out for us? And the final one, are you able to tell us how much of the CapEx in 2012 was maintenance versus expansionary?
Number question one was on Aitik. I think that what we had in Q4 was I think we had a bit of bad luck with the extended period of maintenance because the spare parts didn't fit. And we talk not a little spare part. We talk about a heavy piece of engineering going into the system and it didn't fit. So we had to redesign or rework.
It was quite a messy thing. What will go on in I think is, of course, that we are on grades and we have given a good guidance there. And there by the way, we had a good higher grade of the low volume in Q4 as you know. So maybe lower grade and maybe better volume than certainly in Q4. But again, we are we have said several times that the winter conditions are probably lower production than the average of the year.
So that's the kind of flavor I can give to Aitik. Kankberg has a quite big and meaningful impact even though in the beginning of Kanpur we're starting on lower than average grades which is when we first access the ore zone or the gold zones. So the gold content is smaller, but it's taking over what we are depleting in Kristineberg. So even though the total volume of gold is not changing too much, it's quite a big mix change between the mines. And on CapEx, Mikael?
I do not have an exact number for 2012, but we've said before many times that the maintenance CapEx of Boliden is somewhere between €1,500,000,000 2,000,000,000 and it was a very typical year in 2012. So somewhere a little bit south of €2,000,000,000 was maintenance CapEx and the rest was expansion.
Thanks guys.
Operator, any more questions on the phone line?
Yes. We have another question from Johannes Grunselius. Please go ahead.
Hello, Jan Frohnselius. Johannes Grunselius here, ABG. I have a question on tariffs. If you could give us a bit of a color there, Lamont. Ore volumes were a bit on the low side.
How do you explain that? And also grades were also coming in low compared to previous quarters. And what how can you explain that? And what do you see for 2013 please?
I think that we have a long term trend here, which is going to we're going to hold the ore production. We're going to see slightly lower grades over time. It is not very much, but you can study the resource and reserves grades and you will see probably a little bit declining. Cost will increase and therefore we have to defend the cost side or work on the cost side. What happened in Q4 was basically we had a messy situation in November and it was basically a bad month in well then.
And now we are in negotiation with the unions. But I think that we are again, I would like to stress that we have good relations. It's quite serious discussions with the unions. So there is always a degree of uncertainty around that, but basically it's going well. But we don't know what that might bring, but it's looking okay.
Okay. But is it fair to say that or is it correct to say that the negotiation with Union did have did that have any impact on productivity?
No, I wouldn't say so. It's probably not helping, but I definitely don't blame our own colleagues there. No, I don't.
Right. Thank you for that. Also EBIT at the smelters were a bit below on a sequential basis also lower year over year. Anything unusual there? Was it a clean quarter?
No. It was well, it was the impact of year on year on the byproducts is one thing. And the other one is that we have some maintenance work and some rework in Rundsjar which happened in the quarter. Nothing big, but a little bit of that.
Thank you very much, Nanno.
Thank you.
Any more questions in the auditorium here? Operator, go on if you have any more.
Yes. There's another question from Christian Kopfer. Please go ahead.
Thanks, operator. Good afternoon, gentlemen. Just one quick follow-up on Garstenberg. Jelan, you told us that the head grades will probably stay low for the first half of 2013. Is it also fair to assume that the mill door will stay on the Q4 level for the first half of next of this year?
That's a good question. We are pushing hard to pre grind and or pre crush and to deal with it as we did a couple of years back when we were in hard ore. There is a quite not a perfect, but a quite high correlation of low grade and hard ore. So maybe yes, maybe yes is probably my prudent answer.
Okay. Fine. And also on Tara there has been some talks about the mineral tax for the mines on Ireland.
Do you
have any comments there or
Working on it.
But you haven't heard any news on that on this 5%?
No, no. Okay.
Okay. Thanks.
Okay. Operator, you can keep going because no one is waving their arms in the room here.
Thank you. Your next question comes from Julian Per. Please go ahead.
Yes. Hi, Lennox. I couldn't resist asking questions here. Again on Tara, the question I previously talked about a modest fall in oil mill rates, but from what I can calculate you're down something like 15% versus the rate that you had in the first half of twenty twelve. And one of your colleagues told me before the conference call that that actually related to some tunneling challenges you'd had on the ground.
I'd just like to understand whether these are issues which we should expect from a continuous basis going forward or whether you had a particularly tough time of it in Q4?
I would put it like this. We are over in SWECs and the developments, the tunneling work if you like is sometimes hitting or coinciding with the ore production. So it's narrow. There's a lot of traffic down there. And as you know, it's a big mine.
I think we have had this it's nothing radical that happens now, but the issues have been there also before. So it's nothing new. And on the other hand, I think that the problem is not getting easier. So we have to be more disciplined. We have to be better organized.
We have to be sequencing. Instabilities or no good in order to plan the traffic and the processes down there. So nothing radical is happening, but it's to some degree, it's something that is not getting better over time. But I at the same time, I shouldn't scare you because it's normal with a deeper mind.
So just to understand, are you saying that you hope that things will improve from the Q4 rate or that's the rate that we should expect going forward? No.
I think you should average out what is happening and Q4 was bad. Yes, I think so. You should draw continuous lines. And I think it's it was nothing too dramatic or nothing too dramatic is to be expected.
Okay. Q4 was enormously low.
Yes.
On the Garpenberg grade issue just to make things a bit simpler, do you have a sort of budget average grade for the whole of 2013?
No. What we're saying is that we are going to be in the areas we are right now with similar grades and similar situations going on for perhaps 2 quarters or perhaps for the first half year. And thereafter, we are guiding as always we're going to be around the average grade. That's as much as we're saying.
Okay. So below 5% for the first half and then back to 5.2% the mine life average?
Yes. Probably.
Okay. Great. And then finally on the smelter side, the could you give a quantification of the impact of the lower rare free metals pricing on Q4 smelter earnings either versus or on a year on year basis? And any view on how that's going to develop going forward?
On the prices, we it's difficult to say where they are going forward. As far as I know, we haven't seen any pickup in the particular metals we talk about. And the impact is what is it EUR70 1,000,000 or what was it you
It's close to EUR100 1,000,000. If you take year on year, it's close to EUR100 1,000,000.
EUR100 1,000,000, okay.
But then you're adding in the self forecast as well for all byproducts.
Okay. But was that also a sequential issue?
No. That was the year on year I just gave you number for.
All right. But was there a sequential decline?
Yes. That was also and that one was much smaller. I don't have a good number, but it's this has been coming slowly over the year.
But there we should also say that we have not a very sort of continuous invoicing of these smaller metals. So they tend to be invoiced more in Q4. So even if so therefore, it's difficult to compare. It's not a very smooth sort of continuous stream there.
Okay. But I mean given your good sort of cathode output and what have you come within therefore assuming that the underlying sequential fall in smelter earnings was really more to do about these little irritations that you've had on the cost side, on the process stability side?
Well, I would if I were you. I would look at the smaller products first of all and say that that should be factored in and probably you should study them. You know approximately which metals we talk about there and follow the price mechanism and then its business. No, it's normal I would say.
No. I understand that. But you're saying that there's a very little sequential impact from that, but you've got €100,000,000 plus underlying loss in sequential earnings whereas cathode production is up. So is it to do with your process instability costs?
I don't follow that. Sorry. Yes, you're referring to the 100,000,000 not of the 100,000,000 the 40,000,000 is related to Oda and then you're saying there's 60,000,000 more. And part of that €60,000,000 will be due to the prices a smaller part, but there is also some process instability in Q4 that will make up for the rest for that 100 that you're referring to Julien.
Okay, good. Thank you.
And your next question comes from Yatin Zhang Goel. Please go ahead.
Hi, good afternoon, gents. I've got three questions, if I may. Firstly, on the hedging policy. Has there been a decision to move away from the hedging policy? Because on the Industrial Metals side, I don't see any volumes hedged after first half of twenty thirteen.
Secondly, on the additional SEK10 1,000,000 charge to the net financial items on future reclamation costs, is that a cash expenditure? And finally on the I think diesel issue, do you have any potential to recover the liability from your supplier as well or to share it with your supplier if the final decision goes against you? And what kind of time frame are we looking at there? Thank you.
On the first one, we have no change in hedge policy. We have hedged in relation to the new investment or to the big investments in Garpenberg and Kankeberg. And now we are rolling out those hedges, so we don't have anything else on that one. On the €10,000,000 net financial items is that cash or is it not? Non cash.
Non cash. And on the diesel fuel whether we can get the participation from our suppliers, I wouldn't like to comment on it. It's a good question. But I wouldn't like to sort of voice my opinion about that right now.
Okay. And what sort of time frame are we looking at? Will it be resolved during the first half or 2013? Or can spill over to the next year as well?
This will probably take time.
Okay. And just one follow-up on the hedging side. Does that mean that you don't see much downside in the commodity prices? Because you said it's a conscious decision probably.
Well on the hedges we on this what we call strategic hedges is something that we have done right at the same time as we take decisions on investments. And then as any smelting business, we do transaction hedging when we buy material and we sell it over the couple of months of process time. But that's a different story. That's what everybody is doing and what we do. But on the strategic hedging, we have no plans to extend any of the hedges we have in place right now.
But I
think it's all important to point out that we have never done any hedges because we have an opinion about the metal prices going up or down. We just done in connection with investments to make sure that we have stability of cash flows. So you should not take this as any kind of prognosis from our side regarding future metal prices.
Sure. Thank you very much.
And your next question comes from Oskar Lindstrom. Please go ahead.
Yes. Hello. Oskar Lindstrom from Danske Bank here. Just a little bit regarding the maintenance stops on the smelter side planned for this year and especially the ones in Q2. Is there what's the risk associated with these?
You mentioned that they were larger than usual. Could you let us know a little bit more about that? Is that something we should worry about hurting Q2 earnings and sort of spreading into Q3 as well?
I think that if you study our guidance or guiding of maintenance shutdowns, they have been reasonably accurate and I wouldn't be overly nervous about it. But what the basis of it is that when you have a smelter with a lot of boilers and a lot of process equipment, they are corroding. They are they need to have different kind of maintenance shutdowns. It's just a coincidence that we have unusually many of the 10 years or even 25 year stops happening this year. So I wouldn't say that it's of any particular concern else than it's big numbers and it's at the same time.
So it's certainly going to hit the 2nd quarter results. But it's normal. It's normal of our industry. It's nothing special more than that. All right.
And what kind of number should we expect for 2014 and 2015? Should they be then back to normal or?
Yes. I think we haven't I don't know it by heart. I think we talk about €200,000,000 on a yearly basis. And I do not know that we have published any other number than the normal year on which would be 200. All right.
Well, thank you very much.
Thank you.
There are no further questions. Please continue.
All right. Do we have any final question in the room? Everybody seems to be content. So, Lennart, any final remarks before we wrap this up?
No. I think that Boliren is basically in good shape. The quarter wasn't brilliant and we are in a period of lower grades and we have maintenance shutdowns. So of course, it's a bit of an in between period we are in right now. But I think over time, the increased mineral resources, the investments we have going on, I think Boliden is in good shape.
And of course, it's not one of our better quarters. Thank you very much.