Mineraalit ja miljardit -podcast jakso 6. Boliden and the future of critical minerals

Thank you.

That's an interesting question. I get it many times, so I have a little bit of a prepared answer for that question. I usually say, linked to this, that I never read any management books. Because all management books that you read are all the same way. They say that if you can do one thing and you need to figure out the one thing and you do it right, then you will be successful. So, it's either you focus on the customers or you focus on your employees or you focus on quality and you do one thing and then everything will be fine. I usually say that my job is absolutely opposite. There are 100 things to do and you cannot do any of them wrong. Because if you do any of them wrong, then you have a big problem. So, my work is to make sure that I feel comfortable about the levels that we have of everything from production, environment, people, government relationships. All these things need to fit together and of course, I'm only one of 8,000 employees, so I cannot do it all myself, but my job is to make sure that we have a machine running that can do all of these things.

Well, there are quite a few things on my bucket list. The more things you travel to, the more things you want to see. So, you know, seeing the gorillas, for example, in Africa in real life, and I've done that twice, is, of course, something that is very special that I would put on anybody's bucket list. I have not been to the Galapagos Islands, and maybe you can add that one as something that I still would like to do. I don't know exactly when, but at some stage I'll get there as well.

That's right. I mean, orienteering was when I was young my big sport, and I have been running all the big orienteering races, and I was 15 years old when I first ran the Jukola race here in Finland some 45 years ago, and I've done that several times afterwards as well. So, that's been a link to Finland, and I usually say that because of this link and because Jukola usually is in very odd places, I have been to more parts of Finland than most Finns.

Well, it's good you survived.

I think that your comment is kind of right on spot in the sense that we are not so known and we should be much more known. So, Boliden is a company formed about 100 years ago. We're 100 years old from northern Sweden originally. First thing was gold, but very quickly moved over to base metals. So, today we are into base metals. That is copper, that is zinc, that is nickel, that is lead. We still do a little bit of precious metals and gold and silver as well and a little bit about platinum group and so on. We are still mainly in Sweden. That's maybe about half of our total activities in Sweden, but about 25% will be in Finland. And then we have other activities around Europe which makes us that we are clearly the largest base metal mining and smelting company. I should maybe also say we mine and we smelt and do finish metal.

Roughly 25%. So, Finland is not at all insignificant. It's quite important. We have one large mine and two big smelters in Finland.

It's a very good question. I can say it is not because of lack of trying. I have personally and my team has spent time in Finland with the Finnish institutions to try to make it more interesting and both because it is in Finland, but also because it's an interesting industry. But for some reason we have not been successful. And you are absolutely right. We have about 1% of our owning in Finland, which is then, you know, much lower than a whole set of other countries. And Sweden as you said, close to 40% of our holding is still in Sweden but 60% is abroad and out of those 60, only 1 in Finland. I would like it to be much more.

But from our point of view, the similarities are of course the bigger part. You know, a mine is a mine and a mineral is a mineral and a smelter is a smelter and it's pretty much the same. There are certain things that are a little bit different. Finland is slightly more hierarchical than Sweden would be, which also goes through in the way you manage things. I usually say it's more difficult to be a boss of a Finn than a Swede, because when you say something to your subordinate Finn, he or she will do it. As opposed to when you say to a Swede, he or she will argue back and then do it. And that's why it's a bit dangerous because if you say the wrong thing, the wrong thing will get done. So, that's a little bit of that. On a little bit of another area, for us, government relationships and everything that has to do with governments and everything else is very important. And here I might get some Finns to get upset again, but I always have said for many years in a positive sense that Finland is about 10 years after Sweden, and that was positive all the time because Sweden was going the wrong direction. It was getting more and more difficult, more and more bureaucratic, everything taking more time. Finland was still more pragmatic and it was easy to get things done. I would say that Sweden has now turned the corner. It's actually getting easier in Sweden and getting better. And Finland is now still kind of making things more difficult. So, now it's suddenly become, from our point of view, a drawback to be 10 years behind.

Well, I don't feel good at all and I hope that Finland will reverse these at some stage because they're not good at all. We have, as everybody knows, we have announced that in Kevitsa, which is our big mine in Finland and is also about 1/3 of nickel production in Europe. So, it's a big mine and important also for Europe's nickel production. This mine, the way that it's set up right now and with the investments done, is going through roughly 2033. But there's more stuff in the ground. That's not the end of nickel in the ground and we've said very clearly that you could probably extend the life of mine by at least 10 years by going from then maybe 2033 to 2043. But that's a big investment. This may be a billion euro investment. So, it's a large investment to do that because there's lots of pre-stripping that needs to get done. And not only is it a lot of money, it's also takes lots of time. So, that decision has to be made now in order to be ready with the next stage of the mine and so 2033 when the existing stage is depleted. And that decision we have drawn back and because of that we're also having negotiations with the unions in northern Finland. We are likely to come out with reductions around that which I think is sad. But there are also secondary consequences which have to do with smelters and in our case specifically the Harjavalta smelter. Harjavalta is today fed roughly 25% from Kevitsa and the other 75% it's fed on global markets. You have to compete with Chinese smelters and everybody else to get concentrate from South America and other places. And this is getting tougher and tougher as well as China is really making this difficult and are competing very hard for these concentrates and it is a little bit unclear whether a copper smelter and nickel smelter in Finland that has lots of drawbacks in terms of logistics and other things can survive if you don't have any feed coming locally from Finland. So the problem with Finland is really you have a big metal processing industry, your copper smelter, zinc smelter, steel mills, everything else and a mining sector that's very small. And I think that over time it will be also a threat to the metal processing sector if you do not get more mining in Finland. And then of course mining taxes makes things much more difficult and you get less mining. Part both of the fact that it gets more expensive and you mentioned the taxes, there is actually one more thing which has to do with the indirect compensation for the EU ETS system that Finland even though it's allowed from an EU point of view has decided not to use which is another drawback compared to our competitors in Germany and other places. So it is quite tough and I think that where we're lacking is a little bit of a coherent industrial policy.

Yes, it will. It will for sure because these are linked. Once upon a time, Finland was much more balanced in terms of its processing industry and its mining industry. The mining industry has developed much worse than the processing over time, but I would say looking forward, processing is in a big challenge if you cannot have mines also operating in Finland.

Well, I agree with that in principle, yes. It's quite difficult to operate a smelter because you're competing very hard for the raw material with Chinese and others who are buying the same and working very hard on that. And then maybe so far we're slightly better off than the average European smelters because electricity prices, which is also important, are in Finland and in Sweden and in Norway for that matter as well. Even though we complain that they're high and they are high, they're still lower than they are in Europe. So, we are doing okay, but it's not difficult to foresee a future where it would be quite difficult to keep smelters alive in Europe especially if you close down the existing mines that exist.

Well, generally speaking, quite happy at least up until about a year ago. So, what we did, we bought it. The mine was designed for about 7 million tons of ore per year. It had never done more than six. We operated it, also put in some more investment. We are now got it up to 10 million tons per year, which was important in order to make it profitable. And we have since basically executed on that plan quite well. So, it's been a relatively good position. Now, what is with mines is that you go through lower grades earlier in the mine, and then you always have the best stuff towards the end. So, we have even though this has been going quite well and operationally well, it has not been a huge success from a cash flow point of view because we've been investing and we've been working through lower grades. And then now towards the end, these last 7 years of the existing mine plan is where we're going to have the very good grades and we get the good money to be able to kind of make the economic analysis work out. And then that's when we get hit with the mining tax, which is not a thing which irritates you a lot when something that comes out of nowhere and it's in some way, it's kind of an implicit trust that you have between the authorities and a company that when you have a situation where you're investing a lot and we've invested even more. We have 800 million euros left of investment that we need to repay in the next 7 years. And we done even more, you said 700 US dollar and then we had lots of other investments in. So, we invested even more. And then suddenly at half time, when you change the rules, then it gets not so fun anymore. But up until these last discussions about taxes, it's been going okay. We're quite happy the way we have operated it.

In Sweden, we have no mining tax as such, so that would be good. Now, we have other taxes. So, it's interesting in Finland, you've increased the electricity tax for mining. You said 45 times. But diesel tax is actually lower, much lower than in Sweden. So, if you were to compare, you have to take in that we pay much more diesel tax in Sweden. But in total, it will be much less tax.

We're the biggest taxpayer in Lapland. Just to put things first in context. We provide some 5 to 600 jobs full-time with us, and then there's always this how many are then going through subcontractors and everything else. You can multiply this maybe by a factor of three to get the kind of impact just in Lapland. So, it's maybe 2,000 people that are directly impacted by this. The 1 billion that we would have invested to go further for the next stage, that's investment that almost totally would kind of end up in the local economy because there's lots of local things. It's not that we're buying very fancy equipment that's coming from somewhere far away. It's actually very local. So, big investment that has a hit to local, big employment that's local, big local tax payments. All that is coming into play in this situation.

Well, sustainability is an integral part of all what we do. And it's important in that sense that we cannot operate at all if we're not accepted as somebody who has impact on the environment around both kind of from environmental, but also social and economical impact that is either positive or not so much negative.

Number one, sustainability are three things, right? So, the first one that we spend of course all time is actually financial. If you don't financially are doing okay, then it's not sustainable. So, that needs to be a part of this, and that we of course follow in many different ways. You have to be socially responsible, and that we're looking into. And here, of course, one of the main indicators is the injury frequency that we have, and how our employees are doing. And I think here it's an important point that sometimes you should be careful not to brag about, but you need to say something about it. Boliden has 18 years of fatality-free operations. Zero fatalities. And then you can say, "Okay, well, why do you brag about that?" That's of course self-evident. You should not have anybody that dies at the job. And it is. But if we would have been the average good mining company in the world, if you look at the good mining companies, and you scale that down to Boliden size, we would have had about 10. Between, you know, maybe one every second year or every year. And that's what you see in actually other good mining companies as well. So, we've done that very well. And by the way, you can transfer it into Sweden or Finland and look at: had we been at the average kind of heavy industry, we would have had even more, maybe between 10 and 20 fatalities in this year. We're a big company operating in many other places. We've done that. So, that's an important part. And then comes the last part, and here it's just environmental, and here we're looking at number one, of course, impacts on how we are conforming to our permits, and we have permits. And we do break permits. We don't really try to say that we never break permits, but just have a sense of it. We have about 30,000 points every year that we need to comply with. Our permits globally say that we measure things 30,000, they should be within certain limits. And of our 30,000, around 50 every year are outside the permit levels that we have. So, it's kind of two per thousand that are off. So, it's much less than 1%. That's, of course, too many, but at least we follow this very clearly how much deviation we have. And then we have climate. We have a road map to be able to cut our CO2 emissions by 30% to 2030, and then longer term more than that. And then we have which is still a little bit difficult to measure, but we are trying to measure it to be net positive in terms of biodiversity.

I think that we need to show the people what a modern mine looks like and I think it's important. I mentioned before the fact that we have zero fatality for the last 18 years, but I also usually tell the story that in the 1960s, we had as Boliden 44 zero fatalities in 10 years, roughly one every quarter. In the 70s we had roughly 30, in the 80s we had roughly 20, in the 90s we had eight, and in the 2000s we had two, and then since 2008 we are fatality free. Most of people who think about mining have either never seen mining or they have maybe think of mining and they have an idea that looks now as it did 50 years ago. We need to show what modern mining looks like. In Sweden we've done one example which has been extremely successful, maybe we can do it in Finland as well. We have been part of sponsoring a work life reality show called Gruvan, the mine. Where you actually follow people in their daily job. What they do in the mine, what does it look like, what they do day-to-day. And you also can get a chance of looking at the personalities because we have even if it's not 50/50, it's much more women than people think. It is not dirty, it's not dull, it's not dangerous, it's actually high-tech jobs that are interesting with many different angles. And it's been extremely successful, this show. We have had two seasons, we're right now recording seasons three and four and maybe we can do something similar in Finland as well just to give a sense of what is actually modern mining. What does it look like from a work point of view? The other thing is of course the environmental point of view where in a way it's you cannot make an omelet without breaking some eggs. I mean there is an environmental footprint, but I would say that it's been often vastly over exaggerated and I think that's also an important point to point out. For example, for most of our mines and our smelter in Sweden, the quality of the water that goes out is better than drinking water quality. It's actually less copper coming out from the Ronnskar smelter than the Skellefte River has naturally in the background. So we're diluting the natural copper level by the fact that we have a copper smelter there. These are the kind of things that we also need to get out to the public.

I think there's more room to understand this. I think that we have for the last maybe 30 years started living in a world where not just when it comes to minerals, but generally speaking, when I want something, I get it. If I just pay, I get it. And by the way, I can look everywhere in the world and I can get the cheapest price and I'll get it. And that's I think it's been in the business society and it's been also kind of in a normal society, and you make this joke that, you know, you don't really need a cow, why don't you just get the milk from the food store. At the end of the day, you need to get these materials. I think there are quite a few people that understand how all these value chains and supply chains fit together. Not everyone and maybe not everyone wants to see the full consequences. But in the end of the day, when it comes to everything, if you can't grow it, it is mined. Everything that you see around yourself, if you cannot grow it, it's been dug out of the ground in some way. That's the way it is. Sometimes we call that critical because it's difficult to find many sources and it's difficult to find it. And by the way, if it goes away, it will have big impact. Sometimes we call less critical because there would be many other options available for us or we can do without it. But it's an interesting kind of concept that something is more critical. And by the way, all these critical lists have increased in the latest time. They are now, you know, we're talking about 50 substances because in the end of the day, everything is critical.

Without knowing exactly, I think that it's probably true. I think that there are at least, you know, if you take the Boliden side of things, we're already quite a part of an integrated supply chain. The zinc smelter in Kokkola doesn't have any zinc mines in Finland anymore. There's almost no local zinc supply at all. Most of it comes from Sweden, comes from the Garpenberg mine. So, that's a very kind of interesting example of an intra Nordic countries or intra Sweden-Finland supply chain that has been built up by Boliden in the last 20 years around that. So, I think that there are more possibilities and I also think that coming through in the general EU noise, it's of course better if we can work together.

I think you're absolutely right and I think you could, of course, it's not easy to be EU bureaucrat either, and I have the example of nickel, which is very clear that even if we keep to Kevitsa mine, we keep to Terrafame mine, maybe we'll get a new nickel mine somewhere in Europe, nickel in Europe is still far from self-sufficient. So, you need to get nickel from somewhere else. We are today importing nickel in the form of concentrates into Finland from Brazil, South Africa, Canada and other places. So, that's a way to get it in, but of course, we don't like that you get Finnish nickel that is in an unhealthy competition and we can argue why it's unhealthy and it may come mainly from Indonesia. Now, there are other geopolitical tensions that are in place that means that Europe should be nice to Indonesia. Otherwise, the Chinese will be nicer to Indonesia and that has some other consequences which is not really good for the nickel side. And here, I think Europe is a little schizophrenic because on one side, they say that it's extremely important to get critical raw materials, but they're also saying that there's something else that might be even more important, which has to do with the geostrategic situation.

From a mining side, it is basically all the nickel. From a smelting side, Boliden's Harjavalta nickel smelter is the only smelter in Europe. So, it is extremely dependent on just two companies to get any kind of local nickel into place that has been at least partially worked on locally.

I mean, in the end of the day, I think that the mining and smelting industry in Europe will have a few tough years, but will survive in some way. I don't think that Europe will allow it to die. And what's happening, as you mentioned before, on the smelting side is already a warning signal. I think that Europe wants to do more mining even though it's kind of slow and a kind of tedious process, it's not happening very fast. So, I think there's actually pretty good odds for that the industry will continue to grow, even though sometimes you don't think so, but I think they're pretty good odds. We in Boliden have presented, just from our point of view, seven potential mining projects. This is both new mining projects and extension of existing mines that are scheduled to shut down. And that's a pretty long list of things that could happen and that could both kind of keep what we have for a longer time and also expand what we do have. But it's a long tedious process not just to get the permits but then also to make sure that you have business cases that can stand on their own feet. And of course if you then start getting afraid that somebody will slap you with big taxes halfway through the race, you get of course more concerned as well.

It's of course very careful in this situation because of course I will talk for my part of the world and of course politicians have a bigger world to look at than just the mining industry, but I think that Finland is lacking industrial policy in general. I think that you get decisions that come out of nowhere which is not coherent and I think that what Finland would need would be a coherent industrial policy. Hopefully across all kind of potential coalitions that there could be, meaning that hopefully this industrial policy will not change every time you have election but that they will survive over many elections if you have enough consensus around it, because there is nobody who can build a mine after election. You probably have only spent money until the next election. All the money that you're going to generate comes, you know, in one or two or three further elections. You need to have stability. And that's what have been frustrating me most of all, the lack of industrial policies in Finland.

No, I think so. It's absolutely necessary and I think it's both on the mining side where there is the billion euro on the table for Kevitsa. But then there are other companies, Boliden is not the only company around. And then on the metal processing, that's where I'm actually most nervous. Because if the metal processing industry does not survive, and in order to survive, you need to invest. If you stop investing, you're heading only one way. You're heading towards closure. It might take a couple of years, but you're heading only one way. And we need to come into a situation where you also dare to invest in the processing industry.