INTERIM REPORT Q3/2019 IN A VOLATILE MARKET · Q3 2019 Q3 2018 Q1–Q3 2019 Q1–Q3 2018 Full year 2018 Cash flow from operating activities before urban transformation expenditure

LKAB INTERIM REPORT Q3/2019 1

OPERATIONS – THIRD QUARTER

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales 3, 4 7,751 6,594 24,313 18,981 25,892

Operating profit/loss 3,135 2,477 9,764 4,969 6,869

Less: costs for urban transformation provisions 861 287 1,348 1,817 2,106

Underlying operating profit/loss 10 3,995 2,764 11,112 6,787 8,975

Net financial income/expense 139 35 1,069 605 -185

Profit/loss before tax 3,273 2,512 10,832 5,574 6,685

Profit/loss for the period 2,625 1,954 8,565 4,395 5,274

Operating cash flow 2,488 1,552 6,759 4,655 3,126

Investments in property, plant and equipment 677 475 1,638 1,831 2,455

Depreciation -691 -673 -2,096 -2,127 -2,857

Deliveries of iron ore products, Mt 5.5 6.9 18.4 20.1 26.8

Proportion of pellets, % 79 82 83 83 82

Production of iron ore products, Mt 7.3 6.8 20.0 20.2 26.9

Return on equity, % 10 23.1 14.6 14.1

Net debt/equity ratio, % 10 2.9 5.0 9.2

LKAB IN BRIEF |

7.3 MtProduced during the quarter

5.5 MtDelivered during the quarter

79%Percentage of pellets for the quarter

LKAB REMAINS STABLE IN A VOLATILE MARKET

INTERIM REPORT Q3/2019

It is pleasing

to see that our

work to achieve

more stable

production is

paying off. We are

reaching record

levels for a single

quarter and we

will continue to

focus on consistent

production.

• The production volume was at a record level for the quarter. However, delivery volumes were affected by the downturn in the market, with lower sales than in the same quarter last year.

• Operating profit for the third quarter increased to MSEK 3,135 (2,477), mainly due to higher prices for highly upgraded iron ore products and a stronger dollar exchange rate. Higher costs for urban transformation provisions had a negative impact on the quarter.

• At the start of the quarter the average global spot price1 for iron ore products was USD 125/tonne, but then fell to end the quarter at USD 93/tonne. The average price for the third quarter was USD 102 (67)/tonne, compared with USD 100/tonne in the second quarter of 2019. The quoted pellet premiums fell significantly during the quarter as a result of falling demand for steel.

• Operating cash flow for the third quarter was MSEK 2,488 (1,552). The improvement is primarily due to the increase in profit.

• The return on equity was 23.1 (14.6) percent.

• The net debt/equity ratio was 2.9 (5.0) percent.

1Platts IODEX 62% Fe CFR North China

In the third quarter net sales increased to MSEK 7,751 (6,594) compared with the same period last year and operating profit strengthened to MSEK 3,135 (2,477). The quarter was characterised by high and stable production, while a slowdown in the market led to lower delivery volumes and volatile iron ore prices.

LKAB INTERIM REPORT Q3/2019 2 GROUP |

LKAB – GROUP

NET SALES AND OPERATING PROFIT/LOSS

ANALYSIS OF CHANGE IN OPERATING PROFIT/LOSSMSEK

Q3 Q1–Q3

Operating profit 2018 2,477 4,969

Prices, iron ore 1,439 3,925

Currency effect, iron ore incl. hedging of accounts receivable 581 1,816

Volume and mix, iron ore -485 -792

Volume, price and currency, industrial minerals 19 86

Costs for urban transformation provisions -574 469

Depreciation -18 31

Other income and expenses -304 -741

Operating profit 2019 3,135 9,763

Net sales for the third quarter were 18 percent higher when compared year-on-year. The improvement is mainly due to higher prices for highly upgraded iron ore prod-ucts and a stronger dollar exchange rate. The average spot price for iron ore for the quarter was USD 102 (67)/tonne. Lower delivery volumes and higher costs for urban transformation provisions had an adverse effect on the quarter. Other costs for the quarter were also higher than in the same period last year – mainly as a result of investment in increased maintenance, higher costs for rock reinforcement and increased exploration.

Sales for the first nine months increased by 28 percent or MSEK 5,332 compared with the same period last year, mainly as a result of higher market prices and a stronger dollar exchange rate. Lower delivery volumes had a negative impact.

Operating profit for the first three quarters increased by MSEK 4,795 or 96 percent compared with the previous year. The cost level for the quarter, excluding provisions for urban transformation and volume effects, was higher than in the same period last year – mainly as a result of investment in increased maintenance, higher costs for rock reinforcement and increased exploration.

CASH FLOW

MSEKQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Cash flow from operating activities before urban transformation expenditure and changes in working capital 3,551 2,784 11,837 7,896 9,430

Expenditure for urban transformation -528 -445 -2,109 -1,091 -1,871

Cash flow from operating activities before changes in working capital 3,023 2,339 9,728 6,805 7,559

Change in working capital 87 -316 -1,276 -325 -831

Capital expenditures (net) -571 -471 -1,513 -1,825 -2,446

Acquisition of subsidiaries -39 -1,146

Acquisition/divestment of financial assets -51 -141 -11

Operating cash flow 2,488 1,552 6,759 4,655 3,126

Operating cash flow for the third quarter was MSEK 2,488 (1,552), mainly due to the positive effects of stronger earnings, lower levels of accounts receivable and lower capital expenditure. Higher expenditure on urban transformation and increased capital tied up in stocks of finished products had a negative impact.

Operating cash flow for January – September amounted to MSEK 6,759 (4,655), positively impacted by stronger earnings and lower capital expenditure. Higher expenditure on urban transformation and increased accounts receivables had a negative effect.

NET SALES AND OPERATING PROFIT/LOSS Net sales 2019 Net sales Operating profit/loss

RETURN ON EQUITY Rolling 12 months Target return on equity

OPERATING CASH FLOW Operating cash flow 2019 Operating cash flow

-10

-5

0

5

10

15

20

25

Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4

%

2016 2017 2018 2019

-3,200

-1,600

0

1,600

3,200

4,800

6,400

8,000

9,600


MSEK

2016 2017 2018 2019

-2,000-1,500-1,000

-5000

5001,0001,5002,0002,5003,0003,500


MSEK

2016 2017 2018 2019

LKAB INTERIM REPORT Q3/2019 3 GROUP |

LKAB – GROUP

NET FINANCIAL INCOME/EXPENSE AND NET FINANCIAL INDEBTEDNESSNet financial income/expense was MSEK 139 (35) for the third quarter and MSEK 1,069 (605) for January – September, with positive stock market development in the first quarter having a positive effect on financial investments when compared year-on-year.

The net debt/equity ratio was 2.9 (5.0) percent, which is mainly due to increased equity as a result of the strong earnings for the period.

CREDIT FACILITIES

MSEK NominalUtilised

(nominal) Available

Commercial paper programme, maturing within one year 5,000 400 4,600

Bond programme 7,000 4,009

Maturing December 2019 1,991

Maturing June 2021 1,000

Other bond financing, maturing 2022 250 250

Credit facility 5,000 5,000

Total 17,250 3,641 13,609

There were no changes to nominal credit facilities during the quarter. All credit facilities are subject to 100 percent retention of title.

SUSTAINABLE DEVELOPMENTSustainability is central to LKAB’s strategy. Securing access to ore after 2030, when the current main haulage levels are expected to be mined out, is the basis for the next generation of LKAB – which is why exploration work has continued to have a high priority. LKAB is conducting extensive development programmes aimed at sustainable future mining and steelmaking processes. Four different sub-projects are being conducted under the Sustainable Underground Mining (SUM) umbrella, including a project to develop autonomous, smart, carbon-free vehicles for within the mine. As part of the Hydrogen Ironmaking Breakthrough (HYBRIT) initiative, a pilot facility is being constructed in Luleå to produce hydrogen for use in testing direct reduction of iron ore. The pilot facility is scheduled for completion by next summer.

At the UN Climate Summit held in New York during the quarter HYBRIT was noted as one of the most ambitious and most transformative initiatives for dealing with climate change. During the summer construction also began on a pilot facility in Malmberget for testing fossil-free pellets. The building of pilot facilities for ReeMAP has also begun, the aim being to use residual products from mining iron ore to extract rare earth elements and phosphorous products.

OUTLOOK FOR 2019 The steel industry in Europe and the MENA region is affected by a slowdown in demand. Steel prices have been pushed down and the steelmakers’ profitability has deteriorated considerably. Steelmakers have scaled back their capacity and are prioritising purchases of cheaper iron ore of lower quality, which could affect LKAB’s delivery volumes.

LKAB is continuing to focus on stability, profitability and productivity improve-ments in order to enhance competitiveness.

Work on the urban transformation is in an intensive phase with an increased number of acquisitions as well as the construction of new replacement properties for property owners, resulting in increased expenditure over the year.

NET FINANCIAL INDEBTEDNESS

Net financial indebtedness

NET DEBT/EQUITY RATIO

Net debt/equity ratio Target range for net debt/equity ratio, 0–30%

MSEK

%

Risks and uncertainties

LKAB is exposed to various risks. Risk management plays a vital part in minimising the impact of factors that lie beyond the Group’s control. The Group employs methods for evaluating and limiting these risks by ensuring that they are managed according to approved guidelines and methods.

LKAB works actively to identify, analyse and control how various types of risks affect the business and how LKAB can best avoid or confront them. Effective risk management is a business-critical success factor.

Major risks include securing mineral reserves, access to land for the mining operations, volume dependency, the price of iron ore products and transaction exposure in USD.

For further information concerning risks, please refer to LKAB’s 2018 Annual Report.

-10

-5

0

5

10

15

20

25

30


2016 2017 2018 2019

-4,000

-2,000

0

2,000

4,000

6,000

8,000


2016 2017 2018 2019


THE STEEL AND IRON ORE MARKET

The global steel and iron ore industryGlobal production of crude steel increased in the period July – August by 2.6 percent compared with the same period last year. During the quarter steel prices continued to fall. China’s steel exports decreased compared with the previous quarter, and compared with the same quarter the previous year decreased by 10.2 percent.

The third quarter was characterised by volatile iron ore prices and by substantial decreases in quality premiums and pellet premiums. Continued decreases in steel prices and smaller margins for steelmakers resulted in profit warnings and decreased production. In Europe production of crude steel decreased in the period July – August by -1.2 percent.

Falling steel prices and steelmakers’ shrinking margins have slowed down demand, particularly for high quality iron ore products.

Iron ore spot price developmentsAt the beginning of the third quarter the spot price for IODEX 62% Fe was around 125 USD/tonne, but then fell substantially during August. The lowest quoted price during the quarter was USD 82/tonne and it ended the quarter at USD 93/tonne. The average price for the quarter was USD 102/tonne, which was USD 2/tonne higher than in the preceding quarter. Quoted pellet premiums for blast furnace pellets and DR pellets decreased substantially during the quarter to USD 40/tonne and USD 45/tonne respectively. The pellet premium in China also fell and was quoted at USD 17/tonne at the end of the quarter, a decrease of USD 6/tonne compared with the previous quarter. The price difference between Platts IODEX 65% Fe and 62% Fe decreased during the quarter from USD 10/tonne to USD 6/tonne at the end of the quarter. The average for the quarter was USD 8/tonne, a decrease of USD 7/tonne compared with the preceding quarter.

Steelmakers’ squeezed margins com-bined with high iron ore prices at the start of the quarter contributed to a market climate that favoured cheap iron ore prod-ucts at the expense of high quality iron ore products.

MARKET DEVELOPMENT |

MARKET DEVELOPMENT

THE DEVELOPMENT OF THE SPOT PRICE FOR IRON ORE AND QUOTED PELLET PREMIUMS

1 October 2014 – 30 September 2019

USD/tonne

Source: PLATTS

USD/SEK

CHANGES IN THE DOLLAR EXCHANGE RATE

1 October 2014 – 30 September 2019

Source: Nasdaq

20

40

60

80

100

120

201920182017201620152014

7

8

9

10

201920182017201620152014

Dollar rate

Price 62% Fe DR pellet premium Atlantic basin bf pellet premium


The Northern Division encompasses the mines and processing plants in Kiruna, as well as rail freight services and the ports in Narvik and Luleå.

OPERATIONS SUMMARY

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales 3, 4 3,767 3,718 13,095 10,573 14,416


Less: costs for urban transformation provisions 432 292 914 1,615 1,914


Investments in property, plant and equipment 327 163 758 652 850

Depreciation -413 -424 -1,254 -1,388 -1,848




Production volumes for the third quarter increased by 0.2 Mt year-on-year, mainly as an effect of fewer production disruptions in the pelletising plants. Deliveries de-creased by 1.4 Mt as a result of reduced demand for highly upgraded iron ore prod-ucts and amounted to 2.6 (4.0) Mt with the proportion of pellets at 85 (87) percent.

Sales for the third quarter were somewhat higher when compared year-on-year. High prices for highly upgraded iron ore products and a higher dollar exchange rate were countered by a lower delivery volume and a lower proportion of pellets.

Operating profit for the third quarter amounted to MSEK 1,933 (1,572), with costs mainly impacted by the lower delivery volumes and increased provisions for urban transformation.

In the first nine months 10.9 (11.0) Mt of finished products were produced. The lower production volumes are mainly due to production disruptions in the pelletising plants in the first quarter. Delivery volumes were affected by lower sales during the summer and amounted to 9.7 (11.1) Mt.

Sales for January–September were higher than in the same period last year, mainly thanks to higher market prices for iron ore and a stronger dollar exchange rate. Lower delivery volumes had a negative impact.

Operating profit for the period was higher than in the same period last year, mainly affected by increased sales, decreased costs for urban transformation provisions and lower delivery volumes.

As of 1 June the logistics operations have been incorporated into the Northern Division, which now includes rail freight services, the terminals in Kiruna, Svappa-vaara and Malmberget, and the ports in Narvik and Luleå. Previously the logistics operations were part of the Sales and Logistics unit under Other Segments. Earlier periods have been restated in accordance with the change.

NORTHERN DIVISION |

NORTHERN DIVISION

• The Northern Division mines and processes iron ore products in Kiruna.

• The mining takes place in the Kiruna underground mine. The current main haulage level is 1,365 metres under-ground.

• The ore is processed above ground in three concentrating plants and three pelletising plants.

• The Northern Division produces both blast furnace pellets and pellets for steelmaking via direct reduction, known as DR pellets.

• The processed iron ore products are transported along the Malmbanan and Ofotbanen ore railway to the port in Narvik, for shipment to steel mill customers around the world.

• The iron ore operations have a sales organisation for the markets in Europe, Asia and the Middle East.

FACTS

PRODUCTION OF IRON ORE PRODUCTS (kt)Northern Division

2019 2018

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Q4Q3Q2Q1

LKAB INTERIM REPORT Q3/2019 6 SOUTHERN DIVISION |

SOUTHERN DIVISION

The Southern Division covers mines and processing plants in Malmberget and Svappavaara.

OPERATIONS SUMMARY

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales 3, 4 3,739 2,621 10,408 7,914 10,534

Operating profit/loss 1,379 885 3,641 2,113 2,799

Less: Costs for urban transformation provisions 429 -5 434 203 192

Underlying operating profit/loss 10 1,808 880 4,074 2,315 2,991

Investments in property, plant and equipment 293 235 765 868 1,151

Depreciation -224 -224 -679 -664 -903

Deliveries of ironore products, Mt 2.9 2.9 8.6 8.9 11.6



The production volume for the third quarter reached a record level of 3.4 (3.1) Mt. Deliveries were on a par with the same period last year and amounted to 2.9 (2.9) Mt, with the proportion of pellets at 74 (76) percent.

Sales for the third quarter increased by 43 percent year-on-year, mainly because of higher prices for highly upgraded iron ore products and a higher dollar exchange rate.

Operating profit for the third quarter was MSEK 1,378 (885), mainly as a result of higher sales. Earnings were negatively affected by increased costs for urban transformation provisions, increased maintenance work in the processing plants, higher costs for crushed ore and increased costs for rock reinforcement.

The production volume for the first nine months was somewhat lower than in the same period last year and amounted to 9.1 (9.2) Mt, mainly due to the long maintenance shutdown in Svappavaara at the start of the year. Lower production volumes and sales affected delivery volumes, which amounted to 8.6 (8.9) Mt with the proportion of pellets at 77 (80) percent.

Sales for January – September increased by 32 percent, mainly as a result of higher prices for highly upgraded iron ore products and a stronger dollar exchange rate. Lower delivery volumes, higher costs for urban transformation provisions, increased maintenance work in the processing plants, increased costs for rock reinforcement and higher prices for crushed ore had a negative effect. Operating profit for January – September increased by 72 percent and amounted to MSEK 3,641 (2,113).

• The Southern Division mines and pro-cesses iron ore products in Malmberget and Svappavaara.

• The mining takes place in Malmberget’s underground mine and the Svappavaara open-pit mines.

• Magnetite is mainly mined in the Malmberget mine, but also hematite. The mine has around 20 orebodies, of which around 10 are currently mined.

• In Svappavaara ore is mined in the Leveäniemi open-pit mine. Mining at Gruvberget ended in March 2018.

• The ore is processed above ground in two concentrating and pelletising plants in Malmberget and in one concentrating and pelletising plant in Svappavaara.

• The Southern Division produces both blast furnace pellets and pellets for steelmaking via direct reduction, known as DR pellets, as well as fines.

• The processed iron ore products are transported along the Malmbanan ore railway, mainly to the port in Luleå and on to European steel mill customers.

• The iron ore operations have a sales organisation for the markets in Europe, Asia and the Middle East.

PRODUCTION OF IRON ORE PRODUCTS (kt)Southern Division

2019 2018

FACTS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Q4Q3Q2Q1

LKAB INTERIM REPORT Q3/2019 7 SPECIAL PRODUCTS DIVISION |

SPECIAL PRODUCTS DIVISION

The Special Products Division develops products and services for markets involving industrial minerals, water-powered drilling technology, engineering services and mining and construction contracts. The division is also a strategic supplier within the LKAB Group.

OPERATIONS SUMMARY

MSEK Note Q3

2019 Q3

2018 Q1–Q3

2019Q1–Q3

2018 Full year

2018

Net sales 3, 4 1,219 924 3,563 2,714 3,806

Operating profit/loss 89 98 275 254 330


Depreciation -37 -14 -112 -42 -62

Net sales for the third quarter increased by 32 percent in a year-on-year comparison. The increase is mainly attributable to the acquisition of the UK industrial minerals company Francis Flower, completed in December 2018. Some of the division’s prod-ucts and services for the Northern Division and Southern Division were at a lower level than in the same quarter last year. For instance, the proportion of crushed material was lower, which had a negative effect on operating profit.

Accumulated net sales were 31 percent higher than in the same period last year, amounting to MSEK 3,563 (2,714). The increase is largely due to the acquisition of Francis Flower. Operating profit increased by eight percent compared with the previous year and amounted to MSEK 275 (254).

Capital expenditure and depreciation increased during the year, mainly as an effect of the acquisition of Francis Flower, but the division’s increased assignments for the mines in Malmberget and Kiruna also affected the level of investment.

• The Special Products Division covers LKAB Minerals, LKAB Wassara, LKAB Berg & Betong, LKAB Kimit and LKAB Mekaniska.

• LKAB Minerals is active in the industrial minerals market, with a leading position in areas such as construction, plastics, paint, agriculture and the chemicals industry. It offers a broad portfolio of products that includes minerals from its own deposits, such as magnetite; recycled products, e.g. from blast furnace slag and other industries; as well as other minerals that it sources and processes. LKAB Minerals has sales offices and produc-tion units in Europe, the US and Asia.

• LKAB Wassara develops and man-ufactures water-powered precision drilling systems for mining, construc-tion and exploration drilling as well as dam building and geothermal energy. Customers are located throughout the world.

• LKAB Berg & Betong is a leading provider of full service solutions for the mining and construction industries. LKAB Berg & Betong is also the world’s largest producer of sprayed concrete.

• LKAB Kimit supplies explosives to the mining and construction industries.

• LKAB Mekaniska is a quality-conscious engineering company offering services throughout the supply chain, from planning and design to final inspection.

FACTS

LKAB INTERIM REPORT Q3/2019 8 OTHER SEGMENTS AND PARENT COMPANY |

OTHER SEGMENTS

OPERATIONS SUMMARY

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales excl. hedging 23 22 52 74 128

Net sales hedging -51 3 -148 -69 -80

Total net sales 3, 4 -28 25 -96 5 47

Operating profit/loss -235 -83 -721 -429 -540


Depreciation -17 -11 -52 -33 -44

The lower operating profit for the quarter and for the first nine months is mainly due to increased investment in exploration and a negative result for currency hedging activities. Under LKAB’s hedging strategy, price and currency risk in the Group’s forecast sales are not normally hedged. Currency effects on outstanding accounts receivable are hedged, however.

Logistics operations, which previously fell under Other Segments, are included in the Northern Division with effect from 1 June. Earlier periods have been restated in accordance with the change.

1 Group-wide functions within Other Segments mainly refers to the Group functions for HR, communication and finance, as well as strategic R&D and exploration.

PARENT COMPANY

The Parent Company LKAB consists of the Northern Division and the Southern Division and the group-wide functions reported under Other Segments. The Parent Company includes the majority of LKAB’s operating activities as well as the Group’s financial activities.

OPERATIONS SUMMARY

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales 7,046 6,171 22,311 17,772 24,194


Less: costs for urban transformation provisions 861 287 1,348 1,817 2,106


Investments in property, plant and equipment 612 416 1,423 1,714 2,256

Depreciation -528 -531 -1,601 -1,703 -2,272



Other Segments covers supporting operations such as Group-wide functions1 and certain operations that are run as subsidiaries. Other Segments also covers financial operations, including transactions and gains/losses relating to financial hedging for foreign currencies and purchases of electricity.

LKAB INTERIM REPORT Q3/2019 9 SIGNATURES |

SIGNATURES

FINANCIAL INFORMATION

Year-end Report 2019 12 February 2020

Annual and Sustainability Report 2019 26 March 2020

Interim Report Q1 2020 23 April 2020

Annual General Meeting 23 April 2020

Luleå, 24 October 2019Luossavaara-Kiirunavaara AB (publ)

Jan MoströmPresident and CEO

Reports are available at www.lkab.com

Any questions concerning the Interim Report may be directed to Jan Moström, President and CEO, or to Peter Hansson, Senior Vice President, Finance, +46 920 381 00.

LKAB INTERIM REPORT Q3/2019 10 AUDITOR’S REVIEW REPORT |

AUDITOR’S REVIEW REPORT

IntroductionWe have reviewed the condensed interim financial information (interim report) of Luossavaara- Kiirunavaara AB (publ) as of 30 September 2019 and for the nine-month period then ended. The Board of Directors and the Managing Director are responsible for the preparation and presen - tation of this interim financial report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of reviewWe conducted our review in accordance with the International Standard on Review Engagements ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and other generally accepted auditing practices and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

ConclusionBased on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, for the Group in accordance with IAS 34 and the Annual Accounts Act, and for the Parent Company in accordance with the Annual Accounts Act.

Luleå, 24 October 2019KPMG AB

Helena Arvidsson ÄlgneAuthorised Public Accountant

LKAB INTERIM REPORT Q3/2019 11 LKAB – GROUP |

LKAB – GROUP

STATEMENT OF INCOME

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales 3, 4 7,751 6,594 24,313 18,981 25,892

Cost of goods sold -4,346 -3,909 -13,642 -13,194 -17,989

Gross profit/loss 3,405 2,685 10,671 5,786 7,903

Selling expenses -36 -26 -109 -116 -135

Administrative expenses -117 -99 -402 -372 -478

Research and development expenses -124 -80 -360 -266 -386

Other operating income 101 82 273 225 382

Other operating expenses -94 -85 -310 -288 -416

Operating profit/loss 3 3,135 2,477 9,764 4,969 6,869

Financial income 231 91 1,300 779 429

Financial expense -92 -56 -231 -174 -614

Net financial income/expense 139 35 1,069 605 -185


Tax -648 -558 -2,267 -1,1791 -1,4111


Attributable to Parent Company shareholders 2,625 1,954 8,565 4,395 5,274

Earnings per share before and after dilution (SEK) 3,750 2,791 12,236 6,279 7,534

Number of shares 700,000 700,000 700,000 700,000 700,000

STATEMENT OF COMPREHENSIVE INCOME

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018


Other comprehensive income for the period

Items that will not be reclassified to profit/loss for the year

Remeasurement of defined-benefit pension plans -131 -27 -408 61 -20

Tax attributable to actuarial gains and losses 27 5 84 -13 -9

Total items that will not be reclassified to profit/loss for the year

-104 -22 -324 48 -29

Items that have been or may be reclassified subsequently to profit/loss for the year

Gains/losses on translation of foreign entities for the period -28 -53 163 245 60

Change in fair value of available-for-sale financial assets for the period

-102 54 -43 -9 -304

Changes in fair value of cash flow hedges for the period 9 7 -13 108 140

Changes in fair value of cash flow hedges transferred to profit/loss for the year

-2 -30 -65 -2 -6

Tax attributable to components of cash flow hedges -2 5 17 -23 -29

Total items reclassified to profit or loss -125 -17 59 319 -139

Other comprehensive income for the period -229 -39 -265 367 -168

Total comprehensive income for the period attributable to the Parent Company shareholders

2,396 1,914 8,300 4,762 5,106

1Includes positive remeasurement effects of MSEK 99 resulting from the decision to change the corporate tax rate in Sweden with effect from 2019.


LKAB – GROUP

STATEMENT OF FINANCIAL POSITION

MSEK Note 30 Sep 2019 30 Sep 2018 31 Dec 2018

ASSETS

Non-current assets

Intangible assets 5 1,403 207 1,326

Property, plant and equipment for operations 30,941 30,819 30,776

Property, plant and equipment for urban transformation 8,422 7,338 7,376

Interests in associates and joint ventures 93 39 31

Financial investments 6 971 1,331 1,026

Non-current receivables 102 2 2

Deferred tax asset 3 29 25

Total non-current assets 41,936 39,766 40,562

Current assets

Inventories 4,312 3,387 3,344

Accounts receivable 3,196 2,004 2,217

Prepaid expenses and accrued income 184 184 251

Other current receivables 1,543 1,201 1,544

Current investments 6 27,959 21,531 18,753

Cash and cash equivalents 6 3,335 5,866 2,290

Total current assets 40,530 34,173 28,399

TOTAL ASSETS 82,466 73,939 68,961

EQUITY AND LIABILITIES

Equity

Share capital 700 700 700

Reserves 445 844 386

Retained earnings incl. profit/loss for the year 42,557 36,685 37,487

Equity attributable to Parent Company shareholders 43,702 38,228 38,573

Total equity 43,702 38,228 38,573

Non-current liabilities

Non-current interest-bearing liabilities 1,608 3,236 1,247

Other non-current liabilities 1 11

Provisions for pensions and similar commitments 2,088 1,561 1,647

Provisions, urban transformation 14,204 14,178 14,378

Other provisions 1,236 1,249 1,219

Deferred tax liabilities 1,606 1,900 1,538

Total non-current liabilities 20,741 22,125 20,040

Current liabilities

Current interest-bearing liabilities 10,551 6,465 3,756

Trade payables 1,790 1,439 1,581

Tax liabilities 175 22 156

Other current liabilities 435 566 320

Accrued expenses and deferred income 1,130 1,065 1,087


Other provisions 236 129 199

Total current liabilities 18,022 13,586 10,347

Total liabilities 38,763 35,711 30,388

TOTAL EQUITY AND LIABILITIES 82,466 73,939 68,961


LKAB – GROUP

STATEMENT OF CHANGES IN EQUITY

Equity attributable to Parent Company shareholders

Reserves

2018MSEK Share capital

Translation reserve

Fair value reserve

Hedging reserve

Retained earnings

including profit/loss for the year

Total equity

Opening equity 1 Jan 2018 700 -222 754 -7 35,124 36,348

Profit/loss for the year 5,274 5,274

Other comprehensive income for the year 60 -304 105 -29 -168

Comprehensive income for the year 60 -304 105 5,245 5,106

Dividend -2,882 -2,882

Closing equity 31 Dec 2018 700 -162 450 98 37,487 38,573


Reserves


Translation reserve

Fair value reserve

Hedging reserve incl. hedging cost

reserve

Retained earnings


Total equity

Opening equity 1 Jan 2019 700 -162 450 98 37,487 38,573

Adjustment for IFRS 16, after tax -7 -7


Other comprehensive income for the year 163 -43 -61 -324 -265

Comprehensive income for the year 163 -43 -61 8,241 8,300

Dividend -3,164 -3,164

Closing equity 30 Sep 2019 700 1 407 37 42,557 43,702


Reserves


Translation reserve

Fair value reserve

Hedging reserve incl. hedging cost

reserve

Retained earnings


Total equity

Opening equity 1 Jan 2018 700 -222 754 -7 35,124 36,348


Other comprehensive income for the year 245 -9 83 48 367

Comprehensive income for the year 245 -9 83 4,443 4,762

Dividend -2,882 -2,882

Closing equity 30 Sep 2018 700 23 745 76 36,685 38,228


LKAB – GROUP

STATEMENT OF CASH FLOWS

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Operating activities


Adjustment for items not included in cash flow 1,493 956 3,445 4,011 4,988

Income tax paid -1,212 -684 -2,428 -1,688 -2,228

Expenditures, urban transformation -528 -445 -2,109 -1,091 -1,871

Expenditures, other provisions -3 -11 -1 -14

Cash flow from operating activities before changes in working capital 3,023 2,339 9,728 6,805 7,559

Cash flow from changes in working capital

Increase (-)/Decrease (+) in inventories -860 -412 -968 -785 -702

Increase (-)/Decrease (+) in operating receivables 554 165 -695 100 -331

Increase (+)/Decrease (-) in operating liabilities 394 -69 387 360 202

Change in working capital 87 -316 -1,276 -325 -831

Cash flow from operating activities 3,111 2,023 8,452 6,480 6,729

Investing activities

Acquisition of property, plant and equipment -677 -475 -1,638 -1,831 -2,455

Disposal of property, plant and equipment 105 5 125 6 9

Acquisition of subsidiaries 5 -39 -1,146

Acquisition/disposal of other financial assets -51 -141 -11

Disposals/acquisitions (net) in current investments -1,288 802 -9,206 -3,490 -712

Cash flow from investing activities -1,911 331 -10,898 -5,315 -4,315

Financing activities

Repayments/borrowing repurchase agreements -231 -633 6,509 5,529 833

Borrowing 209 210

Redemption of loans upon business combination -128

Repayment of lease liabilities -25 -74

Dividends paid to Parent Company shareholders -3,164 -2,882 -2,882

Cash flow from financing activities -46 -633 3,481 2,647 -2,177

Cash flow for the period 1,154 1,721 1,035 3,812 237

Cash and cash equivalents at start of period 2,177 4,146 2,290 2,051 2,051

Exchange difference in cash and cash equivalents 5 -1 10 3 3

Cash and cash equivalents at end of period 3,335 5,866 3,335 5,866 2,290

Change in cash and cash equivalents 1,154 1,721 1,034 3,812 237

Sub-components of cash and cash equivalents

Cash and bank balances 3,335 5,816 3,335 5,816 2,190

Current investments (maturity <90 days) 50 50 100

Cash and cash equivalents 3,335 5,866 3,335 5,866 2,290

Consolidated operating cash flowCash flow from operating activities 3,111 2,023 8,452 6,480 6,729

Acquisition of property, plant and equipment -677 -475 -1,638 -1,831 -2,455

Disposal of property, plant and equipment 105 5 125 6 9

Acquisition of subsidiaries -39 -1,146

Acquisition/disposal of other financial assets -51 -141 -11

Operating cash flow (excluding current investments) 2,488 1,552 6,759 4,655 3,126

Disposals/acquisitions (net) in current investments -1,288 802 -9,206 -3,490 -712

Cash flow after investing activities 1,200 2,354 -2,446 1,165 2,414

Cash flow from financing activities -46 -633 3,481 2,647 -2,177

Cash flow for the period 1,154 1,721 1,035 3,812 237

LKAB INTERIM REPORT Q3/2019 15 LKAB – PARENT COMPANY |

LKAB – PARENT COMPANY

INCOME STATEMENT

MSEK NoteQ3

2019Q3

2018Q1–Q3

2019Q1–Q3

2018Full year

2018

Net sales 7,046 6,171 22,311 17,772 24,194

Cost of goods sold -3,866 -3,741 -12,384 -12,759 -17,309

Gross profit/loss 3,180 2,430 9,928 5,014 6,885

Selling expenses -7 -8 -21 -54 -38

Administrative expenses -68 -69 -250 -237 -305

Research and development expenses -121 -71 -348 -249 -372

Other operating income 32 12 49 22 29

Other operating expenses -10 -4 -34 -22 -37


Profit/loss from financial items 131 -78 579 1,433 1,142

Profit/loss after financial items 3,136 2,213 9,902 5,909 7,304

Appropriations 2,093


Tax -620 -494 -2,068 -1,2212 -2,0222

Profit/loss for the period1 2,516 1,719 7,833 4,688 7,376

1 Profit/loss for the period corresponds to comprehensive income for the period. 2 Includes negative remeasurement effects of MSEK 70 resulting from the decision to change the corporate tax rate in Sweden with effect from 2019.



BALANCE SHEET


ASSETS

Non-current assets

Intangible assets 72 72 72

Property, plant and equipment for operations 25,273 25,693 25,624

Property, plant and equipment for urban transformation 8,422 7,338 7,376

Financial assets

Interests in subsidiaries 2,388 2,390 2,388

Interests in associates and jointly controlled entities 94 41 32

Receivables from subsidiaries 3,766 2,601 3,874

Other non-current securities 203 248 248

Other non-current receivables 213 114 115

Deferred tax asset 1,594 1,747 1,594

Total financial assets 8,257 7,141 8,251

Total non-current assets 42,026 40,244 41,323

Current assets

Inventories 3,612 2,765 2,622

Current receivables

Accounts receivable 2,595 1,630 1,848

Receivables from subsidiaries 161 145 619

Other current receivables 1,404 1,029 1,303

Prepaid expenses and accrued income 109 115 131

Total current receivables 4,269 2,918 3,901

Current investments 27,119 20,943 18,826

Cash and bank balances 2,745 5,408 1,767

Total current assets 37,744 32,034 27,115

TOTAL ASSETS 79,770 72,278 68,438



BALANCE SHEET


TOTAL EQUITY AND LIABILITIES

Equity

Restricted equity

Share capital (700,000 shares) 700 700 700

Statutory reserve 697 697 697

Non-restricted equity

Profit/loss brought forward 21,896 17,684 17,684

Profit/loss for the period 7,833 4,688 7,376

Total equity 31,126 23,769 26,457

Untaxed reserves 13,650 15,263 13,650

Provisions


Other provisions 1,433 1,510 1,452

Total provisions 15,637 15,687 15,831

Non-current liabilities

Bond loans 1,245 3,236 1,247

Other non-current liabilities 10 1

Total non-current liabilities 1,255 3,236 1,247

Current liabilities

Liabilities to credit institutions 10,466 6,465 3,756

Trade payables 1,299 1,092 1,021

Liabilities to subsidiaries 1,127 1,581 1,896

Current tax liabilities 174 35 126

Other current liabilities 340 400 242

Accrued expenses and deferred income 754 720 766


Other provisions 236 129 199

Total current liabilities 18,101 14,322 11,253

TOTAL EQUITY AND LIABILITIES 79,770 72,278 68,438

LKAB INTERIM REPORT Q3/2019 18 NOTES |

NOTES

NOTE 1 Accounting policies This interim report was prepared in accordance with IAS 34, Interim Financial Reporting, and applicable regulations in the Annual Accounts Act. Disclosures in accordance with IAS 34 are provided both in notes and elsewhere in the interim report. The interim report for the Parent Company was prepared in accordance with Chapter 9 of the Annual Accounts Act, Interim Reporting.

All amounts are presented in SEK millions (MSEK) unless otherwise indicated. Rounding differences may occur.

Described below are changed accounting policies and calculation methods applied by the Group with effect from 1 January 2019. In other respects the accounting policies and calculation methods applied in this interim report conform to the accounting policies applied in the preparation of the 2018 annual report. For further information concerning the Group’s accounting policies refer to LKAB’s Annual and Sustainability Report for 2018. Other amendments to IFRS effective from 1 January 2019 have had no impact on the Group’s earnings or financial position or on the presentation of the interim report.

Accounting policies changed due to new or amended IFRS IFRS 16 LeasesThe Group is applying IFRS 16 Leases with effect from 1 January 2019. For lessees, IFRS 16 means that almost all leases are recognised in the state ment of financial position. The lessee recognises a right-of-use asset, representing a right to use the underlying asset, and a lease liability, representing an obligation to make future lease payments. Leases with a term of 12 months or less or where the underlying asset has a low value are exempted.

Depreciation of the right-of-use asset and interest expense for the lease liability are recognised in the income statement. Previously the Group recognised operating lease expenses on a straight-line basis over the lease term. This results in an increase in operating profit compared with the situation had the previous accounting policies been applied.

The discount rate used is the LKAB Group’s marginal loan interest rate, which refers to the Group’s borrowing cost based on a reference interest rate for interest rate swaps.

The lease payments are recognised as an outgoing payment in financing activities, with the result that cash flow from financing activities decreases and cash flow from operating activities increases compared with the situation had the previous accounting policies been applied.

The lease liability is recognised under loans payable and thus increases net financial indebtedness, which affects the calculation of the net debt/equity ratio.

The Group applies the modified retrospective approach, which means that the cumulative effect of the introduction of IFRS 16 is recognised in the opening balance of retained earnings as of 1 January 2019 without restating comparative information. The rights-of-use assets attributable to previous operating leases are mainly reported at amortised cost from the start of the lease.

The table below summarises the effects on assets, liabilities and equity in the opening balance as at 1 January 2019.

Effects on assets, liabilities and equity, 1 January 2019

MSEK

Carrying amount

1 January 2019

Restatement acc. to IFRS

16

Restated 1 January

2019

Assets

Property, plant and

equipment for operations 30,776 394 31,170

Deferred tax assets 25 2 27

Total assets 30,801 396 31,197

Equity

Profit/loss brought forward 37,487 -7 37,480

Total equity 37,487 -7 37,480

Liabilities

Non-current interest-bearing liabilities 1,247 321 1,568

Current interest-bearing liabilities 3,756 82 3,838

Total liabilities 5,003 403 5,406

Total equity and liabilities 42,490 396 42,886

During the first quarter adjustments were recognised in respect of the lease com-mitments attributable to a business combination completed in December 2018. As a result of the adjustments, further lease liabilities and right-of-use assets are recognised at MSEK 52.

Change in method of calculating costs of urban transformationEffective from 2019 the cost of provisions for urban transformation is calculated using a production-based method. This means that the cost is calculated on the basis of ore extracted relative to the estimated total volume for the current main haulage level.

Up to and including 2018 the cost was based on the estimated extent of the ground deformations, on the basis of the environmental conditions in force.

The effect of the changed calculation method is to spread the costs of the urban transformation more evenly, since the cost is related to production. The changed calculation method is judged to have no significant effect on earnings for 2019 compared with the previous calculation method.

NOTE 2 Significant assumptions and estimates The preparation of financial statements requires management and the Board of Directors to make assessments and assumptions that affect recognised assets, liabilities, income and expenses and other information provided, such as contin-gent liabilities. For further information concerning these, please refer to LKAB’s 2018 annual report.


NOTES

NOTE 3 Segment reporting Segment information is provided on pages 5–8 of the interim report.

The divisions in summary

Northern Southern Special Products OtherEliminations/

group adjustments Group

MSEKQ1–Q3

2019Q1–Q3

2018Q1–Q3

2019Q1–Q3

2018Q1–Q3

2019Q1–Q3

2018Q1–Q3

2019Q1–Q3

2018Q1–Q3

2019Q1–Q3

2018Q1–Q3

2019Q1–Q3

2018

External income 11,845 9,597 10,121 7,745 2,490 1,685 -143 -46 24,313 18,981

Internal income 1,250 935 286 169 1,074 1,030 47 51 -2,657 -2,176

Total net sales 13,095 10,573 10,408 7,914 3,563 2,714 -96 5 -2,670 -2,176 24,313 18,981

Operating profit/loss 6,630 3,017 3,641 2,113 275 254 -709 -429 -73 15 9,764 4,969

Net financial income/expense

1,069

605

Profit/loss before tax 10,832 5,574

NOTE 4 Revenue breakdown Revenue from contracts with customers for the segments is reported below broken down by product/service area and region. The table also includes a reconciliation between the revenue breakdown and total external income according to Note 3.

Northern Southern Special Products Other Group

MSEK

Q1–Q3 2019

Q1–Q3 2018

Q1–Q3 2019

Q1–Q3 2018

Q1–Q3 2019

Q1–Q3 2018

Q1–Q3 2019

Q1–Q3 2018

Q1–Q3 2019

Q1–Q3 2018

Product/service area

Pellets 10,985 8,872 8,654 6,751 19,639 15,623

Fines 532 537 1,385 986 1,917 1,523

Magnetite 780 736 780 736

Mineral sands 414 398 414 398

Other industrial minerals 1,105 418 1,105 418

Mining and construction services 191 113 191 113

Other 328 188 82 8 20 5 23 415 239

Total 11,845 9,597 10,121 7,745 2,490 1,685 5 23 24,461 19,050

Region

Europe 5,056 4,941 9,267 7,129 1,715 1,211 5 23 16,043 13,304

MENA 5,500 3,545 437 288 60 5,997 3,833

Rest of world 1,289 1,111 417 328 715 474 2,421 1,913

Total 11,845 9,597 10,121 7,745 2,490 1,685 5 23 24,461 19,050

Revenue from contracts with customers 11,845 9,597 10,121 7,745 2,490 1,685 5 23 24,461 19,050

Other income – financing activities -148 -69 -148 -69

Total external income 11,845 9,597 10,121 7,745 2,490 1,685 -143 -46 24,313 18,981


NOTE 6 Disclosures regarding financial instruments The table below shows the financial instruments measured at fair value in the statement of financial position.

Group, 30 Sep 2019

MSEK Level 1 Level 2 Level 3 Total

Shares, financial assets 602 602

Shares, current holdings 7,153 7,153

Interest-bearing instruments 20,781 20,781

Derivatives 21 60 81

Total 623 27,994 28,617

Group, 31 Dec 2018

MSEK Level 1 Level 2 Level 3 Total

Shares, financial assets 646 646

Shares, current holdings 6,381 6,381

Interest-bearing instruments 12,476 12,476

Derivatives -4 170 166

Total 642 19,027 19,669

Fair value calculationThe following summarises the methods and assumptions mainly used in deter-mining the fair value of financial instruments reported in the table above.

Level 1Quoted prices (unadjusted) on active markets for identical assets or liabilities.

Level 2Inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

Level 3Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Interest-bearing instrumentsThe value of interest-bearing instruments is calculated using data from the interest-bearing securities market, obtained from Bloomberg.

Shares and alternative investmentsThe value of these investments is calculated using data from the stock market or received directly from brokers.

DerivativesThe fair values of derivative contracts are calculated using official quotations obtained from Bloomberg.

No transfers have been made between Levels 1 and 2.

Fair value of other receivables and liabilitiesThe carrying amount of other receivables and liabilities is estimated to be a reasonable approximation of fair value.

NOTES

NOTES | NOTE 8 Transactions with related parties No transactions that have significantly affected the company’s financial position and earnings took place between LKAB and related parties.

NOTE 7 Pledged assets and contingent liabilities, Parent Company

Pledged assets

MSEK

30 Sep

2019

30 Sep

2018

31 Dec

2018

As pledged assets for own liabilities and provisions

Company-owned endowment insurance 112 112 112

Deposit of cash and cash equivalents 112 121 121

Collateral provided, derivatives 122 217 56

Pledged assets bonds repurchase agreements 8,075 6,264 1,567

Total pledged assets 8,421 6,714 1,856

Contingent liabilities

MSEK

30 Sep

2019

30 Sep

2018

31 Dec

2018

Guarantees, FPG/PRI 16 15 15

Guarantees, GP plan 4 4 4

Guarantees, Swedish Tax Agency 63 63 63

Surety given for subsidiaries 28 29 29

Collateral, remediation 62 65 63

Total contingent liabilities 173 176 174

NOTE 9 Events after the end of the reporting period There are no significant events after the end of the reporting period to report.

NOTE 5 Business combinations

On 3 December 2018 the Group acquired 100 percent of the shares in the privately owned UK companies Francis Flower (Northern) Ltd and Gurney Slade Lime & Stone Co. Ltd for MSEK 1,277 and paid in cash. A provisional purchase price allocation was prepared for the 2018 year-end accounts pending final calculation of the fair values of acquired assets and liabilities. A portion of the total purchase consideration

was withheld for settlement following establishment of the final values. In the second quarter of 2019 a further MSEK 39 was paid for the acquisition of the shares. This amount is recognised as Group goodwill. At the end of the quarter the purchase price allocation is still provisional.


NOTES

NOTE 10 Key ratios – disclosures Alternative key ratiosThe company also presents certain non-IFRS financial benchmarks and key ratios in the interim report. The management considers this supplementary information to be important if readers of this report are to obtain an understanding of the company’s financial position and performance.

Definitions

Return on equity Profit/loss after tax as a percentage of average equity (rolling 12-months).

Underlying operating profit/loss

Operating profit/loss excluding costs for urban transformation provisions and impairment of intangible assets and of property, plant and equipment.

Operating cash flow Cash flow from operating activities and investing activities relating to property, plant and equipment.

Net financial indebtedness Interest-bearing liabilities less interest-bearing assets.

Net debt/equity ratio Net financial indebtedness divided by equity.

Operating cash flow

A reconciliation of operating cash flow can be found in the section The LKAB Group in summary.

Net financial indebtedness

MSEK

30 Sep

2019

30 Sep

2018

31 Dec

2018

Loans payable 12,158 9,701 5,003

Provisions for pensions 2,088 1,561 1,647


Provisions, remediation 1,363 1,318 1,346

Less:

Cash and cash equivalents -3,335 -5,866 -2,290

Current investments -27,959 -21,531 -18,753

Financial investments -971 -1,331 -1,026

Net financial indebtedness 1,253 1,930 3,552

Net debt/equity ratio

MSEK

30 Sep

2019

30 Sep

2018

31 Dec

2018

Net financial indebtedness, MSEK 1,253 1,930 3,552

Equity, MSEK 43,702 38,228 38,573

Net debt/equity ratio, % 2.9 5.0 9.2

NOTE 11 Quarterly data for the Group

MSEK NoteQ3

2019Q2

2019Q1

2019Q4

2018Q3

2018Q2

2018Q1

2018Q4

2017

Net sales 7,751 9,233 7,329 6,911 6,594 6,160 6,227 6,208

Operating profit/loss 3,135 4,116 2,513 1,900 2,477 931 1,561 1,324

Less: costs for urban transformation provisions 861 102 386 289 287 735 795 353

Less: impairment of property, plant and equipment 14

Underlying operating profit/loss 10 3,995 4,218 2,899 2,189 2,764 1,666 2,357 1,691

Net financial income/expense 139 383 547 -790 35 370 201 47

Profit/loss before tax 3,273 4,499 3,060 1,110 2,512 1,300 1,762 1,371

Operating cash flow 2,488 1,772 2,500 -1,529 1,552 1,333 1,770 587

Investments in property, plant and equipment 677 570 391 624 475 762 594 600

Deliveries of iron ore products, Mt 5.5 6.7 6.1 6.8 6.9 6.4 6.8 7.3

Proportion of pellets, % 79 84 86 79 82 84 84 81

Production of iron ore products, Mt 7.3 6.2 6.5 6.7 6.8 6.1 7.3 7.2

Return on equity, % 10 23.1 22.6 16.0 14.1 14.6 13.9 13.4 14.4

Net debt/equity ratio, % 10 2.9 6.3 4.7 9.2 5.0 11.6 -9.4 -6.6

LKAB INTERIM REPORT Q3/2019 22 LKAB IN BRIEF |

LKAB 2018 IN BRIEF

Northern DivisionComprises mines and processing plants in Kiruna. The products are transported along the Malmbanan and Ofotbanen ore railway to the port in Narvik for shipment to steelworks customers around the world.

Southern DivisionComprises mines and processing plants in Malmberget and Svappavaara. The products are transported along the Malmbanan ore railway, mainly to the port in Luleå for shipment to European steelworks customers.

Special Products DivisionDevelops and supplies products and services including industrial minerals, drilling technology and full service solutions for the mining and construction industries.

25.9

Luleå

Ore Railway

Malmberget

SvappavaaraKiruna

Narvik

ARCTIC CIRCLE

150,000 tonnes of iron ore are mined by LKAB every dayLKAB’s ore deposits are largely mined in underground mines more than a thousand metres below the surface, making demands of both safety and efficiency. All the iron ore mined is then upgraded in our processing plants. Here the ore is sorted and concentrated before finally being pelletised, i.e. fired to become small round iron ore pellets. From the processing plants the iron ore products are transported by rail to the ports and shipped to customers in Europe, the Middle East, North Africa, the USA and Asia. sales in SEK billion

Three divisions

77% 82%of LKAB’s iron ore products are exported to Europe’s steelworks.

of LKAB’s delivery volumes consist of iron ore pellets.

INTERIM REPORT Q3/2019 IN A VOLATILE MARKET · Q3 2019 Q3 2018 Q1–Q3 2019 Q1–Q3 2018 Full year 2018 Cash flow from operating activities before urban transformation expenditure

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