INTERIM REPORT Q3/2018 - LKAB · LKAB INTERIM REPORT Q3/2018 1 OPERATIONS – THIRD QUARTER MSEK Note Q3 2018 Q3 2017 Q1– Q3 2018 Q1– Q3 2017 Full year ... better balance between

LKAB INTERIM REPORT Q3/2018 1

OPERATIONS – THIRD QUARTER

MSEK NoteQ3

2018Q3

2017Q1– Q3

2018Q1– Q3

2017Full year

2017

Net sales 6,594 5,958 18,981 17,159 23,367

Underlying operating profit 7 2,764 2,083 6,787 5,457 7,148

Costs for urban transformation provisions 10 -287 -263 -1,817 -794 -1,147

Impairment of property, plant and equipment -12 -12 -26

Operating profit/loss 2,477 1,808 4,969 4,651 5,975

Net financial income/expense 35 41 605 244 290

Profit/loss before tax 2,512 1,849 5,574 4,895 6,266

Profit/loss for the period 1,954 1,434 4,395 3,825 4,803

Operating cash flow 1,552 1,916 4,655 6,549 7,136

Investments in property, plant and equipment 475 489 1,831 1,408 2,008

Depreciation -673 -741 -2,127 -2,090 -2,887

Deliveries of iron ore products, Mt 6.9 7.1 20.1 20.3 27.6

Proportion of pellets, % 82 81 83 83 83

Production of iron ore products, Mt 6.8 6.5 20.2 20.0 27.2

Return on equity, % 7 14.6 6.6 14.6 6.6 14.4

Net debt/equity ratio, % 7 5.0 -4.4 5.0 -4.4 -6.6

THE GROUP IN SUMMARY |

6.8 MtProduced during the quarter

6.9MtDelivered during the quarter

82%Percentage of pellets for the quarter

STRONG EARNINGS IN FAVOURABLE MARKET CONDITIONS

INTERIM REPORT Q3/2018

LKAB benefitted from the prevailing market conditions and from an ever increasing focus on resource efficiency and sustainability among steel customers.

• The production volumes in the third quarter were higher than in the same quarter last year. Delivery volumes were lower than in the same period last year, partly due to disruption on the Ore Railway during the quarter.

• Operating profit for the third quarter was 37 percent higher than in the same period last year, mainly as a result of a stronger dollar exchange rate and higher prices for highly upgraded iron ore products in the period.

• The average global spot price1 for iron ore products in the third quarter was USD 67 (71)/tonne compared with USD 65/tonne in the second quarter 2018. The global spot price at the end of September was USD 69/tonne. The premium for pellet sales stayed at a high level.

• Operating cash flow for the third quarter was MSEK 1,552 (1,916).

• The return on equity increased to 13.9 (4.0) percent.

• The net debt/equity ratio was 5.0 (-4.4) percent.

1Platts IODEX 62% Fe CFR North China

The market continues to place a premium on high-quality iron ore products, and demand remains high. Sales increased in the third quarter and operating income improved by 37 percent compared with the same period last year. However, operations were affected by both a stoppage at the processing plant in Svappavaara and disruption on the Ore Railway.

LKAB INTERIM REPORT Q3/2018 2 SALES AND PROFIT |

THE LKAB GROUP

NET SALES AND OPERATING PROFIT/LOSS

ANALYSIS OF CHANGE IN OPERATING PROFITMSEK Q3 Q1– Q3

Operating profit 2017 1,808 4,651

Prices, iron ore 144 910

Currency effect, iron ore incl. hedging of accounts receivable 565 64

Hedging of currency and iron ore price 20 1,220

Volume and mix, iron ore 291 473

Volume, price and currency, industrial minerals 6 -22

Costs for urban transformation provisions -24 -1,024

Impairment of property, plant and equipment 12 12

Depreciation 68 -37

Other income and expenses -413 -1,278

Operating profit 2018 2,477 4,969

Net sales for the third quarter were 11 percent higher when compared year-on-year. The improvement is mainly due to a stronger dollar exchange rate and higher pric-es for highly upgraded iron ore products. The average spot price for iron ore for the quarter was USD 67 (71)/tonne and the pellet premium remained at a high level.

The cost level for the quarter was higher than in the same period last year, with the sale of part of the Mertainen machinery fleet in the third quarter of 2017 affecting comparability by MSEK 202. Other revenues and cost were mainly affected by higher energy prices, higher employee benefit expenses and increased costs for the supply of crushed ore in the Southern Division.

Sales for January – September increased by 11 percent compared with the same period last year, mainly as a result of higher market prices for iron ore and a better result from price and currency hedging.

Operating profit accumulated to September increased by 7 percent compared to the previous year. The increase in sales was countered by higher costs for urban transformation provisions of MSEK 1,024. Higher energy prices, higher employee benefit expenses, production disruption, higher costs for the supply of crushed ore and increased exploration also had a negative impact on profit for the period.

CASH FLOW

MSEKQ3

2018Q3

2017Q1– Q3

2018Q1– Q3

2017Full year

2017

Cash flow from operating activities before changes in working capital 2,339 2,315 6,805 5,722 6,970

Change in working capital -316 -182 -325 1,956 1,890

Capital expenditures (net) -471 -217 -1,825 -1,129 -1,724

Operating cash flow 1,552 1,916 4,655 6,549 7,136

Operating cash flow for the third quarter was MSEK 364 lower than in the same period last year, mainly as a result of increased capital tied up in inventories and higher investment expenditure. Sales of property, plant and equipment in the third quarter of 2017 affect comparability between the years by MSEK 267.

Operating cash flow for the first three quarters was MSEK 1,894 lower in a year-on-year comparison. Improved profit and lower expenditure on urban transformation had a positive effect. Increased capital tied up in inventories and accounts receivable, as well as last year’s result from assets pledged for outstanding hedging positions, had a negative effect. Higher expenditure on investments also contributed to the lower cash flow.

NET SALES AND OPERATING PROFIT

Net sales 2018 Net sales Operating profit

RETURN ON EQUITY

Rolling 12 months Target return on equity

OPERATING CASH FLOW

Operating cash flow 2018 Operating cash flow

-20

-15

-10

-5

0

5

10

15

20

25

30

Q3Q2Q1Q4Q3Q2Q1Q4Q3Q2Q1Q4

%

2015 2016 2017 2018

-2,400

-1,200

0

1,200

2,400

3,600

4,800

6,000

7,200


MSEK

2015 2016 2017 2018

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

-5000

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


MSEK

2015 2016 2017 2018

LKAB INTERIM REPORT Q3/2018 3 NET FINANCIAL INCOME/EXPENSE AND FINANCIAL POSITION |

THE LKAB GROUP

NET FINANCIAL INCOME/EXPENSE AND NET FINANCIAL INDEBTEDNESSNet financial income/expense was MSEK 35 (41) for the third quarter and MSEK 605 (244) accumulated to the end of September; a higher return on financial investments was the main positive influence when compared year-on-year.

The net debt/equity ratio was 5.0 (-4.4) percent, an increase compared with the same period last year, mainly as a result of increased provisions for urban trans-formation.

CREDIT FACILITIES

MSEK NominalUtilized

(nominal) Available

Commercial paper programme, maturing within one year 5,000 200 4,800

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 3,441 13,809

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

SIGNIFICANT EVENTS IN THE THIRD QUARTER On 28 July there was a fatal accident involving a fall at the pelletizing plant in Svappavaara. Production was stopped immediately, to deal with the situation that had arisen and to ensure safety. Operations in Svappavaara were resumed just over two weeks later.

In August a fire in a snow protection tunnel along the Ore Railway to Narvik resulted in rail traffic being suspended for five days.

During a planned maintenance stoppage in September it was found that support structures under the cooler at the pelletizing plant in Svappavaara need to be replaced earlier than planned. The pelletizing plant is therefore being taken out of operation until January 2019, which will impact delivery volumes in the fourth quarter.

The results of ongoing exploration in Kiruna with a view to expanding the mineral resources were compiled during the quarter, and indicate a more complex geology and geometry than had previously been assumed. As a result, further exploration work will be carried out.

EVENTS AFTER THE END OF THE REPORTING PERIOD Following approval by the authorities, LKAB Minerals is to acquire all the shares in Francis Flower Limited and Gurney Slade Lime & Stone Co. Ltd.; this is expected to take place in the fourth quarter of 2018. The acquisition will create growth in the area of industrial minerals which, in line with LKAB’s strategic plan, will create a better balance between LKAB’s business areas and make the company less sensitive to fluctuations in the iron ore market.

NET FINANCIAL INDEBTEDNESS

Net financial indebtedness

NET DEBT/EQUITY RATIO

Net debt/equity ratio

MSEK

%

-10

-5

0

5

10

15

20

25


2015 2016 2017 2018

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000


2015 2016 2017 2018

LKAB INTERIM REPORT Q3/2018 4 MARKET DEVELOPMENT |

MARKET DEVELOPMENT

THE STEEL AND IRON ORE MARKET

THE GLOBAL STEEL AND IRON ORE INDUSTRYGlobal production of crude steel increased in the third quarter by 4,1 percent com-pared with the same period last year. During the quarter steel prices remained stable, except in the USA where there has been a downward trend since prices peaked at the beginning of July. China’s steel exports decreased compared with the previous quarter. The introduction of US import duties on steel is continuing to unsettle the market.

The profitability of steel producers is still considered good.

Demand for LKAB’s iron ore products remains good, with demand for DR pellets exceeding contracted volumes because of the scarcity of supply on the market.

EuropeProduction of crude steel within the EU28 increased by 0.7 percent during the third quarter compared with the same period last year. The automotive industry remained strong, despite an increasingly saturated domestic market. The rate of growth in the automotive industry is expected to slow to less than 1 percent from 2020 onwards.

Middle East and North Africa (MENA)Production of crude steel increased by 9.2 percent during the third quarter compared with the same period last year. The oil price continued to rise compared with the previous quarter, which is positive for the region. Demand for DR pellets is high due to continued weak supply on the market.

USAIn the USA production of crude steel increased by 6.8 percent during the third quarter compared with the same period last year. The rising price trend for steel ended at the beginning of the third quarter when steel prices fell in the USA. Prices

for hot-rolled steel/thin plate are expected to continue to fall for the rest of the year, while prices for long products are expected to be stable or moving upward due to greater demand and the fact that a large proportion of long products will consist of imported steel that is affected by the import duties.

ChinaChina’s production of crude steel increased by 5.9 percent during the third quarter compared with the same period last year. Iron ore imports into China decreased by 1.8 percent during the quarter, to 273 Mt. Port inventories of iron ore decreased to nearly 150 Mt at the end of the quarter, but this is an increase of 14 Mt compared with the same period in 2017.

Iron ore spot price developmentsThe third quarter began with a spot price of USD 64/tonne. The spot price then remained relatively stable at around USD 65/tonne, with only small movements during the quarter but an upward trend at the end of

the quarter. At the end of the quarter it was USD 69/tonne. The average price for the quarter was USD 67/tonne, which was USD 2/tonne higher than in the preceding quarter. Quoted pellet premiums for blast furnace pellets and DR pellets were unchanged at USD 58/tonne and USD 63/tonne respectively. The pellet premium in China rose substantially and a new record of USD 90/tonne was set at the beginning of September. It then fell somewhat, ending the quarter at USD 88/tonne. The premium for lump ore at first decreased and then recovered, with a quoted premium of USD 21/tonne at the end of the quarter. The price difference between Platts IODEX 65% Fe and 62% Fe continued to increase. The average price for the quarter was USD 27/tonne, an increase of USD 7/tonne compared with the preceding quarter. There is a continuing trend for the market to put a premium on high-quality iron ore products. Pellet premiums remain strong and stable, while lower grade products are being forced into larger discounts.

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

1 June 2011 – 30 September 2018

USD/tonne

1Platts IODEX 62% Fe CFR North China

Source: PLATTS IODEX 62% Fe CFR North China

0

50

100

150

200

2018201720162015201420132012

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


The Northern Division comprises mines and processing plants in Kiruna.

OPERATIONS SUMMARY

MSEK NoteQ3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017

Net sales* 8 3,686 3,451 10,474 10,380 13,473

Underlying operating profit* 7 1,826 1,377 4,535 4,257 5,241

Costs for urban transformation provisions -292 -250 -1,615 -718 -1,060

Operating profit* 8 1,534 1,127 2,920 3,539 4,181

Investments in property, plant and equipment 122 104 483 436 748

Depreciation -268 -317 -924 -934 -1,344

Deliveries of iron ore products, Mt* 4.0 4.2 11.1 11.6 15.2

Proportion of pellets, %* 87 82 86 86 86

Production of iron ore products, Mt* 3.7 3.8 11.0 11.2 14.8

* As from 2018 a new model is being used internally for allocating results to the Northern Division and the Southern Division. Earlier periods have been restated in accordance with the change.

The production volume for the third quarter decreased by 0.1 Mt in a year-on-year comparison. Deliveries decreased by 0.2 Mt and amounted to 4.0 (4.2) Mt, with the proportion of pellets at 87 (82) percent. The lower volumes are due mainly to production disruptions at the pelletizing plant.

Sales for the third quarter were higher than in the same period last year, mainly as a result of a higher dollar exchange rate and higher iron ore prices for highly upgraded iron ore products. This was countered by lower delivery volumes.

Costs, excluding provisions for urban transformation, were lower than in the same period last year, partly due to decreased costs for production disruptions and a later maintenance stoppage than last year. Operating profit for the third quarter increased by 36 percent to MSEK 1,534 (1,127).

In the first three quarters of the year 11.0 (11.2) Mt of finished products were produced. The decrease is due mainly to production disruptions at the pelletizing plant. Delivery volumes decreased to 11.1 (11.6) Mt, mainly due to lower production and a less favourable inventory position than in the third quarter last year.

Net sales for the first three quarters were on a par with the same period last year. A higher dollar exchange rate and higher iron ore price were offset by lower delivery volumes. Operating profit for the period was lower than in the same period last year, mainly due to the impact of higher costs for urban transformation provisions. Underlying operating profit increased by 7 percent to MSEK 4,535 (4,257).

NORTHERN DIVISION |

NORTHERN DIVISION

Production of iron ore products (k tonnes)Northern Division

2018 2017

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

• The mining takes place in the Kiruna underground mine, which has an inclined slab of magnetite that is around 80 metres wide, four kilometres long and extends around two kilometres underground.

• The ore is processed above ground in three concentrating plants and three pelletizing 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 organization for the markets in Europe, Asia and the Middle East.

FACTS

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

Q4Q3Q2Q1

LKAB INTERIM REPORT Q3/2018 6 SOUTHERN DIVISION |

SOUTHERN DIVISION

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

OPERATIONS SUMMARY

MSEK NoteQ3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017

Net sales* 8 2,621 2,181 7,914 7,219 9,999

Underlying operating profit* 7 880 663 2,315 2,130 2,746

Costs for urban transformation provisions 5 -13 -203 -76 -87

Operating profit* 8 885 650 2,113 2,054 2,659


Depreciation -224 -258 -664 -661 -868

Deliveries of iron ore products, Mt* 2.9 2.9 8.9 8.6 12.4

Proportion of pellets,%* 76 79 80 79 80

Production of iron ore products, Mt* 3.1 2.7 9.2 8.9 12.4

* As from 2018 a new model is being used internally for allocating results to the Northern Division and the Southern Division. Earlier periods have been restated in accordance with the change.

Production volumes in the third quarter were 0.4 Mt higher than in the same period last year. Deliveries for the quarter amounted to 2.9 (2.9) Mt, with pellets accounting for 76 (79) percent of this.

Sales for the quarter increased year-on-year, which was mainly an effect of a higher dollar exchange rate and higher prices for highly upgraded iron ore products. Costs for the quarter increased compared with the same period last year, which was mainly due to price increases for energy, higher employee benefit expenses and higher costs for supplying the processing plants with crushed ore from the mines in Svappavaara. Operating profit increased by 36 percent to MSEK 885 (650).

The production volume for the first three quarters increased to 9.2 (8.9) Mt. Delivery volumes also increased and amounted to 8.9 (8.6) Mt, with pellets accounting for 80 (79) percent.

Sales for the first three quarters increased by 10 percent, mainly as a result of higher iron ore prices and higher delivery volumes. The higher costs for the period are due to increased costs for urban transformation provisions, price increases for energy, increased employee benefit expenses and higher costs for the supply of crushed ore. Underlying operating profit increased by 9 percent to MSEK 2,315 (2,130).

• The Southern Division mines and processes iron ore products in Malm-berget 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 and Gruvberget open-pit mines.

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

• The Southern Division produces both blast furnace pellets and 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 organization for the markets in Europe, Asia and the Middle East.

FACTS

Production of iron ore products (k tonnes)Southern Division

2018 2017

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Q4Q3Q2Q1

LKAB INTERIM REPORT Q3/2018 7 SPECIAL PRODUCTS DIVISION |

SPECIAL PRODUCTS DIVISION

The Special Products Division is a leading global supplier of industrial minerals, with a major focus on LKAB’s own minerals of magnetite, mica and huntite. The division also provides products and services to LKAB such as drilling systems, mechanical services, concrete production, contract work and rockwork. These products and services are also marketed to external customers.

OPERATIONS SUMMARY

MSEK Note Q3

2018Q3

2017 Q1– Q3

2018Q1–Q3

2017Full year

2017

Net sales 8 924 1,027 2,714 2,853 3,936

Underlying operating profit 7 98 105 254 293 417

Impairment of property, plant and equipment -12 -12 -26

Operating profit/loss 8 98 93 254 281 391


Depreciation -14 -13 -42 -45 -57

Net sales for the third quarter were 10 percent lower than in the same period last year and amounted to MSEK 924 (1,027). Lower sales of magnetite for offshore gas pipeline projects are the main reason for the decrease.

The quarter’s underlying operating profit was somewhat lower than in the same period last year at MSEK 98 (105), mainly due to lower sales volumes for magnetite.

Underlying operating profit accumulated to the end of September was MSEK 254 (293), being mainly affected by lower sales volumes for magnetite. The Nord Stream 2 project is in progress and deliveries will continue to be made into 2019. Increased sales volumes for concrete and crushed material had a positive effect compared with the previous year.

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

• LKAB Minerals mines and sells minerals and also processes and sells iron ore for applications outside the steel industry. The business has sales offices and production 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 Q3/2018 8 OTHER SEGMENTS AND PARENT COMPANY |

OTHER SEGMENTS

OPERATIONS SUMMARY

MSEK NoteQ3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017

Net sales excl. hedging 43 18 124 117 157

Net sales hedging 3 1 -69 -1,170 -1,119

Total net sales 8 46 19 55 -1,053 -962

Operating profit/loss 8 -45 -56 -333 -1,234 -1,315


Depreciation -166 -151 -498 -449 -620

The improvement in earnings for the period January to September is mainly due to a better result for hedging activities compared with previous periods. Under LKAB’s hedging strategy, price and currency risk in the Group’s forecast sales are not normally hedged. Outstanding accounts receivable are hedged, however. Costs for the period increased somewhat, partly as a result of increased exploration as well as the intensification during the year of work on the strategic development programmes aimed at securing long-term competitiveness.

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 company’s financial activities.

OPERATIONS SUMMARY

MSEKQ3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017

Net sales 6,171 5,520 17,772 15,783 21,489

Underlying operating profit 2,578 1,903 6,293 4,910 6,373

Costs for urban transformation provisions -287 -263 -1,817 -794 -1,147


Investments in property, plant and equipment 416 454 1,714 1,288 1,860

Depreciation -531 -611 -1,703 -1,704 -2,365

Deliveries of iron ore products, Mt 6.9 7.1 20.1 20.3 27.6

Production of iron ore products, Mt 6.8 6.5 20.2 20.0 27.2

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 of iron ore prices, foreign currency effects and purchases of electricity.

LKAB INTERIM REPORT Q3/2018 9 SIGNATURES |

SIGNATURES

FINANCIAL INFORMATION

Year-end Report 2018 15 February 2019

Annual and Sustainability Report 2018 30 March 2019

Interim Report Q1 2019 25 April 2019

Annual General Meeting 25 April 2019

Luleå, 26 October 2018Luossavaara-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 Q3/2018 10 AUDITOR’S REVIEW REPORT |

AUDITOR’S REVIEW REPORT

IntroductionWe have reviewed the interim report for Luossavaara-Kiirunavaara AB (publ) for the period 1 January 2018 to 30 September 2018. It is the responsibility of the Board of Directors and the Chief Executive Officer to prepare and present this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express an opinion on this interim report based on our review.

Focus and 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 consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially limited in scope compared to the focus and scope of an audit conducted in accordance with ISA and generally accepted auditing practices. The procedures performed consequently do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance conclusion.

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

Stockholm, 26 October 2018Deloitte AB

Peter EkbergAuthorized Public Accountant

LKAB INTERIM REPORT Q3/2018 11 LKAB – GROUP |

LKAB – GROUP

CONDENSED INCOME STATEMENT

MSEKQ3

2018Q3

2017Q1–Q3

2018Q1–Q3

2017Full year

2017

Net sales 6,594 5,958 18,981 17,159 23,367

Cost of goods sold -3,909 -4,164 -13,194 -12,049 -16,563

Gross profit/loss 2,685 1,793 5,786 5,110 6,804

Selling expenses -26 -22 -116 -84 -124

Administrative expenses -99 -77 -372 -297 -440

Research and development expenses -80 -84 -266 -242 -398

Other operating income 82 285 225 407 486

Other operating expenses -85 -88 -288 -244 -352


Financial income 91 114 779 426 515

Financial expense -56 -73 -174 -182 -225

Net financial income/expense 35 41 605 244 290


Tax -558 -415 -1,179* -1,070 -1,462


Attributable to Parent Company shareholders 1,954 1,434 4,395 3,825 4,803

Earnings per share before and after dilution (SEK) 2,791 2,049 6,279 5,464 6,862

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

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

MSEKQ3

2018Q3

2017Q1–Q3

2018Q1–Q3

2017Full year

2017


Other comprehensive income for the period

Items that will not be reclassified to profit for the year

Remeasurement of defined benefit pension plans -27 -41 61 -64 123

Tax attributable to actuarial gains and losses 5 7 -13 13 -27

Total items that will not be reclassified to profit for the year -22 -34 48 -51 96

Items that will be reclassified to profit for the year

Translation differences on translation of foreign operations for the period -53

37 245 -77 -139

Changes in fair value of available-for-sale financial assets for the period 54 22 -9 96 212

Changes in fair value of cash flow hedges for the period 7 13 108 39 40

Changes in fair value of cash flow hedges transferred to profit for the year -30 41 -2 1,015 1,017

Tax attributable to components of cash flow hedges 5 -11 -23 -232 -232

Total items reclassified to profit or loss -17 102 319 841 898

Other comprehensive income for the period -39 68 367 790 994

Total comprehensive income for the period attributable to the Parent Company shareholders 1,914 1,502 4,762 4,615 5,797

*Includes positive remeasurement effects of MSEK 92 resulting from the decision to change the corporate tax rate in Sweden with effect from 2019.


LKAB – GROUP

CONDENSED STATEMENT OF FINANCIAL POSITION

MSEK 30 Sep 2018 30 Sep 2017 31 Dec 2017

ASSETS

Non-current assets

Intangible assets 207 179 167

Property, plant and equipment for operations 30,819 31,176 30,882

Property, plant and equipment for urban transformation 7,338 1,863 1,890

Participations in associated companies 39 39 39

Financial investments 1,331 1,193 1,303

Deferred tax asset 29 31 28

Non-current receivables 2

Total non-current assets 39,766 34,480 34,309

Current assets

Inventories 3,387 2,695 2,602

Accounts receivable 2,004 1,652 1,948

Prepaid expenses and accrued income 184 193 145

Other current receivables 1,201 1,034 1,203

Current investments 21,531 15,061 18,041

Cash and cash equivalents 5,866 5,367 2,051

Total current assets 34,173 26,001 25,990

TOTAL ASSETS 73,939 60,481 60,298

EQUITY AND LIABILITIES

Equity

Share capital 700 700 700

Reserves 844 469 525

Retained earnings incl. profit for the year 36,685 33,998 35,124

Equity attributable to Parent Company shareholders 38,228 35,166 36,348

Total equity 38,228 35,166 36,348

Non-current liabilities

Non-current interest-bearing liabilities 3,236 3,235 3,235

Other non-current liabilities 1 4 3

Provisions for pensions and similar commitments 1,561 1,802 1,642

Provisions for urban transformation 14,178 8,751 9,198

Other provisions 1,249 1,243 1,211

Deferred tax liabilities 1,900 1,826 1,851

Total non-current liabilities 22,125 16,861 17,139

Current liabilities

Current interest-bearing liabilities 6,465 1,857 935

Trade payables 1,439 1,314 1,320

Tax liabilities 22 945 542

Other current liabilities 566 193 230

Accrued expenses and deferred income 1,065 903 926


Other provisions 129 107 147

Total current liabilities 13,586 8,454 6,811

Total liabilities 35,711 25,315 23,950

TOTAL EQUITY AND LIABILITIES 73,939 60,481 60,298


LKAB – GROUP

CONDENSED STATEMENT OF CHANGES IN EQUITY

Equity attributable to Parent Company shareholders

Reserves

2017MSEK Share capital

Translation reserve

Fair value reserve

Hedging reserve

Retained earnings

including profit/loss for the year

Total equity

Opening equity 1 Jan 2017 700 -83 542 -832 30,224 30,551

Profit/loss for the year 4,803 4,803

Other comprehensive income for the year -139 212 825 96 994

Comprehensive income for the year -139 212 825 4,900 5,797

Dividend

Closing equity 31 Dec 2017 700 -222 754 -7 35,124 36,348

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 4,395 4,395

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

CONDENSED STATEMENT OF CASH FLOWS

MSEKQ3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017

Operating activities


Adjustment for items not included in cash flow 956 967 4,011 2,714 3,783

Income tax paid -684 -14 -1,688 -66 -879

Expenditures, urban transformation -445 -487 -1,091 -1,821 -2,178

Expenditures, other provisions -1 -22

Cash flow from operating activities before changes in working capital 2,339 2,315 6,805 5,722 6,970

Cash flow from changes in working capital

Increase (-)/Decrease (+) in inventories -412 152 -785 141 234

Increase (-)/Decrease (+) in operating receivables 165 -222 100 2,041 1,648

Increase (+)/Decrease (-) in operating liabilities -69 -113 360 -226 8

Change in working capital -316 -182 -325 1,956 1,890

Cash flow from operating activities 2,023 2,133 6,480 7,678 8,860

Investing activities

Acquisition of property, plant and equipment -475 -489 -1,831 -1,408 -2,008

Disposal of property, plant and equipment 5 272 6 279 284

Disposals/acquisitions (net) in current investments 802 -1,304 -3,490 -3,789 -6,770

Cash flow from investing activities 331 -1,521 -5,315 -4,918 -8,494

Financing activities

Borrowing 100 5,529

Amortization -633 -217 -14 -937

Dividends paid to Parent Company shareholders -2,882

Cash flow from financing activities -633 -117 2,647 -14 -937

Cash flow for the period 1,721 494 3,812 2,746 -571

Cash and cash equivalents at start of period 4,146 4,873 2,051 2,624 2,624

Exchange difference in cash and cash equivalents -1 -1 3 -3 -2

Cash and cash equivalents at end of period 5,866 5,367 5,866 5,367 2,051

Change in cash and cash equivalents 1,721 494 3,812 2,746 -571

Sub-components of cash and cash equivalents

Cash and bank balances 5,816 5,167 5,816 5,167 2,051

Current investments (maturity <90 days) 50 200 50 200

Cash and cash equivalents 5,866 5,367 5,866 5,367 2,051

Consolidated operating cash flow

Cash flow from operating activities 2,023 2,133 6,480 7,678 8,860

Acquisition of property, plant and equipment -475 -489 -1,831 -1,408 -2,008

Disposal of property, plant and equipment 5 272 6 279 284

Operating cash flow (excluding current investments) 1,552 1,916 4,655 6,549 7,136

Acquisition/disposal of financial assets (net) 802 -1,304 -3,490 -3,789 -6,770

Cash flow after investing activities 2,354 612 1,165 2,760 366

Cash flow from financing activities -633 -117 2,647 -14 -937

Cash flow for the period 1,721 494 3,812 2,746 -571


MSEK Q3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017


Other comprehensive income for the period

Comprehensive income for the period 1,719 1,392 4,688 3,451 6,406

LKAB – PARENT COMPANY |

LKAB – PARENT COMPANY

CONDENSED INCOME STATEMENT

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

MSEK Q3

2018Q3

2017Q1– Q3

2018Q1–Q3

2017Full year

2017

Net sales 6,171 5,520 17,772 15,783 21,489

Cost of goods sold -3,741 -3,942 -12,759 -11,430 -15,794

Gross profit/loss 2,430 1,578 5,014 4,353 5,695

Selling expenses -8 -6 -54 -22 -33

Administrative expenses -69 -60 -237 -191 -269

Research and development expenses -71 -73 -249 -230 -381

Other operating income 12 217 22 222 231

Other operating expenses -4 -15 -22 -15 -18


Profit/loss from financial items -78 146 1,433 273 235

Profit/loss after financial items 2,213 1,786 5,909 4,389 5,460

Appropriations 2,842


Tax -494 -394 -1,221* -938 -1,895


* Includes negative remeasurement effects of MSEK 70 resulting from the decision to change the corporate tax rate in Sweden with effect from 2019.

LKAB INTERIM REPORT Q3/2018 16 LKAB – PARENT COMPANY |


CONDENSED BALANCE SHEET

MSEK 30 Sep 2018 30 Sep 2017 31 Dec 2017

ASSETS

Non-current assets

Intangible assets 72 33 34

Property, plant and equipment for operations 25,693 25,916 25,688

Property, plant and equipment for urban transformation 7,338 1,863 1,890

Financial assets

Participations in subsidiaries 2,390 2,120 2,390

Participations in associated companies 41 40 41

Receivables from subsidiaries 2,601 2,482 2,419

Other non-current securities 248 247 246

Other non-current receivables 114 110 112

Deferred tax asset 1,747 2,380 1,817

Total financial assets 7,141 7,380 7,026

Total non-current assets 40,244 35,191 34,637

Current assets

Inventories 2,765 2,168 2,119

Current receivables

Accounts receivable 1,630 1,212 1,596

Receivables from subsidiaries 145 378 161

Other current receivables 1,029 731 1,080

Prepaid expenses and accrued income 115 99 106

Total current receivables 2,918 2,419 2,942

Current investments 20,943 14,799 17,572

Cash and bank balances 5,408 4,819 1,719

Total current assets 32,034 24,205 24,352

TOTAL ASSETS 72,278 59,396 58,989

LKAB INTERIM REPORT Q3/2018 17 LKAB – PARENT COMPANY |


CONDENSED BALANCE SHEET

MSEK 30 Sep 2018 30 Sep 2017 31 Dec 2017

TOTAL EQUITY AND LIABILITIES

Equity

Restricted equity

Share capital (700,000 shares) 700 700 700

Statutory reserve 697 697 697

Non-restricted equity

Profit brought forward 17,684 14,160 14,160

Profit/loss for the period 4,688 3,451 6,406

Total equity 23,769 19,008 21,964

Untaxed reserves 15,263 17,663 15,263

Provisions


Other provisions 1,510 1,533 1,464

Total provisions 15,687 10,285 10,661

Non-current liabilities

Bond loans 3,236 3,235 3,235

Other non-current liabilities 1 4 3

Total non-current liabilities 3,236 3,239 3,238

Current liabilities

Liabilities to credit institutions 6,465 1,857 935

Trade payables 1,092 972 949

Liabilities to subsidiaries 1,581 1,523 1,765

Current tax liabilities 35 938 510

Other current liabilities 400 34 140

Accrued expenses and deferred income 720 636 706


Other provisions 129 107 147

Total current liabilities 14,322 9,202 7,864

TOTAL EQUITY AND LIABILITIES 72,278 59,396 58,989

LKAB INTERIM REPORT Q3/2018 18 NOTES |

NOTES

NOTE 1 Accounting principles 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.

Accounting principles changed due to new or amended IFRSDescribed below are changed accounting principles applied by the Group with effect from 1 January 2018. In other respects the accounting principles applied in this interim report conform to the accounting principles applied in the prepara-tion of the 2017 Annual Report. For further information concerning the Group’s accounting principles refer to LKAB’s Annual and Sustainability Report for 2017. Other amendments to IFRS effective from 1 January 2018 have had no impact on consolidated earnings, financial position or the formulation of the interim report.

IFRS 9 Financial InstrumentsClassification and measurementFinancial assets are classified into three categories: measurement either at amortized cost, at fair value through other comprehensive income or at fair value through profit or loss. The measurement category in which a financial asset is to be placed depends partly on the company’s business model (the purpose for which the company holds the asset) and partly on the financial asset’s contractual cash flows.

There are no material effects on the classification of financial assets as of 1 January 2018.

ImpairmentThe model used for impairment of financial assets is based on expected credit losses, rather than incurred losses as previously. Under the new impairment model, a year’s expected losses are reserved already upon initial recognition.

In the event of a significant increase in credit risk, the impairment amount must correspond to the credit losses that are expected to arise during the remaining term.

Based on historical bad debts, no impairment is reported as of 1 January 2018.

Hedge accountingIn accordance with IFRS 9, LKAB has decided that the forward points in forward exchange contracts when hedging cash flows for iron ore sales are to be reported separately as a cost of hedging. This means that the changes in forward points will be recognized in other comprehensive income and accumulated in a reserve for hedging costs within equity. Hedging costs are recognized in net sales.

The new reporting is being applied prospectively. As at 31 December 2017, hedg-ing costs amounted to MSEK 5. The change also means that with effect from 2018, hedging costs are reported in net sales instead of as a financial expense.

The restatement of previous periods amounts to MSEK 39 for the first to third quarters of 2017 and MSEK 49 for full-year 2017. The transition to IFRS 9 has not resulted in any adjustment items that are recognized in equity.

IFRS 15 Revenue from Contracts with CustomersRevenue from contracts with customers is recognized in profit/loss for the year when control over the goods or services is transferred to the customer. The basic principle is that an entity recognizes revenue relating to the transfer of promised goods or services to customers at an amount that reflects the remuneration that the company expects to be entitled to receive in exchange for the goods or services.

The recognition of revenue is determined according to a five-step model: Step 1 Identify the contract(s) with a customerStep 2 Identify the performance obligations (promises) in the contractStep 3 Determine the transaction priceStep 4 Allocate the transaction price to the performance obligations (promises)

in the contractStep 5 Recognize revenue when (or as) the entity satisfies a performance

obligation

The transition to IFRS 15 has meant that demurrage – i.e. the cost for delayed loading of vessels – is reported differently. Under IFRS 15 the cost affects the transaction price and is recognized as a part of the net sales that relate to sales of iron ore, rather than as cost of goods sold. The restatement of previous periods amounts to MSEK 46 for the first to third quarters of 2017 and MSEK 76 for full-year 2017. The transition has not resulted in any adjustment items that are recognized in equity.

New IFRS standards that have not yet begun to be appliedLKAB is analyzing the effects of the new standard IFRS 16 Leases, which will come into effect at the beginning of 2019. Management’s assessment is that IFRS 16 may affect the amounts recognized in the financial statements, but that the effects will not be significant. The application of IFRS 16 has not yet been analyzed in detail, so the effects cannot yet be quantified.

NOTE 2 Risks and uncertainties LKAB is exposed to various risks. Risk management plays a vital part in minimizing 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, analyze 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 are LKAB’s 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, refer to LKAB’s 2017 Annual Report.

NOTE 3 Significant assumptions and estimates The preparation of financial statements requires management and the Board of Directors to make assessments and assumptions that affect recognized assets, liabilities, income and expenses and other information provided, such as contin-gent liabilities. For further information concerning these, please refer to LKAB’s 2017 Annual Report.

For more information about the effects of assessments made in respect of provi-sions for urban transformation, see Note 10.

NOTE 4 Events after the end of the reporting period Following approval by the authorities, LKAB Minerals is to acquire all the shares in Francis Flower Limited and Gurney Slade Lime & Stone Co. Ltd.; this is expected to take place in the fourth quarter of 2018. The acquisition will create growth in the area of industrial minerals which, in line with LKAB’s strategic plan, will create a better balance between LKAB’s business areas and make the company less sensi-tive to fluctuations in the iron ore market.

NOTE 5 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 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 2018

(MSEK) Level 1 Level 2 Level 3 Total

Shares, financial assets 941 941

Shares, current holdings 5,712 5,712

Interest-bearing instruments 15,868 15,868

Derivatives 1 114 115

Total 942 21,694 22,636 Group, 31 Dec 2017

(MSEK) Level 1 Level 2 Level 3 Total

Shares, financial assets 950 950

Shares, current holdings 4,964 4,964

Interest-bearing instruments 13,077 13,077

Derivatives 65 65

Total 950 18,106 19,056

Fair value calculationThe following summarizes the methods and assumptions mainly used in determining 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.

NOTE 7 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.

DefinitionsReturn on equity Profit/loss after tax as a percentage of average equity (rolling 12-month figures).

Underlying Operating profit excluding costs for urban operating profit 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 Interest-bearing liabilities less interest-bearing indebtedness assets.

Net debt/equity ratio Net financial indebtedness divided by equity

Reconciliation

Underlying operating profit

MSEKQ3

2018Q3

2017

Full year

2017

Operating profit/loss 2,477 1,808 5,975

Less:

Costs for urban transformation provisions 287 263 1,147

Impairment of property, plant and equipment 12 26

Underlying operating profit 2,764 2,083 7,148

Operating cash flow

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

Net financial indebtedness

MSEK30 Sep

201830 Sep

201731 Dec

2017

Loans payable 9,701 5,092 4,170

Provisions for pensions 1,561 1,802 1,642

Provisions, urban transformation 18,078 11,887 11,911

Provisions, remediation 1,318 1,303 1,290

Less:

Cash and cash equivalents -5,866 -5,367 -2,051

Current investments -21,531 -15,061 -18,041

Financial investments -1,331 -1,193 -1,303

Net financial indebtedness 1,930 -1,537 -2,382

Net debt/equity ratio

MSEK30 Sep

201830 Sep

201731 Dec

2017

Net financial indebtedness, MSEK 1,930 -1,537 -2,382

Equity, MSEK 38,228 35,166 36,348

Net debt/equity ratio, % 5.0 -4.4 -6.6

NOTES

NOTES |


NOTE 9 Revenue breakdown External income for the segments is reported below broken down by product/service area and region.

Product/service area

Northern/Southern Special Products Other Group

MSEK Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017

Blast furnace pellets 11,431 9,904 11,431 9,904

DR pellets 4,090 4,777 4,090 4,777

Fines 1,523 1,419 1,523 1,419

Magnetite 736 784 736 784

Mineral sands 398 551 398 551

Other industrial minerals 418 447 418 447

Drilling technology 17 45 17 45

Mining and construction services 113 124 113 124

Financial activities -69 -1,170 -69 -1,170

Other 240 222 3 81 56 324 278

Total external income 17,284 16,322 1,685 1,951 12 -1,114 18,981 17,159

Region

Europe 13,143 11,796 1,211 1,240 12 -1,114 14,254 11,922

MENA 3,835 4,353 3,835 4,353

USA 125 95 102 90 227 185

China including Hong Kong 181 78 366 614 547 692

Other 6 7 118 7

Total external income 17,284 16,322 1,685 1,951 12 -1,114 18,981 17,159

NOTE 8 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

MSEK Q1–Q3 2018

Q1–Q3 2017

Q1–Q3 2018

Q1–Q3 2017

Q1–Q3 2018

Q1–Q3 2017

Q1–Q3 2018

Q1–Q3 2017

Q1–Q3 2018

Q1–Q3 2017

Q1–Q3 2018

Q1–Q3 2017

External income 9,539 9,363 7,745 6,959 1,685 1,951 12 -1,114 18,981 17,159

Internal income 935 1,017 169 261 1,030 902 43 61 -2,176 -2,241

Total net sales 10,474 10,380 7,914 7,220 2,714 2,853 55 -1,053 -2,176 -2,241 18,981 17,159

Operating profit/loss 2,920 3,539 2,113 2,054 254 281 -333 -1,234 15 11 4,969 4,651

Net financial income/ex-pense

605 244

Profit/loss before tax 5,574 4,895

NOTES


NOTE 12 Quarterly data for the Group

MSEK NoteQ3

2018Q2

2018Q1

2018Q4

2017Q3

2017Q2

2017Q1

2017Q4

2016

Net sales 6,594 6,160 6,227 6,208 5,958 5,689 5,512 4,517

Underlying operating profit 7 2,764 1,666 2,357 1,691 2,083 1,454 1,920 527

Costs for urban transformation provisions 10 -287 -735 -795 -353 -263 -300 -231 -1,179

Impairment of property, plant and equipment -14 -12 -1,192

Operating profit/loss 2,477 931 1,561 1,324 1,808 1,154 1,689 -1,844

Net financial income/expense 35 370 201 47 40 71 132 -34

Profit/loss before tax 2,512 1,300 1,762 1,371 1,849 1,224 1,822 -1,878

Operating cash flow 1,552 1,333 1,770 587 1,916 3,063 1,571 -356

Investments in property, plant and equipment 475 762 594 600 489 547 372 756

Deliveries of iron ore products, Mt 6.9 6.4 6.8 7.3 7.1 6.6 6.6 6.8

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

Production of iron ore products, Mt 6.8 6.1 7.3 7.2 6.5 6.3 7.2 7.1

Return on equity, % 7 14.6 13.9 13.4 14.4 6.6 4.0 0.4 neg

Net debt/equity ratio, % 7 5.0 11.6 -9.4 -6.6 -4.4 2.1 12.6 20.7

NOTES

NOTE 11 Pledged assets and contingent liabilities, Parent Company

Pledged assets

MSEK30 Sep

201830 Sep

201731 Dec

2017

As pledged assets forown liabilities and provisions

Company-owned endowment insurance 112 110 112

Deposit of cash and cash equivalents 121 121 121

Collateral provided, derivatives 217 228 208

Pledged assets, bonds 6,264 1,025 733

Total pledged assets 6,714 1,484 1,174

Contingent liabilities

MSEK30 Sep

201830 Sep

201731 Dec

2017

Guarantees, FPG/PRI 15 14 15

Guarantees, GP plan 4 5 4

Guarantees, Swedish Tax Agency 63 63 63

Surety given for subsidiaries 29 33 33

Collateral, remediation 65 66 68

Total contingent liabilities 176 181 183

NOTE 10 Urban transformation

Provisions are reported in compliance with IAS 37. These accounting principles are applied by LKAB such that a provision for urban transformation is reported where there is an agreement or a clear, constructive obligation that defines a commitment relating to future impact areas.

In view of the agreements with the Municipality of Kiruna concerning commitments within the area of Mine City Park 3 and following assessment of constructive obligations relating to the remaining part of the impact area of the

current main haulage level of the mine in Kiruna, an additional provision of MSEK 6,507 was recognized in the second quarter of 2018. The parts of the provision that relate to commitments for areas outside the impact boundary (the boundary of the impact of mining to date for which compensation is payable) were reported as mine assets relating to future mining. In the second quarter of 2018 an additional mine asset of MSEK 6,045 was reported.

LKAB INTERIM REPORT Q3/2018 22 LKAB IN BRIEF |

LKAB 2017 IN BRIEF

EUROPELKAB is the EU’s largest iron ore

producer and mines around 80 percent of all iron ore within the EU 2

LKAB is the world’s second-largest producer in the seaborne pellet market

1890LKAB is one of Sweden’s oldest industrial

companies and has customer relationships dating back more than a century

100% LKAB is wholly owned by the Swedish state

SEK 23 .4 bnLKAB’s total sales in 2017

4,118total number of employees

83%Iron ore pellets account for 83 percent

of LKAB’s iron ore deliveries

NORTHERN DIVISIONMine, processing and

support functions in Kiruna

SOUTHERN DIVISIONMine, processing and support functions in

Malmberget and Svappavaara

SPECIAL PRODUCTS DIVISIONDevelops and markets industrial minerals, drilling technology and

full service solutions for the mining and construction industries

LKAB IS ORGANIZED INTO THREE DIVISIONS

Luleå

Ore Railway

Malmberget

SvappavaaraKiruna

Narvik

ARCTIC CIRCLE

LKAB’s mines and processing plants are located in the Swedish orefields – in Kiruna, Malmberget and Svappavaara. The iron ore products are transported along the Ore Railway to the ports of Narvik and Luleå for shipment to customers around the world.

Documents

INTERIM REPORT Q3/2018 - LKAB · LKAB INTERIM REPORT Q3/2018 1 OPERATIONS – THIRD QUARTER MSEK Note Q3 2018 Q3 2017 Q1– Q3 2018 Q1– Q3 2017 Full year ... better balance between