The critics are spreading a falsified reality
TODAY’S BUSINESS MANAGERS ALL HAVE an important issue to address at strategic level: How are we part of the green transition?
WHEN IT COMES TO KAUNIS IRON, it feels good to know that the answer is already concrete and given.
Here in northern Sweden, we have unique conditions in relation to the global market, and the fact that we can offer a product with such high iron content provides us with strong competitive advantages in the hunt for fossil-free steel. We can quite simply be more efficient when we optimise our process and quickly reduce the level of carbon dioxide emissions per tonne produced.
Our product is a raw material for the pellets that are required for the electric steel furnaces of the future, where pellets will be mixed with steel scrap to produce the new climate-neutral steel. In other words, we can contribute, in a practical and concrete manner, to the elimination of one of the major sources of greenhouse gas emissions. It is therefore key to the green transition of our society, regionally, nationally and internationally, that we continue to mine our ore here in the north of Sweden.
Naturally there are still significant challenges that must be met if we are to achieve our goal of delivering the world’s most sustainable iron ore product.
One challenge is the electrification of the vehicle fleet and the energy-intensive processes. In this context we have unfortunately seen the emergence of a strange debate that questions whether it is right for us to use electricity here, in the north of Sweden, for the green industrial transition. However, the criticism is built on several crucial and fundamental inaccuracies.
HERE
IN THE NORTH OF SWEDEN, WE CURRENTLY
CONSUME less than half of the electricity we produce. We are also seeing a continued strong expansion of wind power in Sweden’s northern counties. It is a reasonable forecast that today’s level (around 20 terrawatts) can be increased to 40–50 terrawatts by 2030. This would equate to the future needs of businesses such as H2 Green Steel and SSAB’s new fossil-free steelworks. It is, however, likely that the industrial transition will take a little longer than this before it reaches full capacity. So there are probably good margins involved.
There are also fears that this major use of electricity in the north of Sweden would drive up the price of electricity. This is quite simply incorrect.
The production of electricity up here is not particularly expensive. We perhaps have prices of 30–40 öre per kilowatt-hour.
The high electricity price we are currently experiencing is due to the high gas price in Germany, which governs the price of electricity on the energy market, even in Sweden. It is an electricity market the structure of which can be discussed, as is happening at the moment. Is it reasonable that the price of German gas is also driving up the Swedish electricity price for the electricity we produce ourselves? The electricity has not actually become more expensive to produce.
It is therefore a falsification of reality to claim that the increased use of electricity by industry in the north of Sweden would drive up the price. It is completely irresponsible to talk about this as a “problem”. These critics already know what our self-produced hydropower and wind power cost.
ANOTHER STRUCTURAL THREAT EXISTS in the form of our permit processes.
On 1 December, we received a positive judgement from the Swedish Land and Environment Court. This is pleasing, even though the judgement has not yet gained legal force. However, we are talking about a process that has been ongoing for more than five years and still hasn’t reached its conclusion. This is not really reasonable. Not if we want to have continued industrial development in Sweden.
If we had not been able to start operation of the existing plant and live on the cash flow generated, this journey for Kaunis Iron would have been more or less impossible. We would then have been forced to invest SEK 200 million in a permit process while also raising billions for necessary investments, so that we “might” be granted a permit. This uncertainty runs the risk of jeopardising Sweden’s development as a nation of industry. The decision makers therefore need to fundamentally review the permit processes.
WE WILL NEVER COMPROMISE ON SAFETY or the environment, but we must find a constructive path forwards that enables our Swedish industry to develop fully and actively contribute to the green global transition. We have a responsibility to do this due to the unique conditions we have here in our part of the world. It is up to us to make the most of these conditions.
We have succeeded in managing the challenges we have faced
2022 was an unusual year; a year strongly characterised by the pandemic, war and uncertainty, with an unpredictable global economy and an ore price that varied both up and down.
AT THE BEGINNING OF THE YEAR the ore price was just below 200 dollars per tonne, but during the autumn the price had bottomed out at just over 90 dollars per tonne. Towards the end of the year, a stabilisation and upturn has seen a return to levels which, from a historical perspective, can be considered relatively good.
I BELIEVE THAT MANY COUNTRIES have arrived at the insight that we must be more self-sufficient, that we cannot rely on the global market to solve everything for us. I believe this will benefit the current and future mining industry in Europe. The fact is that we produce around 150 million tonnes of steel in the EU, and that the majority of the iron ore used is imported from other parts of the world. In this context I believe that we have a unique opportunity when Europe reviews possibilities to become more self-sufficient and independent. Naturally we must be able to utilise our local natural resources in a sustainable manner. From a strategic standpoint, it is of course very interesting if we can increase our deliveries in our home market.
We are also seeing a steel industry that is facing a historic transition. SSAB, LKAB, H2GS and more or less all other European operators in the industry are striving to find their place in the new value chain for delivery of fossil-free steel. In this context, Kaunis Iron can play a key role in line with our vision of delivering the world’s most sustainable iron ore.
WE WILL NOW CONTINUE THE WORK aimed at realising our own transition, with the ambition of firstly becoming fossil-free and thereafter carbon-neutral. There are still major challenges to be faced but also many opportunities –electrification is proceeding at a rapid rate.
We must realise that, here in northern Sweden, we have a unique opportunity to play a crucial role in the global transition. Naturally the mineralisation and the ore deposits that exist here are a fundamental prerequisite in this regard, but perhaps the most important factor is access to green,
renewable energy. As long as we are innovative, courageous and inquisitive, the conditions exist for us to be part of and write history. It will be incredibly exciting to continue this journey together with all our fantastic staff and business partners.
SO, WHAT WILL HAPPEN IN 2023? I believe that, despite the economic downturn and global uncertainty, we will be able to see positive signs this autumn that an upturn is just around the corner. One important factor is the continued development in China, which is by far the largest market for iron ore and more or less governs the global market price. There is much to suggest that China’s demand for iron ore will stabilise, which will be beneficial from a price perspective. I may be a born optimist, but I believe that we will see a recovery for the mining and steel industry relatively soon.
Within the Group, work is now ongoing to develop a longterm future mining business, which we refer to as Kaunis Iron 2.0. Initial focus is on commissioning our new flotation plant, which is due to be put into operation at the turn of the year 2023/2024.
When the Swedish Land and Environment Court’s judgement of 1 December 2022 comes into force, we will be able to actively commence the next phase of building a sustainable mining industry for future generations. The two new open pits, Sahavaara and Palotieva, will provide us with the time horizon we need to develop additional new mineable deposits – an insight that gives cause for optimism.
IN SUMMARISING 2022, we can note that we have succeeded with the year’s ambitions and goals, despite an uncertain world situation. We have managed to produce and deliver a product of the right quality and quantity to our customers. We have managed the economic challenges we have faced and are able to look back on yet another positive and profitable year. This is important for us, for the communities in which we operate and for Sweden’s green industrial transition as a whole.
I feel it is important that we allow ourselves a moment to stop and reflect with pride on everything we have achieved to date. We have started the Kaunis Iron journey together, with a lot of hard and challenging work, and we have done so in a fantastic manner. Never forget that!
Many thanks!
EVENTS DURING THE YEAR
3 JANUARY
New stretches of road
A further three stretches of road have been completed on the route between Kaunisvaara and Pitkäjärvi!
The Swedish Transport Administration has completed the bypasses at Masugnsbyn and Vittangi, as well as the stretch of road between Anttis and Lovikka.
“The new roads provide a better surface to drive on and make things much safer, not only for us as drivers of heavy traffic but also for other motorists. The village inhabitants now also avoid the need for traffic to pass through their villages”, says Michael Palo, who drives a lorry between Kaunisvaara and Svappavaara on a daily basis.
24 FEBRUARY
Visit by Rickard Gegö, CEO of the Swedish Association of Road Transport Companies
Rickard Gegö, CEO of the Swedish Association of Road Transport Companies, visited Junosuando. He said the following about our operations:
“As CEO of the trade association for the Swedish haulage industry, it is a great pleasure to visit such a forward-thinking and important company as Kaunis Iron. A company that operates in our base industry. It is inspiring to see the way that you are taking responsibility for the transition of the vehicle fleet, despite the special challenges involved, and this is something I will take with me in my continued dialogue to strengthen the Swedish haulage industry and our competitiveness.”
14 MARCH
Kaunis Iron: Falsehoods that disregard a billion in concrete societal benefit
1 APRIL
New dinosaur discovered in Kaunis Iron’s open-pit mine!
Paula Palo couldn’t believe her eyes when she found the gigantic fossil in the rock wall of the open pit. The 18-metre-long carnivore from the Cretaceous period has been given the name Kaunisaurus.
“A unique discovery this far north, and particularly exciting to see that it appears to have a sort of feathery fur”, says Sten “Dino” Bensson, paleontologist at Umeå University.
13 JANUARY
Kaunis Iron permitted to continue its operations
The Swedish Land and Environment Court has rejected the Swedish Environmental Protection Agency’s claim, and Kaunis Iron is permitted to continue its current operations. That said, the judgement limits production increases within the scope of the existing permit.
“By upholding the validity of the permit that has been granted, this represents an important judgement for the entire Swedish industry”, says Klas Dagertun, CEO of Kaunis Iron.
“The Swedish tax equalisation system pays out around SEK 280 million to Pajala. If we consider this in relation to the SEK 369 million that Kaunis Iron pays directly to the government in the form of taxes and duties, Pajala is no longer a grant-taking region – on the contrary, it is a contributing region. This is something that we should all be proud of.”
So wrote our CEO Klas Dagertun and Chairman Anders Sundström in an opinion piece in the Haparandabladet newspaper.
23 MARCH
Trainees from upper secondary school on location
Kaunis Iron is deepening the company’s collaboration with upper secondary schools in Lapland by taking on three trainees.
“The aim is to be able to recruit even more employees locally”, says Sara Stridsman, HR Manager at Kaunis Iron.
By the way, this was (of course) an April Fools’ Day joke!!
12 APRIL
Time to pump out the water
When the thermometer goes above zero, it means that the snow starts to melt, and we need to pump out the water to avoid flooding in the mine area. This is something we do every year at this time of year. This year we started the pumps just before Easter.
16 MAY
Kaunis Iron features in the TV series Agent Hamilton
Kaunis Iron features in episode 3 of the TV series Agent Hamilton. Parts of the episode were shot in our mine area in Kaunisvaara. If you look really closely, you might see some of our staff excelling as extras! Agent Hamilton can be
5 JULY
Åsa Allan discusses relocation allowance at Almedalen Week
On 5 July, our Deputy CEO Åsa Allan spoke on Dagens Industri’s stage at Almedalen Week. The theme of the seminar was: Can we manage the skills supply necessary for the green industrial revolution in northern Sweden?
“Perhaps the historical relocation allowance, which once went to residents of Norrbotten who chose to move south, should now go to people in southern Sweden who want to move north for the new jobs available in northern Sweden. 150,000 is a nice round figure that could have a real effect. Or why not write off an individual’s study loans if they promise to stay for five years”, Åsa Allan said.
6 JULY
8 JULY
From South Africa to Pajala
Now they are here! A very warm welcome to Elsabe Cloete, Alan Johnson, Jakobus Buckle and Inka Buckle, all of whom moved from South Africa to Pajala at the beginning of the year.
30 JUNE
The main hearing regarding Kaunis Iron’s expansion plans will commence on 29 August
The Swedish Land and Environment Court has now announced the date for the main hearing regarding the continuation and expansion of mining operations in Tapuli, Palotieva and Sahavaara, as well as the concentration plant in Kaunisvaara. The hearing is scheduled to start on 29 August in the Folkets Hus community centre in Pajala.
“It feels good to know that we can now take the next step in the formal handling of our application”, says Klas Dagertun, CEO of Kaunis Iron.
3–7 JULY
Kaunis Iron participates in Almedalen Week
At the beginning of July it was once again time for Almedalen Week on Gotland. Kaunis Iron’s Deputy CEO Åsa Allan participated in a number of agenda items, some of them together with Pajala’s municipal commissioner Ulrica Hammarström.
The summer edition of Kaunis Aktuellt is now out
On 6 July we began sending out the latest edition of Kaunis Aktuellt to all households in Norrbotten. It is now also possible to read the Kaunis Aktuellt newspaper digitally, whenever you want.
8 JULY
The summer substitute who stayed Ida Kreivi Barsk got a summer substitute job as a drill cuttings sampler at Kaunis Iron in the summer of 2021. One year on and she is still working in the mine and is loving life in Pajala.
“The way things feel at the moment, I want to remain in Pajala forever, as
8 JULY
64 percent of women in Pajala are positive about working in the mine 64 percent of women have a positive attitude to working in the mine. The mining industry has long been a male-dominated arena, and there is an image of coarse language, sexism and exclusion. Kaunis Iron wants to be different and contribute to the development of a new industry culture. As a relatively newly started company, there is an opportunity for a fresh start, without needing to deal with any established “bad habits”.
9 JULY
Tornedalen Pride
Today saw the arrangement of the Tornedalen Pride parade in Pajala! The speaker at the opening ceremony was our very own CEO Klas Dagertun.
“An important cornerstone of Kaunis Iron’s values is respect, tolerance and understanding for people’s differences, whether it has to do with ethnicity, beliefs, gender perspective or sexual orientation. We want to clearly show, in both words and action, that we mean what we say. It therefore feels important to be part of and contribute to this event, as Pride supports the principle of people’s equal worth and their right to be who they are”, Klas Dagertun said.
24 AUGUST
Opening of activity park in Vittangi!
Kaunis Iron is proud to sponsor the activity park that Vittangi Sports Club has built. The park was officially opened today and is now open to everyone. Naturally we were on site at the opening ceremony to enjoy some physical activity and hand over a gift in the form of a Muurikka grill and barbecue utensils for use at the barbecue site in the area.
26 AUGUST Information meeting
We invited local residents to attend an information meeting in the Folkets Hus community centre in Kaunisvaara. More than 80 people came to meet us and talk about the future. At the meeting we discussed issues such as:
• the current world situation, the ongoing permit process and the upcoming main hearing;
• the project “Starting Point Kaunisvaara”, which is now in operation and means that lorry drivers can base their work from either Kaunisvaara or Junosuando. At present, 7 of 27 lorries are stationed in Kaunisvaara;
• Pajala Municipality’s planning decision regarding the expansion of the zoning plan for the tailings pond and Palotieva open pit.
We are delighted to see that there is
29 AUGUST
“Ready to invest billions”
Monday the 29th of August marked the start of the main hearing that will determine whether Kaunis Iron receives a new environmental permit that will also facilitate the mining of ore in Palotieva and Sahavaara.
“We have been waiting for this day for four years. We are in full agreement with both the Swedish Environmental Protection Agency and the County Administrative Board that a new permit would be good for the business”, says Klas Dagertun, CEO of Kaunis Iron.
14 SEPTEMBER
Court of Appeal confirms: Kaunis Iron’s permit is valid
The Swedish Land and Environment Court of Appeal has decided not to grant leave to appeal the earlier judgement regarding a petition for recall of Kaunis Iron’s current environmental permit.
“Naturally this is an acknowledgement of our stance that the permit we currently hold is valid”, says Klas Dagertun, CEO of Kaunis Iron.
22 SEPTEMBER
13 OCTOBER
Two fatalities in a traffic accident involving an ore lorry
At 05.56 on the morning of 13 October, one of Kaunis Iron’s ore lorries was involved in a traffic accident with a car on route 395 near Vittangi. The two individuals in the car died from their injuries.
“This is an incredibly tragic event, and our thoughts are with the families of the deceased”, says Klas Dagertun, CEO of Kaunis Iron.
19 OCTOBER
Sweden’s largest wetland restoration is ongoing!
Kaunis Iron is carrying out Sweden’s largest wetland restoration project! The wetland is important for a number of reasons. It stores carbon dioxide, protects against drought and flooding, purifies water and contributes to biodiversity.
24 OCTOBER
He will lead the work to create the Kaunis Iron of the future
Kaunis Iron has recruited Peder Nensén from LKAB in the new role of Project Manager for Kaunis Iron 2.0 – the work aimed at starting production in the two new open-pit mines, Palotieva and Sahavaara.
“It will be exciting to see the outcome of the judgement from the Swedish Land and Environment Court, whether we are granted a permit and, if so, which conditions are imposed on the operations.”
LTU students visit Kaunis Iron
We were visited by civil engineering stu dents from the Natural Resources Engi neering programme at Luleå University of Technology, who had performed field studies with us. Their task was to find, measure and draw various geological structures in the wall of the quarry.
Our geologists Jenny Palosaari and Alan Johnson took care of the students and also made the most of the oppor tunity to pose questions to the teacher responsible for the programme, Tobias Bauer, who is an Associate Professor in Ore Geology. It’s always great when opportunities arise to learn from each other!
1 DECEMBER
Permit for expanded operations secured
POSITIVE JUDGEMENT
– mine’s future assured
Today, the 1st of December, the Swedish Land and Environment Court granted Kaunis Iron a new expanded environmental permit. The judgement makes it possible for Kaunis Iron to start operation of two new open pits, Sahavaara and Palotieva.
“This assures mining operations for the future and means that we can also build in the long term for future generations, with exploration for further new deposits”, says Klas Dagertun, CEO of Kaunis Iron.
The Land and Environment Court announced its judgement today, the 1st of December. The decision is to grant Kaunis Iron the new expanded permit, which enables operation of two new open pits, Sahavaara and Palotieva.
The court writes in its decision:
“The Land and Environment Court has decided to grant Kaunis Iron’s application for a permit for existing and expanded operations at Tapuli, Sahavaara and Palotieva mines and Kaunisvaara concentration plant. The permit is valid for 35 years and covers the extraction of a maximum of 10 million tonnes of iron ore per year, corresponding to approximately 4 million tonnes of iron ore concentrate.”
Klas Dagertun, CEO of Kaunis Iron:
“This is a joyful day – not only for us but also for Pajala and the region as a whole. This makes it possible for us to continue investing in our goal to deliver the world’s most sustainable iron ore. It is also an important signal to the Swedish business community – that it is possible to open new mines in Sweden today. Of course, we must now examine the judgement in detail and assess all associated conditions, which may set considerable challenges.”
Dagertun feels that the decision secures the future of the mining operations:
“The judgement provides long-term assurance of more than 500 jobs here in Pajala, which is extremely significant. Furthermore, it means that we can fulfil all our investment plans, which will generate even more jobs for contractors in the region. Ultimately this gives us a time horizon of up to 20 years, which in turn means that we can secure new deposits for the next step. In other words, our dream of establishing mining operations for future generations is not a utopia. We can now realise that dream, which feels fantastic”, Dagertun says.
In its press release, the Land and Environment Court states:
“The court, after examining all the material, has concluded that the application documents and the information that has been presented in the main hearing and in correspondence, are sufficient to substantially examine the application. On this basis, Kaunis Iron AB has shown that the operations can be permitted, although it is the court’s assessment that comprehensive and stringent conditions are required in relation to the operations.”
Åsa Allan, Deputy CEO of Kaunis Iron, who participated on every day of the hearing in the Folkets Hus community centre in Pajala, views the decision as an acknowledgement of Kaunis Iron’s acceptance of responsibility:
“Through our application, we have shown that we can and will be able to run a mining operation with high environmental performance and stringent conditions through the commitments that we have made during the process. We have shown that we can take responsibility for the mining operations. The judgement is an acknowledgement of this, which of course feels extremely gratifying.”
19 DECEMBER
Åsa Allan, Deputy CEO of Kaunis Iron, is named Leader of the Year in Norrbotten 2022
She was previously the Mine Planning Manager for Northland Resources and Municipal Director for Pajala Municipality, and she was the first person to be employed in Kaunis Iron. She was recruited as Site Manager in the autumn of 2017, before the company was even formed, when it was decided that mining would recommence in Kaunisvaara. Three years ago she was appointed Deputy CEO of Kaunis Iron. Åsa was surprised with the news during a Monday afternoon meeting.
Congratulations Åsa – you are the Leader of the Year in Norrbotten 2022!
“Really? That’s great!” said a shocked Åsa Allan when she was presented with the award and a bouquet of flowers.“What a wonderful surprise! Many thanks! This is such an honour!”
STRONG SUPPORT AMONG THE LOCAL POPULATION
A new public opinion survey conducted in October 2022 shows increasingly strong support for Kaunis Iron’s operations in Pajala. Furthermore, no less than 88 percent of respondents support an expansion of operations via new open pits.
“Naturally it feels extremely gratifying to see that we have such widespread public support for our continued operations”, says Åsa Allan, Deputy CEO of Kaunis Iron.
As in 2021, no less than 95 percent of citizens in the municipality of Pajala feel that Kaunis Iron’s operations have a positive impact on the community in Pajala. The current plans to open two new open-pit mines, Sahavaara and Palotieva, are also met with positive reactions. 88 percent of respondents are positive to expanded operations via more open pits.
Åsa Allan, Deputy CEO of Kaunis Iron:
“It is of course positive for us that the plans for expanded operations, which naturally will have an impact on the community, are also welcomed by the local residents. Only eight percent of respondents state that they are against the introduction of expanded operations.”
THE SURVEY ALSO SHOWS that the image of the company is becoming increasingly positive – for example, compared to 2021, the percentage of young women aged 18–34 who would consider working in the mining operations has increased by no less than 10 percent.
“This is important in relation to our work aimed at becoming a workplace characterised by gender equality. It is also worth noting that, even among those who are critical of our operations, there is a healthy percentage who would still consider working for us. In 2021 this figure was 23 percent, but this year it has increased to 46 percent.”
CONFIDENCE IN KAUNIS IRON is also generally stronger, from 85 percent in 2021 to 87 percent in 2022.
“Our environmental work appears to be making a good impression on the local residents, even though we have gone through a permit process that has seen many critical voices heard in media, with questions raised concerning our
551 million spent by Kaunis Iron on goods and services in Pajala in 2022.
environmental work and the risks associated with our operations. Despite this, the residents of Pajala have increased confidence in our company. In 2021, 65 percent of respondents felt that we took responsibility for the environment, but now this figure is up to 74 percent, a significant increase that means a lot to us. It is, after all, the people who live and work here who are impacted most by our operations.”
THE SURVEY IS BASED ON interviews with a statistically assured sample of Pajala residents and was carried out by Kantar Sifo in October 2022.
“It is important for us to know what the general public thinks about us and our actions. This is an important aspect of our quality work. We are therefore extremely grateful to everyone who has taken part and responded to the survey”, Åsa Allan concludes.
1,033 million spent by Kaunis Iron on goods and services in the rest of the region in 2022.
HOW POSITIVE OR NEGATIVE ARE YOU TO THE MINING OPERATIONS CURRENTLY CONDUCTED IN PAJALA?
HOW POSITIVE OR NEGATIVE ARE YOU TO KAUNIS IRON’S PLANS FOR EXPANDED OPERATIONS IN SAHAVAARA AND PALOTIEVA?
75% very positive.
18% quite positive.
4% quite negative.
2% very negative.
1% don’t know.
93 percent are positive to the mining operations, while six percent are negative. Source: KANTAR
“When I closed the café a couple of years ago, we thought about moving away from here. But then my partner got a job at Kaunis Iron, and we decided to continue living here. The mine has provided both hope and jobs to many who live here.”
61% very positive.
27% quite positive.
5% quite negative.
3% very negative.
4% don’t know.
No less than 88% are positive to the opening of two new open-pit mines in Sahavaara and Palotieva. Source: KANTAR
“I don’t think I would’ve dared to start the business now if Kaunis Iron had not existed. It provides extra security to know that so many new people are moving here.”
SWEDEN’S LARGEST WETLAND RESTORATION
Kaunis Iron is currently undertaking Sweden’s largest wetland restoration. A massive project that is of great importance for the environment, animals and nature.
“As far as we know, there is no larger wetland project in Sweden, or even in Europe”, says Emma Grönberg, Environmental Manager at Kaunis Iron.
Kaunis Iron is preparing for expanded operations. This also entails the use of more land and, unavoidably, the need for various species to be moved from a conservation perspective. This is something that the company has taken extremely seriously as we now carry out this wetland restoration project. Emma Grönberg, Environmental Manager at Kaunis Iron, explains:
“It is part of a major initiative to implement biotope improvement measures in relation to both the existing operations and the planned expanded operations. We have a requirement in the form of an exemption from the Swedish Species Protection Ordinance, which does not specify in detail how measures are to be imple mented, but does specify that measures be implemented. Based on this, and in consul tation with the County Administrative Board, we have decided on the measures that we are now implementing. The situation is somewhat similar in relation to the expanded operations we have applied for. In this context we have applied for an exemption from the Swedish Species Protec tion Ordinance, and to obtain such exemption we have proposed these measures.”
The project is very unique in terms of both its content and size. In many ways, Kaunis Iron is a pioneer in this area.
“For the expanded operations, we will restore land and move species before we start to use new land. In this way, natural environments are recreated and species will be moved before they suffer any injury in the location where we unavoidably need to use land. This is both challenging and unique. Furthermore, the actual wetland part of the project is very comprehensive. It is the dominant type of nature in our area and thus a natural part of the process. As far as we know, there is no larger wetland project in Sweden, or even in Europe.”
There is no question that this project is of major importance for the natural landscape. Emma explains more exactly what happens in nature and the effect of the project work:
“We perform felling of trees (conservation trees are left alone), and closure/damming of ditches, with plants moved to certain areas. This leads to the creation of a more open landscape. The water level is raised to an original level. After a number of years, the vegetation will change to become more suitable for species requiring a wetland habitat.”
that must become wetland or undergo forestry measures. To clarify the work involved, it has been decided to divide up the project work over several years.
“The work will be carried out in stages. We are starting with the areas that are needed for the existing operations, as well as the parts that we want to build first according to our plan for the construction of the expanded operations that have been applied for. The first step in this respect involves the land that needs to be used for an expanded tailings and clarification pond. After that, we will need to restore land for the Sahavaara industrial area, with a waste rock area and new open pit. The final part of the plan involves the Palotieva open pit. This governs how we plan the timing of our measures.”
“My heart remains there in Kihlangi, even though I moved when I was 15 to attend upper secondary school in Piteå. It’s my home and my river where I went fishing when I was young.”
“It’s great that they are prepared to believe in a newly started business, and that we get the chance to show that we can perform a project of this nature.”
Emil Lundholm, who via the project has been able to perform recruitments and grow his business, Lundholm Maskin & Skogstjänst
FACTS
Total area: Sweden’s largest wetland restoration involves approx. 700 hectares and around 180 km of ditches
2022/2023
256 hectares of wetland, 50 ha forestry measures
2023/2024
287 hectares of wetland, 90 ha forestry measures
2024/2025
158 hectares of wetland
New awardwinning collaboration supports relocation
“We need more people to relocate to the municipality due to the jobs available here. There are challenges involved, but they are positive challenges! We need new residential areas and new zoning plans, among other things”, says Ulrica Hammarström, Pajala’s municipal commissioner.
From South Africa to adventure in Pajala
In the hunt for new talent, Kaunis Iron has found an unexpected market for recruitment – in South Africa. Several new employees have been attracted to Pajala in a short space of time.
Finding new talent with the right skills and expertise is a challenge for Kaunis Iron. There is tough competition for the best talent in an already overheated region, with many industries that are investing in initiatives. Unemployment in the municipality of Pajala is already close to zero. Via personal relationships, a perhaps unexpected project was born, namely to attract South Africans with mining expertise to Pajala and jobs at Kaunis Iron. In 2021, two curious couples were invited to visit Pajala. Both couples accepted the invitation.
Elsabe Cloete is a resource geologist, and her husband Alan Johnson is an exploration geologist. They arrived in Pajala on a Friday at the beginning of February, and by the following Monday they had already begun their new jobs at Kaunis Iron
“Everything started with me being contacted by a recruiter via LinkedIn. We had never considered moving to Sweden, but when the enquiry came we started thinking about it. Alan travelled to Pajala at the end of September last year, and I followed
his trip digitally. When I picked him up at the airport after the trip, we already knew what our decision would be: we are going to move to Sweden!”
Jakobus Buckle is a geologist, and Inka Buckle is a horse trainer. When a recruiter contacted Jakobus to tell him about Kaunis Iron, the couple realised that their dream of an adventure overseas would become a reality.
“I told him that the nature was fantastic and that the people are very friendly. I also noticed straight away that many of the people who live here support the mine and are engaged in the future of the mine, which felt important for us”, Inka Buckle says. “One thing I appreciate about the work culture here is that people make decisions together. It’s not just the boss who decides everything – an opportunity is given to discuss things and arrive at the best solution, and to make a joint decision. It is less hierarchical in many ways, and everyone discusses things with each other, even between departments”, Jakobus Buckle explains.
“A place far removed from the hustle and bustle of the big city. An area where those involved have broken new ground in their efforts to increase the attractiveness of the area. Marketing and concrete action go hand-inhand when the image of the place is afforded more attention in different forms of media. Communication created by the target group itself, with genuineness as the guiding light. A campaign, but perhaps above all else a way of thinking, and acting, in the work aimed at attracting new people to the place. With the vision of wellcared-for, lived-in and vibrant villages, this year’s winner is an inspiration to small communities everywhere to take command of their future. And what could be more exciting than finding your new home?”
Explanation of why the project “Hej hemby” won the award as Placebrander of the Year 2022. The project involves a collaboration between Pajala Municipality and Övertorneå Municipality.
IT SHOULD BE FUN TO GO TO
The world’s best mine must also be the best workplace. That is why Kaunis Iron is focusing on improving the work environment – together with the company’s staff: “We want to be engaged, considerate and inclusive”, says Sofia Stambro, work environment strategist at Kaunis Iron.
In the autumn of 2022, an extra employee survey was sent out to the staff at Kaunis Iron, with questions about what it means to be a good colleague, how we treat each other, and what is okay and not okay.
Sofia Stambro is a work environment strategist at Kaunis Iron: “Management have chosen to prioritise the organisational and social work environment as part of becoming the world’s best mine. To succeed, we must also be the best workplace, with the best work environment. We want to help each other
with an open mindset in our daily work. This is what we must visualise based on our goal.”
Kaunis Iron’s work environment measures are also strongly linked to the strategic work involving the company’s fundamental values:
“As everyone knows, our core values are Respect, Engagement and Curiosity. We respect the environment, other people and our partners. Engagement means that we do what’s required at work, for each other and to ensure safety
ÄR DU TUFF NOG ATT VARA SNÄLL?
WORK
and security. Curiosity means that we explore, we want to progress and we want to achieve more. But the work is not finished yet, it is an ongoing process. It has to do with going the whole way and practising what we preach. If this is part of our goals, we must show it in some way. But this isn’t just something we do for the moment; it’s on ongoing process that requires work. It has to do with compassion, daring to speak out and also being comfortable in praising each other. That is what leads to job satisfaction. If you receive praise from your colleagues when you have done something well, it feels great. You then find yourself in a situation where the atmosphere is even better and things become even more enjoyable at work.”
It might sound a bit naive, but having fun at work is a key factor in developing effective measures for improved quality and safety:
“It’s good to have fun at work – it makes things more enjoyable and improves our work performance. This is what happens when there is a good atmosphere in the group. It’s important to think about how we can do things better and develop various tasks.”
OUR VALUES ARE OUR COMPASS
Together, we build the culture at Kaunis Iron. You and I. Based on our values, we identify how we should relate to our work and to each other.
RESPECT
We respect the environment, people and our partners.
ENGAGEMENT
We always do what’s required at work, for each other and to ensure safety and security.
CURIOSITY
We explore, we want to progress and we want to achieve more.
“You can be a good colleague in lots of different ways, but here at Kaunis Iron we will come a long way if we simply follow our own core values: Respect, Engagement and Curiosity.”
Sara Stridsman, HR Manager at Kaunis Iron.
“We have started the ‘Järnkoll’ pod because we feel that we want to be better at communicating internally with our colleagues.”
Åsa Allan, Deputy CEO of Kaunis Iron.
Mineral reserve
Mineral resource
Exploration project
LEGEND
Kaunis Iron’s permits Feb 2022
Exploration permit
Exploitation concession
Land allocation
THE TREASURE HUNT – FROM TEST DRILLING TO MINE
The work aimed at securing mining operations for future generations is already under way. Johan Högnäs, Chief Geologist, discusses the exploration of new deposits: “When we drill a hole, we never really know what we will find, which is incredibly exciting!”
He leads the work involving the search for the future in the land around Pajala. A treasure hunt that is already under way, with the aim of securing new deposits.
Johan Högnäs is Kaunis Iron’s Chief Geologist. In addition to Högnäs, the team also consists of three exploration geologists and four engineers. Their task is to find new ore. The ore mined by the company in the mine will eventually be exhausted, at which point the company will need new ore to mine. Otherwise there is no future.
To gain an overview of what the ore bodies look like, the readings and results from the drill cores are entered into a computer. The geologists “map” the drill cores and enter the information in the database where all data derived from the drill cores is collected. This information is then imported into other software programs where the ore deposits can be visualised.
This gathering of knowledge has been ongoing parallel to the mining activities. In Kaunisvaara and the areas to the south which the company is exploring, the ores are very similar. There are different theories within geology, but research suggests that they were formed just over two billion years ago in a volcanic environment with hot solutions containing iron. They penetrated up into a shallow sea and deposited the iron on the sea floor.
“Our new exploration projects are located approximately five and ten kilometres south of Sahavaara respectively. They are called Kahujärvi and Suksivuoma. We performed our first drilling at these projects in the winter, so they are completely new. A lot more drilling and other exploration work will be required before we can start to plan any mining there. We don’t yet really know what the ore bodies look like there. There is still more exploration required. We have gained a rough picture of how they are structured, but it will take a lot more drilling to derive an accurate picture of these ore bodies.”
The exploration work is performed via a series of boreholes from which the drill core is extracted. There are possibilities
to drill at great depths if required. With diamond drilling, which Kaunis Iron uses, it is possible to drill holes that are several kilometres deep if desired, although this is very expensive.
“At the projects we currently have, we are focusing closer to the surface. Our holes are between 50 and 100 metres deep on average. We mostly drill during the winter and collect the drill cores that we obtain from the diamond drilling. These cores are packaged and then taken to Kaunis Iron’s core archive or mapping premises in Pajala, where they are placed on mobile tables that are used by the geologists to examine the cores. The geologists perform calculations and create block models based on the data.”
Two winters ago, Kaunis Iron drilled approximately 11,000 metres. Last year the company drilled just over 6,000 metres, and the plan for the winter of 2022/2023 is to drill somewhere between 5,000 and 10,000 metres. This involves a lot of preparations and very thorough work. It is also work that is very exciting:
“Absolutely, I think it is exciting. We are exploring the bedrock beneath us. When we drill a hole, we never really know what we will find, which is incredibly exciting. It’s like being a detective or solving a puzzle. We have to gain a picture of something with quite limited information.”
FROM MINE TO PORT
Kaunis Iron’s open-pit mine in Kaunisvaara is just the starting point of the ore’s journey to customers around the world. The mining activities, concentration plant and logistics, which occur via road, rail and sea, form an optimised and sustainable chain. Here you can find out more about the process that refines the highly desirable iron ore.
BRIEF FACTS
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BY ROAD, RAIL AND SEA – HOW THE IRON ORE REACHES OUR CUSTOMERS
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Our iron ore concentrate is transported from Kaunisvaara to our customers via road, rail and sea.
From the concentration plant in Kaunisvaara, the ore is transported by lorry to Svappavaara along routes 395, 99 and E45 in a westerly direction.
Every day, more than 100 loads of ore are transported using 30 lorries. Each lorry can take 62 tonnes of ore per load.
Our traffic control centres in Kaunisvaara and Junosuando manage the logistics around the clock and monitor the speed, fuel consumption and location of the vehicles.
The drivers must blow into a breathalyser at the traffic control centre before they depart, and the lorries also have a speed limiter set at 80 km/h.
Our reloading station is located in Pitkäjärvi, Svappavaara, where the iron ore concentrate is reloaded for further transportation by train along the Iron Ore Line to the port of Narvik. From Narvik the ore is then shipped to our customers by sea.
To improve traffic safety and drivability along the Kaunisvaara–Svappavaara route, the Swedish Transport Administration is currently implementing a number of measures through the “MaKS Project”. This involves, among other things, widening the roads and making intersections safer.
A long history with deep roots.
Mining and iron working took place in the Pajala region as early as the 17th century, and Norrbotten has been dependent on a successful mining and steel industry for more than 100 years. Industry has shaped our towns and communities, our culture and our landscape.
2022. On 1 December, the Swedish Land and Environment Court approves Kaunis Iron’s application for a renewed and expanded permit, which also facilitates operation of the two new open-pit mines, Sahavaara and Palotieva, and implementation of the new flotation plant.
2021. Despite a turbulent world market, Kaunis Iron is able to report a record year with net sales of SEK 2,901 million and a net profit after financial items of SEK 1,237 million. Production in the mine is ongoing around the clock and increases by 21% compared with the previous year. The Group, including permanently stationed subcontractors, provides employment for 531 people, of which 338 are employees of Kaunis Iron.
2020. In February, the company announces impressive figures for the first year of production, with net sales of SEK 1,619 million and a net profit after financial items of SEK 389 million.
2019. In May, the operations are in full production at a rate of 2 million tonnes of iron ore concentrate per year.
2012. The mining company Northland Resources opens an open-pit mine in Kaunisvaara to mine iron ore. The first ore shipment takes place in December 2012.
2013. The price of iron ore stagnates. Northland Resources crashes on the stock market and commences a corporate reconstruction on 8 February.
2014. The price of iron ore drops significantly. In October, Northland Resources ceases production, and the company is placed into bankruptcy in December.
On 17 July, Kaunis Iron applies for a new operating permit for the existing operations as well as two new mines, in Sahavaara and Palotieva.
The mining operations now provide employment for around 350 people.
2018. On 19 February, Kaunis Holding AB acquires Abecede AB and all remaining assets in the Northland Resources bankruptcy estate, and changes name to Kaunis Iron AB. A cluster of Swedish investors put up almost SEK 600 million, and mining operations recommence in Kaunisvaara.
On 25 June, the Swedish Environmental Protection Agency applies for Kaunis Iron’s environmental permit to be recalled.
On 18 July, Kaunis Iron recommences the mining of ore.
2016. Abcede AB takes over parts of the business – the concentration plant, the truck workshop and the train wagons.
GROUP MANAGEMENT
Qualifications: MSc in Mechanical Engineering, Luleå University of Technology
Employed: 2020
Born: 1975
Background: Logistics Manager, Lindbäcks Bygg; Head of SSAB ONE Europe, SSAB; Head of Production Technology, Ferruform
Qualifications: MSc in Mechanical Engineering, Luleå University of Technology
Employed: 2022
Born: 1970
Background: Various roles in the management team for SCA Logistics AB, with experience of all modes of transport
Qualifications: MSc in Mechanical Engineering, Luleå University of Technology
Employed: 2019 (consultant since 2016)
Born: 1975
Background: Private business assignments close to the base industry in northern Sweden during the past 20 years in various types of senior executive positions
Qualifications: MSc in Business and Economics, Luleå University of Technology
Employed: 2017
Born: 1989
Background: Senior Auditor, Ernst & Young; Customer Service Advisor, Handelsbanken
Qualifications: BA in Behavioural Science, Umeå University
Employed: 2018
Born: 1978
Background: Team Leader, Swedish Migration Agency
Qualifications: PhD in Ore Geology, Luleå University of Technology; MSc in Geology and Mineralogy, Åbo Akademi University
Employed: 2017
Born: 1975
Background: Municipal Director, Pajala Municipality; Mine Planning Manager, Northland Resources; Head of Department, Hifab
Qualifications: BSc in Environmental and Quality Management, Luleå University of Technology
Employed: 2022
Born: 1982
Background: Municipal Director and Head of Municipal Technology, Pajala Municipality; Technology Consultant, Tyréns
Qualifications: Law and Project Management
Employed: 2022
Born: 1959
Background: Project Manager and Head of Section, LKAB
WE WILL DEVELOP THE WORLD’S MOST SUSTAINABLE IRON ORE
Our vision is to develop the world’s most sustainable iron ore. This sets a challenge and imposes demands on us to ensure that the decisions we make always take into account the three perspectives of sustainability: social sustainability, ecological sustainability and economic sustainability.
Sustainability is often reduced to a purely environmental perspective in the media debate, which is why we feel it is important to stress a holistic view of the concept of sustainability.
To take responsibility for a proactive approach to the development of the sustainability concept in everything we do which has an effect on our own company, business in the region, nature and the local community.
Our sustainability work is based on our own norms and values and how we can contribute to the fulfilment of the UN Sustainable Development Goals in the 2030 Agenda.
Our activities in 2022 included the following:
• Commencement of work on Sweden’s largest
wetland restoration project. The project involves a total of approximately 700 hectares of land where we are implementing biotope improvement measures in relation to both our existing operations and future operations. For this work we have chosen to collaborate with local contractors, who have been given an opportunity to develop organisationally and in terms of their skills and knowledge.
• We have also prioritised the organisational and social work environment as part of becoming the world’s best mine. In the autumn, an employee survey was sent to the staff at Kaunis Iron with questions about the social work environment. We will use the responses to this survey to produce an employee handbook on how to be a good colleague.
“Sustainability work is an integral part of our business plan and our day-to-day operations”
Åsa Allan, Deputy CEO
We support the UN Sustainable Development Goals in the 2030 Agenda.
A vibrant community is important
As a major employer in Pajala, Kaunis Iron has a significant impact on the local community. We spend millions on purchases of goods and services each year, and we want to be a driving force for local businesses and to reinvest when we can. One example of this is the major wetland restoration project we are undertaking, in which we are engaging the services of local contractors.
In addition, we want to contribute to a vibrant community, not least through projects for children and young people. We look to support events, meeting places and other social projects and initiatives that create added value for Pajala and its inhabitants.
Since the start of our operations, we have had a good collaboration with Samhall, which plays an important role locally in Pajala. We have also supported Tornedalen Pride, Tornedalsteatern and the local sports clubs Pajala Hockey and Pajala IF, to name but a few examples.
In 2022 we reinvested SEK 551 million in the municipality of Pajala and SEK 1,033 million regionally.
Examples of our collaboration projects in 2022:
• Local procurements related to wetland restoration
• Activity park in Vittangi
• Samhall
• Tornedalen Pride
• Tornedalsteatern
• Pajala IF
• Pajala Hockey
• Popkollo Norrbotten
93% of local residents are positive or very positive to Kaunis Iron’s operations!
We will be a gender-equal company
Pajala is the Swedish municipality with the greatest imbalance in terms of the number of men and women in the municipality.
An equal workplace contributes to a more equal society and a more inclusive workplace environment and is important for Kaunis Iron’s ability to be an attractive employer on the labour market. The long-term ambition is to achieve a gender distribution that reflects the community in which we live.
We will be an attractive employer for both white-collar and blue-collar workers. We are a modern company that has not inherited any set culture, values or established truths and practices.
Our activities in 2022 included the following:
• Our managers have undergone training in how to handle situations related to undesirable behaviour.
• We have carried out basic health and safety training for all employees.
• We have actively worked on the issue of how to achieve a better gender distribution within the Group.
In 2022, the percentage of women within the Group increased by four percent compared with the previous year. Changing the gender distribution within the Group is a longterm project that requires initiatives in relation to both study choices at school and systematic recruitment measures.
At Group level, the percentage of women in senior executive positions decreased from 34 percent in 2021 to 29 percent. This is largely due to a reorganisation process in the concentration plant that saw the appointment of five new managers, all of whom are men.
DID YOU KNOW THAT…
25% of the people who work at Kaunis Iron are women
55% of all employees in senior executive positions in Kaunis Iron Logistik AB are women
71% of female citizens in the municipality of Pajala have a very positive attitude to Kaunis Iron’s operations.
Our safety work
We always put safety first. We must never compromise on our safety procedures and the fundamental responsibility we have to ensure a safe and secure work environment for all our employees and contractors.
In 2022, the number of risk observations increased by 70 percent. We believe that this is partly due to our staff becoming more aware of their responsibility to report discrepancies and risks in the work environment, and partly due to risk observations being managed more systematically.
Moving forward, we will focus even more on proactive measures such as risk observations, risk analyses and safety rounds, in order to prevent potential accidents before they occur. We have, however, seen a decrease in the number of accidents per million hours worked compared with the previous year.
Examples of initiatives in 2022:
• Representatives from the environmental department have undertaken an HTO (Humans, Technology and Organisation) training course designed to help them visualise what has caused an accident. In this way, we can minimise the risk of re-occurrence of a similar incident.
• A chemicals group has received training in how to minimise unhealthy exposure to hazardous substances.
• A risk analysis and targeted measures have been performed in relation to traffic and the risk of tripping, slipping or falling in the mine area. Information-related activities have also been carried out based on the most serious risks for shift workers.
• A lot of work has been carried out to minimise health and safety risks such as exposure to dust, noise and vibrations.
• Activities and initiatives, such as workshops, have been implemented in the area of Organisational and Social Work Environment.
However, our safety work also stretches beyond our gates. Our plant is Seveso-classified due to the fact that we handle chemicals, fuels such as diesel and blasting agents. According to EU requirements, we have a clear responsibility to prevent chemical-related accidents at our industrial plant and to protect the general public in the event of an accident.
Our heavy vehicles operate on public roads, and we have therefore invested SEK 127 million in a collaboration with the Swedish Transport Administration to reinforce and improve the stretches of road we use. The total investment amounts to SEK 1.2 billion.
In the summer of 2023, work will commence on a new bridge in Autio across the Torneå river, as well as a stretch of road from Erkheikki in a westerly direction towards Lovikka.
The number of risk observations in 2022 increased by 70%.
ECOLOGICAL SUSTAINABILITY
Our environmental work – always in focus
activities. Self-inspection and external analyses are cornerstones of our quality work, and in this context there has been considerable documentation of our immediate environment since 2009. We have carried out thousands of analyses of samples from watercourses in the area according to the applicable national standard. It is satisfying to note that there is currently no evidence that our operations have any negative environmental impact.
More examples of our environmental work in 2022:
• During the year we intensified our work ahead of an environmental and quality certification. We arranged internal audits and a certification audit. We received around 20 findings regarding discrepancies, although none of them serious, which is extremely good for a company of our size and complexity. As a result, the certification body has recommended that Kaunis Iron should receive certification.
• We commenced a project aimed at improving waste management within the Group through a review of existing systems and optimisation of such systems. Local waste management coordinators have been appointed in each region to facilitate and improve the waste management process.
Our operations utilise large amounts of land, and to ensure that we avoid the loss of valuable natural areas, we have undertaken to create long-term protection of these areas. During the year, we commenced work on the restoration of wetland areas. A total of 20 hectares have been restored, and work is under way on a further 120 hectares.
Kaunis Iron will comply with all applicable legislation, all granted permits and the various regulations to which our operations are subject. The mining industry is subject to rigorous regulation, which is a good thing. We both want to and will take responsibility for our obligations as a company.
Our environmental work is based on continual improvement measures, with major investments aimed at successively reducing risks of negative environmental impact. One important challenge is making the whole of our vehicle fleet fossil-free to eliminate CO2 emissions from our transportation
• We commenced an overall energy mapping process during the year as a basis for future energy efficiency measures. An internal energy group has been established with responsibility for prioritisation of systematic energy work and energy efficiency measures in the operations.
• We also commenced an investigation into potential heat recovery and optimisation of compressed air in the concentration plant, as well as an investigation into energy savings in the property system.
• Another ongoing energy project involves an investigation into speed control of grinders in the concentration plant.
• We are also continuing an ongoing investigation into our own electricity production and alternative solutions. The work aimed at finding a solution for a transition to electric vehicles has continued together with our partners.
The transition to a fossil-free and climateneutral society is of importance to us all. Kaunis Iron will be an active and leading force in the achievement of this transition.
“I’m extremely pleased to see that our hard work is producing results. CO2 emissions have decreased by around 10% since 2021!”
Emma Grönberg, Environmental Manager
SUSTAINABILITY
Long-term security is important to us
Our mineral resources are, of course, the decisive factor –but the goal is to work to achieve something that will truly stand the test of time in Pajala, the region and Sweden.
To cope with cyclical economic downturns, we are striving to build a stable business through financial strength and a strong cash position. This is important for a number of reasons, including the ability to implement investment programmes in relation to areas such as industrial development, work environment, safety and sustainable production methods.
Naturally we will also comply with applicable legislation and promote good business ethics.
In 2022, we paid dividends of SEK 294 million. Despite this, we achieved our equity ratio and quick ratio goals for
2022 and exceeded our 2021 production level. The percentage of local purchases exceeds our goal due to the engagement of a large number of contractors in our operations. In 2022, we made purchases for SEK 551 million in the municipality of Pajala and a further SEK 1,033 million regionally
“A large share of Pajala’s residents have a connection to us through their work. We use local contractors as often as we can.”
Linus Styrman, CFO
It is important for us to take responsibility for achieving long-term financial security for our company. We must not be driven by short-term interests; on the contrary, we must strive to achieve mining operations that will last for generations.
ANNUAL AND SUSTAINABILITY REPORT 2022
HOW WE MAKE A DIFFERENCE…
Our vision sets a challenge. We aim to develop the world’s most sustainable iron ore. To achieve this, it is necessary that we have a high level of acceptance of our operations locally, nationally and globally.
Kaunis Iron mines iron ore from Pajala that is refined and sold to the global market. Our production and operations are conducted in an open and transparent manner. We utilise modern technology, sustainable methods and a strong level of local engagement to create long-term value for both the local community and our owners.
This requires us to constantly ensure that the decisions we make take into account the three perspectives of sustainability: social sustainability, ecological sustainability and economic sustainability.
Sustainability is often reduced to a purely environmental perspective in the media debate, which is why we feel it is important to stress a holistic view of the concept of sustainability. To take responsibility for a proactive approach to the development of the sustainability concept in everything we do which has an effect on our own company, business in the region, nature and the local community.
Our sustainability work is based on our own norms and values:
Respect: for the environment, people and our partners. Engagement: we always do what’s required at work, for each other and to ensure safety and security. Curiosity: we explore, we want to progress and we want to achieve more.
Ecological sustainability
Environmental work and the transition to a fossil-free and climate-neutral society are always in focus in our sustainability work. It’s simply not possible to mine ore without having an environmental impact, and an open-pit mine dramatically affects nature. Our operations utilise large areas of land and thus also impact areas with valuable nature. We have a major responsibility to prevent and minimise environmental impact and to improve our utilisation of resources in accordance with the principles of reuse and circular economy. Our undertakings in relation to ecological sustainability mean that:
• we comply with all applicable legislation, granted permits and other mandatory requirements to which our operations are subject;
• we contribute to the fulfilment of global, national and local environmental goals;
• we take responsibility for and play an active role in the work involving the major environmental issues of our time by
striving to achieve fossil-free mining operations and contributing to increased biodiversity in the areas where we operate through measures such as restoration of wetland.
Social sustainability
With respect for human rights, cultures, customs and values among people, Kaunis Iron wants to take responsibility for our employees and our local community, as well as society as a whole. We have a significant impact on the local community, as we are a major employer and a large company that purchases substantial amounts of goods and services each year. Our undertakings in relation to social sustainability mean that:
• the safety of our employees is always of the highest priority. No one should need to risk injury at work;
• we strive to employ locally and to create a workplace characterised by equality and gender equality, where diversity is viewed as a strength;
• we conduct our operations in a completely open and transparent manner in order to build credibility and acceptance of our business among our stakeholders. We therefore implement initiatives such as a collaboration group with our local stakeholders, and we maintain ongoing contact with the local community via personal meetings, our newspaper and digital channels;
• we support local clubs and associations through our sponsorship programme.
Economic sustainability
It is important for us as a company to take responsibility for achieving long-term financial security for our company. We must not be driven by short-term interests; instead, we will strive to achieve something that will be truly lasting for Pajala, the region and Sweden. Our undertakings in relation to economic sustainability mean that:
• we comply with applicable legislation and promote good business ethics;
• we strive to build a long-term stable business through financial strength and a strong cash position to ensure that we can cope with cyclical economic downturns;
• we endeavour to be a driving force for the local business community and to create growth, diversification and skills development among local businesses through our local procurements;
• we aim to provide sustainable and competitive iron ore concentrate on the global market;
• we strive to be a responsive and reliable business partner by delivering on our promises and living up to our customers’ demands and expectations.
Overall governance
The cornerstones of our sustainability work are that
• we will comply with mandatory requirements;
• sustainability will be an integral part of our business plan;
• we strive to conduct responsible mining operations based on economic, ecological and social aspects;
• our sustainability work is based on our own norms and values and how we can contribute to the fulfilment of the UN Sustainable Development Goals in the 2030 Agenda.
In 2019, an analysis of our business was carried out on the basis of the 2030 Agenda. This analysis describes how our operations contribute to the 17 Sustainable Development Goals and has formed the basis for the sustainability goals adopted by the Board of Directors.
Management is responsible for our sustainability work at an overall level by developing proposals for long-term strategies and goals based on the Sustainability Policy adopted by the Board of Directors, and communicating these to the organisation in a clear manner. The Deputy CEO is responsible for coordinating sustainability issues in the management team. Regular reports are submitted to the Board of Directors regarding ongoing activities and the progress of the work, and an annual sustainability report is included as an integral part of the annual report.
To achieve success in our sustainability work, it is important that all staff are aware of our sustainability goals and possess the knowledge required to be able to contribute to the achievement of these goals. At the same time, sustainability work is an integral and given part of the company’s business plan and its day-to-day operations.
In 2022, necessary policies have been produced for the overall governance of our sustainability work. These policies have been adopted by the Board of Directors. Our Sustainability Policy functions as an overall governing policy in relation to our other policies and covers the whole of the Kaunis Iron group, including the subsidiaries Kaunis Iron AB and Malmtransport i Norr AB. To counteract corruption, an Anti-Corruption Policy has been produced, and guidelines on how employees should act in relation to gifts etc. from suppliers have also been implemented operationally. Furthermore, a new Code of Conduct has been implemented.
Good communication and transparency about and in our business is an important aspect of our work aimed at building credibility and trust, with particular focus on vulnerable groups.
Through an annual stakeholder analysis, key stakeholders are identified on the basis of various groups of stakeholders, with the aim of building acceptance and trust.
Our challenges and risks
As a basis for our strategic work aimed at achieving our vision, it is necessary to have good awareness and knowledge of our challenges and the risks associated with them. Below we describe the 6 main challenges that we have identified as necessary to manage in the long term in order to achieve our vision.
Skills supply
We will be an attractive employer for both white-collar and blue-collar workers.
We are a modern company that has not inherited any set culture, values or established truths and practices.
We are an innovative and entrepreneurial company that is starting a new base industry in Pajala.
High-cost producer
Our shipments are expensive, and it is therefore necessary that we have the right machinery, the right technology, the right skills and knowledge, the right quality, the right partners and the right owners to enable us to provide a competitive iron ore product on the global market.
Safety
We conduct comprehensive operations that involve risks for both people and the environment. Safety work is a high priority for us, and we work proactively to create and maintain a culture of safety.
CO2
The transition to a fossil-free and climate-neutral society is of importance to us all. Kaunis Iron will be an active and leading force in the achievement of this transition.
Acceptance & trust
We conduct our operations in a completely open and transparent manner in order to build credibility and acceptance of our business among our stakeholders. It is important to ensure that all our stakeholders are aware of the value we create for the local community and our owners and customers.
Permits
The mining industry is subject to permit and regulation, with impact on the physical environment and other stakeholders with various agendas. Kaunis Iron and the entire industry faces a major challenge in terms of correctly dealing and communicating with all stakeholders.
GOALS AND OUTCOMES 2022
Below we describe the goals and outcomes for our sustainability work based on the three different aspects of sustainability, as well as how our goals contribute to the fulfilment of the 2030 Agenda. For each goal we also perform an evaluation of goal fulfilment and the risk associated with the goal.
ECONOMIC GOALS
The equity ratio is a measure of the percentage of the company’s assets that are financed with equity. The mining industry is volatile, and to achieve a long-term stable business it is necessary to have financial strength to cope with cyclical economic downturns.
The equity ratio is 67%, which is better than the goal for 2022. The company has achieved this goal despite paying dividends of SEK 294 million during the year. The strong equity ratio can largely be attributed to the company’s strong financial performance during the year and relatively unchanged total assets otherwise.
> 200% The quick ratio provides an indication of liquidity in relation to current liabilities. The mining industry is volatile, and in times of weaker market developments it is important to have a strong cash position to be able to implement initiatives such as investment programmes for industrial development, work environment, safety and sustainable production methods.
The quick ratio for 2022 is 263%, which exceeds the previous year’s outcome of 215%, despite the payment of dividends during the year equating to SEK 294 million.
Percentage of local purchases indicates the volume of purchases from suppliers in the region who conduct significant business activities locally, and where the local organisation is the party primarily involved in the business dealings with Kaunis Iron. A high percentage of local purchases creates growth and diversification locally and enables local businesses to develop their skills and knowledge.
The percentage of local purchases exceeds the goal due to the continued engagement of a large number of contractors in our operations. This has contributed to record-low unemployment in the municipality of Pajala in 2022.
SOCIAL GOALS – SAFETY
These goals relate to the number of risk observations reported in the GRIA discrepancy reporting system per employee and quarter, and the number of accidents per million hours worked. We conduct comprehensive operations that involve risks for both people and the environment. Safety work is a high priority for us, and we must have a culture of safety where we work proactively and react before accidents and incidents occur. Accident-free operations enable our employees to feel safe and secure at work and enjoy a healthy working life.
The number of risk observations has increased by 70% compared with the previous year. This increase is believed to be due to the fact that staff have become more aware of their responsibility to report discrepancies and risks and thus contribute to an improved culture of safety. Risk observations and other discrepancies have been managed more systematically during the year based on requirements in the management system, which may also have contributed to an increased willingness to report such matters. The number of risk observations per employee and quarter is not in line with the year’s ambitious goal but still demonstrates a clear improvement compared with the previous year.
The number of accidents per million hours worked has decreased compared with the previous year, although the outcome indicates that we need to focus more on proactive measures in the future. Prior to 2023 we have therefore developed new work environment goals that measure proactive activities (e.g. risk observations, safety rounds and risk analyses) in relation to reactive discrepancies (incidents and accidents).
SOCIAL GOALS – GENDER EQUALITY
This goal relates to the percentage of women among permanent and probationary employees in the Group. Pajala is the Swedish municipality with the greatest imbalance in terms of the number of men and women in the municipality. An equal workplace contributes to a more equal society and a more inclusive workplace environment and is important for Kaunis Iron’s ability to be an attractive employer on the labour market. The long-term ambition is to achieve a gender distribution that reflects the community in which we live.
The percentage of women in the Group has increased by 4 percent compared with the previous year. Changing the gender distribution within the Group is a long-term project that requires initiatives in relation to both study choices at school and systematic recruitment measures. During the year we have actively worked on the issue of how to achieve a better gender distribution within the Group.
This goal relates to the percentage of women among permanent and probationary employees in the Group who are employed as managers or supervisors. In this context, managers and supervisors are employees with responsibility for other staff. This goal relates to the percentage of women among permanent and probationary employees in the Group. Pajala is the Swedish municipality with the greatest imbalance in terms of the number of men and women in the municipality. An equal workplace contributes to a more equal society and a more inclusive workplace environment and is important for Kaunis Iron’s ability to be an attractive employer on the labour market. Good role models are important when it comes to attracting new talent to the business, and also in terms of showing the mining industry as an industry characterised by equality. The long-term ambition (2030) is to achieve a gender distribution that reflects the community in which we live.
The percentage of women among managers has decreased from 34% to 29% since 2021. The main reason for this decrease is a reorganisation process in the concentration plant that resulted in the appointment of five new managers, all of whom are men.
SOCIAL GOALS – LOCAL COMMUNITY
The percentage of employees in the Group who live locally i.e. don’t commute on a weekly basis. Contributes to tax revenues for the municipality and minimises population decline. Being close to one’s social network and family also contributes to greater well-being for the individual. We also believe that this goal leads to an increased level of engagement among employees, as they see how our operations contribute to the local community.
The percentage of local employees was at the same level in both 2022 and 2021. We continue to face challenges in relation to availability of housing, in particular at our operating site in Junosuando. It is therefore our assessment that the housing situation, as well as the availability of individuals with the right skills, may make it difficult to achieve a further increase in the percentage of local employees.
We conduct our operations in a completely open and transparent manner in order to build credibility and acceptance of our business among our stakeholders. It is important to ensure that all our stakeholders are aware of the value we create for the local community and our owners and customers.
The residents of Pajala are generally positive to the mining operations, 93%, which is an increase of 1% from 2021. Compared with 2021, women have a very positive attitude (increased from 62% in 2021 to 71%). Otherwise there is no major difference compared with the previous year. Percentage
We conduct our operations in a completely open and transparent manner in order to build credibility and acceptance of our business among our stakeholders. It is important to ensure that all our stakeholders are aware of the value we create for the local community and our owners and customers.
When it comes to the question of whether Kaunis Iron has sufficient dialogue regarding environmental impact and societal development, 78% feel that this is the case, as opposed to 71% in the 2021 survey. In 2021, women were more doubtful or did not think that the dialogue was sufficient (35%). In 2022 this figure has decreased to 22%. The differences between the different age groups have also decreased from 2021 to 2022. During the year, following the lifting of the pandemic restrictions, we were able to recommence physical information meetings for the municipality’s residents, and we have also continued to develop our external communication aimed at increased transparency, the effect of which is most likely reflected in the outcome. Environmental issues have also gained major focus in the media debate during the year in connection with the conclusion of two major environmental cases.
ECOLOGICAL GOALS
6.0 0
This goal relates to the number of tonnes of CO2 per kt of iron ore concentrate transported by road. The transition to a fossil-free and climate-neutral society is of importance to us all. Kaunis Iron will be an active and leading force in the achievement of this transition.
Compared with the previous year, CO2 emissions have decreased by around 10%, despite an increase in the volume of iron ore concentrate transported. The decrease is due to more stringent requirements regarding the reduction obligation, as well as changed driving conditions. The reduction obligation has been raised from 26% to 30.5%, which has a positive effect in the form of reduced carbon dioxide emissions. The Vittangi bypass was opened in October 2021, and the Masugnsbyn bypass was opened in 2022. The effects of these new bypasses include a shorter driving distance, lower climbing height and fewer starts and stops.
The work aimed at finding solutions for a transition to electric vehicles has continued together with our partners.
1.36
0
This goal relates to the number of tonnes of CO2 per kt of released rock in the mine. The transition to a fossil-free and climate-neutral society is of importance to us all. Kaunis Iron will be an active and leading force in the achievement of this transition.
The amount of CO2 per tonne of released rock has increased. During 2022 we carried out a major relocation of ore dumps, which has affected the emission figures. If all handled volumes are taken into account in the calculations, the figure for total carbon dioxide emissions is 1.26. Lower emissions are primarily achieved by minimising driving distances within the mine, although improved driving methods and reduced idling also have a positive impact.
0.10
This goal relates to the amount of nitrogen (N) kg/tonne of released rock in the mine production. The mining operations have a surplus of water in the system, and the water therefore needs to be released into the Muonio river from time to time. The company is actively working on minimising the need to release water through careful planning, as well as minimising the amount of N in outgoing water.
The amount of nitrogen in outgoing water is lower than in the previous year. The levels in outgoing water have generally been lower than in the previous year, while the consumption of blasting agent has increased by 6.5% compared with 2021. One explanation is that we are now seeing the effect of the work that has been carried out on optimising our drilling and blasting activities.
of wetland and creation of viable stocks of focus species with longterm protection by 2025
100% This goal relates to the degree of completion in relation to the restoration of areas with good status for focus species transplanted to the areas (total of 139 ha).
Kaunis Iron’s operations utilise large areas of land and thus also impact areas with valuable nature. To ensure that we avoid the loss of valuable areas and achieve a continual function, the company has undertaken to implement measures aimed at creating long-term protection for relevant areas and species.
20 hectares of wetland have been restored during 2022. Work is ongoing in relation to an additional area totalling 120 hectares, but this work was not completed during the year.
The outcome for 2021 relates to planning and project design for the total restoration of 139 hectares. In 2022 a revision was performed in relation to how the level of goal fulfilment is calculated, so that this goal is now assessed based on the total number of completely restored hectares. On the same basis, the corresponding figure for 2021 would have been 0%.
The goal for 2023 and thereafter will be revised on account of the new permit, whereby significantly larger areas will be restored in relation to the expanded operations.
DIRECTORS’ REPORT
Information about the business
The Company was registered on 20/03/2017, and since 19/02/2018 it is the parent company in a group that refines and sells iron ore and conducts thereto compatible activities. The subsidiaries in the group are Kaunis Iron AB (5590034103) and Kaunis Iron Logistik AB (559150-4146).
Significant events during the financial year
Similar to the previous year, 2022 has been a year characterised by significant turbulence and uncertainty. Not due to the pandemic and delays in supply and production chains, but rather as a direct consequence of the war that broke out in Ukraine in February following Russia’s full-scale invasion of the country.
The year began with strong global demand for iron ore, with rising iron ore prices as a consequence, in particular due to the recovery in China after the production restrictions that were introduced there during the second half of 2021.
Then, during the spring, the level of financial uncertainty escalated globally, inflation soared and the economy slowed down.
The reasons for these developments varied in different parts of the world. In Europe, for example, developments were largely characterised by the continent’s energy-related dependency on Russia. The economic slowdown in China is largely due to the restrictive COVID policy that has been implemented there as well as uncertainty in the domestic property market. At an overall level, however, the effects on the global economy have basically been the same –high inflation, higher interest rates and a general economic downturn.
As a result, the price of iron ore varied significantly during the year. During the first quarter, the price of 65-percent iron ore concentrate reached a high of just over 190 dollars per tonne, after which it dropped, reaching a low of just over 90 dollars per tonne at the end of October. However, a stabilisation with somewhat higher price levels has been seen during the latter part of the fourth quarter. Pleasingly, the demand for high-quality iron ore has been so high that there have always been sales channels for the iron ore concentrate produced by Kaunis Iron.
The Group’s revenues and profits are directly linked to the global iron ore price. Our performance during the first half of the year was therefore very strong, although the second half of the year saw a significant drop off. Production has proceeded satisfactorily, and the quantity of iron ore concentrate produced during the year was the largest since the start of operations in 2018. Certain direct effects of price increases have impacted the Group’s cost structure, in particular with regard to fuel, blasting agents and other producer goods.
Our environmental permit has been questioned since the start of operations. On 13 January 2022 a judgement was issued regarding the Swedish Environmental Protection Agency’s request for our current permit to be recalled. The judgement – in which the Swedish Land and Environment Court rejected the Environmental Protection Agency’s claim – marked a victory for Kaunis Iron. The judgement was subsequently appealed to the Land and Environment Court of Appeal, where it was decided in the autumn not to grant leave to appeal.
On 1 December 2022 a judgement was then rendered in the case concerning a new environmental permit following a main hearing in the Land and Environment Court during the month of September. This judgement represented yet another success, as the court supported our reasoning in all material respects and found that our application, environmental impact assessment and proposed protective measures were sufficient for the granting of a permit to mine a further two new open pits and construct additional process steps in the concentration plant. The new permit is valid for 35 years.
In summary, the past year has been very turbulent and uncertain. However, the Group has managed to navigate this difficult period well and has always had sales channels for the iron ore concentrate that has been produced. Cash flow and profits have been satisfactory despite significant cost increases. In the long term, the successes achieved in relation to the permit-related issues are of greatest importance in terms of being able to lay the foundation for long-term sustainable mining operations in the Tornedalen region.
Significant events after the end of the financial year
No significant events have occurred after the end of the financial year.
Investments
Investments made in property, plant and equipment and intangible assets in 2022 amounted to SEK 142 million (143.8) and SEK 17.3 million (17.1) respectively, which is in line with the investment budget that was set prior to the financial year. In June 2022, the Board of Directors also decided to commence investment in the next generation mining operations in Kaunisvaara, which we refer to as Kaunis 2.0, through investment in a flotation plant in the concentration plant amounting to just over half a billion Swedish kronor.
The investments made during the year have related to production-related development areas as well as areas for improvement of the Group’s environmental performance, safety and work environment. Investments in exploration have also been made during the year, with the aim of creating conditions for production in new deposits.
Financing
The Group has been financed with equity since the start of operations in 2018. The financial developments during the financial year have further improved the Group’s financial position and have made it possible to pay dividends and make investments according to plan without worsening the Group’s liquidity. During the financial year, the Group has chosen not to renew the credit facility of SEK 90 million that the Group previously had for leases and hire purchase agreements. The total external financing via credit institutions is only related to two objects and amounted to SEK 9 million at the end of the year.
Risk management
The Group operates a business that is exposed to movements in raw material prices and exchange rates and is sensitive to economic changes. The operations are associated with work environment and safety risks and impact the surrounding environment. All parts of the Group work continuously to minimise the risks with which the business is associated. The work performed during the year on achieving certification of the Group according to ISO 9001 and 14001, where an external audit was performed in October, has further contributed to a process of structured risk management at both operational and strategic level.
OPERATIONAL RISKS Risk of accidents and ill health
The Group handles large material flows in the open-pit mine and concentration plant, in the transport chain and at port. Employees and contractors are periodically exposed to risky situations that could entail a risk of accident and/or health-related risks. This risk is managed through systematic work environment measures in a specifically defined work environment organisation that has been developed during the year, including two strategic work environment coordinators. Once again, the number of incidents and accidents per million hours worked decreased this year, and the business has clear goals in this area.
Risk of environmental impact
The Group’s operations impact the air, water, land and the biodiversity in the environment surrounding the mine. Exceeding permitted limits for emissions to air and water, or the occurrence of noise and waste, could lead to production restrictions and even a stoppage of production if necessary measures are not taken. Exceeding permitted limits could also have a negative impact on confidence and trust in the Group and thus the Group’s possibilities to continue conducting operations.
A well-defined and comprehensive self-inspection programme is crucial for minimising the risk of greater environmental impact than permitted in the Group’s existing environmental permit. The Group works systematically in this area in dialogue with relevant authorities and external resources.
Risk of unscheduled production stoppages
The production chain primarily consists of continuous processes where an unscheduled stoppage in one part of the operations could impact the Group’s entire operations and thus its ability to achieve planned deliveries. This risk is managed through systematic maintenance, control activities and inspections of production-critical components in the plant. There are set dates for maintenance stoppages, control activities, inspections and rounds. The single most important form of protection in relation to unscheduled operating stoppages and breakdowns is the maintenance of adequate insurance cover for the business. All property is adequately insured, and the Group has business interruption insurance.
Risk of insufficient skills supply
Our business is dependent on the ability to recruit, develop and retain qualified employees. This applies not only to employees of the Group but also to employees of the Group’s primary subcontractors. A shortage of staff with the right experience makes recruitment more difficult and could have a long-term negative impact on the Group’s production capacity and financial performance. The initiatives and investments that are being implemented in northern Sweden at present have increased the competition for labour, and the generally low level of unemployment in the region constitutes a major challenge in relation to skills supply.
The most important factor in terms of being able to attract staff is the ability to create and maintain an image as an attractive employer. The Group has a structured and carefully considered HR policy that provides employees with scope to develop and ensures that they are offered employment on market terms. Subcontractors and business partners are also included in relation to issues concerning our HR policy, with the aim of developing a team spirit between all parties.
During the year, various strategic initiatives have been implemented to broaden the base for selection of individuals with expertise in certain areas. The work aimed at attracting staff from other parts of the world has continued successfully during the year.
MARKET AND COMMERCIAL RISKS Risks concerning operating permits
The Group, via the subsidiary Kaunis Iron AB, conducts operations that are subject to permit pursuant to the Swedish Minerals Act and the Swedish Environmental Code. A violation of applicable environmental laws could lead to criminal sanctions and coercive measures and could impact the validity of the Group’s permits. The operations cannot be conducted without a valid permit.
Developments during the year, including the judgement issued in the case concerning the petition for recall of the Group’s permit, the Swedish Land and Environment Court of Appeal’s decision not to grant leave to appeal that judgement, and the positive judgement issued in relation to the case involving the permit application concerning the future mining operations, have significantly reduced the Group’s risk with regard to permit-related risks.
Customer dependency
The global iron ore market is characterised by a small number of operators with a high level of sensitivity to changes in the economic situation. The Group has entered into contracts with customers equating to the planned production. A significant economic downturn could entail decreased demand among the Group’s customers, which could in turn lead to reduced sales volumes and lower prices. Developments in China are crucial to the development of iron ore prices. Around 75% of the iron ore transported around the globe by sea is sold to China, so that country’s development has a major impact on both demand and price. Although China has been characterised by major uncertainty and a general economic slowdown during the year, the situation has improved during the latter part of the year, in particular as a consequence of an easing of the previously very restrictive COVID policy in the country.
Supplier dependency
Large parts of the Group’s production-related operations are conducted by subcontractors, including loading and other services in the mine, rail transport and port services. If a subcontractor is unable to fulfil its undertakings, this could result in both temporary and long-term effects on the Group’s production capacity and financial performance.
This risk is minimised by working with a number of different contractors and implementing clear management and control of operations, with well-defined procedures for work tasks and processes. Continual assessment of existing and potential suppliers is performed on an ongoing basis.
Energy prices
Energy in the form of diesel and electricity, primarily for operation of mining machinery, transport vehicles, crushers and the concentration plant, accounts for approximately 20% of the Group’s operating expenses. Changes in energy prices have a major effect on net operating profit. Fuel and energy prices have increased significantly during the year, and there is no direct possibility to pass on these price increases in the value chain. That said, the cost structure of mining operations is, of course, reflected to some extent in the price of iron ore. However, regional and national differences in relation to aspects such as requirements concerning a reduction obligation for diesel in individual countries could give rise to varying market conditions. The changes made to Sweden’s legislation in this area from 1 December 2022 have contributed to cost increases that are unique to Sweden.
The exposure risk in relation to diesel is difficult to manage, and both market changes and changes to legislation and tax rules have a direct impact on the Group’s profits. When it comes to trade with electricity and electrical power supply, the Group has an explicit electricity trading policy that regulates the way in which the Group will manage procurement of electricity in order to reduce the effect of temporary market fluctuations.
FINANCIAL RISKS Raw material prices
Changes in raw material prices have a significant impact on the Group’s profits and cash flow. The Group’s revenues are essentially governed by the global market price for iron ore concentrate and the underlying price of sea freight as well as contracted quality premiums.
The price of iron ore is not hedged in the current finance policy. That said, a certain degree of risk spreading exists indirectly in the customer contracts that the Group has entered into, as the sales revenues are based on average prices during a certain period of time. One risk as a consequence of this model is that the final pricing of deliveries is sometimes based on the market price applicable relatively long after the date of delivery.
Currency risk
The Group’s sales are transacted more or less exclusively in American dollars. The Group’s expenses, on the other hand, are essentially incurred in Swedish kronor. Fluctuations in exchange rates could therefore have major effects on the Group’s cash flow and financial performance. The Group does not have any foreign subsidiaries, and consequently there is no currency risk in relation to translation exposure.
During the autumn of 2022, it was decided to perform currency hedges in relation to part of the forecast sales for the next two years (please also see the section on hedge accounting and notes 19–20).
Credit risk
The Group’s business activities give rise to credit risks. Credit risks are primarily associated with trade receivables. For customer contracts where it is assessed, according to the Group’s policy, that credit risk exists, the counterparty risk is transferred from the customer to a Swedish bank through Letter of Credit.
Financing risk
Financing risk is the risk that the Group will be unable to meet its commitments in the ongoing business operations due to a lack of liquidity or an inability to arrange external financing.
The Group’s cash position and liquidity has been more or less unchanged during 2022, despite the payment of dividends and investments as a consequence of the Group’s positive financial performance. No financing needs have existed during the year.
The Group has an established policy for financial planning regarding cash flow to ensure that the Group will always have adequate liquidity. This policy means, inter alia, that the Board of Directors continuously assesses the Group’s liquidity requirements in relation to existing and significantly worsened operating conditions.
Interest rate risk
Interest rate risk relates to how the return on an interest-bearing asset or the cost of an interest-bearing liability is affected by changes in the interest rate.
At present the Group’s main interest rate risk concerns the interest rate component of leases with suppliers. Apart from leases, the Group does not have any significant assets or liabilities with interest rate exposure. An increased market interest rate, as experienced during the year, only has a marginal effect on the Group’s expenses.
Research and development
Exploration in new and future deposits is included in research and development. Prior to 2021, a more comprehensive and structured form of exploration work was initiated in the search for deposits that can support long-term sustainable mining operations in the region. This work has continued during 2022 and is monitored on an ongoing basis at both Board and management level.
Among other research and development projects, the conversion from diesel-powered production processes to electrified processes is one of the most important projects. In this context, the Group is collaborating with other parties, including Volvo Trucks, on the development of electrified lorry shipments from the mine to the reloading terminal in Pitkäjärvi. Initiatives are also ongoing in relation to mining machinery with the aim of achieving the transition goal of fossil-free mining operations by 2025. In this context the Group is collaborating with leading machinery suppliers.
Operations subject to permit
The operations conducted by the Group are subject to a number of permit and notification procedures on which the business is dependent. Apart from the environmental permit that is a prerequisite for conducting the Group’s business operations, the operations are classified as a Seveso plant of higher class, which means that a safety report has been prepared with the County Administrative Board of Norrbotten as the supervisory authority.
Other noteworthy permits include the exploration permit and exploitation concessions granted by Bergsstaten (the Mining Inspectorate of Sweden), a permit for handling explosive goods granted by the Swedish Emergency Services, a permit for storage and use of radiation sources granted by the Swedish Radiation Safety Authority, dispensation for road transportation using 90-tonne vehicles (including load) granted by the Swedish Transport Agency, and a food plant permit granted by Pajala Municipality in relation to the drinking water production that is undertaken.
Ownership structure
Kaunis Holding AB is owned by 80 or so investors, with the majority of the ownership occurring via other limited companies. No individual party owns more than 10%. Kaunis Holding AB in turn owns 100% of the shares in Kaunis Iron AB and Kaunis Iron Logistik AB.
The Board of Directors proposes that the following available earnings
CONSOLIDATED INCOME STATEMENT THE
As the Company’s shares are not subject to trading on a public market, no figure is presented for earnings per share.
CONSOLIDATED BALANCE SHEET THE
CONSOLIDATED BALANCE SHEET
CONSOLIDATED BALANCE SHEET
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
CONSOLIDATED STATEMENT OF CASH FLOW THE
GROUP
INCOME STATEMENT
BALANCE SHEET
BALANCE SHEET
STATEMENT OF CASH FLOW
NOTES
Accounting principles and notes to the financial statements (amounts in SEK thousand). Kaunis Holding AB (559106-4802), Stationsgatan 46, 972 33 Luleå, Sweden. The Board of Directors has its registered office in the municipality of Luleå.
On 9 February 2023, the Board of Directors approved these consolidated financial statements for publication and for adoption by the Annual General Meeting on 31 May 2023.
Note 1 Significant accounting and valuation principles
General accounting principles
The Company is the parent company in the Kaunis Holding group (the “Group”), whose principal operations involve mining and the production of iron ore concentrate and operations compatible therewith. The consolidated financial statements have been prepared in accordance with the EU-approved International Financial Reporting Standards (IFRS) and interpretations of the IFRS Interpretations Committee (IFRS IC). In addition, the Group applies the Swedish Financial Reporting Board’s recommendation “RFR 1
Supplementary accounting rules for corporate groups”, which specifies the supplements to IFRS required pursuant to the provisions of the Swedish Annual Accounts Act. The Parent Company’s functional currency is the Swedish krona (SEK), which is also the presentation currency for both the Group and the Parent Company. In the consolidated financial statements, items have been measured at cost of acquisition, with the exception of certain financial assets and liabilities (derivative instruments), which have been measured at fair value.
The consolidated financial statements have been prepared with application of the going concern basis of accounting.
The Parent Company’s accounting principles follow those of the Group with the exception of the mandatory rules stipulated in the Swedish Financial Reporting Board’s recommendation “RFR 2 Accounting for legal entities”. The accounting principles for the Parent Company are presented under the heading “The Parent Company’s accounting principles”.
Changed accounting principles due to new or amended IFRS
This section presents details of the new and amended accounting principles that have come into force as of 1 January 2022 and have a material impact on the Group’s financial statements.
No new standards or interpretations have come into force in 2022 that have had an impact on these consolidated financial statements.
New standards and interpretations that come into force in the 2023 calendar year or thereafter
No new standards or interpretations that have currently been enacted to come into force in 2023 or thereafter are expected to have a material impact on the Group’s financial statements.
Significant estimates and assessments
In order to prepare the financial statements in accordance with IFRS, assessments and assumptions must be made that impact the recognised amounts of assets, liabilities, income and expenses as well as other information presented in the financial statements. The estimates and assessments of the Board of Directors and the Company’s management are based on historical experience and forecasts regarding future developments. The actual outcome may differ from these assessments. No significant changes in estimates and assessments have occurred in comparison with the previous year.
Remediation costs
Provisions for remediation costs are made on the basis of an assessment of future expected remediation costs based on current conditions. Conditions and assessments are reviewed regularly by external specialists, and provisions are updated as necessary when the estimated conditions change. Examples of factors that impact the conditions include the design, size and useful life of the mine, the choice of remediation method, technical preconditions and cost elements.
Impairment testing in relation to non-current assets
Impairment testing for property, plant and equipment and intangible assets is based on
the Company’s internal business plan and on assumptions with regard to future developments in relation to factors such as metal prices and exchange rates. The impairment test includes determination of the recoverable amount of the Group’s cash-generating units by calculating the value in use. Changes in market prices have a substantial impact on the Group’s future cash flow and thus on the value in use and the estimated impairment requirement. Assumptions regarding price trends and exchange rates are made by the Group’s Board of Directors with the support of external expertise. The assumptions are reviewed annually and adjusted as necessary.
Useful life and depreciation method for non-current assets
Depreciation periods for the Group’s mining and processing non-current assets are strongly linked to future ore extraction and the useful life of the mine. The Company’s management continually assesses whether changes to production plans and ore reserves are deemed to have an effect on the selected useful life and depreciation method, and adjustments are made as necessary. Useful life is based on the ability to renew necessary environmental permits in accordance with the Group’s mine plan.
Leases
With the introduction of new accounting rules that the Group began to apply in 2019 regarding what constitutes a lease, estimates and assessments are required in many cases. For example, identifiable assets in supplier contracts must be assessed on the basis of who has control and receives the economic benefits associated with the asset. Depending on the assessment performed by the Company’s management, service contracts that have previously been recognised as an operating expense over time may instead significantly increase the value recognised in the Group’s balance sheet and thus impact important key ratios.
Going concern
The Company’s management has made the assessment that the criteria for the going concern basis of accounting are met, as the business is operated with good profitability and liquidity. With regard to the Group’s permit issue, a main hearing was held in relation to the case, whereby the Swedish Environmental Protection Agency requested that the current permit be recalled in November 2021. A judgement was issued on 13 January 2022. In brief and in the main, the judgement means that the Swedish Land and Environment Court supports the Company’s reasoning and dismisses the Environmental Protection Agency’s request for the permit to be recalled. This means that the Group’s operations can continue according to plan within the framework of the existing permit.
Classification etc.
Non-current assets and liabilities essentially consist of amounts that are expected to be recovered or paid more than 12 months after the balance sheet date. Current assets and liabilities essentially consist of amounts that are expected to be recovered or paid within 12 months of the balance sheet date.
Operating segment reporting
An operating segment is a part of the Group that engages in business operations from which it may generate income and incur expenses, and for which independent financial information is available. An operating segment’s performance is monitored by the Company’s chief operating decision-maker, which is Group management, to assess its performance and to allocate resources to the operating segment. In the case of Kaunis, only one operating segment has been identified, which is why no separate operating segment reporting is presented.
Consolidated financial statements
The consolidated financial statements cover the Parent Company and its subsidiaries. Subsidiaries are companies in which the Parent Company, directly or indirectly, has a controlling interest. This normally relates to companies in which the Parent Company has more than 50% of the votes. Subsidiaries are included in the consolidated financial statements from the date on which the Group obtains the controlling interest until the date on which the controlling interest no longer exists.
The consolidated financial statements have been prepared in accordance with the acquisition method, which means that the cost of acquisition of a business comprises the fair value of the consideration that has been paid (including the fair value of any assets, liabilities and equity instruments issued). The identifiable assets, liabilities and contingent liabilities acquired are reported at fair value at the time of acquisition. For each acquisition, a determination is made as to whether a non-controlling interest should be reported at fair value or at the holding’s proportional share of the acquired company’s net assets.
In the consolidated financial statements, subsidiaries’ appropriations are included by way of adjustment in the reported profit/loss after deduction of deferred tax. This means that, in the consolidated balance sheet, subsidiaries’ untaxed reserves are divided between
deferred tax liabilities and equity. When necessary, subsidiaries’ accounts are adjusted to ensure that they follow the same principles applied by other Group companies. All internal transactions between Group companies and all intra-Group balances are eliminated when preparing the consolidated financial statements.
Revenue recognition
In principle, sales of iron ore concentrate account for 100% of the Group’s net sales. The Group’s customer contracts mainly consist of contracts in which volumes are usually set over a period of one to four years. These contracts in their entirety are considered to represent a single performance obligation, and any discounts etc. that constitute a variable price component are allocated evenly over the whole of the agreed volume. The transfer to the customers occurs through a series of distinct deliveries of goods that are essentially the same. The contracts entail both an obligation on Kaunis to deliver and an obligation on the customers to place orders in accordance with the volumes agreed in the contracts. This means that revenue is recognised in conjunction with each individual delivery to the customer when the customer has obtained control of the goods, which occurs at the time when the goods have been confirmed as loaded on the delivery vessel. This applies to all deliveries with the delivery terms FOB (free on board), which are the Group’s standard terms. The sales are reported net of any value-added tax and discounts. For sales in foreign currency, the revenues are recognised at the exchange rate in effect on the transaction date. There are no sales that are transacted in Swedish kronor.
The Group’s iron ore concentrate is preliminarily invoiced one to two weeks after delivery. Final invoicing does not occur until all applicable parameters have been determined. These parameters include the volume, iron ore content and contaminants, as well as the market price of iron ore and sea freight for the agreed pricing period. This pricing period, which is one or three months for all contracts, governs when the applicable parameters can be determined. Volume and quality parameters are finally determined soon after the material has been unloaded in the customer’s receiving port. If an invoice for loaded material has not been prepared as of the balance sheet date, the relevant amount is recognised in the item “Other current receivables”, see note 21. Any remaining uncertainty regarding the relevant amount involves how the market price develops if the pricing period relates to a period after the end of the reporting period and an as yet undetermined volume and quantity. Dispatch and demurrage (price adjustments related to loading of goods on vessels) are also included as part of the selling price, as this constitutes part of the performance obligation to the customer. Some of the Group’s customer contracts relate to one-off deliveries. The contractual terms for these deliveries may vary and are made up of both fixed prices and market-related prices with varying pricing periods. The delivery terms may also vary based on the customer’s wishes. In these cases, each separate delivery is considered to be a performance obligation, and revenue is recognised at the time the customer takes control of the delivery. Income from activities outside the sphere of the regular operations is reported as Other operating income.
In the financial statements for 2022, the Group has two customer deliveries that have been priced on the basis of the market price of iron ore concentrate in the period after the balance sheet date. Each of these deliveries amounts to between 4–5% of the Group’s annual production. One of these deliveries has been priced on the basis of the average price in the month of January, while the other has been priced on the basis of the average price in the month of March. To avoid recognition of revenues in a manner that could lead to a substantial reversal in 2022, the Group has chosen to manage the uncertainty in relation to the final selling price by recognising the revenues according to the average spot price for the latest known month, with deduction of a risk premium depending on when the final pricing occurs. The effects of market movements after the balance sheet date but prior to the Board of Directors’ approval of the annual report are presented in note 2.
Borrowing expenses
Borrowing expenses for borrowed capital are recognised as an expense in the income statement in the period in which they arise.
Leases
The Group as the lessor
When economic risks and benefits associated with leased assets have been transferred to the lessee, the assets are classified as sold and are derecognised from the balance sheet. On initial recognition, a receivable is recognised in the balance sheet. Direct expenses arising in connection with the Company entering into financial leases are allocated over the entire term of the lease. On subsequent recognition, the income attributable to the asset is allocated over the term of the lease so that an even yield is obtained.
When the economic risks and benefits associated with the asset have not been transferred to the lessee, the lease is classified as an operating lease. The assets for
which the Company is the lessor are recognised as non-current assets or current assets, depending on the maturity of the lease. The lease payment is determined annually and is recognised on a straight-line basis over the term of the lease.
The Group as the lessee
The Group recognises all leased assets as property, plant and equipment. At the same time, future lease payments are recognised as a liability in the balance sheet. To assess whether a lease exists, all supplier agreements are evaluated in relation to the three questions listed below. If the answer to all three questions is yes, a lease exists and is recognised in the consolidated balance sheet. Otherwise the agreement constitutes a service agreement.
- Does the agreement include an identifiable asset?
- Does the lessee receive entitlement to essentially all economic benefits from the use of the asset throughout the agreement period?
- Does the lessee control the use of the asset?
The Group chooses not to recognise leases with a term shorter than 12 months or leases concerning low-value assets, nor does the Group recognise intangible assets as leases.
On initial recognition, which coincides with the date on which the lessee takes over control of the asset, both an asset and liability are recognised at the present value of future lease payments and any residual value. If it is likely that agreed extension periods will be utilised, these are also included. However, fixed service fees or variable lease payments that depend on the lessee’s performance are not included. When calculating the present value of the lease payments, the agreement’s implicit interest rate is used. If the implicit interest rate cannot be determined, the Group’s marginal borrowing rate is used.
The asset’s rate of depreciation is assessed in the same way as for other property, plant and equipment based on useful life, which usually corresponds to the agreement period for the asset. Leased assets are also subject to annual impairment testing.
Employee benefits
Employee benefits are recognised in accordance with IAS 19 and relate to all types of benefits paid to employees by the Group. The Group’s employee benefits include salaries, paid annual leave, paid absences, bonuses and benefits after cessation of employment (pensions). Employee benefits are recognised as they are earned. Benefits paid to employees after cessation of employment relate to defined-contribution pension plans or defined-benefit pension plans. Defined-contribution pension plans are classified as plans where pre-determined premium contributions are paid and there is no legal or constructive obligation to pay anything in addition to such premium contributions. Other plans are classified as defined-benefit pension plans.
The Group only has defined-contribution pension plans. Premiums paid for defined-contribution pension plans are recognised as an expense during the period in which the employees perform the services that form the basis for the obligation. The Group has no employee benefits after cessation of employment.
Foreign currency
Transactions in foreign currency are translated to the functional currency at the exchange rate in effect on the transaction date. Functional currency is the currency in the primary economic environments in which companies conduct their operations. Swedish krona (SEK) is both the functional currency and the presentation currency for the Group. Monetary assets and liabilities in foreign currency are translated to the functional currency at the exchange rate in effect on the balance sheet date.
Exchange rate differences that arise on translation are recognised in profit/loss for the year as operating or financial items, depending on the nature of the receivable/liability. Non-monetary assets and liabilities recognised at historical cost are translated at the exchange rate in effect on the transaction date. Non-monetary assets and liabilities recognised at fair value are translated to the functional currency at the rate in effect at the time of measurement at fair value.
Tax
Total tax consists of current tax and deferred tax. Taxes are recognised in the income statement, other comprehensive income or equity, depending on where the underlying transaction has been reported.
Current tax
Current tax relates to income tax for the current financial year and the part of income tax from previous financial years that has not yet been recognised. Current tax is calculated based on the tax rate applicable on the balance sheet date.
Deferred tax
Deferred tax is recognised according to the balance sheet method. According to this method, deferred tax liabilities are recognised in the balance sheet for all taxable temporary differences between the carrying amount of assets and liabilities and their value for tax purposes. Deferred tax assets are recognised in the balance sheet in respect of loss carryforwards and all deductible temporary differences to the extent that it is likely that these amounts can be used to offset future taxable surpluses. The carrying amount of deferred tax assets is reviewed at the end of each accounting period and is reduced to the extent that it is no longer likely that sufficient taxable surpluses will be available for offset. Deferred tax is calculated in accordance with the tax rates that are expected to apply to the period in which the asset is recovered or the liability is settled. Both deferred and current tax receivables and tax liabilities are offset when they relate to income tax levied by the same tax authority.
Property, plant and equipment
Owned assets
Property, plant and equipment is recognised at cost less accumulated depreciation and any impairment. Cost includes the purchase price plus expenses directly attributable to the asset in order to put it in the location and condition that allow it to be used as intended. Property, plant and equipment that consists of parts with different useful lives are treated as separate components. The carrying amount of a property, plant and equipment item is derecognised from the balance sheet when the asset is disposed of or scrapped. The gain or loss arising from the disposal or scrapping of an asset is the difference between the selling price and the asset’s carrying amount less direct selling expenses. Gains and losses are recognised as other operating income/expenses.
Remediation
Future expenditure on dismantling and removing assets and future expenditure on restoring sites or areas are capitalised as remediation expenditure. Capitalised amounts consist of the present value of estimated expenditures which are also recognised as a provision. Effects of subsequent events that result in increased costs that exceed the provision are discounted, capitalised as a tangible asset and increase the provisions, and are depreciated over the remaining life of the asset.
Mine preparation costs
Mine preparation costs at an open-pit mine comprise the waste rock excavation required to access the ore body, as well as work relating to infrastructure in the open-pit mine in the form of roads etc. Mine preparation costs relating to expansion of the mine’s capacity in order to develop ore bodies and prepare the mine areas for future ore production are capitalised. Costs arising from waste rock removal in an open-pit mine are capitalised as part of an asset when it is possible to identify the part of an ore body to which access has been improved.
Depreciation
The depreciable amount consists of cost less an estimated residual value if this is material. Land is not depreciated. The Group applies component depreciation, which means that the estimated useful life of the components is used as the basis for depreciation. Depreciation occurs on a straight-line basis over the asset’s estimated useful life, apart from assets directly attributable to the open pit, which are subject to production-based depreciation. Useful life is based on the assumption that necessary environmental permits can be extended in accordance with the Group’s mine plan.
Kaunis Iron’s mine assets in Kaunisvaara were acquired from the previous operator’s bankruptcy estate in February 2018. Depreciation of the Group’s assets commenced at the start of production. Mine production started in the Tapuli open-pit mine in July 2018 and has an estimated useful life of 9.5 years. At present, Kaunis Iron only possesses a mining permit and environmental permit for the Tapuli open-pit mine, which is why no assets on location in Kaunisvaara have a useful life longer than 9.5 years. In practice, this means that the breaking down of properties and production facilities into components does not, in principle, have any impact on the Group’s depreciation. Estimated useful life is reviewed annually or in connection with a significant change in the Group’s business operations. The new permit has not yet gained legal force, which is why the estimated useful life remains unchanged.
The following depreciation periods are applied to property,
acquisition exceeds the fair value of identifiable assets in connection with business combinations of subsidiaries. Goodwill is allocated to the lowest identifiable cash-generating unit and is assessed as having an indefinite useful life. Goodwill is not amortised. Instead, the cash-generating units are subject to impairment testing at least once a year. Other intangible assets are amortised on the basis of estimated useful life.
The following amortisation periods are applied to intangible assets:
and permits 9.5 years
Rights of use
Impairments
9.5 years
The Group’s recognised assets are assessed at the end of each reporting period to determine whether there is any indication of impairment. If such an indication exists, the recoverable amount of the asset is calculated. Goodwill, together with any intangible assets with an indefinite useful life, is subject to annual impairment tests even if there is no indication of a reduction in its value. The recoverable amount is the higher of fair value less selling expenses or value in use. When calculating value in use, future cash flows are discounted using a discount factor that reflects risk-free interest and the risk associated with the specific asset. If it is not possible to determine essentially independent cash flows for an individual asset, the assets are grouped at the lowest level identifiable. These groupings are called cash-generating units.
An impairment loss is recognised when the carrying amount of an asset or cash-generating unit exceeds its recoverable amount. Impairment losses are charged to profit/ loss for the year. Once impairment has been identified for a cash-generating unit, the impairment loss is initially allocated to goodwill, after which other assets belonging to the cash-generating unit are proportionally impaired. An earlier impairment loss is reversed if there is an indication that the impairment requirement no longer exists and a change has occurred in the assumptions that formed the basis for the impairment. The reversal may never be greater than the carrying amount that would have existed at the time of reversal if depreciation/amortisation according to plan had continued during the period that the asset has been impaired. Reversal of impaired goodwill is not permitted.
As of balance sheet date 31/12/2022, the Group has not identified any assets for which there are indications that the recoverable amount may be less than the carrying amount. The assessment of the period during which the asset is expected to be used is based on the assumption that necessary environmental permits can be extended in accordance with the Group’s mine plan.
The Group does not have any goodwill or other intangible assets with an indefinite amortisation period. Consequently, no calculation of the Group’s recoverable amounts for these assets has been performed.
Financial instruments
Financial instruments recognised as assets in the balance sheet include cash and cash equivalents, loan receivables, trade receivables, financial investments and derivatives. Financial instruments recognised as liabilities in the balance sheet include trade payables, loan liabilities, additional purchase price liabilities and derivatives.
Recognition in and derecognition from the balance sheet
A financial asset or liability is recognised in the balance sheet when the Group becomes party to the instrument’s contractual terms and conditions. A receivable is recognised when the Group has fulfilled its performance obligation and a contractual obligation exists for the counterparty to make payment, even if an invoice has not yet been sent. Trade receivables are recognised in the balance sheet when an invoice has been sent.
A liability is recognised when the counterparty has fulfilled its performance obligation and a contractual obligation to make payment exists, even if an invoice has not yet been received. Trade payables are recognised when an invoice has been received.
A financial asset is derecognised from the balance sheet when the rights in the agreement are realised or expire, or when the Group loses control over them. The same applies to part of a financial asset. A financial liability is derecognised from the balance sheet when the obligation in the agreement is fulfilled or in some other way extinguished. The same applies to part of a financial liability.
A financial asset and a financial liability are only offset and recognised with a net amount in the balance sheet when there is a legal right to offset the amounts and an intention to settle the items with a net amount or simultaneously sell the asset and settle the liability.
Acquisitions and disposals of financial assets are recognised on the transaction date. The transaction date is the date on which the Group commits to acquiring or disposing of the asset.
Intangible assets include patents, licenses, permits and rights of use obtained on acquisition as well as goodwill. Goodwill relates to the amount by which the cost of
Classification and valuation of financial assets
Debt instruments: the classification of financial assets that are debt instruments is based on the Group’s business model for managing the asset and the nature of the asset’s contractual cash flows.
The instruments are measured at:
• amortised cost
• fair value via other comprehensive income, or fair value via profit/loss.
The Group’s assets in the form of debt instruments are measured at amortised cost. Financial assets measured at amortised cost are initially recognised at fair value plus transaction costs. Trade receivables are initially recognised at the amount invoiced. After initial recognition, the assets are recognised according to the effective interest method. Assets measured at amortised cost are held according to the business model of collecting contractual cash flows that are only payments of capital amounts and interest on the outstanding capital amount. The assets are subject to a reservation for expected credit losses.
Equity instruments are measured at fair value via profit/loss, except if they are not held for trading, in which case an irrevocable choice may be made to measure them at fair value via other comprehensive income without subsequent reclassification to profit/ loss. The Group measures equity instruments at fair value via profit/loss. Derivative instruments are measured at fair value via profit/loss, except in cases where hedge accounting is applied (see below for more information).
Classification and valuation of financial liabilities
Financial liabilities are measured at amortised cost, with the exception of derivatives and additional purchase price liabilities. Financial liabilities measured at amortised cost are initially recognised at fair value including transaction costs. After the initial recognition, they are recognised at amortised cost according to the effective interest method.
Debt instruments: the classification of financial assets that are debt instruments is based on the Group’s business model for managing the asset and the nature of the asset’s contractual cash flows.
Hedge accounting
Derivatives are initially recognised at fair value as of the date on which a derivative contract is entered into and are thereafter recognised at fair value. The method for recognising a gain or loss depends on whether or not the derivative has been identified as a hedging instrument in hedge accounting.
The Group uses derivatives to hedge parts of future cash flows from forecast transactions in foreign currency. Hedge accounting is applied to these currency futures. In order for the conditions for hedge accounting to be met, the hedging relationship must be:
• formally identified and designated
• expected to meet the effectiveness criteria, and • documented.
The Group assesses, evaluates and documents effectiveness both at the commencement of the hedge and on an ongoing basis. The effectiveness of the hedge is assessed on the basis of an analysis of the economic correlation between the hedged item and hedging instrument, and by ensuring that the effect of the credit risk does not dominate changes in the value of the underlying item and instrument. In addition, the hedge ratio in the hedging relationship must be the same as in the actual hedge.
The Group applies hedge accounting for cash flow hedges regarding sales in foreign currency. Changes in the fair value of a hedging instrument that relates to the effective part of the hedge are recognised in Other comprehensive income and are accumulated as a separate component in equity, in the hedge reserve. Gains or losses originating from the part of the hedge that is not effective are immediately recognised in profit/loss for the period. Amounts that have been accumulated in the hedge reserve in equity are reversed via Other comprehensive income and recognised in net sales when the hedged income is recognised in profit/loss.
Inventories
The Group’s inventories primarily consist of produced iron ore in various stages of the refinement process. Other inventories relate to additives and consumables for production. Inventories are recognised at the lower of cost according to the first-in-firstout principle or net realisable value. For goods manufactured in house and products under manufacture, a reasonable share of indirect costs are included based on normal capacity. Freight costs for transporting the inventory to the customer in accordance with Incoterms 2020 FOB are included in the inventory value.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and achieving a sale.
Provisions
Provisions are recognised when the Group has a legal or constructive obligation as a result of past events and it is likely that an outflow of resources will be required to settle the obligation. Provisions are measured at the best estimate of the amount required to settle the obligation. If the effect of the timing of payment is material, the present value of the obligation is calculated using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks associated with the provision.
The Group’s provisions relate entirely to remediation costs that are expected to arise when the mining operations in Kaunisvaara are closed.
Contingent liabilities
A contingent liability is a potential obligation that originates from past events whose existence is only confirmed by one or more uncertain future events. A contingent liability may also be an existing obligation that has not been recognised in the balance sheet as it is unlikely that an outflow of resources will be required, or because the size of the obligation cannot be reliably calculated.
Equity
Share capital
Ordinary shares are classified as share capital. Transaction costs in conjunction with a new share issue are reported as a net amount after tax for deduction from the issue proceeds received. According to the Articles of Association for Kaunis Holding AB, the share capital shall amount to no less than SEK 55 million and no more than SEK 220 million. The share capital consists of one type of share. The nominal value of the shares is SEK 1 per share.
Warrants
Compensation for warrants issued by the Group’s parent company is made up of paid warrant premiums and is reported as an increase in Other contributed capital in the consolidated financial statements and as an increase in non-restricted equity in the Parent Company. Repurchase of warrants issued by the Parent Company is made up of the repurchase price for the warrants and is reported as a decrease in Other contributed capital in the consolidated financial statements and as a decrease in non-restricted equity in the Parent Company.
Dividends
A dividend proposed by the Board of Directors does not result in a reduction in equity until the general meeting of shareholders has passed a resolution regarding the dividend.
Stripping
From January 2022, the average accumulated strip ratio has exceeded the average strip ratio for the mine’s useful life. This means that, from this year, we are capitalising the excess waste rock production in the balance sheet and reducing the cost for the mine. Up to and including December, a total amount of SEK 158 million has been capitalised in relation to the higher waste rock production. The cost of the capitalised stripping costs is calculated on the basis of the average cost per tonne of waste rock life of mine. The average production cost since the start of the mine has been used.
The Parent Company’s accounting principles
The annual report for the Parent Company has been prepared in accordance with the Swedish Annual Accounts Act, the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for legal entities, and the statements issued by the Swedish Financial Reporting Board. RFR 2 means that the Company, in the annual report for the legal entity, must apply all EU-approved IFRS and statements to the extent that this is possible within the framework of the Swedish Annual Accounts Act and with due regard to the connection between reporting and taxation. The recommendation specifies the exceptions and additions to be made in relation to IFRS. The differences between the Group’s and the Parent Company’s accounting principles are described under the headings below.
Revenue recognition
The Parent Company’s revenues primarily consist of management services performed on behalf of other companies within the Group. These are invoiced on an ongoing basis and are recognised as revenue in the period to which they relate.
Reporting of group contributions and shareholder contributions
Group contributions received or made are recognised as appropriations. Shareholder contributions are booked directly against non-restricted equity by the recipient and as an increase in the item Participations in group companies by the contributor.
Participations in group companies
Participations in group companies are recognised at cost less any impairment. Dividends are recognised as income, even if the dividend relates to earnings accumulated
prior to the date of acquisition. Dividends are normally recognised when the authorised body has passed a resolution regarding the dividend and it can be reliably calculated. Anticipated dividends of SEK 350 million have been paid from the subsidiary Kaunis Iron AB in 2022.
Other accounting principles
For all accounting principles not described separately for the Parent Company, the Parent Company applies the Group’s accounting principles.
Note 2 Breakdown of net sales
The following is a breakdown of net sales by operating segment:
Financial leases
The Group and the Parent Company do not have any leases for which they are the lessor, which are reported as financial leases.
Note 4 Leases – lessee
The following is a breakdown of leased assets included in the balance sheet:
following is a breakdown of net sales by geographical market:
The breakdown of net sales by geographical market relates to the market to which the products have been delivered and is not based on where the customers are located from a legal viewpoint. The Group’s manufacture and sale of products occurs exclusively from Sweden.
Information on significant customer contracts:
For a breakdown of acquisitions, depreciation, etc. see note 16 Property, plant and equipment. For an outstanding age breakdown, see the balance sheet and note 29 Non-current liabilities. Interest expensed in the income statement with regard to leases amounts to SEK 4,901 thousand (6,492).
All leases have been calculated on the basis of agreed lease payments during the contract period. Any performance-based payments are not included. The discount rate (marginal borrowing rate) used when the interest rate is not clearly apparent from the contracts, is at the same level as for the Group’s owned assets financed via a credit institution, which is 4%.
Variable lease payments based on performance, costs for short-term leasing and costs for leasing of low-value assets, which have not been reported as right-of-use assets, amount to SEK 15.3 million (15.4). It is primarily temporary machinery in the mine area and short-term leasing of ore lorries that have continued to be used after the agreed lease period while awaiting new vehicles. Similar to the previous year, variable lease payments and lease payments for low-value assets are more or less non-existent.
The following is a breakdown of costs related to leases recognised in the statement of comprehensive income:
Applicable payment terms are 14 days after transaction date for one of the customers, and through Letter of Credit via a Swedish bank as soon as all delivery documents have been quality assured for the other customers. Deliveries to the Group’s other customers amount to 2% (11%) of net sales and have been made on varying payment terms based on the applicable credit risk policy.
Information on effects of market price changes after balance sheet date:
The selling price for one of the two deliveries in 2022 priced on the basis of market prices has been finally determined after the balance sheet date. If the final price for these deliveries had been known on the balance sheet date, the net sales for 2022 would have been SEK 38,750 thousand higher.
Note 3 Leases – lessor
Operating leases
The Group and the Parent Company have entered into leases as the lessor, which are reported as operating leases. These relate to leasing of service premises for trains, workshop for trucks and operating leases for individual non-current assets. The operating lease revenues for the year amount to SEK 1,138 thousand (1,061) in the Group and SEK 0 thousand (0) in the Parent Company. Operating lease revenues are recognised as Other operating income in the income statement. Future contracted lease revenues are more or less non-existent, and the carrying amounts of these assets in the balance sheet amount to approximately SEK 7 million. When the contract periods are less than 12 months, there is no difference between nominal and discounted minimum lease payments. The leased assets are also utilised by the Group’s operations.
The term audit assignment refers to the statutory audit of the annual report and consolidated financial statements and bookkeeping, as well as the Board of Directors’ and the Chief Executive Officer’s administration of the Company, along with audits and other reviews performed as agreed or according to contract. This includes other tasks that are incumbent on the Company’s auditor to perform, as well as consultancy or other assistance occasioned by observations during such reviews or the performance of such other tasks.
Note 6 Employees and personnel expenses
There are no other benefits for the Group’s senior executives.
distribution among senior executives:
This data relates to the relationship on the balance sheet date.
Note 7 Operating expenses broken down by type
In addition to fixed remuneration, the Group’s Chief Executive Officer and two of the Group’s other board members have received variable remuneration in the amounts shown above. The terms of the variable remuneration are based on the return generated by the business for the Group’s shareholders.
In the event of cessation of employment, whether initiated by the employer or by the Chief Executive Officer, no severance pay is payable other than salary for the notice period, which is six months.
Note 13 Tax for the year
Amortisation is included in the following lines of the income statement:
Rights of use primarily relate to rights to use the land areas not owned by the Group where mining operations are conducted. Other rights of use relate to land areas where future mining operations may be conducted.
Note 15 Property, plant and equipment
Note 14 Intangible assets
Capitalised remediation costs are included in the item “Land and buildings” and include expenditures on dismantling and removal of assets and remediation of the area where the assets are located. The accumulated cost of acquisition on balance sheet date amounts to SEK 22,201 thousand (22,201). Accumulated depreciation amounts to SEK -10,516 thousand (-8,179).
Depreciation is included in the following lines of the income statement:
Note 16 Right-of-use assets
All changes in deferred taxes have occurred in the income statement. No deferred tax assets are subject to a time limitation. Deferred tax on currency hedging has been reported under Other comprehensive income.
Note 20 Hedging instruments and hedge accounting
The Group applies hedge accounting for cash flow hedges regarding a minor part of forecast sales in foreign currency, USD. Hedge accounting is applied to currency futures which the Group has entered into from November 2022 with a term up to two years.
The hedged risk is made up of the future rate, i.e. the entire currency future is identified for hedge accounting. The hedged item is made up of very probable expected cash flows in foreign currency, regarding sales. The hedge ratio is 1:1. Sources of ineffectiveness may be constituted by imperfectly matched cash flows in the hedging derivative and in payments, as well as by effects from counterparty risk (credit risk) on the derivative’s value (CVA or DVA). The Group enters into derivatives with banks with a high level of creditworthiness, and consequently the effect from credit risk is not deemed to be significant. Assessment of hedging effectiveness is performed according to critical terms; currency, nominal amount and timing of cash flows.
Hedging instruments identified in hedge relationships as of 31 December 2022
Effects
*) The hedged item is made up of very probable expected cash flows, regarding sales in foreign currency. These items are not reported in the balance sheet. No ineffectiveness has been recognised in profit/loss during the year.
Non-current prepaid expenses relate to start-up costs for operating contract regarding port services. The costs are allocated on a straight-line basis over the contract period and are
Note
Note 26 Cash and cash equivalents
The item “blocked bank funds” relates to a bank guarantee for the County Administrative Board of Norrbotten in relation to remediation costs in accordance with applicable environmental permit.
Note 27 Equity
The share capital shall amount to no less than SEK 55 million and no more than SEK 220 million. The share capital consists of one type of share. The quota value of the shares is SEK 1 per share. 100% of equity is attributable to Parent Company shareholders.
Note 23 Trade receivables
(0). The reason why the Group does not book general credit losses on an ongoing basis is that the trade receivables ledger at any given time consists of only a small number of customers with a good payment history, and credit risks are minimised in accordance with the Company’s credit policy regarding transfer of counterparty risk to a Swedish bank through Letter of Credit.
Note 24 Other current
All outstanding warrants provide entitlement to subscribe for 1.75 shares. The exercise period for the warrants is made up of the two months prior to the above redemption date. The intention has been to repurchase the warrants at fair value. The market value of the underlying share was determined as SEK 23 per share by the Board of Directors after discussion and consultation with an independent valuer, based on information obtained from Carnegie Investment Bank regarding the highest price applicable to transfers of shares in the Company during the period 1 January 2020 to 31 January 2021, whereupon this has been assessed as equating to the market value per share as of the valuation date for repurchase transactions. Today, the most commonly used model for valuation of warrants issued in relation to both shares in listed companies and shares in unlisted companies is the Black-Scholes model. Our value simulation of the various series of warrants is based on the Black-Scholes valuation model. In performing a valuation based on Black-Scholes for calculation of a market premium, the following variables are used:
– Current share value (SEK 23 per share)
– Strike price (SEK 20 for all series of warrants)
– Time remaining until expiration (2.46, 2.80 and 2.96 years respectively)
– Risk-free interest rate for a term equivalent to the term applicable to the instrument (based on the Swedish Riksbank’s government borrowing rate, an interpolated risk-free interest rate of -0.33%/-0.32% is indicated for the various terms)
– Volatility (estimated at 40% based on analysis of comparable companies)
The Group’s remediation undertakings relate to present value-calculated future outflows of funds for remediation of sites or areas where mining operations are conducted. The plan includes vegetating the tailings pond and waste rock dump, filling the open pit with water and dismantling and removing plants. The calculation that forms the basis for the assessed provision has been designed by external expertise in this field and updated based on actual production outcome.
The year’s present value calculation of the provision has been performed with a time horizon of 5 years, which corresponds to the remaining “Life of mine” plan with a discount rate of 0.92%. The interest rate level corresponds to the 10-year government borrowing rate at the time of acquisition of the mine assets on 16 February 2018. The year’s effect of the present value calculation has resulted in an interest expense of SEK 0.4 million (0.3).
Note 29 Non-current liabilities
Future undiscounted cash flows include both amortisation and interest. Note
Note 32 Accrued expenses and deferred income
Note 33 Financial assets and liabilities broken down by measurement category
Measurement at fair value involves a measurement hierarchy with regard to input data for the measurements. The three levels are:
Level 1: Listed prices (unadjusted) on active markets for identical assets or liabilities to which the Company has access at the time of measurement.
Level 2: Other input data (i.e. other than the listed prices included in Level 1), which is directly or indirectly observable for the asset or liability. This may even include other input data (i.e. other than listed prices) which is observable for the asset or liability, such as interest rate levels, yield curves, volatility and multiples.
Level 3: Non-observable input data for the asset or liability. At this level, consideration is given to assumptions which market operators would use when pricing the asset or liability, including risk assumptions.
For all items below, apart from other non-current receivables, derivative instruments, liabilities to credit institutions and other liabilities, the carrying amount is an approximation of the fair value, which is why these items are not divided into levels according to the measurement hierarchy.
As non-current receivables and liabilities to credit institutions are subject to an interest rate that, in all material respects, is deemed to equate to current market interest rates, the carrying amount of these items essentially equates to fair value. Non-current receivables and liabilities to credit institutions are measured at amortised cost.
Note 34 Business
Note 35
Note 36 Result from participations in group
Note 39 Receivables from group companies
Note 40 Pledged assets
In addition to the above property mortgages, there are additional mortgages of SEK 701,150 thousand taken out for the Group’s properties in its own custody.
Note 41 Contingent liabilities
Surety provided to group companies:
Kaunis Holding AB to Kaunis Iron AB
Kaunis Iron AB to Kaunis Holding AB
Covenants:
The Group’s credit facility with SEB is subject to a number of specific undertakings (covenants). These are:
- The Parent Company must inform SEB without delay if any shareholder of the Parent Company becomes the owner of 10% or more of the shares or votes in the Parent Company.
- Furthermore, the Parent Company must inform SEB without delay of changes among senior executives with regard to their shareholding in the Parent Company and position in companies within the Group.
Parent company guarantees:
In 2018, Kaunis Iron AB entered into a number of production-critical contracts with several subcontractors in relation to the start of production in the mining operations in Kaunisvaara. As the equity in Kaunis Holding AB is larger than the equity in Kaunis Iron AB, parent company guarantees have been provided to production-critical subcontractors. Some of these parent company guarantees are still in place as of the balance sheet date.
Note 42 Related parties
Details of the Parent Company’s directly owned subsidiaries are presented in note 37, Participations in group companies. Information on senior executives and remuneration to senior executives is presented in note 6, Employees and personnel expenses.
Transactions
No board member or senior executive in the Group has or has had any direct or indirect participation in any business transactions between themselves and the Group during the current or previous financial year which are or were unusual in nature with regard to their terms. Nor has the Group made loans, issued guarantees or provided surety to any board members or senior executives in the Group.
The Board of Directors and the Chief Executive Officer hereby declare that the consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS) as adopted by the EU and provide a true and fair view of the Group’s financial position and results.
The financial statements of the Parent Company have been prepared in accordance with generally accepted accounting principles in Sweden and provide a true and fair view of the Parent Company’s financial position and results.
The Directors’ Report for the Group and the Parent Company provides a true and fair view of the development of the Group’s and the Parent Company’s operations, financial position and results and describes material risks and uncertainties facing the Parent Company and the companies included in the Group.
Definitions of key ratios
Operating margin
Net operating profit as a percentage of net sales
Adjusted equity
Equity plus untaxed reserves reduced for deferred tax
Return on total equity
Net profit after financial items as a percentage of average total assets
Equity ratio
Adjusted equity as a percentage of total assets
Quick ratio
Current receivables as a percentage of current liabilities
AUDITOR’S REPORT
Report on the annual accounts and consolidated accounts Opinions
We have audited the annual accounts and consolidated accounts of Kaunis Holding AB for the 2022 financial year.
In our opinion, the annual accounts have been prepared in accordance with the Swedish Annual Accounts Act and present fairly, in all material respects, the financial position of the Parent Company as of 31 December 2022 and its financial performance and cash flow for the year then ended in accordance with the Swedish Annual Accounts Act. The consolidated accounts have been prepared in accordance with the Swedish Annual Accounts Act and present fairly, in all material respects, the financial position of the Group as of 31 December 2022 and its financial performance and cash flow for the year then ended in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU, and the Swedish Annual Accounts Act. The statutory administration report is consistent with the other parts of the annual accounts and consolidated accounts.
We therefore recommend that the general meeting of shareholders adopts the income statement and balance sheet for the Parent Company and the Group.
Basis for opinions
We conducted our audit in accordance with International Standards on Auditing (ISA) and generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the “Auditor’s responsibilities” section of our report.
We are independent of the Parent Company and the Group in accordance with professional ethics for accountants in Sweden and have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the Chief Executive Officer
The Board of Directors and the Chief Executive Officer are responsible for the preparation of the annual accounts and consolidated accounts and that they give a fair presentation in accordance with the Swedish Annual Accounts Act and, concerning the consolidated accounts, in accordance with IFRS as adopted by the EU. The Board of Directors and the Chief Executive Officer are also responsible for such internal control as they determine is necessary to enable the preparation of annual accounts and consolidated accounts that are free from material misstatement, whether due to fraud or error.
In preparing the annual accounts and consolidated accounts, the Board of Directors and the Chief Executive Officer are responsible for the assessment of the Company’s ability to continue as a going concern. They disclose, as applicable, matters related to going concern and using the going concern basis of accounting. The going concern basis of accounting is, however, not applied if the Board of Directors and the Chief Executive Officer intend to liquidate the Company or cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance about whether the annual accounts and consolidated accounts as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and generally accepted auditing standards in Sweden will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these annual accounts and consolidated accounts. As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit.
We also:
• identify and assess the risks of material misstatement in the annual accounts and consolidated accounts, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinions. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control;
• obtain an understanding of the Company’s internal control relevant to our audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control; evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Board of Directors and the Chief Executive Officer; conclude on the appropriateness of the Board of Directors’ and the Chief Executive Officer’s use of the going concern basis of accounting in preparing the annual accounts and consolidated accounts. We also draw a conclusion, based on the audit evidence obtained, as to whether any material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the annual accounts and consolidated accounts or, if such disclosures are inadequate, to modify our opinion about the annual accounts and consolidated accounts. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause a company to cease to continue as a going concern; • evaluate the overall presentation, structure and content of the annual accounts and consolidated accounts, including the disclosures, and whether the annual accounts and consolidated accounts represent the underlying transactions and events in a manner that achieves fair presentation; obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated accounts. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our opinions.
We must inform the Board of Directors of, among other matters, the planned scope and timing of the audit. We must also inform of significant audit findings during our audit, including any significant deficiencies in internal control that we identified.
Report on other legal and regulatory requirements
Opinions
In addition to our audit of the annual accounts and consolidated accounts, we have also audited the administration of the Board of Directors and the Chief Executive Officer of Kaunis Holding AB for the 2022 financial year and the proposed appropriation of the Company’s profit or loss. We recommend to the general meeting of shareholders that the profit be appropriated in accordance with the proposal in the statutory administration report and that the members of the Board of Directors and the Chief Executive Officer be discharged from liability for the financial year.
Basis for opinions
We conducted the audit in accordance with generally accepted auditing standards in Sweden. Our responsibilities under those standards are further described in the “Auditor’s responsibilities” section of our report. We are independent of the Parent Company and the Group in accordance with professional ethics for accountants in Sweden and have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinions.
Responsibilities of the Board of Directors and the Chief Executive Officer
The Board of Directors is responsible for the proposal on appropriations of the Company’s profit or loss. A proposal regarding a dividend includes an assessment of whether the dividend is justifiable considering the requirements which the Company’s and the Group’s type of operations, size and risks place on the size of the Parent Company’s and the Group’s equity, consolidation requirements, liquidity and position in general.
The Board of Directors is responsible for the Company’s organisation and the administration of the Company’s affairs. This includes, among other things, continuous assessment of the Company’s and the Group’s financial situation and ensuring that the Company’s organisation is designed so that the accounting, management of assets and the Company’s financial affairs otherwise are controlled in a reassuring manner. The Chief Executive Officer shall manage the ongoing administration of the Company according to the Board of Directors’ guidelines and instructions and, among other matters, take measures that are necessary to ensure that the Company’s accounting procedures are in accordance with laws and that assets are managed in a satisfactory manner.
Auditor’s responsibilities
Our objective concerning the audit of the administration, and thereby our opinion about discharge from liability, is to obtain audit evidence to assess with a reasonable degree of assurance whether any member of the Board of Directors or the Chief Executive Officer in any material respect:
• has undertaken any action or been guilty of any omission which can give rise to liability to the Company, or
• in any other way has acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the Articles of Association.
Our objective concerning the audit of the proposed appropriation of the Company’s profit or loss, and thereby our opinion about this, is to assess with a reasonable degree of assurance whether the proposal is in accordance with the Swedish Companies Act. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with generally accepted auditing standards in Sweden will always detect actions or omissions that can give rise to liability to the Company, or that the proposed appropriation of the Company’s profit or loss is not in accordance with the Swedish Companies Act.
As part of an audit in accordance with generally accepted auditing standards in Sweden, we exercise professional judgement and maintain professional scepticism throughout the audit. The examination of the administration and the proposed appropriation of the Company’s profit or loss is based primarily on the audit of the accounts. Additional audit procedures performed are based on our professional judgement, taking risk and materiality as a starting point. This means that we focus the examination on such actions, areas and relationships as are material for the operations and where deviations and violations would have particular significance for the Company’s situation. We examine and test decisions taken, support for decisions, actions undertaken and other circumstances that are relevant to our opinion concerning discharge from liability. As a basis for our opinion on the Board of Directors’ proposed appropriation of the Company’s profit or loss, we examined the Board of Directors’ reasoned statement and a selection of supporting evidence in order to be able to assess whether the proposal is in accordance with the Swedish Companies Act.
The auditor’s opinion regarding the statutory sustainability report
The Board of Directors is responsible for the sustainability report on pages 36–41 and for ensuring that it is prepared in accordance with the Swedish Annual Accounts Act. Our examination has been conducted in accordance with FAR’s recommendation RevR 12 “The auditor’s opinion regarding the statutory sustainability report”. This means that our examination of the sustainability report has a different focus and is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and generally accepted auditing standards in Sweden. We believe that our examination provides a reasonable basis for our opinion.
A sustainability report has been prepared. Skellefteå, 15 February 2023
Ernst & Young AB
Micael Engström
Authorised Public Accountant
BOARD OF DIRECTORS
kaunisiron.se