Comments from the Managing director

After copletion of the feasibility study, which showed good conditions for mining in Blötberget, we are now focusing our work on the practical preparations. But above all, we must secure the financing.

The financing of the continued operations will be through a combination of equity and loans. We will, among other things, investigate the possibilities of financing in discussions with suppliers.

Today, we expect it will take about six months to get the financing fully completed. Thereafter, the preparatory work itself will take 2 years, which means that mining can start in the middle of 2022.

The feasibility study, which was conducted by Golder Associates, showed, among other things, an operating margin of 44 percent and the repayment period for investment has been estimated at 5.6 years after the start of production.

It is worth pointing out that the calculations made by Golder are relatively conservative. Among other things, the economic life of Blötberget is estimated to twelve years. This corresponds to the currently verified reserves, but continued exploration is expected to increase the reserves in Blötberget, and our strategy is also to expand operations to Håksberg and the Väsman field. Since many of the investments we make for Blötberget will also be used in these two mines, they will be less investment heavy. Another factor, which is not included in Golder’s calculations, is that we plan to outsource part of the operation of the contract, which means that the company’s initial investments may be lower.

In summary, our assessment is that the feasibility study shows the conditions are in place for profitable mining operations in Blötberget.

Our market

The general view is that we have a two tier iron ore market developing, with the standard 62%Fe index and a newer index for 65%Fe reflecting the higher quality ores. The divergence of the two indices reinforces the fact that there is a high demand for good quality iron ores >65%Fe. This, as stated before is largely driven by China and its environmental policy.

There appears to be little in the way of new supply of high quality iron ores (especially magnetite rich) to satisfy demand, especially as there are only a few developments able to return to production without raising major amounts of capital. Those who are able to return to production or start production are also low volumes and will not fully meet demands.