The state of the industry Challenges facing secondary producers in a constrained global economic climate Markus Fyhr Manager Sales Boliden Commercial AB 2015-03-11 Unit/Operation choose tab Insert/Header & Footer 2
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
Production volumes and revenue distribution 2014 Copper Production, tonnes Mines 78 427 Smelters 347 345 Zinc Production, tonnes Mines 294 150 Smelters 467 624 Lead Production, tonnes Mines 60 765 Smelters 24 734 Lead alloys Production, tonnes Bergsöe 43 974 Gold Production, kg Mines 4 379 Smelters 17 368 Silver Production, kg Mines 323 325 Smelters 1) 626 767 Tellurium Production, kg Mines 30 917 Smelters - 1) Silver in concentrate in Kokkola included in the specified production from 2014 4
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% 18 16 14 Mt metal +1.8% p.a. Industrial battery potential; telecom, back-up (stationary) 12 +6% p.a. 10 + 4.2% p.a. 8 + 3.6% p.a. 6 4 2 + 2.1% p.a. 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 SLI replacement Industrial traction Non battery uses SLI original equipment Industrial stationary Source: Wood Mackenzie 5
Battery technology 120 100 80 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 60 40 20 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 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
Supply of recycled batteries dependant on vehicle density Vehicle density 7
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% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 0% 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Source: Wood Mackenzie Q4 2014 8
LME Price / Battery price / Margin development 1200 Lead secondary market Price data - index Jan 2000=100 1000 800 LME Cash Lead in Battery Prices Gross Margins 600 400 200 0 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 Source: CRU Ltd 9
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 6 6 1.5 Mt 3.3 Mt 4 4 2 2 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 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
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 1,000 0 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 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
Expansion projects 12
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 2015. Garpenberg 2014 Milled tonnage: 2 224 ktonnes Number of employees: 404 LTI: 4.0 Finding it Mining it Smelting it Selling it 13
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
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
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 2015. >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-2013 -Cal/OSHA publishes initial proposal for health based PEL of 0.5-2.1 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 2020 17
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
Lead supply refined lead to be updated Unit/Operation choose tab Insert/Header & Footer 19