Earnings Call: Q3 2012

Oct 25, 2012

Hello, everyone. Welcome to this, the third quarterly presentation of our results this year. No surprises also today, presenters of the results will be Lennart Evrell, our CEO, and Mikael Staffas, CFO. After the presentation, there will be time for a Q&A session. Hopefully we will be able to wrap this up in 45-50 minutes or something like that. Once again, welcome, Lennart, please. Thank you. The third quarter were summarized as a not very dramatic time, which is unusual given the circumstances in the global markets. 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. Obviously the demand is reduced over time, gradually with the increased difficulties in many markets. We are reliant on or we are depending 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 SEK 9 billion and a little, and as compared to SEK 10.5 billion a year earlier. Earnings before revaluation of the process inventory were just short of SEK 1 billion, compared to SEK 1.4 billion almost a year ago. 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 SEK 310 million as compared to SEK 820 million a year earlier. It's not only that we are in a quite intense CapEx time, but it's also the adjustments of inventories. You have seen one of them probably on the year-end results there. Cost has been improving. It's both a result of 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 million. 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 USA on a small positive growth of industrial production. The global growth in industry production is little positive, but just over the zero line. To the right, we see the BRIC countries, Brazil, Russia, India, and China. We see that China is still on a good growth level, even though it has declined somewhat. We can see that the average of the other three BRICs are around 2, which is not good news. The general demand picture or the general business cycle situation is far from good, as we all know. Boliden is more than anything dependent on the car and the construction industry in the world. 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. 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. We have some construction and automotive numbers which are reasonably good. There are other factors and other sort of commodities which are probably enjoying a worse situation than we do if we look at the different subsegments of China. 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. 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. 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 grid. They are a combination of the base TC and the price escalators. You can also see the spot TC, which has been on a 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. 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. Here you see the spot terms have been improving quite a lot lately in the third quarter. 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, there's a lot of more people having the wealth, where they can afford to buy gold and jewelry and whatever else. At the same time, don't trust your political system or the monetary system. It 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 a similar metal as gold. On the lead chart, you see a similar development as zinc. 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, the use of lead is continuing to be very important. 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, 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, the U.S. is also a bit hesitant. On the supply side, the copper output is limited by the old mines and greater depth and declining grades. Same story as we have seen before. The zinc side is on a slight surplus. 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, a very big number, which is demand global. When those big numbers are going a little bit up and down, the balance is switching, the market is sometimes reacting quite heavily on those small changes. Volatility will probably remain, it's very difficult to predict what's next. On the mines earnings SEK 800 million compared to SEK 1,047 a year ago. It was SEK 726 in the second quarter, so an improvement since then. It includes a write-down in Tara of the SEK 79 million I mentioned in the beginning. The average prices have been lower, but we had a higher price in the end of period. The intuition is a little bit complicated here, 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, there is a different sentiment as we are all aware. CapEx in the quarter was SEK 701 compared to SEK 500, 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 output from the Maurliden 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. It's a quite a big change compared to what probably some of you have in your models. On the zinc side, we are in Garpenberg in low-grade areas, which is giving an impact on the output. As you can see, the ore production has been good. Tara is developing well in the quarter. On the smelters, good profit development. Compared to many other industries in this business cycle, we see declining earnings, but here we have the Boliden smelters have been on the same level for quite some time. SEK 292 compared to SEK 356 a year ago, SEK 240. It's an improvement from the second quarter, 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 second quarter and on the same level as last year. In the notes, we have said that we had some struggle in starting up after one of the small maintenance stops, we had a little bit of a problem in the startup there. CapEx SEK 172 compared to SEK 458, which is in line with, I think, your expectations. The silver recovery project in Kokkola is proceeding according to plan, and it's still in 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. With that, Mikael, to the financials. Thank you, Lennart. 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. As you've heard the numbers before, we had an EBIT of SEK 1,146, which compares to SEK 1,180 a year ago and SEK 769 in the second quarter. If you exclude the revaluation of process inventory, we were at SEK 974 compared to SEK 1,397 a year ago. The CapEx level has continued to be around the SEK 1 billion, a little bit less than SEK 1 billion mark. We ended up at SEK 874 for the period. Cash flow positive at SEK 310. We have some increased inventories that we do have a fluctuality, and then we had a bit high inventory levels at the end of the quarter. We still had a healthy gearing on the balance sheet with 26%. 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 SEK 113 million. You've heard the discussions around it. 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, you add them together, you get a positive number around SEK 100 million. I think that will surprise everybody since we had worse terms on average. I think it's been discussed already that we have the end of quarter effect, evaluate the sales of September according to the end of period date. That will then be settled in the month after, 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 second quarter that we'd not have to the same extent in the third quarter. 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. Also we're seeing some effect our internal work that we've been doing to keep costs under control. Depreciation is adding up another SEK 71, but in that number you have the one-off correction in the balance sheet in Tara of SEK 79 million. Apart from that, we have a stable development there as well. Internal profit elimination of SEK 152 million connected to the relatively high inventory levels in general at the end of the quarter. Also a high delivery of precious metal containing concentrates from the mining division into the smelting division close to the end of the quarter, they were in inventory as we moved across quarter line. If we look on and compare with a year back, we do see that we have positive volume effect. We have higher copper volumes, we also have other volume effect coming in of SEK 126 altogether. Looking year-on-year, we do have negative prices in terms of roughly SEK 200 million. That should not be of any big surprise to anybody. Costs, minus SEK 25 or close to zero. We are running both an extra mine in Kankberg, we're running the Bure project or the electronic recycling in Rönnskär with the same cost structure as we did a year ago, which looks relatively good, we're quite happy about that. We have increased depreciation of SEK 130. SEK 79 of that is, once again, the 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 three 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. With that, Lennart, I will give it back to you for the projects 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 million, 7 times 4 is 36. 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 second quarter, which was very strong. We're following up with a good third quarter. I said to a journalist before that, "Yeah, well, if you push me, we are probably a little bit ahead as it feels right now," I don't think you should draw any bigger conclusion. We have winter season, 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 second quarter and third quarter, we have long process time of the gold leaching, the tellurium plant is not yet ready, starting basically now. We're going to see some impact in the following months. That's starting up as planned. Garpenberg, we all know what it is. It's a huge project. It's SEK 4 billion spent in a little mine, right now it's an impressive visit. By any chance, if you have a possibility to go there, it's really exciting there. It's so big, it's so active, it's so many things going on on different levels and on the surface. It's a huge project in approaching the most intense period. In March we're going to do installations and start to add in, we have the concentrate is really in place, we have the fundamentals for the mill and everything. It's really in a very spectacular phase. Rönnskär, we said in the report that we had slightly lower electronic scrap production this period, you here you know that we have 2 Kaldo furnaces, the old one where we have always been doing electronics, we are doing campaigns between lead and electronics. This quarter we did a bit more lead consequently a bit less of electronics. The New WEEE plant is working according to plan, that sequencing is perfectly normal. The conclusion is, well, we are in a 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, we have enjoyed stable prices. 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, 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 Maurliden is depleting, that's happening over a period now. We are starting the Kankberg gold tellurium mine. Garpenberg was, as I mentioned, in low grade areas in the quarter, that will probably continue for a while. This is the normal disclaimer, that concludes our presentation. Thank you. All right. If we start off in this room, are there any questions here? Yeah. First one, Ola Söderberg from Swedbank. Yes. Just a couple of question 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're not going to have any major shutdowns, 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. I think it is a prudent way to look at it, that we're probably going to be on a similar level going forward. 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 Boliden Area? Is it a fair view? We are on a ramping up in Aitik, and now we are on 36, we don't have too much to give on that. Then longer term, we are below the reserve grade, you're well aware that this is going to be the situation for a time. No, I think you should model it rather to look at Boliden, I'm sure your Excel is doing mine by mine. Boliden is going east depleting, Kankberg is coming in, and then a bit more of zinc from probably Renström or Kristineberg, I think, and Maurliden main pit for that matter. Okay. Just one question about the flooding. It has been quite rainy summer in the northern part of Sweden. Can we expect any production problems in Q4 due to. To raining? No. We had in Q3, but we were very nervous about it. It's good you had it, and we maintain the-- Basically what happens, you can have a production problem, but you can also have different kind of environmental issues relating to rainfalls, which are far above what was expected or could be expected. I think we maintained the environmental side without any major issues. Any issues, you can say. The production was suffering a little, but nothing that was worth mentioning in the report. For Q4, well, I don't know. It looks good now. Yeah, so far. It's cold. The winter is starting already now, but nothing I can point at, no. Any more questions in the room? Operator, do we have questions on the telephone line? As a reminder, star one if you wish to ask a question. Your first question over the phone comes from Owen Scarrott from Goldman Sachs. Please ask your question. Hi, Lennart. Thanks for taking my call. Just a quick question on the potential expansion at Aitik or the development of the Laver 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 Laver, by definition or by default, is a long-term project, if we assume that the exploration results published in the spring here could be justified, 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 real program there is basically ready, we're doing all the calculations, we'll see when that is ready. I think that they should not compete too much, because would we do Aitik 45, it's a much faster paced project where there are mainly more mining equipment as you know, the pressure on big open pits, many of them are in coal and iron, the pressure there has reduced dramatically. Delivery times are better. Prices might also be improving, the concentrator is basically not going to be too much changed. I think, Aitik 45, if it would be doable for permitting and all of that, which is always extremely difficult to say what the timing could be like. Aitik has the potential to be a faster project, therefore I do not see that they necessarily would compete on either resources or capital. Thank you. That makes sense. Just a quick second question. The upcoming tax cut in Sweden. 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. A one-off like this is, we are going to propose it to the shareholders, I don't really have a comment on it, you, Mikael, can comment on the net profit to start with. I can comment quickly that you don't have to calculate too much there. With the present earnings level as we are right now, we will benefit for roughly SEK 150 million per year in lower taxes going forward, 2013 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 million as a one-off effect. Non-cash, I should say, coming in in 2012. That will be the effect, 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, if it is passed, and then we obviously will discuss this. That's great. Thank you. Thank you. Your next question over the phone comes from Joakim Ahlberg from Cheuvreux. Please ask your question. Yes, hello. It's Joakim Ahlberg. I have three questions here. If we start on inventories, I see that we can all see the process effect, et cetera. If you look on the balance sheet, it's more than SEK 700 million here quarter-on-quarter. I just wonder if you can talk a little bit more about the variance there and the delta effect, maybe including on the e-scrap startup, et cetera, and what's more in that number? Well, 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. As I also said, and which is part of the increase or the internal profit reduction, we also have concentrate that are high on precious metals that also came in towards the end of the quarter and that also play into that. There's both a volume number and there is a value of per ton number in that that's part of the place in there. It is, as you've been following us before, these kind of changes happen, and it's not unusual. Okay. Despite the price effect, it should be quite stable quarter-on-quarter in Q4, then. Yeah, it should be quite stable. It goes up and down, and it could go down again, and it could stay. I will not give an estimate on that. Okay, understand. If we take the second question, it's more of the end of month and the pricing, et cetera, 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 SEK 100 million this quarter? You had a slide, but I don't understand 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. As for those of you who don't understand it is an effect that we do have of the pricing. Typically, our concentrate is priced with the average price the month after delivery, and therefore, what is supposed delivered in September is just not priced. It will be priced on 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. Okay. That puts the number high. Okay. Exactly. If we just look then, because the end price September was around 8,200 per ton on the copper side. 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 ton dip. Yeah. Although it will be priced at the average price for October, it's not at the end price. Yeah. Okay. That will spill over into November, I guess if it's a flat price. It's always rolled forward one month at a time. Yeah. Yes, you're right. Okay. Good. That's great. 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 into raking up the smelters, individual smelters in different components. I think the new Boura project is delivering as planned. The concentrates or the material is coming in approximately as planned or as planned you can say. I think we produce less of electronic scrap, and therefore it's a slightly lower contribution this quarter as compared to the previous. The entire electronic scrap is moving on as planned, you can say. Okay. If we look on the initial plan, you had a payback period, I don't remember if it was three or four years in terms of EBIT. Is that still on track going into 2013 because this is one of the year? Yeah, approximately it is on track. 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. I think that's basically true that we have some negatives in some other areas, now we're into the details and I don't think we should go too much into it because it becomes complicated, I think it's giving the flavor. Okay. Absolutely. That's all for me. Thank you very much. Thank you. Thank you. Your next question comes from Julian Beer from SEB. Please ask your question. Very good afternoon to everyone. Firstly, on Rönnskär and the Kaldo furnaces. Can I ask why you are processing lower profitability lead concentrate rather than prioritizing E-scrap, if there's E-scrap available to be processed? The answer on that is quite easy. For many, many years, we have had a Kaldo. The market was so full of supply, but still we were doing lead and the question is even more valid for the past. The reason is that we have different emissions from Rönnskär, and the lead is a carrier of different kind of materials, and we need to run lead through the system in order to get the long-term process going in the right way environmentally. We of course, are building up customers for this lead and suppliers and so on. It's a quite integrated system. We have lead coming from our mines, and we have lead together with the Bergsöe system. It's a quite integral system, which is making up the product mix. We are not entirely free to produce whatever we do or we can at any given point of time. We would prioritize electronics as you're suggesting. Okay. 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, 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, you have a very, very good profit on the lead. It's really depending on how you look at it. The direct contribution is lower, lead is not a bad business either. Yeah. No, I understand. The lead market for that matter is developing favorably, lead is not bad. Just on a purely, on an absolute basis, ignoring integration effects, are we talking about SEK 20 million delta, SEK 50 million? What sort of order of magnitude? I will prefer not to answer because I will have to look into that as well. 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. It's not just the 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. Do you feel that's sustainable going forward? I think Aitik over many quarters, we haven't said anything else than that we like what we see in the mills. I think it's going up and down depending on grindability and the situation. I think also here you have a variation. Every good news cannot be taken as a reason for next quarter to be the same. I think over time, we are running in and we are very satisfied with how the concentrator is operating. That sounds good. I think we'd been expecting perhaps grades to pick up a little bit, versus the previous quarter or two based on some of the indications earlier in the year. Are you indicating that we should stay at these current 0.21% grade levels for the rest of the year now? I don't know what you have in the air or in the air, we haven't disclosed any other information. We are probably going to do some more guiding I think in the Capital Markets Day. There we can probably go a little bit deeper on it. We have not disclosed any changes from previous grade numbers from what I know. Okay. That's great. Finally, when you guided us on the Aitik project down to this lower grade level that we had for some period of time, and will have for another year or two. 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. 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. I mean, a lower grade area doesn't sound like quite the same thing as 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 a not so volatile development on grades. We have been over the average for a longer period of time. 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. I don't think it's for long times. Thank you very much. Thank you. Your next question over the phone comes from Christian Kopfer from Nordea 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. Still, you're running at 36 million tons 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. 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? We have said that the crushers are producing much more predictable now. The problem is that the costs are still high. 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. Immediately, if you double the distance, which you often do, you half the truck capacity. It has an impact. Because of that, we have a few more trucks than originally planned. On the cost side, we are continuing to have a slightly higher cost than we had hoped because of these situations. 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, I understand it's not a huge cost saving still to do in Aitik then. Do you think 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 where you tell us how things could do even better in Aitik in terms of costs? Well, we haven't planned the Capital Markets Day, I don't know. I will remember you asked the question this time, you will probably ask it then, too. Okay. That's great. Thanks. Thank you. Your next question comes from Rob Clifford from Deutsche Bank. Please ask your question. Yeah. Hi, Lennart. Just two questions. Firstly, you talk about the weakened 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 behavior, their stockpiling maybe, or their purchase terms? The second question is, you've now talked about Aitik. You've basically arm wrestled an Aitik 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. It's in the financial world, sometimes you think that we just have a list and we have an IRR to the right, then we sort them in the Excel with the highest on the top, then we go for it. It's not working like that. We have quite many very good projects, we have indicated them to you that we hope that Aitik could be expanded further, we hope that the early exploration results of Laver could be a basis for a new mine. As you heard earlier, there was a question of, is the capital constraints going to be a factor here? I said, "No, probably not." Because I think one is very long-term, the other one has the potential to be not so long-term. I think you can conclude we have a project pipeline with good projects. Then we are going to take them as they prove to be good, when we have management and project management and whatever else, we're going to go for them. That's basically that one. What was the first question? Market in Europe. The market in Europe. You can say that our customer base is three 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 is industrial customers where we are sharing the volumes with one or several others. The third group is for traders or even selling to LME or something else. First of all, we have not been changing much when it comes to trader sales or anything else. We're delivering the same amount of industrial customer volumes as we did before. Not a very dramatic change there. 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. We are increasing where we share. We think that we are replacing imports with our own supplies, with the market organization we have. 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's not what you thought. It's mineral water. We can see the market weakening very clearly in the customer base. We can also see that we can find more volumes in the more marginal customers. Great. Thanks, Leif. Thank you. We have no further questions at this time. Please continue. Do we have any other question in the room? Actually, we've got a question. It's on e-scrap recycling via mail, and it's actually three questions. The first one is, to what extent is Boliden using waste printed circuit boards as feedstock for the Kaldo furnaces? Has PCB availability in Europe significantly tightened as a result of the capacity expansion that Boliden has done? The feeding to our Kaldo, when we do electronic scrap, we are saying that we're the biggest in the world. It's not that we have stripped the electronics or the printed circuit board from the electronics. Some other people do that, we take the entire printed circuit boards, including the plastics and fibers and whatever, and all the components and whatever else on it. This is where we are doing the more difficult part of processing of electronic scrap, this is what we have specialized on. We have the new Kaldo entirely for electronics, the old one is mixing between lead and electronics, as we said before. When it comes to the tightening market, of course, we have almost tripled the capacity in Boliden, some of the competition has done, too. We have seen a mounting volume of electronics coming out. There might be a slight lower output, that is nothing that is hampering our business. It's a good volume, it's a good developing business. The third question on that topic is how do we work to secure the supply long term of electronic scrap? First of all, we respond to the market wishes that we do electronic scrap, that's one side. We don't want to be too dependent on any individual source. We have a network of partners, Boliden 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. We have, say, I don't know exactly, but maybe 80% on long-term contracts and a 20% spot business on top of that. I believe we have another couple of questions from on the phone. Please go ahead. Thanks. The next question comes from Luc Pez from Exane BNP Paribas. Please ask your question. Hi, gentlemen. Two questions, if I may. First of all, on the CapEx, as the nine months figure seems to be running low when compared to the overall guidance you pointed so far. Shall we expect a catch-up in Q4, and I presume related to Garpenberg maybe? Second question would be related to tellurium contracts with regards to the Garpenberg 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 an individual quarter, and therefore we will come in below for the whole year. On the other one, what was it? Tellurium. The spot prices have been weakening quite a lot. Of course, when you have two 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." It works for the other party on the other way around. We are not disclosing any individual contracts and what is happening there. Of course, it's a very good contract we have at this time. Thank you. Thank you. Your next question comes from Johannes Vogel from BMO Capital Markets. Please ask your question. Good afternoon, Lennart. Thanks a lot for taking my call. I was wondering if you could just give us a bit more color around the cash costs. Obviously, an improvement there. I was wondering, are they sustainable going forward in your view, and are they spread across all mines? Also, are we seeing 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. As you know, if you look at a normal C1, you have Boliden and Garpenberg both being very rich. 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 on negative if you put them as we put them, as zinc mines. 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, yeah, we have a few things to say about that. Well, I can say that apart from energy, electricity is important for us. If 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 were seen a year ago or even just a few quarters ago. Okay, great. Thanks. 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 sub-projects, but with no influence over the total. 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. Thank you, everybody, for participating and some final remarks, Lennart, 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.