The state of the industry

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2 The state of the industry Challenges facing secondary producers in a constrained global economic climate Markus Fyhr Manager Sales Boliden Commercial AB Unit/Operation choose tab Insert/Header & Footer 2

3 This is Boliden Nordic metals company with a focus on sustainable development. Core competence in exploration, mining, smelting and metals recycling. Mines, produces and sells copper, zinc, lead, silver and gold. Five mining areas and five smelters. 3

4 Production volumes and revenue distribution 2014 Copper Production, tonnes Mines Smelters Zinc Production, tonnes Mines Smelters Lead Production, tonnes Mines Smelters Lead alloys Production, tonnes Bergsöe Gold Production, kg Mines Smelters Silver Production, kg Mines Smelters 1) Tellurium Production, kg Mines Smelters - 1) Silver in concentrate in Kokkola included in the specified production from

5 Global lead demand Non-battery 19% Industrial stationary 13% Industrial traction 6% SLI replacement 42% Start-stop technology potential in automotive (OEM, replacement with lag) SLI OEM 20% Mt metal +1.8% p.a. Industrial battery potential; telecom, back-up (stationary) 12 +6% p.a % p.a % p.a % p.a SLI replacement Industrial traction Non battery uses SLI original equipment Industrial stationary Source: Wood Mackenzie 5

6 Battery technology Non-ICE share 1.4% WORLD PRODUCTION OF LIGHT VEHICLES Million units ICE Non-ICE Non-ICE share 6.4% New battery technology (Non-ICE) grows strongly Lead-acid continues to dominate Start-stop technology a potential ICE=Internal Combustion Engined Vehicle, includes start-stop vehicles Non-ICE=Hybrid Electric Vehicles, Eletric Vehicles, Fuel Cell Vehicles Source: LMC Automotive, CRU Ltd 6

7 Supply of recycled batteries dependant on vehicle density Vehicle density 7

8 Primary share remains high in China PRODUCTION OF REFINED LEAD WORLD CHINA 100% 100% 80% Secondary 80% Secondary 60% 60% 40% 20% Primary 40% 20% Primary 0% % Source: Wood Mackenzie Q

9 LME Price / Battery price / Margin development 1200 Lead secondary market Price data - index Jan 2000= LME Cash Lead in Battery Prices Gross Margins Source: CRU Ltd 9

10 Lead/Zinc mine projects needed LEAD MINE BASE CASE CAPACITY LEAD MINE BASE CASE CAPACITY + PROJECTS 10 8 Mt metal in concentrate 10 8 Mt metal in concentrate Mt 3.3 Mt Other Closures Expansions New Projects Base case Probable B Probable A Demand for Pb in concentrate Mines closing A few extensions likely Still timing uncertainties for projects Uncertain timing for projects Generally Zn/Pb combined Source: Wood Mackenzie Q4 2014, Base case capacity excluding Paroo Station care and maintenance 10

11 Zinc/lead mine project capital intensity increasing MINE PROJECT CAPITAL INTENSITY MINE PROJECT INCENTIVE PRICE 10,000 9,000 8,000 $/tonne Zn Equivalent 7,000 6,000 5,000 4,000 3,000 2,000 1, Operating Mines Base Case Projects Probable Projects Possible Projects Source: Wood Mackenzie More complex infrastructure Equipment price escalation Mines go deeper, grades decline There are projects with lower PIP Time to production High PIP above 1.5 Mt Unit/Operation choose tab Insert/Header & Footer 11

12 Expansion projects 12

13 Garpenberg Extraction of the deposits at Garpenberg began back in the 13th century. Complex ore containing zinc, silver and lead. Successful exploration work and good metal prices facilitated the current SEK 3.9 billion investment. Expansion from 1.4 to 2.5 million tonnes of ore - to be reached in Garpenberg 2014 Milled tonnage: ktonnes Number of employees: 404 LTI: 4.0 Finding it Mining it Smelting it Selling it 13

14 Summary Positive outlook for lead demand New smelting capacity mainly in developing countries, but also in Europe which increases current overcapacity Continuous strong competition for lead scrap putting pressure on secondary smelters Efficient operation together with compliance with environmental and working environment legislations key to survive Mine project capital intensity increases. Expectations of higher metal prices (Zn, Pb, Ag) needed to start new mining projects 14

15 Disclaimer This presentation has been prepared by Boliden for information purposes only. Nothing in this material shall be construed as an offer or solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. This presentation has been prepared as per the indicated date and Boliden does not undertake any obligation to correct or update the information or any statements made therein. Views that may have been expressed may be subject to change without notice. Certain statements in this presentation are forward-looking and are based on plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other circumstances may also have a material effect on the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange or interest rates or metal prices, technological factors, interruptions in supply or production, actions of courts, regulators, governmental agencies, competitors, customers, suppliers, employees or other third parties. Nothing contained herein shall constitute any representation or warranty as to the accuracy or completeness and Boliden accepts no responsibility or liability as to the accuracy or completeness of the information contained herein. The material may include information from third party sources believed to be reliable. However, Boliden has not made an independent verification of the information provided. Save as by prior approval in writing, this material may not be copied, transmitted or disclosed, whether in print, electronic or any other format. All rights to the material are reserved. Boliden does not accept any liability whatsoever for any direct, indirect, consequential or other loss arising from or in connection with any use of this information. This material has not been reviewed, registered or approved by any authority under any applicable laws. 15

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17 Close to 20 national and international directives / legislations affecting lead smelters Bergsöe Legislation Status Costly Comment Batteridirektivet (återvinningsgrad) OK Yes End of Life Vehicle directive for automotive (dispens för att använda blybatterier, 5 år i taget) Yes Would have huge implication Bref to be updated every 8 years(target for updates) OK Yes Approved 2015, mandatory 2019 Industrial Emission Directive (Demands from Bref) OK Yes Approved 2015, mandatory 2019 Air Quality Revision of National Emission Ceilings Directive, NOx/SO2 trading scheme. Likely ok Likely not Unclear what will happen/impact Soil Thematic Strategy on soil protection, the Soil framework directive, EQS for soil, link to IPPC directive Unclear Yes Water Framework Directive, EU thematic strategy on marine environment EQSs and list of priority substances, input to WFD guidance document Unclear Yes Waste Framework Directive, Landfill Directive,waste shipment regulation, EU waste list, waste Unclear strategy...,focus;end-of-waste criteria, by product issues Avfallsdirektivet Yes REACH Registration, Evaluation, Authorisation and Restriction of Chemicals Threat Yes Integrated Product Policy (IPP) Eco- Efficiency Ok Likely not Environmental Quality Standards (EQS) Ok Likely not SEVESO III to be implemented in MS by 1st June >100tonnes of substances Hazardous to the Aquatic Environment Chronic Category 1 (H410) will be designated SEVESO lower tier and >200tonnes as SEVESO upper tier Inconsistency exists in CLP classification Battery Oxides/Paste ILA Assessment: based upon assessment of components would conclude that battery oxide/paste would be classified as category 1 H410 Unclear Unclear Sweden CLH Proposal Repr. 1A; H360DF. May damage fertility. May damage the unborn child. Impact on customers, expensive handling Product Environmental Footprint (PEF) Likely that every product sold in the EU will ultimately have a PEF. Range of projects chosen by EC, including metallic sheet, batteries and UPS Germany, LOAEC at levels between 17 and 25 μg/dl Pl/blood suggested- might end up in EU legislation USA Cal/OSHA publishes initial proposal for health based PEL of μg/m3 (8hr TWA). A PEL of 0.5 μg/m3 would mean 95% of employees would have BLL below 5μg/dL Nya men okända krav på gränsvärden för bly I arbetsmiljö kommer troligen pga detta. Ok Partly ok Partly ok Partly ok No Yes Germany can be fast, change in EU will take longer Yes US will influence EU Yes Threat beyond

18 Challenges facing secondary producers in a constrained global economic climate What other revenue streams are being targeted? Which other materials are being recovered? District heating, plastics, tror vissa gör något med svavelsyran fish farming J, How can secondary production processes become more efficient? Vet inte hur mycket vi vill säga här. Energieffektivisering, possibility to combine primary and secondary feed. Istället prata om vikten av att branschen håller en hög CR standard, miljö, arbetsmiljö, bly I blodet mm 18

19 Lead supply refined lead to be updated Unit/Operation choose tab Insert/Header & Footer 19