QUARTERLY REPORT, FIRST QUARTER 2020

Press release: Stockholm, 29 May 2020 9.45 CET

HIGHLIGHTS OF THE FIRST QUARTER 2020

• Net sales was 91 MSEK (0)
• EBITDA was 8 MSEK (-11)
• EBIT was -11 MSEK (-14)
• Earnings per share was 0.03 SEK (-0.12)
• Cash and cash equivalents were 10 MSEK (33)
• Investments were 9 MSEK (88)
• The production was about 391 000 ounces silver, 998 ounces gold, 462 tonnes lead, and 958 tonnes zinc in concentrates
• Milled tonnes were about 129 000 and average silver head grade 110 g/tonne
• Safety measurement LTIFR was 10
• The renegotiated secured bond of 13.2 MEUR strengthened company’s short-term cash position

Comparative figures refer to the corresponding period of the previous year.
 
CEO PAUL JOHNSSON

At the end of the quarter Sotkamo Silver celebrates a year in production, but it has also been a quarter that has changed the world with the effects of COVID-19. Operationally Sotkamo Silver has not been influenced in the same way as many other industries. Our staff has so far stayed healthy and production and deliveries have been going on as planned. We processed 129,000 tonnes of ore and produced about 391,000 Oz of silver.

The silver price has however dropped from levels above 17 USD/ Oz to as low as 12 USD/Oz and at the end of the reporting period stabilizing around 15 USD /Oz, which directly effects our revenues. The market environment has been unstable, and it has become clear that the future is hard to predict.

Sotkamo Silver will continue the work that begun at the end of 2019; to optimize the production flows and seeking cost savings in order to be profitable in a world with volatile prices. We are on a positive EBITDA level but need to work harder to obtain a positive EBIT as well.

The rights issue initiated during the first quarter was a success and was oversubscribed once completed in May. The funds raised from the issue will be welcome as cash reserve in these unstable times and will give a foundation for prolonging the life of mine.

 
BUSINESS

Sotkamo Silver AB owns, directly and through its subsidiary Sotkamo Silver Oy, mineral deposits containing silver, gold, zinc, and lead. The Company's main project is the Silver Mine in Sotkamo where the production has been running for one year.
 

   
The metal prices were fluctuating during Q1. Especially silver price was volatile, which affected the sales and profitability negatively. Price fluctuation decreased by the end of March. The high variance in the head grades and mining costs impacted also the company’s cash flows.

Sotkamo Silver has invested 9 MSEK (88) during Q1 2020 in the underground mine, the concentrating plant and the sorter development.

Financial income includes 27.7 MSEK intra-group loan valuations. It is a non-cash valuation item and has no cash flow impact.
 

PRODUCTION AND GUIDANCE

In the first quarter, 129 000 tonnes of ore were milled. During the first quarter, the company produced about 391 000 ounces silver, 998 ounces gold, 462 tonnes lead, and 958 tonnes zinc.

The annual production guidance of 13 March 2020 remains unchanged. Accordingly, we expect to process 480 – 540 kt of ore. Correspondingly, the silver production in 2020 is forecasted to be 1.4 - 1.7 million ounces. The production target is conditional to receiving of an updated environmental permit.

 
ANNUAL GENERAL MEETING

The following main decisions were made at the AGM on 2 April 2020:

The income statement and the balance sheet for both the parent company and the group regarding the financial year 2019 were adopted by the AGM. The AGM decided that no dividend would be paid out for the financial year 2019. The members of the Board and the CEO were granted discharge from liability for the financial year 2019.

The AGM decided that the Board would comprise of six ordinary members without deputy directors. Jarmo Vesanto, Ilkka Tuokko, Eeva-Liisa Virkkunen and Maria Neovius were re-elected as directors and Sixten Sunabacka and Karri Alameri were elected as directors. Eeva-Liisa Virkkunen was elected chairman of the Board.

The AGM resolved to re-elect the auditing company PWC until the end of the AGM 2021, with Anna Rosendal as the head auditor for the time being.

The guidelines for remuneration for the management and the procedure for appointing the members of the nomination committee were approved in accordance with the proposals from the Board.

The AGM approved the nomination committee’s proposal for annual fees to the Board.

The AGM approved the Board’s resolution on 27 February 2020 to issue new shares with preferential rights for existing shareholders with the following main terms:

•   Shareholders in Sotkamo Silver have preferential rights to subscribe for one (1) new share for every three (3) existing shares, i.e. a subscription ratio of 1:3.
   
•   The subscription price is set at 1.38 SEK per new share. Provided that the Rights Issue is fully subscribed, the company will receive approximately 62 MSEK in issue proceeds before the deduction of issue costs.
   
•   The record date for the Rights Issue is 14 April 2020 and the subscription period runs from 16 April to 5 May 2020.

The AGM resolved, for the period until the next AGM, to authorize the Board, at one or several occasions, to issue new shares or other financial instruments. The authorization is limited to a maximum dilution of twenty (20) percent of the total number of shares outstanding at the time of the first Board resolution in accordance with the authorization.
 

EVENTS AFTER THE REPORTING PERIOD

UPDATED TERMS AND CONDITIONS FOR CONVERTIBLES 2019/2020

15 April 2020 Sotkamo Silver and Formue Nord Markedsneutral A/S have, inter alia, agreed to postpone the maturity date of the loan and the period within which conversion can be made with one year. The new maturity date for the loan is 31 May 2021 and the new conversion period run from 1 May 2021 until 31 December 2021. As remuneration for prolonging the convertibles, Formue Nord Markedsneutral A/S receives a cash payment of 0.75 MSEK.
 

RIGHTS ISSUE COMPLETED WITH THE WARRANT ISSUE

11 May 2020 the Rights Issue was completed. In the Rights Issue, 36,593,195 shares, corresponding to approximately 81.3 percent of the Rights Issue, were subscribed for with the use of subscription rights. In addition, 17,555,412 shares, corresponding to approximately 39.0 percent of the Rights Issue, were subscribed for without the use of subscription rights. In total, the Rights Issue was subscribed to approximately 120.3 percent, which implies that Sotkamo Silver raises approximately 62 MSEK before deduction for issue costs. The subscription of 120.3 percent means that the guarantee commitments do not have to be utilized.

Through the Rights Issue, the company's share capital increases by 61,725,388.67 SEK from 185,176,166.01 SEK to 246,901,554.68 SEK and the number of shares increases by 44,994,433 shares from 134,983,299 shares to 179,977,732 shares. Thus, the dilution effect for shareholders who did not participate in the Rights Issue amounts to 25 percent.

Allotment of shares subscribed for without the use of subscription rights has been made in accordance with the principles set out in the prospectus that has been prepared in connection with the Rights Issue and published by the company on 15 April 2020. Notice of allotment is provided through the distribution of a settlement note by mail to the respective subscriber. Allotted shares shall be paid for in accordance with the instructions on the settlement note. Only those who are allotted shares will be notified.

Trading in paid subscribed shares (Sw. BTA) will continue on NGM Equity (SOSI BT) and Nasdaq Helsinki (SOSI1N0120) until the Rights Issue has been registered with the Swedish Companies Registration Office (Sw. Bolagsverket), which is expected to take place in May 2020.

One (1) 2020/2021 warrant will be obtained for every four (4) shares subscribed and paid for through the new share issue with preferential right for existing shareholders, which means that the company will transfer 11,246,583 warrants.  The warrants are issued without consideration. The warrants will be delivered separately once the new share issue has been fully registered by the Swedish Companies Registration Office. The warrants will be transferred only to those who have subscribed for, paid for and received shares in the Rights Issue and thus not to those who have bought BTAs on the secondary market.

Each warrant gives the holder the right to subscribe to one (1) new share in Sotkamo Silver at a subscription price of 2.00 SEK per share. The final EUR subscription price for subscription of new shares will be established on 30 April 2021. Subscription and simultaneous cash payment for new shares will take place during the period between 1 May 2021 and 28 May  2021.

At full exercise of the warrants, Sotkamo Silver will be provided with additional 22.5 MSEK before deduction of issue costs. Upon full exercise, the share capital will increase by 15,428,568.84 SEK, from 246,901,554.68 SEK to 262,330,123.52 SEK and the number of shares will increase with 11,246,583 shares from 179,977,732 shares to 191,224,315 shares.

Sotkamo Silver intends to apply for listing of the 2020/2021 warrants on NGM Equity and Nasdaq Helsinki. The warrants are expected to commence trading in mid-June 2020.
 

FINANCIAL CALENDER                

• Q2 on 5 August 2020
• Q3 on 28 October 2020
• Q4 and year-end report 2020 on 17 February 2021

The reports are available on the Company webpage: http://www.silver.fi/sivu/en/finansiella_rapporter/

The financial information in this press release has not been reviewed by Sotkamo Silver's auditors.

Contact person

Paul Johnsson, CEO of Sotkamo Silver AB, tel. +46 70 777 6976

The information was submitted for publication, through the agency of the contact persons set out above on 29 May 2020, at 9.45 CET. The official Stock Exchange Releases are given in Swedish and there may be differences in the translated versions. Should there be any differences, the Swedish version takes precedence.
 

ABOUT SOTKAMO SILVER AB

Sotkamo Silver´s business concept is to develop mineral deposits in the Nordic countries with regards to human society and environment. Sotkamo Silver owns through its subsidiary the Silver Mine in Sotkamo which started production in March 2019 and has reached full production capacity. In addition, the Company holds exploration rights to precious and base metal deposits in Finland, Sweden and Norway.

Sotkamo Silver applies SveMin's & FinnMin's own rules of reporting for public mining & exploration companies. Sotkamo Silver has chosen to publish mineral resources and ore reserves according to the internationally accepted JORC or NI 43-101 code. The company applies International Financial Reporting Standards (IFRS) as approved by the European Union.Legal Entity Identifier (LEI): 213800R2TQW1OZGYDX93

The ticker symbol is SOSI in NGM Equity in Stockholm and SOSI1 in NASDAQ Helsinki.

ISIN-code for Sotkamo Silver shares is SE0001057910.

Read more about Sotkamo Silver on www.silver.fi

The Company's press releases and financial reports are distributed via Cision Sverige and are available on www.silver.fi

 

The Company's press releases and financial reports are distributed via Cision Sverige and are available on www.silver.fi

Tags: