Annual Report 2003 New Boliden Is an International Mining and Smelting Company That Mines, Smelts and Reﬁnes Copper and Zinc, Lead, Gold and Silver

Annual Report 2003 New Boliden is an international mining and smelting company that mines, smelts and reﬁnes copper and zinc, lead, gold and silver. The company has approximately 4,900 employees who are mainly based in six countries – Sweden, Finland, Norway, Ireland, the Netherlands, and Canada. The company’s share is listed on the O-list of the Stockholm Stock Exchange and on the Toronto Stock Exchange. New Boliden’s operations are conducted by three Business Areas, namely Mining Operations, Copper and Zinc. New Boliden is one of the world’s leading copper and zinc smelting companies and is also the fourth largest zinc mining company in the world. New Boliden was formed on 1st January 2004 through the merger of Boliden’s and Outokumpu’s mining and smelting operations. Pro forma net sales for 2003 totalled SEK 14.5 billion. Contents

Information 4 Directors’ Report 48

The Year in Summary 5 Consolidated Income Statements – Group 59

The President’s Statement 6 Consolidated Balance Sheets – Group 62

The Boliden Share 8 Consolidated Statements

New Boliden in Brief 10 of Cash Flows – Group 64

Boliden’s Metals 12 Income Statements – Parent Company 67

The Metals Market 13 Balance Sheets – Parent Company 68

Business Area Mining Operations 16 Statements of Cash Flows –

Business Area Zinc 22 Parent Company 69

Business Area Copper 25 Accounting Principles 70

Marketing and Sales 30 Notes to the Accounts 74

Operations Sold 32 Auditors’ Report 88

Exploration 34 Five-year Overview 89

Ore Reserves and Boliden’s Board of Directors 94

Mineral Resources 36 Boliden’s Group Management

Human Resources 38 and Auditors 95

Environment 42 Glossary and Deﬁnitions 96

Boliden Locations 98 Information

Details of the The application must reach the A complete notice convening the Annual General Meeting company no later than 4 p.m. Annual General Meeting, together The Annual General Meeting of on Tuesday, 20th April 2004. with financial and other information, Boliden will be held on 26th April is available from the company’s 2004 at 3 p.m. in the Expolaris Nominee-registered shares website at www.boliden.com Kongresscenter in Skellefteå, Sweden. Shareholders whose shares are registered in the name of a nominee must, Printed financial information can Attendance to be entitled to attend the meeting, also be ordered via Boliden’s website Shareholders wishing to attend the temporarily re-register their shares at www.boliden.com or by contacting Meeting should be registered in in their own name with VPC no the company by post at Boliden AB, the Register of Shareholders main- later than 16th April 2004. Such Box 5001, SE-194 05 Upplands Väsby, tained by VPC AB (Swedish Central re-registration requests should be Sweden, by phone +46 8 610 15 00, Securities Depository & Clearing submitted to the nominee in good or by fax on +46 8 31 55 45. As of Organisation) no later than Friday, time before 16th April 2004. 15th April, our postal address is Box 44, 16th April 2004 (see adjacent column SE-101 20 Stockholm, Sweden. with regard to re-registration of Annual Report nominee-registered shares), and This document is a translation of the Questions relating to the content of should also submit an application Swedish original annual report. In the Boliden’s financial information can be to attend to the company by post event of any differences between this addressed to Boliden’s Investor Relations at Boliden AB, Koncernstab Juridik, translation and the Swedish original, on tel. +46 8 610 15 00 or by e-mail Box 5001, SE-194 05 Upplands Väsby, the latter shall prevail. at [email protected] Sweden, by phone on +46 8 32 94 29 (weekdays, 9 a.m.-11.30 a.m. and Financial information in 2004 1.30 p.m.-4 p.m.), by fax on 26th April +46 8 30 95 36, or via Boliden’s Interim Report, January-March 2004 website at www.boliden.com 5th August Interim Report, January-June 2004 26th October Interim Report, January-September 2004 The Year in Summary

Structural deal with Outokumpu Increasing metal prices Sale of the Myra Falls mine In December 2003, Boliden and The prices for Boliden’s main metals, In February 2004, after the end of Outokumpu completed a deal whereby i.e. copper, zinc, lead, gold and silver, the ﬁnancial year, Boliden signed a Boliden acquired Outokumpu’s zinc increased throughout most of 2003, Letter of Intent with the listed Cana- and copper mining and smelting and this trend accelerated during the dian mining company, Breakwater operations and simultaneously sold its fourth quarter. This increase was, Resources Ltd, regarding the sale Fabrication and Technology Sales however, from historically low levels. of the Myra Falls mine in Canada. operations to Outokumpu. The new The sale is expected to yield a small Boliden will thereby become one of Production increases capital gain for Boliden. the world’s leading mining and smelt- Mining production of all of Boliden’s ing companies. The transaction boosts metals increased in 2003, with the Key data – remaining operations

Boliden’s competitiveness and creates primary increases occurring in the SEK m (unless otherwise indicated) 2003 2002 the preconditions for a long-term main metals, copper (19 percent) Sales 7 153 7 127 improvement in profitability. and zinc (18 percent). Operating result 533 415 Result after financial items 327 144 Net result for the year 596 166 Strong result for remaining Exploration successes Cash flow from operating activities 975 380 operations Work on charting the promising Cash flow for the period 697 - 32 The result for Boliden’s remaining Lappberget area in Garpenberg con- Investments 544 447 Capital employed 14 790 7 033 operations, mines and smelting, tinued during the year. The results to Net debt - 8 957 - 4 730 more than doubled to SEK 327 date suggest an extensive mineralisation Net debt/equity ratio, multiple 1.5 1.8 (144) million – the strongest result with high levels of zinc, silver and lead. Return on shareholders’ for these units since 1997. More extensive production is scheduled equity, % 21.3 7.6 Return on capital employed, % 8.2 6.6 to begin in the area during 2004. Equity/assets ratio, % 30.7 24.2 Earnings per share, SEK 6.92 1.94 Shareholders’ equity per share, SEK 36.25 26.79 Market value at year-end, SEK 38.40 14.40 Number of employees at year-end 4 897 2 855 A new era in the Nordic mining and smelting industry

The merger with Outokumpu was zinc mines and zinc smelters – which vital to Boliden in securing the long- means that we will benefit in full from term positive development of the an increase in the price of zinc, with- company. The merger resulted in the out being negatively affected by treat- formation of one of the world’s lead- ment charges. The goal is to achieve ing mining and smelting companies, a similar balance when it comes to thereby increasing our ability both to copper production, where we currently ment whereby Boliden would buy take advantage of economic booms purchase much of the raw material for Outokumpu’s zinc mining and smelt- and to be strong when prices fall. the smelters in Rönnskär and Harja- ing operations and its copper smelting New Boliden will also be able to play valta. We expect to achieve this by operations. In addition to the cash pay- an active part in steering the neces- means of, inter alia, partnerships. The ment, Boliden’s payment also takes the sary reconstruction of the industry. merger also means that we will be one form of shares, and hence Outokumpu of the biggest copper smelting compa- becomes a major shareholder in the Boliden’s and Outokumpu’s structural nies in Europe – and number eleven company, thereby giving the new com- deal marks the start of a new era in in the world. pany a strong industrial principal both the Swedish and the Finnish The reorientation of operations to owner, with in-depth experience and mining and smelting industries. The northern Europe led to the decision to extensive knowledge of the mining new company, which was formed sell the Myra Falls mine in Canada. A and smelting industry. through the merger of Boliden’s and Letter of Intent with regard to the sale The deal also involves Boliden selling Outokumpu’s zinc and copper mining of the mine to the Canadian mining its Business Area Fabrications’ copper and smelting operations, will be one company, Breakwater Resources Ltd, tubing and brass rod operations and of the world leaders in its field. We was signed in February 2004. Technology Sales operations (Contech) are bringing together assets that are to Outokumpu, enabling both compa- unquestionably of world-class and Strong motivation to complete nies to streamline and reinforce their employees with extensive competence the deal core businesses – mining and smelting and in-depth experience. The new Boliden and Outokumpu have dis- for Boliden and refined copper prod- company will also put the Nordic cussed, planned and wanted to make ucts and stainless steel for Outokumpu. region on the global mining and a deal, more or less continuously, for smelting map. several decades. Discussions resumed Coordination benefits The company has significant devel- at the end of 2002, when both parties The merger also means, in addition to opment potential and a clear profile, were strongly motivated to achieve an the already mentioned advantages of with a strong focus on mines and agreement. The motivation lay partly being bigger and stronger, that the com- smelters. Our new, combined company in the consolidation taking place in pany will enjoy both additional finan- will be Europe’s biggest zinc mining the global mining and smelting indus- cial strength and flexibility and greater company and the fourth biggest in the try, which has put pressure on smaller potential for a future growth in profits. world. It will also be one of Europe’s companies in particular, and partly in We also expect to achieve a number biggest and the world’s fifth biggest strategic decisions by both companies of coordination benefits, both opera- zinc smelting company. We will, fur- with regard to future orientation. tionally and with regard to invest- thermore, achieve a balance between The negotiations led to an agreements. These will come not only in

6 the field of sales and logistics, but in The production surplus of recent years an equilibrium. The deal has, further- raw materials, production and market- has resulted in high stock levels and more, given us a balance between ing, as well. Coordination will also in metal prices being pushed down mining production and smelting opera- allow the company to reduce its com- to historically low levels. This trend is, tions on the zinc front – a balance bined investment costs in the field of however, showing clear signs of having that we are also striving to achieve for copper smelting, for example, where been broken. Demand for copper has copper. new capacity can be added cost-effec- increased substantially, whilst produc- In the short term, this increased tively. The goal is to achieve synergy tion has only risen at half the market balance will improve our preconditions profits of in the range of SEK 225 growth rate, leading to reduced stock for benefiting from the expected eco- million and SEK 270 million, of which levels and increased prices. The growth nomic upturn. In the longer term, our half will be carried out during 2004, is coming primarily from the East, increased size and financial strength and the remaining part during 2005. and from China in particular, where will enable us to take the initiative in an increase in growth of 25 percent the ongoing structural transformation Strongest result since 1997 was recorded in 2003. For zinc, which and, inter alia, to enter into new The 2003 result for the remaining is somewhat later in the market cycle, strategic partnerships. units from the “old” Boliden was the a similar reduction in stock levels has The challenges we face in the year strongest since 1997. The combined been noted. ahead include the all-important inte- net sales of the Business Areas Mining This trend – with increased con- gration process involved in merging Operations and Smelting Operations sumption and long-term reductions the operations. The enthusiasm that increased to SEK 7.2 billion, in in stock levels – is expected by several our personnel are showing for the task comparison with SEK 7.1 billion in analysts, including the tone-setting of being involved in the creation of the previous year, at the same time British analysis company, Brook Hunt, a new and important player on the as the result after financial items for to continue in 2004 and to become international mining and smelting the two units more than doubled to even more pronounced in 2005, when scene gives us every hope that we SEK 327 (144) million. A strong a predicted shortage may lead to a will succeed in our aims. increase in production by the mining further price increase. operations, which also benefited from a rise in the price of metals, lies behind Summary and the future Upplands Väsby, March 26th 2004 the positive profit performance. The Our vision is to become a world-leading smelting operations also reported good copper and zinc mining company. production levels during the year, And now, after an intensive period although their results came under of preparation, we can finally start the pressure from lower treatment and process of realising this vision.We have refining charges. The result overall for every chance of success. We have world Jan Johansson the “old” Boliden (SEK -251 million, class know-how and assets. We will President and CEO in comparison with SEK 111 million also be cost-effective – the majority of in 2002) was also burdened by a con- our mines and smelters are amongst siderably poorer result than expected the best in the world in this respect. for the Fabrication and Technology The goal is for all of our operations to Sales units now sold. be equally cost-effective in the long Integration benefits, combined term. with a positive metal price trend, are We are also becoming larger and expected to boost new Boliden’s result financially stronger. Our operations for 2004. focus on two metals that are, to some extent, in different phases of the eco- Market nomic cycle, thereby achieving an Boliden’s result is primarily affected operational balance. We produce other by three global factors – metal prices, important metals as well, such as silver currency trends and market growth. and gold, and this too helps to maintain

7 The Boliden Share

The Boliden share is listed on the from SEK 14.40 at the start of the Ownership structure O-list of the Stockholm Stock year to SEK 38.40 at year-end, a On 30th December 2003, Boliden Exchange since 5th December 2001. rise of 167 percent. The Stockholm completed the structural deal with The share is also traded on the Stock Exchange SAX-index noted Outokumpu announced earlier in the Toronto Stock Exchange (TSX) in a rise of 30 (-37) percent during the year, whereby Boliden, inter alia, gained Canada, where it has a secondary same period. The Stockholm Stock a new principal owner in the form of listing. Approximately 62.5 (27.5) Exchange’s industry index, SX 15 Outokumpu. The deal was ﬁnanced million shares, with a combined Material, which includes Boliden, by means of a non-cash issue of value of approximately SEK 1,670 noted a rise of 15 (-9) percent. At 82,466,475 new shares in Boliden AB, (900) million, were traded on the year–end of 2003, Boliden had market corresponding to 49 percent of the Stockholm Stock Exchange in capitalisation of just over SEK 3.3 votes and capital in the company. 2003, corresponding to a turnover (1.2) billion. The highest price paid The biggest shareholders at the rate of 73 (33) percent. during the year was SEK 38.60 (30th end of February 2004 comprised December) and the lowest, SEK 14.40 Outokumpu (49 percent), Skandia Trading and price trend (2nd January). Since January 2004 the (3.6 percent), Catella (3.2 percent), The average trade in the Boliden share Boliden share has been traded on the Carl Bennet AB (2.6 percent), Nordea increased to 250,000 (110,000) shares O-list’s “Attract 40” list of shares in Bank (2.3 percent) and SEB Fonder per trading day. A full lot corresponds companies with the highest turnover (2.2 percent). On 27th February to 500 shares. The price rose in 2003 rate on the O-list. 2004, Boliden had 72,487 (72,717) shareholders, making the Boliden share one of the Stockholm Stock Exchange’s most widely held shares. Share price trend Foreign ownership comprised 65 (26) Number of shares traded, The Boliden share thousands (including percent of votes and capital. The com- SX All-Share Index after-hours trading) 50 bined institutional ownership totalled 45 around 46 (80) percent.

35 Share capital Boliden’s share capital until the struc- 30 tural transaction with Outokumpu, 15 000 25 was divided into 85,811,638 shares.

12 000 The nominal value per share is SEK 2, 20 and after the increase, Boliden’s share 9 000 capital totals SEK 336,516,226, divided

15 6 000 into 168,258,113 shares. The Articles of Association state that Boliden’s 3 000 share capital shall be no less than SEK 150 million and no more than SEK 10 01 02 03 04 (c) SIX 600 million. Each share represents one

8 Distribution of shares, as of 27th February 2004 Shareholders % of no. of No. shares % of share No. of shares % of shares No. of shareholders shareholders owned capital & votes & votes 1–1 000 68 007 93.82 8 970 984 5.33 Outokumpu 82 446 475 49.00 1 001– 5 000 3 631 5.01 8 199 006 4.87 Skandia 6 010 767 3.57 5 001–10 000 440 0.61 3 411 280 2.03 Catella fonder 5 372 500 3.19 10 001– 50 000 284 0.39 6 222 969 3.70 Carl Bennet AB 4 290 910 2.55 50 001–100 000 40 0.06 2 804 226 1.67 Nordea Bank 3 929 681 2.34 100 001– 85 0.12 138 649 648 82.40 SEB fonder 3 701 080 2.20 Total 72 487 100.00 168 258 113 100.00 Canadian Depository for Securities 2 196 932 1.31 SEB 2 043 752 1.21 Royal Trust Corporation vote and grants equal entitlement to Rights issue of Canada 1 202 500 0.71 the company’s profit and assets. The Boliden is implementing an under- Roburs fonder 1 111 300 0.66 Banks of New York 1 108 300 0.66 new shares have the same rights as all written rights issue during March and Total, biggest 113 414 197 67.40 other outstanding shares in Boliden. April 2004 as an integral part of the Other 54 843 916 32.60 structural transaction with Outokumpu. Total 168 258 113 100.00 Dividend policy This issue will generate a maximum of Source: VPC, as of 27th February 2004, and subsequent changes known to Boliden. Boliden will not, due to restrictions SEK 1,430,193,952 before deductions in loan agreements and the Group’s for issue costs for Boliden. Once the Key ratios per share shareholders’ equity, pay any dividend rights issue is completed, Boliden’s share SEK m (unless otherwise indicated) 2003 2002 1) for the 2003 financial year. capital will comprise SEK 504,774,338, Result 6.92 1.94 Result after dilution 1) 6.90 1.93 divided into 252,387,169 shares. Shareholders’ equity 36.25 30.18 Volatility Shareholders’ equity The beta coefficient of the Boliden Shareholder information after dilution 36.18 30.06 Dividend –– share at the year-end was 1.29, which Boliden’s homepage, www.boliden.com, P/E ratio, multiple 1) 5.55 7.42 means that the Boliden share fluctuat- provides constantly updated informa- Share prices ed, on average, more than the Stock tion on Boliden, the Boliden share, – Year’s highest 38.60 49.30 Exchange average. Historically, 23.8 quarterly reports, Annual Reports, – Year’s lowest 14.40 9.50 – At year-end 38.40 14.40 percent of the price trend is explained and details of how to contact Boliden’s Market capitalisation, SEK m 6 461 1 236 by the market trend as a whole, Investor Relations. Turnover rate, % 73 33 2) measured against the general index No. of shareholders 72 487 72 717 1) Excluding acquired units (explanatory coefficient). 2) As of 27th February

9 New Boliden in Brief

New Boliden is one of Europe’s Business concept New Boliden leading mining and smelting compa- Boliden’s business concept is to extract nies. The company mines, processes minerals and produce high-quality and markets copper and zinc, and metals in a cost-effective and environ- Mining Copper Zinc Marketing Operations & Sales lead, gold and silver. New Boliden mentally-friendly way, and to exploit Aitik Rönnskär Kokkola Zinc Boliden owns and operates mines in Sweden, the commercial opportunities that the Boliden Area Harja- Norzink Commercial Garpenberg valta/Pori Canada and Ireland, and smelters market offers, thereby creating value Tara Bergsöe Myra Falls1) in Finland, Sweden and Norway. for shareholders, employees and cus- 1) Boliden has signed a Letter of Intent whereby the company New Boliden has a total of around tomers. intends to sell Myra Falls. 4,900 employees. The company share is listed on the O-list of the Vision Stockholm Stock Exchange and has New Boliden’s vision is to be a world- company. To achieve this position, a secondary listing on the Toronto leading, focused and cost-effective new Boliden intends to exploit the Stock Exchange in Canada. copper and zinc mining and smelting potential for economies of scale and for modern and cost-effective production that arise in conjunction with the inte-

Zinc smelting – global production, 2003 1) Copper smelting – global production, 20031) gration of Boliden’s and Outokumpu’s Ktonnes Ktonnes mining and smelting operations. 1200 1000 The company also intends to enter 1000 800 into strategic alliances and partner- 800 600 ships, and to make acquisitions and 600 400 selective divestments. 400

200 200 Orientation 0 0 s nco les inc New Boliden focuses on copper and Z orilsk hmy Mitsui Nippon KGHM Jiangxi smincoXstrata encore Codelco Umicore Gl Noranda Rio Tinto Pa s Peno Mitsubishi ludao Kazak Korea Zinc Votorantim RAO N zinc mining and smelting operations. New Boliden New Boliden Teck Comi Hu Grupo Mexico Norddeutsche Hunan NonferrousIndustria The company also produces and sells Global zinc mining production, 2003 2) Ktonnes lead, precious metals, sulphur products, and lead and tin alloys. New Boliden’s 800 operations focus on the early processing 700 stage of the metal industry’s value 600

500 chain – see diagram overleaf.

400 300 Goals and strategies 200 New Boliden’s goal is to become one 100

0 of the most cost-effective copper and s a o r

illiton noles ine Tint rrous Milpo erican Perilya UGMK zinc mining and smelting companies Xstrata M Noranda Glencore Rio Pasminco po Mexico Votorantim New Boliden inera VolcanBHP B Teck Cominco glo Am Gru HindustanM Zinc in the world. The company’s zinc An 1) water Resource Source: Brook Hunt. Industrias Pe 2) reak Guandong Nonfe Source: Brook Hunt and Boliden. B mining and smelting operations are

10 already balanced in terms of capacity, New Boliden has operations in Sweden, Finland, Norway, Ireland, thereby providing a natural protec- Canada and the Netherlands tion against changes in treatment and reﬁning charges. The aim is to achieve a similar balance in the copper operations. The company has the ability to expand its copper smelting and reﬁning capacity at Rönnskär and Harjavalta/Pori at a competitive investment cost. The zinc operations’ strategy is to retain and improve cost advantages by using advanced production technology.

combined capacity of the smelters Business Areas – percentage of Rönnskär and Harjavalta/Pori, the total net sales for new Boliden third largest copper smelting company in Europe and the eleventh largest in the world.

Zinc 27% New Boliden is also the third

Copper 53% largest zinc smelting company in Europe and the ﬁfth largest in the Mining Operations world, and Europe’s largest and the 20% world’s fourth largest zinc mining company.

Market position Financial performance The combination of Boliden’s The Board of Directors and and Outokumpu’s copper and zinc Executive Management of Boliden smelting operations has created believe that the 2004 result will a strong European player with a exceed the 2003 result after net signiﬁcant global market position. ﬁnancial items reported for the New Boliden is, through the remaining operations.

New Boliden

Minerals Mining Smelting & Fabrication Components End products Reﬁning

11 Boliden’s Metals

New Boliden’s most important smelters in Finland and Norway. The New Boliden runs copper mines metals are zinc and copper, and it company is also one of the world’s in Sweden and copper smelters in is first and foremost in the field of largest recyclers of metals, which it Sweden and Finland. smelting – but also of mining pro- recovers by processing slag, metal ash duction – of these metals that new and steelmaking dust. New Boliden’s Other metals Boliden has acquired a position as current production of zinc metal totals Several of new Boliden’s mines contain one of Europe’s – and the world’s – around 17.6 percent and 4.3 percent complex ores, i.e. those that, in addi- leading companies. Lead and the of total European and global production to the primary metals, zinc and precious metals, silver and gold, tion, respectively. copper, contain such metals as silver, are also extracted. gold, and lead. Despite low volumes Copper of these metals, silver production, Zinc Copper and its alloys, brass and in particular, can be of considerable The primary applications for zinc are bronze, are amongst the most impor- importance during periods when as a means of improving the quality of tant metals in the world – and copper zinc and copper prices come under other metals, either as a coating or as is also one of the most important pressure. an alloy. Zinc is characterised by a high metals for new Boliden. Copper Lead is easy to recycle, and around resistance to corrosion and is not aff- corrodes only very slowly in air and 50 percent of the world’s total lead ected by air at normal temperatures. water, and the metal is hence used in production comprises recycled lead. The metal is mainly used as a protec- piping, roofing and plating. Its excel- Approximately 75 percent of global tive coating for steel, but is also used lence in terms of conducting heat and consumption of this metal comprises with copper in the manufacture of brass. electricity makes it well suited for use lead batteries. New Boliden operates zinc mines in in mains distribution systems, electri- Gold is not only present in complex Sweden, Ireland and Canada, and zinc cal equipment and heat exchangers. ores, it is also extracted at smelters from electronic waste etc. The primary areas of use are in the manufacture of precious objects, ornamental items, jewellery, electrical contacts and connectors in the telecommunications technology and electronics industries. For silver, one important area of use is photographic film, but this metal is also used in electrical conductors, advanced electrical equipment and the manufacture of jewellery. The Metals Market

The price of new Boliden’s most smelters for processing the metals and ZINC Western world – Source Brook Hunt important metals, zinc and copper, are negotiated annually by the major Construction industry 51 % is primarily determined by changes players in the mining and smelting Transport 24 % in supply and demand, which are Industrial machinery 6 % industry. Mines benefit from high Consumer products 10 % controlled, in turn, by factors such metal prices and low treatment charges, Other 9 % as the global economic climate and, whilst smelters benefit from high treat- in the shorter term, by the actions ment charges. of large global investment funds. A majority of the trade on the LME COPPER After a period lasting several years – around 65 percent – is conducted by Western world – Source Brook Hunt during which historically low prices investment funds, banks and other Construction industry 37 % Electrical and electronics 26 % were noted, the price of both zinc players outside of the metals industry. Industrial machinery 15 % Transport 11 % and copper rose in 2003 – a trend The major driving force when it Consumer products 11 % that continued in early 2004. comes to the production – but, above all, the consumption – of copper and Several factors influence the price zinc for the past decade has been LEAD of base metals, the most important China, where rapid infrastructural and Western world – Source Brook Hunt being changes in industrial supply and industrial development is consuming Batteries 75 % Pigments & chemical products 9 % demand. One of the biggest buyers for vast quantities of metals. Rolled and extruded products 7 % Alloys 3 % both zinc and copper is the construction Protective cable sheathing 2 % industry, and prices are hence heavily Zinc Other 4 % influenced by economic fluctuations. The biggest consumers of zinc are the The activities of trend-setting financial construction and automobile industries, players in the metals market also have an which collectively account for 70 per- GOLD Western world – Source Brook Hunt important effect. The price of precious cent of total consumption. Jewellery 80 % metals is, furthermore, determined to China, Australia, Peru, Canada and Industrial products 3 % Dental products 8 % some extent by political factors. the USA are amongst the world’s biggest Investment products 9 % Base metal prices are set daily on the mining producers of zinc, whilst China, London Metal Exchange (LME), whilst the USA, Japan and Germany are the price of precious metals is set by the amongst its biggest consumers.

London Bullion Market Association The zinc market is relatively frag- SILVER (LBMA). The price of the metal con- mented, with numerous players. This Western world – Source Brook Hunt Jewellery/silverware 33 % centrate produced by the mines is set is equally true with regard to mine and Photographic products 25 % by taking the current global market smelter ownership, which has resulted Electrical/electronics industry 17 % Soldering/brazing alloys 5 % price for the payable metal content in poor discipline when it comes to Other 20 % and deducting treatment and reﬁning adapting production to demand. The charges, making any adjustments high cost associated with closing down required for quality. mining and smelting production has Treatment and reﬁning charges are helped to ensure that the majority of the remuneration received by the zinc producers have opted to maintain

13 tion of the metal. At the same time, an important component of such demand has increased, driven not least products as cars and white goods. by the strong developmental trend in The biggest copper ore reserves are China. This has resulted in increased located in Chile, which is also the prices in 2003, the increase in visible biggest producer of this metal and stocks notwithstanding. Several experts which, along with Indonesia and Aus- have predicted a cautious but steady tralia, has substantially increased its growth in base consumption of zinc mining production of copper. Major over the next five-year period, and as producers of refined copper other than a result – provided that production can Chile include China, Poland, Japan, be adapted to consumption – prices the USA and Germany, whilst China, will probably increase. South Korea and Mexico are amongst The price of zinc has risen over the its biggest consumers. Europe accounts past year, with the biggest increase for 26 percent of the total global con- occurring during the latter half of 2003 sumption of copper. and early 2004. As of 30th January The copper market is extremely 2004, the price of zinc was 27.9 per- sensitive to economic fluctuations and cent higher than it was a year earlier, price changes are often dramatic. The albeit with a very low entry level, cal- trade in both copper concentrate and culated in US dollars. New Boliden’s copper metal is global. The last 20 current production of zinc metal com- years have seen a gradual build-up in prises around 17.6 percent and 4.3 the over-production of copper, due to percent of total European and global the launch of several new large produc- production, respectively. tion units, the introduction of new and efficient extraction technology, Copper and cost-cutting measures on the part operations, despite the long-term loss The copper metal market is dominated of many producers. When combined that this has generated in many cases. by a few large integrated mining and with the economic slow-down since The average increase in the produc- smelting companies. There are also a the late 1990s, this has resulted in tion of zinc concentrate and refined number of independent smelters, stocks building up and prices falling. zinc during the period from 1996 to primarily in Japan, whose raw material The market has, however, adapted to 2003 was approximately 4 percent each supplies come from a variety of mining these conditions in the past few years, per annum. This should be compared companies. The smelters are often and production has been cut, leading with an increase in zinc consumption located in the vicinity of the major to the LME stocks falling by 49 per- over the past decade of 2.9 percent. producers of semi-finished goods in cent in 2003. At the same time, copper The trade in zinc concentrate and the industrial countries of western prices increased by almost the same zinc metal is global, in which price is Europe, Asia and the USA. The need amount, calculated from the turn of virtually the only means of competi- for restructuring and merger of opera- the year 2002/2003. tion. This fact, when combined with tions amongst the European smelters The average increases in the produc- the way in which production increases is assessed to be considerable, in that tion of copper concentrate (mines) and have outstripped consumption increas- this would not only lead to reduced cathode copper (smelters) worldwide es, has resulted in pricing pressure costs per unit, but to a better balance were 1.8 percent and 2.1 percent, throughout the past decade. between supply and demand for copper respectively, during the period from The long-lasting recession for zinc concentrate. 1998 to 2003. Global copper con- production has recently resulted in The biggest consumers of copper sumption increased during the same signs of market consolidation and of are the construction, electrical and period by an average of 2.9 percent. reduced mining and smelting produc- electronics industries. Copper is also This rate of growth is expected to

14 continue over the next five-year period period. The price of lead has varied Copper – Price and Stocks due to the strong growth in industrial considerably more than the prices of USc/lb Tonnes 140 1 000 000 production in Asia, and in China, copper and zinc over the past 20 years, South Korea and Mexico in particular. but as with these metals, the price of 120 750 000 Treatment and refining charges for lead increased substantially in 2003 100 500 000 copper have fluctuated greatly since and early 2004. 80 250 000 1997, reaching their lowest levels ever, The price of gold remained consist- calculated in real terms, in mid-2003. ently low during the period from 1998 93 94 95 96 97 98 99 00 01 02 03 New Boliden’s mining production to 2001, but in 2002, it rose to the Zinc – Price and Stocks of copper corresponds to around 10 levels noted in 1997. This was due to USc/lb Tonnes percent and 0.7 percent of the total gold finally beginning to attract 65 1 400 000

European and global production, investors again, as the US dollar weak- 55 1 000 000 respectively. ened and global uncertainty increased. But the considerable ﬂuctuations in 45 600 000 Other metals the price of gold in 2003 notwith- 35 200 000 Primary lead raw material (lead con- standing, the trend is clearly upwards, 93 94 95 96 97 98 99 00 01 02 03 centrate) has been in very short supply and in November, the price reached in recent years. The low level of lead USD 400 per ounce, which is its high- Lead – Price and Stocks prices for such a long time has meant est level for seven years. USc/lb Tonnes 38 400 000 that there are scarcely any true lead The biggest producer of gold is mines left, and the lead concentrate South Africa, accounting by itself for 32 300 000 produced is primarily a by-product approximately 15 percent of the total 26 200 000 of zinc and silver mines, in the main. global gold mining production. 20 100 000 The major mining producers of The price of silver is affected by lead include Australia, China, the actual supply and demand to a greater 93 94 95 96 97 98 99 00 01 02 03 USA and Peru. extent than that of gold. In 2003, the Gold – Price The market for secondary lead is price of this precious metal rose by USc/lb fragmented, with many small suppliers around 20 percent. 410 feeding the lead smelters. The availabil- Photographic ﬁlm is an important 370 ity of raw material – i.e. lead batteries sphere of use for silver, but the metal 330 – is critical, and over 90 percent of is also used in electrical conductors, lead batteries are nowadays recycled advanced electrical equipment, and 290 in the industrial countries. the manufacture of jewellery. 93 94 95 96 97 98 99 00 01 02 03 New Boliden’s lead smelter, Bergsöe, The world’s biggest silver producers which has a market share of 2.4 per- include Mexico, Peru, Australia and Silver – Price cent of the European lead consump- China. USc/lb tion, is the biggest purchaser of used 6 lead batteries in the Nordic region. 5 Production and consumption of lead have both fallen in the past two 4 years as a result of falling automobile production levels in Europe and 93 94 95 96 97 98 99 00 01 02 03

North America, which collectively Source: Ecowin. account for 85 percent of the world’s total lead consumption. The exception here is China, where both production and consumption increased during the

15 Business Area Mining Operations

Production1) Rising metal berg, Renström, Petiknäs Tonnes prices and pro- and Maurliden mines, 200 000 Zinc Copper duction records together with a concentra-

150 000 in both the Boliden tor and gold leaching plant Area and Garpenberg in Boliden outside Skellefteå. 100 000 helped to ensure that Boliden has entered into an agree-

50 000 2003 was a good year for ment with the exploration company, the Mining Operations. New Boliden NAN (North Atlantic Natural 0 01 02 03 01 02 03 now includes Europe’s biggest zinc Resources AB), whereby Boliden acts mine – Tara in Ireland. New Boliden as the operator in the NAN-owned

Turnover1) also owns one of Europe’s biggest Storliden mine in Malå. Boliden has SEK m copper mines – Aitik. a 38 percent holding in NAN. 3 000 Complex ore (copper, zinc, lead, Operations gold and silver) and ore containing 2 000 New Boliden conducts mining opera- only gold and copper, are mined at tions in three areas in Sweden – Aitik, Kristineberg, which became opera- 1 000 Boliden Area and Garpenberg. The tional in 1940. Kristineberg produces Business Area also includes the Tara around 500,000 tonnes of ore per 0 01 02 03 mine in Ireland and the Myra Falls* annum. mine in Canada. All of Boliden’s The Renström mine, which has

Operating result1) mines are underground ones, with the been operational since 1952, mines SEK m exception of Aitik and Maurliden in around 220,000 tonnes of complex 400 the Boliden Area, which are open-pit ore per annum. A mineralisation con- 300 mines. The ore mined contains copper, taining substantial quantities of zinc, 200

100 zinc, lead, gold and silver. inter alia, and which is currently

0 Aitik, outside Gällivare, is one of known to extend down to the 1,700 -100 Europe’s biggest copper mines and has m level, has already been conﬁrmed. -200 been operational since 1968. Approxi- The Petiknäs mine, operational -300 mately 18 million tonnes of ore, con- since 1992, produces around 450,000 -400 01 02 03 taining copper, gold and silver, are tonnes of complex ore per annum. mined and milled every year. Aitik, The Maurliden mine, which opened Percentage of total which produces around 220,000 in 2000, produces around 150,000 number of employees tonnes of copper concentrate per tonnes of complex ore per annum. 44 % annum and is an important supplier The combined total workforce in of copper concentrate to the Rönnskär Boliden Area is around 320 people. smelter, has around 340 employees. Boliden Area produces just over Boliden Area comprises the Kristine- 140,000 tonnes of zinc concentrate

1) Excluding units acquired. *Boliden has signed a Letter of Intent whereby the company intends to sell Myra Falls.

16 and around 90,000 tonnes of copper acquired the Garpenberg mine in 1957, brought into production on a larger concentrate every year, along with and Garpenberg Norra became opera- scale than before. A total of over one lead, gold and silver concentrates. tional in 1972. The Garpenberg Area million tonnes of ore are mined in The copper and gold concentrates produces complex ore containing cop- this area every year, and reﬁned into are delivered to Rönnskär, whilst the per, zinc, lead, gold and silver. The just over 80,000 tonnes of zinc con- zinc concentrates are delivered to the copper and lead concentrates are centrate, just over 22,000 tonnes of Kokkola Zinc and Norzink smelters delivered to Rönnskär and the zinc lead concentrate, and copper, gold in Finland and Norway, respectively, concentrates to Kokkola Zinc, Norzink, and silver concentrates. Garpenberg and to other European smelters. and other European smelters. An has around 275 employees. The Garpenberg Area, outside extensive zinc, lead and silver mineral- Tara, to the northwest of Dublin in Hedemora, comprises two mines – isation, known as Lappberget, has been Ireland, is Europe’s biggest zinc mine. the Garpenberg mine and Garpenberg discovered between the two mines, Drilling work began in 1970 and pro- Norra – and a concentrator. Boliden and 2004 should see Lappberget duction started in 1977. Outokumpu

17 acquired the mine in 1986. Around complex ore are mined annually in the for copper mining production are 0.7 2.6 million tonnes of ore are mined in area and milled into approximately percent and 10 percent, respectively. Tara each year and milled to produce 100,000 tonnes of zinc concentrate and The zinc mining market is far more approximately 340,000 tonnes of zinc 40,000 tonnes of copper concentrate, fragmented than the copper market, concentrate and 50,000 tonnes of lead together with some gold concentrate. but ﬁve of the world’s biggest players concentrate. Some of the zinc concen- Myra Falls has approximately 365 still account for almost 30 percent trates are delivered to Kokkola Zinc employees. of it. The biggest producers are Teck and Norzink through Boliden Com- In the ﬁrst quarter of 2004, Boliden Cominco (Canada), Pasminco (Aus- mercial, but the majority of the and the Canadian mining company, tralia) and Noranda (Canada). production is resold to third parties Breakwater Resources Ltd, signed New Boliden’s global and European in Europe. Mining of the extensive a Letter of Intent declaring Boliden’s market shares for zinc mining pro- ore body in Nevinstown, which was intention to sell its subsidiary, Boliden duction are 4.5 percent and 39.7 per- acquired in 2002, will begin in 2004. Westmin (Canada) Limited, which cent, respectively. The only major Tara has approximately 650 employees. owns Myra Falls. European companies, apart from new Myra Falls is in a national park on Boliden, that operate zinc mines are Vancouver Island in the Canadian Competition Anglo American, Arcon and Rio Tinto, province of British Columbia. The Five major players dominate the copper with mines in Ireland and Sweden. operations comprise two integrated mining market – Codelco (Chile), mines and a concentrator. Its primary Phelps Dodge (USA), BHP Billiton Production customers are located in Japan and (Australia, UK), Rio Tinto (UK) and The company has in-depth experience South Korea. Myra Falls commenced Anglo American (UK), which have of the mining industry – a knowledge mining operations in 1966 and the a combined market share of approxi- base that will increase as a result of mine has been owned by Boliden since mately 38 percent. New Boliden’s the integration of Boliden’s and Outo- 1998. Just over one million tonnes of global and European market shares kumpu’s mining and smelting opera-

18 tions. This combined experience and Aitik. New open-pit layout, which Cash cost Aitik (Cu) know-how can be utilised both in the has resulted in lower volumes of Boliden Area (Zn) context of efforts to find new deposits waste rock extraction, greater ore Myra Falls (Zn) Garpenberg (Zn) and with regard to the development of reserves and reduced staffing Tara (Zn) existing mining production and mea- requirements. (Zn, USc/lb) (Cu, USc/lb) 50 75 sures aimed at improving its efficiency. – Production problems at Myra Falls, Optimising the efficiency of mining which failed to live up to the production to the maximum possible planned mining level. Vigorous 40 65 extent will create the preconditions for cost-cutting measures did, however, new Boliden to generate positive counteract the effects. 30 55 results, even when metal prices are low. – Investigation of the Lappberget

The ongoing efficiency-boosting work mineralisation at Garpenberg and 20 45 has resulted in additional increases in at Kristineberg in the Boliden Area production in 2003, whilst simultane- continued according to plan. 1998 1999 2000 2001 2002 2003 ously lowered costs. The developmental – Highest production level since potential of the existing mining areas 1995, calculated in number of has, furthermore, increased as a result tonnes, at Tara, which also reported Outlook for the future of the successful exploration work of the lowest operating costs to date at Boliden considers the outlook for the recent years. the mine. future for its mines to be good. This is One of new Boliden’s strengths is due not only to an expected improve- its highly developed technology for Turnover and result ment in the pricing scenario, but to processing metal-poor ores. The devel- Turnover from Boliden’s mining the way in which long-term work on opment of production control, known operations (excluding Tara) in 2003 mine-site exploration and investments as flow-control production, which is an totalled SEK 2,791 (2,272) million. have developed the mines to a point important prerequisite for continued The operating result for the year was where better grades and volumes are productivity increases in both new SEK 369 (190) million, and was posi- being achieved. Boliden’s underground and open-pit tively affected by increased metal Production cost levels (cash cost) in mines, is another important area. prices, higher production, lower treat- Boliden’s mines are competitive, from Mining methods for deep-seated ment and refining charges, and pro- an international viewpoint, particularly deposits are yet another prioritised ductivity improvements. The result with regard to new Boliden’s zinc developmental area. Some of new was, at the same time, negatively mines. Continued cost-rationalisation Boliden’s mines operate at depths in affected by a deterioration in the US work and improved productivity are excess of 1,000 m, thereby imposing dollar exchange rate in comparison also expected to contribute to improve- severe demands on planning and tech- with last year. ments in the results. nology, amongst other things, as a result of increasing rock pressure. Development at concentrators is pri- Mining Operations1) Change marily focused on process automation. SEK m 2003 2002 in % Investments in the Business Area Turnover 2 791 2 272 23 Mining Operations totalled SEK 477 Operating result 369 190 94 (313) million in 2003 (excluding Tara). Investments 477 313 52 Depreciation 300 287 5

Important events during the year – Sharply rising metal prices – the Metal production1) Change average price of zinc rose by 9 per- 2003 2002 in % cent in 2003, whilst that of copper Copper (tonnes) 93 706 78 906 19 rose by 14 percent. Zinc (tonnes) 178 644 150 990 18 Lead (tonnes) 18 658 18 240 2 – Increased production at Boliden Gold (kgs) 5 124 5 074 1 Area and Garpenberg. Silver (kgs) 272 085 263 066 3 – Lower head grades than planned at 1) Excluding units acquired.

19 Hard Times at Tara gave Modern Zinc Mine

In 1986, when Outokumpu took the mineral rights to Nevinstown. over at Tara Mines in Ireland, After series of legal battles with the over 1,000 people were working in company, Outokumpu emerged Europe’s largest zinc mine. Today’s victorious from the dispute in 2002, workforce has been cut to just over which meant that the extensive ore half this number, while production body could start to be exploited. Min- has increased. The restructuring ing of Nevinstown will commence in has been an arduous process, but the spring of 2004. as a result the likelihood of the Falling zinc prices and a generally mine becoming a long-term profita- depressed market, led to the decision ble investment for new Boliden has in November 2001 to suspend produc- increased substantially. tion at Tara. Approximately 80 percent of the mine’s employees were laid off. The Hill of Tara, located 48 kilometres which from its shaft to its furthest “But there was still an understanding north-west of Dublin, is one of the point stretches more than four kilo- in many quarters of the need to start most legendary and interesting places metres and at its deepest reaches 1,000 again, to build up the operations from from a cultural history viewpoint in metres down into the ground – are scratch, in order to create something the whole of Ireland. The Hill, which concealed behind the park-like entrance with long-term sustainability,” says bears traces of Bronze Age activity, was and under the pastoral landscape. The Eero Laatio, Tara’s Managing Director. the burial ground for the region’s kings, proximity to the town means, for exam- A comprehensive investment project, and according to legend, was the site ple, that test drilling can only be carried designed to upgrade the mine techni- of the entry to the underworld. out during the daytime from Monday cally, was carried out during the pro- A stone’s throw away lies Europe’s to Friday. A great deal of effort has largest zinc mine, whose history is been put into both the mine’s appear- admittedly considerably shorter, but ance and its environment to ensure which has nonetheless had a significant that the sensitive surroundings are not impact on the area. The mine is situated disturbed, and thousands of trees have on the outskirts of the medieval town been planted to screen the mine area. of Navan, at the meeting of the Black- But Outokumpu’s first priority since water and the Boyne rivers, which are it acquired the mine – 75 percent was teeming with fish. The mine, which is bought from a private company and the area’s biggest employer, supplies the remainder from the Irish State zinc concentrate to facilities such as almost two decades ago – has been new Boliden’s smelters Kokkola Zinc to make the operations profitable. in Finland and Norzink in Norway. The location of the Tara mine imposes Valuable assets special environmental considerations. A private mining company had bought It is difficult for a visitor to imagine a farm in the area in the early 1970s – the enormous zinc and lead mine – and thereby simultaneously acquired

20 duction suspension, which lasted until despite the economic boom that Ireland flexible and safe production operation, September 2002. One of the areas that experienced during the shutdown period which is far better able to exploit a received the greatest attention included and despite the fact that many employ- positive market trend. We also have maintenance – because the business ers were crying out for personnel. a greater potential for counteracting stands or falls on the maintenance of “This says something about how strong- negative factors – such as a disadvan- its existing equipment. Today, the ly many people identify with the mine,” tageous exchange rate trend or any mine’s workshops are tidy and well comments Eero Laatio. fall in zinc prices,” says Eero Laatio. organised. This baptism of fire has transformed During 2003, 2.6 million Tara into a modern mine once again: tonnes of ore were mined A modern mine focusing on safety a mine where safety and environmental in Tara. Further capacity and the environment measures and production capability, increases are expected in When production was suspended, the are amongst the best in the industry. the next few years. mine had 680 employees. When oper- “We have always had fantastic assets. ations recommenced, 620 returned – But now we also have an efficient,

21 Business Area Zinc

Zinc Production The Business Area Smelting Opera- galvanising of steel. The plant has Kokkola Zinc tions was, as of 1st January 2004, Tonnes approximately 700 employees. 300 000 divided into two areas – Zinc and The Norzink smelter at Odda on Copper – as a result of the transac- the west coast of Norway is now one

200 000 tion with Outokumpu and the ensuing of the world’s most cost-efﬁcient zinc expansion of the company’s smelting producers. The smelter was previously

100 000 operations. New Boliden is the ﬁfth partly owned by Boliden, but was taken largest zinc smelting company in the over by Outokumpu in 2001. Norzink

0 world with operations in Kokkola in mainly produces zinc, but also alu- 01 02 03 Finland and Odda in Norway. minium ﬂuoride and sulphuric acid. The annual production capacity is Zinc Production Operations 150,000 tonnes of high quality zinc Norzink Tonnes The new Business Area Zinc includes (Special High Grade) and 28,000 300 000 the Kokkola and Odda smelters, both tonnes of aluminium ﬂuoride. The of which were formerly part of Outo- plant is currently undergoing an exten-

200 000 kumpu. sive modernisation amounting a total of Kokkola Zinc in Kokkola is the EUR 88 million and which is scheduled

100 000 world’s ﬁfth largest zinc smelter and for completion in the autumn of 2004. the second largest in Europe. The The new direct leaching method for

0 annual production capacity is 275,000 zinc concentrate will diversify the 01 02 03 tonnes of high-quality zinc (Special quality selection process for zinc raw High Grade zinc, which is 99.995 material. The introduction of the new

Percentage of total percent zinc). This corresponds to technology will also lay the foundations number of employees 3 percent of total world production of for a future increase in production. The this grade of zinc. The zinc smelter is Odda plant has its own ice-free port, 23 % one of the most technically advanced which is used for deliveries of zinc con- and cost-efﬁcient plants of its kind in centrate and other raw materials and for the world. The raw material primarily shipping out the plant’s end-products. comprises zinc concentrate, which is Over 90 percent of the zinc produced freighted to the smelter in Kokkola by at Norzink is exported, mainly to other rail from Inmet Mining’s mine in countries in Scandinavia, Germany Finland and by ship from producers and the UK. The aluminium ﬂuoride in other countries, including Boliden’s produced at the plant is mainly sold own mines in Sweden and Ireland. to Norwegian smelters. The plant has The plant has its own port, with a a total of around 400 employees. 13 metres deep channel that can take vessels with a dead weight of up to Competition 60,000 tonnes. The main end-use for The biggest producers of zinc metal the zinc produced in Kokkola is in the include both integrated mining and

22 smelting companies, such as Pasminco of the total European and global pro- Important events (Australia) and Teck Cominco (Canada), duction, respectively. – New production record for zinc and independent smelters such as in Kokkola. Korea Zinc in Asia and Umicore and Production – Agreement reached with the trade Xstrata in Europe. Chinese smelters, A number of different techniques can union organisations in Kokkola which account for around 20 percent be used when producing zinc metal regarding staff cuts. Approximately of total global production, also play an from zinc concentrate. In addition to 110 of the 700 positions will be important role in the market – even if concentrate, also secondary zinc mate- eliminated within the next four a signiﬁcant percentage of the Chinese rial is used in the production process years through natural attrition. production is consumed domestically. at the zinc smelters. – Extensive modernisation project There are fewer integrated zinc pro- The Kokkola smelter has imple- at Norzink, which is scheduled duction companies than copper ones. mented a direct leaching method for for completion in the autumn New Boliden’s main competitors in the production of zinc metal, which of 2004. the European market are the Swiss also will be implemented at Norzink company Glencore and the Belgian in conjunction with the completion Outlook for the future Umicore. New Boliden’s current zinc of the modernisation process at the New Boliden enjoys a big advantage metal production levels correspond to smelter there in the autumn of 2004. thanks to the balance between zinc around 17.6 percent and 4.3 percent mines and zinc smelters, which creates

23 increased stability for the company. demands that efforts to increase cost- products market. The smelters are The challenging situation in the zinc effectiveness continue at both Kokkola expected to be able to take advantage market in the immediate future Zinc and Norzink. Kokkola Zinc is of the proximity to Boliden’s zinc expected to fully utilise its production mines. Treatment Charge (TC) Zinc capacity this year. The integration of the new ﬂows USD/Tonne For Norzink, the focus over the between the zinc smelters and copper 250 next two years will be on the intro- smelters may lead to increased rev- 200 duction and efﬁcient use of the direct enues and generate the potential 150 leaching technique. Cooperation for developing new niches. 100 advantages in the Business Area Zinc 50 exist in the form of the ability for 0 19992000 2001 2002 2003 joint actions in the raw materials and

24 Business Area Copper

New Boliden smelts copper at one company’s own mines in Sweden and Production1) smelter in Sweden and one in Fin- some of which is imported. Approxi- Tonnes 300 000 land. Boliden also has a smelter in mately 20 percent comprises recycled Sweden for recycling lead from material, primarily metal ashes from 200 000 used batteries. The raw material brass foundries, various types of cop- originates both from the company’s per and electronic scrap, and steel- 100 000 own mines and in the form of making dust. The recycling of copper imported concentrate and recycled and precious metals from metal scrap 0 material, which represents an is an increasingly important part of 01 02 03 increasingly important percentage the smelter’s raw materials supply. of the Swedish Rönnskär smelter’s Approximately 20 percent of the cop- Turnover1) raw material supply. per production, just over 40 percent of SEK m 8 000 the gold production, and 75 percent of Operations the zinc clinker production nowadays 6 000

The Business Area Copper comprises comes from recycled material. The 4 000 Rönnskär and Bergsöe from the “old” plant has its own port, which can take Boliden and Harjavalta Copper from ocean-going vessels and which hence 2 000 Outokumpu. The main products for enables concentrate to be imported 0 01 02 03 Rönnskär and Harjavalta are copper, from all over the world. At the same and for Bergsöe, lead. time, the “Copper Shuttle” train oper- Operating result1) Rönnskär in Skelleftehamn pro- ates the Rönnskär-Helsingborg route SEK m duces copper, other metals, and chem- daily, loaded with cathode copper and 250 icals from mined raw materials. The lead on the way south, and with elec- 200 plant is also a world-leader in the ﬁeld tronic scrap and other smelting mate- 150 of recycling base and precious metals. rials on the way back. Rönnskär has 100 The main products are copper, lead, around 870 employees. gold, silver and zinc clinker. By-prod- Harjavalta Copper (Harjavalta/Pori) 50

0 ucts include liquid sulphur dioxide, in western Finland mainly produces 01 02 03 sulphuric acid, selenium and crude copper from mined concentrate. Its nickel sulphate. The production main by-products are gold, silver and Percentage of total capacity for copper and lead is sulphuric acid. The unit comprises number of employees 230,000 tonnes and 30,000 tonnes two plants – the smelter in Harjavalta, per annum, respectively. The plant which produces blister copper, and the 29 % also produces around 40,000 tonnes reﬁnery in nearby Pori, where blister of zinc clinker, 475 tonnes of silver copper is reﬁned into copper cathodes. and 15 tonnes of gold per annum. Harjavalta Copper produces a total Just over 80 percent of the raw materi- of around 170,000 tonnes of blister al comprises copper and lead concen- copper and 125,000 tonnes of copper trate, some of which comes from the cathodes per annum. The whole of 1) Excluding units acquired.

25 Harjavalta’s blister copper production 4-5 million scrap lead batteries from (Chile), Phelps Dodge (USA), Rio currently goes to the Pori plant, where the Nordic region and Baltic States. Tinto (UK), Norilsk Nickel (Russia), approximately 75 percent is refined into Production totals around 49,000 tonnes Grupo Mexico (Mexico) and KGHM copper cathodes and the remainder is of lead and 1,000 tonnes of tin per (Poland). The biggest independent sold as blister to refineries in Europe. annum. Approximately 95 percent of smelters are in Asia and Europe. Harjavalta Copper buys the copper the production of lead alloys is exported The large smelters are mainly located concentrate used as a raw material to the Nordic region and the rest of in the vicinity of the major markets in copper production on long-term Europe, where the product is used not for semi-finished products in western contracts from suppliers worldwide. only to manufacture batteries, but in Europe, Asia and North America. Harjavalta Copper has approximately the construction industry, the manu- New Boliden’s main competitors in 430 employees. New Boliden also car- facture of electronics, and in medical Europe are KGHM (Poland), ries out nickel smelting at Harjavalta applications. In addition to LME-grade Norddeutsche Affinerie (Germany), on a tolling basis to the US company, lead, the plant produces standard Umicore (Belgium) and Atlantic OMG. alloys, where the lead is alloyed with Copper (Spain). Chilean smelters also Boliden Bergsöe in southern Sweden antimony, copper, calcium, tin or compete through their substantial is the Nordic region’s only smelter for silver, amongst others. Bergsöe, which exports of cathode copper to Europe. the recycling of lead and tin products. has subsidiaries in Denmark, Norway New Boliden’s market share comprises At the same time, it is one of the and Finland, is the Nordic region’s approximately 8 percent of Europe’s biggest and most environmentally- market leader with regard to the manu- copper consumption. friendly smelters of its kind in Europe. facture of tin solder for the electronics, Every year, the smelter recycles engineering and vehicle industries. Production Bergsöe has approximately 120 The end-product of the copper mining employees. and smelting industry is refined copper,

Treatment Charge (TC) Copper or “cathode copper”. The copper Competition USD/Tonne concentrate, which is delivered from

80 The market for copper metal is char- the mining producers, undergoes a acterised by a few, large, integrated pyrometallurgical treatment process – 60 mining and smelting companies and a number of smelting and puriﬁcation 40 a number of independent smelters that stages – at the smelters. Some smelters,

20 purchase their raw material from vari- such as Rönnskär, use recycled material ous mining producers. The major and slag products as input materials, 0 19992000 2001 2002 2003 integrated companies include Codelco in addition to concentrate. Copper

26 can also be produced through a leach- comparison with the previous year. Pori a head start over many of their ing process, where the copper ore is At the same time, a lower US dollar competitors in the face of impending leached with the aid of sulphuric acid exchange rate, lower treatment and environmental legislation. to produce a copper-bearing solution. reﬁning charges, reduced production Bergsöe has a strong position in the The integration of Boliden and Outo- and the planned maintainance shut- market for lead batteries. A well-main- kumpu’s smelting operations gives the down at Rönnskär during the fourth tained plant and advanced technology new company access to the world’s quarter had a negative effect on the results in emissions that are well below most advanced smelting technology. result. current limit values. The so-called ﬂash method of smelting Outlook for the future copper concentrate was developed at Smelters1) Harjavalta. The outlook for the future of the Change smelters is good in the light of increas- SEK m 2003 2002 in % Turnover 5 905 6 587 -10 Important events ing metal prices and low stock levels for Operating result 225 248 - 9 – Sales of lead from Boliden Bergsöe the metals of importance to Rönnskär Investments 67 128 - 48 increased. and Harjavalta/Pori. Europe is current- Depreciation 294 290 1 – Concentrate smelting and cathode ly a net importer of copper cathodes.

copper production records at The high prices are expected to give Metal production1) Harjavalta/Pori. rise to new mining capacity, which Change – Lower production at the beginning should yield a better balance in the 2003 2002 in % Copper (tonnes) 214 181 224 402 - 5 of the year at Rönnskär due to concentrate market and help to ensure Lead (tonnes) 24 208 17 753 36 raw material shortage. that the current low level of treatment Gold (kgs) 12 275 15 562 - 21 – Planned maintenance shutdown at and reﬁning charges is increased. The Silver (kgs) 456 565 408 427 12 Rönnskär during the fourth quarter. ongoing integration of the copper Lead alloys, Bergsöe (tonnes) 49 132 45 698 8 smelters is expected to yield improved Turnover and result productivity and optimisation of the 1) Excluding units acquired. The turnover of the Business Area material ﬂows. New Boliden believes Copper (excluding Harjavalta) totalled that a future expansion of Rönnskär SEK 5,905 (6,587) million in 2003. and Harjavalta/Pori should be possible The operating result of SEK 225 at a competitive investment cost. (248) million was positively affected Early investments to improve the by higher metal prices and increased operations’ environmental impact have sales of lead by Boliden Bergsöe in given both Rönnskär and Harjavalta/

27 Smelters merge Know-how and Experience

Over half of all copper production to the important coordination benefits and one-third of all nickel production possible in such areas as logistics and worldwide involves the use of Outo- purchasing. kumpu technology. The flash method, “We already know each other – not which was developed at the Harja- least thanks to the installation of the valta smelter, was installed at flash furnace at Rönnskär four years Rönnskär in 2000. This is just one ago. And then this is a small world,” example of the cooperation between says Jukka Järvinen, Head of new the smelters that existed even Boliden’s copper operations. before the merger. There are now “The augmented partnership will around 20 integration groups and make us more competitive by enabling contacts are intensive. us to cut costs in connection with development, purchasing and freight, Half of western Europe’s four copper for example. Our main competitors smelters are located in the Nordic for copper concentrate at present are in region – one in Finland and one in China and India, where the smelters Sweden, on either side of the Gulf of operate under completely different Bothnia. And the distance between preconditions with regard to environ- these two smelters has shrunk consid- mental restrictions, wages and sub- erably since the turn of the year – at stantial state subsidies, for example. If least mentally – with a number of we are to compete with these smelters, west coast, for security reasons. Both activities initiated, aimed at making we must increase our efficiency and smelters produce metals from concen- the most of each other’s know-how, make the most of our technological trates – but over the years, they have technology and contacts, in addition head start.” each developed their specialities. “Our European copper concentrate Harjavalta enjoys international recog- competitors are located in Germany nition for developing the flash smelt- and Spain,” he continues. ing method for producing copper and nickel – a development whose roots Many parallels lay in the electricity shortage at the There are many parallels between end of World War II. This shortage Rönnskär and Harjavalta. Located on induced technicians to investigate either side of the Baltic, both smelters alternatives to the traditional smelting represent a part of Nordic industrial processes, which consume enormous history. Rönnskär’s first copper ingot amounts of energy from external was cast on Midsummer’s Eve in 1930. sources. The breakthrough came when Six years later, Finland’s first copper the technicians successfully developed smelter was established on the Russian a furnace where energy could be border, but at the end of World War II, extracted from the metal concentrate it was moved to Harjavalta, on the itself, by burning sulphur and iron.

28 This method is so efficient that it higher zinc levels in the concentrate, cient organisation, where all of the func- actually produces a surplus of energy for example. This means that we can tions outside of the scope of the core that can be used for other production allocate the concentrate to Rönnskär operations have been outsourced to processes. Flash technology has been or Harjavalta by content, i.e. to wher- partners,” comments Jukka Järvinen. sold to just over 40 smelters world- ever they are best able to handle it. wide, because it not only drastically We also have the option of shipping reduces energy consumption, it also recycling materials from Finland to leads to reduced emissions. Rönnskär,” says Jukka Järvinen. “Harjavalta’s contribution to the Rönnskär a world-leader in recycling rest of new Boliden includes the high- Rönnskär, for its part, has developed ly developed quality management, into one of the world’s leading facili- environmental control, and health and ties for recycling base and precious safety systems – all areas in which metals from electronic scrap, scrap Harjavalta has done ground-breaking metal and brass slag. work. Its quality management work, “Rönnskär’s production is more for example, began way back at the flexible because, in addition to the start of the 1990s, and the plant flash method, the plant uses two other achieved its first certification in 1993. production processes that tolerate Harjavalta has also developed an effi-

29 Marketing and Sales

Sales of both the smelter products The work of the newly formed Goals and the concentrate produced in Marketing and Sales started when new One of the overall goals of the opera- new Boliden’s mines are coordinated Boliden organisation came into effect tions is to increase competitiveness by through Marketing and Sales. The on 1st January 2004. In the “old” ensuring that the company’s resources primary purpose of the newly formed Boliden, sales were largely are optimally utilised. unit is to establish a shared, market- handled independently by the indi- The coordination of sales activities proximate organisation that can vidual units, as was the case with is designed to improve the company’s monitor and exploit the commercial Outokumpu’s Harjavalta copper ability to exploit the commercial opportunities arising in the global smelter. Zinc concentrate and metal opportunities that arise – and hence metals market. Other purposes sales were, however, coordinated establish a faster decision-making include securing the availability of through Outokumpu’s Zinc Com- process and optimise revenues. Another materials for the company’s own mercial unit, and it is this organi- aim is to ensure that the company’s smelters and organising logistics sation that forms the basis for the own smelters have access to raw mate- and risk management, etc. new unit. rials, whilst a third is to optimise

30 logistics – signiﬁcant amounts of both metals and sulphuric acid pass through the company, and transport coordination is thus an important area for cost- cutting measures. The new unit will also, in addition to its responsibility for sales, be jointly responsible with Boliden’s Treasury department for risk management (including metal and currency hedging) and for following customers’ developmental work, in order to identify new commercial opportunities.

Organisation Marketing and Sales is divided into two areas, one for zinc and one for copper, because the markets for the two metals are completely different. The staff functions are, however, shared. The zinc operations of Market- ing and Sales have ofﬁces in Rotterdam in the Netherlands, Winterthur in mercial, in addition to the sales of customers’ patterns of behaviour. Switzerland, Stockholm in Sweden these two main products. The unit There are considerably fewer and Espoo in Finland. has 35 employees. customers for copper – around ten – Under the new organisational with Elektrokoppar in Helsingborg model, Marketing and Sales will pur- Customer structure and Outokumpu as the biggest, collec- chase all the zinc concentrate pro- The zinc metal produced at new tively accounting for approximately duced in the company’s mines. The Boliden’s smelters is primarily resold 65 percent of the metal sold. Both concentrate will then either be to steelworks, which use the metal Outokumpu and Elektrokoppar have processed into metal in Boliden’s to galvanise steel, to prevent corrosion. been Harjavalta/Pori’s and Rönnskär’s smelters or resold on the open market. There are around 220 customers, biggest customers, respectively, for A similar business model is being with the UK, Finland, the Nether- many years now, and there are no built for copper. Work began at the lands, Germany and Sweden as the indications of any change in their turn of the year and the new organisa- company’s biggest markets in terms willingness to continue with this tion is scheduled to become opera- of volume. The customer base is the relationship. The other copper cus- tional in January 2005. same as under Outokumpu’s owner- tomers are located primarily in the Sales of sulphuric acid will also be ship and there is no reason to assume UK and Germany. coordinated through Boliden Com- any signiﬁcant changes in these

31 Operations Sold: Fabrication and Technology Sales

As of 1st January 2004, and as a through Boliden MKM in the UK, Fabrication reported net sales in 2003 result of the structural deal between Boliden LDM in the Netherlands of SEK 2,343 (2,347) million and Boliden and Outokumpu, the Business and Boliden Gusum in Sweden, with an operating result of SEK -164 (-6) Areas Fabrication and Technology sales companies located in Spain, million. Substantial non-recurring Sales became part of Outokumpu. France, Germany, Poland, Denmark, costs (SEK 70 m) in the form of These two areas have a combined the UK and Belgium. depreciation of fixed assets and workforce of 1,200, approximately On 1st September 2003, Boliden of structural costs were charged to 90 percent of whom work in and Hexagon formed a 50/50 joint the result. The continued weak Fabrication. market for the Business Area’s products, with reduced demand and pricing pressure resulting from the weak European construction industry climate, contributed signiﬁcantly to the deterioration in the result. A successful cost-reduction programme was implemented during the year, but proved unable to compensate for the reduction in revenues.

Technology Sales Technology Sales (Boliden Contech) markets and sells technology solutions aimed primarily at smelters, both internally and to external customers. Fabrication The Business Area has sales offices Fabrication is one of Europe’s leading venture company between their in Sweden, Russia, China and Chile. manufacturers of copper tubes and brass respective Swedish brass operations, External sales comprised just rods. The copper tubing is primarily Boliden Gusum and Nordic Brass, over 70 percent of sales. The biggest used for sanitation purposes and is under the new name of Boliden commissions to date have involved mainly sold to distributors in the heat- Nordic Brass. All production at copper smelters and copper refineries ing, water and sanitation industry. The Nordic Brass will be transferred to in Russia, Poland and China, where brass rods are semi-finished, and are Gusum during 2003-2004. On 1st Technology Sales has been responsible sold to industrial customers for various July 2003, Boliden MKM acquired for technical design and equipment types of further processing work. The the operations of Cerro Extruded supply. production and marketing of the Metals, which produces brass products Lower levels of investment in copper products is conducted through of the same type as Boliden. Produc- the mining and smelting industry Boliden Cuivre & Zinc (BCZ) in Bel- tion at Cerro’s plant was closed down restricted sales in the Business Area gium and HME in the Netherlands. in December and transferred to during 2003. The brass products are marketed MKM’s facility.

Exploration

Exploration is fundamental to mining Strategy and metal companies, because the New Boliden’s strategy is to prioritise operations depend on the acquisi- mine-site exploration. New discoveries tion of new mineralisations. At the close to an existing mine mean that same time, it involves risks, as the time from discovery to production there is no guarantee that the work can be reduced, and because existing will lead to new discoveries. New infrastructure can be used, the capital Boliden prioritises exploration in the requirement is also lower. Exploration vicinity of existing mines and in the work is being conducted in the vicinity known Skellefte and Bergslagen ore of the existing mines in Sweden, Canada fields, thereby increasing the chances and Ireland. of discovering new mineralisations The geographical scale of field whilst requiring less capital. exploration has been reduced in recent years, and now occurs primarily in the “Old” Boliden invested SEK 60 mil- Skellefte field, but also, to some extent lion in exploration in 2003, in com- in Bergslagen and Ireland. The objec- parison with SEK 69 million in the tive of field exploration is mainly to management, but the company also previous year. SEK 40 (41) million of secure mineral resources in the medi- has an exploration work partnership this sum was invested in mine-site um and long term. The time from a agreement in the Skellefte field, exploration, with the rest going to discovery being made to a mine through its proprietary interest in field exploration. SEK 5 million was becoming operational is often 5-10 NAN (38 percent). Field exploration invested in exploration in the Tara years, and sometimes longer. Field in the Bergslagen area is conducted in area in Ireland, i.e. new Boliden’s new exploration in the Skellefte field is pri- cooperation with the Canadian mining mine. marily conducted under Boliden’s own company, Inmet Mining. One of the results of Boliden’s previous operations in Canada is its part ownership of Expatriate Resources*, a Canadian company with field exploration operations in North and South America. Boliden’s share in the company currently stands at 17 percent.

Successful exploration Boliden’s aim of maintaining an ore reserve sufﬁcient for at least ten years of production is currently being met

*Shares in Expatriate Resources will be disposed of as a consequence of the sale of Myra Falls.

34 by the Aitik mine. A number of new In Kristineberg, development and test Tara is Ireland’s – and Europe’s – discoveries have been made in the past drilling continues in the J-zone, as it biggest zinc mine. The area’s potential ﬁve years and have had a positive is known. The information that has is substantial and ongoing exploration effect on the future of new Boliden’s emerged to date indicates higher min- work is being conducted in the vicinity mining operations. Much work does, eral grades than those seen in previous of already proven deposits. Mining however, still remain to be done before mineralisations found in the area. permits have been obtained for the the discoveries become ore reserves. The Myra Falls mine in Canada has Nevinstown zinc mineralisation and The Lappberget deposit is currently considerable exploration potential, production is scheduled to begin in being developed at Garpenberg and is which is currently being investigated. the second quarter of 2004. adjudged to have excellent potential Exploration work in the area is, how- for meeting the goal of a ten-year ever, being rendered more difﬁcult, reserve. Ongoing test drilling suggests both by the Provincial Park Status of that this could be one of the most the area – which imposes special envi- interesting mineralisations discovered ronmental requirements – and by the to date in Sweden. region’s mountainous topography.

35 Ore Reserves and Mineral Resources

The incorporation into the Group means that continued investigations are tion with smaller investment projects. of the Irish Tara mine means a not guaranteed to lead to all or part of The lowest acceptable metal grade substantial increase in new an inferred mineral resource being (the cut-off grade) is calculated sepa- Boliden’s zinc ore reserves and reallocated to a higher category. More rately for each deposit and depends, mineral resources. The company detailed investigations of a discovery amongst other things, on the proper- already has significant copper can lead to the mineral resource being ties of the deposit and on the mining, assets, due, primarily, to the Aitik classified as indicated. This means that ore haulage, milling, concentrate mine. the information collected through haulage and administration costs. The drilling and sampling is sufficient for costs are compared with the value of Mineral resources technical and financial calculations to the product, taking into account treat- Exploration reveals mineralisations be carried out. Once additional samples ment charges. which, if efforts are successful and cer- have been taken, the information may Long-term metal price forecasts are tain criteria are met, can be classified be sufficiently conclusive that the used when calculating ore reserves, and as mineral resources, i.e. a deposit of resource is classified as measured. The are an expression of the anticipated minerals in the bedrock. A mineral technical data has, by then, been average prices over the forthcoming resource is described as inferred when processed sufficiently that process and economic cycle, which is usually it has been identified through drilling, mining plans can be made. The min- around ten years. The long-term metal sampling and geoscientific interpreta- ing plans and processes form the basis price forecasts are currently based on a tion, but where the information remains for the technical and financial analyses long-term USD/SEK exchange rate of uncertain, so the technical data is made that are conducted to determine the 8.50, as per the table below. up of reasonable assumptions. This project’s profitability.

Long-term metal price forecasts Ore reserves Those parts of the measured and indi- Copper 91 USc/lb SEK 17 000 /tonne cated mineral resources that can be Zinc 50 USc/lb SEK 9 350 /tonne mined and reﬁned in compliance with Lead 26 USc/lb SEK 4 845 /tonne the company’s proﬁtability requirements Gold 280 USD/oz SEK 76 517/kg are known as the company’s ore reserve. Silver 5 USD/oz SEK 1 366 /kg It may be either probable or proven, with the latter being documented in Aitik has the biggest ore reserve, with greater detail. a life expectancy calculated at over Boliden’s goal is for the ore reserve ten years at the end of 2003. The life to have a life expectancy of at least ten expectancy of Tara’s ore reserve was years, in order to meet the return-on- calculated at six years at the turn of capital requirements in conjunction the year. The life expectancies of the with major investments and to cover an Boliden Area and Garpenberg ore entire economic cycle. Ore reserves with reserves were calculated at that time a shorter life expectancy of three to at approximately two years, and at four years are acceptable in conjunc- around seven years for Myra Falls.

36 Boliden AB, Ore reserves, as of 31 December, 2003 Boliden AB, Mineral resources, as of 31 December, 2003

Quantity Au Ag Cu Zn Pb Quantity, Au Ag Cu Zn Pb Ktonnes g/t g/t % % % Ktonnes g/t g/t % % %

AITIK Proven 230 000 0.2 3 0.34 –– AITIK Measured 590 000 0.2 2 0.30 – – Probable 14 000 0.3 3 0.37 – – Indicated 200 000 0.2 2 0.29 – – Inferred 180 000 0.1 1 0.25 – – BOLIDEN AREA 1) Gold ores BOLIDEN AREA 1) Kristineberg Proven 200 8.4 5 1.1 – – Polymetallic mineralisations Probable 250 6.3 13 1.7 0.3 – Kristineberg Measured 50 0.7 45 1.3 4.2 0.2 Polymetallic ores Indicated – – – – – – Kristineberg Proven – – – – – – Inferred 1 225 1.5 55 1.4 8.4 0.4 Probable 760 0.3 178 0.4 11.4 1.0 Petiknäs Norra Measured 310 8.1 73 1.8 3.1 0.3 Petiknäs Proven 590 2.5 110 0.7 5.3 1.0 Indicated 760 5.8 67 1.3 3.2 0.3 Probable – – – – – – Inferred 1 600 3 40 1.5 2.5 0.2 Renström Proven – – – – – – Renström Measured – – – – – – Probable 720 3.9 189 0.8 9.2 1.8 Indicated 290 3.4 167 1.0 9.3 1.9 Maurliden Proven – – – – – – Inferred 2 800 3 201 0.9 10.8 2.4 Probable 430 1.2 61 0.2 4.2 0.5 Maurliden Measured – – – – – – Indicated 1 340 1.2 52 0.2 3.8 0.4 Total Proven 590 2.5 110 0.7 5.3 1.0 Inferred – – – – – – polymetallic ores Probable 1 910 1.9 156 0.5 8.9 1.2 Total polymetallic Measured 360 7.1 69 1.7 3.3 0.3 GARPENBERG AREA mineralisation Indicated 2 390 2.9 71 0.6 4.3 0.6 Garpenberg Proven 275 0.3 51 – 6.4 2.5 Inferred 5 625 2.7 123 1.2 7.9 1.3 Probable 290 0.2 110 – 4.3 1.9 Gold mineralisations Garpenberg Norra Proven 1 450 0.3 173 0.1 3.3 1.7 Åkulla Östra Measured – – – – – – Probable 190 0.4 80 0.2 5.5 3.0 Indicated – – – – – – Inferred 1 500 7.5 – – – – Total Proven 1 725 0.3 154 0.1 3.8 1.8 Probable 480 0.3 98 0.1 4.8 2.3 GARPENBERG AREA 2) Garpenberg Measured 775 0.5 70 0.1 4.2 2.0 MYRA FALLS Proven 5 600 1.2 42 1.2 7.2 0.6 Indicated 565 0.1 69 – 6.8 2.1 Probable 2 150 1.2 33 1.0 4.1 0.4 Inferred – – – – – – Garpenberg Norra Measured 950 0.1 57 0.3 6.4 2.7 TARA Proven 3 000 – – – 9.8 2.3 Indicated 255 0.1 58 0.3 6.5 1.8 Probable 13 900 – – – 9.2 1.9 Inferred 1 000 0.3 320 – 2.7 1.2 Lappberget Measured 1 460 0.3 103 0.1 7.6 2.7 Indicated 3 210 0.2 123 – 8.2 2.8 1) Excluding Storliden. Boliden owns 38 percent of NAN, which owns the mine. The ore is milled in Boliden Area’s concentrator. Inferred 3 800 0.3 63 – 4.5 1.8

Total Measured 3 185 0.3 81 0.1 6.4 2.5 Indicated 4 030 0.2 111 – 7.9 2.6 Inferred 4 800 0.3 117 – 4.1 1.7 Mineral resources are reported in addition to ore reserves in Boliden’s financial reports. The ore reserves and mineral resources have been calculated and compiled in accordance with the Australasian Institute of Mining and Metallurgy’s JORC code. This is comparable MYRA FALLS Measured 1 800 1.5 56 1.6 9.1 0.7 with “CIM Standards on Mineral Resources and Mineral Reserves, Definitions and Guide- Indicated 2 600 2.0 68 1.1 5.8 0.7 lines” adopted by CIM on 20th August 2000, and which constitutes that part of the Inferred 2 300 1.4 57 1.1 4.9 0.6 Ontario Securities Commission (OSC) rules and regulations, National Instrument 43-101, that regulates how ore reserves and mineral resources should be reported. Boliden reports in accordance with NI 43-101 and the recommendations accepted by the Swedish TARA Measured 1 200 – – – 6.1 2.8 Mining Association, which, wherever applicable, are identical to the Canadian rules. Indicated 9 300 – – – 5.9 2.3 Boliden’s mineral resources and ore reserves (excluding Tara) have been compiled under Inferred 10 200 – – – 8.8 1.9 the supervision of Mati Sallert, Ore Reserves and Project Evaluation Manager. Mati Sallert is a “Qualified Person” according to NI 43-101, a “Qualified Person” according to the Swedish Mining Association, a member of the Australasian Institute of Mining and Metallur- gy, and has more than 30 years’ experience in the mining and minerals industry. “Tara’s Ore Reserves and Mineral Resources” have been compiled by John Ashton, Chief Mine Geologist, Tara Mines Ltd. John Ashton is a “Qualified Person” and a member 1) Excluding Storliden. Boliden owns 38 percent of the Institute of Materials, Minerals and Mining and of the Institute of Geologists Ireland, of NAN, which owns the mine. and has more than 25 years’ experience of the mining and mineral industry. 2) The Dammsjö deposit has been removed As a result of a review of the way in which Outokumpu and Boliden have calculated from the list of mineral resources. ore reserves and mineral resources conducted by Tara’s and Boliden’s technical personnel No investigative work is planned for during January 2004, the parameters used by Tara, including those use for cut-off grade its upper sections as Lappberget value calculation, correspond well to the system used by Boliden. is being prioritised.

37 Human Resources

It is not only Boliden’s and Outo- Integration work Boliden has a Group-wide, interna- kumpu’s mining and smelting opera- One of the challenges we face in 2004 is tional trade union body, the Boliden tions that have been merged. It is the rapid integration of the merged oper- Works Council, comprising trade union the know-how and experience of the ations within Boliden and Outokumpu representatives from various countries, employees of two companies that and the creation of a shared corporate which meets regularly to exchange have produced metals and developed culture. Both companies currently pos- experiences. mining and smelting techniques for sess substantial know-how and profes- This body is also the forum for a generations now. sional skill. The two companies are significant part of the communication also rich in tradition and have a long between the employees’ representatives At the end of 2003, the merged units history, in which the expertise has, in and the company management. The within new Boliden had 4,897 many cases, been passed on from one Boliden Works Council is thus an employees, working primarily in generation to the next. This profes- important disseminator of the corporate Sweden, Finland, Norway, Ireland and sional and corporate pride forms a culture, building bridges between both Canada. Of these employees, 2,287 are solid basis on which to build within management and personnel, and based in Sweden, 1,130 in Finland, the context of the integration process. between employees in different operat- 410 in Norway, 646 in Ireland, 396 Equally important is the fact that ing spheres in different countries. The in Canada and 28 in other countries. Boliden and Outokumpu have worked Boliden Works Council is also repre- Approximately 56 percent come from together extensively over the years, and sented on the Board of Directors of “old” Boliden’s mines and smelters, hence many of our employees have the new company by three Members and 44 percent from equivalent opera- already built up a contact network and three Deputy Members. tions within Outokumpu. Overall, the amongst themselves. A new agreement has been reached new company has thus around 900 The integration work involves, within the company during the past more employees than “old” Boliden. among other things, the development year with regard to the position of the Approximately 1,200 people of a new, Group-wide platform for elected representatives in the company, worked in the sold units, Fabrication new Boliden in 2004, where shared with the aim of strengthening their role and Technology Sales. policies and values will be identified. and encouraging trade union activities. The average number of employees Boliden also has an agreement with during the 2003 financial year is shown Trade union cooperation the Boliden Works Council regarding in Note 1. Collaboration within the trade union conduct codes, as they are known. organisations is another important tool These codes, which comply with the in the integration work. Boliden has conventions of the UN body, the Employees in different countries enjoyed the benefits of an agreement International Labour Organization, Other 1% with the trade union organisations, address such issues as bans on child Canada 8% involving cooperation at several levels labour, forced labour and discrimina- Ireland 13% within the Group for a number of years tion. The codes also regulate the right now. This agreement will continue to to trade union membership, and Norway 8% operate and trade union work within ensure that reasonable terms of all sectors of the company will be employment and employment condi- Sweden 47% Finland 23% coordinated. tions apply.

38 The rules of the respective countries strengthening of the brand name that get actively involved in health and safe- apply with regard to conditions of we believe has occurred as a result of ty activities at their workplace. employment and labour market rules. the attention attracted by Boliden’s This work has led to a positive purchase of Outokumpu’s mining and trend in Boliden’s mines and smelters Networks smelting operations. The IT industry with regard to the number of people The integration work also includes crash has also boosted interest in the on sick leave and the number of acci- building networks within the company. core industries. dents. In 2003, for example, Rönnskär The aim is twofold: ﬁrstly to promote Boliden traditionally works closely and Garpenberg reported a record the exchange of know-how and experi- with colleges of further education and number of accident-free days. ence, and secondly, to reinforce the feel- upper secondary schools, with the aim ing of solidarity. The networks comprise of persuading more young people to Equal opportunities both more general areas, such as smelting develop an interest in working in our Boliden operates in a traditionally male- and mining, and more specialist-orien- sphere of operations. Boliden’s joint dominated business, but the company is tated ones, such as exploration and venture with LKAB, involving the striving to increase its percentage of environmental technology. The networks sponsorship of three academic chairs in female employees. These efforts include comprise employees at various levels the mining industry, is yet another measures designed to: within the company and in different aspect of this work. – enable employees to combine work countries, as well as external experts. Skill development within the com- and family life, As part of the efforts to promote pany includes annual programmes at – counteract gender-based distortion network building by employees, newly unit, Business Area and Group level. in different occupational groups, recruited graduates are, for example, The development of these programmes – increase the percentage of female given the chance to participate in a is based on annual performance managers, familiarisation programme. This pro- appraisals conducted with our – maintain equal opportunities for gramme is designed both to impart a employees. men and women within the Group’s clear image of the company and its operations. operations, and to increase cooperation Health and Safety within the organisation. Performance Boliden’s preventative health and safety appraisals, workplace meetings and the work is based – over and above legisla- intranet are other important channels tive requirements – on our in-depth for new Boliden when it comes to experience of mining and smelting communicating with employees and operations. For many years now, the disseminating the corporate culture. company has focused on reducing the number of injuries and improving the Recruitment and training opportunities for rehabilitation. Attracting skilled personnel is an Lifestyle issues, with regard to diet and important aspect of building up the exercise, for example, have also become new company. 2003 saw a pronounced part of our preventative personnel increase in the number of applications health care programme in recent years, to work at Boliden, due, in part, to the and every employee is encouraged to

39 Human Resources

Erik Hjalmar, Pipe Welder, Rönnskär Dominic Yore, Storeman, Tara Ludmila Tönnhed, Metallurgist, Rönnskär What do you think about the merger What do you think about the merger What do you think about the merger between Outokumpu and Boliden? between Outokumpu and Boliden? between Outokumpu and Boliden? Nothing but good. We’re well equipped to face I feel happy about the deal, and look forward to I think we’ll be better off. the future here at Rönnskär, so we’ll have to both companies sharing each other´s knowledge How will it affect your part of the see how far that takes us together. and expertise in our new uniﬁed company. operations? How will it affect your part of the operations? How will it affect your part of the operations? Integration is always good. I don’t really know yet. But I’m hoping that I think it will leave my job busier and more chal- Hopes for the future? Rönnskär will be expanded, giving even greater lenging due to the expansion of the mine. Outokumpu has a successful research production capacity. Hopes for the future? programme, so it’ll be interesting working Hopes for the future? That new Boliden will be proﬁtable, trouble free, together. Great. We’re a world-leading company now. with more job security in the future.

John Ashton, Chief Mine Geologist, Tara Sami Kähkölä, Cutter, Kokkola Zinc Gunnar Knudsen, Process Engineer, Norzink What do you think about the merger What do you think about the merger What do you think about Boliden and between Outokumpu and Boliden? between Outokumpu and Boliden? Outokumpu merging? It´s a deal that has the potential to allow major It was a big surprise. Obviously, I was initially Dividing up the operations in such a way, that synergies between mining and smelting, via inte- concerned to some extent about what the both Boliden and Outokumpu have clear and dis- grated production – and thus allow new Boliden future held, but the initial period has shown tinct core businesses, will mean greater predic- to compete more effectively on a world-wide that the result of our Nordic cooperation will tability for the owners, employees and the market. scale. definitely be good. How do you think it will affect your part How will it affect your part of the operations? How will it affect your part of the operations? of the operations? It will allow management to develop and carry Team sports have taught me over the years I see it as a very good solution. In Outokumpu, we out the long-term plans essential for keeping that two are always stronger than one. And were responsible, relatively speaking, for a small Tara as Europe´s largest zinc mine. I’m relying on that in this context, too: in the percentage of net sales. In the new constellation, Hopes for the future? future, we can benefit from each other’s we, and the zinc business area, will have a higher I particularly hope that major potential surroun- know-how and strengths. profile – and the raw material supply will be secured. ding the Tara orebody, where there are many Hopes for the future? Hopes for the future? untested areas and geological question-marks, We have over 30 years’ experience of making I hope that the US dollar exchange rate normalises can be realized via further successful exploration. zinc, here at the factory, and a generation within a reasonable period of time. It’s an important shift is now in full flow. I hope that the work- factor in the expansion of Odda – which is a prere- places can be retained and that we don’t have quisite of our longer-term survival. I believe that as to deal with changes on too big a scale. a European zinc producer, we will have to produce 500,000 - 600,000 tonnes of zinc per annum.

40 Larry Roe, Mine Department Assistant, Tara Anne-Lene Hauge, Operator, Norzink Margaretha Andersson, Miner, Renström What do you think about the merger What do you think about Boliden and What do you think about the merger between Outokumpu and Boliden? Outokumpu merging? between Outokumpu and Boliden? We’re part of a mining company now. I think the fact that there will be a balance I believe and hope that it will be good. How will it affect your part of the operations? between zinc smelters and mines is a good thing. How will it affect your part of the operations? There’ll be a greater focus on our operations How do you think it will affect your part Time will tell. here at Tara. of the operations? Hopes for the future? Hopes for the future? Zinc production will become even more That we ﬁnd more ore so that the mines Hopefully lots more years of viable production. important than it was in Outokumpu. and the whole company can develop. Hopes for the future? My ﬁrst impression is that Boliden wants to invest in Odda and my hope is that there will be a doubling of production capacity at Odda in the not too distant future.

Anders Holmbom, Maintenance Manager, Carly Anderson, Waste Coordinator, Tara Tanja Nordlund, Financial Department, Harjavalta Renström What do you think about the merger What do you think about the merger between What do you think about Boliden and between Outokumpu and Boliden? Outokumpu and Boliden? Outokumpu merging? From what I can see it seems that the deal is I think the deal is very good in today’s pressurised I think it’s very good for our operations. We’re not only good for operations but also for the market climate. By combining our strengths gaining owners who know the industry and who employees. I believe it will make Tara Mines instead of competing with each other, we can are hopefully in for the long haul. stronger and lead to further development in utilise each other’s know-how to identify the How will it affect your part of the operations? operations. best solutions. We can make new Boliden It will increase the potential for making invest- How will it affect your part of the operations? a strong and competitive company. ments, bring in new know-how that we can Boliden has a high environmental proﬁle. I hope How will it affect your part of the operations? share whilst sharing our own know-how, etc. its knowledge and experience will be transferred The integration process has started and I’m looking Hopes for the future? to Tara integrating environmental importance forward to meeting new colleagues. International My hope for the future is that the incredible poten- with daily operations. contacts have become part of our day-to-day ope- tial that exists on the mining front in Garpenberg, Hopes for the future? rations in the ﬁnancial department and I appreciate Kristineberg and Renström has the opportunity I hope that the deal will open new doors for that greatly. We’re going through an interesting to develop into production within a new infra- me in the future, possibly travelling to other phase and I believe that our efforts will start structure. A structure that improves the current areas of the business within Europe, sharing bearing fruit, even before this year is out. system in all underground mines with regard to and extending my knowledge within the envi- Hopes for the future? ventilation, materials supply, and ore output. I’m ronmental sector. I hope that we can work towards the goals set also hoping that a bioleaching plant becomes a up by the new company and live up to people’s reality in Boliden. We have every opportunity! expectations of new Boliden.

41 Environment – new Boliden increases its Lead in the Environmental Area

The merger of Boliden’s and including societal development. The 75 percent of all zinc come from Outokumpu’s mines and smelters requirements on environmental per- recycled metals. All production at also entails the fusion of world- formance are constantly increasing, Bergsöe is based on recycled material. leading expertise and technology e.g. with regard to lowered limit in the environmental area. The Tara values for emissions, but new Boliden’s Environmental management system mine, for example, is unique when it installations are well-maintained and “Old” Boliden’s environmental mana- comes to showing environmental use modern technology. Boliden’s gement system was established in an consideration in connection with environmental know-how gives it a environmental manual in 1999, desig- mining in a sensitive area, whilst the head start in these respects and con- ned to meet the requirements of ISO Rönnskär copper smelter is a world stitutes a competitive advantage. 14001, and the Swedish mines and leader in the recycling of complex Metals can, used properly, be Rönnskär are currently working on raw materials with minimal environ- recycled time after time. New EU achieving certification in accordance mental impact. The zinc smelter in legislation means that the market for with this standard. Extensive efforts Kokkola is the most energy-efficient secondary material is increasing, and over the past two years have addressed smelter of its kind in the world. hence new Boliden’s investment in the coordination of management recycling waste products is not only systems for the environment, health New Boliden’s operations comply with environmentally correct – it is also and safety, including the introduction stringent international requirements becoming increasingly important from of routines for coordinated audits in for sustainable activity – i.e. good a commercial viewpoint. At Rönnskär, these areas. Three environmental environmental performance coupled 20 percent of the copper produced, audits were conducted at the Swedish with an acceptance of responsibility, just over 40 percent of the gold and units in 2003. Boliden Bergsöe already holds an ISO 14001 environmental certification, as do the smelters at Harjavalta, Kokkola and Odda. The refinery at Pori is currently registered with the EMAS scheme and is working to achieve ISO 14001 certification during 2004. Work on registration in accordance with the EMAS scheme is currently in progress at Tara. In Boliden’s environmental policy the company undertakes, inter alia, to make ongoing improvements in its internal environmental work with regard, for example, to environmental mental impact, and improve safety, e.g. when crushing, hoisting and requirements, technical and scientific landscaping and water quality aspects milling ore, pumping water from great development, economic conditions, of these installations. depths, smelting metal, and drying and society’s expectations and social aspects. Examples of our use of residual roasting smelting materials. New Boli- products include the use by Rönnskär den’s smelters, led by the Kokkola zinc Residual products, waste for several years now of the sulphur smelter, are amongst the most energy- and dams content of the raw material in the efficient in the world. The flash smelt- Both Boliden and Outokumpu are manufacture of sulphuric acid – an ing method of copper smelting devel- standard-bearers when it comes to important process chemical for the oped at Harjavalta, and which is now developing and employing safe and paper industry. The iron and silica one of the methods used at Rönnskär resource-efficient residual product content of the slag from the copper too, also demands a minor supply of management. smelting process is used to produce Boliden has participated in the iron sand, a competent construction redrafting of the Swedish guidelines material. Residual levels of copper are for dam safety (RIDAS) to include extracted from 150,000 tonnes of cop- tailings dams. The company has per slag at the concentrator at Boliden. documented tailings dam safety work Waste rock without ore traces has been routines dating back to 1997. As a stored separately at the Aitik mine for result all dams in operation in 2003 some years now to enable its use over underwent their second comprehensive time as a construction material, e.g. in safety review in five years. Plans have the Bothnia Line railway. been drawn up, at the company’s concentrators, to use a completely new Energy generation of tailings ponds, which are Mining as well as smelting processes expected to further reduce the environ- require considerable amounts of energy,

43 Environment Cont. external energy, because it utilises the completion in 2005. At the Enåsen operational at Boliden Bergsöe during energy present in the raw material for mine, measures being taken include the year, and enables the treatment of the smelting process. covering the waste rock deposit with large amounts of rainfall that would At the same time, the smelters gen- processed sewage sludge. previously have been discharged with- erate surplus heat, which is utilised in out being treated. Emissions to water district heating for both internal use Emissions to water and water use at the Kokkola smelter have decreased and in the surrounding communities. Mining operations usually entail work- considerably in recent years, despite a Energy consumption has declined ing below the groundwater level and simultaneous increase in production. considerably over the years and current water collection and pumping must The seawater near the plant has been levels are approximately half what they hence be used to prevent water from tested regularly and the results show were per tonne of ore produced in filling the mine stopes. Operations that the water quality has improved, 1970. The introduction of a new energy above ground often also entail the thanks to a reduction in emissions. management system as a tool for Emissions into the groundwater have improving the efficiency of energy also declined since a waste water recy- usage still further began in 2002, and cling system at the disposal site was an energy management system manual implemented in 2000. This system was produced in 2003. The first stage brought about a reduction of over of the system will be completed in 50 percent in the zinc and cadmium 2005. levels of the groundwater in certain An energy review has been con- places. The Harjavalta smelter has also ducted, the aim being to demonstrate succeeded in reducing its emissions how additional surplus energy from to water considerably in recent years. Rönnskär could be used, primarily by And in 2003, a project designed to increasing electricity production, but limit diffuse emissions from the area also by expanding district heating. to the fjord by the installation of sys- introduction of water, which must be tems for collecting and treating surface Reclamation work collected and processed in a controlled and waste water in the bedrock under Boliden’s first trials of reclamation manner before being discharged. New the smelter, was completed at Norzink. techniques took place in 1954 at the Boliden is constantly striving to increase This – coupled with an up-grade of Laisvall mine, and the company has, the recycling rate of the water being the water treatment facility – yielded thus, more long-term experience of used and, wherever possible, use it for a reduction in zinc emissions into the reclamation methods than most min- cooling purposes, as a transport medi- fjord of approximately 40 percent ing companies – experience which it um or in wet separation processes. It is during the past year. combines with the practical experience not, however, possible to fully avoid gained from the numerous projects emissions to water. Concentrators use Emissions to air implemented since then. Reclamation tailings ponds as efficient water treat- Most of Boliden’s processes generate methods are constantly developing, ment facilities, whilst smelters and emissions to air as well. These emis- and now include such new elements independent mines use separate water sions come from exhaust air, process as the use of recycled products from treatment plants. gases or exhaust gases from vehicles. the community and other sectors of A problem with the arsenic precipi- Emissions to air have, however, industry. The need for opening of new tation occurred at Rönnskär in 2002 declined considerably in recent years borrow material pits is consequently in the water treatment plant, and Boli- at most of the company’s installations, decreasing. den applied for and received permis- thanks to the focusing on measures New Boliden is currently working sion to implement a fixed-period designed to improve their environ- on the reclamation of the Laisvall increase in limit values from 1 tonne mental performance. Boliden has mine, where just over half of the work to 1.4 tonnes of arsenic per year. The participated actively in the develop- has now been completed, both under- normal limit value was met in 2003, ment of emission-free techniques for ground and at the tailings dams. Recla- thanks to intensive investigative and ore concentrate dewatering, and mation work is also in progress at the developmental work. A new pond for emissions from the mines caused by Rakkejaur mine and is scheduled for collecting surface water has been made this particular process stage have now

44 effectively been eliminated. Another example is the system of LPG-heating of fresh air installed at the Kristineberg mine in 1998. LPG-heating drastically improves efficiency, substantially reduces carbon dioxide emissions, and yields a documented improvement of the environment in the mine.

Recycling Boliden Bergsöe and Rönnskär are two of Europe’s biggest recycling plants for non-ferrous metals. All raw material at Boliden Bergsöe comprises used lead batteries and other recyclable scrap. At Rönnskär not only metal ore concentrates are processed, but also copper waste, electronic waste and ashes from the brass industry. Rönnskär also recovers zinc-bearing steelmaking dust. Zinc is recycled through the production of zinc clinker, a raw material that is transported to zinc smelters for metal production.

Land usage Exploration generally entails operating on someone else’s land, which means that great consideration must be shown to both the environment and the land- owner. Only a fraction of the land comprised by an exploration permit is affected during exploration, and the affect the work does have is usually very limited. Land used for industrial areas and landﬁll sites is affected in a more tangible way. The amount of land used in this way is, however, limited, and the sites are chosen on the basis of a number of criteria designed to minimise the potential impact on landowners and the environment. New Boliden places great emphasis on seeking voluntary agreements with the landowners concerned. For further information on new Boliden’s environmental work, please see the company’s website at www.boliden.com

Directors’ report

The structural deal with Outokumpu previous debt financing, involving position. The operations will be con- On 30th December 2003, Boliden com- the signing of new credit facilities ducted within three Business Areas as pleted a transaction whereby Boliden with a consortium of credit of 2004, namely Mining Operations, acquired Outoukumpu’s zinc and institutions. Copper and Zinc. Boliden’s pro forma copper mining and smelting operations, – A debenture loan issued to Outo- net sales for 2003 totalled SEK 14.5 including: kumpu by Boliden of SEK 1.4 billion. The Group had a total of – Outokumpu Norzink AS, including billion. The size of the debenture loan approximately 4,900 employees, as its subsidiaries will be adjusted, based on the change of 31st December 2003. Boliden AB, – Outokumpu Harjavalta Metals Oy, in capital employed between 31st which is the Group’s parent company, including its subsidiaries December 2002 and 31st December is listed on the O-list of the Stockholm – Outokumpu Zinc Commercial BV 2003 for the units acquired and in Stock Exchange (primary listing) and – Outokumpu Zinc Oy relation to the incidence of liabilities on the Toronto Stock Exchange in – Tara Mines Holding Ltd, including (net) to third parties, all in accordance Canada (secondary listing). its subsidiaries with the accounts for the transaction, and sold its Fabrication and Technology which will be completed during the Orientation Sales operations to Outokumpu. The spring of 2004. New Boliden’s operations focus on the transaction strengthens Boliden’s com- Boliden will be implementing an under- early stages of processing in the metal petitiveness and generates the precon- written rights issue for SEK 1.4 billion industry’s value chain – see diagram ditions for improved profitability. in the first quarter of 2004 as an integral below. The acquisition has substantially improved Boliden’s ability to participate New Boliden in and influence the consolidation of the Minerals Mining Smelting & Fabrication Components End products Refining mining and smelting industry. Boliden is now a stronger company with increased financial and operating strength. The part of the deal. Approximately SEK Boliden’s income model increased focus on mining and smelting 1 billion of the issue proceeds will be Boliden’s profitability is considerably operations also generates greater poten- used to repay debt. affected by external factors, such as metal tial for future growth and profitability, The Fabrication and Technology prices, exchange rates and treatment to the benefit of all our shareholders. Sales operations were sold by means of and refining charges. The effect these The total purchase price for the acqu- the sale of all shares in Boliden Fabri- factors have on income and profitability isition of Outokumpu’s mining and cation AB and Boliden Contech AB can be summarised in the following smelting operations was SEK 7.9 billion. (including subsidiaries) and of all of income model for mines and smelters. Under the terms of the share transfer the Group’s interest-bearing receiv- agreement for the transaction, the pay- ables for the companies. In payment,     ment will be adjusted on the basis of the Boliden received 5,000,000 newly Income Metal price (LME; LBMA) – less changes in 2003 to capital employed. issued shares in Outokumpu, which treatment and refining charges Payment was made by means of were subscribed for by Boliden. All of (TC/RC) and adjustments for quality and metal content. – A directed rights issue (non-cash these shares were sold in January 2004. issue) to Outokumpu for SEK 3.1 The income of the Mining Operations billion, corresponding to 49 percent     is primarily affected by metal price of all shares and votes in Boliden New Boliden is a mining and smelting levels, smelting charges (treatment after the issue. company focusing on the production and refining charges), exchange rates, – A cash component of SEK 3.4 of copper, zinc, lead, gold and silver. volumes and the metal content of the billion. The cash sum was financed The company is a strong European ore mined and milled. through a renegotiation of Boliden’s player with a significant global market The upswing in metal prices noted

48 in 2003, coupled with lower treatment Net sales and results average net debt on loans, and the and refining charges, have had a positive   changes in the value of fixed assets effect on the result, whilst a lower Net sales for the remaining operations that were the main reasons of the USD/SEK exchange rate has had are on a par with last year and totalled improvement in net financial items. a negative effect. SEK 7,153 (7,127) million, whilst the total for the Group (including sold         operations) was SEK 9,545 (9,556) The net result for the remaining million. Net sales have been positively operations improved to SEK 596 Income Metal price (LME, LBMA) affected by increased mining production (166) million, whilst for the Boliden Raw mate- Metal price (LME; LBMA) – less and higher metal prices, and negatively Group as a whole, it deteriorated to rial cost treatment and refining charges (TC/RC) and adjustments for by a lower US dollar exchange rate and SEK 13 (132) million. The Group quality and metal content. lower treatment and refining charges. reported a tax income of SEK 265 Margin Treatment and refining charges (20) million for 2003. The tax (TC/RC)   income refers primarily to deferred The operating result for the remaining tax attributable to previously unre- operations totalled SEK 533 (415) ported deferred tax receivables from million, corresponding to an increase deficit deductions. of 28 percent. The operating result for the Boliden Group as a whole totalled   SEK -19 (414) million, including a The earnings per share (remaining loss on the sale of Fabrication and operations) were SEK 6.92 (1.94). Technology Sales of SEK 394 million. The earnings per share for the Boliden The operating result was positively Group as a whole were SEK 0.15 (1.54). affected by a strong performance on The interest cover for the remaining The Business Area Smelting Operations’ the part of the Business Area Mining operations was 2.2 (1.5) and 0.2 (1.3) income is primarily affected by the Operations, which benefited from an for the Boliden Group as a whole. level of smelting charges (treatment upswing in metal prices and increased and refining charges), exchange rates, production. The effect on the result of Performance per Business Area unit costs and volumes and, to a lesser lower treatment and refining charges,   extent, by metal prices. The balance the planned maintenance shutdown Mining Operations between mining and smelting produc- during the fourth quarter at Rönnskär The 2003 operating result for the tion is a key factor that affects these and a lower US dollar exchange rate Business Area Mining Operations was smelting charges. The smelters can has been negative in comparison with positively affected by increased metal hedge the metal price risk between the last year. prices, higher levels of metal production, purchase of raw materials and the sale lower treatment and refining charges, of finished metal to customers using     and productivity improvements. At the short-term financial instruments. The result after financial items for same time, the result was, negatively The upswing in metal prices noted the remaining operations improved affected by lower income resulting in 2003 has had a marginally positive by 127 percent, and totalled SEK 327 from a deterioration in the US dollar effect on the result, whilst the lower (144) million. For the Boliden Group exchange rate, in comparison with the USD/SEK exchange rate and lower as a whole, the result after financial previous year. treatment and refining charges have items was SEK -251 (111) million. had a negative effect. The loss on the sale of Fabrication Business Area Change, Mining Operations1) 2003 2002 % There is a correlation between the and Technology Sales had a negative SEK m price levels for zinc, copper and smelt- impact on the result by SEK 394 Net sales 2 791 2 272 23 ing charges. The concentrate and million. The financial costs for the Operating result 369 190 94 Depreciation 300 287 5 metal markets are separate, but they remaining operations have been Investments 477 313 52 both develop in line with global eco- reduced by SEK 65 million, primarily Capital employed 1 656 1 289 28 nomic and industry-specific cycles. due to lower interest rates, a lower 1) Excluding units acquired

49 Directors’ report

Production of all metals in the Business last year. At the same time, a lower US Area Mining Operations increased in dollar exchange rate, lower treatment 2003 in comparison with the previous and refining charges, reduced produc- year, as shown in the table below. tion and the planned maintenance shutdown at Rönnskär during the Metal production Change, Mining Operations1) 2003 2002 % fourth quarter of 2003 had a negative Total effect on the result. Copper (tonnes) 93 706 78 906 19 Zinc (tonnes) 178 644 150 990 18 Business Area ...... Change, Lead (tonnes) 18 658 18 240 2 Smelting Operations1) 2003 2002 % Gold (kg) 5 124 5 074 1 SEK m Silver (kg) 272 085 263 066 3 Net sales 5 905 6 587 -10 1) Excluding units acquired Operating result 225 248 - 9 Depreciation 294 290 1 At Aitik, which mainly produces copper, duction has increased substantially this Investments 67 128 - 48 ore production increased marginally in year in comparison with last year. In Capital employed 5 250 5 280 -1 1) 2003. Gold production there was, fur- February 2004, Boliden signed a Let- Excluding units acquired thermore, affected negatively by lower ter of Intent for the sale of Myra Falls gold head grades than in the previous to the Canadian mining company, Boliden’s smelters (Rönnskär and year. The introduction of the new pro- Breakwater Resources Ltd. Bergsöe) mainly produce copper, lead, duction plan at Aitik was completed precious metals and zinc clinker. Pro- according to plan in the latter part of   ‒  duction at Rönnskär improved succes- the year. A reorganisation was imple-  (   sively throughout the year. The lower     mented in conjunction with this ’ ) production levels at the beginning of process, resulting, in a reduction in the Tara the year were mainly due to a shortage number of positions at the mine. The Production at Tara was shut down in of external copper concentrate, primarily measures have increased production 2001 due to unfavourable market con- as a result of continued production efficiency at the mine, and hence ditions, low zinc prices and high pro- restrictions on the part of the major improved the potential for better duction costs, but the launch of a copper concentrate producers in the results and cash flow in the future. technical improvements programme global market. The Group successfully Ore production and milling results enabled production to be restarted in compensated, to some extent, for the continued to develop well in the Boliden September 2002. Production gradually materials shortage by increasing deliv- Area, with production of zinc, copper increased in 2003 and the latter part of eries from Boliden’s own mines. A and gold all increasing in 2003. Copper the year saw the mine report a positive planned shutdown for repairs and production has been prioritised during result, thanks to the improvement maintenance work was carried out the year, in order to improve supplies programme and investments made, during the fourth quarter, and entailed of copper concentrate to Rönnskär. which collectively reduced the unit a temporary loss of production. Production of the main metal, zinc, cost. Tara is now Ireland’s and Europe’s The operations of Boliden’s leadsmel- was higher at Garpenberg than in the biggest zinc mine. ter at Bergsöe in Landskrona developed previous year. Boliden’s exploration positively in 2003. work on the Lappberget mineralisation Production Tara Full year 2003 2002 The following table contains a sum- in Garpenberg continues to yield good Milled tonnage, ktonnes 2 548 755 mary of smelting production: Metal content, (tonnes) results, with high grades reported, Zinc 188 367 49 061 mainly for zinc, silver and lead. Work Lead 29 502 8 280 Metal production Full year Change, on identifying the full extent of the Smelting Operations1) 2003 2002 % Lappberget mineralisation continues, Smelting Operations Copper (tonnes) 214 181 224 402 - 5   Zinc clinker and it should be possible to increase (tonnes) 33 549 34 685 - 3 production at Lappberget in 2004. The 2003 operating result for the Lead (tonnes) 24 208 17 753 36 Metal production at Myra Falls, has Business Area Smelting Operations Gold (kg) 12 275 15 562 - 21 Silver (kg) 456 565 408 427 12 failed to reach anticipated levels in was positively affected by higher metal Lead alloys 2003. The production halt in early prices and an increase in lead sales by Bergsöe (tonnes) 49 132 45 698 8 2002 does, however, mean that pro- Boliden Bergsöe in comparison with 1) Excluding units acquired

50   ‒    that the ruling will, in all probability,  (  Fabrication hold BCZ, Boliden Fabrication AB and   ’ ) Business Area Fabrication 2003 2002 Boliden AB liable to pay fines in accor- Harjavalta – Copper smelter SEK m dance with applicable EU rules. As Net sales 2 343 2 347 noted above, BCZ and Boliden Fabri- Metal production Full year Change, Operating result -164 - 6 Harjavalta 2003 2002 % Depreciation 52 55 cation AB have been transferred to Primary copper Investments 66 55 Outokumpu and Boliden has under- (tonnes) 160 596 160 896 0 Capital employed n.a. 750 taken to indemnify Outokumpu for all Cathode copper (tonnes) 125 635 114 906 9 consequences that this may entail. It is The Business Area Fabrication reported not possible, at this stage, to assess with Metal production at Harjavalta weak demand levels in both the copper any reasonable degree of certainty what remained at an unchanged high level tubing and brass rod market throughout the total financial impact of this will in 2003, the difficult concentrate situ- 2003, mainly as a result of a weak con- be for Boliden, and hence no provision ation notwithstanding. Production of struction industry climate in Europe. has been made for any obligations that cathode copper also achieved a new The pricing pressure on copper tubing may arise in conjunction with the on- production record. has continued and the reduced sales volu- going cartel investigation. mes mirror the decline in the market. The share transfer agreement that Kokkola – Zinc smelter The 2003 result was considerably regulates Outokumpu’s acquisition of poorer than expected due to a continued assets from Boliden includes guarantees Metal production Full year Change, weak market with poor demand and and indemnity undertakings from Boli- Kokkola 2003 2002 % Zinc (tonnes) 265 853 235 337 13 pricing pressure, and to non-recurring den to Outokumpu which primarily costs. Non-recurring costs of SEK 70 (other than insofar as they refer to full The zinc smelter in Kokkola, which is million related to depreciation of fixed and unlimited title to assets) are limited one of the world’s most technically assets by SEK 34 million, and structural to a maximum of EUR 25 million, with advanced and cost-effective smelters, costs totalling SEK 36 million, have been the exception of claims related to the reported a new production record for charged to the result for the full year. so-called copper tubing cartel for which zinc in 2003. In August 2003, the European Com- full indemnity has been separately mission initiated legal proceedings under guaranteed. Norzink – Zinc smelter Article 81 of the EC Treaty and Article 53 of the EEA Agreement, and issued Technology Sales Metal production Full year Change, Norzink 2003 2002 % a Statement of Objections addressed to Boliden Contech, which markets and Zinc (tonnes) 143 627 144 538 -1 Boliden Cuivre et Zinc SA (“BCZ”), sells technology solutions, primarily to Boliden Fabrication AB and Boliden, smelters, suffered as a result of the weak Production at Norzink managed to and to eight other companies. According market for technology in 2003. The remain at a high level, despite the to the Commission, BCZ and the other market came under pressure as a result ongoing major investment work there. companies have participated in cartel of lower levels of investment in the The Odda plant is currently being activities in the European sanitary copper mining and smelting industries. modernised, with the equivalent of tubing market during the period from The sale of Fabrication and Technol- approximately SEK 800 million being 1988 to 2001. The cartel has, according ogy Sales has resulted in a capital loss invested in a modernisation process to the Commission, engaged in coordi- of SEK 394 million, which has been that will be completed in the autumn nation of prices and market sharing. charged to the year’s result. of 2004. It is calculated that it will In a reply to the Commission, Boliden be possible to increase the capacity has, in general terms, acknowledged the Financial position and cash flow for concentrate deliveries to the plant Commission’s description of the factual     by around 10 percent once the mod- circumstances, while presenting a The Group’s total assets increased sig- ernisation of the smelter has been number of mitigating circumstances. nificantly during the year. The increase completed. The EU Commission is expected totalled SEK 9,167 million, of which to announce its ruling on the matter SEK 2,736 million comprises intangible in 2004. The outcome is, admittedly, fixed assets, SEK 3,933 million tangible uncertain, but Boliden must anticipate fixed assets, SEK 1,044 million inven-

51 Directors’ report tories, and SEK 537 million current The increase is attributable in its The 2003 cash flow for the remaining receivables. The increase is primarily entirety to the acquisition of Outo- operations was SEK 697 (-32) million. due to the structural transaction in kumpu’s mining and smelting opera- The cash flow was positively affected 2003 whereby Boliden acquired Outo- tions. Boliden’s net debt on loans are during the year by the closed out dol- kumpu’s mining and smelting opera- summarised in the table. lar hedging contracts totalling SEK tions at the same time as Boliden’s Fab- 592 million. The business areas con- rication and Technology Sales were sold ’  ducted by Boliden within the Mining to Outokumpu. Shareholders’ equity has increased by Operations and Smelting Operations Capital employed increased by SEK SEK 3,510 million in 2003 and totalled are characterised by fluctuations in the 7,757 million, and as of 31st December SEK 6,100 million, as of the closing working capital from one quarter to 2003, totalled SEK 14,790 (7,033) date. The increase is due to the follow- another, in that individual incoming and million. ing factors: outgoing deliveries of metal concentrate and outgoing deliveries of products from   SEK m 2003 the smelters represent huge values. The Opening shareholders’ equity 2 590 Boliden’s operations are characterised Net result for the year 13 completion of the transaction with by fluctuations in the working capital Non-cash issue 3 073 Outokumpu has had a significant effect from one quarter to another, in that Closed out hedging contracts 630 on the cash flow for the year from Deferred tax on closed out individual incoming and outgoing future contracts -176 investment and financing activities. deliveries of metal concentrate and out- Translation differences - 36 going deliveries of products from the Accumulated translation  difference in divested companies 6 smelters represent large values. The Total change 3 510 Investments totalled SEK 611 (505) acquisition of Outokumpu’s mining Closing shareholders’ equity 6 100 million and SEK 544 (447) million for and smelting operations have, first and the remaining operations. Investments foremost, resulted in an increase in The guaranteed preferential rights issue in remaining operations break down the amount of working capital immo- scheduled for completion at the begin- into SEK 477 (313) million in mining bilised in inventories. The Group’s ning of the second quarter of 2004 will operations and SEK 67 (128) million working capital (excluding interest- entail an increase in the Group’s share- in smelters. The increased investments bearing receivables and liabilities) is holders’ equity of SEK 1,430 million, comprise, to a great extent, deferred summarised in the following table. before deductions for transaction costs. development (underground mines) and waste stripping (open pit mines) Working capital (SEK m) 2003 2002   Inventories 2 236 1 192 for future ore extraction. These invest- Current receivables 1 397 787 The debt-equity ratio improved to 147 ments represented approximately 70 Current liabilities - 2 404 -1 708 percent (183 percent). The equity/assets percent of the total investments in the Working capital 1 229 271 ratio, as of 31st December 2003, was Business Area Mining Operations.  30.7 percent (24.2 percent). Both the Other investments in mining opera- debt-equity ratio and the equity/assets tions and smelters largely comprise Boliden’s net debt on the closing date ratio will further improve after the reinvestment. Investment activities in was SEK 8,957 (4,730) million. rights issue for SEK 1,430 million 2004 will focus on the modernisation SEK m 2003 2002 (before transaction costs) to be complet- of the Norzink zinc smelter. The mod- Liabilities to credit institutions 8 709 5 524 ed at the beginning of the second quar- ernisation, which is scheduled for com- Other interest-bearing liabilities ter of 2004. pletion in the autumn of 2004 and (of which the Outokumpu debenture which will cost a total of approximately loan, SEK 1 379 m) 1 430 1   Pension liabilities 224 74 SEK 800 million, principally involves Other long-term The following table shows a summary the installation of a new direct leach- securities holdings - 3 - 3 of Boliden’s cash flow. ing method for zinc concentrate, Interest-bearing SEK m 2003 2002 which will provide increased versatility current receivables - 25 - 98 Cash flow from with regard to zinc raw material quality. Short-term investments - 536 - 537 operating activities 956 497 Liquid assets - 842 - 231 Cash flow from Net debt 8 957 4 730 investment activities - 8 031 - 520 Cash flow from financing activities 7 686 9 Cash flow for the year 611 -14

52 Ore reserves and exploration Operating risks Exchange rate trends Exploration is fundamental to mining  The US dollar has weakened against all and metal companies, because their Boliden’s costs, including those of the of Boliden’s local currencies in 2003. operations depend on the discovery of units acquired from Outokumpu, are Exchange rates Change, Change, new mineralisations. At the same time, primarily denominated in Swedish Full year 2003 % 2002 % 2001 it also involves risk – there are no kronor, euro, Norwegian kronor and USD/SEK 8.09 -17 9.72 - 6 10.34 guarantees that the work will lead to Canadian dollars, whilst its income is USD/SEK 1) 10.10 - 6 10.72 20 8.95 new discoveries. primarily in American dollars. The USD/CAD 1.40 -11 1.57 1 1.55 EUR/USD 1.13 19 0.95 6 0.90 American dollar exchange rate hence USD/NOK 7.07 -11 7.98 -11 8.99     ’ has a critical impact on the result. 1) USD/SEK exchange rate deducted by Boliden from the result. Boliden’s strategy is to prioritise mine- During 2003, Boliden has, as a result site exploration. Field exploration has of a change in hedging strategy, closed Exchange rate fluctuations been reduced in scale, and now occurs out some of the Group’s currency futures The table below contains an estimate primarily in the Skellefte field. New designed to hedge future dollar flows. of the effects of changes in exchange discoveries close to an existing mine rates on Boliden’s result for 2004, mean that the time from discovery to based on average exchange rates for production can be reduced, and becau- 2003 and planned production levels se existing infrastructure can be used, for 2004. The sensitivity analysis does the capital requirement is also lower. not take into account the effects of The objective of field exploration is exchange rate hedging or fluctuations to secure mineral resources in the medi- in metal prices. um and long term. The time from a Change in Effect on result discovery being made to a mine USD rate +/- +/- (SEK m) becoming operational is often 5-10 SEK 10 % 324 years, and sometimes longer. Field EUR 10 % 218 NOK 10 % 52 exploration is, by its very nature, more These transactions had a positive effect CAD 10 % 49 risky than mine-site exploration. Boli- on Boliden’s cash flow of SEK 592 TOTAL 643 den’s field exploration is done under its million for 2003 and a net total positive own management, through part own- effect on shareholders’ equity of SEK The metals market and metal prices ership of exploration companies, and 454 million, after deductions for Several factors determine the price of in joint ventures with other companies. deferred tax. The result of the closed out base metals such as copper, zinc and contracts will be reported in the lead. The most important long-term    Income Statement concurrently with factor is changes in industrial supply A number of new discoveries have the underlying payment flows that and demand, but the activities of been made in the past five years and these currency future contracts were financial players’ activities also have a have had a positive effect on the future designed to hedge. These flows have major effect on prices, whilst political for Boliden’s Swedish mining opera- been forecasted for the period from factors have a greater impact on the tions. Much work does, however, still 2003-2005. Deferred tax receivables in price of precious metals, such as gold remain to be done before the discov- respect of deficit deductions not previ- and silver. eries become ore reserves. ously booked as assets and correspond- Smelting charges, which for base Boliden invested SEK 60 million ing to the deferred tax on the closed metals comprise treatment and refin- in exploration in 2003, in comparison out currency futures contracts, have ing charges, received by smelters and with SEK 69 million in the previous been reported as tax income in the refineries for the conversion of concen- year. SEK 40 (41) million of this sum amount of SEK 164 million for the trates to metals are the primary remu- was invested in mine-site exploration, full year. The Boliden Group’s curren- neration. They are negotiated annually with the rest going to field exploration. cy future and currency option hedges by the major players in the mining The exploration work will be intensi- as of 31st December 2003 are sum- and smelting industries and act as fied over the next few years in order marised in Note 17. benchmarks for the smaller players, to maintain and develop the mineral whilst some concentrate transactions resources. are conducted at spot price.

53 Directors’ report

Base metal prices are set daily on the     with regard to zinc concentrate has, by London Metal Exchange (LME) whilst The table below contains an estimate contrast, been beneficial, in that the the price of precious metals is set by of the effects of changes in the various Group was a net seller of zinc in 2003. the London Bullion Market Associa- metal prices on Boliden’s result for The Outokumpu acquisition does, tion (LBMA). 2004, based on average metal prices in however, mean that there is now a After a period of slow growth in con- 2003 and planned production levels good balance between Boliden’s zinc sumption and low prices that began in for 2004. The sensitivity analysis does smelting and mining production. the late 1990s, the market for base not take into account the effects of metals is now beginning to reflect the metal price hedging or fluctuations     upturn in the global economy. Accord- in exchange rates.   ing to Brook Hunt, a metal markets The table below contains an estimate consultancy company, consumption of Metal Change in Effect on of the effects of changes in treatment both copper and zinc has increased by prices +/- Result +/- (SEK m) and refining charges on Boliden’s result 4 percent in 2003 in comparison with Copper 10 % 153 for 2004, based on processing charges Zinc 10 % 303 2002. Lead 10 % 35 in 2003 and planned production levels Gold 10 % 75 for 2004.   Silver 10 % 41 TOTAL 607 Boliden’s most important metals are Metal/Treatment Change inEffect on and Refining Treatment & Result zinc, copper, lead, gold and silver, for charges Refining Charges (SEK m) which the metal prices at the start of     Treatment charge/ the 2003 financial year remained at Boliden’s mines and smelters are affect- Refining charge – Copper +10 % +30 Treatment charge – Zinc +10 % +10 historically low levels. The price trend ed by the global market’s setting of Treatment charge – Lead +10 % - 6 has, however, been positive for most treatment and refining charges. This is of 2003, a trend that accelerated in the the payment that the smelters receive for final quarter. 63 percent of Boliden’s converting the mines’ metal concen- The Environment planned mined production of gold trates into refined metals. These pay-   has been hedged at USD 364/oz for ments are renegotiated annually by the In Sweden, the Boliden Group is 2004, with 69 percent hedged at world’s major mining and smelting engaged in operations for which a USD 363/oz for 2005. Boliden has companies, and their terms then set permit is required under the provisions also hedged the price of approximately the norms for the rest of the market. of the Swedish Environmental Code. 70 percent of the planned mined Treatment and refining charges are The companies affected are Boliden production of silver for 2004 during affected in the long term by metal Mineral AB and Boliden Bergsöe AB. the first quarter of the year at an average prices and in the short term by the sup- Boliden Mineral AB operates open pit price of USD 6.33/oz. At the end of ply of and demand for metal concen- and underground mines, concentrators 2003, Boliden’s base metals (copper, trate. Individually, the payments are and a smelter within the boundaries of zinc and lead) were essentially unhedged also affected by the quality of the metal six separate local authorities. All of these (summarised in Note 17). concentrate and the smelter’s geo- operations hold the permits required In March 2004, Boliden hedged 40 graphic position in relation to the for their ongoing activities and for percent of the planned mined produc- mines. expansion work. Several units are tion of copper from April 2004 up to Smelting charges for copper deterio- currently preparing permit applications and including March 2005 at an average rated substantially in 2003, and given for future production increases and price of USD 2,790/tonne (USD 1.27/lb). that Boliden is a net purchaser of cop- other changes. The operations’ environ- per concentrate, this is a negative trend mental impact primarily comprises    for the Group. The effect on Boliden land usage, emissions to air and water, noise and vibration, and waste depo- Metal prices, average LME/LBMA Full year 2003 Change, % Full year 2002 Change, % Full year 2001 sition. All operations are conducted Copper USD/lb 0.81 14 0.71 -1 0.72 within the framework imposed by Zinc USD/lb 0.38 9 0.35 -12 0.40 legislation and applicable terms and Lead USD/lb 0.23 10 0.21 - 5 0.22 Gold USD/ounce 364 17 310 14 271 conditions. Silver USD/ounce 4.88 6 4.60 5 4.37

54 The Swedish Ministry of the Environ- ing facilities in Pori. Kokkola Zinc Oy No. employees ment has proposed changes to the is located in Kokkola on the shores of at the end of 2003 Percentage of total Sweden 2 287 47 % rules governing the final storage of the Gulf of Bothnia. In Norway, the Finland 1 130 23 % waste containing mercury, but any Group operates a zinc smelter at Odda Norway 410 8 % new legislation of this kind will not through Norzink AS. The most tangi- Ireland 646 13 % Canada 396 8 % come into force until 2004, at the ble environmental impact of the oper- Other 28 1 % earliest. If the proposed new rules are ations comprises emissions to air and Total 4 897 implemented, it will entail increased water and the generation of slag and costs for Boliden’s final storage of this leaching waste. The work of the Board of Directors waste. The Board of Directors of Boliden Work is continuing within the EU   comprises eleven Members, three of on a Mining Waste Directive which, In September 2003, Boliden Nordic whom are employee representatives. when it is adopted, will entail more Brass AB (at that time 50 percent of Risto Virrankoski is the Chairman of precise regulation of the way in which the company was owned by Boliden) the Board and Carl Bennet, the mining operations’ waste products are took over the operations of Boliden Deputy Chairman. handled. The company has submitted Gusum AB, which requires an operat- Satu Huber, Tapani Järvinen, its views on what these rules should ing permit under the provisions of the Christoffer Taxell and Risto Virrankoski comprise and how they should be Swedish Environmental Code. Boliden’s were elected as new Members of the structured, both directly and through share in Boliden Nordic Brass AB was Board at an Extraordinary General the Euromines coordinating agency. included in the transfer of operations Meeting held on 18th December 2003 The environmental impact of to Outokumpu. The environmental (accession on 30th December 2003), Boliden Bergsöe AB takes the form impact of the operations of Boliden succeeding Gun Berglund, Göran of emissions to air and water and noise Nordic Brass AB, as was previously the Collert, Sverker Martin-Löf and Kjell generation. All emission values during case with those of Boliden Gusum AB Nilsson, as a result of the transaction the year were below applicable guide- in the Valdemarsvik community, com- between Boliden and Outokumpu. line and threshold values. prise emissions to air and water and Carl Bennet, Marie Berglund, Jan Boliden conducts mining operations noise generation. All emission values Johansson and Anders Sundström, similar to those in Sweden at Myra were below applicable guideline and who were elected at the Annual Falls on Vancouver Island, Canada, limit values throughout the year. General Meeting of the company through Boliden Westmin (Canada) Operations within the Business Area held in May 2003, continue as Ltd. The environmental impact Fabrication in Belgium, the Nether- Members of the Board. primarily takes the form of land usage, lands and the UK were conducted in The Board held a total of 13 meet- emissions to air and water, noise and accordance with the respective countries’ ings in 2003, four ordinary and two waste deposition. All operations are environmental legislation in 2003. statutory, in locations where the Group conducted within the framework of These operations were sold to Outo- operates. On 9th February 2004, the applicable legislation and conditions. kumpu at the end of 2003. Board discussed the result for 2003, after which the preliminary financial   Employees statement was published. At the same Tara Mines Ltd conducts mining The number of employees has increased Board Meeting, there was also a dis- operations at the Tara mine in Ireland. by approximately 900 since the trans- cussion on the Auditors’ observations Environmental impact at the mine action with Outokumpu was complet- as part of their audit of the year’s primarily takes the form of land usage, ed in December, and as of 31st accounting records and their examina- emissions to air and water, noise and December 2003, totalled 4,897. The tion of the Group’s closing accounts. waste deposition. average number of employees during At the Board Meeting held on 16th In Finland, the Group conducts the 2003 financial year is shown in February 2004, the Board decided, in operations through Harjavalta Copper Note 1. The majority of the operations accordance with the authorisation Oy and Kokkola Zinc Oy. Harjavalta of new Boliden are located in the received from the Extraordinary General Copper Oy has production facilities in Nordic countries, as is shown in the Meeting held on 18th December 2003, two locations: a copper and nickel following table. to implement a rights issue. smelter in Harjavalta and copper refin-

55 Directors’ report

The Board of Directors establishes a Harri Natunen, principles and IFRS: yearly agenda that regulates the Board’s President, Business Area Zinc – Financial instruments: all financial work in greater detail, and an instruc- Jukka Järvinen, derivatives are recognised in the tion for the division of labour between President, Business Area Copper Balance Sheet. The true value is the the Board of Directors and the Presi- Lars-Göran Björkqvist, valuation norm, with changes in dent. The agenda for the Board states President, Marketing & Sales value in accordance with the funda- that it will decide on issues relating to: mental rule recognised in the – The adoption of budgets and International Financial Reporting Income Statement. A few exceptions business plans for the year ahead Standards are permitted, including cash flow – Policies Under the provisions of a ruling by hedging, where changes in value are – Investments or undertakings outside of the European Commission, all listed booked against shareholders’ equity. the scope of the day-to-day operations companies within the European Union – Share-related payments: to be valued – Acquisitions and sales of companies must, as of 2005, compile their con- at the true value at the time when or operating branches solidated accounts in accordance with payment occurs, at which point – Subscription for, or the purchase or International Financial Reporting they shall be recognised against sale of, shares Standards, IFRS. The IFRS transition shareholders’ equity and booked as – Loans, guarantees and securities date for the Boliden Group is 1st costs over the earnings period. outside of the scope of the day-to-day January 2004, when the companies – Pension undertakings: calculation of operations. included in the Annual Report for benefit-based pension undertakings A Salaries Committee, headed by the 2005 shall submit comparative figures, in accordance with the PUCM Chairman of the Board and comprising in accordance with IFRS, for one method (Projected Unit Credit three people, has been appointed by the comparison year. The financial reports Method) which takes into account, Board of Directors to handle salaries for 2004 will accordingly be recalculated inter alia, future wage increases. and terms of employment for the in accordance with IFRS when included The IASB (the International Account- President and to provide guidelines in the 2005 Annual Report. ing Standards Board) announced dur- for other senior executives. Boliden launched an IFRS project in ing the first quarter of 2004 that a new 2003 to identify significant differences recommendation with regard to con- Changes in the Group Management between generally accepted accounting solidated accounts will be adopted. A new Group management team has principles in Sweden and IFRS. This standard affects, in particular, the been appointed in the wake of the Boliden has structured its IFRS pro- recognition of intangible assets (e.g. structural transaction with Outokumpu ject in order, firstly, to identify current goodwill) with an unlimited economic completed on 30th December 2003. differences between generally accepted life. The new recommendation means, accounting principles in Sweden and in brief, that goodwill is no longer Jan Johansson, IFRS, and secondly, to identify and subject to depreciation according to President and CEO take into account the differences arising plan and that the company shall, Tom Niemi, when new IFRS recommendations are instead, conduct an annual deprecia- Deputy CEO – Business Development, adopted. This process will ensure that tion test of the recognised value. The Purchasing, Environment new IFRS recommendations are taken estimated consolidated depreciation on Jan Öhman, into account in the correct manner. goodwill for 2004 is SEK 136 million. CFO By the latter half of 2004, the IFRS Boliden has implemented IAS Bengt Lindahl, differences will have been identified, 19/RR 29, Payments to employees, as Senior Vice President, and recalculation of the quarterly of 1st January 2004. Group Human Resources information for 2004 will take place. Ulf Söderström, The effects of the transition to IFRS Events after the end of the Senior Vice President, will be presented in the Interim Report financial year Group Communications of 31st March 2005. On 20th January 2004, Boliden and Marianne Lindholm, The following differences are amongst the Canadian mining company, Euro- Senior Vice President, Legal Affairs those noted, based on Boliden’s initial zinc, signed a partnership agreement Svante Nilsson, analytical work with regard to differ- in respect of future supplies of copper President, Mining Operations ences between current accounting concentrate from the Portuguese mine,

56 Neves Corvo. The agreement presup as an integral part of the deal. Approx- The units were resold within the poses, inter alia, that Eurozinc’s bid for imately SEK 1 billion of the issue pro- Group on the same date. Somincor S.A., which owns the mine, ceeds will be used to amortise liabilities. is successfully implemented. The agree- Dividends ment will enable Boliden to reinforce Future development Boliden will not pay any dividend for its future supplies of copper concen- Boliden’s profitability and cash flow are the current year, due to restrictions in trate to the smelters. significantly affected by a number of loan agreements and in the Group’s On 22nd January, Boliden announced external factors, of which metal prices, shareholders’ equity. that it had sold its entire holding of 5 exchange rates and treatment and million shares in Outokumpu. The refining charges are the most important. Proposed allocation of profits sales proceeds received have, after The trend in metal prices during the The Group’s non-restricted sharehold- deductions for costs, primarily been first few months of 2004 has been ers’ equity is negative. used to repay debt. The divestment of extremely positive, reaching levels last The Board of Directors and the the shares had a negligibly positive seen in the 1990s. At the same time, President propose that no dividend be effect on the result. the US dollar has continued to weaken, paid, and that SEK 796,733 thousand On 16th February 2004, it was albeit not to the same extent as that to be carried forward. announced that Boliden and the Cana- which metal prices have strengthened. dian listed mining company, Breakwater Treatment and refining charges indi- Resources Ltd, had signed a Letter of cate a continued weak development in Intent with regard to Boliden’s intention 2004, particularly with regard to copper, to sell its wholly-owned Canadian sub- and the level of smelting charges and sidiary, Boliden Westmin (Canada) availability thus pose major challenges Limited (BWCL), to Breakwater. BWCL for 2004. New Boliden is, however, less owns the Myra Falls mine. Boliden will sensitive to changes in zinc treatment receive 18 million newly issued Break- charges, as there is, by and large, a bal- water shares with a market value equiv- ance between the Company’s mining alent to approximately SEK 70 million and smelting production. (based on a share price of CAD 0.67). The acquisition of Outokumpu’s Boliden will also receive, in addition to mining and smelting operations the shares, 5 million warrants with a makes new Boliden a much stronger redemption price of CAD 1.00 and company. Synergies identified, which expire on 28th January 2009. combined with a continuation Boliden anticipates making a small of efforts to increase efficiency, will capital gain on the sale of Myra Falls. make a positive contribution to the The deal, which the Company expects company’s development in the years to complete early in the second quarter to come. of 2004, is conditional on, among The Board of Directors and execu- other changes, the usual due diligence, tive management of Boliden believe and the approval of both the relevant that the result for 2004 will exceed the authorities and the Boards of both 2003 result after net financial items for Boliden and Breakwater. the remaining operations. In March 2004, Boliden hedged 40 percent of the planned mined produc- The Parent Company tion of copper from April 2004 up to The Parent Company conducts no and including March 2005 at an operations and has no employees. The average price of USD 2,790/tonne Group management team is formally (127 c/lb). employed by Boliden Mineral AB. Boliden will be implementing a gua- Boliden AB acquired Outokumpu’s ranteed preferential rights issue for SEK zinc and copper mining and smelting 1.4 billion in the first quarter of 2004 operations on 30th December 2003.

57 58 Consolidated Income Statements

REMAINING OPERATIONS

Amount in SEK million 2003 2002 Net sales 7 153 7 127 Cost of goods sold - 6 308 - 6 410 Gross result 845 717 Selling expenses -116 -106 Administrative expenses - 232 -169 Research and development costs -88 -93 Other operating income 104 52 Other operating expenses –-2 Result from participation in associated companies 20 16 Operating result 533 415

Result from ﬁnancial items Interest income and other similar items 67 47 Interest expenses and other similar items - 273 - 318 Result after ﬁnancial items 327 144

Taxes 269 21 Minority share in earnings for the year –1 Result for the year 596 166 Earnings per share, SEK 6.92 1.94 Earnings per share after full dilution, SEK 6.90 1.93 Number of shares 168 258 113 85 811 638 Average number of shares 86 037 519 85 811 638 Average number of shares after full dilution 86 382 519 86 169 990

59 Consolidated Income Statements Cont.

OPERATIONS SOLD

Amount in SEK million 2003 2002 Net sales 2 392 2 429 Cost of goods sold - 2 199 - 2 159 Gross result 193 270 Selling expenses - 228 - 210 Administrative expenses -104 -111 Research and development costs -1 -1 Other operating income –51 Other operating expenses -18 – Operating result -158 -1

Result from ﬁnancial items Interest income and other similar items 21 Interest expenses and other similar items -28 -33 Result after ﬁnancial items -184 - 33

Tax on result for the year -4 -1 Minority share in earnings for the year -1 – Net result for the year before capital gains/losses from operations sold -189 - 34 Capital gains/losses from operations sold - 394 – Result for the year - 583 - 34

60 Consolidated Income Statements Cont.

THE BOLIDEN GROUP, TOTAL

Amount in SEK million Note 2003 2002 Net sales 22 9 545 9 556 Cost of goods sold - 8 507 - 8 569 Gross result 1 038 987 Selling expenses - 344 - 316 Administrative expenses 2 - 336 - 280 Research and development costs -89 -94 Other operating income 86 103 Other operating expenses –-2 Result from participation in associated companies 20 16 Loss on the sale of operations - 394 – Operating result 1, 5 -7, 22 -19 414

Result from ﬁnancial items Interest income and other similar items 3 69 48 Interest expenses and other similar items 4 - 301 - 351 Result after ﬁnancial items - 251 111 Taxes 10 265 20 Minority shares in earnings for the year -1 1 Net result for the year 13 132

Earnings per share, SEK 12 0.15 1.54 Earnings per share after full dilution, SEK 0.15 1.53 Number of shares 168 258 113 85 811 638 Average number of shares 86 037 519 85 811 638 Average number of shares after full dilution 86 382 519 86 169 990

Changes in Shareholders’ Equity – Group

Amount in SEK million Note 2003 2002 12 Opening balance 2 590 2 527 Non-cash issue 3 073 – Net result for the year 13 132 Closed out futures contracts, after ﬁscal effect 454 – Revaluation due to termination of associated company relationships – - 4 Accumulated translation difference in companies sold 6 – Translation differences -36 -65 Closing balance 6 100 2 590

61 Consolidated Balance Sheets

Amount in SEK million Note 2003 2002 ASSETS 22 Fixed assets Intangible fixed assets 5 2 745 9 Tangible fixed assets 6 Buildings and land 2 545 1 506 Deferred mining costs 1 248 833 Machinery and other technical facilities 7 061 5 113 Equipment, tools, fixtures and fittings 154 47 New construction work in progress 473 49 11 481 7 548 Financial fixed assets Participations in associated companies 9 83 33 Other shares and participations 65 17 Deferred tax receivables 10 425 235 Other long-term securities holdings 33 Other long-term receivables 23 4 599 292 Total fixed assets 14 825 7 849

Current assets Inventories 11 2 236 1 192 Current receivables Accounts receivable 843 519 Interest-bearing current receivables 9 25 98 Other receivables 224 156 Prepaid costs and accrued income 330 112 1 422 885

Short-term investments 21 536 537 Cash and bank 21 842 231 Total current assets 5 036 2 845 TOTAL ASSETS 19 861 10 694

62 Amount in SEK million Note 2003 2002 SHAREHOLDERS’ EQUITY AND LIABILITIES 22 Shareholders’ equity 12 Restricted shareholders’ equity Share capital 337 172 Restricted reserves 12 001 7 638 12 338 7 810 Non-restricted shareholders’ equity Accumulated deﬁcit - 6 251 - 5 352 Result for the year 13 132 - 6 238 - 5 220 Total shareholders’ equity 6 100 2 590

Minority interest –1 Provisions Provisions for pensions and similar undertakings 13 224 74 Deferred tax 10 307 9 Other provisions 14 686 686 1 217 769 Long-term liabilities Liabilities to credit institutions 16 7 209 5 195 Other interest-bearing liabilities 18 1 428 – Other liabilities 1 101 8 638 5 296 Current liabilities

Liabilities to credit institutions 16 1 500 329 Accounts payable 1 415 882

Other interest-bearing liabilities 18 2 1 Other liabilities 285 309 Accrued costs and prepaid income 19 704 517

3 906 2 038 TOTAL SHAREHOLDERS’ EQUITY & LIABILITIES 19 861 10 694 Pledged assets 20 4 156 4 241

Contingent liabilities 20 486 311

63 Consolidated Statements of Cash Flows – Group

REMAINING OPERATIONS

Amount in SEK million 2003 2002 Operating activities Result after financial items 327 144 Adjustments for items not included in the cash flow: Amortisation and writedowns of assets 581 582 Other -166 -137 742 589 Tax paid –-3 Cash flow from operating activities before changes in working capital 742 586 Cash flow from changes in working capital Increase(–)/decrease(+) in inventories - 218 253 Increase(–)/decrease(+) in operating receivables - 269 28 Increase(+)/decrease(–) in operating liabilities 720 - 487 Cash flow from operating activities 975 380

Investment activities

Acquisition of subsidiaries1) -7 891 – Sale of subsidiaries and associated companies 449 – Acquisition of intangible fixed assets -1 -1 Acquisition of tangible fixed assets - 543 -446 Sale of tangible fixed assets 22 4 Sale of financial assets –22 Cash flow from investment activities -7 964 - 421

Financing activities Non-cash issue 3 073 – Loans raised 4 997 576 Amortisation of loans - 384 -195 Amortisation of pension liabilities – - 372 Cash ﬂow from ﬁnancing activities 7 686 9 CASH FLOW FOR THE YEAR 697 - 32

1) In order to provide an overall picture of the transaction with Outokumpu, the non-cash issue is reported in the Statement of Cash Flow, even though it does not affect cash ﬂow.

64 OPERATIONS SOLD

Amount in SEK million 2003 2002 Operating activities Result after financial items - 578 - 33 Adjustments for items not included in the cash flow: Amortisation and writedowns of assets 77 60 Capital gains/losses from operations sold 394 _ Other 47 13 -60 40 Cash flow from operating activities before changes in working capital - 60 40 Cash flow from changes in working capital Increase(–)/decrease(+) in inventories -21 -51 Increase(–)/decrease(+) in operating receivables 159 54 Increase(+)/decrease(–) in operating liabilities -97 74 Cash flow from operating activities -19 117

Investment activities Acquisition of line of business _-52 Acquisition of tangible fixed assets -67 -58 Sale of tangible fixed assets _11 Cash flow from investment activities -67 -99 CASH FLOW FOR THE YEAR -86 18

65 Consolidated Statements of Cash Flows – Group Cont.

THE BOLIDEN GROUP, TOTAL

Amount in SEK million Note 2003 2002 21 Operating activities Result after financial items - 251 111 Adjustments for items not included in the cash flow: Amortisation and writedowns of assets 6 658 642 Capital gains/losses from operations sold 394 – Other -119 -124 682 629 Tax paid –-3 Cash flow from operating activities before changes in working capital 682 626 Cash flow from changes in working capital Increase(–)/decrease(+) in inventories - 239 202 Increase(–)/decrease(+) in operating receivables -110 82 Increase(+)/decrease(–) in operating liabilities 623 - 413 Cash flow from operating activities 956 497

Investment activities

Acquisition of subsidiaries1) -7 891 – Sale of subsidiaries and associated companies 449 – Acquisition of line of business –-52 Acquisition of intangible fixed assets -1 -1 Acquisition of tangible fixed assets 6 - 610 - 504 Sale of tangible fixed assets 22 15 Sale of financial assets –22 Cash flow from investment activities - 8 031 - 520

Financing activities Non-cash issue 3 073 – Loans raised 4 997 576 Amortisation of loans - 384 -195 Amortisation of pension liabilities – - 372 Cash ﬂow from ﬁnancing activities 7 686 9

CASH FLOW FOR THE YEAR 611 -14 Opening liquid assets 768 787 Exchange rate differences on liquid assets -1 - 5 Closing liquid assets 21 1 378 768

1) In order to provide an overall picture of the transaction with Outokumpu, the non-cash issue is reported in the Statement of Cash Flow, even though it does not affect cash ﬂow.

66 Income Statements – Parent Company

Amount in SEK million 2003 2002 Result from ﬁnancial items Dividend from subsidiaries –35 Interest income –1 Result after ﬁnancial items –36

Result before tax –36

Tax on result for the year –– Result for the year –36

Changes in Shareholders’ Equity – Parent Company

Amount in SEK million Note 2003 2002 12 Opening balance 1 271 1 236 Non-cash issue 3 073 – Group contributions –-1 Result for the year –36 4 345 1 271

67 Balance Sheets – Parent Company

Amount in SEK million Note 2003 2002 ASSETS Fixed assets Financial ﬁxed assets Participations in Group companies 8 4 146 1 236 Other long-term receivables from Group companies 199 36 Total ﬁxed assets 4 345 1 272 TOTAL ASSETS 4 345 1 272

SHAREHOLDERS’ EQUITY & LIABILITIES Shareholders’ equity 12

Restricted shareholders’ equity Share capital 337 172 Premium reserve 3 207 299 Statutory reserve 40 3 548 471 Non-restricted shareholders’ equity Proﬁt brought forward 797 764 Result for the year –36 797 800 Total shareholders’ equity 4 345 1 271

Current liabilities Other liabilities –1 Total current liabilities –1 TOTAL SHAREHOLDERS’ EQUITY & LIABILITIES 4 345 1 272 Pledged assets Shares in subsidiaries 3 911 1 001 Contingent liabilities 20 – None

68 Statements of Cash Flows – Parent Company

Amount in SEK million 2003 2002 Operating activities Result after ﬁnancial items –36 Cash ﬂow from operating activities –36

Investment activities Acquisition of subsidiaries -7 891 – Internal sale within the Group of subsidiaries 4 981 – Cash ﬂow from investment activities - 2 910 – Financing activities Loans to Group companies -163 - 36

Non-cash issue1) 3 073 – Cash flow from financing activities 2 910 - 36 Cash flow for the year –– Opening liquid assets –– CLOSING LIQUID ASSETS ––

1) In order to provide an overall picture of the transaction with Outokumpu, the non-cash issue is reported in the Statement of Cash Flow, even though it does not affect cash ﬂow.

69 Accounting principles

General accounting principles pany, either directly or through sub- Income Statement are converted at the The Annual Report has been compiled sidiaries, holds more than 50 percent average rate of exchange. Any exchange in accordance with the provisions of of the votes, or otherwise has a con- rate differences are booked directly the Swedish Annual Accounts Act. trolling influence. towards equity. Accumulated conver- The Company complies with the Companies that have been sold are sion differences arising in connection recommendations and guidelines issued included in the Consolidated State- with the conversion of subsidiaries’ by the Swedish Financial Accounting ments up to and including the date of results have been reported as of 1999. Standards Council. their sale. Companies acquired during Boliden hedges its net investments in As of 1st January 2003, a number the current year are included in the foreign subsidiaries by adopting the of new recommendations from the Consolidated Statements as of the opposite position in the relevant foreign Swedish Financial Accounting Stan- acquisition date. currency. External loans and/or currency dards Council (Redovisningsrådet) futures taken with a view to reducing have come into force: Associated companies translation effects in exposed currencies Shareholdings in associated companies, are reported in the hedge accounting. – RR 2:02 Inventories in which the Group has a minimum The exchange rate difference on the – RR 22 The wording of financial reports – RR 24 Buildings held for investment of 20 percent and a maximum of 50 hedging measures is booked directly purposes percent of the votes, or otherwise has towards the Group’s shareholders’ equi- – RR 25 Reporting for segments – Lines a significant influence over operational ty after adjustment for the fiscal effect. of business and geographic areas – RR 26 Events since the Balance Sheet or financial management, are normally In conjunction with the sale of date reported in accordance with the equity independently run foreign operations, – RR 27 Financial instruments method. Under the equity method, the the accumulated conversion differences – RR 28 Government support consolidated book value of the shares attributable to the operations are Boliden has adapted to the new recom- in the associated companies corre- realised in the Consolidated Income mendations wherever applicable. None sponds to the Group’s share of the Statement, after deductions for any of the new recommendations have led associated companies’ shareholders’ currency hedging activities. to changes in the values reported for equity and any residual values from previous years. In other respects, the consolidated surplus and deficit values. Receivables and liabilities accounting principles are unchanged Shares in associated companies’ results in foreign currencies compared with previous years. are reported in the Consolidated Receivables and liabilities in foreign As of 2004, recommendation no. 29 Income Statement under Operating currencies are converted at the closing from the Swedish Financial Accounting Result and comprise the Group’s share day rate of exchange. Exchange rate Standards Council, ”Remunerations to in the associated companies’ net differences on operating receivables and employees”, shall be applied to financial results. Shares in profits accumulated operating liabilities are included in the reports. Based on Boliden’s initial review after the acquisition of associated com- Operating Result, whilst differences in of the Group’s pension plans, a number panies but not yet realised through financial receivables and financial liabili- of plans have been identified that are dividends constitute part of the Group’s ties are reported under Financial Items. categorised as coming under the head- restricted shareholders’ equity. Unrealised exchange rate gains and ing of benefits (”förmånsbestämda”), losses attributable to business-related and this may affect Boliden’s state- Conversion of foreign subsidiaries receivables and liabilities are reported ments in 2004. and other foreign operations net as Other Operating Income/Expens- The current method is applied to es. Receivables and liabilities in foreign Consolidated Statements convert the Income Statements and currencies that have been hedged using The Consolidated Statements have Balance Sheets of independent foreign futures are converted at the future rates. been compiled in accordance with the operations. Under the current method, acquisition accounting method. The all assets, provisions and liabilities are Short-term investments Consolidated Statements comprise those converted at the rate of exchange of Holdings of securities or other invest- companies in which the Parent Com- the closing day, whilst all items in the ments that are not fixed assets and are

70 not designated as liquid assets are maintenance expenses are booked as ing operations linearly over whichever reported as Short-term Investments. costs, whilst substantial improvements is the lower of the anticipated life and Short-term investments are valued at and replacements are capitalised. Devel- the life of the mine to which they whichever is the lower of the acquisi- opment costs in mines comprise both relate. Smelters and production plants tion value and the true value on the the waste rock mining required to access are depreciated linearly over the antici- Balance Sheet date. Interest income is the ore body and work relating to infra- pated life. distributed over a fixed period and structural installations, roads, tunnels, The following depreciation periods reported under Other Financial Items. shafts, inclined drifts and service, elec- are applied to tangible fixed assets: tricity and air distribution facilities. Liquid assets Development costs arising from the Buildings 20-50 years Land improvements 20 years Short-term investments with a term of expansion of the mining operations’ Development Concurrently three months or less that can easily be capacity, the development of new ore with depletion converted into cash are classified as liquid bodies, and the preparation of mining Machinery and other technical facilities assets, as are cash and bank deposits. areas for future production are capi- Machines 3-10 years talised and written off concurrently with Processing plants 10-25 years Equipment, tools and Income reporting production. Mining costs associated fixtures & fittings 3-10 years Product sales are reported at the time with waste rock removal from open pit of delivery to the customer in accor- sites are capitalised and booked as costs Leasing dance with the terms and conditions in the operations on the basis of the A financial leasing agreement is an of the sale, when significant rights and average percentage of waste rock per agreement whereby the financial risks obligations associated with the title mine. The average percentage of waste and benefits associated with the title transfer to the purchaser. These sales rock is calculated as the estimated are, in every significant respect, trans- are reported net after VAT, discounts number of tonnes of waste rock and ferred from the lessor to the lessee. A and exchange rate differences when ore that must be mined divided by the leasing agreement that is not classified sales are made in foreign currencies. estimated number of tonnes of ore that as a financial leasing agreement is classi- Income from activities outside the the deposit is believed to contain. When fied as an operational leasing agreement. sphere of the regular operations is the percentage of waste rock for the Assets held in accordance with finan- reported as Other Operating Income. mines remains relatively constant over cial leasing agreements are reported as the life of the mines, the costs are nor- fixed assets in the Consolidated Balance Exploration, research and mally reported when they arise. When Sheet at the lower of the market value development events or changes in current conditions of the assets or the present value of the Expenses associated with in-house indicate that the book value of the future lease payments. The Group’s research and development are largely fixed assets exceeds the recovery value, liability in relation to the lessor is booked as costs when they arise. When it is written down to a utility value reported in the Balance Sheet under the financial potential for extracting a corresponding to the current value of the heading Other Interest-bearing mine deposit has been confirmed, the estimated future net cash flows. Liabilities, broken down into current expenses are booked as costs up to that and long-term liabilities. date. After that date, the expenses are Depreciation principles for fixed Lease payments are broken down capitalised as development costs, the assets into interest and amortisation of liabil- governing principle of which is described Depreciation according to plan is based ity. The interest is distributed over the under the Tangible Fixed Assets heading. on the original acquisition values (or, leasing period so that an amount corre- where relevant, the appreciated values) sponding to the fixed interest amount Tangible fixed assets and the calculated economic lifespan. payable on the liability reported in Land, plants and equipment, and costs Goodwill arising in conjunction with each period is charged to each report- associated therewith and capitalised for corporate acquisitions of long-term ing period. The leased asset is depreci- development and pre-production mea- strategic value is depreciated over a ated according to the same principles sures are booked at the acquisition value. maximum of 20 years. Other intangible as those that apply to other assets of Interest expenses attributable to develop- fixed assets are depreciated according the same type. ment financing and completion of sig- to plan over their economic lifespan. The leasing charges for operational nificant tangible fixed assets are includ- The Company normally depreciates leasing agreements are booked as costs ed in the acquisition value. Repair and plants and equipment used in the min- on a linear basis over the leasing period.

71 Receivables deductible temporary differences, to Pension undertakings Receivables are booked, after individ- the extent that it is likely that the The Group’s companies have a variety ual valuation, according to their amounts can be used to offset future of pension systems in accordance with expected recoverability. tax-liable surpluses. The reported value local conditions and practice in the of deferred tax receivables is checked countries in which they operate. They Inventories at the end of each accounting period are usually financed through payments Inventories are valued at whichever is and reduced to the extent that it is no to insurance companies or through the lower of the acquisition value in longer likely that sufficient taxable sur- personal provisions determined accordance with the so-called first-in- pluses will be available for its use. through periodic actuarial calculations. first-out principle, as it is known, and Deferred tax is calculated in accordance No conversion in accordance with the true value. Obsolescence risks are with the taxation rates that are expect- Swedish principles is effected. taken into account in this context. ed to apply to the period in which the The acquisition cost of inventories of asset is recovered or the liability settled. Financial liabilities metals from the Company’s mines and Both deferred and current tax Financial liabilities comprise liabilities in-house manufactured semi-finished receivables and tax liabilities are offset to credit institutions. The liabilities are and finished products comprises the when they relate to income tax levied reported in the Balance Sheet at their direct manufacturing costs and a rea- by the same tax authority and when acquisition value on the settlement sonable surcharge for indirect manu- the Group intends to settle the tax in date. Interest expenses are distributed facturing costs. Supplies inventories the form of a net amount. over a fixed period and reported on an are valued at whichever is the lower of ongoing basis in the Income Statement. the average acquisition value and the Provisions Borrowing costs are capitalised and replacement value. Provisions are reported when the Group charged to the result over the term of has, or may be considered to have, an the loans. Taxes obligation as a result of events that have The tax expense (income) for the peri- occurred and it is likely that payments Financial derivative instruments od comprises current tax and deferred will be demanded in order to fulfil this Currency derivatives tax. Taxes are reported in the Income obligation. One prerequisite is also The Company uses a combination of Statement, with the exception of that it is possible to perform a reliable currency futures and options to hedge instances when the underlying transac- estimate of the amount to be paid. contracted and forecast future commer- tion is booked directly to shareholders’ Provisions are made for the estimated cial currency flows. Hedge accounting equity, in which case the associated reclamation costs for the mining oper- is applied, which means that the effects fiscal effect is also reported to share- ations that are expected to arise when of the currency derivative on the result holders’ equity. the operations are decommissioned, are reported at the same point in time Current tax is the tax calculated on and are booked as costs over the total as the underlying (hedged) transaction the tax-liable result for the period. The estimated life of the operations. The affects the result. Outstanding currency year’s tax-liable result differs from the cost is reported as part of the mines’ derivatives that do not meet the criteria year’s reported result in that it has been cost of goods sold. for hedge accounting are valued at adjusted for non-taxable and non- their market value and unrealised losses deductible items. The Group’s current Negative goodwill are booked to Net Financial Items. tax liability is calculated in accordance When the acquisition value of acquired Effects arising when extending with the taxation rates stipulated or net assets is lower than their true value, currency future contracts signed for announced on the Balance Sheet date. negative goodwill is reported. Negative hedging purposes are reported as assets Deferred tax is calculated using the goodwill is reported as a provision in and liabilities in the Balance Sheet and Balance Sheet method. This method the Balance Sheet. To the extent that are reported in the same period as the stipulates that deferred tax liabilities negative goodwill is due to expected underlying (hedged) transaction is are reported in the Balance Sheet for losses, it is dissolved over the period booked against the result. all tax-liable temporary differences during which the losses are expected between reported fiscal values of assets to arise. Negative goodwill attributable Raw material derivatives and liabilities. Deferred tax receivables to acquired assets is dissolved over the The Company uses raw material deriv- are reported in the Balance Sheet in average utilisation period of acquired atives to a limited extent to hedge respect of deficit deductions and all assets to which depreciation applies. planned metal production. The Com-

72 pany uses hedging transactions to limit the exposure of its inventories against changes in raw material prices. Hedge accounting is applied, which means that the effects of raw material derivatives on the result are reported in the same period as the underlying payment ﬂows. Outstanding raw material futures that do not meet the criteria for hedge accounting are valued at their market value and unrealised losses are booked to Net Financial Items.

Information per business area The Company’s accounting comprises the three lines of businesses within the Group: – Mining operations – Smelting operations – Fabrication The complementary information provided in respect of net turnover per geographical market shows the location of the external clients. Notes

All amounts are in SEK million unless otherwise stated. All Notes refer to the Group unless otherwise stated.

NOTE 1 EMPLOYEES AND PERSONNEL COSTS The Parent Company has no employees. Group management is employed by Boliden Mineral AB.

AVERAGE NUMBER OF EMPLOYEES 2003 of whom, women of whom, men 2002 of whom, women of whom, men Subsidiaries Sweden 2 455 313 2 142 2 573 332 2 241 Belgium 214 17 197 225 18 207 UK 530 26 504 376 18 358 Netherlands 236 22 214 267 25 242 Canada 397 8 389 363 8 355 Other 64 21 43 61 22 39 Total in subsidiaries/Group 3 896 407 3 489 3 865 423 3 442

The average number of Group employees includes 1,285 (1,239) employees at the operations sold in 2003. At the turn of the year, the units acquired on 30th December 2003 had 2,194 employees. They are not included in the average number of Group employees reported for 2003.

PERCENTAGE OF WOMEN SALARIES, OTHER REMUNERATIONS AND SOCIAL SECURITY EXPENSES AT CORPORATE MANAGEMENT LEVEL 2003 2002 2003 2002 Salaries & Social security Salaries & Social security The Board of Directors 25 % 0 % remunerations expenses remunerations expenses Other senior executives 10 % 12 % Subsidiaries 1 238 478 1 170 477 (of which pension cost) (197) (185) Group total 1 238 478 1 170 477 (of which pension cost) (197) (185)

SALARIES AND OTHER REMUNERATIONS BROKEN DOWN BY COUNTRY AND BETWEEN BOARD MEMBERS ETC. AND OTHER EMPLOYEES 2003 2002 Board of Directors Other Board of Directors Other & President employees & President employees Subsidiaries in Sweden 10 773 8 753 Subsidiaries abroad Belgium – 72 – 71 UK 1 127 2 112 Netherlands – 81 – 78 Canada – 149 – 123 Other 3 22 3 20 GROUP TOTAL 14 1 224 13 1 157

Staff stock options programme acquire shares in Boliden AB, with 20 stock in the Company of approximately 0.14 percent. A staff stock options programme was intro- options granting entitlement to one share. The stock options are non-transferable. duced at Boliden Limited in 1997, known No stock options were exercised in 2003. In One-third may be exercised each year during as the Stock Option Plan of Boliden Limited. 2001, the Company issued convertible deben- periods shown in the table below (vesting Based on this plan, allocations of stock tures in order, inter alia, to ensure the fulﬁl- period). If employment with the Company options have been made, free of charge, ment of the Company’s undertakings with ceases, the stock options mature immediately to key people during 1997- 2001. No stock regard to the contributions potentially entailed if they cannot be exercised at that time, and options were issued in 2002 or 2003. by the stock options that might have a future otherwise after 30 days. Holdings and principal Outstanding stock options, which originally impact on cash ﬂow. Full exercise of outstand- conditions governing outstanding options at granted entitlement to acquire shares in ing stock options is estimated to entail a dilu- the beginning of the year are shown in the Boliden Ltd., now grant entitlement to tion of the total number of shares and votes following table.

Allocation 1998 1999 2000 2001 Due date 2003 -12 - 24 2009 - 03 -10 2010 - 04 - 05 2011- 09 - 30 Redemption price/share, CAD 239.00 27.40 48.20 6.00 Vesting period 2001- 2003 2000 - 2002 2001- 2003 2002 - 2004 Outstanding, 1st Jan. 2003 8 000 200 000 370 000 3 000 000 Matured, 2003 8 000 – – – Outstanding, 31st Dec. 2003 – 200 000 370 000 3 000 000 Number of shares to which outstanding options grant entitlement – 10 000 18 500 150 000

74 Remunerations to senior executives are paid as part of the total remuneration neration earned for the 2003 financial year Principles package. and paid out during 2004. Other benefits refer Fees, as approved by the Annual General primarily to company cars. Meeting, are payable to the Chairman of the Remunerations and other benefits Board and members of the Board. No separate during the year Variable remuneration fee is payable for committee work. Employee Fees totalling SEK 450,000 have been paid The variable remuneration paid to the President representatives receive no Directors’ fees. during the year to the Chairman of the Board, for 2003 was based on the Group’s operating Remuneration paid to the President and who is not employed by the Group. Other Board result. The variable remuneration for 2003 other senior executives comprises the basic Members not employed by the Group have corresponded to 27.78 percent of the basic salary, variable remuneration, other benefits, received fees totalling SEK 1,425,000. The salary. For other members of the Group man- in some cases a pension, and, in a few cases, President of Boliden AB has received salary pay- agement, 50 percent of the variable remuner- financial instruments. ments, variable remuneration and other benefits ation for 2003 was based on the Group’s oper- The term “other senior executives” refers totalling SEK 6,787,550 during the year. SEK ating result, with 30 percent based on their to the eight people who, together with the 3,600,000 of this total remuneration com- personal sphere of responsibility and 20 percent President, comprise the Group management. prises the basic salary and SEK 1,000,000 on individual goals. The variable remuneration The breakdown between basic salary and comprises variable remuneration, with pension paid to other members of Group management variable remuneration shall be in proportion benefits and other benefits comprising SEK in 2003 corresponded to 8 - 25 percent of the to the executive’s responsibilities and authority. 2,079,288 and SEK 108,262 respectively. basic salary. The variable remuneration is maximised to 50 A total of SEK 12,503,501 has been paid to percent of the basic salary for the President, the Group management (eight people) in salaries, Financial instruments etc. whilst for other senior executives, it is max- variable remuneration and other benefits. Basic The following table shows senior executives’ staff imised to 20 - 40 percent of the basic salary. salaries and variable remuneration comprise stock option holdings. Twenty stock options The variable remuneration is based on the SEK 9,013,800 and SEK 1,338,024 respec- grant entitlement to acquire one share in the result in relation to the Group’s operating tively of this compensation, with pension benefits Company. No stock options have been allocated result goals and individual goals. and other benefits comprising SEK 1,476,792 in 2003. The terms and conditions governing Pension benefits and other benefits paid and SEK 674,885 respectively. staff stock options are specified under the to the President and other senior executives Variable remuneration refer to variable remu- heading Staff Stock Options Programme above.

Allocation 1999 2000 2001 President – – 3 000 000 Other senior 95 000 100 000 – Total 95 000 100 000 3 000 000

Pensions Other income shall be offset against the sever- President after consultation with the Chairman The President is contractually entitled to retire ance pay. No severance pay shall be payable in of the Board. at the age of 60, at which time a pension the event of notice being given by the President. The Salary Committee comprises the Chair- comprising 70 percent of the basic salary will Other persons in the Group management man of the Board, the Deputy Chairman and be paid up to the age of 65. From the age of have notice periods of three months if they give one other Member of the Board. 65, the retirement pension comprises 32.5 notice. The notice period is 6 months if notice of percent of the pensionable salary exceeding termination is given by the Company. Severance Stock options allocated by Outokumpu 20 times the basic amount received from the pay varying between 12 and 18 months’ salary In 2004, Outokumpu has allocated stock options Company at the age of 60. The survivor’s pen- is additionally payable. Other income shall be off- to four senior executives and a further eight sion comprises approximately 50 percent of set against the severance pay. No severance key staff members at Boliden. All of these the retirement pension. pay is payable in the event of notice being given people are former employees of Outokumpu The retirement age varies for members of by other members of the Group management. and were included in Outokumpu’s staff stock Group management from 60 to 65 years of options programme in 2003. They transferred age. Where relevant, the pension will be paid Preparatory and decision-making process to Boliden in conjunction with the Outokumpu between the ages of 60 and 65 at 70 percent The Board’s Salary Committee has discussed transaction at the end of 2003 and none of of the basic salary, up to the age of 65 when the principles applicable to remuneration paya- them will be allocated any further stock the normal retirement pension will be paid. ble to senior executives during the year, inclu- options. Each stock option entitles the holder ding the proportions between ﬁxed and variable to subscribe for one share in Outokumpu Severance pay remuneration, the criteria for severance pay during the period from 1st September 2006 The President and the Company shall give three and pension terms and conditions, as well as to 1st March 2009, both dates included, at months’ and six months’ notice of termination of the size of any pay increases. a price of EUR 10.70 per share (but less his/her position with the Company, respectively. Remuneration payable to the President for the deductions for dividends paid during the rele- If notice is given by the Company, severance 2003 ﬁnancial year has been determined by the vant intervening period). A total of 24,888 pay corresponding to 18 months’ salary shall Salary Committee. Remunerations payable to stock options were allocated to senior executi- be paid, over and above the notice period pay. other executives have been determined by the ves and 22,628 to other key staff members.

NOTE 2 FEES AND REIMBURSEMENT OF EXPENSES TO AUDITORS 2003 2002 Deloitte & Touche Audit assignments 86 Other assignments 62 Mats Fredricson Audit assignments 00 Other assignments 0– KPMG Audit assignments –0 Other assignments –1 Other Auditors Audit assignments –– Other assignments –2 14 11

The term “Audit assignments” refers to the and the President, other duties incumbent upon vations in conjunction with such auditing duties auditing of the Annual Report, bookkeeping, and the Company’s Auditors, and the provision of or the carrying out of such duties. Everything the administration by the Board of Directors advice or other assistance occasioned by obser- else is classiﬁed as “Other assignments”.

75 NOTE 3 INTEREST INCOME AND OTHER SIMILAR ITEMS NOTE 4 INTEREST EXPENSES AND OTHER SIMILAR ITEMS

2003 2002 2003 2002 Interest income, other 15 36 Interest expenses, other - 267 - 317 Interest income, associated companies 4 5 Exchange rate differences - 8 -1 Exchange rate differences 16 3 Other - 26 - 33 Reversal of previous year’s - 301 - 351 write-down of ﬁnancial asset 33 – Other 1 4 69 48

NOTE 5 INTANGIBLE FIXED ASSETS Capitalised expenses for Patents, licences and Total intangible development similar rights Goodwill ﬁxed assets Acquisition values Beginning of year 17 – 60 77 Investments – – – – Acquisitions 1 33 2 757 2 791 Sales and retirements -16 – -105 -121 Year-end 2 33 2 712 2 747 Depreciation according to plan Beginning of year - 8 – - 60 - 68 Year’s depreciation -1 – -1 - 2 Sales and retirements 7 – 61 68 Year-end - 2 – – - 2 Residual value according to plan – 33 2 712 2 745 Depreciation according to plan, included in operating result 2003 1–12 2002 1–12

NOTE 6 TANGIBLE FIXED ASSETS Equipment, New construction Buildings Deferred Machinery & tools, fixtures work in progress Total tangible & land mining cost technical facilities & fittings & advance fixed asset Acquisition values Beginning of year 1 794 2 224 7 632 254 49 11 953 Acquisitions 2 077 248 6 851 1 015 457 10 648 Investments 17 326 217 3 47 610 Sales and retirements -166 – -957 -181 -26 -1 330 Reclassifications 20 – 29 4 -53 – Year’s translation differences -5 -37 -25 -1 -1 -69 Year-end 3 737 2 761 13 747 1 094 473 21 812 Depreciation according to plan Beginning of year -976 -653 -4 345 -207 – -6 181 Acquisitions -894 -39 -4 326 -869 – -6 128 Sales and retirements 70 – 595 152 – 817 Year’s depreciation -54 -96 -369 -17 – -536 Year’s translation differences 2 3 15 1 – 21 Year-end -1 852 -785 -8 430 -940 – -12 007 Write-ups Beginning of year 688 – 2 065 – – 2 753 Year’s depreciation -28 – -85 – – -113 Year-end 660 – 1 980 – – 2 640 Write-downs Beginning of year – -738 -239 – – -977 Year’s translation differences – 10 3 – – 13 Year-end – -728 -236 – – -964 Residual value according to plan 2 545 1 248 7 061 154 473 11 481 Depreciation according to plan,included in operating result 2003 82 96 454 17 – 649 2002 84 83 451 15 – 633

The combined rateable value of the Group’s SEK 71 (71) million in acquisition value and tively. Capitalised interest expenses relating to Swedish real estate is SEK 1,406 (1,377) mil- SEK 10 (5) million in accumulated depreciation. Rönnskär’s expansion are included in the resid- lion, of which buildings account for SEK 1,305 Future payments in respect of ﬁnancial leasing ual value according to plan formachinery in the (1,275) million. Machinery held under ﬁnancial have been taken into account under current amount of SEK 71 (75) million. leasing agreements is included in the sum of and long-term liabilities in the Group, respec-

76 NOTE 7 OPERATIONAL LEASING CHARGES 2003 2002 The Group Assets held via operational leasing agreements Leasing charges paid in the financial year 51 33 Contracted future leasing charges Maturity within one year 51 36 Maturity later than one year, but within five years 73 76 Maturity later than five years 5–

NOTE 8 PARTICIPATION IN GROUP COMPANIES

SPECIFICATION OF THE PARENT COMPANY’S AND GROUP’S HOLDINGS OF PARTICIPATIONS IN GROUP COMPANIES

Subsidiary/Company reg. no./Registered ofﬁce Shares/participation Participation, % Book value Boliden Limited, CA 3366623-5, Toronto, Kanada 85 811 638 100.0 235 Boliden Westmin (Canada) Ltd, 352439-6, Toronto, Canada – Gibraltar Mines Finance Ltd, Nevada 13838-96, USA – Boliden de Mexico SA de CV, Mexico – Compania Minera Boliden SA de CV, Mexico – Ontario Inc, Canada – Boliden BV, 18048775, Drunen, Netherlands – Boliden Apirsa S.L in the process of liquidation, ESB-41518028, Aznalcóllar (Sevilla), Spain – Boliden Barbados Ltd, 13761, St James, Barbados – Boliden Mineral AB, 556231-6850, Skellefteå, Sweden 1 650 000 100.0 3 911 Boliden Rönnskär AB, 556047-1947, Skellefteå, Sweden – Bolidens Gruvaktiebolag, 556039-7936, Skellefteå, Sweden – Aitiks Gruvaktiebolag, 556049-4378, Skellefteå, Sweden – Garpenbergs Gruvaktiebolag, 556010-6261, Hedemora, Sweden – Mineral Holding Finland Oy, 1749578-3, Finland – Mineral Holding Sweden AB, 556499-3979, Skellefteå, Sweden – Harjavalta Copper Oy, 1591739-9, Harjavalta, Finland – Nickel og Olivin A/S, 946255459, Ballangen, Norway – Kokkola Zinc Oy, 0772004-3, Kokkola, Finland – Boliden Zinc Commercial BV, 24191971, Rotterdam, Netherlands – Tara Mines Holding Ltd, 60135, Navan, Ireland – Tara Mines Ltd, Navan, Ireland – APC Properties Ltd, Navan Ireland – Tara Prospecting Ltd, Navan, Ireland – Tara Exploration and Development Company Ltd, Navan, Ireland – Dowth Investment Holdings Ltd, Navan, Ireland – Motet Investments Ltd, Navan, Ireland – Mineral Holding Norway A/S, 986009183, Norway – Norzink A/S, 911177870, Odda, Norway – Hardanger Byggeselskab A/S – Boliden Bergsöe AB, 556041-8823, Landskrona, Sweden – Boliden Bergsoe AS, A/S244629, Glostrup, Denmark – Boliden Bergsoe AS, 910538853, Lierskogen, Norway – Boliden Bergsöe Oy, 411.259, Vantaa, Finland – Boliden International AB, 556040-1399, Skellefteå, Sweden – Boliden France SA, B 612 050 138, Rueil-Malmaison, France – Other subsidiaries, dormant or of less importance – 4 146

At the end of December 2003, a major struc- and smelting operations and sold its Fabrica- dormant companies were deregistered during tural transaction was completed between tion and Technology Sales operations to the year: Boliden Mineral BV, Yukon Inc, Boliden and Outokumpu, whereby Boliden Outokumpu. In addition to this major structural Gibraltar Mines Exploration Ltd. and Boliden acquired Outokumpu’s zinc and copper mining transaction in December 2003, a number of Holdings (Barbados) Limited.

77 NOTE 9 PARTICIPATIONS IN ASSOCIATED COMPANIES 2003 2002 Book value at start of year 33 39 Sales –-22 Acquisitions 31 – Share in associated companies’ results for the year 19 16 Book value at year-end 83 33

Partici- Capital share Market Co. reg. no. Registered ofﬁce No. of shares pation, % value in Group value Indirectly owned North Atlantic Natural Resources AB 556538 - 5076 Uppsala, Sweden 11 917 000 38 % 47 223 Proffspoolen i Skellefteå AB 556545 - 4344 Skellefteå, Sweden 4 000 33 % 5 – Tysselfaldene A/S 916958900 Tyssedal, Norway 20 937 40 % 25 – Rennicks & Bennett Ltd Ireland 6 – 83

The acquisition of companies from Outokumpu owns participations in Rennicks & Bennett Ltd. was SEK 98 million and was reported as included holdings of shares in associated Current receivables include a receivable from a long-term receivable. companies. Norzink AS owns participations North Atlantic Natural Resources AB of in Tysselfaldene A/S, and Tara Mines Ltd. SEK 25 million. Last year, the receivable

NOTE 10 TAXES

Current tax expenses/income 2003 2002 Tax expenses for the period -10 - 3 Adjustment of tax attributable to previous years 16 -9 3 Deferred tax expenses/income Deferred tax income attributable to changes in temporary differences 5 11 Deferred tax income attributable to value of tax losses carried forward capitalised during the year 269 6 274 17 Total reported tax income 265 20

Difference between the Group’s tax income and tax expenses based on current rate of taxation Reported result before tax - 251 111 Tax according to current rate of taxation (28%) 70 - 31 Fiscal effects of non-deductible expenses -16 – Fiscal effect of non-taxable income 9– Fiscal effect attributable to capital loss, shares in subsidiaries -110 – Fiscal effect of tax losses carried forward, net 312 51 Total reported tax income 265 20

The current rate of taxation has been calculated on the basis of the rate of taxation applicable to the Parent Company at 28 percent.

DEFERRED TAX RECEIVABLE/TAX LIABILITY The receivable reported in the Balance Sheet and the provision for deferred tax come from the following assets and liabilities.

2003 2002 Deferred tax Deferred tax Deferred tax Deferred tax receivable liability Net receivable liability Net Intangible assets – -1 -1 – – – Buildings and land 13 - 444 - 431 – -193 -193 Machinery and fixtures and fittings 45 - 831 - 786 28 - 578 - 550 Closed out hedge – -164 -164 – – – Open metal and currency positions – - 26 - 26 – – – Financial fixed assets – - 5 - 5 – – – Inventories – - 5 - 5 – – – Current receivables – - 4 - 4 – - 9 - 9 Other provisions 64 - 4 60 47 – 47 Current liabilities 5 – 5 38 – 38 Tax losses carried forward 1 475 – 1 475 893 – 893 Total 1 602 -1 484 118 1 006 -780 226

Offset within companies -1 177 1 177 – -771 771 – Total deferred tax receivable/ tax liability 425 - 307 118 235 - 9 226

78 NOTE 10 CONT. CHANGE IN DEFERRED TAX IN TEMPORARY DIFFERENCES AND TAX LOSSES CARRIED FORWARD

Acquired Receivables Amount at Reported in Other tax receivables and liabilities Amount at The Group, 2003 start of year Income Statement changes and liabilities sold year-end Intangible assets – – – -1 – -1 Buildings and land -193 8 – - 246 – - 431 Machinery and fixtures and fittings - 550 21 – - 257 – -786 Closed out hedge – – -164 – – -164 Open metal and currency positions – – – - 26 – - 26 Financial fixed assets – – – - 5 – - 5 Inventories – – – - 5 – - 5 Current receivables - 9 - 2 – - 3 10 - 4 Other provisions 47 2 – 11 – 60 Current liabilities 38 - 24 -12 3 – 5 Tax losses carried forward 893 269 - 8 321 – 1 475 Total 226 274 -184 - 208 10 118

Tax losses carried forward that calls into question tax losses carried mercial BV (“OZC”). The initial written exchange Unutilised tax losses carried forward in Sweden forward totalling SEK 2,043 million, as well between ONZ and the Norwegian tax authority for which no deferred tax receivable has been as imposing a tax surcharge of SEK 29 million. indicates that the tax authority believes that it reported totalled SEK 705 (1,646) million on The ruling has been appealed and the Company has grounds for assuming that the agreement 31 December 2003. The corresponding has been granted a payment respite for charges was not concluded on market terms. The ﬁgures for Canada and Ireland are SEK 550 occasioned by the ruling. The questioned tax Company’s assessment is that the outlook for million and SEK 398 million respectively. losses carried for ward are not included in the showing that the agreement was concluded compilation above, and are thus not included in on market terms is good. Since the tax author- Other deferred tax receivables either. ity’s investigation has not been completed and The Boliden Treasury subsidiary was the subject The Norwegian tax authority has asked a no demands have been made concerning of a tax audit in 2002 in respect of the ﬁnancial number of questions concerning a reprocess- changes/measures, it is currently impossible years 1998 - 2000. The Company has received ing agreement for zinc concluded between to assess whether this matter is likely to form a ruling from the Swedish National Tax Board Norzink AS (“ONZ”) and Outokumpu Zinc Com- the object of a dispute.

NOTE 11 INVENTORIES 2003 2002 Raw materials and consumables 732 258 Products under manufacture 1 107 547 Finished goods and tradable goods 397 387 2 236 1 192

NOTE 12 SHAREHOLDERS’ EQUITY

The Group 2003 Share Restricted Accumulated Total shareholders’ capital reserves loss equity Beginning of year 172 7 638 - 5 220 2 590 Non-cash issue 165 2 908 – 3 073 Closed out forward agreements – 630 – 630 Fiscal effect on closed out forward agreements – – -176 -176 Result for the year ––1313 Transfer between restricted and non-restricted equity – 1 711 -1 711 – Accumulated translation differences in sold companies – - 281 287 6 Year’s translation differences – - 605 569 - 36 Year-end 337 12 001 - 6 238 6 100

Accumulated translation differences in the Group’s shareholders’ equity Beginning of year, translation differences 752 - 886 -134 Year’s change when converting foreign subsidiaries - 613 570 - 43 Accumulated translation differences in sold companies - 281 287 6 Year’s exchange rate differences on hedging instruments 7 – 7 Translation differences at year-end -135 - 29 -164

79 NOTE 12 CONT.

The Group 2002 Share Restricted Accumulated Total shareholders’ capital reserves loss equity Beginning of year 172 10 321 -7 966 2 527 Revaluation due to termination of associated company relationship – - 4 – - 4 Transfer between restricted and non-restricted shareholders’ equity – -1 809 1 809 – Result for the year – – 132 132 Year’s translation difference – - 870 805 - 65 Year-end 172 7 638 - 5 220 2 590

Accumulated translation differences in the Group’s shareholders’ equity Beginning of year, translation differences 1 622 -1 691 - 69 Year’s change when converting foreign subsidiaries - 872 805 - 67 Year’s exchange rate differences on hedging instruments 2 – 2 Translation differences at year-end 752 - 886 -134

The Parent Company 2003 Share Share premium Statutory Non-restricted Total capital reserve reserve shareholders’ equity shareholders’ equity Beginning of year 172 299 0 800 1 271 Non-cash issue 165 2 908 – – 3 073 Provision to statutory reserve – – 4 - 4 0 Result for the year – – – – – Year-end 337 3 207 4 797 4 345

The Parent Company 2002 Share Share premium Statutory Non-restricted Total capital reserve reserve shareholders’ equity shareholders’ equity Beginning of year 172 299 0 765 1 236 Group contributions – – – -1 -1 Result for the year – – – 36 36 Year-end 172 299 0 800 1 271

The share capital in Boliden AB totals SEK 336,516,226, represented by 168,258,113 shares with a nominal value of SEK 2.

During 2001, convertible debentures were debentures were issued to ensure the avail- account of the fact that staff stock options issued that may be converted into a total of ability of shares in Boliden AB for the fulﬁlment have matured since the issue, maximum 371,703 shares in Boliden AB, corresponding of obligations to holders of issued staff stock conversion into shares is estimated to total to a maximum dilution of the total number options and warrants in Boliden Ltd., as well around 345,000 shares, corresponding to of shares and votes in the Company of 0.22 as to cover any social security contributions a dilution of the total number of shares and percent on full conversion. The convertible arising from the staff stock options. Taking votes in the Company of 0.20 percent.

NOTE 13 PROVISION FOR PENSIONS AND SIMILAR UNDERTAKINGS 2003 2002 PRI/FPG undertakings –– Other undertakings 224 74 224 74

Undertakings in 2003 in the acquired companies totalled SEK 162 million and SEK 20 million in the companies sold. Boliden redeemed pension liabilities totalling SEK 372 million in 2002, primarily through external ﬁnancing.

NOTE 14 OTHER PROVISIONS 2003 2002 Cost of restructuring measures 11 19 Reclamation costs 395 396 Potential future guarantee effects, operations sold 100 – Negative goodwill (refers to HME, included in the Business Area Fabrication) – 90 Other 180 181 686 686

80 NOTE 15 FINANCIAL RISK MANAGEMENT shall lie between 50 and 100 percent. The Refinancing and liquidity risk hedging period may be a maximum of 36 The term “refinancing and liquidity risk” refers The Boliden Group is exposed to a number months. Hedging is handled via currency deriv- to the risk that costs will be higher and financ- of financial risks that primarily arise because atives (currency futures, options and swaps). ing possibilities will be limited when loans are to the Group is a net borrower and buys/sells be renewed, and that payment undertakings metals priced in foreign currencies. Changes Translation exposure cannot be met due to insufficient liquidity. The in metal prices, treatment charges, exchange When the net assets (shareholders’ equity finance policy stipulates that there shall be rates and interest levels therefore affect the and surplus values allocated Groupwise to sufficient unutilised credit facilities to guarantee Group’s results and future cash flows. The overseas subsidiaries) of foreign Group com- healthy current liquidity. most significant financial risks to which the panies are translated into Swedish kronor, Boliden has established a cash pool struc- Group is exposed are currency risks, metal a translation difference arises in conjunction ture that enables it to maintain a central price risks, interest risks, refinancing risks with exchange rate fluctuations, and this has overview of liquidity flows and ensure efficient and liquidity risks, as well as credit and an impact on the Group’s shareholders’ equity. management of the Group’s overall liquidity. counterparty risks. According to the finance policy, the effect of Since July 2001, the Group has had a Boliden has a centralised treasury function this exposure shall be limited with the aid of confirmed loan facility corresponding to primarily tasked with supporting the manage- currency futures or external borrowing. SEK 4,701 million, together with the new ment and operative units in line with the credit facilities totalling SEK 3,395 million adopted finance policy. The treasury function METAL PRICE RISK (received in conjunction with the acquisition is also responsible for identifying and efficiently Metal price risks arise on an ongoing basis of the Outokumpu units). The credit facilities limiting the Group’s financial risks. This central- in the Group’s operations, since the smelter mature over the period 2004 - 2006 and isation leads to healthy internal risk control, as process requires raw materials in the process the loan agreements have negative clauses well as financial and administrative economies stocks. The risk lies in the fact that raw mate- (so-called Loan Covenants, see note 16). of scale. The Group’s finance policy is adopted rials are purchased from mines at one point The Company has, among other things, every year by the Board of Directors and regu- in time and sold in refined form to customers lodged securities in subsidiary shares, as lates the way in which the financial risks should at another. When conditions are unfavourable, well as charges on the business assets be managed, as well as specifying limits and i.e. stocks are built up at high exchange rate and mortgages on real estate, as security. the financial instruments that may be used. and metal price levels and sales are effected at low levels, this will have a negative effect Credit and counterparty risk CURRENCY RISK on the Group’s results. The finance policy stip- The term “credit and counterparty risk” Through its international operations, Boliden ulates that this type of stock-related risk shall refers to the risk of a counterparty in a is exposed to currency risks, in that exchange be eliminated. Metal price risks also arise transaction failing to fulfil his/her obligations, rate fluctuations may affect the Consolidated when metals (raw materials) are sold exter- thus causing the Group to incur a loss. In Income Statement and Balance Sheet. The nally by the Group’s mines. order to limit counterparty risk, only highly Group’s currency exposure covers both trans- creditworthy counter-parties are accepted, action exposure and translation exposure. Interest risk in accordance with the finance policy, and the Interest-bearing borrowing leads to exposure commitment per counterparty is also limited. Transaction exposure of the Group to interest risks. The term “inter- Boliden is primarily exposed to counterparty The Group’s transaction exposure arises est risk” refers to the risk of a negative effect risk when trading in derivative instruments. because considerable parts of the commercial on the Group’s results and cash flows as a In order to limit this risk, netting agreements payment flow consist of foreign currencies. result of market interest rate fluctuations. have been signed in accordance with the When exchange rates change, future sales The speed with which a lasting change in stipulations of the International Swaps and and purchases in foreign currencies may interest levels impacts on the Group’s net Derivatives Association (ISDA). On 31st affect the Group’s results. Boliden Mineral AB financial items depends on the fixed interest December 2003, the total counterparty and the units acquired from Outokumpu mainly terms of the loans. The Group’s loan portfolio exposure in derivative instruments totalled have costs expressed in Swedish kronor, euro, has a fixed interest term of 3 - 6 months on SEK 481 million (calculated as the net receiv- Norwegian kronor and Canadian dollars, while 31st December 2003. A change of one per- able per counterparty). their incomes are largely based on the US centage point in the market interest rate The commercial credit risk within the dollar. The US dollar exchange rate trend thus entails an effect of SEK +/– 101 million on group is limited, since there is no significant has a significant impact on the Group’s the result on an annual basis. credit risk concentration in relation to a results. In accordance with the Group’s All interest-bearing financial assets and particular customer or counterparty, or finance policy, the currency-hedged share of liabilities have a fixed interest term shorter in relation to any geographic region. forecast payment flows in foreign currencies than 12 months.

NOTE 16 LIABILITIES TO CREDIT INSTITUTIONS

SEK million Currency Interest rate Liabilities to credit institutions Amortisation 2003 2004 2005 2006 Credit facility A SEK 4.00 3 454 391 – 3 063 Credit facility B SEK 4.00 952 – – 952 Credit facility C SEK 4.00 295 126 85 84 Credit facility D EUR 4.68 2 030 – – 2 030 Credit facility E EUR 4.65 1 365 910 455 – Debenture loan SEK 3.98 204 – – 204 Financial leasing SEK 4.79 56 10 10 10 Other external liabilities SEK 3.89 353 63 – 290 Total 8 709 1 500 550 6 633

Since all loans have a fixed interest term of Outokumpu. The syndicated loan runs until and interest coverage ratio. In addition, certain 3 - 6 months, the actual value corresponds 2006 and has a contractually stipulated specified limits apply with regard to the to the reported value. amortisation plan. According to the additional Group’s potential for additional loan financing, The Group’s long-term financing is based terms (so-called Loan Covenants) of the credit the sale or acquisition of assets, investments, on the syndicated credit facility signed in facility, Boliden is required, in order to avoid the distribution of funds to Boliden shareholders July 2001 and expanded in December 2003 premature redemption) to achieve certain or the buy-back of Boliden shares. in conjunction with the transaction with defined key ratios in respect of debt/equity

81 NOTE 17 FINANCIAL DERIVATIVE INSTRUMENTS

Boliden uses financial derivative instruments to manage currency and metal price risks (raw material risks) arising within its operations. All outstanding financial derivative instruments on 31st December 2003 have been signed with a view to hedging the Company’s financial risk exposure and are reported in the hedge accounting. The deferred profit/loss on hedging transactions (including the closed-out hedge totalling SEK 586 million) totalled SEK 935 million on 31st December 2003.

OUTSTANDING FINANCIAL DERIVATIVE INSTRUMENTS, SEK M 2003 Nominal amount Reported value Actual value Currency derivatives intended to hedge currency exposure Currency futures 485 -19 -19 Currency options -73 8 8 Currency derivatives intended to hedge commercial payment ﬂows Currency futures 547 126 285 Currency options 4 321 290 Raw material derivatives intended to hedge currency exposure Raw material derivatives 154 51 51 Raw material derivatives intended to hedge commercial payment ﬂows Raw material derivatives 573 - 34 -134 Total 6 007 132 481

The actual value has been estimated on the basis of ofﬁcial market quotations and in accordance with customary calculation methods.

Maturity structure, derivative instruments, Currency breakdown, outstanding derivative SEK m instruments, SEK m 2004 2005 2003 Currency derivatives 3 733 1 547 USD 5 762 Raw material derivatives 406 321 EUR - 316 Total 4 139 1 868 GBP 406 Other 155 Total 6 007 The table shows nominal amounts, SEK million.

CURRENCY DERIVATIVES IN RESPECT OF FORECAST COMMERCIAL PAYMENT FLOWS

The table shows unrealised future and option contracts taken with a view to hedging forecast cash ﬂows in US dollars for Boliden Mineral AB. Boliden decided during the ﬁrst quarter of 2003 to formulate a new hedge strategy, which means that the proportion of dollar revenues hedged through currency futures is to decrease. In order to limit the risk of a further weakening of the dollar, a new currency options programme has been signed.

USD m Currency Currency futures Options Exposure Percentage Floor Ceiling Budget hedged Maturity, 2004 amount, sold 34 215 147 393 63 % rate1) 10.57 Maturity, 2005 amount, sold 18 79 79 409 24 % rate1) 10.29 Total, unrealised contracts 52.00 294 226 802 43 % Market value of unrealised contracts 2) SEK m 159 290 Closing day rate, 30th December 2003 USD/SEK 7.28

1) Recognition rate for currency futures and strikes for put options and call options, respectively. The rates for options have been calculated as weighted strike rates in the portfolio. The ﬂoors in the options portfolio range between USD/SEK 7.65 - 9.50, and the ceilings between USD/SEK 8.14 - 9.50. 2) Outstanding currency and options contracts valued at market value.

With regard to exchange rate hedging at the units acquired from Outokumpu, there are no future contracts with longer terms. The units continuously hedge parts of the value of their sales over a period of 2 - 6 months. The market value of the future contracts designed to hedge future forecast payment ﬂows totals SEK 126 million on 31st December. These unrealised contracts were valued at market value in the acquisition analysis.

82 NOTE 17 CONT. RAW MATERIAL DERIVATIVES IN RESPECT OF METAL PRICE FOR GOLD MINING PRODUCTION Metal futures Production Budget Percentage hedged Maturity, 2004 Ounce, sold 108 100 159 609 63 % Gold rate1) 364 Maturity, 2005 Ounce, sold 116 560 168 265 69 % Gold rate1) 363 Total unrealised contracts 224 660 327 874 66 % Market value of outstanding contracts SEK m -100 Closing day rate, USD/Oz 417 31th December 2003 USD/SEK 7.28

1) Contract rate, USD

With regard to the assets acquired from Outokumpu, the base metals are, in respect of forecast payment ﬂows, essentially unhedged on 31st December. The value of outstanding raw material futures signed with a view to hedging forecast payment ﬂows total SEK - 34 million on 31st December. These unrealised metal futures have been valued at market value in the acquisition analysis.

NOTE 18 OTHER INTEREST-BEARING LIABILITIES

2003 2002 Debenture loan, Outokumpu 1 379 – Other 51 1 1 430 1

On 30th December 2003, Boliden completed a transaction whereby Boliden acquired Outokumpu’s mining and smelting operations and sold its Fabrication and Technology Sales operations. Part of the financing of the acquisition consists of a debenture loan to Outokumpu, the amount of which will be finally adjusted during the spring of 2004, based on the change in capital employed. The change is calculated on the basis of the acquired assets between 31st December 2002 and 31st December 2003, as well as in relation to the existence of liabilities (net) to third parties, all in accordance with the financial statements relating to the deal. The debenture loan totals SEK 1,379 million on the Balance Sheet date and the interest rate is 6.6830 percent. The loan is to be repaid on a six-monthly basis between June 2008 and December 2010. Interest is to be paid every six months from June 2004.

NOTE 19 ACCRUED COSTS AND PREPAID INCOME

2003 2002 Salaries 134 100 Social security expenses 112 77 Currency hedging reserve 6 136 Other 452 204 704 517

83 NOTE 20 PLEDGED ASSETS

2003 2002 Pledged assets For own liabilities and provisions Real estate mortgages 100 100 Charges on company assets 1 510 1 530 Blocked bank funds 143 3 Shares in subsidiaries 2 288 2 077 Receivables 42 437 Operating capital 73 94 Total pledged assets 4 156 4 241

Contingent liabilities Guarantee undertakings, FPG/PRI 95 98 Other sureties and guarantees 77 35 Agreed residual values according to leasing contracts 186 178 Warranty, Outokumpu excluding the copper tubing cartel, see below 128 – 486 311

The Group’s loan agreements include certain negative clauses and other loan conditions (so-called “loan covenants”).

It is possible that the Group may, in addition to the above speciﬁcations of contingent liabilities and the details included in the ﬁnancial information, incur environmentally related contingent liabilities or contingent liabilities attributable to legal proceedings which cannot be calculated at present, but which may, in the future, entail costs or investments.

Environmental and reclamation costs must expect that the ruling will, in all probability, court having been dismissed, the local All of the Company’s mines are subject to hold BCZ, Boliden Fabrication AB and Boliden government has since initiated administrative reclamation requirements in conjunction with AB liable to pay fines in accordance with proceedings against Apirsa, Boliden BV and decommissioning. The minimum norms for applicable EU rules1). As stated above, BCZ Boliden AB in respect of the same claim. reclamation have been set by the authorities and Boliden Fabrication AB have been trans- A decision by the local government can be in the various countries in which the Company ferred to Outokumpu and Boliden has under- expected in the spring of 2004. Apirsa, operates. Provision is made on an ongoing taken to indemnify Outokumpu for all conse- Boliden B.V. and Boliden AB will appeal any basis for reclamation costs, based on the quences that this matter may entail. It is not adverse ruling against the respective compa- estimated costs of complying with applicable possible, at this stage, to assess with any nies to the administrative court. reclamation norms. The Company’s estimate of reasonable degree of certainty what the total Boliden’s overall opinion, based on the the total provision requirement for reclamation financial impact of this will be for Boliden, and opinion given by Boliden’s Spanish legal repre- costs may be amended as a result of changes no provision has thus been made for the sentative, is that Boliden will not suffer any to laws and statutes, interpretations of the potential obligation that may arise in conjunc- financial damage as a result of the claims same, and amendments to cost estimates. tion with the current cartel investigation. directed at Apirsa, Boliden BV and Boliden AB. In the autumn of 2002, in the light of the Legal proceedings Disputes arising out of the dam breach ruling at the criminal proceedings that the dam Companies within the Group are engaged in in Spain breach was caused by design and construction extensive national and international operations In April 1998, a dam breach occurred in a errors, Apirsa initiated proceedings in the civil and are, in connection therewith, involved in tailings sand pond at the Los Frailes mine in claims court against the companies responsi- disputes and legal proceedings that arise Spain, which was owned by Boliden Apirsa S.L. ble for the dam’s design and construction and from time to time in the course of such oper- (Apirsa), a Spanish subsidiary of the Group. their insurance companies. The summons ations. These disputes and legal proceedings The dam breach led to criminal proceedings application, with its claim for approximately are not expected, either individually or collec- being initiated against Apirsa. In December EUR 115 million, was submitted in January tively, to have any significant negative impact 2000, the criminal prosecutor dropped the 2004. Apirsa’s claim will be increased corre- on Boliden’s operating result or financial posi- case and in November 2001, Apirsa was spondingly, should any of the proceedings tion, over and above that described below. finally freed from any liability for the accident. described above find the company liable to The criminal proceedings determined that the pay compensation. Copper tubing cartel accident was caused by design and construc- In August 2003, the European Commission tion errors in the dam, and hence not by Class action in Canada initiated proceedings under Article 81 of the Boliden’s operations at the mine. A class action claim for damages has been EC Treaty and Article 53 of the EEA Agree- The “not guilty” ruling in the criminal case submitted to the Supreme Courts in both ment, and issued a Statement of Objections notwith-standing, the Spanish Ministry of the British Columbia and Ontario by people who addressed to Boliden Cuivre et Zinc SA Environment has declared Apirsa liable to pay acquired shares in Boliden Ltd. in conjunction (“BCZ”), Boliden Fabrication AB and Boliden, approximately EUR 45 million in clean-up costs, with the stock market flotation in Toronto. Both and to eight other companies. According to damages and fines. The decision is based on cases are based on claims that the prospectus the Commission, BCZ and the other compa- alleged breaches of water-related legislation. issued in conjunction with the flotation gave an nies have participated in cartel activities in Apirsa has appealed the Ministry’s ruling to inaccurate picture of the circumstances relat- the European sanitary copper tubing market the Supreme Court. ing to the Spanish Los Frailes mine, where during the period from 1988 to 2001. The As a result of the dam breach, the local a dam breach occurred in 1998. The class cartel has, according to the Commission, government (Junta de Andalucía) sued Apirsa, action in Ontario involves claims for damages engaged in price fixing and division of Boliden BV and Boliden AB in a civil claims totalling CAD 400 million. No amount has markets. In its reply to the Commission, court for damages of approximately EUR been specified in the class action in British Boliden has, in general terms, acknowledged 89 million. The basis of the suit is that Apirsa Columbia. the Commission’s description of the actual is liable for the costs allegedly incurred by the The cases are in their initial stages and it is circumstances, but has presented a number local government because of the dam breach. too early, at present, to comment on Boliden of mitigating circumstances. The suit was dismissed on formal legal Ltd.’s liability for the claims being made. If The EU Commission is expected to grounds. The ruling was appealed, but was damages liability is awarded against Boliden announce its ruling on the matter in 2004. finally confirmed by a higher court in the Ltd., it intends to pass the liability on to Although the outcome is still uncertain, Boliden autumn of 2003. The suit in the civil claims Trelleborg AB on the basis of the contingent

1) These rules mean that potential ﬁnes will be in the interval 0 -10 percent of Boliden’s net sales in 2003.

84 NOTE 20 CONT. liability provided by Trelleborg in conjunction same circumstances will obtain if a damages extant on 5th December 2001 (the date of with the stock market flotation. Based on the liability is actually awarded against Boliden the relocation). The disputes from that time opinion of its Canadian legal representative, Ltd. at some time in the future. currently in progress are the class actions in Boliden believes that the contingent liability is Under the terms of an agreement between British Columbia and Ontario. Boliden AB’s valid for any damages that may be imposed Boliden Ltd. and Boliden AB in conjunction undertaking only becomes relevant if Trelle- on Boliden Limited. Boliden believes that with the relocation of the Group’s registered borg AB is unable to fulfil its undertakings in Trelleborg currently has the financial capacity office from Canada to Sweden, Boliden has accordance with the contingent liability in to fulfil its obligation to indemnify Boliden Ltd. undertaken to indemnify Boliden Ltd with respect of Boliden Ltd. No guarantee can, however, be given that the regard to all disputes and legal proceedings

NOTE 21 SUPPLEMENTAL INFORMATION TO THE STATEMENTS OF CASH FLOW The Statements of Cash Flow are drawn up in accordance with the indirect method.

2003 2002 Interest paid and dividends received Interest received 21 47 Interest paid - 273 - 249 Liquid assets The following subsidiary components are included under liquid assets: Cash and bank 842 231 Short-term investments 536 537 1 378 768

Short-term investments for 2003 include 5 million Outokumpu shares received in payment for units sold. The Out-okumpu shares were valued at SEK 485 million on the Balance Sheet date. These shares were sold in January 2004, and a minor capital gain arose.

Sale of subsidiaries and other Acquisition of subsidiaries, 2003 business units, 2003 Acquired assets and liabilities: Sold assets and liabilities: Intangible fixed assets 2 745 Intangible fixed assets 48 Tangible fixed assets 4 483 Tangible fixed assets 366 Financial fixed assets 411 Financial fixed assets 18 Inventories 1 269 Inventories 463 Current receivables 1 230 Current receivables 778 Total assets 10 138 Total assets 1 673

Provisions 689 Provisions 65 Long-term liabilities 454 Long-term liabilities 213 Current liabilities 1 104 Current liabilities 659 Total liabilities and provisions 2 247 Total liabilities and provisions 937

Purchase sum 7 891 Net value 736

85 NOTE 22 INFORMATION PER BUSINESS AREA AND GEOGRAPHICAL MARKET Other, including Mining Smelting eliminations and 2003 Operations Operations Fabrication acquired units The Group External net sales 1 318 5 808 2 330 89 9 545 Internal net sales 1 473 97 13 -1 583 – Net sales 2 791 5 905 2 343 -1 494 9 545 Operating result 369 225 -164 - 449 -19 Net ﬁnancial items - 232 Result after net ﬁnancial items - 251 Taxes 265 Minority share in earnings for the year -1 Net result for the year 13 Intangible assets – – – 2 745 2 745 Tangible assets 2 017 4 853 – 4 611 11 481 Inventories 116 847 – 1 273 2 236 Other receivables 318 185 – 916 1 419 Assets 2 451 5 885 – 9 545 17 881 Provisions, other than for pensions and tax 392 – – 294 686 Other liabilities 403 635 – 1 367 2 405 Liabilities 795 635 – 1 661 3 091 Capital employed 1 656 5 250 – 7 884 14 790 Depreciation 300 294 52 6 652 Investments 477 67 66 1 611

Other, including Mining Smelting eliminations and 2002 Operations Operations Fabrication acquired units The Group External net sales 448 6 478 2 325 305 9 556 Internal net sales 1 824 109 22 -1 955 – Net sales 2 272 6 587 2 347 -1 650 9 556 Operating result 190 248 -6 -18 414 Net financial items - 303 Result after net financial items 111 Taxes 20 Minority share in earnings for the year 1 Net profit for the year 132 Intangible assets – – 1 8 9 Tangible assets 1 844 5 082 372 250 7 548 Inventories 130 623 439 – 1 192 Other receivables 218 175 514 -125 782 Assets 2 192 5 880 1 326 133 9 531 Provisions, other than for pensions and tax 395 – 5 286 686 Other liabilities 508 600 571 133 1 812 Liabilities 903 600 576 419 2 498 Capital employed 1 289 5 280 750 - 286 7 033 Depreciation 287 290 55 3 635 Investments 313 128 55 9 505

Net sales per geographic market 2003 2002 Sweden 2 819 2 180 Nordic region, other 343 457 Europe, other 5 690 6 287 North America 616 547 South America 14 32 Other markets 63 53 9 545 9 556

86 NOTE 23 TRANSACTIONS WITH AFFILIATES

No Member of the Board or senior executive loans, issued guarantees or provided sureties action. These agreements were concluded on at the Company participates, nor has partici- for any of the Members of the Board or senior a business basis and on market terms. Some pated, either directly or indirectly, in any busi- executives in the Company. of the agreements were concluded with a view ness transactions, occurring during the In conjunction with the transaction in to simplifying the separation of the Outokumpu current or previous ﬁnancial years, between December 2003, Boliden and Outokumpu units from the Outokumpu Group. Within the himself or herself and the Company, which concluded agreements concerning services framework of its operating activities, Boliden are or were unusual by nature in respect and technical exchange between Boliden and may also, from time to time, conclude agree- of their terms. Nor has the Group granted Outokumpu after the completion of the trans- ments with Outokumpu on market terms.

NOTE 24 EVENTS AFTER THE END OF THE FINANCIAL YEAR

On 20th January 2004, Boliden and the Cana- On 16th February 2004, it was announced quarter of 2004, and is conditional, among dian mining company, EuroZinc, signed a part- that Boliden and the Breakwater Resources other things, on the customary due diligence, nership agreement concerning future deliveries Ltd mining company, listed in Canada, had and approval from both authorities and the of copper concentrate from the Portuguese signed a Letter of Intent whereby Boliden plans Boards of Directors of Boliden and Breakwater. mine, Neves Corvo. The agreement assumes, to sell its wholly owned Canadian subsidiary, In March 2004, Boliden hedged 40 percent inter alia, that EuroZinc’s bid for Somincor S.A., Boliden Westmin (Canada) Limited (BWCL) to of the planned copper mining production from which owns the mine, is successfully completed. Breakwater. BWCL owns the Myra Falls mine. April 2004 up to and including March 2005 The agreement will enable Boliden to boost its Boliden will receive 18 million newly issued at an average price of USD 2,790/tonne future deliveries of copper concentrate to the Breakwater shares with a market value corre- (USc 127/lb) As an integral part of the trans- smelters. sponding to around SEK 70 million (based on action with Outokumpu, Boliden will be imple- On 22nd January 2004, it was announced a share price of CAD 0.67). In addition to the menting a guaranteed preferential rights issue that Boliden had sold its entire holding of shares, Boliden will receive 5 million options totalling SEK 1.4 billion during the ﬁrst quarter 5 million shares in Outokumpu. The proceeds with a redemption price of CAD 1.00 and a of 2004. Around SEK 1 billion of the proceeds received from the sale have, after deductions term extending to 28th January 2009. Boliden of the rights issue will be used to amortise for expenses, primarily been used to amortise is expected to make a minor capital gain on liabilities. liabilities. The sale of the shares resulted in the sale of Myra Falls. The deal is expected to a minor capital gain. be implemented at the beginning of the second

Upplands Väsby 10th March 2004

Carl Bennet Risto Virrankoski Jan Johansson Deputy Chairman Chairman President and CEO

Satu Huber Tapani Järvinen Christoffer Taxell

Anders Sundström Marie Berglund Alf Lindén

Lars Sundström Hans-Göran Ölvebo

Our Auditors’ Report was submitted on 10th March 2004.

Hans Pihl Mats Fredricson Authorised Public Accountant Authorised Public Accountant

87 Audit Report

To the General Meeting of the Shareholders of Boliden AB (publ) Company identity no. 556051-4142

We have audited the annual accounts, disclosures in the accounts. An audit The annual accounts and the consoli- the consolidated accounts, the also includes assessing the accounting dated accounts have been prepared in accounting records and the adminis- principles used and their application accordance with the Annual Accounts tration of the Board of Directors and by the Board of Directors and the Act and, thereby, give a true and fair the President and CEO of Boliden AB President and CEO, as well as evaluat- view of the company’s and the Group’s for the year 2003. These accounts and ing the overall presentation of infor- financial position and results of opera- the administration of the company are mation in the annual accounts and tions in accordance with generally the responsibility of the Board of the consolidated accounts. As a basis accepted accounting principles in Directors and the President and CEO. for our opinion concerning discharge Sweden. Our responsibility is to express an from liability, we examined significant We recommend to the General opinion on the annual accounts, the decisions, actions taken and circum- Meeting of Shareholders that the consolidated accounts and the admin- stances of the company in order to be Income Statements and Balance istration based on our audit. able to determine the liability, if any, Sheets of the Parent Company and We conducted our audit in accor- to the company of any Board Member the Group be adopted, that the profit dance with generally accepted audit- or the President and CEO. We also for the Parent Company be dealt ing standards in Sweden. Those examined whether any Board Member with in accordance with the proposal standards require that we plan and or the President and CEO has, in any in the administration report and that perform the audit to obtain reasonable other way, acted in contravention of the Members of the Board of Directors assurance that the annual accounts the Companies Act, the Annual and the President and CEO be dis- and the consolidated accounts are free Accounts Act or the Articles of charged from liability for the financial of material misstatement. An audit Association. We believe that our audit year. includes examining, on a test basis, provides a reasonable basis for our evidence supporting the amounts and opinion set out below.

Stockholm, 10th March 2004.

Hans Pihl Mats Fredricson Authorised Public Accountant Authorised Public Accountant

88 Five-year overview

AITIK 1999–2003 2003 2002 2001 2000 1999 Milled ore, Ktonnes 18 022 18 601 17 718 18 219 17 736 Head grades Cu, % 0.37 0.35 0.40 0.42 0.38 Au, g/tonne 0.16 0.17 0.19 0.17 0.15 Ag, g/tonne 4.25 3.63 3.66 4.19 5.30 Concentrate production Cu, tonnes 210 789 202 290 222 129 240 202 211 146 Concentrate grade Cu, % 27.8 28.3 28.8 28.2 28.3 Metal content Cu, tonnes 58 687 57 293 63 940 67 828 59 838 Au, kg 1 383 1 542 1 698 1 542 1 260 Ag, kg 55 176 47 409 48 550 56 606 63 522 Financial performance EBITDA, SEK m 1) 128 132 244 307 28 EBIT, SEK m 2) 3) 34 38 153 216 -72 Cash cost, USc/lb copper 64 56 51 55 63 Investments, SEK m 175 138 251 140 68 Proven and probable ore reserves 4) Ktonnes 244 000 240 107 226 400 247 900 213 000 Cu, % 0.35 0.38 0.37 0.37 0.40 Au, g/tonne 0.2 0.2 0.2 0.2 0.2

1) EBITDA – Operating result before depreciation, net interest items and tax. 2) EBIT – Operating result before net interest items and tax. 3) EBIT does not include either depreciation of assets related to the mining operations or the result of currency hedging or other adjustments that would affect EBIT. See Note 17. 4) Main metals.

BOLIDEN AREA 1999–2003 2003 2002 2001 2000 1999 Milled tonnage, Ktonnes 1 759 1 804 1 767 1 668 1 581 Head grades Zn, % 5.6 4.6 3.9 4.2 4.4 Cu, % 1.7 1.0 0.8 0.7 0.8 Pb, % 0.6 0.6 0.6 0.6 0.5 Au, g/tonne 2.5 2.5 2.5 1.8 1.7 Ag, g/tonne 73 73 74 72 64 Concentrate production Zn, tonnes 143 396 116 975 92 775 101 783 104 806 Cu, tonnes 91 265 57 541 42 335 38 404 47 239 Pb, tonnes 9 790 11 713 12 659 10 757 8 644 Precious metals, tonnes 368 467 361 371 348 Gold doré bullion, kg 3 057 3 779 2 228 Concentrate grade Zn, % 53.6 54.1 53.5 54.1 54.6 Cu, % 26.1 22.4 22.6 23.9 22.2 Pb, % 27.1 27.5 25.0 27.6 33.2 Metal content Zn, tonnes 76 910 63 242 49 633 55 067 57 150 Cu, tonnes 23 801 14 162 9 551 9 190 10 465 Pb, tonnes 2 656 3 218 3 162 2 963 2 838 Au, kg 2 677 2 630 2 512 1 682 1 754 Ag, kg 71 207 72 984 65 263 63 423 17 186 Financial performance EBITDA, SEK m 1) 162 149 100 109 43 EBIT, SEK m 2) 3) 38 29 - 9 11 - 55 Cash cost, USc/lb zinc 22 21 28 38 40 Investments, SEK m 128 72 127 149 76 Proven and probable ore reserves 4) 5) Polymetallic ores, ktonnes 2 500 3 620 4 390 4 892 5 500 Zn, % 8.1 7.0 6.0 4.8 4.0 Cu, % 0.6 0.6 0.7 0.7 1.0 Gold ores, ktonnes 450 698 880 1 098 – Gold, g/tonne 7.2 6.3 6.6 6.4 – Cu, % 1.4 1.4 1.4 1.2 –

89 Five-year overview cont.

GARPENBERG 1999–2003 2003 2002 2001 2000 1999 Milled ore, Ktonnes 1 062 1 058 984 976 976 Head grades Zn, % 4.6 4.0 3.9 3.9 4.1 Cu, % 0.1 0.1 0.1 0.1 0.1 Pb, % 1.9 1.8 1.8 1.9 2.1 Au, g/tonne 0.4 0.4 0.4 0.5 0.5 Ag, g/tonne 151 153 136 141 125 Concentrate production Zn, tonnes 80 748 67 142 61 126 59 666 65 231 Cu, tonnes 2 563 3 320 3 384 3 588 4 208 Pb, tonnes 22 257 20 589 19 489 20 580 22 551 Precious metals, tonnes 38 95 94 72 96 Concentrate grade Zn, % 54.9 55.7 55.8 55.9 54.1 Cu, % 20.7 20.4 22.5 23.5 21.7 Pb, % 71.9 73.0 72.2 69.7 70.4 Metal content Zn, tonnes 44 314 37 392 34 084 33 333 35 349 Cu, tonnes 531 676 760 842 916 Pb, tonnes 16 002 15 022 14 081 14 384 15 891 Au, kg 216 284 291 336 340 Ag, kg 123 278 123 978 103 802 106 047 93 023 Financial performance EBITDA, SEK m 1) 32 38 29 42 16 EBIT, SEK m 2) 3) -15 - 7 -13 - 2 -26 Cash cost, USc/lb zinc 33 30 34 42 44 Investments, SEK m 78 54 36 22 36 Proven and probable ore reserves 4) Ktonnes 2 205 3 591 4 540 4 830 5 900 Zn, % 4.0 4.0 3.8 3.8 4.1 Ag, g/tonne 141 135 151 132 114

MYRA FALLS 1999–2003 2003 2002 2001 2000 1999 Milled ore, Ktonnes 1 036 774 979 1 167 740 Head grades Zn, % 6.5 7.3 6.5 5.0 5.7 Cu, % 1.4 1.2 1.6 1.7 1.6 Au, g/tonne 1.5 1.5 1.5 1.6 1.6 Ag, g/tonne 44 47 25 27 20 Concentrate production Zn, tonnes 107 986 93 054 105 483 94 758 69 153 Cu, tonnes 42 954 27 567 49 630 66 922 40 004 Au, kg 8 6 10 10 5 Concentrate grade Zn, % 53.2 54.1 54.9 55.1 45.0 Cu, % 24.9 24.6 26.5 26.1 21.6 Metal content Zn, tonnes 57 420 50 356 57 892 52 172 37 861 Cu, tonnes 10 687 6 775 13 167 17 501 10 397 Au, kg 848 618 632 755 422 Ag, kg 22 424 18 695 12 053 16 337 6 373 Financial performance EBITDA, SEK m 1) 14 21 -70 79 9 EBIT, SEK m 2) 3) - 2 16 -184 - 31 - 65 Cash cost, USc/lb zinc 36 33 45 40 44 Investments, SEK m 94 75 60 81 144 Proven and probable ore reserves 4) Ktonnes 7 750 8 347 8 400 7 716 7 720 Zn, % 6.3 6.7 7.0 6.6 7.3 Cu % 1.2 1.2 1.3 1.3 1.4

1) EBITDA – Operating result before depreciation, net interest items and tax. 2) EBIT – Operating result before net interest items and tax. Does not include goodwill depreciation between 1999 and 2001. 3) EBIT does not include either depreciation of assets related to the mining operations or the result of currency hedging or other adjustments that would affect EBIT. See Note 17. 4) Main metals.

90 TARA 1999–2003 2003 20021) 20012) 2000 1999 Milled ore, Ktonnes 2 548 755 1 968 2 167 2 024 Head grades Zn, % 7.94 7.02 8.00 7.55 7.38 Pb, % 1.68 1.57 1.92 2.14 2.19 Concentrate production Zn, tonnes 335 314 89 003 263 606 271 467 246 785 Pb, tonnes 47 378 13 079 44 029 54 382 52 028 Concentrate grade Zn, % 56.2 55.1 55.5 56.0 55.7 Pb, % 62.3 63.3 62.3 64.6 64.5 Metal content Zn, tonnes 188 367 49 061 146 197 151 980 137 481 Pb, tonnes 29 502 8 280 27 420 35 129 33 575 Financial performance 3) EBITDA, SEK m 4) - 4 -156 -167 76 0 EBIT, SEK m 5) 6) -192 - 229 - 287 - 34 -106 Cash cost, USc/lb zinc 37 50 41 43 44 Investments, SEK m 310 696 204 127 79 Proven and probable ore reserves 7) Ktonnes 16 900 18 000 12 800 12 100 13 700 Zn, % 9.3 9.3 8.9 9.2 9.5 Pb, % 2.0 2.0 2.1 2.2 2.4

1) Tara operational from September to December. 2) Production interrupted from November 2001 to September 2002. 3) EBITDA, EBIT and investments have been translated from EUR to SEK. The average exchange rates for EUR/SEK were as follows for 2003-1999: 9.1250; 9.1627; 9.2600; 8.4488 and 8.8065, respectively. 4) EBITDA – Operating result before depreciation, net interest items and tax 5) EBIT – Operating result before net interest items and tax. 6) EBIT does not include depreciation of assets related to the mining operations. See Note 17. 7) Main metals.

BERGSÖE 1999–2003 2003 2002 2001 2000 1999 Smelting material, tonnes Lead batteries 72 739 61 700 53 572 65 823 62 319 Lead bullion 56 900 48 900 47 800 53 000 49 021 Production, tonnes Lead alloys 49 132 45 698 44 295 47 399 44 119 Tin alloys 921 1 057 1 142 1 448 1 384 Financial performance EBITDA, SEK m 1) 59 67 43 33 30 EBIT, SEK m 3) 51 59 35 25 21 Investments, SEK m 14 28 20 6 3

1) EBITDA – Operating result before depreciation, net interest items and tax. 2) EBIT – Operating result before net interest items and tax. 3) EBIT does not include the result of currency hedging or other adjustments that would affect EBIT. See Note 17.

RÖNNSKÄR 1999–2003 2003 2002 2001 2000 1999 Smelting material, tonnes Copper Primary 605 976 621 183 564 690 395 665 295 215 Secondary 128 217 132 240 116 392 111 708 107 564 Total 734 193 753 423 681 082 507 373 402 779 Lead Primary 35 998 24 059 40 862 39 056 43 764 Secondary 2 283 2 517 2 631 1 486 1 278 Total 38 281 26 576 43 493 40 542 45 042 Production Copper, tonnes 214 181 224 402 216 237 133 118 113 960 Lead, tonnes 24 208 17 753 31 313 30 669 34 734 Zinc clinker, tonnes 33 549 34 685 35 095 31 141 35 797 Gold, kg 12 275 15 562 14 102 8 640 9 597 Silver, kg 456 565 408 427 319 890 359 535 330 492 Sulphuric acid, tonnes 551 946 544 030 490 283 293 353 210 291 Liquid sulphur dioxide, tonnes 40 674 54 724 56 481 65 259 60 079 Palladium concentrate, kg 1 956 2 252 2 574 2 255 2 781 Financial performance EBITDA, SEK m 1) 168 385 498 471 336 EBIT, SEK m 2) 3) -118 104 192 342 231 Investments, SEK m 53 99 132 802 686

91 Five-year overview cont.

HARJAVALTA/PORI 1999–2003 2003 2002 2001 2000 1999 Smelting material, tonnes Copper concentrate 548 536 525 376 531 057 501 178 504 019 Nickel concentrate 205 300 251 272 235 991 234 939 228 133 Production Primary copper, tonnes 160 596 160 896 169 251 155 431 149 594 Cathode copper, tonnes 125 635 114 906 115 471 113 969 114 657 Cathode nickel 1), tonnes – – – 15 278 52 800 Gold, kg 5 564 4 666 5 552 4 956 6 110 Silver, kg 33 959 29 907 22 821 23 643 30 652 Sulphuric acid, tonnes 611 987 631 842 636 103 591 329 602 229 Liquid sulphur dioxide, tonnes 47 670 40 598 37 552 42 813 43 522 Financial performance2) EBITDA, SEK m 3) 283 302 315 177 361 EBIT, SEK m 4) 110 137 148 59 79 Investments, SEK m 82 55 46 59 62

1) Nickel plant sold to OMG on 4th April 2000. 2) EBITDA, EBIT and investments have been translated from EUR to SEK. The average exchange rates for EUR/SEK were as follows for 2003–1999: 9.1250; 9.1627; 9.2600; 8.4488 and 8.8065, respectively. 3) EBITDA – Operating result before depreciation, net interest items and tax. 4) EBIT – Operating result before net interest items and tax.

KOKKOLA ZINC 1999–2003 2003 20021) 2001 2000 1999 Smelting material, tonnes Zinc concentrate 500 813 459 649 472 947 442 337 441 582 Production, tonnes Zinc 265 853 235 337 248 816 222 881 225 190 Cadmium – 4 604 683 696 Mercury 25 51 71 76 55 Financial performance EBITDA, SEK m 2) 237 156 269 355 264 EBIT, SEK m 3) 73 - 9 139 245 150 Investments, SEK m 91 82 250 228 88

1) Including a one-month shutdown for maintenance work in June 2002. 2) EBITDA – Operating result before depreciation, net interest items and tax. 3) EBIT – Operating result before net interest items and tax.

NORZINK 1999–2003 2003 2002 2001 2000 1999 Smelting material, tonnes Zinc concentrate (inc. zinc clinker) 256 318 260 271 266 381 252 652 250 832 Production, tonnes Zinc 143 627 144 538 144 694 138 390 143 976 Cadmium 323 215 371 302 237 Aluminium ﬂuoride 27 500 28 976 29 266 28 372 26 427 Financial performance1) EBITDA, SEK m2) 59 22 322 362 245 EBIT, SEK m 3) - 26 -72 238 284 159 Investments, SEK m 475 121 91 104 56

1) EBITDA, EBIT and investments have been translated from EUR to SEK. The average exchange rates for EUR/SEK were as follows for 2003–1999: 9.1250; 9.1627; 9.2600; 8.4488 and 8.8065, respectively. 2) EBITDA – Operating result before depreciation, net interest items and tax. 3) EBIT – Operating result before net interest items and tax.

ZINC COMMERCIAL 1999–2003 2003 2002 2001 2000 1999 Financial development1) EBITDA, SEK m 2) 219 202 167 161 141 EBIT, SEK m 3) 219 202 167 161 141 Investments, SEK m 0 0 0 0 0

92 93 Board of Directors

Risto Virrankoski Carl Bennet Marie Berglund Satu Huber Jan Johansson Born: 1946 Born: 1951 Born: 1958 Born: 1958 Born: 1954 Chairman of the Board since 2003 Deputy Chairman since 2003 Member of the Board since 2003 Member of the Board since 2003 Member of the Board since 2001 Deputy CEO and Deputy President (Chairman of the Board, 2001–2003) Environmental Manager Director of Finance and Head of Finance President and CEO of Boliden AB of Outokumpu Oyj Directorships: Chairman of the Board of of Botniabanan AB Division, Finnish State Treasury Directorships: Chairman of Deputy Chairman of the Group Elanders, Getinge, Lifco and Directorships: Member of Directorships: Member of the Board of the Board of North Executive Committee at Outokumpu Oyj Sorb Industri. Deputy Chairman the Swedish National Board Directors of Finnish Industry Ltd, National Atlantic Natural Resources AB Directorships: of SNS and TeliaSonera of Forestry and the Swedish Board of Economic Defence, Association for Boliden shareholdings: Member of the Board of VR Ltd Member of the Board of AMS and World Wildlife Fund the Finnish Culture Foundation and Economic 11,000 1) shares and (Finnish railways) Member of the Swedish Government Boliden shareholding: 0 1) Society of Finland, and Deputy Member of the 3,000,000 1) Boliden shareholding: 0 1) Research Advisory Board Board of the Swedish School of Economics staff stock options Boliden shareholding: 4,290,910 1) shares and Business Administration in Finland. Boliden shareholding: 0 1)

Tapani Järvinen Anders Sundström Christoffer Taxell Alf Lindén Lars Sundström Born: 1946 Born: 1952 Born: 1948 Born: 1944 Born: 1964 Member of the Board since 2003 Member of the Board since 2001 Member of the Board since 2003 Member of the Board Member of the Board President of Outokumpu Technology (Deputy Chairman of the Board, Chancellor of Åbo Academi University since 2001 since 2001 and Member of the Group Executive 2001–2003) Member of the Directorships: Chairman of the Board Representative of SiF, Representative for the Committee, Outokumpu Oyj Swedish Parliament, Former Swedish of Directors of Finnair Plc and the Employees’ Union Swedish Metal Workers’ Union Chairman of the Finnish-Latin Minister for Industry and Trade Åbo Academi University Foundation Superintendent Electrical Process Operator, Rönnskär American Trade Association Directorships: Chairman of the Board Member of the Board of Directors Department, Boliden Area Boliden shareholding: Directorships: Member of the Board of Luleå University of Technology of Stockmann Oyj Abp, Boliden shareholding: 60 1) shares of Directors of International Copper and Sparbanken Nord. Member of Sampo Plc, Raisio Group Plc, 50 1) shares Association, Eurométaux and the Board of FöreningsSparbanken Nordkalk Corporation and Dragon Mining NL and the Executive Committee of the Skandia Insurance Company Boliden shareholding: 0 1) Social Democratic Party Boliden shareholding: 0 1) Boliden shareholding: 3,725 1) shares

Hans-Göran Ölvebo Rolf Högdahl Bo Karlsson Seppo Ukskoski Born: 1955 Born: 1941 Born: 1955 Born: 1951 Member of the Board since 2001 Deputy Member since 2001 Deputy Member since 2001 Deputy Member since 2003 Representative for the Representative of SiF, Representative for the Representative for the Finnish Swedish Metal Workers’ Union Employees’ Union Swedish Metal Workers’ Union Union of White-collar workers, TU, Production worker, Aitik Laboratory Technician, Rönnskär Process Operator, Boliden Area Fire and Security Chief, Boliden shareholding: 0 1) Directorships: Member of the Boliden shareholding: 5 1) shares Kokkola Zinc Board of Skellefteå Kraft Directorships: Member of the Boliden shareholding: 20 1) shares Board of Outokumpu Oyj Boliden shareholding: 0 1) 1) Holdings on 1st March 2004.

94 Group Management and Auditors

Jan Johansson Tom Niemi Lars-Göran Björkqvist Jukka Järvinen Bengt Lindahl Born: 1954 Born: 1950 Born: 1950 Born: 1947 Born: 1949 Employed: 2001 Employed: 2004 Employed: 2004 Employed: 2004 Employed: 2001 President and CEO Deputy CEO – Business President, President, Senior Vice President, Boliden shareholdings: Development, Purchasing, Marketing and Sales Business Area Copper Group Human Resources 11,000 1) shares and Environment Boliden shareholding: 0 1) Boliden shareholding: 0 1) Boliden shareholding: 3,000,000 1) Boliden shareholding: 0 1) 1,000 1) shares staff stock options

Marianne Lindholm Harri Natunen Svante Nilsson Ulf Söderström Jan Öhman Born: 1950 Born: 1955 Born: 1956 Born: 1964 Born: 1960 Employed: 2002 Employed: 2004 Employed: 2003 Employed: 2001 Employed: 1996 Senior Vice President, President, President, Senior Vice President, CFO Legal Affairs Business Area Zinc Mining Operations Group Communications Boliden shareholdings: Boliden shareholding: Boliden shareholding: 0 1) Boliden shareholding: 0 1) Boliden shareholding: 3 1) shares and 1,400 1) shares 1,000 1) shares 25,000 1) staff stock options

Auditors

Hans Pihl Mats Fredricson Authorised Public Accountant Authorised Public Accountant Deloitte & Touche AB

Deputy Auditors

Jan-Hugo Nihlén Björn Sundkvist Authorised Public Accountant Authorised Public Accountant Deloitte & Touche AB Deloitte & Touche AB

1) Holdings on 1st March 2004.

95 Glossary and Deﬁnitions

GLOSSARY Galvanising Indicated mineral resource A process whereby zinc is bonded metallurgi- A mineral resource identified through drilling Alloy cally to steel to protect it against corrosion. and sampling with an information density that Substance with metallic properties and is too sparse to confirm continuity, but which, which is composed of two or more chemical Geochemistry together with geo-scientific interpretations, elements, at least one of which is a metal. The study of the natural occurrence of metals nevertheless provides a reasonable idea and other chemical substances. of the geology and grade continuity that is Base metals sufficient to enable technical and economic The most commonly occurring metals, Gold leaching plant calculations to be performed to assess such as copper, lead and zinc etc. Hydrometallurgical plant for extracting gold the project’s profitability. from ores or concentrate. The leaching is Blister copper achieved with the aid of cyanide. Measured mineral resource Unrefined copper with a purity of 98-99 A mineral resource identified through drilling percent. Joint venture and sampling with an information density suffi- Shared risk project. cient to confirm geology and grade continuity. Brass The basic technical data has been studied An alloy containing approximately 60 percent LBMA thoroughly. Permitting mining plans to be drawn copper and 40 percent zinc. The London Bullion Market Association up as a basis for technical and economic is responsible for pricing precious metals. analyses to determine the project’s profitability. Cash cost Direct costs affecting cash flow, such as pro- LME Mineralisation duction and transportation costs, as well as The London Metal Exchange: the international A concentration of minerals in the bedrock. smelting and refining charges, less deductions market where non-ferrous metals are bought for by-metals, converted into US dollars (aver- and sold. Trading on the LME is used as the Open pit age exchange rate). basis for the daily pricing of metals worldwide. A method of mining mineral deposits located The LME also maintains warehouse stocks near the surface which involves stripping the Cash pools of the metals traded. overburden to expose the ore. Group account structure in which the main part of Group´s liquidity is administered. Metal ashes Ore grade Pulverised slag from metal foundries and The average amount of valuable metals in a Cathode copper/Copper cathode brass manufacturers. tonne of ore, expressed in grams per tonne 99.99 percent pure copper plates. for precious metals and as a percentage for Metal content other metals. Complex ore The amounts of copper, zinc, lead, gold and Ore that contains several metals, such silver contained in concentrates, for example. Ore reserve as copper, zinc, lead, gold and silver. Ore reserves are those parts of a mineral Metallurgy resource that can be mined and processed Concentrate The art and science of extracting metals and in accordance with the company’s demands The product that results from the separation metallic minerals from their ores by means on profitability. In this context, the waste rock of economically valuable minerals in an ore of mechanical and chemical processes. dilution, pillar offset and process yields are from those with no economic interest by taken into account. Ore reserves are divided means of milling and flotation, for instance. Mineral resources into the following categories: The content of valuable minerals is thus A mineral resource is a concentration of considerably increased. minerals in the bedrock from which valuable Probable ore reserve minerals can be extracted commercially. Those parts of a measured and indicated Concentrator Mineral resources are divided into the follow- mineral resource where mining engineering A plant in which ore is processed mechanically ing categories: and profitability studies show that it is techni- and/or chemically to extract and produce cally and economically feasible to mine and a concentrate of the valuable minerals. Inferred mineral resource process the find. A mineral resource identified through drilling, Copper disseminated ore sampling and geo-scientific interpretation with Proven ore reserve Scattered distribution in rock of chalcopyrite. information so sparse that the geology and Those parts of a measured mineral resource grade continuity cannot be confirmed and where mining-engineering and profitability Copper Shuttle where the basic technical data consists of studies show that it is technically and econom- Fast and environmentally friendly rail transport reasonable assumptions. This means that ically feasible to mine and process the find. between Rönnskär and Helsingborg. The train continued investigations will not with any runs five days a week, carrying cathode copper degree of certainty enable the entire inferred Precious metals and other products to customers in southern mineral resource, or parts of it, to be moved The opposite of base metals, i.e. gold, silver, Sweden. On the return trip, it carries recycl- to a higher category. platinum, palladium etc. able material and concentrate.

96 Secondary raw materials Net margin Average number of outstanding shares Various types of materials from which metals Result for the year as a percentage of net sales. Based on the number of shares at the end of can be recovered, e.g. electronic scrap and the year, see under the heading, Financial State- other types of scrap material, metal ashes, Return on shareholders’ equity ments – Accounting principles. Full dilution results slags, dusts, scrap lead batteries etc. Result for the year as a percentage of average in only a negligible increase in the number of shareholders’ equity. shares and refers to warrants issued by Boliden Slag Limited granting the right to obtain a total of Product generated in conjunction with various Return on capital employed 345,000 newly issued shares in Boliden AB. types of metallurgical reactions and which Operating result divided by the average capital primarily consists of oxides. employed. The average capital employed con- Earnings per share Smelter sists of an average of the closing figures for Result for the year divided by the average A plant in which the metal raw material is capital employed in the last four quarters for number of out-standing shares. processed to separate metals from impurities each respective year. The calculation for 2003 by means of high temperature reactions. The excludes the transaction with Outokumpu. Cash flow after investments per share end product is a crude metal for subsequent Cash flow after investments in intangible and refining. Capital employed tangible fixed assets divided by the average Balance Sheet total less interest-bearing number of outstanding shares. Smelting materials investments and non-interest-bearing operating Raw materials for smelters, primarily compris- liabilities. Shareholders’ equity per share ing metal concentrate, but also including Shareholders’ equity divided by the number scrap, ashes and other recyclable materials. Net debt of outstanding shares. Interest-bearing current and long-term liabilities Treatment and refining charges (including pension liabilities) less financial assets Dividend yield The remuneration received by a smelter for including liquid assets. Dividend per share as a percentage of the processing smelting material and extracting share price. metals. Equity/assets ratio Shareholders’ equity as a percentage of the P/E-ratio Yield Balance Sheet total. Share price divided by the earnings per share. The percentage portion of an amount of a given metal in an ore extracted during Percentage venture capital lb = pound = 0.4536 kgs the concentration process. The sum of shareholders’ equity and deferred oz = ounce = “troy ounce” = 31.104 grams tax liabilities (including minorities) divided by USD = US dollar Zinc clinker the Balance Sheet total. USc = US cent A refined zinc raw material for producing CAD = Canadian dollar pure zinc. Net debt/equity ratio SEK = Swedish kronor The net of interest-bearing provisions and Ag = silver liabilities less financial assets including liquid Au = gold DEFINITIONS OF KEY RATIOS assets divided by share-holders’ equity. Cu = copper Pb = lead Gross margin Interest cover Zn = zinc Gross result as a percentage of net sales. Result after net financial items plus financial costs divided by financial costs. Operating margin Average number of employees Operating result as a percentage of net sales. The average number of employees during the year, converted into full-time positions.

97 Boliden Locations

Head Ofﬁce Boliden Mineral AB Copper Zinc Boliden AB SE -776 98 Garpenberg Boliden Mineral AB Kokkola Zinc Oy P.O. Box 44 Sweden Rönnskär Smelter Outokummuntie 8 SE -101 20 Stockholm Tel +46 225 360 00 SE - 932 81 Skelleftehamn FIN - 67900 Kokkola Sweden Fax + 46 225 360 01 Sweden Finland Visiting Adress: Tel +46 910 77 30 00 Tel +358 6 828 6111 Klarabergsviadukten 90 Tara Mines Limited Fax +46 910 77 32 15 Fax +358 6 828 6005 Stockholm Knockumber House, Knockumber Tel +46 8 610 15 00 Navan Boliden Bergsöe AB Norzink AS Fax + 46 8 31 55 45 Co. Meath Gasverksgatan NO - 5751 Odda Ireland SE - 261 22 Landskrona Norway Mines Tel +353 46 907 9800 Sweden Tel +47 5364 9100 Boliden Mineral AB Fax + 353 46 907 9899 Tel +46 418 572 00 Fax +47 5364 3377 Box 85 Fax +46 418 572 05 SE - 982 21 Gällivare Boliden Westmin (Canada) Limited Marketing and Sales Sweden Myra Falls Operation Harjavalta Copper Oy Boliden Zinc Commerical B.V. Tel +46 970 735 00 c/o Spit Road FIN - 29200 Harjavalta Blaak 22 Fax + 46 970 735 01 Box 8000 Finland NL- 3011 TA Rotterdam Campbell River B.C. Tel +358 2 535 8111 Netherlands Boliden Mineral AB V9W 5E2 Canada Fax +358 2 535 8239 Tel +31 10 201 29 99 SE - 936 81 Boliden Tel +1 250 287 92 71 Fax +31 10 201 29 98 Sweden Fax +1 250 287 71 23 Harjavalta Copper Oy Tel +46 910 77 40 00 Copper Reﬁnery Fax + 46 910 77 42 34 P.O. Box 60 FIN-28101 Pori Finland Tel +358 2 626 6111 Fax +358 2 626 5312

Aitik (Sweden) Rönnskär (Sweden) Copper mine Copper smelter

Boliden Area (Sweden) Kokkola Zinc (Finland) Zinc mines Zinc smelter

Garpenberg (Sweden) Harjavalta/Pori (Finland) Zinc mines Copper smelter

Tara (Ireland) Norzink (Norway) Zinc mine Zinc smelter

Bergsöe (Sweden) Lead smelter

Myra Falls (Canada) Head Office (Sweden) Smelter Zinc mine Stockholm Mine

98 99 Alfa Print Boliden AB, P.O. Box 44, SE-101 20 Stockholm, Sweden. Visiting address Klarabergsviadukten 90. Tel +46 8 610 15 00, Fax + 46 8 31 55 45, www.boliden.com Boliden Annual Report 2003