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10 May 2019, Sweden | Mutual Funds | News

A visit to Garpenberg

The Garpenberg mine is situated in the municipality of Hedemora, in one of the oldest mining areas of Sweden still in operation. Ore extraction in the Garpenberg area began as early as the 13th century, and in the 14th century German miners were engaged to improve the mining techniques and make them more efficient. The locals called the Germans ‘garpar’, which later gave the town of Garpenberg its name.

I visited the mine, one of the most modern in the world, along with other investors. After a presentation of the mine and a safety briefing from General Manager Jenny Gotthardsson, I put on safety equipment and travelled down to a depth of 1,045 metres. The speed of the elevator was about 7 meters/second. Once at the bottom, we were picked up by a series of vehicles that drove us through the tunnels to the control room. The temperature down in the mine is slightly higher than normal room temperature and it smells of ammonia, which is a result of the two blasts that are detonated each day, one at 4:00 am and one at 4:00 pm. After each blasting, the mine is ventilated for about 2 hours. We get to meet two teams in the control room, one that handles the drilling and one that handles the loading of the ore. These operations are fully automated.

Image 1: Down at a depth of 1,045 metres, the ore is on its way up to the surface.

Boliden has owned the Garpenberg mine since 1957. During the 1990s, the mine’s continued survival hung by a thread due to low metal prices, resulting in very weak financial results. The big turnaround came at the start of this century, when no fewer than four new discoveries were made. The biggest, Lappberget, is second largest in Boliden’s history after Aitik.

The mine was producing around 300,000 tonnes of ore per year when Boliden took over, but output has since risen sharply to 2.6 million tonnes as a result of multiple investment programmes, and the company aims to achieve production at Garpenberg in excess of 3.0 million tonnes by 2020. Zinc, lead, copper, silver and gold are extracted from the ore now produced, and the Garpenberg mine currently accounts for about 1 percent of the world’s production of zinc and silver.    

Safety is the most important issue for the company, and Boliden’s investment in the mine has led to automated solutions that have made Garpenberg more reliable, environmentally friendly and cost-effective. The mine expansion has also secured jobs for a long time to come, which obviously benefits the local community. Boliden continues its efforts to develop the automation of its mines, and this is carried out together with a number of partners such as ABB, Epiroc, Ericsson, Sandvik and Volvo.

We have a positive view of Boliden as an investment because we are upbeat about metals due to rising demand. Meanwhile, not enough is being invested in new capacity and metal levels in the world’s mines are decreasing over time, which means that more ore has to be extracted to obtain the same amount of metal. Boliden is a quality company in the mining sector and, for example, is at the forefront of sustainability. Boliden is attractively valued, not least thanks to its automation and energy efficiency, a very strong balance sheet and a well-diversified mining and metal exposure that we appreciate.

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Martin Nilsson

Fund manager
Direct: +46 8 614 25 64

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