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Boliden AB
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Ladies and gentlemen, I'd like to welcome you to Boliden's Q3 2021 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 where we will start here in Stockholm and then it will be followed by the web. Mr. Staffas, welcome.
Thank you, Olof, and good morning to everybody. It's good to see so many here in the room. It's a little bit new to be able to have people in the room again and also all of you standing there behind the camera. It's a privilege to be able to be here today and present these results. Just on the key highlights, I mean, start with the obvious one. We do have very strong prices and terms, and you all know that, and it's been clear to everybody. It should be pointed out a little bit just to be aware of it that in the general euphoria of high prices, actually on the closing day of the quarter, the prices were down a little bit, especially the PGM and nickel prices, which plays quite a big role in terms of the financials, where more it's the end-of-period prices that matters rather than the average prices during the quarter. We have had production disturbances during the quarter, which, in some extent, a mining company always has that, but it's been a little bit larger than what we've seen before. We had the crusher in Garpenberg, we've had issues with COVID in Kevitsa, we've also had issues with the fire in Harjavalta. We'll come back to all those, but going forward. We've also had very big maintenance stops. This is a big maintenance year, generally, and we're, to some extent, catching up from last year. We have been able to carry out the maintenance stops according to plan, more or less, in the even though they were maybe slightly more expensive, but we're quite happy with the way that it turned out. Financial performance. The SEK 2.4 billion in EBIT, excluding the process inventory revaluation, slightly up from last year, we'll come into those details and what's behind that. The cash flow is at about SEK 1 billion or less than SEK 1 billion. That is maybe a little bit lower than what everybody would expect. We've also had a buildup of working capital in the quarter. The build out the working capital, we will also come back to a little bit, but it's mainly due to the combination of maintenance stops, which always ties working capital around that. And then we also have some issues of getting the -- some of the products out in the end, and you've also seen that, that plays into our internal profit elimination that was also worse than I think many of you expected. CapEx at SEK 1.5 billion in the quarter. We are doing these things according to plan, and we will come out a little bit less than what we said last year in terms of the -- we said last quarter, I should say, in terms of the investment for the full year. I'll come back to that as well. On the project side, well, of course, the other project has started, so there's not much to report back on there, but it started well, and there are no issues so far in that project. The Rönnskär smelter has been commissioning quite a few projects. We've commissioned a niching plant, we've commissioned the new copper expansion with the dual converter operations during the quarter and the underground repository is right about as we speak -- now, as we speak, ready to take on the first deposits into it. So all of that has worked out very well and also according to plan. So if you look at the EBIT numbers in general, we're pleased with the level as such with the high -- relatively high EBIT that we do have, higher than last year compared to what I think many of you expected, we're slightly lower on the mining side, has to do slightly with, I think, for the pricing and the fact that we had some production disturbances. Smelters, I think, quite in line with what the guidance would have led you to think. It is lower than last year, but that's, of course, a totally different maintenance quarter this time than compared to last year. On the ESG side, if we start there, we've also had a relatively okay, I would say, a quarter. The LTI frequency is a little bit on a higher level, even though it was lower than it was last year. The sick leave is slightly coming back. We are still on higher levels than we should have and what we had before COVID. Even though COVID is likely going out, it's not going out totally. And I think we will continue to see some issues with it also going forward. Even though COVID is coming back, the stricter regulations around how you have to be home or you feel are slightly sick also plays into us. The CO2, which is maybe too short to measure on a quarter, but you can see this quarter was better than the same quarter last year in terms of CO2 intensity. And we're still very much on target with our -- or on plan, I should say, with the target to reduce by 40% until 2030. Pricing terms. Spoke a little bit about it. The pricing terms are on a very high level. Even though they are slightly below what they were in the last quarter, they're still on a high level, as you can see on that graph up to the right. You can also see that it's coming down a little bit towards the end, and that's what I also said before that some of these prices were lower right on the close of the period. The exchange rates are very stable from our point of view. Looking at the prices. Well, the metal prices are high. We said that a couple of times, and you can also see on this chart that we show every quarter that the prices are quite above where the cost levels are in the industry, which you can expect because there's a very good demand situation and demand outlook for the metals, which drives up the prices. But of course, at being at this high price is always a risk of a set back on prices. You can also see that -- you can compare to average prices and the prices right now are on a high level, which is something that we feel good about, of course. If we then start coming into production, while in the mines, we've had a couple of setbacks in terms of production. I think the grades came in roughly around where they're supposed to come in. So we feel good about that. We did not reach the volume in Aitik. Once again, we've had issues with availability of both our people, but also availability of some of the equipment that we're working on to solve. In Garpenberg, you know that we had a crusher failure in the [indiscernible] and there are 2 crushers. Each of them have enough capacity to handle the whole production. So there's clearly an overcapacity. But 1 of the 2 crushers is out of operations for over 6 months due to renovation of a shaft that is right behind it, which means that it's offline. So we're relying only on 1 crusher in Garpenberg since the summer and all the way through Christmas. And of course, when you have the situation, there's always some kind of bad luck and we had a failure of the bearing system inside the operating crusher. That's a 10-day renovation that took place or both getting care hand of spare parts, but also a relatively big operation to change those inner bearings, but that's all done and finished and the system is working very well. We also managed to catch up with a few of those days because this happened in the middle of the quarter, but we did not catch up the full effect of the 10-day shutdown. Kevitsa had a stop for 4 days due to COVID. We were having enough people that were either sick or into quarantine because people around there were sick that we could not get enough people to have a safety level for the staffing of the mill. So we had to shut the mill for 4 days because of that, which, of course, plays into the production numbers. Boliden area had a relatively stable situation around our plans. Tara did have a weak situation. Tara is in a level -- in a situation, as I think you know, where there are relatively few alternatives. And when things happen, we have to go to worst stopes and those worst stopes are both lowering grade and lower in volume and that shows off. And we are working hard to try to get Tara back on speed to be able to be ahead of the curve in order to handle those situations. On the smelter side, well, Harjavalta has been a busy place. We started to have the fire in July. We talked about it already a quarter back because it had happened before we had the presentation then. It turned out to be slightly more expensive in the end than what we indicated when we met then. With that, then being done, we've had a -- one of the bigger maintenance stops that we had in Harjavalta ever. We're still in maintenance as we're speaking today because we're still working on the nickel line where maintenance, but the copper line is done and finished. The maintenance in the nickel line is also linked to the expansion project in the nickel line, that is also moving ahead and will become operational in this quarter, in the fourth quarter. But all in all, the maintenance stop has worked out well. In Rönnskär, we also had a stable production. The copper line expansion is not commissioned. The dual converter operations has been working since late in the third quarter, which is also very good. We've had also the inauguration of the leaching plant, is also good. We do have a limited supply or have had a limited supply of e-scrap, which has played into the operations, and we'll see if we can get new sources and see if we can get the e-scrap to come up again. Odda and Kokkola, basically stable production in all these units. But also here, we've had maintenance stops in Odda and Bergsöe that, of course, play in into the production. With that, we'll come back into the financial summary, and I'll let Håkan to come up and give you the -- run through of the numbers.
Thank you, Mikael, and good morning. So just to summarize what Michael just talked about, we are reporting a stable EBIT, excluding process inventory of 2.4, and that's compared to 2.3 and 2.6 in the comparison periods. We are up on CapEx, but we still reduced the guidance for the full year. Mikael will come back to that. Free cash flow is down due to working capital. I'll come back to that in a minute. And then it all adds up to an earnings per share of SEK 6.57. Looking by business areas, Mines is up compared to last year, about SEK 300 million. This is due to a strong development in base metal prices. Smelter is down about SEK 200 million due to a strong maintenance quarter and a strong maintenance year. And then other and eliminations, that's primarily then the internal profit eliminations, which is an accounting adjustment for timing of revenue recognition, that's influenced by inventories and price levels. This is better than comparisons periods, but it's still a couple of hundred millions higher than what we expected. And the reason is that we've tied more precious metals in the system. It's silver from Garpenberg, but above all gold from the Boliden area. And the reason is that we have moved one process step in the gold manufacturing, the gold processing from Boliden to Rönnskär. And in that change, we piled up a bit of material that we expect to be able to realize externally within a few weeks. So about SEK 200 million that is sort of extra in this amount. Going through the comparison Q3 to Q3, we've improved the result by SEK 200 million. We've been helped by better prices, and it's primarily the base metal prices that have gone up compared to last year. On the negative side, we've got the currency, but also lower treatment charges, but a strong price development year-over-year. Volumes are down SEK 451 million. Lower grades in Aitik is one of the main explanations. We have SEK 200 million in lower grades. This is in line with the guidance that we've given. But we also have lower mill volume in a couple of the other mines, Garpenberg, Tara and Kevitsa, that are down due to disturbances and the challenges Mikael mentioned. Compared to last year, we also had a fairly big maintenance in Q3 of last year, but this is a heavier maintenance year. So we have lower volumes due to maintenance in smelters and then also finally due to Kylylahti being closed. On the cost side, we are seeing some inflation. And this number then includes, of course, inflation on labor cost and energy as well. Everything included, we're talking about slightly above 5% inflation year-over-year. And that has -- that is included in this number. We also have the cost effect of higher maintenance stops. And then in the other direction, working towards lower cost, we have lower mine production and the fact that Kylylahti is closed. But inflation is back, as we talked about already last quarter. Comparing quarter-to-quarter, Q3 to Q2, the price change is fairly limited. It's a negative of 92. We have lower price -- metal prices, but offset by stronger currencies. And as Mikael also mentioned, the end-of-period prices are important for us, the price on the last day of the quarter because all the preliminary pricing is valued at end of quarter prices and in particular, palladium and silver and also nickel were lower in the quarter end than the averages. Having said that, they've come back after the quarter end, so this looks good for the future, but it did have an impact on this line. Volumes, down quarter-on-quarter, lower milled volume, we've talked about that and mainly -- this is mainly in Garpenberg. Garpenberg was running at a 3.2 million ton pace in Q2 and comes down due to the disturbances that Mikael talked about. We have lower grades in Kevitsa. Again, Q2 was a strong great quarter where we were mining significantly above reserve grade in Kevitsa, and that's now down to normal levels or to reserve grade levels. And then we have, again, extensive maintenance stop in smelters, primarily in Harjavalta this quarter. Costs are lower. We have lower production in mines and that is visible in the cost line. We also have seasonally lower personnel costs about SEK 150 million in Q3. On the other hand, we have a higher maintenance cost that works in the other direction here. Cash flow is lower. The reason is that we've tied more working capital in this quarter. The typical seasonality that you see in Boliden is that we normally would build working capital in the first half of the year and then release it in the later part of the year. That was, for example, what happened in 2020 and in most years, if you look back in time. This year, we have not built working capital during the first half of the year. But we have built SEK 841 million in Q3, which is much related to the maintenance stops. Typically, Q4 would be the strongest quarter that we have from this perspective. So I expect that a lot of this will be released in the next quarter. Finally, capital structure. As in previous quarter, a strong balance sheet. We have a net debt of just over SEK 1 billion, and that converts to a gearing ratio of 2%. So it's a strong balance sheet. We have a net payment capacity of SEK 14 billion, which is the cash that we have and the liquidity reserves. And we have an average interest rate of 1.6%, which is -- which we consider as a competitive level. Mikael, continue.
Thank you, Håkan. Just to draw your attention to that, we've also announced today that we're going to go ahead and start the journey towards mine automatization in the sense that we are kind of fit 11 of our existing trucks in Aitik with the automatic system to be able to run automatically. This is something that will be a first in Europe, which means there is some regulation that needs to be handled and some laws, both around how you can operate it. There are also some issues around how to make sure that we have all the staff with us and this change. And I think that we've gotten quite far on that level as well. So this is a little bit more than SEK 200 million that we're investing into the system in a corporation that we're having with Komatsu on this development. And of course, the aim is to get a better productivity, which is coming both with the fact that we need it because we're increasing the production, but also because there is an increased transport demand over time as the mine gets deeper and as the, what should say, the waste rock hills gets higher and get further away, there is an increased travel needed for every tonne as we move forward. Now on the guidance going forward, there is not really much change here. The Aitik 0.21% is still on the guidance that we have for the year or for the rest of the year, I should say. For '22, we are now putting in the guidance for the grades and Aitik at 0.20, and the goal is slightly below the -- down to 0.10. In Garpenberg, we are also not changing any guidance for this year with the 3.8 and the 110. Here, we're coming up with the guidance for '22 at 3.6% and 110 as the guidance for the grades. In Kevitsa, we were guiding that for '22, there will be slightly below the average grade there as well being mined. In terms of the maintenance shutdown, we have now the maintenance for the total year of SEK 560 million for the total year, of which SEK 200 million ends up in Q4. This is a slight increase of the previous guidance that we've had. The inflation pressure is a very difficult thing to get a number around. Håkan mentioned one number, which is 5%, which in some way is the order of magnitude of the inflation that we're feeling. It's very different from different parts, and it's lots of moving part. You can understand that the kind of annual negotiation with suppliers of everything are very special this year compared to other years. It is the higher metal prices, which we benefit from one side, but that comes in on the cost side from our suppliers is also the higher energy prices that come in as a cost base for many of our suppliers that plays into this discussion. And then, of course, you have energy prices themselves, where we are maybe to 80% hedged in terms of electricity prices. We're not hedged in terms of diesel prices. And that all comes into this mix. It's very difficult to give an exact guidance, but there is clearly inflation in the system right now. The CapEx, finally, we have reduced the guidance for this year from 5.5 to below -- sorry, 7.5 to below 7. The reasons that we are a little bit late on many smaller projects, and we are not really on time on that, and that shows it's an effect. So this is not thing that we are really happy about, but that's the way it is. Regarding guidance for '22, we are at slightly above the SEK 10 billion mark. The big reason here is, of course, that we get in Odda around 2.5. And then we also get some of the things that we don't get done this year, we will have to do next year, and therefore, we end up with these numbers. I should say that there's, of course, a big uncertainty regarding this number because it will depend quite a lot on exactly what happens in late '22 and early '23 in Odda, what happens before and after new year, which is a little bit difficult on an exact plan for us. This would be a very intensive investment phase of the Odda projects. So with that, I will open the floor for questions, Olof.
Ladies and gentlemen, that opens up our Q&A session, and we will start here in Stockholm. And we have a question from Christian Handelsbanken. Please.
Yes. On the guidance, you are very precise on the copper, zinc, gold, et cetera, for Garpenberg and What is the reason for not being -- or adopting the same approach for Kevitsa?
You could clearly do that, but we feel that we've taken the Aitik and Garpenberg because they are more material. Kevitsa is not quite as material to the total numbers. So we are more soft on that one in the term guidance.
But it still would help, yes? So this kind of soft wording slightly below, doesn't say very much. So it is much better if you can provide -- no one will blame you if you are a little bit wrong because there is always underlying uncertainty and so.
Yes. And in the Kevitsa pit, there are more uncertainties because it's different from other areas where because there's quite a lot of grade difference within the pit. So it's exactly where you go will vary, and therefore, we decided not to be too perfect around that one.
Okay. So in Aitik, what is the underlying uncertainty you typically say that it is 10% or so?
Yes, it's typically 10%. That's where we are everywhere. So that means that, of course, since I'm saying something on Kevitsa, it's because we're heading that lower kind of 10% expectation. Otherwise, I wouldn't say anything. Otherwise, I would say keep to the average.
Okay. Previously, you have been pretty explicit on milled ore guidance, how much ore you will mill during the next year. So what is the answer here on Aitik, you have previously stated 45 million tonnes, and on Garpenberg, when you will reach the nameplate capacity there?
We think the guidance that we had for this year the 3 million. And then we've also guided when we came out with the fact that we got the permit that we should be able to get for '23, 3.3 million. Exactly what the number will be for '22 is this, of course, somewhere between 3 million and 3.3 million exactly what we don't know because some of the debottlenecking investment that needs to be done to get to the 3.3 million will happen right towards the end of '22. So -- but it's somewhere in between there. So I think that's not in the numbers here, but we spoke about that when we got the permit. And by the way, maybe I should mention to everybody hasn't seen that we have gotten the environmental permit for Garpenberg cleared. It can still be appealed formally to the Supreme Court for another week or 2, that's very unlikely to happen, but just so I haven't promised anything that theoretically could go wrong. But if that doesn't happen, we will have the environmental permit ready and done and we can go with it. We have, by the way, also got the environmental permit cleared in the appeal court in Liikavaara, maybe I should have mentioned that earlier as well. There, the process is not quite as simple because they're -- that went so fast and faster than we thought. So we have some other permits, including zoning permits and some of that needs to come into place. But it's, of course, a major milestone that we have passed in terms of the Liikavaara permit process as well. Now I have said that as well. Now -- so -- and then we come back to the other part of the question, which is the guidance for Aitik. Well, the guidance is to work at 45, we will need to get the COVID out of the system and COVID is a tricky thing in Aitik, and it has more to do with people on the fact that we have -- we don't have -- we have a labor market where an hour, that's not driven by a driver doesn't get driven because there is basically no other substitute they can take it with the labor market situation in that part of Sweden. So we need to get the sick leave level down and get more hours in the trucks. So that's the challenge. But 45 million is still the ambition for next year.
Okay. And for Kevitsa, 9.5 million, right?
9.5 million.
Okay, the Tara 2.5 million?
Yes, 2.5 million to 2.6 million in that order of magnitude.
For 2022.
Yes.
Okay. That's great. I was a little bit surprised on the byproducts because you said that sulfuric acid prices came up during the quarter, and you still recorded a minus figure on byproduct. So what happened there?
Well, we have strong product -- strong prices already last quarter. It depends if you compare it to last year or to last quarter. But the thing with with sulfuric acid is that we operate a big part of it in long-term contracts, and it's also very sensitive to mix changes because depending on where you ship the material, the freight cost will be a very big part of the price. So I would say those are the 2 reasons to that. But you're right, market prices, spot prices are -- have been very good during the quarter.
Okay. And finally for me then on CapEx. So you have roughly SEK 5 billion on growth CapEx or call it growth CapEx, but strategic CapEx or -- for 2022, of which SEK 2.5 billion Odda. So the other SEK 2.5 billion, just roughly dividing them into...
Well, first of all, we've got about SEK 1 billion to SEK 1.5 billion that is what we are earlier labeled as same business CapEx, which is environmental improvements, debottlenecking projects. We have a harbor project going on in Harjavalta. Of the pure growth projects, we have Odda, which makes up SEK 2.5 billion and then Rävliden, which is a significant part. Then in addition, there are smaller parts classified as growth, but not of the size where we have to communicate them externally.
And any other questions here from Stockholm? Yes, Gustaf Schwerin, also Handelsbanken.
Yes. First a follow-up on the Aitik sequential development on the throughput. I mean if you would have had full availability of truck drivers, I mean, because the COVID situation shouldn't have been worse quarter-on-quarter, right? So the equipment you're talking about, I mean, what's the underlying run rate here?
It's a difficult question to answer, but the underlying run rate is exactly right now because we do have the lack of people. We also have a lack of availability -- by the way, which I think we haven't spoken about, but those in Sweden will know that we also had a fire in Aitik where one truck got burned up and is now out of the system. So we've had availability issues, which are partly labor liberated and partly nonlabor related and it's linked to the trucks and the trucks availability. That is the major challenge that we've had in Aitik.
I mean all others equal, would we have been at a 45 million run rate if we had full availability in Q3? Or is there something else that's disturbing the...
I would say that it's relatively clear that it is the mine and it is the availability of truck to some extent availability of shovels that is the bottleneck. It is not the kind of classical ones. If you've been around for a while, there is no bottleneck that is a problem on the crushing side or on the mill side. And then I think it can vary a little bit. We don't talk too much about maintenance in the mines because it comes a little bit erratically and up and down. But of course, there could be -- there's also some maintenance that plays into this.
All right. And then second, on the cost inflation side, the wage part for next year, what are you seeing there?
Well, we're seeing about 2% to 2.5%. That's in order, but the collective bargaining agreements that we have in place.
Any other questions here from Stockholm? Yes, we have Viktor Trollsten now with Danske Bank.
Just on the Liikavaara you mentioned here in the report, just interesting to hear your view. I think you have talked about 0 to 15 million tonnes of milled ore from that deposit in 2023. If everything goes right, is that where we should be thinking or how much can you put in the mill from that deposit?
Well, you know that the plan is to have, as we get going, roughly 20% for the next kind of 8 to 10 years from Liikavaara, so we're at 45 million, then we should have around 9 -- 8 million to 9 million, 10 million. That's a kind of order of magnitude that should come from Liikavaara. Now the exact start, as I said, it's -- we've passed one major milestone, but there's still other things that need to happen. So regarding exactly how much we'll get into '23, we'll have to come back with. But it's not going to be more than 15 million for sure. It's rather not more than 10 million, but somewhere in there, hopefully.
Okay. And that's clear. And also, just in terms of the grades guidance for Garpenberg, I think that is still quite impressive relative to the reserve grade. I know you don't guide for 2023 and so forth. But could you just discuss regarding the grade profile? I think you mentioned previously, we will build around 3 years above reserve grade that should be now basically just how are you thinking for the coming years?
I think you should -- regarding Garpenberg, we will always be above reserve grade because what happens when you have an underground mine like this, you have a degree of freedom where you go. And of course, we will aim to go at the better parts first. So what happens, you go at the better parts, eventually that will drive down the average grade because you've taken the better parts out and you have the worst parts left. But you'll continue to always be above reserve grade. And of course, then the grades will decline over time, exactly how fast we are not that detailed about, but as I said, they will always be above reserve grade. And at some stage, they will become below the present reserve grade. But at that time, the reserve grade would be have lowered now, of course, all depending on what the exploration finds we can get in the meantime.
Okay. No, that's clear. And just finally from me in terms of the short-term risks here, you mentioned in the report that you are planning for normal production in the coming quarters, you obviously highlight certain risks. But you're planning for all of this is behind us sort of if everything goes right?
I mean all the things that happened in this last quarter are behind us. There's nothing that is kind of continuing regarding that. What we did highlight is that we are running on one crusher in Garpenberg towards -- until the end of the year. And so of course, there's an elevated risk if something happens with a crusher that it is working, then we don't have a crusher. But that should not happen. Normally, these crushers are extremely reliable. It's kind of whatever you call it, Murphy's law that when you only have 1 or they get this kind of 1- in 10-year event for the broker inner bearings.
Okay. Okay. And sorry, one final from me, sorry. But in terms of the ramp-up of the smelting projects, I didn't really understand. Are you still on time on that? Should we see a production uplift now in Q4? Or when will those be up and producing...
I mean the one that's tricky here is Rönnskär, and I think we've spoken about that before. That is a very, we think is a very good expansion project. But just remember, it's an expansion of input, not an expansion of output because the output is still the same. So what's the point with it? Well, the point is that we can feed lower-grade material and still keep the production up, lower grade material typically have a better than for us, at least a better average earning. So that is what you will see, but you will not see more copper coming out of the process. So that's -- talk about the double converter operations that we're doing there. And also then we talk about the leach plant. Once again, the leach plant, yes, you will see, but it doesn't really show in the big numbers, the increase that will come through the lead and the copper and so on that will come out of the leach plant. There is the important thing is that we're getting through and starting to work down the stockpile that we have on site.
Any other questions here in Stockholm? Okay. Operator, please, then we go over to the questions over the phone, please.
We have our first question. It's from Liam Fitzpatrick, Deutsche Bank.
I've got 3 questions. The first one on power, and so you've given us a useful number there on the 80% hedged. And if you could maybe just elaborate on that a little bit. How far out do you hedge? And am I understanding that correctly that it's 80% of your power costs that are hedged, so 20% of power is spot exposed? So again, I'm trying to work out when these high power prices will flow through into higher costs when the hedges roll off? That's the first question. And number two, just on the CapEx. Would you view this as a fully loaded number for next year? Or should we still anticipate that there could be some smaller project approvals that could come into that number next year? And third and final question, just on the, I guess, supply bottleneck theme, is there anything that you're seeing that concerns you that could impact your operations either at the mines or the smelters in the quarters ahead?
Okay. Let me take those. I can take them from the back. Regarding the supplier bottlenecks, I've said many times and I say again that we have quite a few yellow flags. We don't really have a red flag that we see right now, but we have yellow flags. One of the ones that we spoke about last time, and those here in Sweden will know about, it's a cement situation. I mean, the cement situation is not fully cleared out. We are, of course, working our way around with both plans B and C and so on to handle on if the cement permit will not come through. But of course, there's a risk on that one. Otherwise, yes, we're seeing all kind of strengthening that happens and it's linked to flooding in Europe in the summer and some suppliers declaring force majeure. It's linked to transportation out of China, and it's linked to the high energy prices. But as I said, as of right now, not really any red flags, but quite a few yellow flags that keeps us busy. The CapEx number, I will look as a fairly fully loaded. We don't really have any project that we foresee as of right now that we will come to take a decision on during a time that would affect the '22 number. I mean all the other potential bigger investment that we have, that we could make a decision on will be after that time. And regarding power, we are on purpose a bit fuzzy because power is, of course, also a commercial game and where we don't want to tell exactly to our counterparts exactly our situation. But you're right in the sense that for the next 12 months, we are roughly 80% hedged and we're roughly 20% open. Now we should also be clear that even though the local prices in Sweden have also gone up, but the spot prices have gone up, not -- they haven't gone up quite as much as we've done in other parts of Europe. Then this hedge goes down according to some measures, of course, after you get out of 12 months, the hedging effect goes down. But exactly how it goes down, we don't want to go into the details, not to tell too much to our counterparts.
The next question is by Jack O'Brien, Goldman Sachs.
Just one second, I'll get to you. I just want to make sure that everybody understands, and I think it's an important point, that having hedged electricity, just to be very clear, if the prices go high enough and we're not there yet, but if the prices go higher now, we will shut down operations and we will sell the power and make more money on that. That is clear. We're not going to spend very expensive power on producing something if we don't make money. And so we're doing that very carefully. Now we have not yet hit any time period, any individual day so far, where the prices have been high enough that we have sold off the hedges and took the -- pocketed the money and not run the operations. That could, of course, also happen. I mean it's very open that it could happen. But we are -- because of our cost productivity in general and because we are in areas where spot prices even though they go high do spray rocket the way they do in other places, we don't foresee that, but it could happen. Now Goldman Sachs, back to you, sorry about that.
And a number of the questions have been touched on, but I just want to come back to this power point, given its relevance at the current juncture. As you see it today, given your regional mix and you mentioned that prices do vary somewhat by country and region, based on the 20% open, and I guess we can do this math afterwards, but what would you envisage the year-on-year impact to be in the fourth quarter, just so we can think about the profit bridge here?
Can I take it? I can comment what we've seen in the third quarter, and I think then you can extend it, but we're about 12%, 13% inflation on the electricity. Now when we talk about energy, we spend roughly SEK 3 billion a year, and that includes on diesel and a few other things. The electricity side of that, the power side of that is SEK 2 billion. And in this quarter, we've seen a bit over 10% inflation.
Okay, terrific. And just pressing on one more point, if I may, which is that as I understand it, you typically hedge around 8 quarters out. And you've mentioned in the past that you see power as a source of competitive advantage for Boliden. But when you're coming to renegotiate hedges for, I guess, 8 quarters, so we're now talking fourth quarter 2023 and into 2024, how are those planning out? I mean in terms of agreed contract prices versus the spot we see today, clearly, I would imagine there'd be some fairly heavy discount given the spike we've seen, but what sort of order of magnitude are you seeing there?
Those are the areas that we don't really want to get into. But just to get a little bit of a flavor to that, what you said about 8 quarters might be true on an average. But you know that we have certain power prices that are hedged or at least long-term contracts with indexes where we don't have to negotiate anything that they are either fixed or they're moving with an index for 10 to 15 years connected to wind farms, for example. So it's going to be difficult for you guys to say that we have a clear hedging strategy and that we're always hedging something that is 8 quarters out. That might be on average, but it's not so in total. And then it's lots of different things moving in this one. And we're also using this -- the fact that we can play a little bit around the timing effect to make sure that we do it in an efficient way.
And if I may just ask one more. Following up on Liam's question on supply bottlenecks? Obviously, clearly a theme that's coming through. And you mentioned a number of sort of yellow flags, which are these sort of materials that you're sort of keeping an eye on, that could potentially be at risk as we look through the rest of this year and into '22?
I would -- they go across a wide spectrum. They start at kind of simple things like spare parts for underground equipment or spare part for mobile equipment, in general. They move across to specialty chemicals of different sorts. And the reason for specialty chemicals shortage could be that there was a specialty chemical plant that was hit by the flooding in Germany in the summer or that you have a very high energy component of producing some specialty chemicals where the supplier either wants to hike the price very high or say that they will put their operations into care and maintenance. So those are the type of things. So I would say specialty chemicals, but also normal spare parts of things and then cement on top of that, which I spoke especially about.
Our next question is by Ioannis Masvoulas, Morgan Stanley.
A few questions left from my side. The first one on Aitik, again, just to push a bit on the throughput rates. You mentioned the ambition to reach 45 million tonnes throughput in next year. But if we look at COVID restrictions and challenges around truck driver availability, as we go into peak winter season, and given that you also have weaker visibility -- sorry, weaker seasonality in Q1 in terms of throughput, how realistic is it that you can get to 45 million tonnes as an average for the year? And should we be baking in more of second half run rate for that 45 million tonnes?
It's clearly an ambition that we will have the run rate for the whole year. But you're right that Q1 can be lower on the kind of on the average because Q1 is a winter quarter.
Okay. Understood. And the second question on the Odda smelter expansion. We talked about inflationary pressures. We talked about some challenges around the supply chain. Could you give us an update on the progress you've made since we last spoke about this project on looking in some longer lead items? And is there any risk around the CapEx figure you gave us earlier in the year?
Well, there's always a risk of these things until you're really done. And so right now, we see no need to change any kind of guidance. Regarding that, it's a relatively straightforward process. Of course, when we gave the numbers only 3 months ago, we, of course, already knew about steel prices, for example, that was factored into that number. Now there might be a factor exactly everything in. But so far, as we're now locking in the prices, it looks -- fits very well with the budget that we've had.
Understood. And a very last question from me on scrap availability, which you mentioned as a headwind. What are you seeing on the ground? Is China pulling a lot of material in the past few months? And how do you see that playing out in the next year? I'm just trying to figure out what sort of a headwind could it be for the smelting business?
I think that from where we are today, it shouldn't be more of a headwind. I think that we will hopefully get the situation that eases out and the question is more of how we will get the tailwind of getting more supply there. Once again, this is also a competitive market where supply could be available if you put on other prices and terms, and this is something that we're negotiating constantly and that we're working on is, of course, a matter of both volume and also the price in terms of the volume that you purchase.
The next question is by Luke Nelson, JPMorgan.
I've got 4, if I may. Firstly, just a quick one back on power. You mentioned that you had some supply from wind. Is it any -- is it possible to breakout how much of your power needs come from renewable PPAs?
I think that's possible, and it's also not really a secret because we have announced these as we have been putting them in. Now the question is, do you know the number, Håkan? I don't know if I know it from the top of my head, we're talking about order of magnitude.
For renewables, if you include hydro, it's about 70%.
But I was -- the question was wind PPAs that we have announced...
I don't have that on the top of my head. So...
My answer, but don't quote me on this, it's roughly 20%, that's on wind PPAs that has been announced in separate order once we've done them all. But that could be -- it could have to be checked with Olof.
Yes, no problem, no problem. And just following up on your comment from Jack's question before around supply chain issues. I think you mentioned specialty chemicals. Can you maybe just break out exactly sort of what specifically you're seeing within that supply chain issue? Anything in particular? If I look in sort of the chemical sector, there's obviously some large price moves. So any additional color on that?
No. I think that this is not really a special, just take a few examples. Ammonium nitrate very high energy intensity in producing. Of course, the producers there have ideas around pricing that might not be in line with the contracts that we have and that leads to discussions. We have a situation on something like zinc sulfate that is linked to production disturbances in the chain, which means there's a lack of availability, not maybe so much a price issue. We have some of the special chemical costs coming out of China. [indiscernible], for example, where there's been also some interruptions in the supply chain and so on. As I said, all of these, I would put under the label of yellow flags and not red flags.
Okay. Great. And then third question is in capacity in Europe. We've obviously seen some announcements from some key players around capacity on power. Just interested to get your view on the rate cross to your business, particularly more from, say, TC/RCs, even byproducts with asset prices. Are you seeing any benefit come through in that? And then I suppose as we think to 2022, how are you -- do you expect that could potentially play into where the contract TC/RCs could rest?
I mean you're pointing at all things that are good for us and that could play in our advantage exactly how we don't know. But of course, you can think both about asset prices, you can think about premiums and how premiums would work out in this situation. You can also think generally about the TC/RCs or the TCs from the zinc side, more specifically, and you can also think about the actual zinc price and what this does to the whole balance. Exactly how, this can be very difficult to understand some of the players that are behind these shutdowns or capacity are, of course, also very big traders, and we have no transparency to what their books look like.
Okay. Very clear. And sorry, final question is just on the quarter-on-quarter waterfall group level. The FX benefit looked like it was around SEK 250 million, which was a bit higher than expected. Is there anything special within that I should be aware of or not really?
There is nothing really special there. I mean the big part, of course, is the dollar rate compared to other currencies and then euros. So you should be able to find every background information in the sensitivity tables that we issued.
The next question is by Daniel Major, UBS.
Three, if I may? Can you give a number on the impact of the provisional pricing during the quarter? That's the first question. Second, maintenance outlook for smelters in 2022, any guidance there after it's been quite a big year this year? And final question on the special dividend. Any reason to think that you won't pay the special dividend for the fourth quarter to take your net gearing back up to your targeted level?
I'll take the 2 last ones and I'll leave the first 1 for Håkan. If you start from the back, we have no intention of changing our dividend policy. If you take the second 1 regarding maintenance for '22, we will guide that in 3 months, so you all have to be patient. And regarding the first one, I'll give it over to Håkan.
Provisional pricing, yes. The first part is the open positions from last quarter and that got their final prices in this quarter, and that effect was more or less 0. And then -- so that is one thing. Zero effect on on the open position from last quarter. Then within the quarter, as we talked about, we have a difference compared to the realized prices and the average prices in that the later part of the quarter is more important. And that -- we're talking about a few hundred million Swedish krona, something like that. But you have the open positions in the backup slide to this presentation. So I think you can work that out, but a few hundred.
Okay. Maybe if I could just push you on the maintenance question slightly. Just as a reminder, what is the normalized level? And has that changed in recent years?
It has changed. Now you have to know that the impact that we're giving, the EBIT impact is of course, very much depends on prices and terms because the biggest part of our maintenance is the fact that we don't produce. So we lose the gross profit from that. So therefore, as the prices and terms have gotten better over time with higher metal prices and also improved other prices in terms of smelters, it becomes more expensive to have a maintenance shutdown. And that's part of it. Now if you look at the other thing that we have to maintain more, I would say, on the margin, that is also true that we do have more to maintain. Our smelters are expanding all the time. They get bigger. They have more equipment in place that all need maintenance, which means that the maintenance itself is expanding, not drastically, but slightly.
Any other questions, operator? Okay...
I will remind you.
Yes, let me just say then that I check with our Head of Energy and your answer regarding the wind power's share of our overall energy mix of 20% was perfectly fine. It's perfectly right.
Thank you, Olof. Now you can quote me on the number.
Okay. Operator, did we have more questions? I thought we were at the end, or do we have more questions?
We have 2 more questions. The first one is from [indiscernible].
Can you hear me? Hello?
Yes, we hear you.
Yes, yes. My question is on more on the CapEx side. So you said in the release that the maintenance CapEx is going to be SEK 5 billion for next year versus SEK 4.5 billion in this year. So is this sort of a steady state level we should consider for modeling purposes going forward? And then my second question is, I mean, you've made an interesting point on Rönnskär expansion that this is basically the input capacity expansion rather than the output. So would you be able to discuss the normalized level of copper and the lead production at Rönnskär, like, for example, like 2022?
You take the first one, and then we'll think about the second one.
Yes. The maintenance CapEx, you're right, SEK 5 billion is what you should plan for going forward. In there, it's about SEK 2 billion, that is replacements and about SEK 3 billion that is mine sustaining, basically stripping. So with the knowledge we have today, that is what we plan for going forward until the time when the stripping volumes comes down in Kevitsa, for example, that has a shorter life of mine, and that's a few years away.
And regarding the production guidance at Rönnskär. You know that we don't issue production guidance because it depends on so many things, including exactly what feed mix you have and so on and so forth. It's not just a matter of copper content, it's also other things that could affect the throughput level, but it can still be very profitable because there are better precious metal content or other things around that. But the answer to you will be that you should not see any change in output in either lead or copper because of the investments are done right now. The actual output in the end will be about the same. Then we might sell some lead intermediaries more than we've done historically, but it's something that doesn't really come into those numbers.
The next question is by Jat Goel, BNP Paribas.
Jatinder Goel from Exane BNP Paribas. A couple of questions. On Liikavaara what does this recent milestone mean in terms of timing because you're indicating this came quicker than you were expecting. How -- what level of risk would you ascribe to the remaining permits versus this one? And what does it imply in terms of timeline? And is it still 2024 when the first volumes will come from this satellite deposit if everything goes to plan? Second question on concrete availability and procurement. Is there a plan B in process, if anything, because you have managed to buy more time courtesy regulators, but is there any active plan to diversify that sourcing? Or is it practically not viable?
Well, I'll take those. If you start with the concrete, yes, we're doing all kind of plans to diversify the sourcing. But this is not an easy task because it's not just finding the source of the actual cement. There's a whole logistic chain that is involved in this and that we are working with. And on top of that, which is both a good and a bad, the lots of other customers of cement or concrete are in the same boat. That means that we can, to some extent, cooperate and try to find new logistical solution, but we're also competing for the supply. So as you can understand, a kind of an interesting situation in that market right now where everybody is trying to juggle to corporate whether that's doable but still try to compete to get the resources. And as I said, we are very much on top of the issue. We have lots of different plans. But exactly how it will play out depends on what happens with the permit and it happens on really a few other discussions. We don't have a ready solution to do without the cement to 100% as of right now. You had a question on Liikavaara. Liikavaara is an interesting one. We got the permit in the lower court already back in April. That was an interesting kind of environmental permit as such because it had a 1-year delay. Typically, you get a permit, you have it, but that was given, but with a 1-year starting delay. And that's because we need to clear out a few things, including there's still a village that needs to be moved and that wasn't really done. As this got appealed, we thought it was very clear that the appeal court will listen to the appeal, that was our base plan. And then that would take a longer time. It would take at least until, what I know, the summer of '22 until that's always heard through. What happened then last week or 2 weeks ago was that the appeal court decided not to take up the case, which we are, of course, happy about because we have an environmental permit that is then valid unless this -- not reading it is appealed to the Supreme Court that could theoretically send it back again into the court system, so it's not quite done. So we have then apart from the Supreme Court part, we do have an environmental permit valid as of I think, is May 1 to be the number. However, normally, you need many other permits as well, which we have on purpose not pushed so hard because we thought that we had time. You need a zoning permit that is normally never a problem. We actually need an alteration to the mining license, and that is usually not a permit. And we also need a road permit that is usually not a problem either. Suddenly, all these things ended up on a critical path, and now we're working with them. And on top of that, before we do anything, we also need to make sure that the villages have been fully moved which has also suddenly become a critical path. We thought that we had ample time until summer. So you understand with all these things that we are happy where we are. We're happy that we've gotten where we've gotten. Exactly how fast we will be able to get the remaining permits and also be able to get the village moved, finally moved, I can't answer right now. So there's still some uncertainties, which means that as we had a previous question, the volumes for '23 are, of course, questionable unless we can get going early in '22 with the stripping. Volumes for '24 should be less risky. I mean that's still quite some time out. I wish you a very happy weekend. Now is there anybody else? Are we done there?
Yes, no further questions at this time.
Okay. Mr. Staffas, please conclude.
Okay. I will conclude this. Thank you all for attending. We've had a quarter that you can say that we've had some production issues, and that's true. But in general, we are in a very good situation. We were producing relatively well, and we're in strong pricing terms. And as you look at this going forward, I think that we are very much sticking to the guidance that all of you should know. Thank you all, and have a very good weekend.