Hello, everyone. Welcome to this the 3rd quarterly presentation of our results this year. And no surprises, also today, presenters of the results will be Lena Terell, our CEO and Mikael Staffas, CFO. After the presentation, there will be time for a Q and A session. And hopefully, we will be able to wrap this up in 45 to 50 minutes or something like that.
Once again welcome and Lennart please.
Thank you. The Q3 were summarized as not very dramatic time, which is unusual given the circumstances in the global markets. And I will take us or take you through the reason why we think it was a quite straightforward quarter. To summarize, well, the market is full of uncertainties and it's very difficult to predict both the supply side and the demand side. And obviously, the demand is reduced over time gradually with the increased difficulties in many markets.
But we are reliant on or we are dependent on China, which is continuing to be on a good growth rate even though it's on a lower level than before. Revenues in the quarter were €9,000,000,000 and a little and as compared to €10,500,000,000 a year earlier. Earnings before revaluation of the process inventories were short of €1,000,000,000 compared to €1,400,000,000 almost a year ago. But the strong price development in the end of Q3 gave a positive inventory result and we ended with almost the same operating earnings including the process inventory revaluations. The cash flow was where the cash flow was €310,000,000 as compared to €820,000,000 a year earlier.
And it's not only that we are in a quite intense CapEx spend time, but it's also the adjustments of inventories. And you have seen one of them probably on the year end results there. Cost has been improving. It's both a result management actions. We had very high cost development in the beginning of the year.
We had put a lot of focus on the high inflation in the industry, but also on our own quite high cost increases. We have seen a better development on our increased focus as well as the lower inflation in the general markets. We have had low head grades in the zinc mines in the quarter. The expansion projects are on plan. We did a correction of the balance sheet of SEK 79,000,000 and we had enjoyed the positive effect from the strong price development in the end of the quarter.
If we look at the industrial production in the world, the top curve is China. And below that we see Europe on negative growth and U. S. A. On a small positive growth of industrial production.
And the global growth in industrial production is little positive, but just over the zero line. To the right, we see the BRIC countries Brazil, Russia, India and China. And we see that China is still on a good growth level even though it has declined somewhat. But we can see that the average of the other 3 bricks are around 0.2 which is not good news. So the general demand picture or the general business cycle situation is far from good as we all know.
Buliden is more than anything dependent on the car and the construction industry in the world. And as we can see, it's very much a mirror of the industrial production in the world. Construction is strong in China. It's positive in U. S, but we have seen a little decline in the end, but quite good news streams.
And we have a quite heavy negative development in Europe. The car sales is a quarter on quarter or year on year sales by month here. And as you can see, it's a very negative bar on Germany, but you can also see that the general growth in the automotive industry is reduced. This is a very busy slide and we put it on and we had a discussion whether it's putting some light on China, but it's more for your ability or your possibility to study a lot of the reasonably reliable statistics from China. What is good on this picture is that galvanized sheet is one of the better of the curves, power cable as well.
And we have some construction and automotive numbers, which probably enjoying a worse situation than we do if we look at the different sub segments of China. So something to take home and have a look at. Quite interesting reading actually. What this boils down to is that the zinc and copper prices are holding up reasonably well. We have circled in the spike, which you can if you look sharply there, it was a spike, which happened to be right in the turn of the quarter.
And we have a blow up of the couple of days before and a couple of days after. This is quite interesting or important to know when you analyze the result of the process inventory evaluation. So those of you who are doing the detailed analysis of our performance should be aware of that specific period. On the TC side, we have seen the benchmark TCs developing as you can see on the green. They are a combination of the base TC and the price escalators.
But you can also see the spot TC, which has been on a very, very low level, but has been climbing gradually in the year. The premiums are developing, if anything, in a positive direction. On the copper side, it's looking very much the same. We had a similar peak at the end of the quarter, which gave inventory effects and end of period effects. And we have seen the prices falling after the 1st of October here.
The TCs are looking quite the same and the tendencies are the same as for zinc. But here you see the spot terms have been improving quite a lot lately in the Q3. The premiums are looking a bit similar to the zinc. On the other precious metals have developed well, which is often happening when there is unrest in the world and a lot of people are nervous about their central banks or their financial or monetary systems. And there's a lot of more people having the wealth where they can afford to buy gold and jewelry and whatever else.
And at a time when you at the same time don't trust your political system or the monetary system. It is has become an attractive investment In parts of the world that goes for gold and other precious metals and it has an impact on silver which is partly an industrial metal and partly sort of a similar metal as gold. On the lead chart, you see a similar development as zinc. And we see many analysts being increasingly optimistic and favorable to the future of lead because it's a very difficult metal to get permits on and the use of lead is continuing to be very important. And with an increase in car industry and electric cycles and other applications start stop functions as we have on all new cars in U.
S. And Europe. It's a good demand for the metal and the supply is scarce. The market situation in summary. Metal demand, China is slowing, but on a good level.
Europe hit by general difficulty in the macro and the U. S. Is also a bit hesitant. On the supply side, the copper output is limited by the old mines and old mines and greater depth and declining grades. Same story as we have seen before.
The zinc side is on a slight surplus. And I think that if you look at the numbers in detail here, there is only one conclusion. The price point is set as a result of a very big number which is supply global and a very big number which is demand global. And when those big numbers are going a little bit up and down the balance is switching and the market is sometimes reacting quite heavily on those small changes. So volatility will probably remain and it's very difficult to predict what's next.
On the mines, earnings SEK 800,000,000 compared to SEK 1,047,000,000 a year ago. It was 726 in the 2nd quarter, so an improvement since then. And it includes a write down in Tara of the 79,000,000 I mentioned in the beginning. The average prices are have been lower, but we had a higher price in the end of period. This the intuition is a little bit complicated here, but the average price is low.
The end of quarter is high and it gives some end of quarter effects. We see the effects of our cost activities or cost focus and also a lower inflation development in the general market given basically that some iron ore mines are declining and there's a different sentiment as we are all aware. CapEx €701,000,000 compared to €500,000,000 and it's a similar level as in the previous quarter. The projects are all on plan. The production numbers are looking very good on copper, which is primarily from Boliden this time.
We have had a good copper outputs from the Mauriden East pit, which we are depleting in the coming quarters. It's going towards depletion. On the other hand, you see the opposite on the zinc side where we have had a very weak zinc production in Boliden area. So it's a quite big mix change from compared to what probably some of you have in your models. On the zinc side, we have also seen we are in Garpenberg in low grade areas and which is giving an impact on the output.
But as you can see the iron product or the ore production has been good. Tara is developing well in the quarter. Compared to many other industries in this business cycle, we see declining earnings. But here we have the bull in smelters have been on the same level for quite some time. $292,000,000 compared to $356,000,000 a year ago, dollars 240,000,000 so it's an improvement from the Q2, but there we had a number of maintenance shutdowns.
We enjoy the positive development from the TCs improving. We have the same situation with lower cost. We had a maintenance stop also in this quarter, a lot lower than in the Q2 and on the same level as last year. And in the notes, we have said that we had some struggle in starting up after 1 of the small maintenance stops. But so we had a little bit of a problem in the start up there.
CapEx SEK 172,000,000 compared to SEK 458,000,000 which is in line with, I think, your expectations. The silver recovery project in Kokola is proceeding according to plan and it's still on an early stage. The production is really not so much to talk about. Copper is on a flat level and the zinc production has been going generally well, but with a slightly lower grade or a slower lower I mean, the bar is high and the casting is on the level as before. And with that Mikael to the financials.
Thank you, Leonard. I will go through the financials briefly and then reiterate some of the numbers that you've already heard. This is a summary page of the financials. And as you've heard the numbers before, we had an EBIT of 1.46 dollars which compares to $1.180 a year ago and $7.69 in the Q2. If you exclude the process inventory revaluation, we were at EUR 974,000,000 compared to EUR 13.97 a year ago.
The CapEx level has continued to be around the $1,000,000,000 or a little bit less than the $1,000,000,000 mark. We ended up at 8 74,000,000 for the period. Cash flow positive at EUR 310,000,000 we have some increased inventories that we do have a fluctuality and then we held the high inventory levels at the end of the quarter. We still had a healthy gearing on the balance sheet with 26%. Now if we want to start to look at the bridge and how we got over to these numbers, you can see here when we compare sequential quarter on quarter that we had a lower volume effect of $113,000,000 You've heard the discussions around this.
We do have lower grades coming through in the zinc mines that will be showing up in these areas, which is what's coming through here mainly. If you're looking at the price in terms and currency effects and you add them together, you get a positive number of around €100,000,000 And I think that will surprise everybody since we had worse terms on average, but I think it's been discussed already that we have the end of quarter effect to evaluate the sales of September according to the end of period date. That will then be settled in a month after and that gave a positive effect, which give positive terms even though the prices on average were down. The cost, a quite positive development for several reasons. We had maintenance stops in the 2nd quarter that we'd not have to the same extent in the 3rd quarter, but we are also seeing both an effect of improving conditions around where the inflation pressure is not all the strong as it has been historically.
And also we're seeing some effect our internal work that we've been doing to keep costs under control. Depreciation is adding up another €71,000,000 but in that number you have the one off correction in the balance sheet in Tara of €79,000,000 So apart from that, we have a stable development there as well. Internal profit elimination of €152,000,000 connected to the relatively high inventory levels in general at the end of the quarter and also a high delivery of precious metal containing concentrates from the Mining division into the smelting division close to the end of the quarter and therefore inventory as we move across quarter line. If we then look on and compare with a year back, we do see that we have positive volume effect. We have higher copper volumes and we also have other volume effect coming in of EUR 126,000,000 altogether.
Looking year on year, we do have negative prices and terms of roughly €200,000,000 That should not be of any big surprise to anybody. Costs, minus €25,000,000 or close to 0. So we are running both an extra mine in Kankberg and we're running the Bure project or the electronic recycling in Rundsherr with the same cost costumer as we did a year ago, which is looks relatively good and we're quite happy about that. We have increased depreciation of 130 €79,000,000 of that is once again a correction in Tara that we did not have the same thing last year. Otherwise, it's increased depreciation from the investments that we've done over the last few years.
My final remark is on the capital structure. You saw already on the previous slide the balance sheet gearing at 26%. In general, there are no big changes in the balance sheet on any other levels as well. We have a relatively stable development both in terms of debt, in terms of solidity ratio and also in terms of the loan interest that we're paying on our debt. So with that, Lennart, I will give it back to you for the product update and the summary.
Well, on the projects, I have little to say really. I think it's moving on. We did on an annual basis. We did €9,000,000 and 9 times 4 is €36,000,000 I think it's again proving that after a period of being a little short on the or below the plan on the ramping up towards 2014, we were certainly happy with the Q2, which was very strong. And now we're following up with a good Q3.
So I said to a journalist before that, yes, well if you push me, yes, we are probably a little bit ahead as it feels right now. But I don't think you should draw any bigger conclusion. We have winter season and it is the open pits in large scale. I think it's corresponding well to the ramping up plan as we have said. Kankberg starting to produce.
It already started in the Q2 and Q3, but we have long process time of the gold leaching and the Tellurium plant is not yet ready. It's starting now basically now. So we're going to see some impact in the following months. So that's starting up as planned. Garpenberg is well, we all know what it is.
It's a huge project. It's SEK 4,000,000,000 spent in a little mine. And right now, it's an impressive visit. So by any chance if you have a possibility to go there, it's really exciting there. It's so big and so active and it's so many things going on different levels and on the surface.
So it's a huge project in approaching the most intense period. In March, we're going to do installations and start to add in, but we have the concentrate the concentrate is really in place and we have the fundamentals for the mill and everything. So it's really in a very share. We said in the report that we had a slightly lower electronic scrap production this period. But you hear you know that we have 2 Kaldo furnaces, the old one where we've always been doing electronics, but we are doing campaigns between lead and electronics.
And this quarter, we did a bit more lead and consequently a bit less of electronics. The new Bora plant is working according to plan. And that sequencing is perfectly normal. The conclusion is, well, we are in a very, very uncertain market. We know that the global economy is going in different directions and its difficulties.
The market prices or the metal prices have held up primarily because of short supply and we have enjoyed stable prices. And it looks like we are in good metals at this point, but that can change quickly. We have stable production. I said in the quote on the press release that it was a not very dramatic quarter, which is of course a quite remarkable statement at this time of the business cycle and what is happening around us. We have a cost pressure, which is easing a bit on the outside and we have also enjoyed the effect of increased the focus we have really been working on for several quarters now.
We are seeing a mix change where we do a lot of copper right now, but it's going to go opposite direction when Mauriden is depleting. I mean that's happening over a period now. And we are starting the Kankpa Gold Mine, Gold Tellurium Mine. Garpenberg was as I mentioned in low grade areas in the quarter and that will probably continue for a while. This is the normal disclaimer and that concludes our presentation.
Thank you.
All right. So if we start off in this room, are there any questions here? Yes. First one, Ola Sodermaier from Swedbank.
Yes. Just a couple of questions on production. When we're looking into Q4, how should we view the production then? You are guiding for that Garpenberg is going to have lower grades or be at this low grades. Is this going to be for the whole Q4?
Well, the guiding we have done is first of all on maintenance shutdowns. We are not going to have any major shutdowns. So that's an improvement compared to Q3. When it comes to Garpenberg, we have for a long time we have been hinting that you cannot forever mine over the reserve average. And now we are below the reserve average.
And we are going to be here for a time. So I think it is a prudent way to look at it that we're probably going to be on a similar level going forward.
And when it comes to copper production in Aitik and the Boliden area, can one view that fine tuning the copper production in Aitik is going to compensate for lower copper production in the Buliden area? Is it fair view?
I mean, we are on a ramping up in Aitik and now we are on 36, so we don't have too much to give on that. And then longer term, we are below the reserve grade, but you're well aware that this is going to be the situation for a time. Now I think you should model it rather than to look at Bouhilden and I'm sure your Excel is doing mine by mine. I'm saying Bouhilden is going east depleting. Cankpe is coming in and then a bit more of zinc from probably Rheinstrand or Kribe, Christianeberg, I think.
And Marley the main pit for that there.
Okay. And just one question about the flooding. And it has been quite rainy summer in the northern part of Sweden. Can we expect any problems production problems in Q4 due to raining? No.
But we had in Q3, but we were very nervous about it. It's good you had it. And we maintain basically what happens you can have a production problem, but you can also have sort of different kind of environmental issues relating to rainfalls, which are far above what was expected or could be expected. But I think we maintain the environmental side without any major issues any issues you can say. And the production was suffering a little, but nothing that was worth mentioning in the report.
For Q4, well, what's I don't know what's it looks good now. It's cold. It's starting the winter. It's starting already now, so but nothing I can point at
at all.
Any more questions in the room? So operator, do we have questions on the telephone
line? And your first question over the phone comes from Owen Skerritt from Goldman Sachs. Please ask your question.
Hi, Lena. Thanks for taking my call. Just a quick question on the potential expansion at Aitek or the development of the Lave deposit. Do you think you could do both of those simultaneously? Or would you have to sequence it given the constraints on capital?
Thank you.
I think that Lalor by definition or by default is a long term project. And if we assume that the exploration results published in the spring here could be justified and we're going to do that towards the end of the year or in the updating after the New Year. We haven't decided. The drill program there is basically ready, but we're doing all the calculations and we'll see when that is ready. I think that they should not compete too much because would we do ITIG 45?
It's a much faster pace project where there are mainly more mine equipment. And as you know the pressure from on big open pits many of them are in coal and iron and the pressure there has reduced dramatically. So delivery times are better. Prices might also be improving. And the concentrator is basically not going to be too much changed.
So I think I think I think 45,000,000 if it would be doable for permitting and all of that which is always extremely difficult to say what the timing could be like. But I think has the potential to be a faster project and therefore I do not see that they assuming
you don't make any change to your dividend paying policy, assuming you don't make any change to your dividend paying policy of a third of net income, you should see quite a substantial increase in your dividend payout. Are you going to make a change to your policy?
I think this is nothing we have discussed. The one off like this is we are going to propose it to the shareholders. And I don't really have a comment on it. But you Mikael can comment on the net profit to start with.
Well, I can comment quickly that it doesn't you don't have to calculate too much that with the present earnings level as we are right now, we will benefit for roughly SEK150 1,000,000 per year in lower taxes. Going forward, SEK13 1,000,000 and forward, if it goes through the way it's planned, we will also have a one off effect in 2012 of reduced deferred taxes of roughly SEK 400,000,000 as a one off effect, non cash, I should say, coming in, in 2012. So that will be the effect. And then I think the Board will have to come back to what extent they will intend to change the dividend policy.
Have to wait and see if it is happening for if it is passed and then we obviously will discuss this.
That's great. Thank you.
Thank you. And your next question over the phone comes from Joachim Alberg from Chevro. Please ask your question.
Yes. Hello. It's Joachim Alberg from Chevro. I have three questions here. So if we start on inventories, I have to see that we can all see the process effect etcetera.
But if you look on the balance sheet, it's more than €700,000,000 here on quarter on quarter. I just wonder if you can talk a little bit more about the variance there and the delta effects maybe including on the e scrap startup etcetera and what's more in that number?
I will make a quick comment. There's not much e scrap to talk about. The higher inventory is partially part of a normal situation. As you know, the inventory does go up and down depending on scheduling of ships with concentrate coming in. But as I also said and which is part of the increased or the internal profit reduction, we also have concentrates that are high on precious metals that also came in towards the end of the quarter and that also play into that.
So there's both a volume number and there is a value of per ton number in that that's part of replacing there. But it is as you've been following us before, these kind of changes happen and it's not unusual.
Okay. So despite the price effect, it should be quite stable quarter on quarter in Q4 then?
Yes. It should be quite stable. It's yes. It goes up and down and it could go down again and could stay. I will not give an estimate on that.
Okay. I understand.
And if we take the second question, it's more of the end of month and the pricing, etcetera, because we can all see the high price and the difference of end September and the beginning now. And how much was that effect in absolute terms? Was it EUR 100,000,000 this quarter? Or what you had a slide, but I don't understand the exact full effect in this current
quarter. It is a good question and I will not give you an exact number because I do not have an exact number. But you are of course somewhere in that order of magnitude. And as for those of you who don't understand it, it is an effect that we do have of the pricing. Typically, our concentrate is priced with the average price a month after delivery.
And therefore, what is was delivered in September is just not priced. It will reprice some prices in October. But the way it works in the accounting is that it's the end September price, which is the best proxy for the coming October price. And that price then goes in for the deliveries of September. And that's what that was puts the number high.
Okay. Okay. Exactly. So I mean if we just look then because the end price September was around $8,200 per tonne on the copper side. So if we look on the spot price now and we see that this is ending at the end of October at 7,800 that means that it's a $400 per
tonne beef?
Yes. Although it will be priced at the average price for October, so it's not at the end price.
Okay. But that will spill over into November, I guess, if it's And then
it's always rolled forward 1 month at a time. Yes. Yes, you're right.
Okay. Okay. That's great. And the last question is on the e scrap side. How much is the EBIT contribution here in this quarter?
And what's the delta effect from the last one? And how do you see it progressing into Q4 as well?
I think that we are not going in to raking up sort of the smelters individual smelters in different components. But I think the new Bure project is delivering as planned. The concentrates or the material is coming in approximately as planned or as planned you can say. So I think it is we produce less of electronic scrap and therefore it's a slightly lower contribution this quarter as compared to the previous. But the entire electronic scrap is moving on as planned you can say.
Okay. So if you look on the initial plan you had a payback period. I don't remember if it was 3 or 4 years in terms of EBIT. Is that still on track going into 2013? Because this is 1 of the year.
Yes. Approximately, it is on track. And if you do the math, you will figure out that well then something negative is happening for the rest because you can probably not see that kind of great addition. And I think that's basically true that we have some negatives in some other areas. But now we're into the details and I don't think we should go too much into it because it becomes complicated.
But I think it's giving the flavor.
Okay. Absolutely. That's all for me. Thank you very much.
Thank you.
Thank you. And your next question comes from Julien Bir from SEB. Please ask your question.
Very good afternoon to everyone. Firstly on Runde and the Kaldow furnaces. Can I ask why you are processing lower profitability led concentrate rather than prioritizing e scrap if there's e scrap available to be processed?
And the answer on that is quite easy. For many, many years, we have had a Kalda, which were I mean, the market was so full of supply, but still we were doing lead. And the question is more valid even more valid for the past. The reason is that we have different emissions from Rondeau share. And the lead is a carrier of different kind of materials.
And we need to run lead through the system in order to get sort of the long term process going in the right way environmentally and also and we of course are building up customers for this lead suppliers and so on. So it's a quite integrated system. Then we have lead coming from our mines and we have lead together with the Baixe system. So it's a quite integral system, which is making up the product mix. We are not entirely free to produce whatever we do where we can at any given point of time, then we would prioritize electronics as you're suggesting.
Okay. And just to get a feeling for what the financial impact is of running lead or scrap approximately what would the delta be on a lead quarter versus a scrap quarter?
It's better on scrap than on lead. But depending on how you look at it, if you charge the lead that we have to do it in order to be able to produce then you have a very, very good profit on the lead. So it's really depending on how you look at it. The direct contribution is lower, but lead is not a bad bad business either. And the lead market for that matter is developing favorably.
So lead is not bad.
But just on a purely on an absolute basis ignoring integration effects is it are we talking about DKK 20,000,000 delta DKK 50,000,000? What sort of order of magnitude?
I will prefer not to answer because I will have to look into that as well. Because when you're saying an e scrap quarter versus a lead quarter, it also depends on how much e scrap and how much lead and how the campaigns work out. So it's not just one or the other, but you're talking about double digits, small double digit number I would say.
Great. On Aitik, the very good looking recovery of copper in the circuit coupled with the good mill rates is that do you feel that's sustainable going
forward? I think, I think, over many quarters, we haven't said anything else and that we are really we like what we see in the mills. And I think it's going up and down depending on grindability and the situation. So I think also here you have a variation. Every good news cannot be taken as a reason for next quarter to be the same.
But I think over time, we are running in and we are very, very satisfied with how the concentrator is operating. Pick up a little bit versus the previous quarter
or 2.
Okay. And then, I think, we've been expecting perhaps grades to pick up a little bit versus the previous quarter or 2 based on some of the indications earlier in the year. Are you indicating that we should stay at these current 0.21 percent grade levels for the rest of the year now?
I don't know what you have in the air, but or in the air, but we haven't disclosed any other information. But we are probably going to do some more guiding, I think, in the Capital Market Day. So there we can probably go a little bit deeper on it. But we have not disclosed any changes from previous grade numbers from what I know.
Okay. That's great. And then finally, when you guided us on the Aitik project down to this lower grade level that we have for some period of time and we'll have for another year or 2, we obviously had to get that right to model the earnings correctly. Is that the sort of period that we're looking at for Garpenberg a few years of below average grade now for zinc?
No. We are very prudent when it comes to guiding on grades. We are going to do it to everybody at the same time. This is nothing we would like to communicate now. But I think what we have said is we are in a lower grade area and that's true and that's as much as we have said at this point.
Okay. But I mean a lower grade area doesn't sound like quite the same things or the pushback impact that you've had on Aitik?
Absolutely. I think what you look at here is we have said if you hear nothing special, you should look at the reserve average. We are trying to mine sequences, so we have not so volatile development on grades. We have been over the average for a longer period of time and we have said that all the time that we are going to have a period of lower than average. Otherwise, it's not going to be an average.
That's quite simple. We're going to be here for a while. We probably will be more specific later on. But I don't think it's for long, long times.
Thank you very much.
Thank you. Your next question over the phone comes from Christian Kopfer from Nordea Bank Markets. Please ask your question.
Good afternoon. Just one follow-up on Aitik then. I guess you will not say anything more about the grades going forward. But still, I mean, you're running at 36,000,000 tonnes currently. Do you see any room for cost optimization in Aitik going forward?
Well, you see that the costs are improving for a variety of reasons. And one is production is more stable or has been more stable and that is positive for tuning the cost no doubt. I think that I have got specific questions today. Are you happy with the crushers and all of this? And we have said that the crushers are producing much more predictable now, but the problem is that the costs are still high.
And because we have so many sort of planned maintenance stops in order to get the proper production out, we have to drive longer distances while one is staying. We have to choose a non optimal crusher. And immediately, if you double the distance, which you often do, you half the truck capacity. So it has an impact. And because of that we have a few more trucks than originally planned.
So on the cost side, we are continuing to have a slightly higher cost than we had hoped because of these situations. But the good news is we are learning to live with it and it's going better and it's not hampering production in the way that it used to.
Okay. So I understand it's not a huge cost saving still to do in I think then. But do you think you would I mean, you said that you will come back on the Capital Markets Day maybe describing what will happen with the head grades. Will you also have a session then where you tell us how things could do even better in Aitik in terms of costs?
Well, we haven't planned the Capital Market Day, so I don't know. But I will remember you asked the question this time. So you will probably ask it then too.
Okay. That's great. Thanks.
Thank you. And your next question comes from Rob Clifford from Deutsche Bank. Please ask your question.
Yeah. Hi, Leonard. Just two questions. Firstly, you talk about the weekend markets in Europe. We've had them for some time.
You say they're ongoing. Could you tell us what changes you've seen from your customers over the last couple of months maybe in terms of their behaviors, their stockpiling maybe or their purchase terms? And the second question is you've now talked about ATIC. You've basically arm wrestled a project you inherited and it's working well now. What do you think going forward about capital allocation?
You've got a couple of projects going forward, but where do you think the company should be allocating its capital on a longer term view?
Well, if we take the latter where we allocate the money is where we have profitable projects in the pipeline ready to go. So it's in the financial world sometimes you think that we just have a list and we have an IRR to the right and then we sort them in the XL with the highest on the top and then we go for it. It's not working like that. We have quite many very good projects and we have indicated them to you that we hope that Aitik could be expanded further and we hope that the early exploration results of Lager could be a basis for a new mine. As you heard earlier, there was a question of are is the capital constraints going to be sort of a factor here?
And I said no probably not, because I think one is very long term and the other one has the potential to be I think one is very long term and the other one has a potential to be not so long term. So I think you can conclude, we have project a project pipeline with good projects. And then we are going to take them as they prove to be good. And when we have management and project management and whatever else and we're going to go for them. So that's basically that one.
What was the first question?
The first question.
Yes, yes, the market in Europe. We you can say that our customer base is 3 groups. We have industrial customers where we are basically alone. We supply all the needs of metals to this group of customers. The second group of customers are is industrial customers where we are sharing the volumes with 1 or several others.
And the 3rd group is for traders or even sending to LME or something else. First of all, we have not been changing much when it comes to trader sales or anything else. So we are delivering the same amount of industrial customer volumes as we did before. So not a very dramatic change there. But within the two groups of industrial customers, we can see the weakening European market because those customers where we supply the entire need, we see with, I would say, maybe no exception, a declining volume, but we are increasing where we share.
And we think that we are replacing imports with our own supplies with the market organization we have. And this is a quite natural thing. We have distinct advantages as being oops. Was that some kind of a sign? It's water.
You cannot see it. It's not what you thought. It's mineral water. So we can see the market weakening very clearly in the customer base, but we can also see that we can find more volumes in sort of the more marginal customers. Great.
Thanks Dennis.
Thank you. We have no further questions at this time. Please continue.
We have any other question in the room? Then actually we've got a question on the if I can read this. It's on e scrap recycling via mail. And it's actually three questions. The first one is to what extent is Bouley then using waste printed circuit boards as feedstock for the Kaldo furnaces and has PCB availability in Europe significantly tightened as a result of the capacity expansion that Bulin has done.
The feeding to our Caldor, when we do electronics craft and we are saying that we are the biggest in the world, it's not that we have stripped the electronics or the printed circuit board from the electronics and we only take the some other people do that, but we take the entire printed circuit boards including the plastics and fibers and whatever and all the components and whatever else on it. And this is where we are doing the more difficult part of our processing of electronic scrap and this is our what we have specialized on. We have the new Kaldur entirely for electronics and the old one is mixing between lead and electronics as we said before. When it comes to the tightening market, there are of course, we have tripled almost tripled the capacity on in Boliden and some of the competition has done too. We have seen amounting volume of electronics coming out.
There might be a slight lower output, but we are not that is nothing that is hampering our business. It's a good volume and it's a good developing business.
And the third question on that topic is, how do we work to secure the supply long term of electronic scrap?
Well, first of all, we respond to the market wishes that we do electronic scrap. So that's one side. But we are we don't want to be too dependent on any individual source. So we have a network of partners, Borde partners and building a network of suppliers that help us with long term projects. We are having a level of spot sales because as in any business of this kind you don't want to commit yourself to the entire volume because if you then have a technical problem you're going to sit there with too much material coming in.
So we have say I don't know exactly but maybe 80% on long term contracts and a 20% spot business on top of that.
And then I believe we have another couple of questions from the on the phone. So please go ahead.
Thanks. The next question comes from Luc Tappas from Exane BNP Paribas. Please ask your question.
Hi, gentlemen. Two questions, if I may. First of all, on CapEx as the 9 months figure seems to be running low when compared to the overall guidance you pointed so far. So shall we expect a catch up in Q4 and I presume related to Garpenberg maybe? And second question would be related to Tellurium contracts with regards to the Carpenberg expansion.
Wondering whether the 75% locked in contracts could be renegotiated given how spot prices have been dropping? Thank you.
On CapEx, could you answer that?
I think you're right. We are lower than what we have guided before. I don't think there will be a catch up in Q4. I think that you can expect Q4 to be in line with the previous guidance as in the original quarter. And therefore, we will come in below for the whole year.
And on the other one, what was it say? Tellurium. The spot prices have been weakening quite a lot. But of course, when you have 2 parties doing a long term deal, when it's going one direction, one is saying, well, why do I need to do this? It's better to do this.
And it works for the other party and the other way around. We are not disclosing any individual contracts and what is happening there. But of course, it's a very good contract we have at this time.
Thank you.
Thank you. Your next question comes from Johannes Pfau from BMO Capital Markets. Please ask your question.
Good afternoon, Leonard. Thanks a lot for taking my call. I was wondering if you could just give us a bit more color around the cash costs. I'll see an improvement there. I was wondering are they sustainable going forward in your view?
And are they spread across all mines? And also are we seeing just the inflation of costs slowing? Or is there actually a deflation of costs out there in the market?
If you take the inflation I can start with the cash cost. We are updating the cash cost once a year. We give guiding on the different components of the cash cost. And as you know, if you look at a normal C1, you have Boliden and Garpenberg both being very rich. I mean Boliden is almost impossible to talk cash cost on because they have such a variable metal mix.
Garpenberg is so full of silver. So they are both negative if you put them as we put them as zinc mines. And net of credits they are both on negative. And they are heavily dependent. The cash cost is heavily dependent on what is happening with copper, gold and lead copper, gold, lead, silver.
When it comes to the inflation, yes, we have a few things to say about that.
Well, I can say that apart from energy, electricity is important for us. And as you know, the Scandinavian context, of course, we have a deflation or negative electricity prices, which is helping us. If you look apart from that and look at the rest of our cost base of purchased services and materials, we do not see a deflation, but we see clearly a tapered off inflation where I would say even though it's difficult to have exact numbers that we are seeing in inflation, that is somewhat what you would expect in the rest of the economy or maybe 2% at this stage as opposed to the much higher numbers that we've seen a year ago or even just a few quarters ago.
Okay, great. Thanks. And just lastly, in saying that your growth projects are on plan, does that mean they're on time and also on budget as well?
It means that we have a few issues on some subprojects, but with no influence of the total. And when we say on plan, we mean both time and CapEx for the projects.
Fantastic. Thank you.
Thank you. We have no further questions over the phone. Please continue.
All right. It's time to wrap up. So thank you everybody for participating and some final remarks, Lennox, you would like to make?
No, not really. I think a good quarter production stable, prices holding up, cost going down in line with the market expectations. I think that we are happy with the quarter, but we're nervous about the future. I think that maybe is