Boliden is exposed to various types of risks that could have a substantial impact on the Group. We continuously work to reduce and monitor risks through effective risk management where all business units have implemented processes to identity risks. As part of the risk work, a consolidated risk scenario is performed on an annual basis to identify and evaluate all risks within the Group.
Read the our full risk management statement, including comments for the preceding year, in our Annual and Sustainability Report.
Health and safety
Risk description: We handle large material flows both under and above ground, and from time to time our employees and contractors are exposed to heavy machinery, lifting, high temperatures and hazardous substances. Furthermore, many people work
in shifts, which increases psychosocial risks. Deviations from established procedures, inadequate planning and deficient resource allocation can create dangerous situations and increase the risk of injury.
Risk management: In order to achieve our target of accident-free operations and healthy workplaces, we focus on proactive risk reporting and learning from best practices both internally and externally, and we continue to work on strengthening our value-based behavior and culture.
Environmental impact
Risk description: Our operations impact both the global climate, nature and the local environment. For both operational and decommissioned sites, considerable risks can be linked to emissions to air and water, the storage of waste, energy consumption
and the significance of land use that has an impact on biodiversity. The risk is also linked to an increasing difficulty in getting environmental permits for our operations.
Risk management: Boliden owns large land areas, which gives us the opportunity to utilize the land areas to compensate for our impact on the use of land and related nature values. Hazardous waste streams are stored in safe repositories underground or in mountain caverns to minimize harm on the environment. For other waste streams we are looking at opportunities to produce products from current waste streams. Compliance with our emissions targets is closely monitored and emissions generated by the operations are managed using the best available technology and according to environmental permits. Emergencies are prevented through continuous monitoring and systematic maintenance.
Water management and dam safety
Risk description: Tailings facilities and their dam structures are a risk in the mining industry. In case of a dam failure there is potential for major consequences for humans and the environment. The integrity of our tailings facilities will be affected by extreme
weather conditions and changes in precipitation.
Risk management: The Global Industry Standard for Tailings Management (GISTM) is being implemented for all our tailings storage facilities. The system will ensure that we comply with our Tailing Governance Commitments in the following areas: roles, responsibilities and competences, planning and resources, risk management, change management, emergency preparedness and response, audit and review. As a member of the International Council on Mining and Metals (ICMM) we always implement the latest international guidelines regarding tailings management and dam safety.
Climate change
Risk description: Climate change leads to global warming and more frequent and severe extreme weather events such as heatwaves, droughts, floods, heavy rain or snowfall and wildfires. Related operational risks include damaged or destroyed vital equipment, facilities and infrastructure, operational issues, supply chain disruptions, increased costs and reduced revenue streams.
Risk management: Boliden has ambitious targets and roadmap integrated in budgets and long-term planning to further reduce our absolute greenhouse gas emissions. We fully integrate climate considerations into decision-making processes and engage with stakeholders to communicate our commitment to climate resilience. The units evaluate their own weather-related operational risks and are responsible for conducting scenario analyses on the effects of the changing climate conditions in the relevant areas.
Unscheduled production stoppages
Risk description: Our environmental performance and financial results can both suffer from unplanned production disruptions, for example due to technical problems, injuries, accidents or strikes. The pandemic years also demonstrated the risk of production disruptions due to societal restrictions and disturbances in our supply chains.
Risk management: All Boliden units carry out preventive maintenance with the aim of minimizing the total cost for the Group. Major maintenance shutdowns are carried out every year in the smelting operations, while maintenance work forms an integral part of day-to-day operations in mines. The risk of unscheduled production stoppages are also managed through continuous evaluation of the Group’s insurance solutions.
Skills supply
Risk description: Competition for skilled labor is still increasing in many of the areas where we operate, as a result of the industrial sector growth in those regions. At the same time, a major technology shift is taking place, with an increase in digitalization, process development and automation, which risks leading to skills shortages in many different occupational groups.
Risk management: We work continuously to attract new employees with the right skills to join Boliden, for example by intensive employer branding activities directed to selected target groups. It is equally important to retain and develop current employees by systematically supporting career opportunities, providing development programs as well as working with people engagement. This is carried out both at the Group and unit levels within Boliden.
Cyber risks
Risk description: The risk of intrusion into the IT environment with ransomware or similar, which can bring IT systems to a halt, thus stopping production or other operations.
Risk management: Since 2021, Boliden has run a program to systematically raise its security level. The program, called B-secure, runs for three years and is based on the NIST (National Institute of Standars and Technology) framework, which includes identifying and protecting against intrusions, as well as detection, management and recovery in the event of an intrusion. The program addresses both administrative IT and production IT.
Legal risks
Risk description: Boliden’s operations are subject to extensive laws and regulations, both general and industry-specific in each of the geographical markets in which Boliden operates. There is a trend towards stricter regulation, in particular in the field of environmental law. Compliance with such laws and regulations or the enactment of new laws and regulations and changes to existing laws and regulations may impact Boliden and its operations. Regulatory approvals, such as environmental permits and exploitation concessions, are required in all countries where Boliden has mining or smelting operations. Accordingly, regular permit assessments are required and, if Boliden seeks to increase or change its operations, it must in some cases apply for new or amended permits covering the affected operations. Necessary permits not being awarded or renewed at relevant time or on reasonable terms may constitute a risk to the operations continuing without disruption, or require large investments or result in increased costs. There is also a risk that we may be involved in commercial or other legal proceedings.
Risk management: We monitor legal developments in relevant fields, and we implement, follow up and ensure compliance with applicable laws and regulations and our permit requirements on an ongoing basis. Boliden is an active member of domestic and foreign trade organizations and international and European organizations such as ICMM, the International Copper Association, the International Zinc Association, Euromines and Eurometaux, etc. and works through these channels to increase knowledge about our industry and to ensure conditions appropriate for it. Boliden is also a referral body for new rules, regulations and initiatives relating to the industry.
Non-compliance risks
Risk description: The Group may be exposed to legal or regulatory sanctions, material financial losses or damaged reputation as a result of any failure to follow applicable regulations.
Risk management: We put high emphasis on compliance with external laws and regulations and internal policies. Specific focus areas include Boliden’s Codes of Conduct for employees and business partners, as well as handling cases reported through Boliden’s whistleblower system. Anti-corruption, trade sanctions, human rights, combating money laundering and terrorist financing, the protection of personal data, and compliance with competition law and regulations are other priority areas.
Confidence
Risk description: Confidence in Boliden can be harmed by events such as serious incidents, or if employees or business partners fail to live up to business ethics and sustainability requirements.
Risk management: Since we seek to be associated with ethical, sustainable business partners, we conduct systematic evaluations of and monitor customers and suppliers, both potential and existing, on the basis of criteria linked to business ethics and sustainability. Before concluding agreements, we review new business partners on a number of parameters. They are expected to adopt Boliden’s Code of Conduct for business partners or undertake to comply with other relevant and generally accepted business standards before agreements are concluded, and where necessary, audits are carried out on suppliers’ premises to ensure compliance.
Political risks
Risk description: Political decisions may have effects on our operations. Examples of such decisions include permit application processes for the mining industry
Risk management: Boliden and the trade associations in which we participate often act as referral bodies for upcoming political decisions that affect our operations, and this allows us to spread knowledge and information so that any decisions affecting us or our industry are appropriate and reasonable.
Metal prices
Risk description: Changes to metal prices are a significant risk for Boliden’s profit and cash flow.
Risk management: Group policy is not to hedge metal prices, but rather to allow changes to be reflected in profits. However, we hedge smelter metal price exposure of payable metals in the period between the purchase of raw material and the sale of the corresponding metal.
Treatment charges
Risk description: Treatment charges are determined by the supply and demand for metal concentrates, which represents a risk since they constitute a large part of the smelters’ gross profit.
Risk management: Benchmark treatment charges are negotiated annually by the major players in the mining and smelting industries. These terms are applied to our internal purchases, and in most contracts with external metal concentrate suppliers.
Customers
Risk description: We are dependent on a few large customers for part of our product portfolio, and reduced demand from industrial customers would increase the risk of sales via the London Metal Exchange, resulting in reduced margins.
Risk management: We manage this risk through a diversified portfolio with long-term customer relationships and regard for exposure to different end-user segments. At the same time, there are plans in place to convert production to products suited to the London Metal Exchange, if necessary
Credit risks in trade receivables
Risk description: The risk that our customers fail to fulfill their obligations constitutes a credit risk.
Risk management: Boliden manages credit risks in trade receivables through an established credit rating process, active credit monitoring, short credit periods and, in certain cases, credit insurance. We have daily procedures for monitoring payments and we also constantly monitor the necessary provisions for expected credit losses
Raw materials supply
Risk description: A stable, reliable raw materials supply is needed to enable the smelters to produce at high levels of capacity utilization and consistent quality. The implementation of barriers to international trade in metal concentrates is a related ris
Risk management: We manage risks with raw materials supply through long-term contracts and relationships with reliable external suppliers of metal concentrate and secondary materials, who also demonstrate high performance in sustainability. We engage with suppliers and collect information on their greenhouse gas emissions to promote reduction measures and to plan for possible changes in future trade flows.
Supply of goods and services
Risk description: Our operations depend on an ongoing supply of equipment, consumables and services, and as a consequence, sensitivity to disruptions in suppliers’ production and supply chains is a risk for Boliden.
Risk management: We work actively to reduce price and supply risks by having multiple qualified suppliers in each category and area. In cases where there is only one supplier, we reduce the risk through buffer stocks and by identifying alternative supply solutions. In this regard, the organization’s ability to adapt rapidly has been a success factor.
Energy prices
Risk description: Since energy accounts for a significant part of operating costs, changes in energy prices constitute a significant risk for our financial performance.
Risk management: In Norway, Odda has a long-term electricity agreement with inflation adjusted pricing clauses. The contract portfolios in Sweden, Finland and Ireland have shorter terms and the Group is partly more exposed to market prices, which has had a negative impact on the operating profit. We anticipate continued high price volatility in the electricity market, which is partly managed through longer electricity contracts, activated in 2023 and 2024, in Sweden and Finland. At the same time, we analyze opportunities for long-term contracts on an ongoing basis.
Exchange rate and metal price risks
Risk description: Pricing terms for products are based mainly on metal exchanges, and ours are priced largely in USD. As a result, transaction exposure arises from binding undertakings to our customers and suppliers, where the cost of raw materials and exchange rates may differ from the final sales value, or in fixed price offers made in different currencies long before delivery. Changes in exchange rates and prices have a major impact on Boliden’s profit and cash flow.
Risk management: Transaction exposure in conjunction with binding undertakings are hedged while the smelters process inventories are not hedged. Forward exchange contracts are used to hedge the sales price and exchange rate when purchasing input raw material, or in fixed price sales agreements. We make constant calculations concerning the way in which changes in metal and exchange rate markets affect Boliden’s financial position. For major investments, the Group may enter into contracts to hedge forecasted sales from metal price and currencies. Future investment payments in currencies other than the local currency may be hedged under certain defined circumstances.
Currency risk in translation exposure
Risk description: A translation difference arises when converting net investments in overseas operations into SEK in conjunction with exchange rate fluctuations, which risks impacting other comprehensive income negatively within the Group.
Risk management: Under our finance policy, we do not actively eliminate the effect of translation exposure through equity hedging. However, if an external borrowing requirement exists, the liability in foreign currency is used as equity hedge against the foreign asset pool. The main borrowing currencies are SEK, EUR and NOK.
Interest rate risk
Risk description: Changes in market interest rates affect profits and cash flows.
Risk management: Our finance policy allows an average fixed interest term of up to four years.
Refinancing and liquidity risk
Risk description: There is a risk that Boliden will be unable to obtain the requisite financing or meet its payment obligations due to insufficient liquidity.
Risk management: We limit refinancing risk through diversification of counterparties, financing sources and maturities, and through good governance to ensure compliance with loan agreement terms. Current liquidity is available in the form of unutilized credit facilities and is reviewed regularly.
Credit risks and financial operations
Risk description: Credit and counterparty risk refers to the risk that a counterparty in a transaction may fail to fulfill their obligation, thus causing the Group to incur a loss.
Risk management: Our finance policy mandates a Standard & Poor’s credit rating of minimum “A” for financial counterparties when entering into new transactions, and sets a maximum deposit of cash and cash equivalents per counterparty.
