Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway Market analysis President & CEO Jan Johansson Mines Smelters Zinc Copper
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 2 Continued strong growth in China lower growth rate in the rest of the world Global 2006 Q1* - Cu-consumption 5.5 % - Cu-production 7.3 % - Zn-consumption 3.4 % - Zn-production 1.1 % 20 15 Industrial Production USA - Cu-consumption 9.9 % 10 - Zn-consumption 0.0 % Europe - Cu-consumption 2.6 % 5 - Zn-consumption 0.0 % China - Cu-consumption 10.6 % 0 - Zn-consumption 9.5 % -5 Continued good forecast for 2006 03 04 05 06 Growth % USA W Europe Japan China Q1 2006 v.s. Q1 2005
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 3 Zinc production and consumption 1995 vs 2005 kton REFINED ZINC PRODUCTION ZINC SLAB CONSUMPTION 10000 EU 25 EU25 5000 0 USA Japan EU 25 Asia USA Japan China Asia China 33% Others Others 1995 2005 43% USA EU25 Japan USA Asia Japan Asia 37% China China Others Others 1995 2005 48%
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 4 Copper production and consumption 1995 vs 2005 kton 17000 0 REFINED COPPER PRODUCTION EU25 USA Japan EU25 Asia USA China Japan Asia 31% China Others Others 1995 2005 43% COPPER CATHODE CONSUMPTION EU25 USA EU25 Japan USA Asia Japan Asia 38% China China Others Others 1995 2005 50%
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 5 China and the rest of Asia together represent 43% of global zinc metal production and 48% of consumption NORTH AMERICA 1381 1071 1365 L. AMERICA EUROPE 864 2323 2433 2509 AFRICA CIS 577 327 ASIA 644 820 2616 405 185 272 1825 CHINA 2674 2853 2000 ( 000 tonnes 2005, Brook Hunt) 804 623 AUSTRALIASIA 1346 Mine Production 9901 Metal Production 10068 Metal Consumption 10663 456 262
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 6 China and the rest of Asia together represent 43% of global copper metal production but 50% of consumption NORTH AMERICA 1749 1787 2569 L. AMERICA AFRICA 7037 689 EUROPE 843 2488 515 3932 1213 158 CIS 731 1525 1556 ASIA 3269 CHINA 3815 730 4592 2670 AUSTRALIASIA 1095 153 957 460 ( 000 tonnes 2005, Brook Hunt) 4028 Mine Production 14912 Metal Production 16740 Metal Consumption 16907
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 7 China refined zinc and concentrate trade kt 800 600 400 200 Zinc Zinc in concentrate 0-200 1997 1998 1999 2000 2001 2002 2003 2004 2005-400 -600 Source: Brook Hunt
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 8 LME Zinc Price and Stocks USD/t ton 3 900 1 200 000 3 500 1 075 000 3 100 950 000 2 700 825 000 2 300 700 000 1 900 575 000 1 500 450 000 1 100 325 000 700 200 000 jan-03 apr-03 jul-03 okt-03 jan-04 apr-04 jul-04 okt-04 jan-05 apr-05 jul-05 okt-05 jan-06 apr-06
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 9 LME Copper Price and Stocks USD/t ton 8 500 1 400 000 8 000 1 300 000 7 500 1 200 000 7 000 1 100 000 6 500 1 000 000 6 000 900 000 5 500 800 000 5 000 700 000 4 500 600 000 4 000 500 000 3 500 400 000 3 000 300 000 2 500 200 000 2 000 100 000 1 500 0 jan-03 apr-03 jul-03 okt-03 jan-04 apr-04 jul-04 okt-04 jan-05 apr-05 jul-05 okt-05 jan-06 apr-06
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 10 Europe copper and zinc balance 2005 Europe copper balance (kt Cu) Europe zinc balance (kt Zn) Consumption Consumption Refinery production (incl. secondary) Smelter production (incl. secondary) Mine production Mine production 0 1000 2000 3000 4000 5000 0 1000 2000 3000 Copper balance and market in Europe Depending of import of copper concentrate and copper cathodes. Consumption of copper is far beyond production capability. Zinc balance and market in Europe Depending of import of zinc concentrate. Consumption and production of zinc, balanced by imports mainly from Namibia (Skorpion material) Expected effects from 2005 closures
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 11 Increased demand for zinc import in Europe Production and Consumption in 000 tons 2600 2500 2400 2300 2200 2100 2000 64 12-162 -203-271 -323-358 2004 2005 2006 2007 2008 2009 2010 900 700 500 300 100-100 -300-500 Balance in 000 tons Balance Europe Production Total Europe Consumption Total Europe data: CRU Zinc Quarterly, 1st quarter 2006; comparison of forecasted Zn metal production capacity and Zn metal consumption
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 12 Increased copper metal premium US$/t 150 140 155 150 130 120 110 90 110 90 93 93 113 70 50 30 70 70 50 45 40 45 45 50 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sept-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 May-06 Copper premium Source: Brook hunt
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 13 Increased zinc metal premium US$/t 235 215 230 195 180 209 175 155 135 115 95 75 55 100 100 100 105 105 105 94 88 77 130 130 115 115 110 110 105 100 115 123 100 100 100 105 110 105 100 94 100 100 105 61 83 73 140 143 110 155 158 130 170 135 145 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sept-05 Oct-05 Nov-05 Dec-05 Jan-06 Feb-06 Mar-06 Apr-06 current US Midwest Delivered Europe ex-works Far East (Western) Source: CRU Monitor Zinc
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 14 The galvanizing industry is the biggest customer of zinc metal Zinc Consumption by first use Western World (2004) Misc Oxides and 3% chem icals 6% Zinc Consumption by end use Western World (2004) Other 10% Die-casting 17% Galvanising 50% Transport 23% Construction 45% Brass Se m is & Casting 18% Rolled Zinc 6% Consumer products 10% Ind. Machinery 10% Source: Brook Hunt
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 15 Boliden s major copper customers are found in the wire rod sector, where a premium is paid for quality. Copper Consumption by First Use 2005 Other 9% Copper Consumption by Market Sector 2005 Consumer Products 10% Cu Alloys 17% Transport 11% Construction 38% Tube 11% Wire Rod 55% Industrial Machinery 13% Sheet/Strip 8% Electronic products 28% Source: Brook Hunt
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 16 Boliden's customers are located in north-western Europe (Nordic Countries, UK, Germany, France) markets with big volumes in construction activity now and in the future Construction Risk Score 5 years Source: Global Insight
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 17 Europe has been and will stay an important player in the automotive industry an important factor for Boliden s customers units World Wide Vehicle Production 60 000 40 000 20 000 0 2003 2004 2005 2006 Total Europe America China Asia excl. China Others Vehicles: passenger + utility cars source: GI, Metal Bulletin s 10th International Galvanizing & Coil Coating Conference, Oct 2005
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 18 Despite many different replacement products, zinc is still very competitive Aluminum, e.g.. in car bodies gives weight reduction (energy savings) and corrosion resistance. But automotive industry can t change fast and demands heavy investments. Minimal risk of substitution in European galvanizing market. Painting could be used instead of galvanizing and is short term financial beneficial. Plastics, e.g. pipes, handles etc. Wood in construction details. No immediate risk of substitution for zinc die-casting, but there is a risk of move to low cost countries.
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 19 Threats to the copper market exist, but there are few real replacement products for Boliden highgrade copper in the coming years Reduced use of copper by the power cable industry in favour of aluminium. Reduced use of copper for tubes in favour of plastic materials. Outsourcing of brass production from EU to Far East will give less raw material supply regarding supply of copper/zinc bearing ashes. Production of wire rod cable outsourced to Far East due to lower labour cost leads to higher freight cost for EU cathode producers. Risk for substitutes in vehicle heat exchanger. To expensive to use as roofing sheets or aesthetic use. According to CRU, less than 1% of copper could be substituted in the next year.
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 20 Price effects on end products are limited Value of zinc and copper content < 1% of price of a new car
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 21 Shortage of zinc concentrate? Zinc: Present production + probable expansions + possible expansions '000 tonnes of Zinc p.a Possible Expansions Probable Expansions 20000 Base Case + Highly Probable 18000 1% Demand Growth 3% Demand Growth 16000 5% Demand Growth 14000 12000 10000 8000 6000 4000 2000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: CSFB, Brook hunt
Boliden s Capital Markets Days 7-8 June 2006 Odda, Norway 22 Shortage of copper concentrate? Copper: Present production + probable expansions + possible expansions '000 tonnes of copper 30000 25000 20000 Possible expansions Probable expansions Base Case New Projects and planned expansions 1% growth rate 3 % growth rate 5% growth rate 15000 10000 5000 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: CSFB, Brook hunt