Boliden AB

STO:BOL

Q2-2025 Earnings Call

[Olof Grenmark, executive]

Ladies and gentlemen, I'd like to welcome you to Boliden Q2 2025 results presentation. My name is Olof Grenmark, and I'm Head of Investor Relations. Today, we will have results presentation led by our President and CEO, Mikael Staffas; and our CFO, Håkan Gabrielsson. We will also have a Q&A session, which will be led by the operator.

Mikael, welcome.

[Mikael Staffas, executive]

Thank you, Olof and welcome to all of you out there as well. I hope you're doing fine. Let's get going and get to talking about the quarter and the quarterly report that we have just released. If you look at the highlights, we had a profit, excluding inventory revaluation of almost SEK 1.3 billion. There's been quite a lot of accounting going on in this quarter, and Håkan will come back and talk a little bit about those things that are affecting plus and minus. What is clear, though, is that we have a negative currency effect of about SEK 600 million compared both to last year and compared to first quarter. It happened to be the same numbers.

We've also had extensive planned maintenance, and this was well communicated beforehand and we were happy to be able to complete them exactly according to plan. As always, when you have major maintenance stops, you're always a little bit nervous when you cool down the processes and start looking at what you have that you will find something more that needs to get done while you're doing things. But this year, most of the things were in the condition that we expected, and we could do the needed actions as was planned.

We have a stable production and a stable underlying cash flow. We'll talk more about that going forward. We've included the 2 Lundin mines as of this quarter or as of April 16 to be more exact. The integration is going fine and we're moving along well there as well. This also creates some accounting issues, but Håkan will clear that all out for you as he comes in a little while.

We have a record production in Aitik, and we're bringing this up here because it is important. It is so that regarding ore production, we are producing according to what we have guided. We are around 40 million tonne pace right now. But we have been able and we're very happy that we're so good in getting the stripping done. That has been an issue during the whole dam project that stripping was falling a little bit behind. It's part of the issues right now that we don't really have too many alternative places to go to when things happen, and the fact that we get stripping going now will give us more flexibility going forward to handle issues.

Our big projects are according -- planning and they're going on according to plan as we have presented them in the Capital Markets Day back in March. So the financial performance talked about just shy of SEK 1.3 billion in there, there is a real comparison issue, which is linked to the one-off cost for advisers, et cetera, linked to the acquisition and the equity raise that we did with the Lundin assets. And we had the planned maintenance at SEK 400 million EBIT impact, just as it was communicated. Free cash flow, if you exclude the proceeds for the acquisition was at SEK 2 billion. We're very strong and happy about that. Almost one of it came from insurance money, but that was also well communicated beforehand. And part of the project that we're doing right now.

The total free cash flow then, if you take also the acquisition amount into place was, of course, much more negative. We're happy with the 29% gearing. This is a -- in our mind, at least a stronger balance sheet than we would have planned to have after the acquisition. Of course, thanks to the relatively strong cash flow that we had in the quarter. CapEx is moving along according to what has been communicated.

On the big projects, the Odda project, nothing really major to happen compared to what we said in March. The commissioning is ongoing, and we're looking for ramp up now in the second half of the year. The Kristineberg expansion is more or less done. It was inaugurated back in May. And the last pieces are coming in place as we're speaking. The Rönnskär tank house well on track, and we will see the ramp up here in the second half of next year. The Aitik dam is already completed. You can see, it's already history, but we did mention it here that we actually now have all the permits in place.

When we did the Aitik dam, we used an exception in the Swedish environmental law that you can do certain things and ask for a permit afterwards. Normally, you have to ask for the permit first. There is a little bit of a risk with this. We never thought it was very big, but of course, good now that we actually do have the permit in line with what we thought we will get. The Boliden Area tailings recycling is also well underway, completion in the second half of next year. And also here, and this one is we're also very happy with, we've gotten the permits regarding this in place during this quarter. So we now have all the prerequisites ready to be able to continue going forward.

On the ESG side, things are also moving well forward. The greenhouse gas emission looks like it's going the wrong way. But here, you have to remember that we're now including 2 more units into this one that we will -- of course, also, we will restate our base here in the science-based target as we move forward. We had a good quarter when it comes to LTIs. So we are clearly better than last year, and we're also moving our 12-month rolling average down. So we're in a good place regarding that. Also sick leave, as you know, has been a little bit of a tough issue for us. Sick leave went up during COVID and hasn't really come down yet. But now finally, we're seeing trends coming in the right direction. Let's hope that we can keep that trend in place. And it's important to understand that Somincor and Zinkgruvan are included in the last quarter, but not recalculated the numbers here for historical periods.

On the market side, well, lots of things have happened on the market side. As you recall, we had a very clear dip on metal prices and currency during April. Metal prices basically recovering in the later part of the quarter, whereas the exchange rates for the dollar has continued to be weaker than we have been used to. So we see that. And if you look more on the metal side, we also see that the zinc price has been going lower, whereas the precious metals have been going higher, but the total mix for us is about 0.

There is a very big push on the copper spot TCs. It doesn't affect us so much directly because we have very little on spot. Most of our copper comes on benchmark. But of course, as this very low spot TC continues into the second half of the year, it will, of course, have some effect on benchmark for next year. So it's a development, which is clearly problematic from our point of view. And I think it's problematic for the whole industry point of view because the levels that we see on TCs right now is not sustainable for the industry as such, even though the miners right now have a very good time. The byproducts, including sulfuric acid prices have been quite stable for us as well.

If you look generally, what's happening in the market on the cost situation, you can see here when we're looking at the different percentile development, you can see that copper, still the copper price is quite a lot above where the cost curves are. There is a shortage of copper that is already priced into the price, but the price has been relatively stable during this latest time. You can also see here that the cost is coming down. It looks like copper miners around the world are good at taking cost out. But do remember that the high gold price is part of this and also the low copper TCs start playing in as a kind of freebie for the copper miners in lowering their cost.

If you move over to the zinc side, once again, it has been for a while, the zinc price is relatively low. It also looks like zinc mines around the world are extremely good at taking out costs. Here, the high silver price is helping a lot, and also the lower zinc TCs is helping to get the cost level down. It is not so much that the mines around the world are that good at taking out cost.

Looking at nickel, nickel is problematic. You can see that there are very few nickel mines in the world that make any kind of money at all. There has been a hard push to get the costs down. Here, there are some real costs, cost cutting that's been going on, and it's now on the level and the nickel price is on a level where it's very unsustainable for many in the industry over time.

If we move over to mine production, when you look at that here, number one, just to be very clear, we have once again included Zinkgruvan and Somincor as they have produced during the 10 weeks of the quarter that we have owned them. We have not adjusted historical periods. Therefore, of course, zinc looks extremely strong with the profile of the new mines. Also, copper gets some help from Somincor. And nickel is, of course, only Kevitsa that pushes it.

Having said that, we've had a relatively strong production in all the mines. The Aitik is in line with what we guided for, the 40 million pace as we can have now with the diorite issue. Recoveries are going in the right direction and better than they were in Q1. Still a little bit to go to get back to the normal levels, but we're heading in the right direction. We're getting out of this oxidized zone. In Garpenberg, the throughput is slightly lower. We've had quite a lot of maintenance in Garpenberg as well during the quarter, and we have a lower zinc grade compared to last year. We're having sill pillar mining that is slower than we had anticipated or I should say, high grade sill pillar mining is progressing slower. We have not sterilized any of this. It's not that we have lost any of the high-grade stopes, but we've had to, in the short term, replace the high-grade stopes with some alternative stopes, which have been lower grade. And we're coming back a little bit to the outlook, and we don't think that we're going to be able to speed up the sill pillar mining in the very short term.

Kevitsa has strong production and also relatively good grades. The Boliden Area, very stable production, good grades, even though they're lower than last year, but last year was crazy high grades in the Boliden Area.

In Tara, the ramp-up is going on. Somincor, stable production. We've had some issues, as you all read about, the big power outage in the Iberian Peninsula. We had a separate power outage, which was more local around Somincor that has impacted negatively, but otherwise, generally moving on nicely. Zinkgruvan moving on nicely. They've had slightly lower grades than what they usually have and what they have in the R&R statement, but not really much around that.

On the Smelter side, also good production. Rönnskär, strong and stable production. We've managed to find that with the right feed for Rönnskär. We have very strong free metals coming out of Rönnskär in this quarter partly linked to the fact that we've been producing well, and we've been having a good mixture and also part to that -- as with this free metals, part of that is linked to inventory and inventory measurement, and we have done some inventory and been able to adjust positively according to that.

Harjavalta, major maintenance stop, but apart from that, also good production around that solid production.

Kokkola, major maintenance stop, but good production around that and also very well planned before, and we managed to get inventories of semi products within the system so that we could run the areas that were not having maintenance in a good way. So very strong performance there.

In Odda, we're moving in the right direction in terms of getting up to the 200, as you know, from 160 to 200. That is progressing well, although we did have an unplanned maintenance situation around that. But otherwise, well around that. And as we come into the fall, we'll start looking at the 350 level. Also Bergsöe, small but very strong production in this quarter.

So with that financial summary. Håkan, please.

[Håkan Gabrielsson, executive]

Thank you, Mikael, and good morning. Well, as you have seen, we have reported an EBIT result, excluding process inventories, just shy of SEK 1.3 billion in a quarter, that has been characterized by production at or above expectation in most units. Lower prices, significantly lower prices in particular dollar. And then as usual in the summer months or summer quarters, high planned maintenance. This is down compared to last year, but then bear in mind, though, that last year had SEK 2.4 billion insurance income included in the results. Capital expenditure is at SEK 4.2 billion, which is an increase compared to both comparison periods, but fully in line with our full year guidance.

Free cash flow, a number that we're quite happy with, SEK 2 billion, excluding the cost of the acquisition of Somincor and Zinkgruvan, and that is an improvement compared to both comparison quarters. I'll come back to that in a while.

Looking at the result by business area, mines delivered just above SEK 1 billion, relatively stable compared to the comparisons. Smelters, a really strong quarter at SEK 600 million, close to SEK 600 million. And this is in a quarter where we have the full quarterly impact of the lower treatment charges, high planned maintenance. So I think this is a sign of strength from the smelting division. Obviously, it's lower than last year when we had the one-off in the form of insurance income in the income statement.

Other elimination then that's mainly the internal profit elimination that we do, which is a timing adjustment connected to revenue recognition. That is a negative SEK 300 million. In there, there is about SEK 100 million that is an internal profit elimination connected to the new mines, Somincor and Zinkgruvan, which are now classified as internal feed.

Going in a bit more into detail about the changes between quarters. There have been quite a few moving parts. Year-on-year, if you put everything together, the development of prices and terms is actually flat. We have a significant negative impact from the U.S. dollar, about 600 million. Treatment charges, negative of about 300 million, but then compared to last year, we have a good development on metal prices and in particular, the precious metals which improved by about 700 million and then we also had a good run on byproducts.

Volumes are up by a bit more than SEK 1 billion, and that's primarily the acquired units. On top of that, we have a negative impact from internal profit eliminations. This year, it was negative. Last year, it was positive. So that makes a fairly big difference here in this line. Costs are up, again, due to Somincor and Zinkgruvan being consolidated and also due to the ramp-up of the Tara mine. We also had a bit more maintenance cost in smelters compared to last year.

Depreciation, up SEK 700 million. Here, the new units account for almost SEK 500 million, Somincor and Zinkgruvan. But we also have increases in Tara or the Aitik as a result of the recent investments and the ramp-up of Tara.

Odda just putting some numbers on that. Last year, we were running at SEK 50 million per quarter depreciation. This quarter, we are running at SEK 100 million this quarter. But as the project is fully commissioned, the Green Zinc Odda expansion project is fully commissioned, I expect that number to come up further to about SEK 275-ish per quarter.

And then, of course, I've commented on the items affecting comparability and that's included in this comparison as well, of course. Looking at quarter-over-quarter, here, we see a significant price reduction. Again, dollar is the main part, roughly SEK 650 million negative. Treatment charges going from half of the impact in Q1 to full impact in Q2 that makes up about SEK 150 million. And then metals, all put together is about SEK 100 million negative. There, we have a fairly big impact from definitive pricing of volumes that were preliminary priced at the last quarter end. So we had a negative impact of about SEK 300 million from that. But then that was largely countered by a good development on precious metals, which contributed by about SEK 250 million in this quarter compared to Q1. So all in all, a fairly big change mainly attributable to dollar.

Volumes were up. We had the impact of Somincor and Zinkgruvan being consolidated. We had some negative internal profit, as I commented, but we also had a strong development of free metals in smelters. That was a mix of a number of reasons. One is the favorable, the relatively favorable concentrate mix in the quarter. We've had good recoveries in production in the smelters. And then there is also a positive component from a stock take where we actually had more metals than anticipated. So really strong performance in smelters in that respect.

And then on the cost side, again, mostly related to the changes, mostly related to Somincor and Zinkgruvan plus a little bit more planned maintenance in smelters. And then items affecting comparability here is mainly the transaction cost for Somincor and Zinkgruvan that we wrote about also in the Q1 report in the outlook.

Moving over then to cash flow. We have a good cash flow here, SEK 2 billion. If we back out the cost for the acquisition of the 2 new mines, we had cash flow of about SEK 3.5 billion each from EBITDA and from working capital. And in particular, the working capital is good. It is true that we were helped in there with about SEK 1 billion from insurance income, insurance cash flow, and also in a situation with prices coming down that automatically means that we released a little bit of working capital, but it was still well managed inventory positions during the maintenance stops in smelters. So we're happy about that.

All in all, when we look at the balance sheet and the financing, you can see the impact of the acquisitions. We have total assets coming up to SEK 136 billion, capital employed to close to SEK 100 billion. And also the net reclamation liabilities coming up from 6% to 8%. So that's all impact from the 2 acquisitions and 2 acquired mines. But we are really happy that we have been able to maintain a net debt to equity at below 30%, this close to an acquisition. Again, that is a position of strength, and we have a robust balance sheet. So I'm very happy with that.

And for the outlook, I hand over again to you, Mikael.

[Mikael Staffas, executive]

Thank you, Håkan. Regarding the outlook, it is a relatively short and quick presentation. We are reiterating basically everything we have said before regarding CapEx, regarding throughput and regarding grades with one exception. We are guiding down the full year grade in for zinc, I should say, in Garpenberg from 3.3% to 3.1%. This is more in line with what we have been mining the last couple of years. There is a couple of questions, I should say. This is mainly due to that we're having some very high-grade stopes in the sill pillar mining area.

As you know, sill pillar mining is always dependent on having good ground conditions, and we've had issues with that, and we have not been able to mine this area as fast as we had originally planned. We have not sterilized any part of this. It's all going to come out at some stage from the mine. But in the meantime, it's going slower, and we have been able -- or we've been forced to move over to other areas to cover the volume, areas that have lower grades. But apart from that, there is basically no change.

Regarding the calendar, there's not much to talk about it in general. You see this before. There is one new item that we have not done before, we have historically guided for the next coming year in 2 tranches. We've done certain parts together with Q3 and certain parts together with Q4. It's been a little bit, I would say, wrong in terms -- compared to our internal processes because many of the guidance actually is set in a Board meeting in early December when we set formally both CapEx and also grades and production volumes and so on. And we have, therefore, decided to move this all together. We will do all the communication regarding next year in one chart. The things that used to come in Q3, like CapEx and so on, and the things that usually come in Q4, like the maintenance stops, all in one chart coming in early December. So it's a little bit different than it has been historically. Otherwise, I think you should remember or recall all of these numbers or these dates, should not be anything new.

And with that, I'll just reiterate while we're on this planet, our purpose, our vision and our values. And with that, I'm open to take questions.

[Operator]

[Operator Instructions] The next question comes from Marina Calero from RBC Capital Markets.

[Marina Calero Ródenas, analyst]

Two questions on my side. The first one on the new assets, Somincor and Zinkgruvan. I appreciate you only report yearly financials for each of the mines. But can you give us some color on how the cash cost for the quarter are tracking for these assets compared to your full year guidance? And then my second question is on working capital, assuming prices stay where they are today, how should we think about working capital in the second half of the year.

[Mikael Staffas, executive]

I give them both to you.

[Håkan Gabrielsson, executive]

Okay. Well, if we look at the new assets, I think most when it comes to production is roughly in line with the full year guidance. We have provided also an EBITDA outlook of USD 300 million to USD 350 million per year as a 5-year average at consensus prices, and current prices are a bit lower than that, having an impact roughly of SEK 150 million. So we are a bit lower than our long-term outlook due to prices, in particular, the dollar, but production has started roughly in line with our expectations. Mikael indicated that we had some impact from power shortages and from slightly lower grade than usual in Zinkgruvan, but it's still a fairly limited impact. So the guidance is still solid.

Working capital, we released this quarter SEK 3.5 billion. In there, there are a couple of things that I'm not expecting necessarily to repeat. One is the insurance income. We have SEK 1 billion this quarter, I expect SEK 300 million. So that's a reduction of SEK 700 million. And then we were helped a bit by the reduction of prices, which hopefully will not happen in Q3.

So it will be -- it will be a substantially lower number. But I still think that we should not tie too much more working capital. So my best estimate for the working capital development is flat roughly compared to where we stand right now.

[Operator]

The next question comes from Adrian Gilani from ABG Sundal Collier.

[Adrian Gilani Göransson, analyst]

My first question is what really was the issue here with Garpenberg that caused you to lower the grade guidance? And I guess, what has changed in the mine plan compared to your assumption from before?

[Mikael Staffas, executive]

As I said, this is regarding the sill pillar mining that has been gone on for quite some time. And for those of you who don't know what sill pillar is, that is what we have mined in one area and we have mined below, and there is a piece in between these 2 areas that was left in earlier time and now we're doing this intermediary level because it's mine, both the low and above, it has some specially built-in challenges regarding rock stability in these areas. And we have not been able to mine this area as quickly as we would have liked to, and it is a high-grade area. We have alternative stopes to go to, alternative positions, but they are at lower grade.

It is possible when you run into these problem that you might sterilize the mine, i.e., that you run into rock mechanical problems that means that you can never mine there because there is -- but that's not the issue for us. We're still in an area -- we're going to get all that zinc out of the Garpenberg mine. It's just going to take a longer time.

[Adrian Gilani Göransson, analyst]

Okay. Understood. And then in Aitik. Should we expect any notable improvements in the recoveries for the second half of the year? Because I think you mentioned them passing that you're sort of starting to move out of this problematic zone that you're in?

[Mikael Staffas, executive]

Yes. Recoveries should go up in the second half of the year as we move out of the oxidized zone. So yes. And you can see there's already been quite an improvement from Q1 to Q2, even though we're still below historical levels, but we should be able in the second half, if not quite at historical level, at least get quite a bit closer to historical levels.

[Adrian Gilani Göransson, analyst]

Okay, understood. And then finally, just a housekeeping question. Can you remind us how much of the insurance cash flow is left and when that will come?

[Håkan Gabrielsson, executive]

Well, let's see if I can do that. It should be -- I'm looking at Olof here to do it. But we should have about SEK 350 million per quarter in Q2. Sorry, in Q3 and Q4. And then there's about SEK 300 million left for next year.

[Mikael Staffas, executive]

So about SEK 1 billion left, right?

[Håkan Gabrielsson, executive]

Yes. Correct.

[Operator]

The next question comes from Liam Fitzpatrick from Deutsche Bank.

[Liam Fitzpatrick, analyst]

One question on Garpenberg and then another one on Aitik. On Garpenberg, can you just give us an update on the permitting process and the timing there? And in relation to this ground issue that you're encountering at the moment. Is this just short term? Or could this persist into 2026?

And then on Aitik, you're sounding more confident just in terms of the amount of material that you're moving and completing the tailings dam. Are you still of the view that you're going to remain some way below the 45 million tonne nameplate for the next few years? Or could there be upside to that in terms of getting up to 45 million tonnes within, say, the next 1 to 2 years?

[Mikael Staffas, executive]

If we start with the last one, it's -- we haven't guided for anything beyond this year. It's true that we've hinted that it might not jump right away, but we'll come back with the guidance regarding next year. It is mainly not about the mine as such. It's more about the mill and how the pebble crushing that we need to increase in order to handle the direct situation, how quickly that one is moving on.

So I'll leave you with that. Then you had Garpenberg permits. We are moving on, and we hope to get a permit for the increased level to 4.5 million before the end of the year. We are not sure that we will get it, but we're still hopeful that, that will happen. We are relatively sure that we will get the permit, but it's a timing that is a little bit unclear.

And then the issues on the mining in Garpenberg. Garpenberg is a big mine with many different areas, and we do sill pillar mining in other areas as well. But this one is a little bit more sensitive to the outside because it's such a high-grade area. And therefore, it shows. Otherwise, when we're doing sill pillar mining and it goes slower than we thought, you won't notice as we go somewhere else. But yes, there are always those kind of issues, but you should maybe not see them normally. It's because that we're having so high grades in that particular area.

[Liam Fitzpatrick, analyst]

And so is it just an impact on 2025 or could it extend to 2026?

[Mikael Staffas, executive]

Well, I mean, there are two different answers to that one. Number 1 that, of course, what's happening in '25 is actually improving '26, because we're saving some high-grade areas till next year. That doesn't necessarily -- I need to be very clear, but that doesn't necessarily mean that the grades will go up because you know that we are on a grade decline over time as we are mining above the average of the reserve. But of course, this is helping. And then comes the question whether next year, where we have other sill pillar mining, whether that will be affected by this thing being slowed down. This should also be viewed in light of the -- that we hopefully will mine much more next year given that we hope that we get a permit to mine at a higher level. Those are all things that we'll come back to as we start guiding and we come to December. .

[Operator]

The next question comes from Krishan Agarwal from Citigroup.

[Krishan Agarwal, analyst]

A quick follow-up on the working capital. So Håkan mentioned that working capital flat is kind of a good assumption for the second half? And then you're also saying SEK 700 million will be insurance claim to that. So is it fair to assume that underlying business will have a slight amount of working capital build and hence, full year probably may also be a flat working capital development, excluding the insurance?

[Håkan Gabrielsson, executive]

Well, typically, what we have is -- if I talk about the general development of working capital, we typically have a fairly stable level in Q3, and then we release in Q4. I expect that to be true this year as well. Everything related to working capital for Zinkgruvan and Somincor is already in. So that is not a change. There will be some working capital build in Odda once Odda is ramped up. Being a zinc smelter, it's still on a fairly modest level compared to the inventory build you see in a copper smelter. So let's say, 0.5 billion or something like that, that is the magnitude we're talking about. So I still think that the overall picture holds flat Q3 and then some release in Q4.

[Krishan Agarwal, analyst]

Okay. That's very clear. And then a question on free metals. So the free metal recovery, you are attributing to a bit of inventory adjustment and higher pricing. Should we read this in a way that at current gold and the silver pricing, free metal recoveries can stay significantly higher for '25 and '26?

[Mikael Staffas, executive]

I'm not sure I got the question right. Did you get the question?

[Håkan Gabrielsson, executive]

Not sure. Did you ask about whether the current level of free metals is sustainable?

[Krishan Agarwal, analyst]

Yes.

[Håkan Gabrielsson, executive]

Yes. Okay. I think there is -- we talked about some one-offs, and I think that accounts to about SEK 100 million. But apart from that, I mean, it is sustainable. And in particular, once we get to the point where we're ramping up the new tank house in Rönnskär, which will happen next year, we should see a substantial improvement. We've been talking about roughly SEK 1 billion per year previously. And with current gold prices, it might even be more than that.

[Krishan Agarwal, analyst]

Yes. No, that's very clear. And my last question is on -- you are into the ramp-up phase. How should we think about any kind of earnings contribution in Q3 and Q4?

[Mikael Staffas, executive]

For Q3, there will be a relative limited contribution for Q4. We should see -- so we should see contributions from Q4. Yes. Exactly how much, I don't know if we have guided for, but there will be clearly contributions coming in.

[Operator]

The next question comes from Amos Fletcher from Barclays.

[Amos Fletcher, analyst]

A couple of questions. First question was about Tara where production actually went down quarter-on-quarter when the mine is supposed to be ramping up. Just wondering what happened there? And then secondly, on the Lundin assets. Can you just give us a feel for the EBIT contribution in the second quarter, so we can get a sense of what the Q3 delta will be from a full quarter of ownership?

[Mikael Staffas, executive]

On the second one, I don't think we're going to guide you much more than what Håkan just said that the number that we have given of $300 to $350 per year is -- we're looking a little bit south of that right now because prices and terms are slightly lower than what they were when we looked at this in the fall and guided for this. And then, of course, you have to make the correction from having 10 weeks going up to 13 weeks, of course, is something around that. And I don't think we can really say much more.

Regarding Tara, it's true that you're seeing that production actually went down. It's always when you start up things like this, we had a little bit of a free go in the beginning because we had ore that was easily muckable then we came into a situation that you have to develop every stope that you're then going to muck later and the developments have been slightly slower coming up to speed. And all in all, this should not change the guidance for the whole year, but that's -- there's been a little bit of that. We've been slow at getting the new development up to the real pace and that what has hindered us during Q2.

[Håkan Gabrielsson, executive]

Maybe just one additional comment on the Lundin assets. We mainly talked about EBITDA in our guidance and in our follow-up. But we -- as a part of the accounting year of the acquired units, we have -- we do not have any goodwill or any assets that are never depreciated. So we're depreciating the full acquisition price over time. And in this quarter, we had close to SEK 500 million in depreciation, and that, of course, has an impact on the level of the EBIT contribution. EBITDA is on, as we said, roughly SEK 150 million, away from what we have seen in our business case and what we've guided for externally.

[Operator]

The next question comes from Ioannis Masvoulas from Morgan Stanley.

[Ioannis Masvoulas, analyst]

Just a few questions left from my side. The first on the Odda smelter. You talked about some earnings contribution from Q4 this year. But can you remind us, which quarter do you actually expect to get the full contribution during 2026? And then can you remind us what's the annual depreciation charge once the asset is fully commissioned?

[Mikael Staffas, executive]

Regarding the full impact, we should see quite a lot of the full impact starting relatively early in '26. Regarding depreciations?

[Håkan Gabrielsson, executive]

Yes. Well, the full impact should be about SEK 275 million per quarter. And then when I say full impact, that's the full depreciation of the Odda site. Out of that SEK 50 million per quarter was the run rate before the expansion. So a little bit more than SEK 200 extra million per quarter is what we're looking at.

[Ioannis Masvoulas, analyst]

Very clear. Second question on the corporate treatment charges. Mikael, you mentioned that the depressed TCs we've seen are problematic for the smelting industry. But are we at a pain point that we're going to see some curtailments across the industry? Or contribution from gold and sulfuric acid are keeping margins just about manageable, which seems to be the case as the curtailments so far haven't been as prominent as someone would have expected? And also related to that, do you think it's possible we could see a negative benchmark for 2026?

[Mikael Staffas, executive]

Regarding curtailment, Ioannis, I think you're much better than me to see what's happening in the rest of the industry. You're right that we don't see the curtailments and you could argue what because I'm pretty sure that there are some smelters out there who are running at negative cash margins at these prices and terms. But might not be willing as of yet at least to take the downtime, that's also expensive if you run a smelter. But it's clearly so that the low TCs, even though they are partially compensated by the high gold price and partially compensated by a healthy sulfuric acid prices, is still on an unsustainable level.

Regarding TC's benchmark going forward, that's an interesting one. I don't really want to speculate because we are not part of the table, and we are just a price taker on those TC discussions. But you're not the first one who are mentioning the possibility of negative full year TCs for next year. We will see what happens in the fall.

[Ioannis Masvoulas, analyst]

Maybe just the last one on the guidance that you will release in December. You mentioned it's going to be harmonized across the assets. Out of curiosity, are you looking to stick with a traditional Boliden format? Or potentially shift to a format of providing asset level guidance on contained or payable metal for the mines?

[Mikael Staffas, executive]

Let's keep that for December, Ioannis.

[Operator]

The next question comes from Paul Kirjanovs from Bank of America.

[Pavel Kirjanovs, analyst]

I had a higher-level question for you. Is there a capacity for Boliden to do further deals here? Or is internal focus fully on the integration of the new mines for now?

[Mikael Staffas, executive]

I would put it this way. Number one, our strategy has always been that we are primarily taking care of what we have. And that's what we have always focused on. And then we said that we are always willing to look at potential deals if they are value creating. And we've also said that you have to be very careful when you do those kind of deals because it's easy that the deal could be value destructive as well if you're doing the wrong deal and paying too much.

So having said that, right now, our full focus is on taking care of our all 10 units and the 2 new units that we've gotten. If something were to show up, we will have to look at it, but we're not seeking any kind of extra growth as of this.

[Operator]

The next question comes from [indiscernible] [ ZCSD. ]

[Daniel Major, analyst]

Can you hear me?

[Mikael Staffas, executive]

Yes, we hear you.

[Daniel Major, analyst]

It's Dan Major from UBS. I'm not quite sure where the name came from. Three questions on my side. Firstly, just to clarify on this depreciation delta. You said Taras at SEK 100 million is going to SEK 275 million. Over what time frame is that, is one part of the question. And Lundin is SEK 500 million of run rate of depreciation. Is that correct? And then it's SEK 200 million higher when Odda gets fully ramped up. Is that the right math on the depreciation?

[Håkan Gabrielsson, executive]

No. Well, I think there is -- I mean the big part here is that Lundin assets in Q2 are running at roughly a SEK 500 million per quarter rate, and we expect them to continue to run at that rate. That's including everything, overvalues and so on. Odda, we're at SEK 50 million, are now at SEK 100 million, and are going to end up at about SEK 275 million. Tara, I didn't mention any numbers. If I said Tara, then it was clearly a mistake. Tara has a slightly increase in depreciation as some of the assets are depreciated based on production volume, but that's pretty small in the grand scheme of things. And then on top of that, Aitik, with the dam investment, also has a slight increase.

[Mikael Staffas, executive]

But that's already in.

[Håkan Gabrielsson, executive]

That's already in. Both of those are already in. So the main changes that we're looking at from now and onwards is that Odda goes up from the run rate of SEK 100 million right now to SEK 275 million. Then the rest is in the Q2 books.

[Daniel Major, analyst]

Okay. I think that's clear. Yes. I mean just one other thing I guess we've asked before, but I think you're the only mining company that focuses on EBIT, not EBITDA. Have you considered changing that? I certainly think investors would welcome it.

[Mikael Staffas, executive]

Well, you can read EBITDA as well. It's not that we're making it a big secret. It's in there. But yes, we have been focusing on EBIT over time. That's true. Also -- yes, go ahead.

[Daniel Major, analyst]

Yes. Sorry. Just second question, just thinking about the bridge to earnings in Q3 versus Q4. So maintenance of SEK 400 million is positive. I think it was SEK 150 million advisory charges on the Lundin deal. And then you mentioned SEK 300 million of provisional pricing. Are they the main items we should be focusing on beyond the sensitivities and the depreciation?

[Håkan Gabrielsson, executive]

I think so. I mean, the grade guidance, we reiterated that. The only thing I could add possibly is on Aitik that the grade guidance for the full year is not changed. It's the same. I think we will have, according to the latest forecast I saw, a little bit weaker in Q3 and a bit stronger in Q4. And then we had a bit -- I mean, roughly 100 free metals in smelting that is going to be difficult to repeat. So maybe some prudent estimates there will be good. That's -- I don't know if I'm forgetting something, but apart from that, it should be okay.

[Mikael Staffas, executive]

Yes. And maintenance is not 0 in Q3 and Q4 either. It's not -- so you still have some maintenance even though the SEK 400 million comes away, but there is some more coming back.

[Daniel Major, analyst]

Okay. That's useful. And then just final one. I noticed the -- I guess you'll give guidance on CapEx later in the year. I noticed the consensus is just under SEK 12.5 billion. Is that a sensible number? Can you walk us through those building blocks that you outlaid at the Capital Markets Day, just to be clear?

[Håkan Gabrielsson, executive]

I think it's better just to refer back to the presentation down in the Capital Markets Day. I think that's pretty clear. And then the only thing that has really changed in the outlook since that time is the addition of the 2 new units, which we have guided for separately in the press release. So I'll refer back to those.

[Operator]

The next question comes from Igor Tubic DNB Carnegie.

[Igor Tubic, analyst]

I just have two follow-up questions. The first one is the internal profits. Can you say anything if there are any one-offs there? Or yes, is this business as usual, so to say? And the second one is on the balance sheet, given that you have increased your debt quite a bit post the acquisition. I just wonder how you are thinking about repaying that versus focusing on dividends going forward?.

[Mikael Staffas, executive]

I can take this one. I get to play CFO for 2 seconds as well. Yes. On internal profit, just to be very clear, that is a timing issue. So that one should over time be 0. The only thing that's different this time is that we have this roughly SEK 100 million that has come from the acquisition. They will not go back. We will continue to have those SEK 100 million there. The other roughly SEK 200 million in there is something that is not expected to be happening every time, it's supposed to be 0 over time, which means that you could potentially see that as a positive coming one of the next few quarters.

Regarding the balance sheet and the dividend policy, the dividend policy is very clear and stays at the 1/3 payout ratio, that is what we're going to do, and we will use the other money to pay down debt for the time being. And then if it continues to be positive after the debt has come down under 20%, including the net reclamation liability, then we will think about other ways of distributing money.

[Operator]

The next question comes from Richard Hatch from Berenberg.

[Richard Hatch, analyst]

I've got three questions. The first one is just on costs. Can you just talk us through if you're seeing any kind of cost pressure creeping through to the business? So I know you have kind of mentioned a bit of it in the release, but I'm just interested as to whether you're seeing any persistent cost inflation pushing through? That's the first one.

The second one is just on the Tara ramp-up. So should we expect that line to be fully ramped up in Q3?

And then thirdly, just on Kevitsa grades, you're running about 13% ahead of your guidance. So do you think that you're still happy to expect grades to normalize in H2? Or do you think there's scope for a beat?

[Håkan Gabrielsson, executive]

Should I start with cost?

[Mikael Staffas, executive]

Starting with costs.

[Håkan Gabrielsson, executive]

Now what we're seeing, if you keep personnel costs and salary part is roughly 0 inflation. So we do not feel cost pressure right now. Then I can read in the press that there are some speculations about that generally in the market, so we'll have to see. But currently, it's about 0 inflation for us.

Kevitsa grade guidance, the numbers that we've guided for holds. So we'll normalize towards that. And then do you want to take the Tara?

[Mikael Staffas, executive]

The Tara ramp-up holds as well and the full year guidance holds of 1.8.

[Operator]

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

[Krishan Agarwal, analyst]

A quick follow-up. I mean, there's been a lot of discussion on depreciation in the call. So in that context, if I see the consensus number, the depreciation is around SEK 8.5 billion for the full year. Would you sort of agree with that number?

[Håkan Gabrielsson, executive]

Well, I think the depreciation, to make it very simple, if you take the number that we have in this quarter and then you extrapolate that for the full year, then you're pretty close. You have to add a little bit 100 or something for Odda, but then the bigger change in Odda is for next year. So I think this quarter is fairly representative for what we should be for the remainder of the year.

[Krishan Agarwal, analyst]

Okay. So SEK 8.5 billion is not million miles apart from your expectations?

[Håkan Gabrielsson, executive]

No.

[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]

Well, thank you. Thank you all for listening this morning. I don't know where it is -- where you are at, but at least here in Stockholm, it's a lovely day with the lovely weather and the Stockholm-based crew has probably been waiting to get outside. I just wanted to leave you with the words that we feel stronger than we've done in a long time. We have just done a big acquisition. We have a strong balance sheet, and we feel good about our operations. And I wish you all a very good summer. Bye.