Boliden. Capital Markets Day Jan Johansson, President and CEO. Boliden AB

Transcription

1 Boliden AB 1 Boliden Capital Markets Day 2007 Jan Johansson, President and CEO

2 Boliden AB 2 Boliden s Production Entities Aitik (Sweden) g Copper mine Boliden Area (Sweden) g Zinc mines Rönnskär Boliden (Sweden) g Copper smelter Harjavalta/Pori (Finland) g Copper smelter Garpenberg (Sweden) g Zinc mines Tara (Ireland) g Zinc mine Smelters Kokkola (Finland) g Zinc smelter Odda (Norway) g Zinc smelter Bergsöe (Sweden) g Lead smelter Mines

3 Boliden AB 3 Boliden s goals To be Europe s leading supplier of copper and zinc To be the world leader in the recycling of electronic scrap To be one of the world s most cost-effective metal producers To generate a return on capital employed exceeding 10 per cent over a business cycle To achieve a net debt/equity ratio of approximately 40 per cent To pay a dividend corresponding to approximately one third of the net profit over a business cycle

4 Integrated value chain from mining and smelting to metal sales Boliden AB 4 Mines Smelters Sales EXPLORATION MINING OPERATIONS RECYCLING SMELTING & REFINING MARKET & SALES Advantages: Full process control ensures a high and consistent quality High guaranteed capacity utilisation (Boliden mines/smelters, logistics, customers capacity) Supply reliability One single point of contact for customers Process and logistics integration Customized products

5 The Metals Market Boliden AB 5

6 Boliden AB 6 Continued strong demand for zinc and copper Industrial Production Growth % Q USA W Europe Japan China

7 Zinc price and stock levels (LME) USD/tonne Tonnes Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 Boliden AB 7

8 China s net imports Chinese Net Imports of Zinc Tonnes apr-05 jan-05 okt-04 jul-04 apr-04 jan-04 okt-06 jul-06 apr-06 jan-06 okt-05 jul-05 apr-07 jan-07 Source: Metals Insider Boliden AB 8

9 LME Copper Price and Stocks USD/tonne Tonnes Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 Boliden AB 9

10 Boliden AB 10 Chinas import of copper April 07 Source: Metals Insider

11 Global zinc consumption exceeds total production Boliden AB 11

12 and larger copper consumption than production in many regions Boliden AB 12

13 Boliden AB 13 Global zinc production and smelter demand kt Zn Probable B Projects Probable A Projects Base Case Production Capability Smelter demand ~3% grow th Smelter demand ~5% grow th ~5 % ~3 %

14 Boliden AB 14 Global copper production and smelter demand kt Possible Expansions Probable Expansions Highly Probable Expansions Mine Production Smelter Demand ~3% grow th Smelter Demand ~5% grow th ~5 % ~3 %

15 Boliden AB 15 Potential for continued growth for metals 2006 Copper consumption vs. GDP per capita 12,0 Japan 11,0 10,0 High increase in metal demand 9,0 W Europe Canada 8,0 7,0 Malaysia Saudi Australia USA Kg per capita 6,0 5,0 4,0 Russia Kazakhstan Thailand Brazil Indonesia Top 5 population % of world population 3,0 2,0 1,0 0,0 0 China World Latin America Brazil Indonesia Vietnam India Africa Philippines USA India China Million GDP per capita PPP adjusted 2005

16 Boliden AB 16 Potential for continued growth for metals 12,0 11,0 10,0 9,0 8,0 Potential Brazil Indonesia China India Large populations * 9 kg per capita = 28 M tonnes copper Kg per capita 7,0 6,0 5,0 4,0 Russia + 60% from today s global copper consumption 17,5 M tonnes (2006) 3,0 2,0 1,0 0, GDP per capita PPP adjusted 2005

17 Boliden AB 17 Focus on value creation Boliden is operational and financial reconstructed Cost efficient operations Strong cash flow Leading edge treatment technology World leading with patent technology for metal recycling Intensified exploration activities, tripled ore reserves in Q Organic growth projects Continue to evaluate possible acquisitions of project and companies to grow mine assets

18 Financials Boliden AB 18

19 Boliden AB 19 Result first quarter 2007 Quarter 1 Change SEK m % Revenues Operating profit (EBIT) Profit before tax Earnings per share, SEK Cash flow from operating activities Return on capital employed (%) Net debt (%) Higher metal prices, increased revenues Reduced operating profit mainly due to lower grades of copper and gold, poorer USD exchange rate and lower TC/RC

20 Boliden AB 20 Result first quarter 2007, deviations compared with fourth quarter 2006 Quarter 1 / Quarter 4 SEK m Diff. Operating profit (EBIT) Net price deviation of which, Currencies -88 Hedges 138 Definite prices (MAMA) Stock results 132 Treatment charges Price decreases Net volume deviations Net cost deviations 262 Other - net - 19

21 Boliden AB 21 Operating profit per segment Quarter 1 Change SEK m % Mines Smelters Others The Boliden Group Mines: Prices and terms improved operating profit by SEK 444 million but volume decreases, mainly due to planned lower grades at the Aitik mine, had negative effect of SEK -336 million. Costs increased by SEK -53 million compared to first quarter 2006 Smelters: Decreased operating profit by SEK -487 million mainly due to lower TC/RC, lower USD exchange rate and increased costs by SEK -112 million.

22 Boliden AB 22 Cash Flow First Quarter Cash flow from operating activities SEK million (SEK 999 m) Operating profit before depreciation (EBITDA), SEK m Cash flow from investment activities SEK -373 million (SEK -441 m) Free cash flow SEK million (SEK 558 m) Net loan amortisation SEK 26 million (SEK m) Q Q Q Q Q1 2007

23 Boliden AB 23 Cost Structure of the Boliden Group Q Depreciations and others 16% Energy 18% External services 16% Consumables 17% Transports 5% Personnel 28%

24 Boliden AB 24 Production Mines Zinc (metal content) Copper (metal content) Tonnes Tonnes Q Q Q Q Q Q Q Q Q Q Production of milled tonnage is higher or at the same level during first quarter 2007 than in corresponding period 2006 in all mining areas. Production of zinc concentrate during the first quarter remained largely on a par with levels during the corresponding period in 2006.

25 Boliden AB 25 Aitik Milled production, head grades, metal content Cu tonnes Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Milled prod (ktonnes) Metal content, Cu (t) Ore grades, Cu act. 0.50% 0.39% 0.36% 0.35% 0.28% Ore reserve, Cu grade 0.31% 0.31% 0.31% 0.31% 0.28% 0.60% 0.50% 0.40% 0.30% 0.20% 0.10% 0.00%

26 Boliden AB 26 Boliden Area Milled production, head grades, metal content Zn tonnes Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Milled prod (ktonnes) Metal content, Zn (t) Ore grades, Zn act. 6.0% 6.0% 5.6% 4.7% 5.1% Ore reserve, Zn grade 6.7% 6.7% 6.7% 6.7% 5.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

27 Boliden AB 27 Garpenberg tonnes Milled production, head grades, metal content Zn Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Milled prod (ktonnes) Metal content, Zn (t) Ore grades, Zn act. 5.5% 5.3% 6.0% 5.8% 6.1% Ore reserve, Zn grade 5.7% 5.7% 5.7% 5.7% 5.8% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

28 Boliden AB 28 Tara tonnes Milled production, head grades, metal content Zn Q1-06 Q2-06 Q3-06 Q4-06 Q1-07 Milled prod (ktonnes) Metal content, Zn (t) Ore grades, Zn act. 8.6% 7.4% 6.7% 8.2% 8.5% Ore reserve, Zn grade 8.5% 8.5% 8.5% 8.5% 8.4% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%

29 Boliden AB 29 Production Smelters Cast zinc (zinc slabs) Cathode copper Tonnes Q Q Q Q Q Tonnes Q Q Q Q Q Production of copper cathodes was stable and on a level that was as high during the first quarter of 2007 as in the previous year. Production of zinc metal was higher during the first quarter than during the corresponding period in 2006.

30 Boliden AB 30 Share Ownership Structure Ownership April 30, 2007 Name Share Ownership % Foreign nominee accounts AMF SEB Funds (incl. Gamla Livförsäkringsbolaget) Afa Försäkring Swedbank Robur Funds Handelsbanken Funds The Fourth AP Fund Nordea Funds Skandia Folksam-KPA-Förenade Liv The First AP Fund Odingroup The largest shareholders in total: Other shareholders Total Source: VPC AB

31 Business Area Market Ulf Söderström, President BA Market Boliden AB 31

32 Content BA Market Customers Market development MAMA pricing Boliden AB 32

33 Boliden AB 33 Business model BA Market within the Group Boliden Mines Commercial terms New Mines External Mines and Smelters BA Market Concentrate sales Metal sales Tolling Tolling Boliden Smelters New Smelters

34 Boliden AB 34 Responsibility for becoming a leading supplier Generating value outside the industrial processes Optimising flows in the value chain Optimising cash flows Optimising physical flows Customer, business and product development Exploration Mining/Milling Recycling Smelting & Refining High quality metal products and services

35 Boliden AB 35 The Organization of BA Market Rönnskär Copper Market 15 Zinc Market 1 Common 7 Odda Zinc Market 4 Lemington Spa Zinc Market 3 Rotterdam Zinc Market 12 Stockholm Zinc Market 3 c Kokkola Zinc Market 7,5 Pori/Harjavalta Copper Market 4 Common 2 Espoo Copper Market 6 Zinc Market 4 Common 2 Bergsöe(Swe/Dk) Zinc Market 3 No. of employees Common 11 Zinc Market 40 Copper Market 26 Total 77 Paris Copper Market 1 Sales branches Neuss Zinc Market 3

36 Content BA Market Customers Market development MAMA pricing Boliden AB 36

37 Boliden AB 37 Zinc customers Continuoues Galvanisers General Galvanisers Brass Zinc Based Alloyers Others (zinc sheet, powder, wire)

38 Boliden AB 38 Boliden Zinc Sales by customer segment General Galvanizers 20% Zinc Based Alloyers 5% Brass 5% Continuous Galvanizers 55% Others 15%

39 Boliden AB 39 The galvanizing industry is Europe s largest customer of zinc metal and the one experiencing highest growth Zinc Consumption in Europe (2006) Global Zinc Consumption by market sector (2006) Diecasting Alloys 10% Miscellaneous 5% Oxides & Chemicals 8% Galvanising 45% Industrial equipment 10% Infrastructure 10% Capital Goods 10% Construction 45% Brass Semis & Castings 21% Rolled & Extruded Products 11% Transport 25% Source: Brook Hunt The construction and transport industry are the two most important users of zinc

40 Boliden AB 40 Copper customers Wire Rod Tube Sheet Strip Copper Profile Others

41 Boliden AB 41 Boliden Copper Sales by customer segment Sheet Stripe 15% Other 5% Profils 10% Wire Rod 55% Tube 15%

42 Boliden AB 42 The wire rod industry is the largest customer of copper metal power cables are experiencing highest growth First use By First (2006) Use Other 13% Market sector By Market Sector (2006) Transport 11% Cu Alloys 17% Consumer Products 10% Construction 35% Tube 10% Wire Rod 53% Industry Machinery 12% Sheet/strip 7% Electronic Products 32% Source: Brook Hunt The construction and Electronic products industry are the two most important users of copper

43 Boliden AB 43 Strong market share in northern Europe growth potential in central and southern Europe ZINC Region/ Total consumption Boliden Boliden country of primary zinc (kt) Sales (kt) market share Nordic % UK % Germany % France % Other % Europe % COPPER Region/ Total consumption 2006 Boliden Boliden country of cathode copper (kt) Sales (kt) market share Scandinavia % UK % Other % Europe % Source: Brook Hunt, Boliden

44 Content BA Market Customers Market development MAMA pricing Boliden AB 44

45 The zinc metal deficit continues to be significant and needs to be filled by non-eu sources Boliden AB 45 Zinc Balance in Europe Balance Europe Production Total Europe Consumption Total Europe (100) (300) (500) Source: CRU

46 Boliden AB 46 Zinc metal premiums lower since year end but still on historical high level USD/tonne J an-0 6 F eb-06 M ar-06 Data: CRU Monitor Zinc Apr-06 M ay US Midwest Delivered Europe ex-works Far East (Western) , J un-0 6 J ul-06 Aug-06 Sept-06 O ct-06 N ov-06 D ec-06 J an F eb-07 M ar-07 Apr

47 Benchmark Zinc TC for 2007 almost settled Year Bas TC Basis Price Escalator Other $ 1400$ +14%/-12% 2007 A 300$ 3500$ +8%/-6% 2007 B 300$ 3000$ +8,5%/-6,5% 0% $ Term Contracts Spot Contracts Market Contracts Jan Feb Mar Apr Base TC Basis Price Realized TC Actual Zn price data: Brook hunt Boliden AB 47

48 Boliden AB 48 Demand for copper import in Europe is still on high level Production and Consumption ktonnes Balance in ktonnes Balance Europe Production Total Europe Consumption Total Europe 48 data: Brook hunt

49 Spot TC increasing as copper market tightens USD/ton Benchmark USD annual Benchmark USD annual Jan-0 5 Feb-05 Mar-05 Apr-05 May-05 Jun-0 5 Jul-05 Aug -05 Sep t-05 O kt-05 Nov-05 Dec-05 Jan-0 6 Feb-06 Mar-06 Apr-06 Maj-0 6 Jun-0 6 Jul-06 Aug -05 Sep t-06 O kt-06 Nov-06 Dec-06 Jan-0 7 Feb-07 Mar-07 Apr-07 Spot Copper premium CIF W. Europe Benchmark USD annual Boliden AB 49

50 Boliden AB 50 Two year brick system makes changes in copper TC/RC less volatile USD/ton Benchmark TC Boliden TC (2 years brick)

51 Boliden AB 51 Official TC/RC impact on total revenues Zn Cu TC/RC PP Free Metal Premiums Foot-note:Above figures is from 2006 and the revenue distribution is very dependant on the market situation.

52 Content BA Market Customers Market development MAMA pricing Boliden AB 52

53 Boliden AB 53 Ownership and valuation of inventories Type of inventory Ownership Valuation Off-set hedge Str. hedge Concentrates at mines and in harbours Mines Production cost No Yes, partly Raw materials at smelters Market Balance day price Yes No Metal products Market Balance day price Yes No Iron stock (process stock) Smelters Lowest of BDP and last months average No No

54 Boliden AB 54 MAMA-Pricing January QP MAMA Action Production Delivery of Final of concentrate concentrate Pricing January February March Valuation Mines production costs Balance day price (BDP) Month average price MAP = Final price P&L BDP Mines production costs MAP BDP (positive or negative)

55 Boliden produces metals that make modern life work Boliden AB 55

56 Boliden AB 56 Business Area Mines Jan Moström, President BA Mines

57 Boliden AB 57 Zinc mining in Europe dominated by Ireland, Sweden and Poland Source: Raw Materials Data, Stockholm 2006

58 Boliden AB 58 Copper mining in Europe dominated by Poland, Sweden, Bulgaria, Portugal. Russia is also a major copper producer Source: Raw Materials Data, Stockholm 2006

59 Boliden AB 59 Aitik Aitik, with copper, gold and silver, is one of Europe s largest bulk tonnage mines Mining operations began in 1968 and over the years the mine has been expanded and production has increased Today s known ore reserves should last until the year 2025 at current production level No of employees 457 Production 2006 Ore Mt Metal content Copper t Silver kgs Gold kgs

60 Boliden AB 60 Boliden Area The Boliden Area comprises four mines, a concentrator and a gold leaching plant In 1925, Europe's richest gold mine was opened at Boliden Since then, mining activities have been carried out at 29 mines in the Boliden Area No of employees 422 Production 2006 Ore 1.7 Mt Metal content Copper t Lead t Zinc t Silver kgs Gold kgs Kristineberg Mine, Boliden Area

61 Boliden AB 61 Garpenberg Garpenberg Mine and Garpenberg Norra are Boliden s mines in the Swedish county of Dalarna Boliden acquired the Garpenberg mine in 1957 and commenced production at Garpenberg Norra in 1972 An extensive mineralization, Lappberget, has been discovered. In 2004, production on a wider scale commenced No of employees 275 Production 2006 Ore 1.20 Mt Metal content Zinc t Lead t Copper 593 t Silver kgs Gold 270 kgs

62 Boliden AB 62 Tara Tara mine in Ireland is the largest zinc mine in Europe Production started in 1977, and over 62 million tonnes of ore have been mined since then Investment in an improvement programme and extensions to the mine have reduced unit costs Boliden acquired Tara at the end of 2003 No of employees 678 Production 2006 Ore 2.75 Mt Metal content Zinc t Lead t

63 Boliden AB 63 Business Plan BA Mines With the purpose to maintain and create conditions for an increased persistent mine production are the following areas of highest priority: Cost Efficiency Exploration Expansion

64 Boliden AB 64 Cash Cost Copper USc/lb Mine Site Costs Subtotal Cash Cost 1 USc/lb Realisation Costs (TC/RC) Credits (byproducts) Mine Site Costs etc. are calculated per lb Copper Payable Metal. Note, USD conversion effects

65 Boliden AB 65 Cash Cost Cu 2006 Brook Hunt Aitik

66 Boliden AB 66 Cash Cost -Zn 2006 Brook Hunt Garpenberg Boliden

67 Boliden AB 67 Boliden s mines are considered to be among the most productive in the world Productivity Ton / man hour global average ,3-1,6 Global average 0 Aitik 18 Mton Aitik 36 Mton 0 Garpenberg Boliden Tara

68 Boliden AB 68 Potentials At the mines are the potentials mainly costs and productivity. A potential of %, on the production cost is estimated. The largest potential in revenues (about 5 %) is in the concentrators, (recoveries and conentrate quality).

69 Boliden AB 69 Exploration The targets for exploration activities during the period : 10 years long time planning of ore reserves and mineral resources Contribute to the balance in mine and smelter production, with a special focus on copper Contribute to increased growth for the mines

70 Boliden AB 70 One of Europe s largest players within base metal exploration Boliden s ore base tripled. Intensified exploration activities at all mine areas during first quarter. Focus on the Boliden area with new findings at Kristineberg, Renström and Maurliden. Doubled investment to approx. SEK 300 million (SEK 162) for 2007.

71 Boliden AB 71 Field exploration Sweden: Skelleftefield (Zn, Cu, Pb, Au), Dorotea (Zn, Cu, Pb), Bergslagen (Zn, Pb) och Aitik (Cu, Au, Mo) Ireland: Tara, Limerick (Zn, Pb), Wexford and Longford-areas

72 Boliden AB 72 Exploration External growth through: Acquisition of advanced projects, deposits, mines, companies Joint Venture Exploration As a logical follow-up after acquisition of deposit/mine Joint Venture Own exploration»give priority to countries»acquisition of projects»joint Venture

73 Aitik Ktonnes Inferred Measured&Indicated Proven&Probable Production Year Boliden AB 73

74 Boliden AB Boliden Area Ktonnes Inferred Measured&Indicated Proven&Probable Production Year

75 Boliden AB 75 Garpenberg Area Ktonnes Inferred Measured&Indicated Proven&Probable Production Ktonnes Year

76 Boliden AB Tara Ktonnas Inferred Measured&Indicated Proven&Probable Production Year

77 Boliden AB 77 Kristineberg Orereserv Mineralresource Potential Mined Planned drifts Drifts Z0 Target areas Field drilling Target areas - explored Z500 K-Zinken Einarsson väst Einarsson B-Malm Z1000 J-zonen Y1000 Y1500 Y2000 Y2500 Y3000

78 Boliden AB 78 Expansion Aitik Garpenberg

79 Expansion Aitik Boliden AB 79

80 Boliden AB 80 Expansion Garpenberg Plannes drifts Orereserv Drifts Mineralresource Potential Target areas Mined Target areas explored Garpenberg Garpenberg N 0Z 400Z Dammsjön Kvarnberget Lappberget Lappberget 870 Z 800Z 910 Z 870 Z Strandmalmen Kanalmalmen Finnhyttan Tyskgården och Kyrkmalmen Dammsjön Kaspersbo N 1200Z

81 Boliden AB 81 Business Area Smelters Svante Nilsson, President BA Smelters

82 Boliden AB 82 Main Zinc Smelter Competitors slow growth in output in the coming years Umicore/Zinifex Budel Balen, Belgium Auby, France Boliden Kokkola Odda Xstrata Nordenham, Germany San Juan de Nieva, Spain Glencore Portovesme, Italy

83 Boliden AB 83 Primary Copper Smelter Competitors Boliden Rönnskär Harjavalta NA Hamburg, Germany KGHM Lublin, Polen Atlantic Copper Huelva, Spain Cumerio Olen refinery, Belgium Pirdop, Bulgaria

84 Boliden AB 84 Rönnskär The world class smelter, Rönnskär, is situated in Skelleftehamn, northern Sweden It focuses on sustainable production and maintains very high standards towards environmental requirements and resource-efficiency while treating and refining metals from concentrates and various recycled materials Production 2006 Copper Lead Silver Gold Sulphuric acid Liquid SO 2 Zinc clinker t t kgs kgs t t t No of employees 813

85 Boliden AB 85 Harjavalta Boliden Harjavalta comprises two plants - a copper smelter in Harjavalta and a copper refinery in Pori. They are both situated on the west coast of Finland The flash smelting method, used and developed at Harjavalta, is efficient both environmentally and economically Boliden Harjavalta smelts also nickel concentrates on a tolling agreement Pori Production 2006 Primary copper Cathode copper Liquid SO 2 Silver Gold Sulphuric acid Nickel concentrates t t t kg kg t t Harjavalta No of employees 449

86 Boliden AB 86 Kokkola Boliden Kokkola is situated on the west coast of Finland Production at the Kokkola zinc plant started in 1969 After four expansions the Kokkola plant is one of the biggest, most automatized and most technically advanced zinc plants in the world Production 2006 Zinc t No of employees 685

87 Boliden AB 87 Odda This sole Norwegian zinc plant is situated in the western part of the country The company was founded in 1924, close to a hydro power plant A modernisation (88 meuro) was carried out in 2004 and over the last years the environmental performance has been greatly improved Production 2006 Zinc metal Sulphuric acid Aluminium Fluoride Anhydrite t t t t No of employees 385

88 Boliden AB 88 Bergsöe The only secondary smelter for recycling lead acid batteries in Scandinavia One of the cleanest smelters in Europe Among the five largest secondary smelters in Europe Holds 5% of the European market for secondary lead Highly developed environmental standards Logistical advantages harbour, railway and road transports Metal production 2006 Lead and lead alloys t No of employees 101

89 Boliden AB 89 E-waste is the faster growing segment of all municipal waste stream in developing countries WEEE generated by category in Europe Approx 9,5 M ton* Each European produce in average between 17 and 20 kilos of electrical and electronic waste (WEEE) Fridges/Freezers 9% Other Household appliances 11% Sources of Light Electric Fittings 6% Other 2% Cameras, Watches, Sport Equipment, Toys 1% Large White Goods 32% TV, Video, Audio 19% IT, Office equipment 20% Target segments for Boliden 39% of generated e-waste * EU 25 Source: Electronic waste Recovery Business 2006, Environmental Impact Assessment Review 2005

90 Boliden AB 90 BA-Smelters route to operational excellence Commissioning of decided investments Expansion of secondary raw-materials two new mines Debottle-necking projects Bench-marking Material balance Process groups Finnish synergy team