full year report - bolidenir.boliden.com/files/press/boliden/boliden_2010-q4...full year report...

Full Year ReportJanuary – December 2010

Lennart EvrellPresident & CEO

Johan FantCFO

2011-02-111Boliden Group

Summary

Full year Revenues MSEK 36 716 (27 635) EBIT ex PIR* MSEK 4 830 (2 350)

‒ Operating profit MSEK 5 643 (3 623) Free Cash Flow MSEK 3 202 (-948)

Aitik start-up Aitik and Boliden area production

increase E-scrap expansion on plan Decision to expand Garpenberg

Q4 Revenues MSEK 10 120 (8 356) EBIT ex PIR* MSEK 1 445 (870)

‒ Operating profit MSEK 1 942 (1 232) Free Cash Flow MSEK 1 850 (350)

2011-02-11Boliden Group 2

* PIR=Process Inventory Revaluation

Group EBIT Development


*Process Inventory Revaluation

-500

0

500

1 000

1 500

2 000

2 500

Q407 Q108 Q208 Q308 Q408 Q109 Q209 Q309 Q409 Q110 Q210 Q310 Q410

MSEK

Quarterly EBIT

Quarterly EBIT excl PIR*

The Market


Market - full year 2010

Metals Demand

‒ Record global demand for zinc and copper‒ High growth in all regions‒ Copper inventories down but zinc up 50%‒ Sulphuric acid demand up

Supply‒ Mine production could not match demand first 9 months‒ Smelter build continued – low capacity utilisation rates

Prices‒ Average USD prices up for all metals – SEK stronger‒ Record highs for copper and gold‒ Sulphuric acid – prices up

Tight mining concentrate markets first 9 months‒ Very low copper spot TC/RC and low zinc TC‒ Realised contract zinc TC 258 (245) USD/t concentrate‒ Copper benchmark TC down to 46.5 (75) USD/t concentrate


Global GDP development


World growth near 5% in 2010 Lower growth in the second half Recovery in industrial activity Lower than normal levels in mature

economies

-10

-5

0

5

10

15

Year on year %

World China USA EU

Source: Reuters Datastream, IMF, Boliden calculation of world GDP

World: Countries accounting for approx.80% of world GDP

2005 2006 2007 2008 2009 2010

Construction Market

Continued high activity in China Low activity in mature economies


-20

-10

0

10

20

30

40

Year on year %

China-residential investments cumulative valueUSA-total construction spending valueEU construction production

2006 2007 2008 2009 2010

Source: Reuters Datastream

Automotive market

High global growth in 2010 Significantly lower growth in second

half of 2010 Level remained well below normal in

mature economies


-100

-50

0

50

100

150

Year onyear %

Car productionMonthly data 3m moving average

2006 2007 2008 2009 2010

Source: Reuters Datastream * Light vehicle assemblies

China

USA

Japan

Germany

Metals demand

Record global demand Since the peak in 2006

‒ China +50%‒ RoW -9%

Record global demand Since the peak in 2007:

‒ China +53%‒ RoW -15%


Growth Q1 Q2 Q3 Q4 FY 2010 FY 2009

Global 24% 23% 10% 8% 16% -7%

China 25% 21% 9% 8% 15% 10%

RoW 24% 24% 11% 8% 16% -16%

Growth Q1 Q2 Q3 Q4 FY 2010 FY 2009

Global 11% 9% 9% 3% 8% -4%

China 22% 14% 10% 2% 12% 26%

RoW 5% 6% 8% 4% 6% -16%

Zinc Price and Inventories


Zinc price (LME average)

USD/tQ4-10 vs period

Q4 09 2,211 + 5%

Q1 10 2,288 + 1%

Q2 10 2,018 + 15%

Q3 10 2,013 + 15%

Q4 10 2,315 -

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/t Tonnes

Shanghai inventory LME Inventory Cash Price LME Quarterly average

Price increased 14% in Q4 Inventories up 16% and continued to increase into 2011

Copper Price and Inventories


Copper price (LME average)

USD/tQ4-10 vs period

Q4 09 6,643 + 30%

Q1 10 7,243 + 19%

Q2 10 7,013 + 23%

Q3 10 7,242 + 19%

Q4 10 8,634 -

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

11 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

TonnesUSD/tCOMEX Inventory Shanghai inventory LME Inventory LME Cash Price Quarterly average

Price increased 21% in Q4

Inventories slightly up, 5%

0

5

10

15

20

25

30

35

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/oz

0100200300400500600700800900

1 0001 1001 2001 3001 4001 500

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/oz

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

2003 2004 2005 2006 2007 2008 2009 2010 2011

USD/t Tonnes

LME Inventory LME Cash Price Quarterly average

Lead, Gold and Silver prices


Silver

Lead

Gold

0

50

100

150

200

EUR/t Sulphuric acid pricecfr NW Europe

Annual average 6 month contract

Source: © CRU (www.crugroup.com), British Sulphur

2006 2007 2008 2009 2010

Treatment charges

Concentrate shortage 9M – spot TC down Concentrate surplus in Q4 – spot TC up Spot well below contract all year

Concentrate shortage 9M – spot TC sharply down

Surplus in Q4 – spot TC sharply up Spot TC above 2010 benchmark in Q4


0

20

40

60

80

100

120

140

160

USD/t concentrate

Copper treatment charge (TC)

Standard grade TC Cif spot mine/trader USD/t TC benchmark

Source: © CRU (www.crugroup.com)

2006 2007 2008 2009 20100

100

200

300

400

500

600

USD/t concentrate

Zinc treatment charge (TC)

Realised TC (including price participation) Spot TC - outturn


2006 2007 2008 2009 2010

Metal premiums

European demand up – spot premiums up in 2010

Contract premium rising

European demand up – spot premiums up in 2010

Scrap supply rose - cathode surplus –– premiums down in Jan 2011

Benchmark premium higher in 2011


020406080

100120140160180

USD/t metalCopper metal price premium

Spot Copper premium CIF W. Europe Benchmark CIF Europe


2005 2006 2007 2008 2009 2010 20110

50

100

150

200

250

300

350

400

USD/t metalZinc metal price premium

Europe ex-works US Midwest Delivered Far East (Western)


2005 2006 2007 2008 2009 2010

Business Area Mines


Mines - Production


0

4 000

8 000

12 000

16 000

20 000

24 000

0

2 000

4 000

6 000

8 000

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 09

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Metal content, tonnes

Milled ore, ktonnes

Copper

Milled ore (Aitik) Metal content

0

20 000

40 000

60 000

80 000

100 000

0

300

600

900

1 200

1 500

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 09

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Metal content, tonnes

Milled ore, ktonnes Zinc

Milled ore Zinc metal content

Aitik expansion from Q2 Metal production +4% vs Q3

Growth in Boliden area and Garpenberg

Metal production +11% vs Q3

Mines - Financial Summary Q4


EBIT 1 217 (541) MSEK in Q4– 1 061 MSEK in Q3 2010

Higher copper, gold and silver production Higher prices High costs in Aitik Reclamation cost in Boliden

area0

200

400

600

800

1 000

1 200

1 400

MSEK

Quarterly EBIT

Mines – EBIT by Unit


0

1 000

2 000

3 000

4 000

5 000Aitik Boliden area Garpenberg Tara

09 10

BA Mines

09 10 09 10 09 10 09 10

Ore Reserves & Mineral Resources


Ore Reserves & Mineral Resources - Summary

Continued stable trend 229 MSEK invested in exploration

2010 Increased mineral resources in Aitik

and Garpenberg Significant increase in ore reserves in

the Boliden area



0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Boliden Area

Ore reserveMineral resource (measured/indicated)Mineral resource (inferred)Ore production*10

kton

0

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

1 600 000

1 800 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

kton Aitik


Ore reserves grew by 29% Mineral resources increased by 14%



0

5 000

10 000

15 000

20 000

25 000

30 000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

kton Garpenberg


0

5 000

10 000

15 000

20 000

25 000

30 000

2002 2003 2004 2005 2006 2007 2008 2009 2010

kton Tara


Mineral resources increased by 38% Mineral resources unchanged Ore reserves slightly reduced


Aitik Expansion - update


Capacity Reliability

Mine and logistics √

Crushers √Conveyors √Mills √ √Flotation √ √

Ramp-up period

Mine and logistics‒ Measures to improve truck availability

Crushers‒ All ore through new crushers Q1-Q2‒ Crusher 165 (old) disconnected,

to be reconnected end Q2‒ Availability not yet satisfactory

Grades declining below averagereserve grade from Q2

36 Mtonnes 2014

Garpenberg Expansion - update

Project‒ Investment: SEK 3.9 billion‒ Capacity increase of ore production from 1.4 to 2.5 million tonnes‒ Gradually increase from 2 million tonnes in 2014 to full production by the end of 2015‒ New mine site and facilities‒ Production through 2030

Hedging‒ Hedging of zinc, copper, lead, gold and silver metal prices ‒ Approx 1/3 of the Group's metal price risk and corresponding exchange rate risk for the

period of the investment in Garpenberg.‒ Refers to 2011, 2012 and the first six months of 2013.

2/11/2011Boliden Group 24

Business Area Smelters


Smelters - Production

Rönnskär -2 % compared to Q3 Harjavalta +16 % compared to Q3 Improving feed through the year Lead alloys higher +49 % vs Q3

Kokkola + 6 % compared to Q3 Odda, + 6 % compared to Q3 Record year for Kokkola


0

20 000

40 000

60 000

80 000

100 000

0

50 000

100 000

150 000

200 000

250 000

300 000

350 000

400 000

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Cathode production,

tonnes

Total feed, tonnes Copper

Copper feed, total Copper cathode production

0

20 000

40 000

60 000

80 000

100 000

120 000

140 000

0

50 000

100 000

150 000

200 000

250 000

Q3 07

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Metal production,

tonnes

Total feed, tonnes

Zinc

Zinc feed, total Zinc metal production

Smelters – Financial Summary

EBIT excl. PIR* 530 (356) MSEK in Q4– 238 MSEK in Q3 2010

Price increases‒ Free metals‒ Realized zinc TCs

Sulphuric acid improved‒ Volumes and prices

No maintenance stops Q4


-500

-300

-100

100

300

500

700

900

1 100

1 300

MSEK

Quarterly EBIT

Quarterly EBIT excl PIR*

* Process Inventory Revaluation

-250

0

250

500

750

1 000

1 250

1 500Rönnskär Harjavalta Bergsöe

09 10

BA SmeltersKokkola Odda

09 10 09 10 09 10 09 10 09 10

Smelters – EBIT* by Unit


* Excl. PIR

Update E-scrap expansion


Capacity for recycling of electronic scrap from 45,000 to 120,000 tonnes/year

New Kaldo plant – Capex 1.3 billion Start 2011/2012 On plan

Financials


Financial Summary


MSEK Q4 2010 Q4 2009 YTD 10 YTD 09

Revenues 10 120 8 356 36 716 27 635

Operating profit (EBIT) 1 942 1 232 5 643 3 623

EBIT margin 19% 15% 15% 13%

EBIT excl Process Inventory Revaluation 1 445 870 4 830 2 350

Free cash flow 1 850 350 3 202 -948

Capex 1 025 1 269 2 996 4 915

Earnings per share, SEK 5,17 3,00 14,47 9,14

Gearing 24% 46%

Group EBIT Q4 2010 versus Q3 2010


Improved zinc grades in all units

Ramp up of production in the Boliden area

Copper smelters

Copper USD/ton +19 %Zinc USD/ton +15%

Positive hedge effect Q3Little effect Q4

Volume related costs

Reclamation costs

Costs for start up issues in Aitik

Group EBIT 2010 versus 2009


Volume driven costs in Aitik, Boliden area and smelters

Aitik start-up

Reclamation

Exploration

Aitik Expansion

Increased production of Maurliden Östra, Boliden area

Lower zinc grades in Tara and Garpenberg

Copper USD/ton +46 %

Zinc USD/ton +30%

Negative SEK/USD impact

Capital Structure


48%46%

43%46%

37%

24%

0%

10%

20%

30%

40%

50%

60%

Q309 Q409 Q110 Q210 Q310 Q410

Gearing

1. Shareholders’ equity includes the value of outstanding hedge contracts

SEK bnUnless otherwise stated

31 Dec2010

31 Dec2009

Total Asset 35,1 33,3

Capital employed 27,2 26,2

Shareholders' equity1 18,8 16,3

Net debt 4,6 7,4

Gearing % 24 46

Equity/asset ratio, % 54 49

Duration of committed credit facilities, years 4,2 3,0

Average interest rate, % 3,29 2,62

Interest duration, years 2,0 2,1

Net payment capacity 10,728 6,924

Operating costs


Operating costs 2009 (constant currency rates) 10 098Volume related 650Depreciation 250Start-up problems Aitik 150Exploration and reclamation 150General cost increases 337

Operating costs 2010 11 635

MSEKEnergy; 17%

Consumables; 17%

Personnel; 28%

Transport; 5%

External services; 19%

Depreciation & other; 14%

Share of total operating costs

Cash Flow


MSEK Q4 10 Q4 09 YTD 10 YTD 09Op profit before depreciation (EBITDA)* 2 397 1 620 7 445 5 185

Changes in working capital* 483 100 -1 475 -1 063

Capital expenditure -1 025 -1 269 -2 996 -4 915w hereof Aitik 36 -61 -665 -625 -2 982

Free cash flow 1 850 350 3 202 -948*Includes Process Inventory Revaluation

Capex in 2011 about SEK 4-5 billion

Sensitivity Analysis


Changein metalprices,+10%

EBITeffect, SEK m

Change inUSD, +10%

EBITeffect, SEK m

Change inTC/RC,+10%

EBITeffect,SEK m

Copper 580 USD/SEK 1 160 TC Zn 45

Zinc 585 EUR/USD 425 TC/RC Cu 50

Lead 105 USD/NOK 90 TC Pb -10

Gold 125

Silver 155

Dividend proposal

Dividend policy states one third of net profit to be distributed to share holders

Proposal 2010:‒ SEK 5 per share‒ Equals 34,6% of net profit‒ 1,368 MSEK

SEK 2005 2006 2007 2008 2009

Earnings per share 7.07 21.66 13.37 3.42 9.14

Dividend 2.00 4.00 4.00 1.00 3.00

Pay-out ratio,% 28.3 18.5 29.9 29.2 32.8

2/11/2011Boliden Group 38

Summary

Strong quarter Good quarter for smelters – improved production Higher full year production volumes in Aitik and Boliden Area Aitik ramp-up:

‒ New crusher availability still too low‒ Old crusher closed for 6 months‒ Grades decline‒ 36 Mton/year 2014

E-scrap expansion in Rönnskär – 2011/2012 Garpenberg expansion and new hedge program

2/11/201139Boliden Group

Forward-looking statements

Certain statements in this presentation are forward-looking, and the actual outcome could be materially different. Such forward-looking statements are based on Boliden’s present plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other could have a material effect on the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange rates, interest rates and in metal prices, production disruptions, technological issues, interruptions in supply, actions of courts, regulators, government agencies, competitors, customers, suppliers, employees and other third parties.


Boliden produces metals that make modern life work


full year report - bolidenir.boliden.com/files/press/boliden/boliden_2010-q4...full year report...

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