Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance,...
Transcript of Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance,...
Market Overview
Lennart EvrellPresident & CEO
1Capital Markets Days - November 1-2, 2010
Forward looking statements
Certain statements in this presentation are forward-looking, and the actual outcome could be materially different. Such forward-looking statements are based on Boliden’s present plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other could have a material effect on the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange rates, interest rates and in metal political conditions, fluctuations in exchange rates, interest rates and in metal prices, production disruptions, technological issues, interruptions in supply, actions of courts, regulators, government agencies, competitors, customers, suppliers, employees and other third parties.
Capital Markets Days - November 1-2, 2010 2
Volume
S
Demand - supply balance
3
Price
D
Capital Markets Days - November 1-2, 2010
Price
D2
S
Demand and supply in metals and mining
D1
D3
Volume
D2
4
D1
Capital Markets Days - November 1-2, 2010 4
Copper mine industry cash cost
Price 8300 USD/t
5
Aitik
Capital Markets Days - November 1-2, 2010
Price S
Cu open pit, supply curve turns negative(!) and demand curve is steeper than ever…
S1
Volume
DD1
6Capital Markets Days - November 1-2, 2010
Mines are closed at negative cash flow, below the curve, and are restarted on the curve…
Price
Volume
7Capital Markets Days - November 1-2, 2010
…and 85% capacity utilization can give price on the 50th percentile
Price
D2 D1
-15%50%
D2 D1
8Capital Markets Days - November 1-2, 2010
Volume
Price
Cu prices will peak high. Volatility!
P2
Volume
P1
9Capital Markets Days - November 1-2, 2010
Price
Will Zn prices go as high as Cu?
P2
Volume
P2
P1
10Capital Markets Days - November 1-2, 2010
Metal marketShort term
11Capital Markets Days - November 1-2, 2010
Demand, prices and TC
� Metal prices� Global GDP� Construction� Automotive� Metals demand� Boliden customers� Supply and main changes�
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� Supply and main changes� Metal balance� Metal prices
� TC� Smelters production capability� Balance smelters – mines� Treatment Charges
� Other� Sulphuric acid
12Capital Markets Days - November 1-2, 2010
GDP, from bust to boom…or not
� Global growth recovered back to 5%
� Mature countries - comparing with a very weak period
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� Inventory build and general recovery but…
13Capital Markets Days - November 1-2, 2010
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Industrial production recovering
� General industrial production recovered from the very weak period in 2009
� Slower growth in Q3��
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14Capital Markets Days - November 1-2, 2010
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Construction investments
Mature economies� Low level of investments� Effects of stimulus wanes
China� High and growing investments��
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� High and growing investments� Overheating concern
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Capital Markets Days - November 1-2, 2010
Car production
Mature economies� Comparison with a very weak first
half 2009� Slowing growth after Q1� Demand below normal
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China� Growth around +20%
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Capital Markets Days - November 1-2, 2010
Metals demand forecasts
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� Global demand back at the previous peak� World excluding China still well below the previous peak
Capital Markets Days - November 1-2, 2010
Boliden industrial demand
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20
25
30
35
40
45
50
kt
Zinc - Industrial Sales vs Trader Sales
10
15
20
25
30
35
kt
Copper - Industrial Sales vs Trader SalesBoliden zinc metal shipments Boliden copper metal shipments
� Base metals can always find a buyer� Weak times – sales to traders and via
LME� Normal conditions – majority to
industrial buyers
� Boliden often sell around 10% of the volume to traders
� Limited sales to traders at this point
18Capital Markets Days - November 1-2, 2010
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Metal supply – smelter production
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Annual growth Q3 2010 9M 2010
Global + 10% +15%
Asia + 12% +18%
North America 0% +8%
Europe + 10% +16%
Annual growth Q3 2010 9M 2010
Global - 1% +3%
Asia + 4% +10%
North America - 7% -5%
Europe + 3% +7%
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Capital Markets Days - November 1-2, 2010
Smelter industry – recent development
Closures and reductions
� Vedanta ordered to close the Sterlite Tuticorin smelter, environmental issue – 350 ktkoppar
� Pan Pacific Copper and Mitsubishi - annual production combined of 1.1 mt –production reduced in Q4 – maintenance, poor concentrate terms, lack of secondarymaterial
� Maintenance stops among Chinese smelters in 2H 2010
� Planned new Cu projects in China scrapped according to CRU – no clearannouncements though
� Chinese Ministry of Industry: 2000 companies to close inefficent manufacturingplants this year – low share of base metal smelter capability
Long term smelter capability
� Excess capability over the next five years
� Smelter terms expected to be under pressure
20Capital Markets Days - November 1-2, 2010
Metal market balance
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Zinc� Production increase in Asia, North America and Europe� Increased metal stocks up to July, declining thereafterCopper� Tight concentrate market in 2010 – constrained smelter production� Decreasing metal stocks from April
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Capital Markets Days - November 1-2, 2010
Metal prices
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400
500
600
700
800
900
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
ktUSD/tZinc
600
800
1,000
1,200
1,400
3,000
4,000
5,000
6,000
7,000
8,000
9,000
10,000
ktUSD/t Copper
� Price recovery partly driven by inventory build
� Decline in stocks from July
� Copper approaching previous peak -stocks down since the spring
� Partly driven byfinancial investors
22Capital Markets Days - November 1-2, 2010
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300
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2003 2004 2005 2006 2007 2008 2009 2010
LME SHFE Zinc price
Source: Reuters Datastream
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400
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2,000
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2003 2004 2005 2006 2007 2008 2009 2010LME SHFE COMEX Copper price
Source: Reuters Datastream
Concentrate supply – mine production
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Annual growth Q3 2010 9M 2010
Global + 7% +11%
Asia + 9% +20%
North America + 8% +4%
Europe + 2% -2%
South America +6% +5%
Annual change Q3 2010 9M 2010
Global + 2% 0
Asia + 2% -1%
North America + 9% -6%
Europe + 5% +3%
South America + 6% +5%
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Capital Markets Days - November 1-2, 2010
Treatment charges
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� Spot TC stabilized - Chinese smelter buying activity slowed
� Spot TC up sharply in Q4 –maintenance stops, Chinese smelter buying activity slowed
24Capital Markets Days - November 1-2, 2010
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Metal performance
� All metals have performed strongly in the recovery
� Zinc was pushed down lower than copper relative to cash cost
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Summary – short term market
Economy� Chinese economy remains strong� Slowing economic growth in mature countries� Construction activity low in mature countries – high in China� Automotive and industry production growth slowing
Metals market� Global demand back at peak - mature well below, Asia well above� Global demand back at peak - mature well below, Asia well above� Metal prices well above cash cost� European zinc premiums slowly moving up, copper premiums up
Concentrate market� Slower activity among smelters in China and Japan
� Maintenance shutdowns, compliance with five year plan targets in China
� Improved concentrate availability in the short term� Higher spot copper TC, stabilized zinc spot TC
� By product prices at good levels� Sulphuric acid – good demand, prices moving up
26Capital Markets Days - November 1-2, 2010
Market outlookmedium to long term
27Capital Markets Days - November 1-2, 2010
Developing world has grown in importance
2009 Developing markets 46%
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Metals growth zone
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� Developing countries - in or below the metals growth zone
� China – growth rate to slow but the strong potential remains
29Capital Markets Days - November 1-2, 2010
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Metals demand growth projected to be high
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20
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Global zinc demand
1982 - 19911.7% growth p.a.
1960 - 19735.4% growth p.a.
2002 - 20091.2% growth p.a.
2010 - 20193.9% growth p.a.
2020 - 20254.6% growth p.a.
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mt metalGlobal refined copper demand
1960 - 19694.7% growth p.a.
1980 - 19891.8% growth p.a. 1990 - 1999
3% growth p.a.
2010 - 20253.6% growth p.a.Source: Brook Hunt Source: Brook Hunt
� Scenario based on economic growth in line with IMF projections� High growth in developing economies� Mature countries
� Copper - cyclical recovery - declining demand to 2025� Zinc - cyclical recovery and slow growth to 2025
Capital Markets Days - November 1-2, 2010 30
0
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1960 1970 1980 1990 2000 2010 2020
1991 - 20013.5% growth p.a.
1974 - 1981-0.4% growth p.a.
0
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1960 1970 1980 1990 2000 2010 2020
1970 - 19793.4% growth p.a.
2000 - 20091.5% growth p.a.
Examples of depleting zinc mines
MineProduction
estimate 2010 in kt metal
Closed by
Brunswick, Canada 210 2013
Century, Australia 505 2015
Lisheen, Ireland 170 2014
Perseverance, Canada 130 2013
Capital Markets Days - November 1-2, 2010 31
Perseverance, Canada 130 2013
Skorpion, Namibia 164 2016
Total 1,179
Source: Brook Hunt – A Wood Mackenzie Company
Head grade decline in copper
Capital Markets Days - November 1-2, 2010 32
Zinc supply
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� Overcapacity for smelting� Short term mine capability over demand� Disruptions can quickly tighten the market
33Capital Markets Days - November 1-2, 2010
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Copper supply
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balance
34Capital Markets Days - November 1-2, 2010
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Cash cost now and in the future
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� Similar cash cost floors in the future� High incentive prices for projects� Metal price volatility to remain or increase
35Capital Markets Days - November 1-2, 2010
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� Trough years on average at 90th percentile
� Copper has been well above 90th percentile cash cost in trough years
36Capital Markets Days - November 1-2, 2010
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Summary - Medium to long term market
Economy� Developing countries - high proportion of world GDP� Several large population nations will be in the metals growth zone
Metals market� High growth in developing countries� High growth in developing countries� Stagnation or decline in mature countries� Cash cost floors to remain at current levels
Concentrate market� Projects started but not enough to meet projections� Risk of concentrate shortage in zinc and copper� Incentive prices for new projects are high
37Capital Markets Days - November 1-2, 2010