Boliden AB (publ) ($BOL)

Ladies and gentlemen, I'd like to welcome you to Boliden's Q1 2026 Results Presentation. My name is Olof Grenmark, and I'm Head of Investor Relations. Today, we will have a results presentation led by our President and CEO, Mikael Staffas; and our CFO, Håkan Gabrielsson. We will also have a Q&A session led by the operator. Mikael, welcome.

Thank you, Olof, and welcome to all of you. We are welcoming you from [indiscernible]. For those of you who are maybe on [ Swedes ] and wonder where that is, that is the -- the closest [indiscernible] to Zinkgruvan. We will have our AGM here in a couple of hours, following the tradition that we try to have our AGMs close to operating sites. Right. Now regarding the quarter. The highlights for the quarter is that we've had a good production quarter. We're coming in with a EBIT excluding the process inventory revaluation of around SEK 4.4 billion. And also a strong cash flow, strong cash flow also considering that Q1 is normally a relatively weak cash flow quarter. We've had solid performance in both of our operating units. So we've had it in mines and in smelters. And then on top of that, we have strong metal prices and with our business model with definite pricing coming a little bit later, we, of course, benefit from having strong metal prices [ than ] when reevaluating previous periods deliveries. The gold and silver production has also been very strong in the smelters. Regarding the [indiscernible], I'll come back to that one, but the impact on the financials for the quarter has been SEK 400 million negative on volumes and EUR 700 million negative from a one-off write-off of connected to that. In Odda, we have managed in the quarter to start. The ramp-up of the expansion project, we had the first feed, I think, on March 31. And I'll come back to that also in a little while. So the financial performance in general has been strong with a strong cash flow. The CapEx in the quarter is right around where it should be according to our budget and according to what we have guided to you. On Garpenberg, I think it's time to take a little bit just so we get these numbers more in perspective. As you all know, we had a rock fall and followed by seismic events that happened in mid-March. What then happened is basically 3 things that we need to separate in Japan where we have altogether 105 million tonnes of reserves. The upper part of [indiscernible] is 14 out of those 105 million, and we have 91, which is other positions. Those other positions were basically totally undamaged whereas the damage to the upper part of the [indiscernible] was substantial. And then we have all the infrastructure in Garpenberg [ worst ] damaged, but not very severely. So what has happened now, well, given the fact that we have all these 91 million tonnes left but it's largely undeveloped. The most critical thing, the critical path for us is to get development going. And I'm very happy to say that as of last week, we had our first development explosives and the tunneling is now going on at full speed. We have gotten all power restored. We have pumping restored. We have ventilation restored. We have pumping and water restored. So we are able to do lots of things. There are certain infrastructure. I would say also the workshops [ by way ] are restored and working fully. There is some infrastructure linked to the past infrastructure in the mine and also linked to the ore hoist and the personnel shaft that are still being repaired and will take a couple of weeks or a couple of months to get ready. But I said the critical path to get the developments going has been passed. Regarding the guidance for 2026, we had to give a very rough estimate that once we get up to production, we will produce roughly 100,000 tonnes per month and we're standing by that. So if you -- we're going to be able to get only later in this quarter up to production. So we have 100,000 in Q2, and then we have about 100,000 per month for the rest of the year. If you add that up together with what we have already produced to get around 1.5 million tonnes. So the guidance for 2026 is right in line with what we had said before. Now we are now issuing 2 new pieces of guidance, which I think are very important. Number one, we are saying that for 2032, we should reach full capacity and full capacity is not just the 3.7 million tonnes that we had before this happened, but the 4.5 million tonnes that we had guided for the Capital Markets Day. So we will reach the higher production level in 2032 that we're going to do. And we're also ensuring that we're going to be able to get to about 2.3 million tonne or just shy of 200,000 tonnes per month in 2027. So the developments are going ahead as expected and actually faster than expected, so we can get mining from the other ore bodies up into speed. In this plan, we have not put anything in [indiscernible] because the [indiscernible] is still very much unclear. We have not been able to get our arms around fully inspect, being able to think what we prudentially can produce and with what method and at what cost can production be done. We have hopes that this is going to be able to get production out of there to some extent, and that's going to help us for the years '28, '29 and '30 [indiscernible], but that's still very much unclear and we'll get back to that once we've been able to get our arms around the [indiscernible] situation. So that's hopefully giving you somewhat of a good understanding of where we're standing on Garpenberg. If you look at our other projects, I already [indiscernible]. We are happy to announce that we had first production even though it was on the last day of the quarter, we've got some low production in there. We've had some [ teething ] problems during April to get this one up to speed. We've had to change some elements in the boiler. We've had some pumps and we've had a -- also some of the small [ reason ] need to be changed. As we're speaking right now, it is up and running again. We haven't produced much in April. And hopefully, we'll get up to speed and have good production in May and then in June going forward. The other projects, the [indiscernible] tank house is progressing very well. We're still just as we said on the Capital Markets Day, we're aiming for a start in Q4 of this year. Boliden [indiscernible] recycling project, very much running forward on track. And on Garpenberg, the expansion with the new shaft, that project is also, although it's very early days. Moving ahead, and we do not see that, that will be impacted by the seismic events, we should be able to pursue that project according to the original plan. On the ESG side, I'm happy to announce that the positive development here is that we're going down in the [indiscernible] when we're about to hit pre-COVID levels finally after having been way above that for a while. So [indiscernible] level is really going the right direction. The LTI frequency is -- we've had a little bit of a setback in the quarter. Now the numbers are still quite much lower than they were if you go back a couple of years, but we're slightly worse than we were in the same quarter last year. On the greenhouse gas effect, it might look silly here as it looks like we're increasing it. But here, you have to remember that we have not restated the numbers for the [ Lundin ] acquisition. And if you do that separation, we're very much on our plans for our decogonization program. Market side. The market side has, of course, been what has been really pushing us up in the last couple of quarters. You can see here from the graph that it's -- the metal prices have gone up. And even though they peaked a little bit early in the quarter and they came off a little bit during the quarter, it's still on a very high level. At the same time, you can also see down there that as the metal prices tapered off a little bit. We actually got some positive push again from the currencies in there. We also have relatively weak [ TCs ], although [ TCs ] is getting less and less important as part of the revenue mix for a smelter, we also see by products, especially sulfuric acid prices growing on spot. We have a contract portfolio, so that doesn't really contain any spot on sulfuric acid prices. So we haven't really seen the uptick yet. But if these levels continue to be on this level as we see them today, of course, they will slowly also get into our longer-term pricing that we have. If you start looking into the outside world and where we're standing, you can see that copper prices have remained on a relatively high level, actually going up a little bit here lately. You can also see that the margins for copper mines in the world are actually very large. And it looks like every copper mine in the world is good at getting cost out. This is, of course, not quite true because the reason for the cost reduction is very much linked to the high gold prices that comes as a negative to the cost level. The same thing on the zinc price, you can also see there that the price levels stabilized on a decent level. Costs are coming down very quickly. This has to do with the silver content in the mine that comes in as a negative cost. If you look at our production, I would say that Aitik is producing more or less according to plan. We've had a winter quarter and then still working through the [ diorite ] issues. The grades are relatively low, but we are unchanged in the guidance for the year, we still expect higher grades to come later in this year. What you don't really see in the picture here, but we just want to make the point is that after having had a couple of years of quite low stripping development, we have been able to push the stripping quite a lot already in previous quarters. And in this latest quarter, it was another very strong mine production quarter in the sense of lots of stripping going on, which we feel very good about. Garpenberg, we've spoken quite a lot about. I think that we don't have to say much more about that right now. In Kevitsa, stable and reliable production, it's been a good production quarter. Here, the grades are picking up according to exactly what we have also guided and also very happy the recoveries are also going up in Kevitsa. That is sometimes actually related to exactly to the higher grades. Somincor, despite the fact that were lost, as we've spoken up before, we lost a week in the mill due to very heavy rain. We managed to keep on producing in the mine, and we've caught up maybe some of that already in the quarter and the rest will catch up during the rest of the year. So we had a very stable production and a good production coming from Somincorcore. Zinkgruvan, where we're standing today, also had good and high milled volume. [ Tara ], slightly below expectations, but still in the ramp-up phase, and we still feel relatively good about that. On the smelter side, also a good production quarter, improved process stability in Rönnskär, increased silver production coming out of intermediary products, which has helped us. Harjavalta also steel production, copper cathodes coming out in a good way. We have a slightly lower nickel production due to feed mix, where we've had to add pyrite to get the energy balance right. Kokkola strong production, generally speaking, base, small unit, but very strong and stable production. And although we've spoken about a little bit, we've -- we had the first feed in the quarter, but we have not been able to speed that up and get it into meaningful production numbers. So with that, Håkan, I'll leave it to you and talk a little bit about the numbers.

Thank you, Mikael, and good morning. As Mike said, we had a good quarter. We delivered an operating profit, excluding process inventory of SEK 4.4 billion which is actually one of the better quarters we've had. Free cash flow at EUR 1.7 billion and earnings per share of 13.45%. So all in all, a good quarter. Looking by business area, you can see that both mines and smelters are roughly on par with the profits from Q4. Mines is on par with Q4 in spite of a hit from the Garpenberg event of about SEK 1.1 billion. Smelters is on par with Q4 in spite of Q4 being positively impacted by a one-off in [indiscernible] SEK 400 million. So all in all, a strong underlying performance in both business areas. Internal profits roughly 0 in the quarter. Looking at the EBIT bridge year-on-year comparing to Q1 of last year. As you can see, we are helped by stronger prices, close to SEK 1.8 billion positive impact there. And that's, of course, mainly a result of the strong development of metal prices that we've seen. Metal prices alone contributes by more than SEK 3 billion. It's mainly gold, silver, but also copper. And then on the negative side, you have currencies and a little bit of TCs that adds up to SEK 1.8 billion total. Volumes are higher, and this number is explained entirely by the acquisitions of the 2 mines from -- in [indiscernible], then on top of that, you have a negative impact from Garpenberg, which is then offset by positives in other operations. Same thing with costs. That number is entirely explained by adding 2 new mines, comparing -- excluding those new mines and comparing apples-to-apples, costs are more or less exactly flat. So we see an inflation roughly at 0 and the good cost control in the operations. And then you're aware of the one-off that we've had here, and that's the write-down in Garpenberg SEK 700 million. Comparing sequentially again very in prices, positive 1.3%. It's basically across the line for most metals, but with gold and silver being the main contributors. I should also say that the provision and the definitive pricing of contracts that were open at last quarter end December 31, contributed by about SEK 450 million. I think those of you that are modeling it in detail would have that number in there. Volumes, a negative impact, mainly as a result of the Garpenberg incident. And then or costs are significantly better than the fourth quarter. The fourth quarter was an expensive quarter, typically is. We had a lot of contractors and external services and also as we had a good run of prices towards the end of last year, we had to adjust provisions for profit sharing in similar, which weighed on the cost in Q4. But good cost control. Moving on to cash flow. When we talked about our earnings, we talked about the CapEx, Mikael did. I'm happy about the working capital side. Typically, we tie about SEK 1.5 billion in Q1. Q1 is normally a weak quarter for working capital. And this time, we're roughly flat in spite of stronger prices. So it's good work in the smelting divisions behind this, working with working capital, working with the inventory reductions and then also a little bit of impact from the situation in Garpenberg. Another thing that stands out here is the tax side. Again, we had a good run of prices towards the later part of next year, and we've been catching up in tax payments. There is always a delay there, but you see it's a significant amount paid in Q1. All in all, this leads to a strong balance sheet. Net debt to equity of 18%, payment capacity of close to SEK 22 billion, and all in all, a strong balance sheet. So with that, Mikael, you want to continue with the outlook?

Thank you, Håkan. And regarding the outlook, it's easy to say first that regarding guidance for everything except Garpenberg, we have no changes. It's all the same guidance for the full year as we had before. That's also true for CapEx levels and so on. And just to repeat regarding Garpenberg, we are now guiding for 1.5 million tonnes in 2026. That is roughly a run rate of 100,000 tonnes or so per month for the last 7 months of this year and then adding on the production that we have had already in Q1, very much in line with the very preliminary guidance that we issued in connection with the profit warning once we had the seismic event. Regarding the 2027, we have a new guidance that has not been issued that is basically doubling production from the 100,000 tonnes per month pace to almost 200,000 tonne per month or 2.3 million tonnes for the full year or 2027. And then we are now also guiding that in 2032, we should be up to the new estimated full production of 4.5 million tonnes, which is clearly above what we were producing before the seismic event at 3.7 million tonnes. Also, grades are the same. The grade for Garpenberg for this year has changed slightly, slightly lower zinc and slightly higher silver as a consequence of other position being mined than the [indiscernible] precisions. We're also here just very clarifying that we are guiding for the maintenance impact in smelters where the big chunk of the maintenance for 2026 will come into Q2 of SEK 350 million. With that, operator, I think we're ready for questions.

[Operator Instructions]. The next question comes from Adrian Gilani from ABG Sundal Collier.

My first question is on the 2027 guidance in Garpenberg. Just to clarify in that guidance, is it included that you also expect to reach a run rate of 3.7 million tonnes at some point during the year? Or do you expect to be below nameplate capacity for all 2027?

We will expect to be below nameplate capacity for all of 2027.

Okay. Understood. And I guess also a question you talked shortly about asset prices and not having any spot exposure. Can you talk a bit about how that contract portfolio is structured and when you will see a P&L effect if the high prices were to remain? Is this something that should boost those earnings in Q2 already?

Most likely not so much in Q2, but for the second half of the year, it would. We are -- we have a portfolio which is a little bit complex and combines all kind of length of contracts and they have longer contracts with adjustments that are kind of slower to spot prices and so on. But if the current spot prices will hold on, we will see some meaningful effect in the second half of the year.

Okay. Just to follow up quickly. Can you say roughly how much of the volume will be priced on current prices in the second half of the year? Is that possible to say?

This is now when it gets really complex because, as you know, there is one kind of European spot price and there's a global spot price. We have much bigger exposure to the European spot price than we have to the global spot price. The European spot price increased already a little bit in '25. So we had good byproducts there already. And it has not spiked as much as the global one in so far this quarter. So -- and that's the most important one to us. I don't know, Håkan, if you have a number what it could be, if that one were to say. And then we have some that's on the kind of international global spot price, but that's a relatively smaller part.

I don't have a number apart from the fact that it's less than 20% that is exposed to the global spot, most is European levels.

The next question comes from Alain Gabriel from Morgan Stanley.

Again, on Garpenberg, you've given the guidance for grades for the average for '27. How should we think about the sequencing of the grades for both zinc and silver over the course of the year and into '27. That's one. And then two, on the run rate you've given for next year, the 2.3 million tonnes. If I may interpret your comments suggesting that there's a wide range of outcomes. How should we think about the bottom and the upper end of that range? And what needs to happen for you to meet the bottom of the upper end of the range for '27?

Just to clarify on that, and it has to do with the Lapberyet ore body. We do not, at presently expect to be able to mine anything at all from [indiscernible] in '26 or '27. We have not yet been able to conclude that investigation. We have hopes that we can mine something coming to '28 and beyond. The 2.3% that you've seen is then based on no [indiscernible]. Of course, there's a potential upside if we were to get able to produce out of a pay it, but we do not think that we will even though we do not know. I think that the 2.3 is based upon getting access to [indiscernible], [ Humalmen ] and more positions in [ Dunk ] and [indiscernible] with relatively little risk. So we would feel that we feel pretty good about the 2.3. We have not guided formally for grades for 2027. They are similar to the grade for 2026. Regarding sequencing, no comment really on that. We tend to avoid to guide on grades for the individual quarters.

And a follow-up on that as well on the flow of material from Garpenberg into your smelting system. Do you expect some disruptions? And how do you plan to mitigate this disruption, if you can give us some financial indications of what we should be expecting as a fallout from the concentrate treatment disruption?

I think that the financial implications are relatively small. There are potential issues, there is very little risk that we will not get zinc units, so we cannot produce. That was close to 0. We have already basically procured zinc enough to be able to mitigate Garpenberg. There is a little bit of a financial impact. That's, of course, when we procure something, now we have to buy it at spot terms and of course, what [ TC ] terms are not that good right now. So there is a little bit of a financial impact from that. There is a second financial impact, which is very much difficult to get your arms around, but it shouldn't be that big. As you know, in zinc smelting, it's not just having the enough amount of concentrate you're very dependent on making sure that you can get the right recipe to be able to feed it well through the smelters, losing Garpenberg, which is a very good and a very useful ingredient makes it difficult to replicate the recipes, which might impact a little bit on throughput availability and so on and some of the performance in the smelters, but we don't think it's going to be a major financial impact.

The next question comes from Liam Fitzpatrick from Deutsche Bank.

A few questions on Garpenberg. The first one, just to step back a bit, can you just explain in a bit more detail what you mean by substantial damage to [indiscernible]? Just to give us an idea of the challenges you're facing. The second question is just around how high production can get through other areas if you can't reaccess that part of the ore body is 2.3 million tonnes sort of about the limit? Or could you push that higher before the second hoist or the new hoist comes in? And then what you haven't told us is sort of additional CapEx the development work to open up the new areas. Is that expected to be substantial? Will that have some impact?

If we start from the back, CapEx relatively not so substantial. I think it's part of the more normal development. On [indiscernible], just for you to give -- just to have a sense of what has happened. And this is, of course, very much oversimplifying things. But you can imagine that [indiscernible], which is kind of 300-meter wide, 150 meters thick and kind of from 1,100 to 400 to 700-meter high. Without going into kind of any detail, I would say that this thing has fallen down 5 meters. The whole thing has fallen down 5 meters. What's the challenge with that? Well, of course, all the kind of development that we have done in the ore doesn't match the developments on the outside. That might be the simpler thing to kind of fix if that will be the only problem to get that to happen. The much more challenging thing is that when this has happened? How has the ore body cracked? If this has just kind of moved down, you could imagine going into the ore body and keep on mining the way it's always mined before. They will be very easy. Most likely, it has cracked not uniform in the same part, but it's cracked in different pieces. And where it's cracked a lot it might be impossible to go in because as you start going in and try to tunnel things, you will just get rockfall over you. So it will be unsafe to do that. In other areas, it might be possible. It might be possible with smaller dimensions. It might be possible if you mine slower. So these are all the issues that need to be answered. Then on top of that, there is a kind of another challenge. The Garpenberg mine has quite a lot of water into it. And as this kind of thing has fallen down, there is also the need to make sure that we control the water levels within the ore body. And with the new cracks and everything else, we might have a different level of water and a different way for water to go through. And that also needs to be investigated thoroughly so you understand where it is. So therefore, coming back to what I said, we think this is going to take months until we kind of have our arms around what can really be done and we think it's not going to be easy. We hope that we're going to be able to mine. But as we said before, we don't think that we can mine anything in '26 or '27. So the 2.3 that we have guided for should be fine. We should also, even without [indiscernible], be able to gradually step up in 2028 and '29. But it might be that they will be not stepping up so much if we don't get [indiscernible] paid in until we get the new hoist in '32.

Okay. That's very helpful. Just a quick follow-up on seismic activity. Is it kind of back to normal? Or are you still experiencing abnormal ...

It's back to normal. After the 48 hour of roller coaster, if you use that word, it's basically been back to normal sense. So there is no increased seismic activity at the moment.

The next question comes from Marina Calero from RBC Capital Markets.

I have a couple of questions. One follow-up on Garpenberg. When do you think you'll be in a position to announce the market to the extent that you can recover mining at the [indiscernible] ore body. And then my second question is on inflation. You've had very good cost control so far. Given the ongoing conflict in the Middle East, do you expect any inflationary pressures in the second half of the year?

I heard you a little bit [indiscernible], but if I understood you right, your first question was about Garpenberg about [indiscernible], did I understand right? How we could mine that one. I didn't really understand the question. But I can repeat what I just said, hopefully answering your question that [indiscernible], it will not be mind exactly as we have historically mined it. I'm pretty sure, but it doesn't mean that it cannot be in mined, and it might have to be mined with a smaller, more small-scale type of mining method, and it might mean that you might need to leave more pillars. There are lots of issues around that. And when will we know that? As I said, it will be months. This is very difficult to push these kind of investigations. It will be towards the end of the year. Hopefully, we'll have some more feeling around the 2028 and beyond. Regarding inflation, Håkan.

Yes, I think that's not an easy question. I mean there is obviously, a great deal of uncertainty. But I mean, we're obviously monitoring the development of oil prices and so on. But just to give -- so I guess that's -- if we get inflation, that's mainly connected to oil. We spend each quarter a bit more than SEK 300 million on diesel and oil. So any increases will have an impact on that. On top of that, we have about EUR 700 million spend, which is chemicals, explosives, transport and similar, not directly connected to oil, but with a significant impact. So that might also have an impact. And then as a follow-on, an additional EUR 700 million roughly per quarter on electricity. So all that will depend on what happens in the Middle East, et cetera. So we just have to monitor that.

The next question comes from Amos Fletcher from Barclays.

A couple of questions. I guess the first one was just to think about the EBIT bridge into Q2. Could you give us what the Garpenberg EBIT contribution was in Q1?

I think that Garpenberg had a contribution of about -- let's see if I get this right, about -- SEK 4 billion, SEK 1.5 billion in Q1. So we'll lose a fair part of that gross profit. As you saw, the SEK 400 million impact that we talked about that was just for the couple of weeks that the mine was closed. So that will have an impact and then prices, I mean, we'll see what happens. And then on top of that, we'll have some maintenance in smelters. I think those are the main components. And then other, we'll see how much impact we get on that.

Okay. And then I just wanted to ask on the working capital side. Can you give us any guidance for future quarters? Obviously, as you noted, Q1 was a very small build versus normal seasonal patents.

Well, I think typically, Q2 is a quarter that is relatively flat on working capital. But as other gets up to speed, we will tie a little bit. It's not as much in a zinc smelter that compared to, for example, a copper smelter, but I would expect a flat quarter with the exception of the build from Odda, which could be about SEK 0.5 billion or something like that.

Okay. That's great. And then final question was just on -- just kind of related to Marina's earlier question on diesel. I was just interested to know your purchasing position, but obviously seems like there's very little effect realized in the financials for Q1. Is that just the inventory position that you hold. And I was just wondering how big that is, how many weeks that is and when we might start to see higher prices flowing into the financials.

I don't have an exact number, but you're right, it's 1.5, 2 months of lag before the diesel hits the P&L because of the inventory positions of the material we've already bought.

The next question comes from Krishan Agarwal from Citigroup.

Can I clarify that the guidance of 4.5 million tonnes for Garpenberg 2032, does that include any of the mining happening into the [indiscernible] area?

Sorry, does it include any of the what -- the 4.5%, then we're into the new hoist and it doesn't contain any [indiscernible].

I understand. I understand. And then the second question, more of a clarification. The order smelter ramp, mean is it on track for the Q4 full run rate? Is that a fair assumption?

Yes. I think it's still on track for a relatively full ramp-up rate. Of course, the challenge with running up the smelter is not really getting it -- we where exactly you get the first -- the last percentage, we need to make sure that we get production going. And as I said, as of right now, when we're speaking, we're producing fully, and it looks relatively good. So it looks like these teething problems with the boiler and with the pumps that we had seem to be now all working. Does that mean that we will not find something else or maybe something else will also show up in this in this ramp-up period, but we should clearly be able to ramp up during the next few months. It shouldn't be that long.

I understand. And the final question is on the tank house. So I remember, I mean, you're saying you're okay, the tank house building you are doing is essentially a higher capacity than the earlier one. Would you be able to give us some kind of a sense as how much of the production we should expect after the commissioning of the tank house in the Q4 and probably full ramp-up in '27?

The tank house that we're building has 230,000 tonne capacity, which is very much in line with the one that burned down. So we are not increasing capacity because of this. This means that if you combine the [ 230 with 170 ] that we have in Hiawatha, we will be slightly long tankers capacity. We are unlikely to buy [indiscernible] because of logistics and other things. So the limiting factor is going to be our annual production and not to tank house going forward.

The next question comes from Daniel Major from UBS.

Just a follow-up again on the Garpenberg kind of earnings bridge from Amos' question. Can you provide us an estimate of what split in the cost base is fixed versus variable? If we look at 2025, your reported costs defined as revenue less EBITDA was about SEK 2.1 billion? Yes, can you just give us a sense of what the cost base will look like when you're running at a lower volume.

I can at least try. There is obviously some uncertainty still. But you're right, it's -- we had, I think,about SEK 550 million, SEK 560 million in the first quarter. So it -- that's up to the number you gave for last year, just to confirm that. We typically consider about 30% to be variable, meaning energy, consumables, et cetera. And there will be some savings on that. However, we will use more resources for tunneling not in the ore body, but 2 new ore bodies. And we'll have to decide whether that should be treated as CapEx or OpEx. And then on top of that, there will be some repair costs. So without giving an exact number, 30% is variable, but I think you should treat the cost savings quite conservatively on your -- in your assumptions because there is a lot to do to get this up and running again.

Okay. That's clear so much closer to the SEK 550 million than SEK 550 million less 30%. Is that the right way of thinking about it?

The next question comes from Richard Hatch from Berenberg.

Just a few questions. Just firstly, just quickly on [indiscernible]. Right. Just wondering if you can just give us a bit of a steer as to when you hit that 1.8 million tonne run rate. Should we expecting that to be occurring over the coming quarters? Or should we be going below that? That's the first one. And then just the second one is just on grades at Garpenberg in '27. I don't think you've given guidance, but I was just wondering if you would be able to give the direction of travel? And then thirdly, just you mentioned that you were comfortable in obtaining zinc material for the smelters to offset the Garpenberg reduction in volumes. But can you just perhaps just give a bit of a bit more color around just what you're seeing in that zinc concentrate market if you do see it tightening over the next couple of years or if you feel comfortable that you're going to be able to secure the material you need while Garpenberg.

[indiscernible], 1.8, we haven't changed the full year guidance from 1.8, which means that we need to reach that level within the next few quarters to keep the full year guidance. Grades 27, order of magnitude similar as 26 without going into detail. And then zinc material, we don't see -- and we don't foresee there being any issues in finding the zinc material. It's a matter of cost and where the spot TCs will develop on zinc. I think your good is as good as mine.

Okay. Mikael, can I just push you a bit on Tara. I mean your run rate is currently well below that 1.8, right? So what are the challenges, the bottlenecks, where you sort of seeing the areas to improve and get to the level you want to get to?

It has been developments. We have not been able to keep developments up to the level we need. We have done efforts to increase developments. They have not given quite the effect that we wanted, but the given some effects, the developments are coming, and we're working hard with developments also now in this quarter. And as I alert -- before we've actually sent some crews from Garpenberg over to work with development [indiscernible] as Garpenberg has been down.

The next question comes from Boris Bourdet from Kepler Cheuvreux.

The first one is on Garpenberg about the systemic activity now that you have more insight into what happened. Can you say whether that was linked to the mining operations, this rock fall or whether it was connected to external systemic activity? I'm asking the question because recently, we had medium magnitude, seismic activity in Norway and Sweden on the western part of Sweden. And the second question is on IT grade. We see the grades further going down. So what makes you comfortable that the grades will go up in H2?

IT grade, I think we were very clear in our early communication that the first half would be lower and the second half would be higher when we communicated the 0.18. We have a better position. It's that we're better positions that we're coming into in the second half of the year with higher grades. [indiscernible] by why. This is, of course, something that we cannot definitely say why, and that's part of the investigation why this happened. I think it's fair to say that it's because of our mining. This is an area that is quite seismically stable and should not normally have sales activity. But maybe theoretically, there was also an outside event that triggered this thing, but that we do not know, and we can absolutely not say for sure. I think it's more likely that it has been triggered by our own activities. And of course, we need to take the learnings from that to make sure that this doesn't happen again on this scale. But as I said, this is very early days and the investigations are still ongoing to both why this triggered and why it triggered in the way that -- once it triggered, why it continued the way that it did.

And maybe just a follow-up on Garpenberg. If I get you right, there is no specific additional costs or CapEx or I mean, no significant amounts to be expected. On top of the already impaired 700 [indiscernible] and missed volumes? Or should we include additional things?

I think this was Håkan said that there will be some repair costs but those repair costs might be more seen as not getting down the operating cost for operating only at 30%. And I think that, that's more the way to see it. I don't think there will be any increased costs as such, but maybe not quite as much lower as you would have expected otherwise. And we don't see any additional.

The next question comes from Pavel Kirjanovs from Bank of America.

I just had another one on Garpenberg. And I apologize if this was asked previously, but as we think about at Garpenberg through 2030 to what would allow you to reach that earlier potentially?

Well, the -- I would say that the way to reach it earlier and the only way to reach it earlier would be that we will get significant mining coming in [indiscernible] because we will not be able to develop the other ore bodies any faster. This is in line with the development pace that we have. So it will be -- that will be dependent on getting mining and some meaningful mining out of [indiscernible]. And just to make sure, again, we do not, in any way, promise that we do not know. We hope, but we do not know the situation in [indiscernible].

[Operator Instructions] The next question is from Daniel Major from UBS.

A couple of follow-ups, if I may. Just on the depreciation line, I'm assuming this quarter, the SEK 700 million write-down at Garfenbay went through here. But can you just provide us a guidance level on the quarterly run rate of DNA across the group following the changes at Garpenberg? And then a second follow-up I've asked many times before, but why do you focus on EBIT, not EBITDA, when all of your peers focus on EBITDA?

Let's say, the depreciation [indiscernible], we take out EUR 700 million from the asset base which is depreciated over a quite a long time. So if you just spread it across the life span of those, that's been the development. So that is a fairly low change in -- fairly limited change in depreciation. What will happen though is that when [ ADA ] gets up to speed, we will increase the depreciation there, as we talked about earlier. And also a reminder is that Aitik is largely depreciating based on metal value produced. So also the depreciations in Aitik will increase. Regarding EBITDA and EBIT, well, I don't really have any specific comments on that. I'm aware that many people focus on EBITDA. We have -- we're working with EBIT, excluding process inventories and then I think it's easy to get the EBITDA number as well. But I guess we might have to think about that, but until further notice we're sticking to our regular follow-up.

Just to push you on that slightly. So what would be a sensible run rate with those moving parts on depreciation through quarterly basis through the remainder of the year?

Let's see, no. I think that we're going up in Odda from about 200 million, 300 million to about NOK 800 million per year. So that will be the change there. I think it's not so much this year. But as we go over the next few years and getting closer to higher-grade areas, that would be fairly significant numbers, but it all depends on what exactly are you looking at. But for others about 200-something to 800 something per year.

Per year?

Per year.

Increasing through the remainder of this year?

Yes, about SEK 150 million or SEK 200 million.

And then slightly lower because of the SEK 700 million -- but that's maybe SEK 350 million comes out or something like that.

Yes, I'd say less because it's quite long depreciation times on those assets.

Right. So we should take the base, which is this quarter less EUR 700 million and add those variables on? Is that the right way of thinking about it?

At about SEK 150 million, SEK 175 million per quarter, then I think you should be fairly spot on.

Okay. Versus this quarter, less SEK 700 million?

Yes.

Okay. And just one other follow-up, if I could, just a clarification that you mentioned earlier. Did you say that the net provisional pricing impact was a positive SEK 450 million this quarter total?

The -- it depends what you mean by net. But the value in the Q1 profit that came out of preliminary price volumes at the end of Q4, and that was definitively priced in Q1, that was SEK 450 million. And if you refer to the EBIT bridge, you'll have to compare what we had for what the impact was in the respective quarter prior. But the impact on this P&L was SEK 45 million this quarter.

The next question comes from Liam Fitzpatrick from Deutsche Bank.

A couple of quick follow-ups on the numbers as well. Just on that EUR 1.4 billion number that you gave us, [indiscernible] for Garpenberg, I assume that's before the impairment. I just wanted to confirm that. And then you kind of suggested that just you're still not entirely certain or clear in terms of how you're going to classify between OpEx and CapEx at Garpenberg in terms of the additional development work. In terms of what you're sort of guiding to us at the moment, are you assuming that most of this sort of additional tunneling work and so on is flowing through or is it sort of split or how should we think about it?

When we say that be conservative on your estimates of OpEx that we will not be able to save that much on OpEx. That's based on the fact that we still have to do the tunneling. Then if we decide to classify some of it as CapEx then you will see slightly lower OpEx and slightly higher CapEx, but it's -- I think we're talking about SEK 100 million or SEK 200 million order of magnitude. But what we've said today is basically based on that being mainly OpEx. But normally, when we develop towards a new ore body that will be CapEx. So we'll just have to come back on that. But it's relatively small numbers anyway.

Okay. And Gothenburg, 1.4, is that pre the impairment?

Yes.

Thank you for questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you all. Thank you all for very insightful questions. I am personally going to go out for a few minutes and enjoy the sun here that we're having at [indiscernible] before we continue with our AGM. I hope that wherever you are standing that you're having a good day as well. Thank you, everybody.