Good morning and a warm welcome to this call regarding Boliden's announcement today on acquiring mine and exploration rights in Finland. Present from Boliden on this call is our CEO and President Lena Tverel, CFO Mikael Staffas and myself, Sophie Arnios, Head of Investor Relations. The presentation material is available on Buliden's website. After the presentation, there will be an opportunity to ask questions via phone and web. Let me now hand over to Lennart.
Good morning, everybody. Yesterday evening, we signed an agreement with Altona Mining to buy their Finnish assets, which is essentially a mine, an operating mine, which has been in production for a short period and the exploration rights and deposits in the Uttokampo field. The story really started some years back when we looked at the opportunities in Finland. And it was on the back that when we acquired the smelters from Outokamp back in 2004, Of course, we were a bit unhappy that the mining rights and the data geological database, which had been developed over almost 100 years did not come to Boliden as well. We have had discussions with Altona Mining about cooperation in the field of exploration for some time and not until now have we agreed how to do it and it ended up as a straight on acquisition.
Altona will continue to focus on their business in Australia and we will see what we can how we can develop the area here. The what we are looking for is essentially a geology, which is similar to what we know from Skene or from Sweden. And they are located in the east of Finland. The mine had sales of US72 $1,000,000 and earnings of US18 $1,000,000 in the last 12 months period. We had the mine had a positive cash flow.
The cash cost is €1.94 or €1.94 per pound. Life of mine on current known or on resources is to 2021. The mine employs 110 people in the mine and the concentrator and additional 120 contractors are working there. The enterprise value we pay is US95 $1,000,000 It will be adjusted. It's cash free debt free on a cash free debt free basis, which corresponds to an EV EBIT of $5,000,000 The transaction is subject to an approval of the competition authorities in Finland and to a shareholder vote, which is planned to take place in a little more than a month from now.
If all of that is passed, closing can be expected on the first of October 2014. US100 $1,000,000 or US95 dollars is not changing much of the key ratios or the financial situation of Voliden. We do it on present debt arrangements. Next page, operating it's an operating mine in the Uttokompe area, which is geologically very similar to Buliden's operations in Sweden. With the mine is or the deposit is known for since a long time and it's called Kyulilakti.
And the milling or processing of the ore is done at Lukolakti Concentrator. We see significant synergies in mining. We think that our mining methods is underground and there is a ramp going down to depth. And this is very similar to what we are doing in Sweden. The processing is similar to what we have in Sweden.
So the concentrator development we are well aware of. The brownfield or the potential for exploration is the most exciting part of the acquisition. And the thing here is that exploration has been very limited after Otokamp decided to leave the mining industry or the mining in 1980s. So after 1980, very little has been done. Altona has been doing the preparation for the mining, but basically on the deposit which is well known since many, many years.
So below 400 meters, very little has been down in terms of exploration. We can use the expertise we have in geophysics and analysis of the ore and resources or the deposits. And we think there is potential to extend both the life of this mine, but also opportunities in other parts of the Outokampu field. The infrastructure is well in place. And if we look at just exploration without offices, without good personnel in the area, it's much more difficult.
Here we have a lot of people with long experience and a good basis for the exploration. Finland is a country with very low country risk. And of course, we know Finland very well since we have over 1,000 people employed in our smelters in Finland. The mine itself is operational since 2012. It has a production capacity of 650,000 tons per year of ore.
Life of mine on the reserves is to 2021. The cash cost is €194,000,000 as I already mentioned. In the start up of the mine done by Altona, they have had almost no accidents at all. But it's a small headcount and they had an accident recently. But it's a minor thing, but it has a quite big impact on lost time injury frequency.
We ore on the table you can see the ore production or ore milled which is 630,000 or was in the previous 12 months 630,000 tonnes. The grade of copper is 155 and the gold grade is 0.62 grams per ton. So it's a high level of gold together with a high grade copper. Recoveries are good and the metal content altogether is 9,000 tons of copper in this 12 months period. So as you can see, it's a small mine.
It's similar to Vistinver in the Buliden area. The concentrator is not immediate on the side of the mine. Instead, Altona found a depleted mine or concentrated next to a depleted mine, which is 40 kilometers from Kulylahti and ore is transported by road from the mine. This is similar to what we do in the Buliden area, one concentrator linking several mines. So we know how ore transportation on the roads is managed and done.
The concentrator was constructed originally by Outokampu 1968, but was refurbished by Altona 2012 as part of the startup of the mine. The capacity is slightly higher than the current ore capacity of the mine. Environmental permits both of the mines and the concentrator is 800,000 tons per year. Concentrates from the concentrator are delivered by road to Boliden Harjavalta essentially, the copper concentrate. And there is a little bit of zinc as well going to Kokkola, which is 400 kilometers away.
If we look at reserves and resources, we have reserves of 4,500,000 tons with an average of 1.66 grams or percent of copper and a little less than 1 gram of gold. So the gold grade is quite important here. The reserves also contain zinc, cobalt and a little bit of nickel. The resources are adding another 8 or included in the resources. The reserves are included in the resources and together they are 8.8 1,000,000 tons with slightly lower grades than what is classified as reserves.
On next two slides, we have a map of the exploration areas. And if we look at the first one, you can see the town of Utukampo at the bottom of the map. You can see the Kirliklaktin mine to the right and the mill 40 kilometers northwest of the mine. It's very interesting because this is an old mining area. We have the old Quereti mine with the basis for Otokampo, which is the reason why the town of Outokampo is there.
It was mining between 1913 1988, 28,000,000 tonnes with an average grade of 3 little more than 3% of copper. When it depleted in 1988, it was left there. But also in the stretch between Kililachi and Utokampo, there are other depleted mines. And infrastructure, power, roads are there in the case that additional deposits or opportunities could be discovered. And the rights for exploration is all the marked fields here.
So basically we will be having the rights for the exploration here. And again, it has not been explored after 1980 basically. There is also a nickel deposit up in the north. It's called Kumu. It is not on resource level, but it is a discovery and there are some nickel opportunities in this area as well.
The deposits defined on a resource level are listed on the slide 9 here. Small deposits basically on copper, cobalt nickel and some with zinc. And this is around these deposits or resources that we will increase
our
update, I would just like to say that we are enthusiastic. We have spent some time with Altona about the exploration rights. We like to get the infrastructure with the operating mine. It's not a bad mine. It's a good mine, but it's small.
But I think the package altogether is what makes it interest for us where we can take advantage of the knowledge in from Bulid and with a complex ore, the exploration and the geophysics that we are good at can all be applied in this area. So with that, I think we conclude our presentation and we leave the floor open for questions.
And we have the first question coming in from Mr. Gustav Sandstrom from Danske Bank. Your question please.
Thank you, operator. Good morning, everyone. I have, first of all, a question on the actual mine. From what you see today, are there any potential to improve the cost side or the volume side? Or is what you get what you get so to speak?
I think
that this is Altona is a junior company and they have done a great job in starting up an old mill refurbishing and get it up in production at with composite cash flows and a profit, which is not exactly the case for many junior companies. I think they have done great, but with minimal both personnel and financial resources. What we can do in the end of the day, we are we don't want to speculate on. The resources are open to the depth. There are some information on the Altona homepage, which you can study.
But we will, of course, say a year from now or something when we have been able to go in there, we will be much well, we will be able to answer to some with some degree of accuracy that question. I think what we are buying here is not a mine as is and we're happy with it. We are buying an opportunity and we hope to be able to find additional resources And we know that we have good knowledge in the kind of milling, the kind of mining we have here. So of course, together we have a very strong combination. That's evident from the meetings with management and from the share.
I mean, if you look at the case, it's pretty obvious.
Okay, great. And could you indicate what the maintenance CapEx for the asset would be on a yearly basis?
No, I could not because that could be I mean, hopefully, it's we find something big and then it's big. But in the near term, I think you should look at the Altona guiding.
Okay. And the final for me. What implications will this have on LABER and your other projects?
Well, in the first case, this is an operating mine and together with it is exploration. So we're going to sort of reallocate a bit on the existing exploration budget. We're going to spend money obviously here and try to take that resource from other parts with lower potential. When it comes to Lava, it's a very large project and compared to an exploration area with a small mine. I mean, in the end of the day, if we would fall over on but it's taking many years even if we would be very lucky with exploration.
So think Lava and this the opportunities here are probably not exactly competing with each other. Okay.
Great. That's all for me. Thank you, guys.
Okay. And we have a next question coming in from Mr. Julian Baer from SEB. Please go ahead, sir.
Thank you very much, operator. Good morning, Lennart. Congratulations on your reentry to the mining M and A environment. When you were valuing the asset, what sort of return hurdle rate did you put on the valuation? And also what sort of assumptions did you use for copper and zinc price?
We apply the long term prices of bullionum which are published on the annual or in our reports. You can say that the calculations is it's a value beyond the net present value if you calculate it, which is we think more than supporting the exploration opportunities. We get a lot of exploration work over basically 100 years of Outokumpu. And this geological data is worth considerable amount of money. How much it can return?
Of course, it's exploration and it's geological data. So the answer to that is not possible to give of course.
Understood. Can you remind me what your return hurdle rate is?
No. I mean we what we're saying is on 10% or 12% IRR is what we look for in investments. And I think that depending on how you value the opportunities here or the optionality, this can this is going in very well with our financial targets.
Very good. Do you have a depreciation and amortization estimate yet?
Mikael, I have to lean on you now. Do you have that by heart?
We said that from the offset it's roughly US10 $1,000,000 per year. So US65 $1,000,000 in depreciation. This will though has to be adjusted once we do the final calculations.
Okay. And in the sort of EBIT numbers that Altona used for the 2013 figures, do you know what sort of depreciation rate they used?
I'm not quite sure.
Okay. We'll come back to that. In terms of the fact that you have reentered the trading or asset market for money, could this be indicative of a new era of asset trading or focus on acquisitions for Boledin?
We have been looking at acquisitions for a long time and we have studied many projects over the years. And I think that this is a small acquisition. So but it is the kind the profile we like. It's low risk. It's a good upside sort of optionality or opportunity we think.
And it's also giving the infrastructure. I think the structure of the deal is or the structure of what we buy is to us very ideal. We want to go into Finland. We get a little operation with 100 people. We get an operating mine, which is a fine little mine.
And from these offices and from these locations, we can work on exploration and that's kind of good. What this means for other acquisitions, I think that we should not draw any conclusion on that. We continue to look for acquisitions just as we have done in the past. And we cannot say exactly that we have been overly dynamic when it comes to buying a lot of companies as you are well aware. And I think we are going to be this is not a change of our attitude.
We could have presented acquisitions also in the past, but they have not been materializing. And by the way, this is also subject to approvals. But no, I don't think there is a new era in Bolivar.
Great. And then finally from me, you mentioned in your summary slide that net debt to equity ratio is pushed up 3 percentage points. Would you be able to give us any guidance as what you expect to do with your debt levels going forward? Are you happy with this level? Or would you still strive to head towards a peak target of 20% gearing?
No. I think that we are now into a period where Garpenberg investment is coming to an end. We are going to see beyond this year better grades in Aitik. We are going to see the results or the returns of all the investments in Garpenberg. And of course depending on terms or metal prices and currencies and all of this, we are the base case is that we are going to use a cash flow for taking down the debt from this point.
No change in any of the communication we have done before.
Okay. Thank you very much, gentlemen. Sophie, hope you're in a place to enjoy the fine weather.
Thank you.
And we have the next question coming in from Mr. Alain Gabriel from Morgan Stanley. Your line is open now.
Yes. Hi, Alain Gabriel. Just a question on the optionality you have. It looks to be a little bit exposed to nickel. Do you want to be in nickel?
And how does it fit in your future strategy given that most of your existing mines and expertise has been just in copper and zinc and other polymetals, but not specifically nickel?
We are in nickel. We are a quite significant party in or in Harjavalta. Italy is a significant part of the smelting. We don't mine nickel at this point, but we buy nickel concentrates and we have strong relations with many nickel mines. Nickel, as we all know, is another sort of another base metals, which can be in many ways compared to zinc and copper.
And would we have an interest in nickel? We don't have a particular strategy to look for nickel, but I would say that nickel is fitting us relatively well. So the nickel coming here is not bad.
Okay. Thank you.
There is a question now from Mr. Ole Sodermark from Swedbank. Your question please.
Yes, good morning. Do you know the timetable for Altona shareholders when they are going to approve the deal?
I think it is 33 days from now, but but a lot happened now last night. The deal was signed yesterday evening and the press release went up 1 in the morning here. But what is the time plan?
They have indicated in their press release August 2014.
August 2014, yes.
Okay. That's very good. And can you tell us anything about Altona's shareholder base? Do they have a main shareholder?
The Altona shareholder base is relatively widespread in Australia. They have a I think perpetual is the largest share individual shareholder of around 14% and then there are some other funds that are relatively large.
Okay. Thank you. Looks very interesting.
And there is a last question coming in from Mr. Christian Kopz from Nordea. Your question please.
Thanks for taking my question. Good morning. Sorry if I missed it, but regarding the closing date of our 1st October 2014, does that mean that you will receive cash flows from the mine from that or from that date or will you receive cash flows from the mine right ahead?
We will only receive cash flow after closing.
Okay. Thanks. So the transaction, if the closing is adjusted later in time or so, will the transaction price will be will that be adjusted or how does it work?
No, it will not be adjusted because of that. Now if you go enough far out, of course, there are other clauses in a contract like this.
Okay. Thanks.
Okay. There are no further questions for the moment. Okay. There are no further questions at this time. Please go ahead speakers.
Okay. So the conclusion is we're happy with this. We think it is making us a more complete company in or a metals and mining company in Finland. I think what we do now should really have been done, but it wasn't possible at the time when acquired the smelters from Outokampo. We get the total or almost the total rights of exploration in the Outokampo field and a little mine.
And I think from our perspective, it fits very well and it's a very both strategic and synergistic acquisition with good industrial logic. So I think we're doing a small but beautiful deal here. Thank you very much for attending the conference. Thank you very much.