Boliden AB (publ) (BOL) Earnings Call Transcript & Summary

Ladies and gentlemen, I'd like to welcome you to this Boliden Press Release Presentation. Here, on the line is Olof Grenmark, Head of Investor Relations. Today, we will have this presentation led by our President and CEO, Mikael Staffas; and he's also joined by our CFO, Håkan Gabrielsson. I remind you that we are in silent period, so this analyst call is intended for this press release that we released this morning only. We will not answer questions about the last quarter that it has just passed, neither about current market conditions. You will find a short presentation regarding today's press release at our web page, which you can follow as Mr. Staffas speaks. Finally, I'd like to remember -- I'd like to remind you about that this presentation is intended for the financial community that is, of course, journalists and private persons are welcome to listen in to this presentation, but we ask you to be preferably in a listening mode. Mikael Staffas, the stage is yours. Welcome.

Thank you, Olof. I hope that you will now be able to, if you wanted, to look at the website on the front page to the right there, there will be a little exhibit deck, [indiscernible] exhibits. It's not that you're going to miss a lot if you don't find it, but if you find it, it might be easier to follow what I will say. So the background or the information that we've gone out with today in the morning is that we, as most other global mining companies, have committed to follow the global tailings standard, the new global tailings standards being implemented. This new global tailings standard has lots of elements to it, but the element that is most interesting for us has to do with static liquefaction. This is a phenomenon that was not included in previous tailings standards. Thus, it was not -- wasn't in there in the calculations for the stability of dams. We have, over the last 2 years, intensively [Audio Gap]

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[Audio Gap] once you change this design, you actually get more space into the dam, so you can get more tailings in. So if anything, this creates a possibility for a longer life of mine in Aitik, going forward.

And our next question comes from the line of Liam Fitzpatrick at Deutsche Bank.

Yes, just on Aitik, I guess a few questions within this. The first one is just the level of confidence that you have that production won't be impacted because, as you say, this is a -- it's a fairly big project in terms of CapEx size and you're having to move infrastructure. And then linked to that, does this have any impacts on, I guess, Liikavaara and the mine plan for Aitik? And finally, just in terms of the permitting, do you foresee any kind of challenges in getting the necessary requirements through for this? Because I guess if you don't, then potentially in 2 years, that could have quite a material impact? And apologies, the final, final one. In terms of CapEx, so will all of the -- so you said SEK 1 billion in 2022, with the remaining SEK 4 billion all be in 2023? Or could that also creep into the after years?

Let me take them from the background. Regarding permits, you know that we are constantly at the, if you want to say, at a risk because we only get permits of 10 years at a time. And we have a new -- permitting new renewal coming up in Aitik in about 2 years' time from now. Given that we're doing this, I would say, if anything, the likelihood that we will be able to continue in Aitik increases with the fact that we have, if you want to say so, the dam's stability issue, which is always a major part of any renewed environmental permit, that issue should be much easier to be resolved now than it would have been otherwise. Regarding permits and other sense, we are not too worried. There's always a little bit of a risk that you can't get a permit exactly what you want and that there is something happening. The main issue normally with permits in Sweden is that it takes a longer time. But as we have the right to start and to do actions while the permit process is going on, that should not be too much of a risk right now. The CapEx timing, I should say generally that there will be things also happening in '24. So it's not going to be all in '23, but it -- so you can maybe split those last 4 between '23 and '24. There is, as you pointing out behind this, of course, in an ideal world, we would have liked to have much more planning to do these things. We are now forced to kind of make a speedy start from standing still, which we are normally not used to. So of course, there are risks into this one, but we tried to build in margins enough to be able to handle that both from a timing point of view and from a CapEx point of view. As you -- as we have pointed out, it is critical that this moves on and moves on swiftly for us to be able to hit this 24-month period in order to secure that we have production. The last one on your question was Liikavaara. As of right now, we do not see this impact in the Liikavaara expansion. It might be that we need to reconsider that over time because, of course, we haven't been able to do a full calculation of where we, for example, best utilize the trucking fleet, and whether there are some things that needs to be rescheduled because trucking capacity will be a bottleneck at this time since we need to move lots of rock around. But it shouldn't really impact, that's my best estimate as of today.

If I could just have 1 follow-up. As you say, this is kind of a short notice, big project that you didn't expect to have to do in terms of how you're thinking about where the risks are? Is it labor availability that could be a challenge? Is it equipment? Are there any particular pinch points that you see with this?

I would say there's a little bit of all of that. There is -- there could be a labor challenge. There could be an equipment availability challenge that will play into this. And then if you -- maybe not on timing, but on cost, there is, of course, a general inflation situation that could hit on this one that we don't really know. And that's both kind of a global inflation with diesel prices and everything else, but also kind of local inflation, whether we -- how we can get the local economy to absorb a relatively large product like this. So yes, there are risks, but life is full of risks, and then we think we're going to be able to manage them.

Our next question comes from the line of Alexander Pearce at BMO.

So you mentioned that the key part of the cost of this lift has actually moved to some of that infrastructure. But I wondered maybe you could provide some guidance for the next phases of the dam? Obviously, we can see the green cross section there in the presentation. And is that likely to also have some kind of lumpy spend? Or is that going to go back to a smoother CapEx profile through the life of mine?

That's going to go back to a smoother. The lumpy part is to get that bluish, pinkish, whatever bluish thing going, and that's what needs to be done. And maybe the size of it, if you look at it, doesn't really reflect, but that needs to be done in 2 years. And with the greenish, that might look big, it's actually over 25 years. So it's is not so much every year, and it's not moving infrastructure in the same way. So that greenish thing, exactly how much it is and how we play out, we'll come back to. We haven't done the detailed planning for that.

And our next question comes from the line of Johannes Grunselius of DNB Markets.

Yes. It's Johannes here. Just a question on your thinking about grades and perhaps also volume output from the Aitik mine, is this impacting your planning whatsoever for the coming years?

I'd say it's a little bit premature to answer that because I said we haven't done a detailed mining plan yet, that's how we're going to manage this thing. You know that grades are going to be impacted with the low grades for the next few years, and that's been communicated well before. I don't think that, that shape is in any kind of major way being changed. We still have these low-grade years. In terms of volume, yes, there will be risks in terms of volume because of this because there are additional constraints that come into play, trucking capacity will be 1 of them. But as I said, our best estimate as of today is that we will be able to obviously get the volumes through as planned.

Okay. Okay. Then my second question is about overall CapEx in the rest of Boliden here for 2023 -- 2024. Do you foresee that you will push out some other projects in the group because of this? Or is this sort of coming -- or is this sort of independent on what's happening here in the Aitik dam construction?

This, we haven't looked into, we haven't gotten so far. This is really just a hunch of the top of my head, but I would estimate that there could be a chance that we will postpone some projects because of the simple fact that, of course, this will also take quite a lot of resources from the internal project resource that we have, which means that it will be difficult to do other projects in the same fashion as we maybe would have done otherwise. But as I said, this is really prematurely, and we have not looked into our investment plans in that detail yet.

Our next question comes from the line of Christian Kopfer at Handelsbanken.

Just a few questions from my side. Firstly, I think you talked about that this substantially opens up for longer life length of the mine. So just trying to understand that what kind of magnitude we're talking about in terms of that? And secondly, on the CapEx, I mean, obviously, it's a huge amount of CapEx to my perspective. And how sure are you about the CapEx? What kind of contingency have you included in this? And yes, those are the questions.

Regarding CapEx, I don't want to go through exactly how we've done the calculations. I will phrase what I said before that, yes, there are some uncertainties regarding the numbers because they've been done quickly. On the other hand, we've also done the best estimates as far as we can, also taking into account that there will be costs coming in that are difficult to see. Regarding life of mine, it's a little bit tricky to give a clear picture on this one. But you put it this way, with the old dam construction, even before we found out anything about static liquefaction, but they're old dam construction for -- it would have been challenging to go more than 20 years on from now. So in kind of the early 2040s, we would have needed to have another tailings facility. As you know, the Swedish context, new tailings facilities are really difficult, but it's not impossible. So we could have continued after that, but it would have been with some challenge and also, by the way, some investment. By using this [ changed ] dam method without going into details, it feels that we probably can gain in the existing tailings pond a couple of years, maybe even after 5 years compared to what we've been able to do previously. Now -- and nobody knows what's going to happen going forward. As you know, there's lots of mineralization around Aitik, and we have no ambition to close this facility in 20 years either. I think it's going to be around for much longer. But that's, of course, it all depends on where copper prices go in the future.

Our next question comes from the line of Viktor Trollsten of Danske Bank.

Just thinking on what you write in the presentation, prepared for long-term move to downstream dam construction. Could you just elaborate a bit on what that means in terms of timeline and what do you think about that? I know that basically all your tailings facilities across the group are upstream and quite old ones. When I look at the construction here in Aitik, it was [ 1968 ]. We're talking 1967 in Harjavalta, et cetera. So for the coming 10 years, could we see an investment pace where you change all your tailings to downstream?

We're not going to change anything to downstream just because of the word downstream. We'll look at every individual dam and make the assessment based on that. And as I said before, yes, we've looked into this in Garpenberg, and there is a section of the Garpenberg tailing pond that we know that we want to change to making it downstream. It's not as all time-critical, but we need to do that over time to secure life of mine of Garpenberg. We have also looked into Kevitsa, so far, and not found any reason to change dam construction in Kevitsa that's as far as we've gone so far. And otherwise, Harjavalta, you're -- Harjavalta actually is a brand new dam, and Harjavalta doesn't have these kind of issues as it is a much smaller facility. The other potential issue could be in the Boliden area, but Boliden area, well, the tailings facility there as the present one as we're working with is only up until 2028 anyway. So we need to find another solution in the Boliden area for tailings in a few years anyway, and that will potentially also include change of dam raising methods, but that we don't really know yet. So I don't know if I answered your question. I think that in the context of Boliden and the context of dams, Aitik is by far the biggest one. It is, as you pointed out, a relatively old dam. This was built in 1968 at times when, number one, I think was, not supposed to be -- become 50 years old. Aitik was maybe supposed to be around for 10, 20 years. So nobody could foresee at that time that the dams will be raised as high as they've been raised already. And then secondly, it is by far the biggest one. I mean these dams today raise over 60 meters tall from the base. And as we move forward, as the end of life of mine, they're going to be well over 120 meters, which is much bigger than anywhere else in the group.

Okay. No, that's clear. And just thinking about Tara, just looking at the Tara tailing facility, also relatively well, and also our current storage is quite close to the planned total storage for the coming 5 years. Just -- does this make you also consider an investment in the new tailing facility if you go ahead with the title? Or is that already included in your previous, let's say, thinking? Does this [ change ] anything, how you think of future projects?

No. By the way, the dam in Tara is, by the way, not a downstream dam, it's a central dam. The Tara -- present Tara tailing facility reaches until also late [ '20s ]. So it was always perceived that in order to do a Tara Deep, we will need a new tailings facility in Tara.

Yes. Yes. No, that's clear. And just finally and maybe more a hypothetical. But -- is it way too early to start thinking about this tailings as assets rather than liabilities, i.e., or do you see any -- or let's say, potential for actually extracting metals out of, let's say, the tailing facility in Aitik, as it should include some metals? Is it well too early to commercialize that?

This is also on a case-by-case method, and I would say that we are already doing this. We have used some old dams in the Boliden area that we've had around for the last few years. We have a dam in Kylylahti, which contains cobalt that we are interested in doing and so on and so forth. So we are constantly looking into this. Regarding Aitik, specifically, I would say that the chances are relatively low because the Aitik recoveries have always been relatively high, which means that the metal content in tailings is relatively low. But we will always have this as a potential and look into it, even though I'd say Aitik is relatively small chance.

And we currently have 1 further question in the queue. [Operator Instructions]. And that question comes from the line of [indiscernible] of Morgan Stanley.

I just have 1 further question with regards to the infrastructure. I think you mentioned about SEK 2 billion of the CapEx will be needed to move that and just create space. Could you elaborate on what type of infrastructure you need to move?

The biggest part around this is that we need to have another water storage facility because we will need to encroach on the existing water storage facility that is next to the dam. So this one needs to be built new, and with that comes the whole water infrastructure, piping, water cleaning -- yes, piping, pump stations and so on. That is by far the biggest piece of this. We also have the electric cabling that is going right in this area that needs to be moved, which is also a substantial part. We have part of the rail infrastructure, which is in a place that we will need to use for increasing the dam, which is also part of this number. So those are just to give you -- but the water piece is by far the largest.

And as there are currently no further questions lined up, I'll hand back the floor to our speakers for the closing comments.

Okay. Well, this is a situation that in some way is, of course, unfortunate that it's an investment that we didn't think that we would have to do, at least not in this time frame. We, as a company, have gotten information. We've taken the information very seriously, and we've acted very quickly to make the best out of the situation, to make sure that we can get into a situation, we can continue to produce in Aitik, and we will also future-proof the mine for the next decades. It is, as I said, it's a quick one, but we feel good about the assessments that we've been able to pull together in a very short time. With that, if there are no further questions, thank you, everybody, and have a good day.