Ladies and gentlemen, a warm welcome to this presentation of Boliden's 4th Quarterly Report for 2010. As usual, it will be presented by our CEO, Leon Terrell and CFO, Johan Fandt. And after the presentation, there will be a Q and A session from the audience here in Stockholm and via the web and also through e mail. So with that, Lennart, please.
Thank you. 4th quarter result for Boliden, I think in all in most aspects, a positive result. Good production, could have done a little better in Aitik and a few things as usual. But I would say overall, we are quite pleased with the development. If we summarize the full year and the quarter and first to the left side there, revenues of $36,000,000 versus SEK 27,600,000 a year ago.
EBIT before the process inventory revaluation came out a little short of SEK 5,000,000,000 compared to SEK 2,300,000,000 a year ago. And again, we would like everybody to focus on this line in order to avoid the big volatilities for from the process inventory revaluations. The cash flow was strong, SEK 3,200,000,000 as compared to SEK 948,000,000 negative a year ago when we were in the final phase of the Aitik expansion. In the year, I think if we summarize, of course, we are focusing in very much on crushers and things. But that said, and we're coming back to that later, we started up Aitik and we see a very strong development on copper production from the mine.
Quarter 4 compared to a year ago is plus 88% in copper production. So we're contained metal in from our copper mines. But not only Aitik was ramping up in the year, it was also the Bulidin area, which has also been increasing. And further down the line are the 2 expansions we have decided on in the spring. We decided on the electronic scrap expansion in Rundsjern.
And only a month ago, we decided to go on with the long expected, I would say, Garpenberg zinc and silver mine expansion. So I think good progress in what we have started up this year and also quite exciting expansions going on, which will come later on. In the Q4, revenues were SEK 10,000,000,000, so a progress up from the average over the full year, and that was compared to SEK 8,000,000,000 a year ago and earnings before inventory revaluation SEK 1.5 billion or SEK 1.44 billion compared to SEK8.70 billion a year ago. Free cash flow was strong, SEK1.8 billion, almost SEK2 1,000,000,000 in Q4. And if we put that financial performance in a diagram, it looks like this, a quite steady improvement curve on the black curve, excluding the process inventory revaluation and a slightly more volatile and higher curve on the quarterly EBIT, including the inventory revaluations.
If we start this presentation by going through some more details of the metals markets with a focus on copper and zinc. Fundamental demand in the global markets are continuing to be good, and we saw record highs in both zinc and copper in the later part of the year. High growth in all regions, and we had a copper inventory, which declined and zinc inventory, which went up and having the impact on the prices. On the supply side, we saw in general smelters around the world. But we saw a difference in the end of the year when the copper corn market clearly eased up and we had the possibility to fill up our inventories and probably overfilled a little.
But it's clearly a better supply situation in copper. In on pricing, we have seen in U. S. Dollar very sharp increases, well, in all metals, certainly for gold, silver and copper. But we saw in the end of the year about if you look at Q4 development on metal prices, approximately half of that increase disappeared with the strong strength of the Swedish krona.
So strong negative impact from the currencies. The sulfuric acid, which created a lot of difficulties a year ago for the copper smelters, That market has also improved both when it comes to the demand and deliveries. Many customers are really wanting more and more, and the prices have gone up accordingly. The market situation for zinc and copper can were negative and tight in the 1st 9 months, but eased slightly in the end of the year. And we saw the thesis for copper improving or at least we see the spot thesis terms coming up.
If we then look at the world, of course, we have a global economy, which is today continuing the trends we have seen for some time with very strong development in China with the Western world or mature economies, which have been sort of cyclical return, but which are not all in very, very good shape. But it's an astonishing global GDP growth of 5%. So it's by all comparisons a very strong global growth. And it is concentrated quite a lot to markets where GDP growth means much higher demand for base metals. The construction market, China is sticking out, and we continue to have a negative growth in the USA and Europe, even though the negative numbers are less negative than some time ago.
The automotive industry had a very strong peak when we compared we had a year on year growth compared to the very low numbers. And of course, the year on year percentage growth has come down quite a bit. China is today with 15,000,000 cars with a margin larger than the U. S. With 12,000,000 cars produced in 2010.
The metal demand, I think if you look at the lower tables here, we see to the left the zinc, and we see that the full year demand growth was 15% or 16%, equally split between mature economies and China. And we can see to the left of the full year numbers, Q4 on 8%. So again, the year on year numbers came down, but it's continuing to be a nice growth. When we look at copper, the full year growth numbers were a little bit different, 8% global growth, in 2010, composed of 12% in China and 6% in the rest of the world. And the tendency of a slower year on year growth rate towards the end of the year is the same there.
But I think it is more a question of the comparison period than the real growth itself. With that demand situation, we have seen the zinc prices developing as follows. We have seen we saw last year a very strong development, and we have seen this year volatility around the levels between 2,500 and we have seen the inventories continue to grow. In copper, we saw the last year development, which was similar to the previous one. But after a somewhat hesitant first half, the copper prices went on, and we have seen over $10,000 per tonne days recently.
The other metals, gold, silver, they are looking quite a lot like the copper, very strong continuous growth or price increase over a 2 year period with an extraordinary development for silver. And we see the lead markets, which or prices which have developed similar to the zinc. And finally, to the bottom right, you see the sulfuric acid contract prices, which has also improved. The treatment charges, there we see here we have the historic benchmark and spot markets. And if we look at the contract negotiations going on right now and the rumors coming out, it seems as if the zinc TCs are coming down from the previous year and the copper thesis are coming up from the year before or from 2010.
Premiums have a positive development. If we then look at our internal performance or operations, we start with the mines. As we can see here to the left, we have the copper mines, and we see clearly when we started to produce in Aitik. And again, Q4 versus Q4 is 88% up. But we are, of course, slightly disappointed that we have not seen a continued positive trend in the, well, Q3 and Q4, more on that later.
On zinc, we have seen very good development in Garpenberg, and we have seen the expansion in Buliden area, both contributing to the consecutive growth in quarter by quarter development from the zinc mines. If we look at the financials, well, it's no wonder it's following basically those numbers in production increasing and metal price is good, even though the Swedish krona is going opposite direction. We do a unit by unit earnings breakdown in once a year, and we publish those in the annual report. And this is what you see here. We have a double earnings or EBIT in Aitik.
We have an increase in Boliden, Garpenberg an increase and Tara an increase as well. And that's adding up to almost well, from slightly over SEK 2,000,000,000 to slightly over SEK 4,000,000,000 in earnings for Buliden's mines. We also publish once a year the ore reserves exploration results. Let me say a few words about it. We have with the results this year seen the positive trend continue.
We have invested SEK229 1,000,000 in exploration last year, and we have seen mineral resources increase in Aitik and Garpenberg, and we have seen the reserves increasing in Boliden area. And I think I would like to point out that when you do exploration, of course, the reserves are for immediate use for mining and the resources are long term increase of the resource base. Both Aitik and Garpenberg have very long life of mines, and now we are focusing the exploration of increasing the resources. Whereas in Bouleydon area, we are have been short or having short life of mine. So there, the focus has been to upgrade resources to reserves.
So there is a good logics why this has happened and of course, good success with what we've done. Tara, I'm coming back to that, so I have not forgotten it. Bulidin area, we see the reserves coming up, and we are also seeing the expansion in ore production on the solid line or the line graph there. And that is corresponding to 10 years of production at the rate of 2010 to the right there or point is 10 years of production comparing to the reserves and resources. So for example, if the line is on the same level as the reserves, well, then we have a 10 year life based on the reserves only.
Aitik, as we see, has started the growth and the production seems low compared to the reserves. And we have seen the resources increasing considerably, the highest bars there. In Garpenberg, resources are coming up, reserves are not changing so much, and we're also seeing that the production has continued to grow. In Tara, we have basically almost maintained the reserves in spite of the production we're doing. But here, as we have said many times, Tara is seemingly going to deplete at the later well, 2017, 2018, 2019, something like that.
If we then jump to something else, well, we talk a lot about crushers and the situation with the Aitik expansion. First of all, we are in continuing the ramp up and step by step. We are Mine and Logistics. We Mine and Logistics. We have had some truck availability.
We have had some breakdowns on engine or the truck's engines. We have bought some more spare motors or spare engines, and we are improving that situation. The crushers is the area where we have been talking a lot, and the new crushers had very low reliability. And we had a program that we presented last time. Basically, that to do list has been done.
We have sorted many of the smaller and many issues we had on the crushers. The sad thing is that despite that, we still have a lower availability than we would wish, but it has improved. All ore is from the 1st January going through the new crushers because the old crusher, which we called 100 and 65,000,000, it is a crusher in pit crusher, which is feeding the old mill, is now disconnected, and it's going to take 4, 5, 6 months to reconnect it to the new system. And when everything is ready, we're going to have the 2 new crushers and the old crushers all feeding material into the new lines or into the new mill. But we are now disconnecting the old, and we are now fully dependent on the new crushers for 6 months.
Grades in Aitik will decline. And as you know, we this has been the no news on this one. But just to remind that the bottom of the north side of the mine have high grades, and that will finish towards the end of Q1 or early Q2. And then we will work in other sections of the mines lower grades. So we will be below reserve average from the beginning of the second quarter.
And we are continuing the growth ramp up to 2014, as we have said before. And on the table here, we continue to have the capacities well under control in all parts of Aitik. The reliability, we said last time, has been proven on the mills. And now this quarter, we're putting on also flotation, The whole mill and flotation, everything there is working beautifully. But we still have a bottleneck in the supply of ore, primarily for the crushers.
Next one is the Garpenberg expansion. Basically, those of you not knowing the details, we have just a reminder what we're doing. It is on plan, and we continue to be excited about what we have done there. After the presentation of the investment itself, we have also taken on a hedge program, 35% or approximately 35% of our metal production from mines, but also the exposure we have in the smelters have been hedged for 2.5 years. I got the question out here, why did we hedge the dollar?
It seems like it's low, but we're not thinking that way. We are taking a full picture, and we're saying that in order to reduce the exposure to a possible downturn in the economy, if we see rough times coming back at the time of this investment, we are sort of reducing sort of the risks in such a situation. We think it's a very good risk reducer in this. Business Aerosmeltters, good results. We can see it in copper.
The consecutive development quarter by quarter has been very strong in the year. We had the big maintenance shutdown in the first half, and then it has been continuing up. In zinc, we had a very strong 4th quarter, in particular, Kokolabatulsolda had a better Q4. The financial summary. Well, excluding the inventory revaluation, we are clearly coming up on a level which we haven't seen for a long time.
We did SEK 500,000,000 in Q4, excluding the process inventory revaluation. And then we have the process inventory, which is, of course, heavily impacted by the price increases. If we look at the performance, Rundsjerg is having a good, almost doubling the earnings from 2,009. Harjavalta has returned or reversed a loss to a quite good profit. Is a small unit.
And if you look at margin or compare it with size, it's a profitable very profitable and small unit, flat to last year. And Kockola, finally, with the new Gulin Way and continuous improvements, very good productivity and profit development. ODDAR came from a breakeven to a small plus and is still a problem area, I would say. We have a new area manager, and we are working hard to reduce cost and improve productivity and process stability there. Business Area Smelters in total has, of course, all this included a very strong development, 2,009 to 2010.
On the smelters, one of the more exciting long term developments is, of course, electronic scrap expansion. We are increasing from 45,000 tonnes of electronic scrap to 120,000 tonnes in the special line for electronics. We are spending SEK 1,300,000,000 and will start around New Year or early parts of 2012. And we are on plan. And with that, Johan, if you can take us through the financials.
I will mention a few words about the strong development that we saw in the 4th quarter. Operating margin strong, cash flow strong and of course, earnings per share and gearing developing nicely as a consequence. I will continue to explain and elaborate on that. If we look at the bridge that you are used to in our presentations, I would like you to focus on the right hand column here where we compare the operating result of the 4th quarter with the operating result of the Q3 last year. And
as you
can see, we've had a positive effect all in. We've had a positive development of SEK 233,000,000. And that is explained by a lot of positive on volume, where we have seen strong zinc grades in all units. We have the ramping up, not of Aitik because Aitik was also strong in Q3, but the ramp up of Vouleden area, when we see us within the quarterly comparison with Q3 and increased profit strong profit development in the copper smelters with nice contributions from free metals, as an example. We have, however, had some cost issues.
Part of that is, of course, driven by the volume increases in Boliden and in the smelters. But we've also increased our reclamation costs or reserves for future reclamation works related to mines. We have had continued start up problems in Aitik, which have resulted in the costs. And if we continue down in the bridge, you can note that we've seen a strong development of primarily zinc and copper. Further down, you can see that on the last row, we've had in the quarter minus SEK 133,000,000 effect of our hedge portfolio.
So all in, the hedges have not impacted the Q4 much, which they did in the 3rd quarter where they actually contributed to the performance of Bolivin in that quarter. So when we look at the bridge, we have a negative development of over NOK 200,000,000 related to the hedge effect. If we then do a comparison full year 2010 to 2,009, Once again, we have a strong, strong improvement, almost a doubling of the operating result before process inventory and revaluations. We have a 800,000,000 effect plus effect related to volumes. And of course, that's a lot of that is Aitik.
But I would like to also note that the Aitik volume impact is less, of course, than what we were shooting for when we were talking about higher production numbers in our ambitions than we came out with. We've had the positive effects from the increased production in Boliden and the somewhat negative impact of our lower grades in Tara and Garpenberg. On the cost side, of course, the cost sticks out as very high compared to the volume effect. But once again, we didn't get all the volume out as we had planned for. So but we all have do have volume driven costs here, both in Aitik Bolid and in some of the smelters.
We have the start up issues in Aitik, and we have noted around SEK 50,000,000 per quarter in additional costs relating to running double mills and other problems and the wire and tear parts that have been exchanged far too frequently. I noted the reclamation costs, and we have an increased effort on exploration. Metal prices have, of course, impacted the comparison with last year a lot, and we have somewhat negative impact from the stronger Swedish krona. Capital structure, a nice graph to the right, if you like lower gearing. Some shareholders may have a different opinion, but you know that what our objective is when it comes to capital structure and gearing.
We want to be below 20 percent in the peak economy or the strong economy times in order to have the financial stability to take on a low cycle or recession. And we have been able to bring down debt step by step with the strong earnings development we've had in 2,009 2010. If you continue with some of the key ratios on the capital structure, you can note that shareholders' equity is now SEK 18,800,000,000. We have a duration of our credit facilities over 4 years. That's more than a year above what we reported a year ago.
And then you, of course, should deduct the year that has gone since. So we have been through the actions we've taken in the year really prolonged our credit facilities. We have a net payment capacity of SEK 10,800,000,000 unutilized facilities. Operating costs. Here is the pie chart to the right where you see the split of our cost items.
And to the left, you have some of the explanations driving the cost increase from SEK 10,000,000,000 to almost to above SEK 11,600,000,000. You see the volume effect, the increase of depreciation, which is, of course, related a lot to the Aitik expansion. You have the start up issues in Aitik, exploration and reclamation and general cost increases and other over SEK 300,000,000 Cash flow. Strong cash flow, always SEK 2,000,000,000 in the quarter. We have the EBITDA development.
And then on top of that, we've been able to crank out cash flow from reduced working capital. And we continue to actually run somewhat higher inventories than we would like to, both on copper concentrates, but also on finished metal gold, for example, and some of the secondaries on raw material as well. So we have some items to continue to work on when it comes to inventories. CapEx in the quarter over SEK 1,000,000,000. When we talk about CapEx, I would like to put your attention to the fact that we think that CapEx, as we see it right now, will come out in current year around SEK 4 or between SEK 4,000,000,000 and SEK 5,000,000,000.
We have, as you know, some delays in the Bora project, in the CapEx of the Bora project, not delays in the Iskrapp expansion project as such. But in when it comes to payments and the payment structure, in reality compared to what we planned and communicated, there are timing differences and more payments will come into current year. In addition, the Garpenberg project will consume some investments. So the best proxy at this time for 2011 is between SEK 4,000,000,000 and SEK 5,000,000,000. Sensitivities, the usual quarterly update on the annual impact of a 10% change of important price parameters for Boliden.
And I would like to underline that these are unhedged. So when you do your calculations, you must take into consideration the impact of hedges on these sensitivities. And you must also be aware about the fact that we have a new hedge program in place for the Garpenberg project, 2.5 years, as Lennart noted, around onethree of our price exposure to copper, zinc, silver, gold and lead. Thanat?
Last year firming up that we're going to, if nothing spectacular happens, the aim is to pay out onethree of net profit. Onethree of the net profit this year is very close to its SEK 4.93 or something like that, slightly lower than SEK 5. So the proposal to the AGM is SEK 5 a share in dividends. And that corresponds to SEK 1,400,000,000 paid out in the second quarter. The summary of the Q4 of this year is, obviously, we're quite pleased.
We're never fully pleased in this management, but we're it's an okay quarter. We had good development in the smelters. We have seen the impact of better availability of copper can combined with our ability to use copper or to use electronic scrap to produce gold and copper from, which is a very good business. And we have the combination in Finland with copper, better availability and the nickel business we're doing. And then we had in the zinc smelters very solid results from Kokkola and an improvement in Oda, but still on a too low level.
The mine production was also very good, of course, based on the big investment in Aitik, which was ramping up in the year, but also the growth in the Buliden area, which is also very good news for us. On the Aitik side, we of course, as we said before, the new crushers availability are even if they are a lot better today than they were a quarter back, they are still not up to full satisfaction. And we are disconnecting the old crusher to connect it to the new system and exercise, which will take slightly almost 6 months. Grains will decline in line with what we have said for a long time, and we are continuing the route to 36,000,000 tonnes per year in Aitik 2014. On electronic scrap, we have taken one of the biggest investment decisions ever in Droneshare and SEK 1,300,000,000 will be spent essentially this year.
And delay in payments is something we are very pleased to push the payments forward a little bit, but a big chunk of it is obviously coming in this year. Garpenberg expansion and is the very big undertaking. It's going to take several years to have that up and running, but we think it is one of the most exciting programs we have ever done, and it's a big one as well. So I think that concludes our presentation, and I think we are ready to take your questions.
And if we start off here with the audience in Stockholm, and you should have this microphone as well.
Thank you. Ulla Sodermaier, Swedbank. Question about sulphuric acid market. Can you give any guidance about the benchmark prices for this year compared to previous year and the impact on earnings for Smelters?
The sulfuric acid market is not as transparent and not as clear. There are published numbers, and I think the only reliable or you cannot get reliable numbers where the market is. It's very much a question of buyer and sellers meeting and making up the deals. Many of the contracts we have are in different stages. So we average out 1 or 2 or 3 years to some of them.
So even if the spot levels are going up and down, a large part of our sulfuric acid will move slightly slower. I think we have obviously a positive trend, but more important is we have a good demand. So we are not sort of filling up inventories with this with the acid and which puts some pressure on our whole planning. The benchmark, well, I don't have the numbers which are the most current ones. Do you know, Johan?
No. You have, yes.
The 6 month contract price in Europe has been around €50 per tonne for most part of 2010, but increased towards the end of the year towards 770 or around that.
And we have read about some very high numbers have been sort of flying around, but I think those are the numbers to look at. And they are not impacting all of our deliveries either, as
you know. So it's a gradual improvement then? It's
a very big improvement.
Just one more question about Aitik and the production there. Is it right to assume that your additional cost for the oil processing plant is going to disappear now?
We have now we're going into the details. We are continuing to have it standing on idle or producing a little tonnage. We have a possibility. We have a sort of worst case, what should we say, a little possibility, and that is to take the truck and offload them in the mill itself up at the area, not going through the in pit crusher, but we have a smaller crusher directly at the mill. So we're going to maintain personnel and an availability or ability to use it, but to a limited extent.
I think most of the additional cost relates to queuing up and the lack of stability in the entire system. So I think the cost reduction from the whole new system when we finally close the old mill will wait sometime still.
Markus Dembe, ABG. Question here still on the smelting side. Given that the market speculation is right that the contract prices for 2011 will start to increase, how much of your volumes will be renegotiated for that volume? And did you already have a fairly large spot exposure for the Q4, which regards to TCs and RCs and TCs for zinc?
We have some spot impact, which helped us in the Q4, not that much, I would say. It is I think that more important is the impact on free metals. When we are doing certain materials, we get quite substantial amounts of free metals, and that was more of the impact in Q4. When you look at the continuation into 2011, basically most of Arokon will be on the new benchmark terms. And at the same time, we have an opposite development going for the zinc thesis, as you know.
But for copper, it's true.
I think you mentioned that the grades will fall below the average of the reserve average starting from the Q2. Could you provide some kind of, let's say, numerical or figurative guidance as to what kind of profile the grade development would have in the remaining quarters of 2011?
The graphs we showed at the Capital Market Day a year ago was indicating something north of slightly over 0.20. And we have not revised those numbers. So I think if you look at the information we had at the Capital Market Day, I think that is the best indication you would have. We have pushed it slightly forward, but that is because we had more optimistic production number in the start up ramp up period. So basically, the picture is the same, but slightly lower or slower ramp up times has delayed it a little bit.
So basically no news on it, but so that's the explanation.
Okay. Thank you.
Any more questions here in yes, sure.
Reza Storn by Dejan. Could you elaborate a little bit more about exploration? You spent about SEK 200,000,000 this year. And what's your level in the coming years? And is it mainly brownfield or some greenfields?
And how do you view your possibility to increase reserves and resources even further?
I think all corporate management, they like they never like spending anything basically. But when what we like to spend on is where the result seems to come. And we have been successful in exploration. And as a result, we will continue to grow the exploration area. We are primarily exploring or doing exploration work around our mines, which for good reasons.
They are there because we are in geologically interesting areas. But if you follow the news clippings, you see that we are in different parts of Sweden and also a little bit elsewhere. But basically, we are probably going to spend a little bit more on greenfield exploration than we have done in the past, but no big change from the successful route we have followed so far.
Okay. Should we check do we have any questions from the telephone conference?
We have a question from Mr. Julian Beer from SVB Yahwehla. Please go ahead, sir.
Thank you very much. Very good afternoon. Firstly, on Aitik, how will mill rates during the first half compare to the rates you saw in Q4? If I understand it correctly, you're taking out some of the crushing capacities now. And then the second question will be, would the introduction of the new capacity later in the year enable a step improvement in the rates?
And what's the timetable for commissioning of that new capacity?
Julian, we have difficulties to hear you. I heard you the question number 1. You can probably fill in or if someone else can repeat question 2 here, if you heard it better. On question 1, on the mill, We have had very good production numbers. We feel that we have a good capacity in the mill and the reliability seems to be very good.
However, the bottleneck in the entire system is to feed the mill's capacity with sufficient amount of ore. And so there are, of course, some degree of uncertainties. But when it comes to the entire new mill flotation and the entire plant, it looks very good. On question number 2, did you can you fill it in or
Maybe you can hear me a bit better, The question was, will the mill rates be lower in the first half of the year than in Q4 because of the decommissioning of the old crusher?
We are the bottleneck is not in the mill. So the fact that we close the old mill should not have any impact in the mill capacity. We have so the new mill has sufficient capacity. It's a question of how much ore we can process if well, the risk element is that we are going down from 3 crushers to 2 crushers. But then I would also like to point out that the crushers have a substantial overcapacity and needs to have so because the trucks will not offload in a sort of perfect chain of works.
So I think the fact that we closed the old plant is that itself should not have an impact.
I may add to that.
We have seen better in the new mill and flotation, we have seen better and higher yields than in the old mill. So closing the old mill and running all the ore through the new mill, everything else equal, should mean higher yields.
Okay. I'll come back after it. I don't really understand why, if there's going to be no impact, you need to put in some additional crushing capacity in the second half of the year. But let me come back to you. Can I just ask a quick question on the reserves or resources?
You've got a nice increase in your resource estimate. Given that, could you envisage any investments to further increase your production capacity even above the projects that you've already completed or are about to embark on?
I think in the 1 or 2 year perspective, increased reserves would not have an impact on the yearly production or the annual production rates. If the question is with increased result, would that open up for new expansion programs, it's a different story. And there, we have nothing to say right now. But of course, the more the reserves are increasing, the easier it is to sort of good get a good return on new expansions. We saw that in Garpenberg, good results in exploration first, and then we take a big decision to almost double the capacity.
The same thing goes for Aitik. But so this is an ongoing, very natural sort of development in when you have a positive development of the reserves, sooner or later, it opens up for new investments in further capacity increase. But short term, it will not have an impact.
Okay. So no new exciting things based on this new reporting itself? Very lastly then, Leonard, on Gothenburg. Your Q4 zinc head grade was a really great 7.1%. And that was well above the proved reserves average grade of 5.8%.
How do you expect the zinc grades to develop at Gardenwood over the next few quarters? And forgive me if you've already answered the question earlier.
Yes. We had lower grades in Q3. We had good grades in Q4. It's going up and down a little bit. And we had all of what I can say is the guidance unless we say something else is to go on the reserve average, and that is lower than the Q4, Q4 as you're rightly pointing out.
Funt for leaving the balance sheet in such great shape.
Thank you.
Yes. Thank you. Next question comes from Mr. Andrew Kane from HSBC. Please go ahead, sir.
Yes. Good afternoon, gentlemen. Andrew Kane from HSBC. I've got just a few questions on copper, in particular, treatment and refining charges. At the moment, the world believes that there's a large structural deficit in the copper market, and that deficit is based on very poor mine supply.
Yet here we have an example of yourself as a custom smelter with plenty of concentrates. In fact, you're talking about possibly excess stocks and rising treatment and refining charges. So my questions are around sort of trying to resolve those two issues. First of all, what do you think has driven the turnaround in the copper concentrate market so quickly? Secondly, what do you think spot conditions are right now both physically and in terms of prices?
And lastly, can you make any comment on whether you're looking at doing shorter term contracts for concentrates you're going to stick to long term? Thank you.
What has driven the increase in copper TCRs is obviously a lower import and a lower demand from China in the Q4. That has been an impact immediately, which our buyers are feeling. As you're pointing out, we do not necessarily believe this is a long term trend, but we think it is for a variety of reasons, stock and purchasing policy sort of change in China. And that will help us as it looks when it comes to the benchmark levels of 2011. When it comes to the spot levels right now, they are higher, but they have been increasing towards the end of the year, and the early parts of this year has been mixed signals.
And I do not have any good comments on that short term. Do you, Frans, probably have something to add there, spottices for copper in the early parts of the year?
What could be said is perhaps that it's been quite an illiquid market with low volumes and not too many transaction, which, of course, even small volumes have a large impact on the spot pricing. And now we should also remember that there are ongoing negotiations on benchmark levels for 2010. So there are a lot of rumors in the market as well.
2011. Yes. And when it comes to policies of buying short or contract terms, we have not changed our attitudes. We have a portion where we buy spot, and we have the bulk of it on benchmark terms. And that's basically what we are going to continue on when the market allows us to do so.
May I add that the fact that we have slightly high stocks of copper cons in Boliv and should not be taken as a sign for the general market. We focused a little too hard on securing feed for our copper smelters in the first half of 2010 when the market was very short, and it resulted in somewhat too high inventories.
And we consequently paid a little too much there, you can say, but you have also seen the good progress. So I think we did well. But in retrospect, we could probably have done a little better.
In the meantime, do we have any more questions here in Stockholm? No more questions from the phone audience either.
There are no further questions at this time. Please go ahead, speakers.
So please allow us then to conclude this presentation this Friday afternoon, A good conclusion of the year. It's the 2nd highest profit ever in Boliden history. It's the best mine result ever in Boliden, The years 2006 when the premiums in Europe were absolutely sky high was contributing to a better result that year. But else than that, I think we are quite pleased with the production growth, and the market is continuing so far to be favorable to our industry. Thank you very much.