QUARTERLY REPORT, THIRD QUARTER 2021

Press release: Stockholm, October 15, 2021, 08.45 CET

HIGHLIGHTS OF THE THIRD QUARTER 2021

• Net sales was 83 MSEK (130)
• EBITDA was 13 MSEK (58)
• EBIT was -9 MSEK (40)
• Earnings per share was -0,07 SEK (0.18)
• Operative cashflow in Q3 was 14 (22) MSEK and cash and cash equivalents were 48 MSEK (30)
• Investments were 10 MSEK (4)
• The production was about 308 000 (433 000) ounces silver, 839 (923) ounces gold, 323 (419) tonnes lead, and 742 (818) tonnes zinc in concentrates
• Costs, i.e., supplies and other expenses, were 59 MSEK which was 3 MSEK lower than in Q3 last year. At the same time, processed ore volume increased almost by 13%.

Q1 – Q3 2021

• Net sales was 287 MSEK (287)
• EBITDA was 64 MSEK (67)
• EBIT was 1 MSEK (7)
• Earnings per share was -0.09 SEK (-0.13)
• Investments were 23 MSEK (18)
• The production was about 1 034 000 (1 231 000) ounces silver, 2 534 (2 996) ounces gold, 1 028 (1 202) tonnes lead, and 2 324 (2 497) tonnes zinc in concentrates

Comparative figures refer to the corresponding period of the previous year.

CEO ERKKI KURONEN

During the last few months, we have been in the middle of the transformation. As we all know, it is usually challenging and sometimes painful. By transformation, we want to change our way to operate to more long-sighted, remove silos, improve planning, and ultimately increase productivity and profitability. During the transformation we have faced low head grades at the plant due to the blending of ore with marginal ore. At the same time, we have managed to debottleneck our processing plant and enabled increase of the feed tons by over 25% during the times of low head grade. Through this development we have learned to process different metal grades efficiently. Looking forward, we are a lot more adaptable to ore grade and ore mix variance.

Our operative cashflow in Q3 was 14 MSEK and cash position at the end of the period was strong, 48 MSEK. Year to date operative cashflow has improved by 43 MSEK since the same period last year. The revenue of Q3 was 83 MSEK which included the negative impact of 6 MSEK due to the final price settlement from Q2 2021. As we have seen, it broadens the variance of the quarterly revenue and earnings.

Average silver grade of the period, 68 g/t, was heavily impacted by the above-mentioned use of the marginal ore. On the other hand, by being material efficient, our mining and processing costs per feed ore ton have reduced by 18 % compared to the previous quarter.

Surface drilling targeting to the levels between 550 to 700 meters depth commenced in September. Assay results of the earlier campaign will be utilised in the update and subsequent sign-off of the Mineral Resource estimate. We have engaged AFRY to act as an external auditor and they will sign-off the Mineral Resource estimate.

I look forward to work with our excellent team and wish all the best to our stakeholders.

BUSINESS

The Company operates the Silver Mine in Sotkamo, Finland. The production was started in March 2019 and the mine produces silver, gold, zinc, and lead in concentrates which are sold to a smelter. In addition, the Company holds mining and exploration rights to mineral deposits nearby current operations in Sotkamo region in Finland.

Net sales in Q3 was 83 MSEK compared to 130MSEK in the previous year Q3. The variance was partly due to the lower metal production but also impacted by the final price settlement mechanism which had a positive impact to the net sales in Q3 2020 (+14MSEK) and negative (-6MSEK) in Q3 2021.

Other income and expenses included -2 MSEK (1) unrealised final sales price adjustment for the period due to the slightly decreased metal prices after the period. The final sales price for silver and gold is based on monthly average market price two months after the delivery, deducted by the customer’s smelter charges.

Costs, i.e., supplies and other expenses, were 59 MSEK which was 3 MSEK lower than in Q3 last year and 7 MSEK lower than previous period, Q2 2021. At the same time, processed ore volume increased almost by 13% to 160 000 tonnes from 142 000 tonnes in Q3 2020 and 143 000 tonnes in previous quarter, Q2-2021.

Depreciation is based on the processed ore volume. Period’s higher ore volume was the key driver for higher depreciation.

The YTD financial net expenses were -19 MSEK (-29), in previous year the expenses were significantly higher due to unrealised FX loss of intra-group capital loans. The Company has classified the intra-group capital loans as net investment loans in Q4 2020 and since then FX currency rate change impact of intra-group capital loans have been booked directly to equity and it will not impact financial income and expenses in 2021.

Environmental investments in the tailings pond area and investments in the underground mine and in the concentrating plant amounted to 10 MSEK (4) in Q3 and 23 MSEK (18) in Q1-Q3 2021.

PRODUCTION AND GUIDANCE

In the third quarter, 160 000 (142 000) tonnes of ore were milled. In Q3 theCcompany produced about 308 000 (433 000) ounces silver, 839 (923) ounces gold, 323 (419) tonnes lead and 742 (818) tonnes zinc in concentrates. The metal grades of the mill feed were lower than in the reference period resulting lower metal production in the concentrates.

Year to date, the production was about 1 034 000 (1 231 000) ounces silver, 2 534 (2 996) ounces gold, 1 028 (1 202) tonnes lead and 2 324 (2 497) tonnes zinc in concentrates. Milled tonnes until the end of Q3 were about 442 000 (407 000).

We had high variance in the metal grades during the first half of the year. To overcome this, we started a transformation process during the third quarter. We have reviewed and revised our mine plan and scheduled and implemented new processes to model, schedule and predict mine production. To give time and enable the transformation, we have utilised our marginal ore stock and continued development work in the underground mine. The impact of the changes will materialize in the coming months.

The annual production guidance of 1.45-1.75 million ounces remains unchanged. However, we expect that the annual production will end up close to the lower limit of 1.45 million ounces.

EVENTS AFTER THE REPORTING PERIOD

No events after the reporting period.

FINANCIAL CALENDER 

• Q4 2021          17 February 2022

CONTACT PERSON

Erkki Kuronen, CEO of Sotkamo Silver AB, tel. +358 50 599 3539

This information is information that Sotkamo Silver AB is obliged to make public pursuant to the Swedish Financial Instruments Trading Act. The information was submitted for publication, through the agency of the contact persons set out above on October 15, 2021, at 08:45 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.

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

ISIN-code for Sotkamo Silver shares is SE0001057910.

Legal Entity Identifier (LEI): 213800R2TQW1OZGYDX93

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

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