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Market Overview Lennart Evrell President & CEO 1 Capital Markets Days - November 1-2, 2010

Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

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Page 1: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Market Overview

Lennart EvrellPresident & CEO

1Capital Markets Days - November 1-2, 2010

Page 2: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Forward looking statements

Certain statements in this presentation are forward-looking, and the actual outcome could be materially different. Such forward-looking statements are based on Boliden’s present plans, estimates, assumptions, projections and expectations and are subject to risks and uncertainties. In addition to the factors explicitly discussed, other could have a material effect on the actual outcome. Such factors include, but are not limited to, general economic or political conditions, fluctuations in exchange rates, interest rates and in metal political conditions, fluctuations in exchange rates, interest rates and in metal prices, production disruptions, technological issues, interruptions in supply, actions of courts, regulators, government agencies, competitors, customers, suppliers, employees and other third parties.

Capital Markets Days - November 1-2, 2010 2

Page 3: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Volume

S

Demand - supply balance

3

Price

D

Capital Markets Days - November 1-2, 2010

Page 4: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Price

D2

S

Demand and supply in metals and mining

D1

D3

Volume

D2

4

D1

Capital Markets Days - November 1-2, 2010 4

Page 5: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Copper mine industry cash cost

Price 8300 USD/t

5

Aitik

Capital Markets Days - November 1-2, 2010

Page 6: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Price S

Cu open pit, supply curve turns negative(!) and demand curve is steeper than ever…

S1

Volume

DD1

6Capital Markets Days - November 1-2, 2010

Page 7: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Mines are closed at negative cash flow, below the curve, and are restarted on the curve…

Price

Volume

7Capital Markets Days - November 1-2, 2010

Page 8: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

…and 85% capacity utilization can give price on the 50th percentile

Price

D2 D1

-15%50%

D2 D1

8Capital Markets Days - November 1-2, 2010

Volume

Page 9: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Price

Cu prices will peak high. Volatility!

P2

Volume

P1

9Capital Markets Days - November 1-2, 2010

Page 10: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Price

Will Zn prices go as high as Cu?

P2

Volume

P2

P1

10Capital Markets Days - November 1-2, 2010

Page 11: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metal marketShort term

11Capital Markets Days - November 1-2, 2010

Page 12: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Demand, prices and TC

� Metal prices� Global GDP� Construction� Automotive� Metals demand� Boliden customers� Supply and main changes�

� Supply and main changes� Metal balance� Metal prices

� TC� Smelters production capability� Balance smelters – mines� Treatment Charges

� Other� Sulphuric acid

12Capital Markets Days - November 1-2, 2010

Page 13: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

GDP, from bust to boom…or not

� Global growth recovered back to 5%

� Mature countries - comparing with a very weak period

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� Inventory build and general recovery but…

13Capital Markets Days - November 1-2, 2010

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Page 14: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Industrial production recovering

� General industrial production recovered from the very weak period in 2009

� Slower growth in Q3��

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14Capital Markets Days - November 1-2, 2010

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Page 15: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Construction investments

Mature economies� Low level of investments� Effects of stimulus wanes

China� High and growing investments��

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� High and growing investments� Overheating concern

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Capital Markets Days - November 1-2, 2010

Page 16: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Car production

Mature economies� Comparison with a very weak first

half 2009� Slowing growth after Q1� Demand below normal

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China� Growth around +20%

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Capital Markets Days - November 1-2, 2010

Page 17: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metals demand forecasts

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� Global demand back at the previous peak� World excluding China still well below the previous peak

Capital Markets Days - November 1-2, 2010

Page 18: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Boliden industrial demand

15

20

25

30

35

40

45

50

kt

Zinc - Industrial Sales vs Trader Sales

10

15

20

25

30

35

kt

Copper - Industrial Sales vs Trader SalesBoliden zinc metal shipments Boliden copper metal shipments

� Base metals can always find a buyer� Weak times – sales to traders and via

LME� Normal conditions – majority to

industrial buyers

� Boliden often sell around 10% of the volume to traders

� Limited sales to traders at this point

18Capital Markets Days - November 1-2, 2010

0

5

10

15

Industrial sales Trader sales

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Industrial sales Trader sales

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Page 19: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metal supply – smelter production

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Annual growth Q3 2010 9M 2010

Global + 10% +15%

Asia + 12% +18%

North America 0% +8%

Europe + 10% +16%

Annual growth Q3 2010 9M 2010

Global - 1% +3%

Asia + 4% +10%

North America - 7% -5%

Europe + 3% +7%

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Capital Markets Days - November 1-2, 2010

Page 20: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Smelter industry – recent development

Closures and reductions

� Vedanta ordered to close the Sterlite Tuticorin smelter, environmental issue – 350 ktkoppar

� Pan Pacific Copper and Mitsubishi - annual production combined of 1.1 mt –production reduced in Q4 – maintenance, poor concentrate terms, lack of secondarymaterial

� Maintenance stops among Chinese smelters in 2H 2010

� Planned new Cu projects in China scrapped according to CRU – no clearannouncements though

� Chinese Ministry of Industry: 2000 companies to close inefficent manufacturingplants this year – low share of base metal smelter capability

Long term smelter capability

� Excess capability over the next five years

� Smelter terms expected to be under pressure

20Capital Markets Days - November 1-2, 2010

Page 21: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metal market balance

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Zinc� Production increase in Asia, North America and Europe� Increased metal stocks up to July, declining thereafterCopper� Tight concentrate market in 2010 – constrained smelter production� Decreasing metal stocks from April

21

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Capital Markets Days - November 1-2, 2010

Page 22: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metal prices

300

400

500

600

700

800

900

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

ktUSD/tZinc

600

800

1,000

1,200

1,400

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

ktUSD/t Copper

� Price recovery partly driven by inventory build

� Decline in stocks from July

� Copper approaching previous peak -stocks down since the spring

� Partly driven byfinancial investors

22Capital Markets Days - November 1-2, 2010

0

100

200

300

0

500

1,000

1,500

2003 2004 2005 2006 2007 2008 2009 2010

LME SHFE Zinc price

Source: Reuters Datastream

0

200

400

0

1,000

2,000

3,000

2003 2004 2005 2006 2007 2008 2009 2010LME SHFE COMEX Copper price

Source: Reuters Datastream

Page 23: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Concentrate supply – mine production

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Annual growth Q3 2010 9M 2010

Global + 7% +11%

Asia + 9% +20%

North America + 8% +4%

Europe + 2% -2%

South America +6% +5%

Annual change Q3 2010 9M 2010

Global + 2% 0

Asia + 2% -1%

North America + 9% -6%

Europe + 5% +3%

South America + 6% +5%

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Capital Markets Days - November 1-2, 2010

Page 24: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Treatment charges

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� Spot TC stabilized - Chinese smelter buying activity slowed

� Spot TC up sharply in Q4 –maintenance stops, Chinese smelter buying activity slowed

24Capital Markets Days - November 1-2, 2010

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Page 25: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metal performance

� All metals have performed strongly in the recovery

� Zinc was pushed down lower than copper relative to cash cost

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25Capital Markets Days - November 1-2, 2010

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Page 26: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Summary – short term market

Economy� Chinese economy remains strong� Slowing economic growth in mature countries� Construction activity low in mature countries – high in China� Automotive and industry production growth slowing

Metals market� Global demand back at peak - mature well below, Asia well above� Global demand back at peak - mature well below, Asia well above� Metal prices well above cash cost� European zinc premiums slowly moving up, copper premiums up

Concentrate market� Slower activity among smelters in China and Japan

� Maintenance shutdowns, compliance with five year plan targets in China

� Improved concentrate availability in the short term� Higher spot copper TC, stabilized zinc spot TC

� By product prices at good levels� Sulphuric acid – good demand, prices moving up

26Capital Markets Days - November 1-2, 2010

Page 27: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Market outlookmedium to long term

27Capital Markets Days - November 1-2, 2010

Page 28: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Developing world has grown in importance

2009 Developing markets 46%

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28Capital Markets Days - November 1-2, 2010

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Page 29: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metals growth zone

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� Developing countries - in or below the metals growth zone

� China – growth rate to slow but the strong potential remains

29Capital Markets Days - November 1-2, 2010

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Page 30: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Metals demand growth projected to be high

10

15

20

25

Global zinc demand

1982 - 19911.7% growth p.a.

1960 - 19735.4% growth p.a.

2002 - 20091.2% growth p.a.

2010 - 20193.9% growth p.a.

2020 - 20254.6% growth p.a.

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15

20

25

30

35

mt metalGlobal refined copper demand

1960 - 19694.7% growth p.a.

1980 - 19891.8% growth p.a. 1990 - 1999

3% growth p.a.

2010 - 20253.6% growth p.a.Source: Brook Hunt Source: Brook Hunt

� Scenario based on economic growth in line with IMF projections� High growth in developing economies� Mature countries

� Copper - cyclical recovery - declining demand to 2025� Zinc - cyclical recovery and slow growth to 2025

Capital Markets Days - November 1-2, 2010 30

0

5

1960 1970 1980 1990 2000 2010 2020

1991 - 20013.5% growth p.a.

1974 - 1981-0.4% growth p.a.

0

5

10

1960 1970 1980 1990 2000 2010 2020

1970 - 19793.4% growth p.a.

2000 - 20091.5% growth p.a.

Page 31: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Examples of depleting zinc mines

MineProduction

estimate 2010 in kt metal

Closed by

Brunswick, Canada 210 2013

Century, Australia 505 2015

Lisheen, Ireland 170 2014

Perseverance, Canada 130 2013

Capital Markets Days - November 1-2, 2010 31

Perseverance, Canada 130 2013

Skorpion, Namibia 164 2016

Total 1,179

Source: Brook Hunt – A Wood Mackenzie Company

Page 32: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Head grade decline in copper

Capital Markets Days - November 1-2, 2010 32

Page 33: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Zinc supply

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� Overcapacity for smelting� Short term mine capability over demand� Disruptions can quickly tighten the market

33Capital Markets Days - November 1-2, 2010

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Page 34: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Copper supply

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� Overcapacity for smelting� Tight concentrate market� There are possible projects for long term

balance

34Capital Markets Days - November 1-2, 2010

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Page 35: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Cash cost now and in the future

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� Similar cash cost floors in the future� High incentive prices for projects� Metal price volatility to remain or increase

35Capital Markets Days - November 1-2, 2010

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Page 36: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Downside risk in prices if markets turn weaker

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� Price historically bottoms out at 60th percentile

� Trough years on average at 90th percentile

� Copper has been well above 90th percentile cash cost in trough years

36Capital Markets Days - November 1-2, 2010

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Page 37: Lennart Evrell President & CEO...Century, Australia 505 2015 Lisheen, Ireland 170 2014 Perseverance, Canada 130 2013 Capital Markets Days - November 1-2, 2010 31 Skorpion, Namibia

Summary - Medium to long term market

Economy� Developing countries - high proportion of world GDP� Several large population nations will be in the metals growth zone

Metals market� High growth in developing countries� High growth in developing countries� Stagnation or decline in mature countries� Cash cost floors to remain at current levels

Concentrate market� Projects started but not enough to meet projections� Risk of concentrate shortage in zinc and copper� Incentive prices for new projects are high

37Capital Markets Days - November 1-2, 2010