Interim Report April–June 2023: Lower iron ore prices impact earnings
LKAB’s operating profit for the second quarter amounted to MSEK 2,257. Price levels for iron ore products fell during the quarter and as in the same period last year, operating profits was affected by significant scheduled maintenance shutdowns which resulted in low production and high costs.
Net sales for the second quarter totalled MSEK 9,350 (12,375), primarily affected by lower iron ore prices and delivery volumes. Operating profit amounted to MSEK 2,257 (5,719) and was also affected by higher costs during the quarter, mainly associated with price increases for energy and other inputs and with measures to secure production capacity.
Production for the quarter amounted to 5.3 (5.7) Mt and was affected by scheduled maintenance shutdowns, production disruptions and a shortage of crushed ore in Kiruna due to the seismic event in the Kiruna mine in 2020 that is still limiting production. Difficulties in transporting crushed ore from other mines have affected the quarter. During the summer extensive maintenance work was also carried out on the Ore Railway, further reducing transport capacity. The mining in Svappavaara therefore had to be curtailed during the summer.
“There is a risk that delivery capacity for our highly upgraded iron ore products will be limited due to the inadequacies of the Ore Railway, which is already a bottleneck that increases costs and reduces flexibility. This is particularly apparent during the maintenance work that takes place in the summer months and is something that we will unfortunately see worsen over time, if nothing changes,” says Jan Moström, President and CEO LKAB.
Delivery volumes for the quarter amounted to 5.8 (6.2) Mt and were affected primarily by lower production. The global spot price for iron ore products remains at high levels but is lower than in the same period last year. The average for the quarter was USD 111 (138) per tonne. Quoted pellet premiums for the quarter were around USD 30 per tonne lower than in the same period last year.
Significant steps for the transformation
During the quarter LKAB submitted an application for environmental permits required to begin the transformation in Gällivare. In addition to continued mining and upgrading activities, the application includes the establishment of HYBRIT’s first demo plant and an apatite plant for extracting phosphorus and rare earth elements from current waste streams.
“With today’s permitting processes there is unfortunately a risk that this will be a lengthy process, making it difficult to start up the new production as planned. The transformation begins in the mine and we have done a thorough job with our application. New record temperatures around the world are showing us all that the pace of transformation needs to be stepped up, not slowed down,” says Jan Moström.
LKAB also submitted its application for an exploitation concession for the Per Geijer deposit in Kiruna, Europe’s largest known deposit of rare earth elements, during the quarter. Further investigations have resulted in recognised mineral resources for rare earth oxides being increased by 25 percent to more than 1.3 million tonnes. Per Geijer is fundamentally an iron ore deposit with a high content of both phosphorus and rare earth elements. The concentrations of rare earth elements are 10 times higher than in the Kiruna ore that we are currently mining. If the exploitation concession is granted, it will be possible to continue developing the deposit and to prepare an application for an environmental permit.
This information constitutes information that Luossavaara-Kiirunavaara AB is required to disclose under Sweden’s Securities Markets Act. It was released for publication at 13.00 CEST on 14 August 2023.
Contact: Niklas Johansson, Senior Vice President Communication and Climate LKAB. Tel: +46 (0)10-144 52 19. E-mail: niklas1.johansson@lkab.com
LKAB is an international mining and minerals group that offers sustainable iron ore, minerals and special products. We are committed to developing carbon-free processes and products by 2045, leading the transformation of the iron and steel industry. Since 1890 we have developed through unique innovations and technological solutions and are driven forward by more than 4,500 employees in 12 countries. In 2021, the LKAB group had sales of about SEK 47 billion. www.lkab.com