Boliden AB

STO:BOL

Earnings Call Transcript 2022-Q4

[Olof Grenmark, executive]

Ladies and gentlemen, I'd like to welcome you to Boliden's Q4 2022 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, which we will start here in Stockholm. The whole call is scheduled for 1 hour.

Mikael, the stage is yours. Welcome.

[Mikael Staffas, executive]

Thank you, Olof, and welcome all of you over in the camera over there as well. And happy Valentine to everybody. We have wonderful weather here in Stockholm and somebody has put lots of red hearts around all this venue this morning. So we feel very welcome.

So the presentation today, and I'll just start with getting the general measures across. We've had a good quarter. Even though we have the good quarter is, of course, we've had a good situation in terms of our prices and terms that have helped us a lot, and that's, of course, the basis for everything. We have had lower grades in our mines, which is nothing new. You all know about this and it's been well guided for in advance. But the smelters have performed very well, not just because of price and turns, but also because of good performance in general and good production.

We're having a little bit more than SEK 3 billion in EBIT coming online here, but we also have a very strong cash flow of more than SEK 3.5 billion despite the fact that we've been investing record amounts as well in line with the guidance that we did have. The dividend proposal is out as well, and we're following our dividend policy exactly the way that it has been done before. And therefore, it happens to come out at 50 or more than last year. Somebody made the joke this morning that you have tweaked your dividend policy to be able to say that you'll increase it. No, we have not. We've followed the dividend policy to the letter, and that's what it comes out with.

Our projects are doing fine, both in Odda and the big project in Aitik are both moving ahead according to schedule, the weather is set up. And also, we have gotten a clearly improved production in the nickel line in Harjavalta, where you can see that now the ramp-up is completed. Too late, but better late than never.

So generally speaking, the EBIT level, if you look first at the solid line here, you get the rolling 12 months. You will also see that 2022 was a record year altogether, which was a good thing. Now if you look sequentially, yes, we have lower profitability, which is due both to lower grades in the mines as well as that we don't have quite as brilliant price in terms as we did earlier in the year even though they're still on a very good level, and I'll come back to that in just a moment.

Talk a little bit about health and safety and environment and other sustainability issues. We've also had a good quarter. Our LTI frequency has come down. It is -- 2022 is the best year that we've had regarding occupational health. We have a 15th year of fatality-free operation, and the LTI frequency, as I said, is getting lower. We've also continued to improve our CO2 emissions. The intensity measure that we have in -- this is the last quarter we use what I call the old measure, and we move over to science-based target as reporting as of 2023, but also according to this old way of measuring, we have had a very good quarter. You can see a clear reduction compared to same period last year.

What is a little bit disturbing for us, it's disturbing in many aspects, is the high sick leave that we have. That 1 is record high, which is nothing that we're proud of. It also does affect our productivity and does affect our production, especially in the mining side, and I'll come back a little bit to that as I move on.

The price index, as we said, we're still just don't fool anybody. We're still having very good prices and terms. We are being helped by high metal prices, even though they're not as high as they were in the early part of 2022. We're also being helped by strong currencies, strong currencies from our perspective, the way that we measure starting in the Swedish krona, we've had good currency that has helped us with the revenue side.

If you look on the prices, as we have shown this exhibit many times over and over again, you will see that the prices are good. They are way above the cost levels in the industry and everybody is basically making good money. What you can see from this one is that the inflation that we have in the industry, and I'll come back and talk about our inflation in a while is getting a bite into the industry, and we see that the cost levels in the industry are going up. We also see that especially on the nickel side, the cost levels are going up due to the fact that also new marginal production is coming online, which is driving up the cost level in the industry. But as you see, you cannot really complain this industry saying that the prices are too low. They're actually in a pretty decent level, I would say.

So if you go through the production that we had, we had in Aitik, I would say a decent quarter in terms of throughput, not quite as good as last year. We have been hit partially by winter condition, but also by the high sick leave and high sick leave as you know, especially in the open pit mines actually hits us pretty hard. If you don't have somebody showing up for work in the morning, that truck will not move. It's not that we have somebody else sitting beside waiting, and it's not like in a control room where you might be 6 people working and if 5 show up where you can do most things. Anyway, in the open pits, that's not the case, and we're suffering from that both in Aitik and in Kevitsa.

The grade is down to 0.17 as we had guided, we're already in Q4 coming into the levels that we will see also for 2023. In Garpenberg, also strong production. The zinc rate is 3.6 according to the level that we had guided for and also the silver grades being in line with, I think, most of the people had expected.

Kevitsa 2.6 million tonnes in the quarter, which means that we're over 10. Some of you know that we have an environmental permit that is 10. So some will say have you broken environmental permit. In Finland, you can occasionally if you don't have a habit of going over your permit. So this was in the full year, about 2.2 or 2.3 million tonnes, which is okay, if you don't repeat it. So follow you out there. You can't expect that to really be repeated, but we have proven with the investment that we can fulfill the permit that we do have.

Boliden Area has had a good mill volume and good grades in general speaking, in the Boliden Area, if you look at it, it's probably the 1 that's performing best of all our mining areas. Tara is coming back from a low level, but it's had a good -- relatively good production, increasing the mill volumes, and we're still waiting to get into the really good stopes to get up the grade, but still working on that.

On the smelter side, generally, a very strong quarter, generally good production in the smelters all in all. We've also been able to produce a lot of gold. This is by far a record gold quarter. As you know from before, we've been suffering a little bit from having lots of gold in intermediary products. We've been good at getting it out, which is also the basis for getting a very strong cash flow in the quarter. And we are now down to, I would say, working capital levels that are kind of significant or normal for the season as such.

The Harjavalta the nickel line has also improved. You can say it's more or less up to full speed as of the fourth quarter. In Rönnskär also strong production, strong throughput, also there, good precious metal production coming through. The zinc smelters also good production. The power prices have been lower than they were in Q3, which means that we have not as much as before taken voluntary curtailment of production to sell power. That has happened, and we do have some margin from selling power but it's not that often, and we have been able to do what we wanted to do producing most of the time, which you can see.

Bergsöe has a planned maintenance stop basically Bergsöe from the issues that we had early in the year is basically up to full speed. So if you look at the full year, as I said before, the full year for 2022 is by far the best year that we've ever had with, of course, very good price in turn where you put in the earlier quarters that we did have in the year. We've had improved volumes, but the grades were heading down already in this quarter in the mines. The volumes in smelters have been going up. Generally smelters have had a very good year, a record year in smelters.

And then, of course, we've been stuck by high inflation. And especially as we mentioned in the Swedish krona that has also been suffering from the current exchange rate, as much as it helps us on the revenue side it is, of course, also biting us on the cost side.

If we look just quarter 4 over quarter 4, we're close to a 20% inflation level. If you look at the whole year, as I said here, it's not quite as much because it was a little bit less in the beginning of the year, but it's well over 15% for the whole year in terms of inflation.

The mines, you can see very similar types of profit levels for the mine, the individual mines this year compared to what they have been in previous year. This is, of course, a mixture of better price and terms and lower grades that makes this to become relatively similar. What is, of course, is interesting and new is this picture on the smelter side, where you can see that many of the smelters have taken a big step forward and are now bringing very good profitability levels, Harjavalta, especially, but also Kokkola and Odda have increased the margins during the year all in all.

Exploration. We're also today releasing the R&R statement. Number one, which I think we learned to before, we have not curtailed investments into exploration, rather, it's a record year in terms of spending on exploration. This is partially an inflation piece in this as well, but it's also an increased ambition of being able to explore the way that we want to do.

The really good news on this R&R update is Garpenberg, but we have both improved resources and improved reserves at the same time. And you have to remember, we measure resources without the reserves in them. So when I say that, it's -- the sum has gone up even more, which is very good, which means that we, from a strategic point, will have to come back to you about why we're going to handle the improved geological situation that we have in Garpenberg.

Otherwise, relatively small updates. Boliden Area continues to add a year-per-year, Tara with the issues with the water in leak that we've had and therefore, lack of possibility for exploration, not quite a year in every year. And then in the open pits in the north, we actually have a little bit of reduction of the relatively long times as we have had to factor in higher cost, but that negative in terms of volume comes back with higher average grades and Aitik has now moved from 0.22 to 0.23 average grade, again, in the R&R statement.

So having said that, you can see here now in Garpenberg, what a long life of mine we have, and that's something, as I said, alerted that we will have to think about over time what we can do about that from a project point of view and the minimal resources have also fared relatively well.

With that, I will leave it over to you, Håkan, to go through some of the finances.

[Håkan Gabrielsson, executive]

Thank you, Mikael. Good morning. So I'll just try to sum up the financial position that we have. Mikael has covered parts of it. We are reporting an EBITDA today of SEK 5 billion which is on par with Q3 and about SEK 300 million up compared to the same quarter last year.

Looking at EBIT before inventory valuations, we are at SEK 3.2 billion which is down from the SEK 3.5 billion that we saw in Q3. The difference is mainly the write-down of exploration rights in Kylylahti that we talked about in the Capital Markets Day and we charged the P&L this quarter.

Investments are 3.7 -- SEK 3.7 billion, which is up compared to both comparisons. We do see the projects in Odda and Aitik getting up to speed. Free cash flow, SEK 3.5 billion. This is, in fact, the strongest cash flow number we have reported in a quarter. And of course, it feels good to have -- to be able to both to report record investments and record cash flow in the same quarter.

By business area, as you can see, mines see an impact from lower grades. We are reducing the profit level there compared to both comparison periods. While smelters is for the fourth consecutive quarter, stable on a very good level at about SEK 1.3 billion to SEK 1.5 billion.

Looking at the analysis of the changes in profit this quarter compared to the same quarter last year, we are up about SEK 350 million compared to last year. We have a big impact from favorable currencies with a strong dollar relative to the Swedish krona, which adds up to about 1.3. Then we have seen lower metal prices in the quarter year-on-year, which is then compensated by a good development of metal premium and byproduct prices.

Volume-wise, we are roughly stable compared to last year. We have lost about SEK 1 billion worth in grades, but that has been compensated by a good performance in smelters and in this quarter by a reduction in inventories. Most importantly, we have reduced the inventories of gold that was tied in the processes, and that has had a significant contribution to the P&L.

Inflation and cost is up. We are increasing the cost by about SEK 941 million. Included in there is an increased reclamation reserve or cost for reclamation in Kokkola 54, but it's a significant cost increase, and we are looking at about 20% inflation in the quarter. Out of that increase of SEK 940 million, SEK 700 million is an increase in energy and consumables. Consumables mean an explosives and similar. So that is really where we see the cost increase. The remaining parts are fairly stable. I already talked about the write-down that we had in Kylylahti, which is the 259 affecting comparability.

Looking sequentially, Q4 versus Q3, we have a reduction of SEK 295 million, which is basically the same amount as the write-down I just talked about. We have stronger prices. Metal prices are up, especially copper, nickel is the most important one here and silver. Volumes are also positive, lower inventories and good production in smelters. On the cost side, we are up. There is a fairly significant seasonal effect here. I would say that roughly SEK 200 million is a seasonal effect between Q3 and Q4 that we see every year. And then we have a bit of inflation and the SEK 54 million reclamation cost in Kokkola.

Moving on then to the cash flow. Again, record high cash flow, which is, of course, driven by a good underlying earnings with the EBITDA, excluding process inventories of close to SEK 5 billion. We have high investments, but we have been able to release a lot of working capital. It's about SEK 3.2 billion released in the quarter. This is -- this brings inventories down to a normal level for this time of the year. We have reduced a lot of the goal that we had in the processes, and we've also reduced most of the nickel that we talked about previously, the extra nickel stock that we had.

Taxes is fairly high. There is always a lag between the taxes charged to the P&L and the taxes charged to the cash flow. So far, for the full year, there is about SEK 400 million lag in taxes where we are charging more to the P&L than the cash flow. And that will, of course, be recovered in the following year.

So as a final slide for me, then we end the year with a very strong financial position. We have in fact, a net cash position, a small net cash position, it says 0.0 here, but it's a plus before the 0.0 if you get that. And also, we have a net payment capacity of SEK 23 billion in the beginning of the year. Those SEK 23 billion are made up of SEK 12 billion cash and SEK 11 billion credits that are not yet utilized. So we feel that we are in a strong position and again, a strong quarter.

So with that to Mikael.

[Mikael Staffas, executive]

Thank you, Håkan. Yes, you talked about the impairment. So we'll jump that 1 and very quickly talk about the outlook going forward. And here, there is absolutely nothing new. We are still guiding for the same grades as we did last quarter. We're still guiding for the same CapEx as we did last quarter. I think that was actually a little bit of an adjustment on the maintenance stop, which has to do more about the exact prices and terms around what is actually the cost of the idle time, but that's a minor one.

So the summary is there is nothing new in terms of the guidance going forward. You have seen all these numbers before.

So with that, I'll just remind you exactly why we're here, what the purpose is and the vision and the values. And with that, Olof, I'll leave it over to you to guide us through the questions.

[Olof Grenmark, executive]

Thank you, Mikael. Ladies and gentlemen, that opens up our Q&A session, and we'll start here in Stockholm. The first question comes from [ Matthias Wolstin ], SEB.

[Unknown Analyst]

Two for me to start with. If we look on the financial result per unit, you have a line called smelters out there at a delta of some SEK 750 million year-on-year, I presume. And -- if you could just elaborate a little bit on what this is? And do we have an expected outcome for 2023? Or how does it look?

[Håkan Gabrielsson, executive]

Well, what it is, is metal premium basically. That's the short answer. As you know, we've had a situation in Europe with -- I mean, driven by the higher electricity prices, where Finnish metal has been difficult to get hold of from the customer side and that has driven up the metal premiums to very high levels. Now we set internal prices between smelters and the head office annually. So that number for next year will end up in -- out in the smelters result. But there is a lag when setting those internal prices, but metal premiums.

[Unknown Analyst]

Okay. Good. And the next one, sort of the mineral resource we see in Tara Deep, versus last year, can you describe how this compares to what you have expected through the year maybe as the year has gone by and what do we need to see going forward really for -- in terms of these investments to go ahead?

[Mikael Staffas, executive]

Well, number one, it is according to expectation because we haven't explored anything because we got stuck with the water in the drift and couldn't explore anything from underground and very limited from surface. So that's -- you can say it's a last year in Tara. We're still very hopeful that we will find much more. We will need more in order to motivate the investment exactly where that is. We don't know. We'll get back to that once we have more exploration results under our arms.

[Olof Grenmark, executive]

Then we have Viktor Trollsten, Danske Bank.

[Viktor Trollsten, analyst]

Firstly, on cost per mine. If we look in Aitik, Garpenberg, also Kevitsa, I guess we're looking at, let's say, 15% cost inflation in '22 versus '21, I think looking at OpEx per tonne milled or we are at 71 in Aitik, for example, now we are talking about inflation tapering off, while also there's upside to milled volumes in '23. So how should we look at those figures, '23 over '22? Should we expect similar levels in '22 or still inflation?

[Håkan Gabrielsson, executive]

I think that's -- in one way a difficult question because as I mentioned, SEK 700 million out of the SEK 900 million cost increase year-on-year is related to energy and consumables, which is done varying a lot. Now we have seen prices -- market prices coming down in the earlier parts of the year. But the crystal ball to see how the full year will develop is -- that's more difficult. But so far, it's looking good.

[Viktor Trollsten, analyst]

Okay. And then maybe on the potential Garpenberg project, if I may, given that you have now 35 years reserve life. If I'm not totally mistaken, I guess, in our optimal life-of-mine vision of 15 years, 20 years. Firstly, is that a fair assumption and also in terms of management capacity, given that you are in an investment phase now, do you have capacity in '23 or '24 to actually do something?

[Mikael Staffas, executive]

Well, I would say that, of course, you're right, we're having a resource that is bigger than maybe what is appropriate for the current setup. We are doing right now conceptual studies about what we can do around this, what the options are, how that could potentially be mined faster, but we are pretty far still from any decision. We will need to have both better studies. And by the way, we will need another environmental permit for that, so.

[Viktor Trollsten, analyst]

And then if I -- just 1 final quick one. But on the planning prices, which you increase on metals, but your little effect unchanged. Just what's the reasoning behind both metal prices and living currencies?

[Mikael Staffas, executive]

Maybe I should just -- you've seen the 1 that has come out now with the R&R statements. Those are already -- they're a little bit obsolete because they were the ones that were right in the beginning of '22, which is also when we took the costs and -- if we do the R&R statement, so there was a match between long-term prices and the costs.

As we now go into the next planning season, we're already starting that one. The long-term prices will be higher, but also the cost will be higher because now the inflation that will happen during this year will come into that calculation. So it's new numbers that come in here in the R&R statement that you will see in a year from now.

Now the reason why metals moving 1 way and currency moving another way. I don't know Håkan you want to go into the details around exactly how we do our crystal ball, but it's kind of a best estimate. And -- and we have maybe been too conservative on currencies. On the other hand, we also know that a certain place times the Swedish krona gets much stronger as well.

[Håkan Gabrielsson, executive]

I agree. We've typically been perhaps more conservative on the currency side than the metal prices. You don't have to go that far back to see $1 to Swedish kroner 8, for example. But it's I think you're right in that assumption. So we'll have to look at it in the next year update, which we are actually getting into quite more or less now.

[Olof Grenmark, executive]

Adrian Gilani, ABG Sundal Collier.

[Adrian Gilani Göransson, analyst]

Two questions from my end. First of all, can you -- are you able to quantify the EBIT effect from the voluntary sort of power curtailments during Q4?

[Håkan Gabrielsson, executive]

Let's see, that's relatively limited. Olof, can you help us here.

[Olof Grenmark, executive]

SEK 56 million.

[Håkan Gabrielsson, executive]

SEK 56 million.

[Mikael Staffas, executive]

Yes. But that's the SEK 56 million, which is the margin on the power that we have sold, but there is also cost of standing still. So the fact that we're selling doesn't give that much, but it's better than not doing it. So it's a very small number.

[Adrian Gilani Göransson, analyst]

Okay. That's clear. And also, just a follow-up on the inflation question. In previous quarters, you've actually given us a sort of percentage how to think for the next quarter. Now you sort of just say it's tapering off. Has visibility decreased? Or do you have any percentage...

[Mikael Staffas, executive]

Visibility, no, I actually I think I said it, I should have maybe been more clear. I think that for Q1 over Q1 last year, we're talking about 10%. So it's clearly down from the 20% that we have seen, but it's not close to 0. But as Håkan mentioned before, a large part of this is what's going to happen with energy prices and oil prices and so on, that plays a big part. So it is even more difficult to have crystal balls in place than it usually is.

[Olof Grenmark, executive]

Johannes Grunselius, Den Norske Bank.

[Johannes Grunselius, analyst]

Johannes Grunselius here. A question on your smelters because how you have altered particular well shining star. Could you give some color on that? I know they have obviously -- there is a nickel line there, maybe that's the secret or could you give some flavor why that is shining. And also if it was kind of a smooth earnings progress throughout 2022, and we should expect more of it all the same in 2023?

[Mikael Staffas, executive]

I would put this way, Harjavalta has for a while been our best-performing smelter. So it has that in the base. If you then start adding the nickel line to it, which, of course, was a little bit of a frustration in the early part of the year, but towards the later part of the year, nickel was going on full.

If you then on top of that put that we did have lots of inventory of gold and inventory of gold means not just that you're tying up working capital, you're also tying up profits. But when you get that out, that, of course, gives a boost on the profits. So all these things play into the strength of Harjavalta, and that's why we have a very good performing units.

[Johannes Grunselius, analyst]

Then also a question on -- I mean, we have seen a lot on the, well, copper TCRCs, what's going on there in terms of global benchmarking. Could you give some color on the TCs for zinc, please?

[Mikael Staffas, executive]

Not really. The negotiations are ongoing. As we're speaking, we're not at that table. We're only seeing it from the sideline. I would prefer not read or speculate. I think that most people would agree that we are seeing an increase of the zinc TCs, but to what level, I don't know.

[Olof Grenmark, executive]

Any other questions here from Stockholm? Christian Kopfer, Handelsbanken.

[Christian Kopfer, analyst]

Just 1 short follow-up from my side. It's -- I think also the production on the precious metals, especially on gold was very high in Q4. Is this something that you expect to remain? Or was it something extraordinary in the quarter?

[Mikael Staffas, executive]

It was extraordinary. We were releasing gold that was sitting in inventory. So the Q4, gold levels are probably going to be a record for a long time. However, if you look for the full year, I think we also have record goal. That's more kind of reasonable because we are because of the very strong pressure metal plant that we have with a very good operating performance in Harjavalta we are sourcing more gold rich concentrates because that's a good economic thing. So that gold production on an annual basis could be -- could remain on a high level, that's true, but not the quarter x4.

[Christian Kopfer, analyst]

Right. Okay. Did you mention the call it, earnings effect from this release of gold in Q4, I mean, in rough numbers?

[Håkan Gabrielsson, executive]

No, I didn't mention that, but I'd say it's somewhere around -- just above SEK 100 million. That's my estimate.

[Olof Grenmark, executive]

Any final questions here in Stockholm? Operator, please go ahead with the questions that we might have on the line, please.

[Operator]

[Operator Instructions] The next question comes from Krishan Agarwal from Citigroup.

[Krishan Agarwal, analyst]

A couple of them have already been asked. Just a quick follow-up on Viktor's question on inflation. So could you help us with the total energy cost in 2022, just to get us a flavor as to how much of the energy cost inflation has been there in the full year? And then is there any kind of expectation based on the visibility you might have on your contract that how that energy cost base is likely to shape up in the full year 2013? That's my first question.

[Håkan Gabrielsson, executive]

Okay. The total energy cost that we see in the full year of 2022 is about SEK 4.5 billion. And when we -- let's say energy, we include diesel a little bits of coal that we have and -- but mainly diesel and then electricity. The electricity of that is about SEK 2.5 billion. Out of that SEK 2.5 billion, we have about 80% hedged. We talked a bit about the price levels in the latest Capital Markets Day. So there are some slides on that -- in there.

Then there is, of course, also an indirect impact from the energy on various consumables. Another of the moving parts that we have been talking about is explosives, which is, I believe, about SEK 1 billion in a year, just to give some numbers. The visibility is for diesel and electricity, I mean, we have 80% of the electricity hedged. But for the remaining part, we're fully exposed to market prices. So limited visibility going forward.

[Krishan Agarwal, analyst]

Okay. Okay. Understood. And then a quick question on -- there was a news flow that I mean, Anglo American is looking to do something with the Sakatti mine. And Boliden may be interested in that? Any thoughts there?

[Mikael Staffas, executive]

No, there is not really anything to say about it. We Sakatti is where Sakatti is and Anglo is managing that project.

[Operator]

[Operator Instructions].

[Srivathsan Manoharan, analyst]

Can you hear me, sorry?

[Mikael Staffas, executive]

Yes, we hear you.

[Srivathsan Manoharan, analyst]

Sri from RBC. My 2 questions, please. First 1 is on Aitik. The reserves have come down. So when was this area that's been removed from the plan is supposed to have been mined. And how are these changes going to impact the next few years, please? And the second question is on smelting. We are seeing power prices falling. So do you expect smelters in Europe to restart in the near term?

[Mikael Staffas, executive]

Regarding Aitik, the tonnage has been removed was the tonnage that was on the lower grade that was towards the rear part of the plan. So it doesn't affect anything really in short term, but taking them out, as I said before, has increased the average grade from 0.22 to 0.23. In terms of what's going to happen with Aitik, I think this doesn't really matter. I think there will be lots of restatements of R&Rs between now and 10 or 15 years forward when this might become very relevant. So that was that.

Regarding the power prices in Europe, I think you'll have to ask all your friends in Europe, exactly what they're going to do with their zinc smelters. My hunch would be that, yes, as power prices come down, we will see more zinc smelting capacity coming back online in Europe. But how fast and exactly how that will be done, I don't know.

[Operator]

The next question comes from Jason Fairclough from Bank of America.

[Jason Fairclough, analyst]

Just a little bit of a question on the inflationary impact on CapEx. I think we're always guessing a little bit when it comes to your CapEx numbers, I think the guide is for SEK 15 billion for '23 that's 2x your D&A. So maybe you could just talk to us a little bit about how you're thinking about stay flat CapEx for the business, right? So D&A, SEK 6 billion, SEK 7 billion per year, is stay flat CapEx that level? Or is it more like SEK 10 billion to SEK 12 billion to keep the output flat?

[Håkan Gabrielsson, executive]

Looking at the 5-year guidance that we talked about in Q3 or the SEK 15 billion guidance that we talked about in Q3 and in the Capital Markets Day. Out of that, half of that number is related to 3 significant projects, the Rävliden-Kristineberg expansion, the Aitik Dam project and Odda. The remaining part, about SEK 7.5 billion is probably a reasonable level going forward, then it will vary. I mean if there is a very tight financial situation, we could postpone part of that. The stripping will vary over time, especially as we get closer to the life of mining in Kevitsa, for example.

But I would say that in the number that we have today and also including the latest inflation number of SEK 15 billion total out of which 3 is -- out of which half is 3 very specific projects that are not there for the long term then.

[Jason Fairclough, analyst]

If I could just follow up. So you talked a little bit about the cost inflation in the business. A lot of that is obviously energy. Do you think that those CapEx numbers are current for what's happened with cost inflation. So in other words, just thinking about the OpEx read across into CapEx figures.

[Mikael Staffas, executive]

Just as if you follow, as you will know that we did adjust some of the specific CapEx numbers for some of these specific projects, upwards during the year because of CapEx inflation. There was nothing really strange with the projects themselves. As we're standing right now and we're reiterating the guidance, we don't see that there is any more CapEx inflation than we had already put into those calculations. So we are -- we don't see any need to adjust anything around that.

So we feel that we at least -- unless something more strange happens, we have enough -- we have enough margins to handle inflation in those numbers that we have given you.

[Jason Fairclough, analyst]

Okay. If I could be cheeky and maybe just ask 1 more quick one. Harjavalta, can you just remind us, is there any complications to the operations there because of the war and Russia, Ukraine?

[Mikael Staffas, executive]

Not as of now, but you're bringing up a fair point, we have our neighbors on the industrial area, Norilsk Nickel Harjavalta that are not sanctioned right now, could potentially become sanctioned. But even if they're not sanctioned, there have been pressures on them from self-sanctioning from others. They are so far operating fine. If they were to seize operation that doesn't primarily affect us. We have no material flow that goes between us. But yes, we have a neighbor. We have energy balances. We have lots of other things where we share the cost. So what we said is that if they were to have to shut down for some reason that we don't control that would affect us negatively in the sense of costs, maybe not in a material way, but it would change the effect as negative in terms of cost, but we should be able to continue to produce.

[Operator]

The next question comes from Alexander Vilval from Pareto Securities.

[Alexander Vilval, analyst]

Two questions, please. First, regarding Garpenberg, could you say something sort of conceptually around the possibilities for Garpenberg in the longer term? Obviously, it's perhaps early days, but how -- which options do you have regarding possible expansion or sort of structural changes regarding the operation? And secondly, please, any expectations regarding personnel cost inflation in 2023?

[Mikael Staffas, executive]

You can start with Garpenberg, it's extremely early days. We're looking at conceptual studies. But just to be very clear, the Garpenberg operations is right now a very well-balanced operation. There's not really any surplus capacity in many of the stages in the production, which means that we will probably need more shaft capacity, maybe a new shaft able -- to be able to produce more. We will probably need a second mill line in the mill because the existing mill cannot really take much more.

We will need an extended telling facility, which has all kind of implications around how these things can be done. But those are giving a few of the things that we are, of course, looking into and see how we could potentially manage -- it's very early days.

And then labor inflation, regarding Finland, if you read in Finnish news, the collective bargaining agreement is going on right now. We're talking about roughly 3.5% year 1, 3.5% to 4% year 1 is coming through most likely than in '23. Swedish collective bargaining agreements are not done yet. They will be done late March, early April. We'll see where they end up. And Norway has already concluded since a while back at around 4%, '23 over '22. Ireland, we are still negotiating. We don't have a collective bargaining agreement yet.

[Operator]

The next question comes from Liam Fitzpatrick from DB.

[Liam Fitzpatrick, analyst]

Three or 4 questions from my side, if that's okay. First, on the working capital. It was a good performance in Q4, are you kind of now at a stable level? Did you undershoot -- just any kind of color on where you see working capital versus that kind of end of year starting point. And then on -- in terms of the Aitik kind of labor availability issue that you had in Q4, can you give us any kind of feel or sensitivity for what that would mean once that normalizes in terms of uplift to EBIT in Q1 and beyond?

The third question, just on zinc premiums. So my understanding is there's going to be a big lift in contract premiums. Can you give any color in terms of what that delta is going to be for your business in 2023 versus 2022?

And then final question on Tara. I think you told us at the CMD that the power contract was close to expiring. Where does that asset once it rolls on to spot terms fit in terms of margins? And are you comfortable that operations should be pretty steady as we go through the year from an overall cost perspective.

[Mikael Staffas, executive]

You start.

[Håkan Gabrielsson, executive]

Working capital, as you know, we typically have low level. I mean there is a seasonality in this, and we have low levels, basically every Q4 related to, I mean, the behavior of industrial customers and so on. That is the fact also this year. I would say it's a normal level. It's slightly higher than the same than 1 year back. But at that time, we had the issue with water inflow in Tara, which meant that we were short of zinc.

So basically, working capital is on a normal level for year-end. We have come down most of the gold. We have come down on the nickel, and we're a bit short on a couple of other areas. In Q1 with the same seasonality is typically a quarter where we build some working capital. And I expect that to happen also this year. So basically, the short answer would be a normalization.

[Mikael Staffas, executive]

Then if we take some of your other questions, I can take Tara Power. Yes, Tara is a high-cost mine Tara is very sensitive to these kind of inputs. It looked, if I want to be frank, pretty bad for a while in the fall. It looks better now. I mean the power prices have come down in Ireland quite a lot, and we are managing to handle that exactly what it would mean for our cost position. There are more things into this. It's also things on the revenue side and of course, premiums and so on play into this picture. I can't really give you any more detail around that.

The net impact of zinc premiums for us. I don't know, Håkan, if you have any kind of number, it's, of course, positive. You should be aware that some of these zinc premiums have already come through in Q4, but I don't know if we have any kind of estimates around that.

[Håkan Gabrielsson, executive]

I think that there is -- I mean, if you just look at the quarter-to-quarter, there is a line in the EBIT bridge. And as I said, most of the revenue in the other -- in the business area, smelters for the full year is zinc premiums. So it's substantial numbers. But then if you're asking about an outlook going forward, I think that's probably a bit difficult to say. I mean, it depends on the overall zinc market, electricity development and so on.

[Mikael Staffas, executive]

And then your last 1 around labor availability in Aitik. The answer is we don't really have a number. But if we go back to normal levels, we would have 3% more availability of labor, which basically will mean 3% more production, but that's maybe oversimplifying it because there are other ifs and buts around this, but that's maybe the order of magnitude and then you can play around with what that means.

[Liam Fitzpatrick, analyst]

Okay. Yes, that's fine. Just on the zinc side, could you just remind us what your spot to contract exposure is? And I hear what we're saying we're in Q4, but I take it the Q4 numbers would only have included the spot premiums. Is that right? The contracts will apply from 2023 onwards.

[Mikael Staffas, executive]

That's a good question. I'm not sure that if we've ever come into discussions around how much on the metal side that we have on spot and on fixed annual contracts in premiums. Do you have that number, Håkan, I didn't even know myself.

[Håkan Gabrielsson, executive]

No. But I think -- I mean, in general, the spot sales is about 10%, 15%. So that should cover it.

[Mikael Staffas, executive]

Yes. I would say that the say 80% to 85% is actually on annual zinc premiums that have more or less been set for the year.

[Operator]

The next question comes from Daniel Major from UBS.

[Daniel Major, analyst]

A couple of questions. Firstly, at Kevitsa, you reduced the reserve life from 2034 to 2032. It's not a super long duration asset. Can you give us any update on the next sort of development of Kevitsa, I think it's pushed back 5%, when you would expect to approve that and what the impact on the sort of asset duration and any potential CapEx associated with the project would be?

[Mikael Staffas, executive]

You're absolutely right. We are looking into the pushback 5. The pushback 5 is not in the reserve statement. It's made more in the resources statement. We are -- and it's way too early to give any numbers, but we are looking into that. We hope that we will probably in '24 maybe. So in a year, year to 2 years from now to make a decision regarding potential pushback number 5, but as said, the CapEx numbers is too early to say and also the exact impact on life of mine is also too early to tell. And also, just to be very clear on that, we will need a new tailings facility for a pushback 5. So there are also environmental issues linked to that.

[Daniel Major, analyst]

Okay. But just to, I guess, [indiscernible], in the context of previous CapEx projects, would it be fair to assume would be a substantial multibillion project for a new tailings dam and the pushback 5. Is that the right way of thinking about it?

[Mikael Staffas, executive]

I think it's going to be very difficult to get it for less than the billion if you're asking it that way.

[Daniel Major, analyst]

Multibillion, I suppose. Okay. Yes. That's all for me.

[Operator]

The next question comes from Daniel Major from UBS.

[Daniel Major, analyst]

I just had my question.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Mikael Staffas, executive]

Okay. Well, thank you all for all your questions, and thank you all for participating. I wish you all a very good day, and I hope that you will all have a very nice Valentine's Day. Thank you all.