Annual and sustainability Report, 2012

Transcription

2012//
Integrated report
ANNUAL AND SUSTAINABILITY REPORT
overview of the past year
president’s report
4
continued good profitability
4
business concept, strategy and vision
8
strategic focus areas
9
performance in ironmaking
10
a clear-cut customer promise
11
sustainability strategy and
governance56
ambitions for future development
gri index
auditor’s report
57
62
64
corporate governance report
65
66
67
72
74
76
77
flexibility16
quick adaptation to change
17
safe and resource-efficient
production22
a sustainable value chain
23
growth32
we grow with our customers
33
urban transformation
40
in close collaboration with all
stakeholders
41
attractive lkab
48
a long-term strong brand
49
corporate governance structure
corporate governance at lkab
board of directors
group management
auditor’s opinion
group overview
financial accounting
administration report
financial statements and notes
proposed appropriation of profits
auditor’s report
80
90
128
129
appendix
glossary
addresses
annual general meeting and
financial information
2012
78
130
131
132
table of
contents
ABOUT LKAB’S 2012 INTEGRATED REPORTING
According to owner directives, LKAB shall each year present an annual report and a sustainability report in accordance with the Global Reporting Initiative (GRI) framework. For 2012, LKAB chose to integrate its annual and sustainability reports, since it reflects how
LKAB’s operations are run. The basis of the integrated report is LKAB’s business strategy, in which each strategic focus area has sustainability dimensions. These strategic focus areas also constitute the very structure of and navigation through the report. This means
that information previously reported in a separate sustainability section is now integrated into the description of LKAB’s products and
services, market, growth and other strategic areas of focus. The integrated report is followed by information on sustainability management, the corporate governance report, administration report and financial statements.
26,971
4,199
SEK millions in
sales 2012
Number of permanent employees
31 December 2012
30%
of Sweden’s total
explosives production
is done by LKAB Kimit
+2.3%
LKAB’s deliveries in 2012
LKAB reallocated 2 million
tonnes among its customers
during the year, both within
Europe and between continents
37mt
three new mines in Svappavaara
will ensure a delivery volume
of 37 million tonnes of finished
iron ore products in 2015
11,023
profit before
tax in SEK millions
LKAB’s position among
Swedish export companies in 2011:
+500
By 2015 LKAB Fastigheter will
have built 500 new homes in THE
MUNICIPALITIES OF KIRUNA AND
GÄLLIVARE
-13%
lkab’s sales in 2012
26.3mt
RECORD DELIVERIES:
26.3 million tonnes of
iron ore products
360
Minelco, which is changing its
name to LKAB Minerals 1 July
2013, has 360 employees
250,000m3
production of over 250,000 m3 of concrete per
year makes LKAB Berg & Betong the world's
largest producer of shotcrete.
9
no cost in SE
lkab wassara 2012
lkab 1987
7m
committed. innovative. responsible.
55 m
Drill rigs like the LKAB Wassara can drill fans up to 55 metres deep.
This means that each fan gives more than eight times as much iron ore
as it did 25 years ago.
Do it yourself
lkab c
ti
ve
petiti
m
co
The
proportion of
women at LKAB
will be at least 25%
by 2020.
A
longterm
competitive
mining operation creates secure
jobs and opportunities
for suppliers, other local
businesses and community
services.
veness
Attra
cal
lo
and
di
versit
eq
ualit
y
and
y
responsible
operation
EK million to expand flue gas treatment to all six pelletizing plants 1,500
5,808
LKAB invested SEK 5,808
million in its facilities in
2012. Optimism is strong.
Fold your own cootie catcher and learn more about LKAB's strategy for sustainable development, approved by the Board in December 2012.
Annual
average
for falling
particulates will
be reduced by 10%
and sulphur dioxide
emissions from pelletizing plants will be halved
from 2011 to 2015.
y
healt
safet h
Maximum 2.5
accidents per
million hours
worked by 2020.
Long-term sickness
absences continue to be
less than 0.8%.
“LKAB
generates
prosperity by
being one of the
most innovative and
resource-efficient
mining companies
in the world.”
ent
m
viron
en
ce
cient
tion
resour c
effi
produ
m
y
-ter
sc
New
generation of
climate-smart
iron ore pellets by
2017. Max 130 kWh of
energy use per tonne of
finished products
by 2020.
Ensure
new ore
long suppl
reserve for at
ore
least 20 years to
2020 through active
prospecting.
hool
LKAB
Academy shall
foster Sweden’s
best school in
Malmfälten. LKAB
secondary school generates increased interest in
technical education.
LKAB will
build 500 new
dwellings with
varying
rental rates in Malmfälten by 2015.
755
lkab produces per second
and
y
ate
m
energ
cli
A
co ttra
m
m cti
unities
ve
housing
number of iron ore pellets
lkab’s values
2012
ore with added value
world leader in pellets
LKAB is one of the world’s largest producers of iron ore pellets
for the global steel industry. Iron
ore pellets are a premium product that constitute 10-20 percent of the global iron ore market.
LKAB’s main market is the EU,
where we account for about 40
percent of all pellet deliveries. Today, we are a
quality leader, technical pioneer and innovative
driving force in our industry. LKAB’s worldleading R&D projects are conducted in close collaboration with customers. Our vision is to offer
them tangible added value.
lkab processes
Pellets, LKAB’s main product, are
a highly upgraded iron ore product
which constitute 84 percent of deliveries. We also produce fines, a
fine-grained iron ore sand that is the
dominant product in the global iron
ore trade. In addition, LKAB develops
and produces processed industrial
minerals that are sold to customers outside the
steel industry and give the Group a complementary leg to stand on.
a clear-cut customer promise
Performance in Ironmaking is our
customer promise and is about delivering products that are tailored to
the ironmaking processes of the customer. With LKAB’s iron ore pellets,
our steelworks customers increase
their efficiency and productivity, and
reduce their carbon dioxide footprint.
The higher the proportion of LKAB’s iron ore
pellets that customers use in their ironmaking,
the more efficient the process. LKAB pellets
have a unique advantage, since they are made
of magnetite, an iron ore mineral that gives off
heat during the pellet manufacture. This makes
LKAB’s production process less energy intensive
and reduces carbon dioxide emissions throughout the chain, as compared to the manufacture
and use of iron ore pellets made of hematite ore.
That is why LKAB Green Pellets are the world’s
most climate-smart iron ore product.
a swedish heavyweight
Iron ore and other minerals make up
40 percent of Sweden's net exports.
In 2011 LKAB was Sweden's ninth
largest export company. A third of all
goods transported on Swedish railways are linked to LKAB. In recent
years, LKAB has also been one of the
country's major industrial investors.
During the 2000s, capital expenditures totalled
about SEK 5 billion annually.
focus on growth
Long-term forecasts point to a
strong increase in demand for steel
around the world. LKAB’s customers
are growing and need more iron ore.
It is against this backdrop that the
LKAB 37 programme is being implemented. This initiative represents an
increase in LKAB’s annual production capacity to at least 37 million tonnes of finished iron ore products. A parallel programme
will also be implemented whose purpose is to
ensure that LKAB’s costs remain competitive.
This focus on growth requires that LKAB employ
upwards of 700 new qualified employees from
2013 to 2015.
secure access to raw
materials
LKAB’s ore mining is concentrated
to the orefields of northern Sweden.
The area has a unique geology with
orebodies of magnetite that have
an unusually high iron content. The
world’s two largest underground
iron ore mines are located in Kiruna and Malmberget. The new main levels that
are being established in both locations ensure
LKAB’s access to raw materials to 2030–2035
in Kiruna and to 2023 in Malmberget. Mining in
Gruvberget, Leveäniemi and Mertainen will increase LKAB’s delivery capacity by about 12 million tonnes per year over the next decade. LKAB
is also prospecting in existing mines and starting new projects to gradually secure additional
raw material for the future.
new communities emerge
Over the next 20 years, large areas
of Kiruna and Malmberget will be
affected by continuing mining. People and buildings must be moved.
Changes in infrastructure will be required. At the same time, it enables
new and attractive communities to
take shape. LKAB takes responsibility for both the practical and financial implications of this. Everything is done in close consultation with all stakeholders, particularly the
municipalities that are responsible for planning
the new developments. It is all about building a
future based on a fruitful symbiosis between a
growing economy and a vibrant community.
the past year the steel and iron ore market
Iron ore is the main raw material in steel production. Besides iron ore,
scrap metal is also used as a raw material. Demand for LKAB's iron ore
is therefore closely linked to global production and consumption of steel.
Since 2000, the balance in the steel market has shifted strongly from
Western economies to Asia, mainly China. Today, China accounts for almost
half of world crude steel production. With the exception of a brief downturn
during the financial crisis of 2008–2009, world production has shown
steady growth. From 2000 through 2012, production increased from 800
to 1,500 million tonnes, an increase of nearly 90 percent.
Global exports of iron ore and production of crude steel (Mt)
1,600
1,400
1,200
1,000
800
600
Global exports
of iron ore (prelim. 2012)
400
Global production
of crude steel (
2012)
(Source: CRU, December
2012, worldsteel, January 2013)
200
0
1960
1970
1980
1990
2000
2012
total income
by market region
by product
by division
MINING DIVISION
The division's core business is to mine,
process and sell high-quality iron ore
products for steelmaking.
External sales in 2012 totalled SEK 24,909 million,
representing 92 percent of Group sales.
Other countries 5%
Middle East/
Asia 28%
Minerals division
LKAB develops, produces and markets various industrial mineral products through its company
Minelco. Customers include companies in the construction and engineering, oil and gas production,
chemical, and automotive industries. Sales for the
year totalled SEK 1,760 million, representing 7 percent of Group sales.
Iron ore
products 92%
Special businesses division
The division brings together a number of companies with diverse activities that support the work
of the Mining and Minerals divisions in different
ways, but the companies also have external customers. These activities include essential construction services like sophisticated drilling, rock
reinforcement, drifting and explosives expertise,
along with property management, insurance and
power transmission. External sales were SEK 302
million, representing 1 percent of Group sales.
Europe 67%
Industrial minerals 7%
Other 1%
Significant events in 2012
first quarter
Early in the year we were pleased to
break several production records while
also breaking the record for lowest number of accidents. In 2011, accidents at
LKAB had declined by a third over the
previous year.
On 1 February, LKAB launched a new
brand image with a refreshed logo
and clarification of our values. Several
of LKAB's subsidiaries changed their
names to include the LKAB name so as
to clarify that they belong to the Group.
LKAB launched a new external website
to more effectively reach out to more
people and to stimulate dialogue on the
web.
The County Administrative Board decided
not to rescind the detailed development
plan for Gruvstadspark 1 in Kiruna. Accordingly, the agreement on urban transformation and construction of the first
phase of Gruvstadspark that
Kiruna's municipal management approved in February 2011 went into effect.
LKAB welcomed the decision, since it
means that we will not risk exceeding the
environmental conditions of our mining
operations. Also, that LKAB and Kiruna
have a common view on the management
of important cultural sites in the city.
A decision was made to invest in new,
supplementary flue gas treatment installations for the pelletizing plants in Malmberget and Svappavaara.
second quarter
On 23 April, extensive cracking was discovered on the bearing ring of the rotary
furnace in the KK4 pelletizing plant in
Kiruna. The replacement of the bearing
ring caused a one-month outage.
LKAB and the Municipality of Gällivare
signed a partnership agreement that
regulates urban transformation in Malmberget over the next 20 years. LKAB's
agreement with the Municipality of Gällivare was appealed by homeowners in
Malmberget, so the agreement was not
legally binding at the end of the year.
On 24 May a strike broke out among
Jernbaneverket's public employees in
Norway. District traffic controllers in
Narvik were involved in the conflict. All
ore deliveries to and from Narvik were
stopped for nine days.
On 14 June the new main level in mine
M1250 in Malmberget was officially
opened by King Carl XVI Gustaf. The event
took place in LKAB's new research and
visitor centre in Malmberget.
Mining at the Gruvberget open-pit was
forced to cease in June due to the ongoing environmental permit process.
The detailed development plan for Gruvstadsparken in Kiruna became legally
binding via notification from the Land and
Environment Court of Appeal on 5 June.
lkab group
Group
(SEK million)
Special
MiningMineralsBusinessesConsolidated
Division Division Division adjustmentsEliminations
External income
24,909
Intra-Group income
1,760
302
Group
2012
2011
26,971
31,122
235
2
2,049
-2,286
Total income
25,144
1,762
2,350
-2,286
26,971
31,122
Operating profit
10,127
132
106
10,595
14,705
Net financial items
428
97
Profit before tax
11,023
14,801
230
Tax-2,234
-3,842
Net income for the year
10,960
Net sales and operating profit
(SEK million)
8,789
Production and productivity
Mt
LKAB's production and deliveries
sustained record levels in 2012,
while lower iron ore prices
affected sales and earnings
negatively. Uncertainty about
developments in China led to
big swings in iron ore prices
during the year.
Return on equity
(%)
Tonnes/employee
30,000
30
12,000
25,000
25
10,000
20,000
20
8,000
15,000
15
6,000
10,000
10
4,000
5,000
5
2,000
50
40
30
20
0
2007
Net sales
2008
(
2009
2012)
2010
2011
2012
Operating profit
0
2007
2008
Production, Mt
2009
(
2012)
2010
2011
2012
0
0
Productivity, tonnes/employee
Pellets
Fines*
Total
(Mt)
23.822.922.114.7
2.43.23.23.0
26.226.125.317.7
third quarter
LKAB was granted a permit to drain the
water from the Leveäniemi open-pit
mine. To start mining, 30 million cubic
metres of water needs to be pumped to
a separate physical system. Drainage is
expected to take up to two years and is
designed to limit environmental impact.
To reduce the amount of dust over central Kiruna, LKAB Berg & Betong invested in improved technology and moved
the crushing plant that was causing dust
problems to a more sheltered location.
The investment will be monitored via
continuous measurements of falling particulates.
2008
2009
2010
2011
2012
Targeted return is 10 percent after tax over a business cycle.
2012201120102009
*including special products
2007
Return on equity (after tax)
Targeted return on equity (after tax)
Net sales were SEK 26,971 (31,122) million.
Operating profit was SEK 10,595 (14,705) million.
Production of iron ore products
10
Deliveries Pellets
Fines*
Total
(Mt)
2012201120102009
22.020.920.814.3
4.34.85.24.4
26.325.726.018.7
*including special products
The rail approach to central Kiruna was
rerouted behind Mt. Kirunavaara. In a
joint project, the Transport Administration and LKAB built 7.5 km of new track
and a rail yard in Kiruna. The route was
officially opened and operational in late
August.
The government's party leaders held a
press conference at LKAB in Kiruna and
proposed that SEK 800 million be allocated in the autumn budget for work on
the Ore Railway.
fourth quarter
In October it was clear that the demand
for steel products was considerably lower than supply. Things were especially
bad for the steel industry in northern
Europe. The market situation led LKAB
to reallocate deliveries from customers
in northern Europe to the Middle East
and China.
The first link in the production chain
for the Kiruna mine's new main level
reached the stage at which a test run
could be conducted. Commissioning is
planned for the first quarter of 2013.
LKAB Fastigheter took the decision to
build new homes in Kiruna and Gällivare.
Land with building rights in the Terrassen and Glaciären residential areas in
Kiruna was acquired from municipallyowned Kirunabostäder.
A total of 26.3 million tonnes of iron ore
products were shipped in 2012 and pellet
production hit a record high of 23.8 million tonnes.
A new delivery record was set for Narvik
harbour; more than 18.5 million tonnes of
iron ore products shipped in 2012.
The year ended on a happy note when
LKAB received news of a temporary permit being issued for mining in Gruvberget in 2013. Production was thus able to
resume after a six month stop.
4 | INTEGRATED REPORT 2012
lars-eric aaro, president and ceo
Continued good profitability | President´s report | 5
The year 2012 was full of challenges for LKAB. The company
maintained its ability to adapt to changing market conditions. When
deliveries are summed up, we can conclude that it was yet another
record year. Now we continue to build a bigger, stronger LKAB that
will have three open-pit mines in operation in Svappavaara in 2015.
Continued
good profitability
Net income before tax for the
year was SEK 11 billion on
sales of SEK 27 billion. Thus,
LKAB’s profitability remains
strong despite both lower iron
ore prices and an increased
supply on the world market.
We are also pleased to report continued low sickness
absence rates and a decrease in the number of workplace
accidents, even though the outcome was worse in terms
of the total number of accidents in the business.
LKAB 37, which is LKAB’s growth plan, ran into obstacles when we were forced into a nearly seven-month
mining hiatus at the Gruvberget open-pit mine in Svappavaara. But since 28 December 2012 production has
been in full scale again after the Land and Environment
Court issued a temporary permit for 2013. There have
been many legal turns with regard to Gruvberget. The
actual content of the environmental conditions has
never been a contentious issue, though. LKAB is now
working on realizing plans for three new mines to start
producing no later than 2015.
down in the Chinese economy and lower demand from
several European steelworks. As a result, iron ore prices fell during the summer and autumn, leading to cost
inflation in the mining sector and increased cost consciousness. Several mining companies have reviewed
their expansion plans.
Since the Lehman crash in 2008, we have seen increased volatility in prices in the global iron ore market. The pricing of iron ore products is mainly governed
by Chinese demand, since China accounts for over half
the world's iron ore imports. The market has largely
switched to a more short-term pricing system, compared to the annual pricing that was common until
about five years ago. Spot-price trading of iron ore has
also emerged in recent years.
Long-term growth
Divided steel market
The global steel market was characterized in 2012
by the slowdown in GDP growth around the world.
Crude steel production increased by 1.2 percent, but in
Europe, LKAB's largest market, it decreased by 4.9 percent. Many steelworks are running at reduced capacity
and some have chosen to shut down blast furnaces.
In the Middle East, LKAB’s second home market,
large construction and infrastructure projects are helping boost steel production, as is also the case in China
and the United States (US). The price of natural gas in
the US has been halved in recent years due to increased
extraction of so-called shale gas. Over time, shale gas
will radically change the global playing field for steelmaking. A large number of iron ore projects were started in the latter half of the 2000s, and in 2012 the supply
from Australia increased. This coincided with a slow-
In the long term, however, the demand for iron ore from
China and other Asian countries is expected to remain
high. China´s dependence on imports is actually expected to increase. This implies a growing iron ore market
in which LKAB is well placed to take advantage of the
fact that billions of people in other parts of the world
are moving into the middle class and what that entails
in terms of demand for household appliances, automobiles, infrastructure and more. In 2012 the Swedish
government decided on a new mining research programme, major expenditures on the Ore Railway and
more resources to the environmental courts for faster
permit processing. There is a better understanding of
the mining industry’s growth challenges.
The trade association SveMin launched a growth
strategy for the Swedish mining industry in October.
It highlights the potential for a tripling of the Swedish
LKAB’s growth will
necessitate recruitment
of up to 700 people
through 2015 …
mining industry by 2025 and
the creation of
50,000 new jobs,
while underlining challenges
like access to
expertise, infrastructure and resources as well as processes for permit management.
LKAB’s planned growth is in line with the developments SveMin outlines and, in the autumn of 2012 the
plan for production of 37 million tonnes of finished products by 2015 was intensified and specified.
LKAB needs to grow to avoid losing market shares.
New business opportunities are arising for LKAB’s
direct reduction pellets in countries with natural-gasbased ironmaking, especially in the US and the Middle
East.
Besides the new mines, a new main level was
opened in Malmberget in 2012 and in 2013 the new
main level in the Kiruna mine will also open. These expenditures, totalling about SEK 17 billion, will prolong
the life of the two underground mines by about 20 years.
Controlling costs is crucial to securing LKAB’s
long-term competitiveness. Larger delivery volumes
reduce the cost per shipped tonne. In 2012, a three-year
cost-efficiency programme was also launched, which in
the autumn identified an efficiency potential to date of
SEK 2.2 billion. Our sights are set on a financially sustainable business. regardless of economic conditions.
Record deliveries
Production disruptions in the pelletizing plants as well
as a district traffic controller strike on the Ofotbanen
Line disrupted our deliveries in the spring and early
summer. The year’s second half was marked by record
production and became a test of LKAB's flexibility in rerouting deliveries between customers and continents.
At year-end, when production and deliveries were summarized, we found that, despite the difficulties, 2012
was LKAB's best year yet.
Although only 5–10 percent of LKAB’s deliveries go
to China, and although we have agreements with many
customers on long-term pricing of our products, our
terms and conditions are influenced by developments in
China. This means that we must be prepared to fend off
rapid fluctuations in both demand and price. In 2012 we
managed to maintain and even increase volumes and
to sell everything LKAB produced, while profitability fell
slightly as a result of lower prices.
Recruitment needs
LKAB's growth plans mean that we will need to hire
nearly 700 people through 2015, of which half for the
new open-pit mines and an equal number to cover the
generation shift occurring in the production operations.
Interest in working at LKAB has increased in recent
years. The number of applicants is rising for most positions. The proportion of female applicants is increasing,
and currently 17.5 percent of the company’s employees
are women. In various studies in which university and
college students rank potential employers, LKAB is becoming more popular.
The challenge in the coming years is, as usual, the
recruitment of specialists. Ventures like our new research centre in Malmberget, which opened in June
2012, pave the way for continued technical leadership
in pellet research. LKAB’s ambition to maintain its lead
over rival pellet manufacturers, both in terms of product
characteristics, function and climate impact, requires a
continuous injection of new talent.
LKAB is therefore continuing its efforts to modernize the image of the company and raise awareness of
our operations. An important aspect of these efforts is
our increased focus on developing leadership within the
company. In 2012 the company’s values were integrated into manuals and training courses for performance
appraisals and new employees. An effective brand platform was launched with a focus on increased clarity
and improved recognition. As a consequence, all subsidiaries except Minelco changed their name in 2012 and
are now easily recognized as part of the LKAB Group.
Minelco will change its name to LKAB Minerals on 1 July
2013.
Attractive communities
LKAB's recruitment process does not stop at an attractive company. Equally important to our ability to attract
and retain talented employees in the future is the attractiveness of the communities in which we operate. This
is something LKAB must promote, especially in light of
the challenges we pose for Kiruna and Gällivare, as continued operation of the underground mines necessitates
relocation of large parts of these communities within the
next 20 to 30 years. Urban transformation is necessary
to secure jobs and the continuing operation of the underground mines, and requires a sound relationship between LKAB, the municipalities and the people involved.
Together, we have the opportunity to lay the groundwork
for attracting newcomers to Malmfälten by working for
a stimulating, rich living environment that attracts men,
women and young people alike. Our success is crucial to
LKAB’s human resources management.
Continued good profitability | President´s report | 7
In 2012 LKAB signed a partnership agreement with the
Municipality of Gällivare concerning Malmberget’s future, but because the agreement was challenged, it is not
yet legally binding. A partnership agreement with the
Municipality of Kiruna already exists.
Vision projects funded by LKAB are being conducted
in both municipalities. LKAB also works actively to support the schools in our business locations through the
LKAB Academy Foundation, among others, and by sponsoring recreational activities for children and youth.
Various collaborative projects with local business development companies relate to such diverse areas as improved flight connections and World Cup competitions
in cross-country skiing. We also signed a partnership
agreement with Narvik’s local business development
company during the year.
Attractive communities require a variety of housing
options. In 2012 LKAB decided on new construction and
acquisition of residential areas that need refurbishment.
There are currently plans to build about 500 new homes
in Malmfälten by 2015. But that’s just the beginning.
LKAB hopes to lead the way for other housing developers. Adequate housing construction is a prerequisite for
urban transformation to work according to plan. People
who need to move must know in advance what options
are available, whether they rent or own their home today. Therefore, an increased housing supply with good
advance planning is essential. Natural chain reactions
can also proceed that give individuals the choice of both
new and older homes.
Sustainability challenges
Urban transformation is LKAB’s single greatest sustainability challenge for the future, and yet it is essential to
our continued operation. If mining is to proceed at greater depths, people and buildings must move.
The same is true of LKAB’s sustainability efforts in
general. These issues are tightly woven into the company's business, from the climate-smart aspects of our
products, through the importance of diversity to our
human resources management, and the effect of energy use on costs, to our impact on the environments in
which we conduct our business. A sustainable approach
is a necessity in a business like LKAB’s, where mining
takes place in capital-intensive facilities one kilometre
under ground.
In 2012 LKAB’s initiatives and objectives for sustainable development were formulated in a comprehensive
sustainability strategy that has four focus areas closely
linked to the Group's business strategy. Sustainability
is an integral part of LKAB’s business. That is why we
chose to submit an integrated annual and sustainability
report this year.
Confidence in the future
LKAB’s new mines create opportunities for developing housing, schools, trade and vibrant communities
in Norrbotten. The geological conditions immediately
surrounding our existing mines are also very promising.
LKAB’s exploration operation was therefore expanded in
2012 through a number of strategic recruitments that
will help secure ore reserves for many decades of continued mining.
While the mining industry foresees new opportunities, other public interests question the impact of new
mines on the nature and culture of northern Sweden.
It is important for that debate to be conducted with a
holistic approach, while accountability must rule the actions of mining companies. LKAB has a long tradition of
good relationships with local stakeholders in our region.
We want to preserve and spread that tradition.
Steel is a recyclable material. Today scrap constitutes a third of the iron needed for steel production.
The greater proportion of the remaining two-thirds that
comes from the world’s most climate-smart pellet producer, the better for the global environment and climate.
Swedish iron ore mining inevitably leaves behind
wounds in the landscape. But other than that, the environmental risks are small. LKAB’s planned resumption
of mining in the Leveäniemi open-pit mine in Svappavaara is a striking illustration of this. Where mining has
been discontinued since 1983, there is now an 80-metre-deep, water-filled basin. When the fish are taken
care of and the water is pumped out in about a year, the
mine will be ready to start up. And it will be done without
polluting or the need for any costly decontamination.
The Swedish bedrock is a treasure that is worth taking advantage of. LKAB is well positioned to play a leading role in this process. With 122 years of experience in
Malmfälten, we embody the continuity that will ensure
continued prudent mining in Sweden.
Luleå, March 2013
Lars-Eric Aaro, President And CEO
business concept,
strategy and
vision//
8-9
LKAB’s business concept
is to manufacture and deliver products and services from Malmfälten that generate added value for customers on the world market. Other closely related
products that are based on LKAB’s know-how and that support the main business are also included in the operation.
LKAB’s business strategy
is to develop, manufacture and sell iron ore products with properties that surpass those of our competitors. An important, business-critical objective is to
also be a major supplier to each customer. To maintain and strengthen its industry position and to not be marginalized, LKAB must be able to guarantee the
availability of iron ore products in pace with its customers’ growth. Drastically
increasing production over the next few years is consequently LKAB’s Groupwide objective.
LKAB’s vision
is to be perceived by its customers as the supplier that provides the best added
value, thus becoming the market leader in its chosen segments.
LKAB’s strategy for sustainable development – Our objective
is for LKAB to generate prosperity by being one of the most innovative and
resource-efficient mining companies in the world.
Business concept, strategy and vision | 9
LKAB has identified six strategic focus areas that are decisive
for the company’s business strategy and for reaching targeted
annual production exceeding 37 million tonnes of
finished iron ore products by 2015.
Performance in Ironmaking
Flexibility
Safe and resource-efficient production
Committed – Innovative – Responsible
A brand must be built from the ground up. LKAB’s values – Committed,
Innovative and Responsible – govern our behaviour and permeate our
entire operations. Together, our values clarify and encourage the behaviour
that we want others to associate with LKAB and that will help us realize
our ambitious growth plans, while we ensure delivery according to our
customer promise: Performance in Ironmaking.
Growth
Urban
transformation
Committed – Innovative – Responsible
Performance in Ironmaking
Growth
LKAB is the world’s technologically leading supplier
of iron ore pellets to the global steel industry. Performance in Ironmaking is our promise to customers and
means that we consistently provide our customers with
the market’s best added value. On a long-term, growing
world market, we want to be the innovator that drives
development.
For continued prosperity it is business-critical for LKAB
to be a major supplier to every one of our customers. To
do that, we must have the resources to grow with them.
This is done by stepping up our delivery capacity, where
increased access to ore is key.
Read more on page 10
Urban transformation
The market for our iron ore products has long-term,
strong growth. But the major shifts in the global economy mean that we must be prepared to quickly manage temporary fluctuations in demand along the way.
This assumes that the actions we take are flexible, from
production of finished products to deliveries to the
world market.
LKAB’s continued mining and growth plans depend on
large parts of Kiruna and Malmberget being gradually moved. This urban transformation is being realized
in close collaboration with all stakeholders in order to
create long-term, sustainable solutions. LKAB and municipal authorities in our operating locations have a shared interest in building attractive communities that are
able to draw people to the area during the entire urban
transformation process.
Flexibility
Safe and resource-efficient
production
LKAB's competitiveness is directly linked to the fact
that we make continuous and sustainable improvements that increase operating efficiency. Safe, smooth,
uninterrupted production is the backbone of LKAB’s
business, which is large-scale and based on continuous
optimisation. We have the world's most energy-efficient
pellet manufacturing process. With accountability in
focus, our ongoing efforts will benefit customers and
the environment.
Attractive
LKAB
Attractive LKAB
A condition of LKAB’s planned expansion is that we hire
nearly 700 new skilled employees from 2013 to 2015.
Successful human resources management is based on
LKAB having a strong brand that builds on a well-defined customer promise, clear-cut values, equality and
diversity, and a safe, pleasant, stimulating work environment. It is just as important for our local communities to be attractive as it is for LKAB to be an attractive
employer.
10 | INTEGRATED RePORT 2012
flexibility
safe and resource-efficient production
growth
attractive lkab
performance
in ironmaking//
10-15
LKAB is the world’s technologically leading supplier of iron ore pellets to
the global steel industry. Our goal is to consistently provide our customers
with the market's best added value.
This is founded on LKAB’s basic understanding of the function of its products in its customers’ reduction processes combined with high-quality,
consistent pellet manufacturing. With our experimental blast furnace and
agglomeration lab as a base, we have unique tools and research resources for developing processes and products together with our customers.
Our Performance in Ironmaking customer promise means that our
steelworks customers increase their process efficiency by using
LKAB's products. Together, we also put less of a burden on the global climate by making and using LKAB Green Pellets.
In a steadily growing world market, we want to be the innovator that
drives development.
A clear-cut customer promise | Performance in Ironmaking | 11
A clear-cut
customer promise
LKAB has access to a uniquely rich and pure raw material, which we cannot
see the end of yet. We process our Norrbotten magnetite into iron ore pellets
with the market’s best added value. Our products help customers to be more
efficient and competitive, and they provide climate benefits. LKAB is the
innovator that drives technological development in close collaboration with
customers. Together, we create Performance in Ironmaking.
Look around you. You see iron and steel everywhere. In infrastructure. In buildings. In vehicles of all kinds. No other material
means as much to the development of modern society as iron
and steel. The material is a crucial requirement for the continued growth of world prosperity. This is based on a sustainable
perspective, since iron and steel produce structures are sustainable over time, while the material remains fully recyclable and
is part of the industrial ecosystem.
A GROWING MARKET
China currently represents the largest, most important market
for iron ore products. It is a society undergoing rapid development, which includes better living standards and more migration to cities, requiring continued investments in infrastructure.
Although developments are currently marked by uncertainty, nothing fundamental has changed in the iron ore market
in the long term. Growth in China is expected to require more
steel and the country will be dependent on iron ore imports. In
the past ten years, the use of iron ore has more than doubled.
Forecasts by independent market analyst CRU indicate a
growth market of more than 40 percent over the next ten years.
It is easy to see that iron ore is a strategically important product
in a global perspective.
Scrap shortage – more iron ore required
Currently, iron ore constitutes about 70 percent of the raw material in iron and steel production. The rest is recycled scrap.
However, scrap is becoming a scarce commodity, especially in
the fastest-growing countries. This leads us to believe that the
expected need for virgin iron ore will increase in the long term.
Today, there are basically two methods for making iron
and steel. More than 90 percent of production is via the traditional blast furnace process. Of the other methods, the natural-gas-based direct reduction (DR) processes dominate. The
DR process is expected to take a larger share of production in
the long term. Increased availability of natural gas combined
with environmental benefits means that new construction of iron and steel plants will likely be focussed on
this process.
“Currently, iron ore constitutes about 70 percent of the
raw material in iron and
steel manufacturing”
Bright future for DR process
Blast furnace process most common
The blast furnace process is by far the most widely used
method for producing iron. By adding coke, which is combusted with blasts air, oxygen is removed from the iron
ore. The method produces large amounts of carbon dioxide and uses large amounts of energy.
LKAB works with several blast furnace customers to
tune processes, develop new and better products, and develop new technologies in order to help improve product
quality and reduce environmental impact. These partnerships are based on LKAB’s ability to offer customers the
opportunity to test possible improvements in the world’s
only experimental blast furnace. It is a unique tool and an
offer that creates opportunities for long-term, frequent
collaborations.
During the 1970s a new steelmaking process known as
the direct reduction process was developed. This process
uses natural gas as energy input instead of coke. The process also operates at lower temperatures. The end product from the DR process is sponge iron that is refined into
various grades of steel.
The DR process has environmental benefits compared
to the blast furnace process, since it generates less carbon
dioxide per tonne of steel produced. In the Middle East, the
vast, inexpensive supply of gas has created a major market for the DR process. The new steel and iron plants under consideration in the US are also based on this process.
Natural-gas prices, halved in the US over the past two
years, present good opportunities. New technology has
enabled exploitation of large deposits of shale gas, which
is not completely straightforward from an environmental
perspective.
PELLET QUALITY THAT ALWAYS HOLDS UP
For iron ore pellets to survive transportation, loading and unloading, while maintaining quality, they must be very robust. Before commencing their journey to customers
around the world, they are fired in LKAB's pelletizing plant at 1,250 degrees.
pellet research
Investments made in the agglomeration laboratory, which was
completed in 2012 will strengthen
LKAB's technological lead as the
best quality pellet manufacturer on the global market. The new
laboratory is working with both
the cold part of the process (rolling the pellets) and the hot part
(sintering the pellets).
Leading pellet innovator
The raw material for both the blast furnace
and DR processes is iron ore. It can be delivered as lump ore, fines (concentrates)
or pellets. Pellets are concentrates mixed
with additives important to the iron and
steel process and formed into small spheroids. The spherical shape of the pellets
enables a smoother, more efficient reduction process in steelworks.
Pellets are LKAB’s main product, representing 84 percent of the company’s
deliveries. Most deliveries now go to the
blast furnace process. But every year we see a significant increase in demand for pellets used in the DR
process. The increased availability of natural gas is expected to accelerate this transition. LKAB intends to be
at the forefront of this development and is planning – in
parallel with the experimental blast furnace – to also
build an experimental installation for the DR process.
This will further strengthen LKAB's position as the technologically leading supplier of iron ore pellets. In terms
of capacity, with about 15 percent of the global market,
we are now one of the three largest pellet suppliers on
the market. LKAB will never be the biggest in terms of
shipped tonnage. But we’ll be number one for customers
who demand quality and productivity. That is what the
Performance in Ironmaking concept stands for.
product development part
of the sustainability strategy
In 2012 LKAB revised and updated its
sustainability strategy. An important focus area is ensuring product competitiveness and process efficiency. That is
why LKAB has formulated an objective on
developing a new generation of climatesmart pellets by 2017. Read about the strategy and the new objectives under the Sustainability Strategy and Governance section on
pages 56-63.
Our unique raw material
Iron is one of the most common elements in the earth's
crust. But it is the quality of the geology in general and
the volume that determine whether it is worth mining
and being called iron ore. Ore mining is usually done in
open-pit mines around the world. Australia and Brazil
are the largest producers, with almost half of world production and two-thirds of the global seaborne trade in
iron ore. From a global perspective, Sweden is a small
producer, but we have a unique geology that means unusually good conditions for iron ore mining.
LKAB mines the world’s two largest underground
iron ore mines. We have managed to make it profitable by being innovative and adapting iron ore mining
to large-scale underground mining in a cost-effective manner. Another explanation is that LKAB’s iron
ore mainly consists of high-grade magnetite. It has
an iron content of between 60 and 70 percent, which
is outstanding. The major presence of
magnetite is also unique to Malmfälten.
Ninety percent of the world’s known
iron ore resources consist of hematite.
… LKAB has a strong foothold
The difference between magnetite and
in
the Middle East, where there
hematite is in itself only a small oxygen
atom. But this small difference means a
is a shortage of steel?
lot in the production of pellets.
Did you know that …
Climate-smart pellets
In pellet manufacturing, LKAB’s magnetite ore has major advantages over competitors’ hematite. More than
half of the energy requirement is derived from the heat
liberated by magnetite when it is converted to hematite. The positive consequence of this is that LKAB does
not need to use as much fossil fuel as its competitors
that use hematite ore. A full 60 percent
of the energy needed for pelletizing is
CO2 emissions during sintering and
supplied in this way. That is why we
pelletizing (kg C02/tonne)
call our pellets LKAB Green Pellets.
300
LKAB has the world’s most ener250
gy-efficient manufacturing process,
even when compared with other mag200
netite-based pellet manufacturers.
150
Learn more about our manufacturing
100
process in the Safe and ResourceEfficient Production section on page 22.
50
0
Sinter
Hematite-based
pellets
LKAB pellets
The total carbon dioxide emissions for production of
crude steel, about 2,000 kg CO2/tonne, is reduced when
LKAB pellets are used as iron raw material. Production
of LKAB pellets generates seven times lower carbon
dioxide emissions compared to sintering at steelworks
and three times lower than in hematite-based pellet
production. The reduction is about 215 kg and about 95
kg CO2/tonne of crude steel, respectively.
Source: Benchmarking of Carbon Dioxide Emissions
from Iron Ore Pelletizing, Lawrence Hooey, MEFOS,
2010-05-24.
We help set the agenda
Our external research collaboration causes synergy
effects and drives development.. For example, we are
currently working closely with technology suppliers
within the DR process. As rapid growth is expected, we
aim to participate in and contribute to the next stage of
development.
As for the blast furnace process, the challenge is
to minimize its weaknesses. Carbon dioxide emissions
and energy use must be reduced. Consequently, LKAB
is participating, as the only iron ore supplier, in a European collaborative project in the iron and steel industry.
The aim of the project, called ULCOS, is to eventually
reduce carbon dioxide emissions by 50 percent. LKAB’s
experimental blast furnace plays an important role in
this context. It is also the key to the Course 50 project,
of which the aim is to reduce carbon emissions from
Japanese steelworks by about 30 percent.
research centre
IN MALMBERGET
New premises and instruments for material parameters are now in place for research and evaluation of
how our deposits are affected in the pelletizing process
and what product quality can
be achieved.
Research and
development
that delivers results
Our business strategy is based on LKAB being the technology leader. Our ambition is to be a significant partner to each of our customers. To live up to this, we do
extensive research and development in many different
dimensions. LKAB has long had extensive partnerships
with external centres of excellence, both nationally and
internationally. Our own research is closely linked to
Luleå University of Technology and the Hjalmar Lundbohm Research Centre, where 25 highly qualified researchers are now employed.
Our process and product development aims to leave direct, measurable impressions on our productivity.
LKAB’s unique agglomeration laboratory plays an important role in this context. Interdisciplinary research
is done here in areas such as mineral processing, chemistry, metallurgy and process control and automation,
and new pellet types are developed and tested. All with
a view to more effective and energy-efficient production. A one percent higher iron content per tonne of ore
from the mine gives a significant boost to production in
the processing plants, which leads to increased profitability.
lkab’s experimental blast furnace is unique
The experimental blast furnace in Luleå is a unique test facility and the steel industry is showing
great interest in it. The furnace provides considerable benefits to process and product development. It is appreciated by our customers, especially since many of the risks of performing fullscale tests in a production blast furnace can be avoided.
16 | INTEGrated REPORT 2012
flexibility
growth
attractive lkab
flexibility//
16-21
LKAB shipped 26.3 million tonnes of iron ore products in 2012. That
is the largest volume in modern times.
The market for our iron ore products shows long-term, strong
growth. But major shifts in the global economy mean that we must
be prepared to quickly respond to temporary fluctuations in demand along the way. This assumes that the actions we take are
flexible – in production as well as logistics.
When certain markets decline, we must be able to quickly redirect
our efforts towards markets with higher demand. We must also
be prepared to deal with fluctuations in the market by focussing
sharply on customers outside the steel market. All of this requires
a high level of flexibility.
Quick adaptation to change | Flexibility | 17
Quick adaptation
to change
That the market for iron ore products shows strong, long-term growth is in itself
no guarantee of success for LKAB. In the short term, we must have a capacity for
flexibility, and preferably benefit from a constantly changing world. Living with
change is a normal state for us.
Geographic flexibility
LKAB produces 90 percent of Europe’s iron ore. Our
strengths are clear: we have a strong profile in the pellet area, our products are climate-smart, our quality is
admittedly high, we can offer a unique combination of
experience and expertise. In short, we provide our customers with functional products.
A volatile market
With a world market share of less than two percent,
LKAB is a small iron ore supplier. We operate in a
market that is indeed experiencing strong, long-term
growth, but which may fluctuate widely in the short
term. We must keep this in mind at all times. We must
always act in such a way
that we can respond to
LKAB
Other
economic downturns and
equally important, benefit
from upturns in the market. By doing this, we will
strengthen our market
position. What is important is to have different
dimensions of flexibility.
The ongoing European debt crisis put its stamp on 2012.
Uncertainty about economic developments led to a decline in demand for steel and hence iron ore. Europe is
LKAB’s main market and traditionally represents about
two-thirds of the company’s sales. This market showed
a declining trend in 2012.
Although LKAB’s markets in Germany, the Netherlands and the UK grew, sales of blast furnace pellets
decreased sharply in the Nordics. Therefore, we quickly
reprioritized the geographic distribution of delivery volumes so as to continue to maintain a high production
level.
The company already has a strong foothold in
the Middle East, so it was a natural step to increase
deliveries to customers in this region. There is a
shortage of steel in this part of the world and it is an
important market for LKAB’s DR pellets. In the latter
part of 2012 we were also able to increase deliveries
to China. Overall, this geographic redistribution led
to LKAB reaching its highest delivery-volume ever in 2012.
Global trade in iron ore
Countries with most exports
Global trade in iron ore products
The world market for iron ore products did not generally change
in 2012. LKAB’s sales in the Nordic countries and Europe decreased, while deliveries to the Middle East and China increased
during the year.
Australia
Brazil
South Africa
India
Ukraine
Canada
Source: CRU
(521 Mt)
(327 Mt)
(58 Mt)
(37 Mt)
(36 Mt)
(35 Mt)
(Mt)
Countries/regions with
most imports
China (739 Mt)
EU 27 (126 Mt)
Japan (124 Mt)
South Korea (62 Mt)
Middle East (27 Mt)
Flexibility in production
LKAB’s main products are iron ore products. In 2012
pellets accounted for 84 percent of deliveries. Our specialization in pellets is essential to our profitability and
this is where we have a leading technological position.
LKAB’s pellets increase productivity and provide a more
stable process in steelmaking with lower energy needs
and less slag formation. It is a clear-cut, strong profile
that we want to consolidate.
In parallel with pellets, we also produce fines, finely ground iron ore sand that must be clumped together (sintered) into larger pieces before it can be used in
steelworks. Offering both magnetite-based fines and
pellet fines (sieve residue) to the market increases
LKAB’s ability to respond to shifting product demand
and market fluctuations. An unusually high iron content
in our ore means that fines from LKAB are considered
unique. In 2012 fines products made up 16 percent of
our product portfolio.
Through our Minelco subsidiary, LKAB is also a leading supplier of industrial minerals, mainly magnetite but
also other strategically important industrial minerals,
such as mica and huntite.
iron ore price trends
USD/dry ton
(April 2012-April 2013)
200
170
140
130,5 USD/t
110
12
04
0
12 2
05
0
12 2
06
0
12 2
07
0
12 2
08
0
12 2
09
0
12 2
10
0
12 2
11
0
12 2
12
0
13 2
01
0
13 2
02
0
13 2
03
02
80
PLATTS IODEX 62% Fe CFR North China 2012
Average price
The daily spot price for fines with 62 percent iron content sold to
China gives an indication of pricetrends for iron ore products in
general. Large price fluctuations were the norm in 2012.
With this palette of blast furnace pellets, DR pellets,
fines and industrial minerals, LKAB has several production engineering legs to stand on. As the market changes, we can quickly rearrange our production process to
match shifting demand.
The fact that LKAB managed in 2012 to reach its
highest delivery volume ever, is a sign of strength and
that the flexibility strategy works in practice.
Flexibility in purchasing
LKAB spends large sums annually on spare parts and
maintenance products. And we are continuously investing in industrial machinery. In order to make these
purchases more cost-effective, LKAB established a
purchasing office in Shanghai, China in 2011. The goal
of this effort is to eliminate the middleman, thereby reducing costs. We also wish to gradually establish direct
partnerships with suppliers in this part of the world that
strive for quality and have businesses that are permeated by sustainability and responsibility.
In 2012 extensive efforts were devoted to identifying
and visiting potential partners. Evaluations were made
and the first transactions were executed with significant
cost savings as a result. The Swedish government has
a Corporate Social Responsibility (CSR) agreement with
China, which is a mutual agreement on issues of corporate responsibility for the environment, climate, labour
legislation, human rights and corruption. Its principles
are reflected in LKAB's conduct in the Chinese market.
efficient purchasing
LKAB's purchasing office in Shanghai, led by branch manager Anders
Lundgren, is meant to eliminate costly intermediaries and buy quality products directly from manufacturers.
Custom industrialminerals
Minelco generates new business opportunities by offering customized industrial
minerals, many with environmental benefits.
Magnetite products originating from LKAB's iron ore
are used as water treatment chemicals, for desulphurising coal, as a finely
ground dried product in polymers used for noise and vibration damping, and as ballast in heavy concrete used
for things like radiation protection and underwater
structures. Key industries
are construction, offshore,
foundries, and the rubber,
plastics, paint, chemical,
vehicle and steel industries.
Flexibility in the logistics chain
LKAB’s competitive opportunities in the global marketplace are based on the fact that we are one of the
worlds leading logistics companies, both underground
and at surface level. With relatively few possibilities for
interim storage at depots and harbours, one of LKAB’s
main goals is to deliver as much volume at the steadiest
pace possible. This is achieved through highly specialized production flows.
Transport is by rail from mines and processing
plants along the Ore Railway. The unloading ports in
Luleå and Narvik are the backbone of LKAB’s logistics
systems and business operations. Since LKAB has two
harbours, ports, logistics flows can be optimized depending on where the customer is located. A third of
the products reach the market through Luleå and twothirds via Narvik, which can accommodate the largest
vessels for long-distance transport.
The Ore Railway was upgraded to handle heavier
loads than other European railways. In order to meet
the steadily increasing production of iron ore products,
LKAB invested about SEK 5 billion in terminals, new ore
cars and locomotives, and a new automated unloading
and storage facility in Narvik harbour in the 2000s. This
means that the transport capacity of the Ore Railway
has increased by 60 percent, and storage in Narvik has
become efficient, with reduced environmental impact.
Future plans are to increase the unloading capacity in
Narvik from about 20 million to more than 28 million
tonnes annually.
In 2011 LKAB took a decision to invest further billions in new locomotives and cars in order to reach
a transport capacity on the Ore Railway of 40 million
tonnes per year in 2015.
Open-pit mining in Gruvberget
The year ended with good news and partial judgement with regard to the collective environmental permit processing for LKAB’s operations in Svappavaara.
LKAB Berg & Betong was thus able to resume mining in Gruvberget on 20 December. With the three new mines of the Svappavaara field in production, the goal is to
increase LKAB’s total annual production of iron ore products to 37 million tonnes.
Product mix in iron ore trade
(Mt)
2,000
30
Global steel production (Mt)
1,800
1,600
25
20
1,400
1,200
1,000
15
1,000
10
800
600
400
5
0
Global
LKAB
0
Fines
DR pellets
Blast furnace pelletsOthers
200
0
1980
1990
2000
2008
2009
2010
2011
2012
GlobalOf which China
Fines is still the dominant product in the iron ore
market. Pellets have a smaller share, 10–20 percent
but this is expected to increase. Pellets are LKAB’s
major product.
Iron ore is the main raw material in steel production.
Demand for iron ore is linked to global steel production.
Today, China accounts for almost half of world steel
output.
Flexibility in product mix
FLEXIBILITY IN CAPACITY
In 2012 direct reduction pellets represented about 25
percent of our pellet deliveries. That is an increase from
2011 and confirms the trend we have been seeing for
some years. Success in this area is essential to the
company, and it fits well with LKAB’s determined, longterm strategy. The DR process requires purer pellets,
which matches LKAB’s focus and strength factors.
In addition, the future expansion of steel capacity
in many markets will favour the DR process in particular. Old blast furnaces will be shut down and must be
replaced. The DR process is environmentally advantageous. Energy input is from natural gas, which has
become a cheaper type of energy as new reserves are
commercialized, especially in the US, where large supplies of shale gas have changed the playing field. The
price of natural gas has fallen by 60 percent over the
past two years.
LKAB plans to be a driving force in the development
of DR pellets in the future as well. LKAB is focused on
becoming a leading partner and supplier in the anticipated expansion of DR processes in the US and other
places. In these efforts LKAB will follow environmental
developments in the extraction of shale gas.
As a niche provider, it is business-critical for LKAB to
be a significant partner to each of our customers. This
means that we work closely with our customers to deliver products tailored to their processes and with consistently high product quality. LKAB must grow in pace
with its customers; otherwise, we face the risk that our
products constitute too small a share in the customer’s
process and we become marginalized as a supplier.
Growth requires access to more iron ore to process.
That is why LKAB is opening three new open-pit mines
in the Svappavaara field. Expenditures on these mines
total about SEK 7.5 billion for 2011-2015.
The new mines are expected to give LKAB opportunities for a total annual capacity of 37 million tonnes
of finished iron ore products for ten years from 2015.
Demand for iron ore products is expected to continue to
increase during that period.
With the Svappavaara field, LKAB gets, at a competitive cost of investment, three flexible mines that,
with a high proportion of variable costs, can vary
production according to demand. This will give us
great flexibility in quickly adjusting to our customers’ needs in terms of changes in deliveries. It also
reflects that we operate in a market that can fluctuate greatly in the short term. Read more about
LKAB’s expansion plans in the Growth section on pages
32-39.
flexibility
growth
attractive lkab
safe and
resource-efficient
production
22–31
Safety is fundamental to maintaining a safe workplace at LKAB. In a corporate culture where safety is prioritized, we can also minimize disruptions and ensure consistent, uninterupted production.
LKAB has the unique potential to be an international leader in sustainable
development. Our climate-smart LKAB Green Pellets are manufactured in
the world's most energy-efficient process. This is a result of being continuously innovative and highly cost-conscious.
But we can never be complacent. LKAB works diligently to reduce the use
of fossil fuels and to switch to renewable energy sources as much as possible. We have a sharp focus on reducing emissions to air, decreasing dust
and noise, and increasing the recycling rate. It is also a matter of course
that LKAB's suppliers and partners must live up to the requirements of
responsible operations. They are a link in the value chain.
A sustainable value chain | safe and resource-efficient production | 23
A sustainable
value chain
Sustainable development is the strong chain that runs through everything
LKAB does. It stretches from having a long-term perspecitive, secure
workplaces, safety consciousness, and efficient energy and resource use
at one end, to delivery of climate-smart finished products that streamline
our customers’ processes at the other. Having no weak links in this long
chain is critical to our competitiveness.
LKAB’s process chain ranges from the ore deposits all
the way to the customer. The first step is the production
of ore in the mines. Then the ore is processed in the processing plants at surface level. Finally, the finished products are transported to the harbours at Narvik and Luleå
for delivery to customers around the world. It is a continuous process that runs around the clock, all year round.
High-tech mining
Most of the iron ore mined in the world is in the crustal
layer and can relatively easily be mined in large openpits. Most of LKAB’s ore deposits must be mined more
than one thousand metres underground. However, the
three mines in Svappavaara are open pits. One of them is
already open, and LKAB intends to open the other two in
2015. Mining ore at such depths is a logistical challenge.
Sophisticated technology and production systems place
LKAB’s mines among the most modern, high-tech mining facilities in the world. Our processes for underground
mining are as effective and large-scale as those used in
open-pit mines around the world. In the Kiruna mine
alone, more than 75,000 tonnes of ore is mined every
day. Total ore production for the Kiruna mine amounted
to 26.8 million tonnes in 2012. That is the second best
result in modern times, surpassed
only by 2008’s ore production.
... the market for iron ore
products has strong long-term
growth?
Processing of the raw material
The mined ore contains other materials that must be
sorted out. The main by-product is waste rock. Tailings are also left behind but are not considered hazardous waste. After dressing, the ore’s iron content
increases from about 45 percent to about 62 percent.
Next, in the concentration plants, the ore is further
pulverized. We “grind out” impurities, such as apatite.
The iron content is further raised after concentration to
about 71 percent.
Part of the output is fines. Due to the ore’s unusually high iron content, fines from LKAB in Malmberget are
considered the best in the world.
BY-PRODUCTS PROVIDE
NEW BUSINESS OPPORTUNITIES
Together with Luleå University of Technology, LKAB is
currently investigating the possibility of recovering minerals from iron ore processing tailings. The tailings contain apatite and rare earth metals. Apatite is a raw material used for manufacturing fertilizers and earth metals.
It can be used in all types of electronics, motors, glass,
automobiles and as alloying elements. Additionally, subsidiary Minelco recovers refractory material, among other things.
The world's most energyefficient pellet process
The first step in the process is to produce a rough ball
consisting of 69 percent iron along with unique additives (industrial minerals) that give the pellet the conical
and mechanical properties requested by the customers.
In the pelletizing plants, crude iron balls are produced
that are about 10 mm in diameter. These are dried, preheated, sintered and cooled. During sintering at 1,250
degrees Celsius, magnetite generates considerable
amounts of energy while it oxidizes into hematite. This
means that LKAB’s pellet production requires 60 percent less input energy than pellets made with hematite.
The positive consequence of this is that LKAB does not
need to use as much fossil fuel as its competitors that
use hematite ore. That is why we call our pellets LKAB
Green Pellets.
LKAB has the world’s most energy-efficient pellets process, even when compared with other magnetite-based pellet manufacturers, as evidenced in a comparative study by Swerea MEFOS.
There is currently no global emissions trading
scheme for carbon dioxide. LKAB falls under the European system of emission allowances and has so far
received an annual allocation that covers much of its
needs. From an international perspective, LKAB is one
of few suppliers of iron ore products that has costs for
emission allowances.
Emissions, vibrations and dust
LKAB’s operation generates significant emissions to
air. As part of our improvement efforts, a decision was
made in 2012 to invest SEK 1.5 billion in flue gas treatment installations in the Svappavaara and Malmberget
pelletizing plants. Emissions of particulates and acidic
gases such as sulphur dioxide, hydrogen fluoride and
hydrogen chloride will thereby be reduced by about 90
percent. This means that these pelletizing plants will be
among the first facilities in Europe to comply with the
future requirements of the Industrial Emissions Directive (IED).
LKAB currently has valid environmental permits
for the installations in Svappavaara, but compliance
with the IED's predecessor, the Integrated Pollution Prevention and Control Directive (IPPCD), was delayed at
LKAB and the authorities for various practical reasons.
The compliance application was submitted by LKAB in
2010. In early 2013, the EU Commission took legal action against Sweden because LKAB’s pelletizing plant in
Svappavara, for instance, did not yet have environmental permits that comply with the IPPCD.
Based on an EU directive, the EU court fined Sweden
because the Svappavaara installation was not considered to live up to environmental permit requirements.
The measures LKAB is now taking will put the operation
in compliance with the requirements.
LKAB’s discharges to water contain nitrogen and
phosphor from explosives debris and the ore. These
discharges into surrounding waterways are not considered to have any significant environmental impact.
Mining operations produce noise, vibrations and
dust that are sometimes perceived as disruptive to the
local environment. Vibrations can occur as a result of
explosions or displacements in the rock mass near the
mining areas and can be perceived as unpleasant. With
the help of high-tech equipment, LKAB carefully monitors all rock mass displacements. Noise is measured
and deviations in the measurements were recorded in
2012 for Svappavaara and Kiruna. Action plans were
prepared for deviations from prescribed levels.
When ore and waste rock is crushed, diffuse dust
forms that first and foremost makes things dirty. LKAB
regularly checks the air quality and has set its own target value for falling particulates.
From ore deposit to customer
m ining
dr e s s ing and c o n c e ntrati o n
p e ll e ti z ing
Employees
optimize the
process
In the Kiruna mine, development teams focus on
increasing internal productivity by identifying and
eliminating various obstacles. The work involves all
employees, so everyone takes responsibility for identifying elements that delay the process underground.
Through scheduled observation rounds, smart
solutions as well as work obstacles are identified.
This forms the basis for suggestions for improvement and action plans. All changes are monitored and
measured against key performance indicators. In the
development of the Kiruna mine, this has meant an
internal efficiency increase of 21 percent since process optimization was introduced in 2011. This means
that time is spent more efficiently and more work can
be handled by the internal team without the need for
outsourced services. This represents significant savings for LKAB.
Focus on safety
LKAB’s safety efforts are extensive and include the Safety First development program. For underground work in our mines, focus on safety is a given, but the company’s
safety efforts cover all parts of our operation. See the Attractive LKAB section on page 48 for more information.
Or e tran s p o rt
S h i p p ing
C u s t o m e r d e li v e r y
Cost-efficiency programme
To further strengthen LKAB’s competitiveness, we
launched a new cost efficiency programme in 2012. The
purpose of the programme is to implement improvements within various focus areas that will reduce the
company’s costs.
Measures will take three different dimensions:
1. Continuous improvements with a focus on minimizing downtime. Availability will be increased by
fine-tuning machinery and installations so that return on investment is maximized.
2. Capacity in the mines is currently a bottleneck. The
LKAB 37 programme is aimed at expanding mining
capacity. This means that we can reduce LKAB’s
fixed costs while using our processing capacity to
the maximum.
3. Increase LKAB’s operational efficiency. We can
be more effective in our internal work. Each unit
must attend to its own operation. Energy use can be
streamlined. Iron yields can generally be higher. Purchasing costs can decrease.
Overall, the programme is all about lowering the cost
per produced tonne of finished iron ore products by
20 percent. The programme will be completed by the
end of 2015 and is an important part of the company’s overall efficiency measures for achieving the
government’s proposed new financial targets.
TEMPORARY DELIVERY challanges
In late April 2012 extensive cracking was discovered
on the bearing ring of the rotary furnace in one of the
pelletizing plants in Kiruna. The repairs caused an outage of almost a month with a production loss of 320,000
tonnes of pellets.
In late May a strike broke out among civil servants
in Norway. District traffic controllers from Jernbaneverket in Narvik were involved in the conflict. All ore shipments to and from Narvik were stopped for nine days,
resulting in temporary stockpiling.
CLEAR-CUT ENERGY
AND ENVIRONMENTal TARGETs
Rising energy costs and a sharper focus on the environment have led LKAB to work purposefully and actively to reduce energy demand. LKAB is Sweden’s single
largest consumer of electricity. We account for about
1.5 percent of Sweden’s total electricity consumption.
Different types of fossil fuels are also used in the company’s processes. Undoubtedly, LKAB faces a number
of challenges relating to energy and climate issues. We
are working towards phasing out coal and oil as fuel in
the long term. This will be achieved by gradually transitioning to renewable fuels throughout our operation. We
will also increase our flexibility in selecting fuels used in
production. Based on this, we have adopted a number of
strategic objectives:
1. The specific energy consumption will be reduced
from 160 kWh per tonne of finished products in 2011 to
130 kWh per tonne in 2020.
2. Carbon dioxide emissions per tonne of finished products will be reduced from 27 kg in 2011 to 17 kg in 2020.
The previously formulated goal of reducing energy consumption by 5 percent per tonne of pellets produced by
2012 compared to 2006 was not attained. We are now
reviewing work processes in order to clarify allocation
of responsibilities.
The 2006-2012 environmental objectives were
reached. The strategy for 2013 and beyond also includes
goals of reducing falling particulates by 10 percent by
2015 and reducing emissions of sulphur dioxide from
the pelletizing plants by a thousand tonnes in 2015. See
page 61 for more information about these objectives.
Comprehensive results reporting
Modern, up-to-date environmental permits are fundamental to LKAB’s operations. The company must also
conduct business in accordance with prevailing conditions. The permits regulate how the business may deal
with emissions, by-products and waste from mining and
processing operations. LKAB submits environmental reports annually for all licensable operations, which can
be found on our website at www.lkab.com. In 2012 LKAB
reported 12 environmental incidents regarding chemical spills to the County Administrative Board, mainly
regarding spillage of oil.
Efficient transport
A decisive factor for LKAB’s competitiveness is efficient transport on the Ore Railway to the harbours at
Narvik and Luleå. That is why LKAB operates its own
rail services. The objective is logistics that provide
an internationally competitive cost image for LKAB's
products.
Fifteen times a day, 1,700 railcars of pellets and
fines are hauled on the Ore Railway and Ofotenbanen Railway. The IORE locomotives and 100-tonne
ore cars make it possible to run longer trains of up
to 8,500 tonnes. Overall, the transition to new trains
with modern technology over a five-year period reduced energy costs for ore shipments by 50 percent.
Remediation of the landscape
Remediation actions are carried out gradually as operations in LKAB’s industrial zones close down. It is about
creating new habitats similar to the surrounding landscape by establishing vegetation, stabilization and decontamination where necessary. See the Administration
Report on page 87 for more information.
Modern technology uses less energy
Thanks to a focus on eco-driving and regenerative braking on locomotives,
energy use can be reduced by more than 25 percent compared with conventional trains. The ore trains can generate almost as much energy as they use. The
record so far is held by an ore transport to Narvik. Of the 8,400 kWh consumed,
as much as 6,200 kWh was regenerated.
Environmental and energy performance
Material and energy balance in LKAB’s production in 2012
emissions to air 
ENERGY
4,390 (GWh)
EXPLOSIVES
PELLETS
Particulates1,965 (t)
SO2 19.1 (kt)
23.8 (Mt)
1,831 (t)
HF 202 (t)
HCI 592 (t)
FINES
2.4 (Mt)
NOx3,911 (t)
CONCRETE
ADDITIVES
CRUDE ORE
CO2
500 (kt)
688 (kt)
By-products
26.2 (Mt)
Surplus heat
943 (kt)
41.9 (Mt)
discharges to water 
nitrogen303 (t )
total phosphorus393 (kg)
Trace metals120 (kg)
Resource consumption, production and emissions MANAGED WASTE – LKAB GROUP 2008 2009201020112012
Input materials
Energy (GWh)
Explosives (kt)
Additives (kt) ****
Crude ore (Mt)
Concrete (kt)
3,668
18
666
41
***
3,050
15
569
27
***
3,986
19.2
866
42.6
480
4,237
19.4
852
42.7
496
4,390
19.1
943
41.9
500
Emissions to air
Particulates (t)
2,345
1,640 1,545 1,828 1,965
2,267 1,6842,2822,0261,831
So 2(t)
HF (t)
309
166
221
177
202
HCI (t)
722 400682590592
NOX (t)
4,001
2,597 4,187 4,138 3,911
460
684
687
688
CO2 from pellet production (kt) 573
Products
Pellets (Mt)
Fines (Mt)
201020112012
Operational waste * (t)
Scrap (t)
Hazardous waste ** (t)
Hazardous waste ** (%)
8,133
6,946
1,243
8
9,670
6,921
1,909
10
* Wood, rubber, landfill, combustible, unsorted
** Def. per Swedish Waste Ordinance SFS 2011:927
Emissions per tonne of pellets
(g/tonne of pellets)
250
19.9
3.9
14.7
3
22.1
3.2
22.9
3.2
23.9
2.4
By-products
Waste rock (Mt)
13.9
10.7
14.9
21.0
20.6
Tailings (Mt)
**
**
** 6.42**
5.60
Lime (Mt)
0.036
0.024 0.036 0.042 0.041
Surplus heat (GWh)
280 276372 371404
Discharges to water
Nitrogen (t)
Total phosphorus (kg)
Trace metals (kg)
370
388
410
206
702
250
201
440
88
324
497
151
303
393
120
* Some waterways receiving water are included in the Natura 2000 areas. LKAB
conducts biological and water chemistry evaluations and tests as part of its
self-monitoring to ensure the quality of the water system.
** Information was calculated using another method, not comparable to 2012.
*** No information.
**** Additives from Minelco are included 2012.
8,745
8,002
1,961
12
200
150
100
50
0
2007
Nitrogen oxide
Particulates
Sulphur dioxid
2008
2009
2010
2011
2012
Hydrogen chloride
Hydrogen fluoride
Emissions from ore processing in Kiruna, Svappavaara and Malmberget.
404 (GWh)
safe and resource-efficient production | 31
EnvironmentAl and energy performance
Fuel consumption 2012 (TJ)
Coal
Electricity*
2006186
1081,082 4,506
Fuel oil
2007180
Diesel oil
Kiruna 3,153
Svappavaara931
5
Malmberget 0
Energy consumption 213
801
2008184
1331,564 2,843
2009
207
Luleå
00.428 58
2010
180
Narvik
0 15 23156
2011
185
Minelco **
0 4337 73
2012 184
* Electricity purchased is an energy mix of 51 percent hydropower, windpower
and biofuel power (renewable energy sources), 48.7 percent nuclear power, and
0.3 percent coal, oil and peat (fossil fuels), based on Vattenfall’s electricity sales
in 2009. Refers to electricity use in Kiruna, Svappavaara, Malmberget, Luleå,
Narvik and Minelco, excluding sales to external end users.
** Minelco has a consumption of propane corresponding to energy value 0.0002
TJ and kerosene corresponding to energy value 17.5 TJ for 2012. Minelco also
uses natural gas (0.012 TJ), as well as liquid petroleum gas (56 TJ).
Percentage of sorted waste in iron ore operations in 2012
(%)
100
Refers to the facilities in Kiruna, Svappavaara, Malmberget, Luleå, Narvik and
subsidiaries, excluding sales to external end users.
The specific energy consumption has declined only marginally since 2006.
Surplus heat recovered internally
(GWh)
400
90
350
80
300
70
60
250
50
200
40
150
30
100
20
50
10
0
(kWh/t pellets)
Kiruna
Malmberget
Svappavaara
Luleå
Narvik
0
2006
2007
2008
2009
2010
2011
2012
Goal
Waste that is sorted is operational waste and includes wood, rubber, landfill waste,
combustibles and unsorted waste. Hazardous waste is not included in the operational waste but it is handled by a third party with approved permits to handle hazardous waste. In 2006 a goal was set to increase the proportion of sorted waste
by 2012 from about 50 percent to at least 80 percent. The goal was attained at all
business locations except Narvik. Activities outside the ore fields and ports are not
included in the statistics. LKAB is constantly working to increase the amount of recovered surplus heat as
part of its energy efficiency efforts.
Carbon dioxide emissions
Pellet processing
688 kt CO2
Electricity consumption
211 kt CO2
Internal transports
19 kt CO2
Electricity 23%
Internal
transports
2%
Pellet processing 75%
Direct and indirect emissions
Combustion of fossil fuels and additives in the pellet process and oil furnaces accounts for 75 percent of LKAB's carbon emissions. Electricity (indirect emissions) accounts for
23 percent. The quantity of vehicle fuel consumed internally
at LKAB accounts for 2 percent of carbon dioxide emissions.
Transport activities of contractors are not included in the
documentation, nor are carbon dioxide emissions from ore
transport by rail or emissions from Minelco. Reported carbon dioxide emissions do not include Minelco.
flexibility
growth
attractive lkab
GROWTH//
32-39
LKAB is Europe’s largest iron ore producer. In a global perspective, however, LKAB is a minor player. In just a few decades, we have shifted our
market position from being a pure commodity producer to becoming one
of the world’s leading developers of processed iron ore products.
For LKAB’s competitiveness and continued success it is business-critical
for us to be a significant supplier to each of our customers. To achieve this,
we must have the resources to at least grow with them. This can occur
organically or through acquisitions to secure our supply of raw materials.
It can also be done by upgrading and streamlining our work methods.
The common thread is that we must always make sure to offer our customers added value in their partnerships with us. We can only do that if we
act responsibly and with respect for people and the environment.
We grow with our customers | GROWTH | 33
We grow with
our customers
There is strong demand for steel. And there is underlying growth in the
market. LKAB meets the high demands of customers around the world.
To maintain our position as a niche supplier and not be marginalized, we must
have the capacity to grow with our customers. This is done through an upshift
of our delivery capacity, for which increased access to ore is the key.
Developments in the global steel market have been very
positive over the past ten years. Demand has primarily
been driven by China and Middle Eastern states.
The global iron ore market has grown by about 250
percent. According to analysis analyst CRU, the iron ore
market should increase by about 40 percent over the
next ten years.
Long-term growth
While developments in the world seem uncertain, the
long-term outlook is that there is still growth and demand for steel. To maintain the strong position that
LKAB has attained, it is important for us to grow in pace
with our customers. If LKAB’s products constitute too
small a share in a steel process, the respective customer can no longer perceive or appraise the added value
that we deliver with our products. We could simply be
marginalized as a supplier and partner, which constitutes a risk when times are bad. To ensure future competitiveness and jobs, it is therefore important that we
are able to grow as a company.
increased capacity
From 2015, growth project LKAB 37 entails shipping 9–10 million tonnes of finished products
through the Port of Luleå and 27–28 million tonnes via Narvik, where tugboat Rombak is an important part of the operation.
LKAB invests in the future
Efforts to develop LKAB’s production system are continuous. A new main level in Malmberget was operational
in 2012 and in 2013 a new main level will open in Kiruna.
In addition to new ore reserves, securing existing
capacity will be decisive for the company’s growth.
The LKAB 37 programme entails LKAB gearing up
its delivery capacity by about 35 percent. This will be
achieved through the opening of three open-pit mines
in the Svappavaara field: Gruvberget, Leveäniemi and
Mertainen. All these mines are well located in relation
to LKAB's existing infrastructure. These favourable geographic conditions mean that the time-to-market of
these projects is very competitive compared with other
countries.
The new mines are expected to increase LKAB's annual production by 12 million tonnes of finished iron ore
products from 2015. Overall, during this period, LKAB
will have the capacity to ship about 37 million tonnes of
finished iron ore products.
The increased volumes will help reduce unit costs
for the company as a whole. This means that a larger
LKAB is also a stronger LKAB. We get the opportunity
to grow with our customers. We also get opportunities
to market our products in emerging markets outside
Europe. The potential market for DR pellets due to the
construction of new direct reduction plants in North
America is of particular interest. We have the world’s
best product for the DR process and can play an important role when this market picks up momentum.
Impact on nature and reindeer herding
Since the spring of 2011, LKAB and the stakeholders affected by
the planned mining in Mertainen have been meeting to discuss
impacts and opportunities.
The district has a high nature conservation value that is critical to Sami villages Gabna and Laevas. Therefore, different options for designing the area have been thoroughly examined and
evaluated. LKAB has taken into account and, where possible, adjusted the proposed design of the operational area. The objective
is to minimize interference with reindeer herding. Certain impacts
or indirect impacts are difficult to predict. LKAB has initiated a collaboration with the intention of entering into a partnership agreement with the two Sami villages in order to clarify principles for
conduct and to continue to discuss and evaluate impacts.
In conjunction with exploration of the area, LKAB initiated a
joint action called Project Peregrine with the Norrbotten Ornithological Society. Exploration meant that the falcons' prior nesting
site disappeared. When the open pit closes, it will be a good habitat for all ledge-nesting birds. To compensate for the loss during
the nesting season, LKAB will build several artificial nesting ledges adjacent to Mertainen and other appropriate environments.
LKAB also started a project on ecological compensation.
Currently, the project is conducting a risk assessment and an
evaluation of the loss of biodiversity. LKAB also started a project
on ecological compensation, in which a risk assessment and an
evaluation of the loss of biodiversity are currently being conducted.
We grow with our customers | growth | 35
commissioning in progress – new main level in Kiruna
Preparations for commissioning of the new main level in Kiruna
(KUJ 1365) continued at year end. This is the first part of the production chain, consisting of trains, chutes, discharging stations,
crushers and hoists that will be operational in the first quarter of
2013. Commissioning of the remaining stages will take place gradually over the next few years. In 2012, the main activities of the
project consisted of rock work in the so-called lake ore, drilling
shafts, and construction work and installations in permanent facilities.
Official opening OF NEW MAIN LEVEL IN
MALMBERGET MINE
On 14 June, the new main level in the Malmberget mine was officially opened by King Carl XVI Gustaf. At the same time,
LKAB’s new Research and Visitor Centre opened. Vice President
Technology and Business Development, Per-Erik Lindvall gives a
presentation.
Permits are business-critical
Mines and mining impact their surrounding environments. New mines entail an encroachment in the earth's
crust and thus a negative impact on the environment. We
must have an understanding of how mining affects biodiversity. For example, is there a risk that the area’s ecosystem is disturbed when reindeer trails are affected?
This is the type of question LKAB deals with in the process.
Opening the three new mines is subject to extensive
permitting. The fact that environmental issues must be
analysed accurately and fully is a given. LKAB's ambition
is to be an industry role model from an environmental and
sustainability perspective. We support all of the environmental requirements placed on the Group’s operations.
Applications for environmental permits for the three
new mines are submitted gradually over the life of the
project. LKAB’s expectations and aspirations are to have
all permits in place to facilitate production start-up in
2015. Timely permits are critical if we are to continue to
be a strong and driving force in the market. Projections
indicate that the iron ore market will be strong around
2015. Therefore, it is important for the pace of the process to hold steady so that LKAB can offer increased
delivery capacity when required.
Draining 30 million cubic metres of water
One of the new mines is Leveäniemi, an open pit in Svappavaara. It was previously mined, but the operation
has been shut down for many years. Before ore can once again be mined, 30 million cubic metres of water
must be pumped out. That is as much water as would fill 50 of Stockholm´s Globe Arenas.
In autumn 2012 LKAB got the green light from the County Administrative Board to drain the pit and
pumping began in late September. The work is expected to be finished in autumn 2014, according to Peder
Nensén, project manager for new mines.
LKAB’s investments in growth
All Svappavaara mines will be mined as open pits. Investments in these mines are ongoing and are expected
to continue until 2015.
The biggest investments are being made in Mertainen and Leveäniemi, where new crushing and dressing
installations will be built. Existing concentration plants
must also be upgraded. In addition, logistics around the
mines needs to be improved. New tracks, terminals and
marshalling areas must be constructed. To cope with
transportation of the additional 12 million tonnes of finished products per year, LKAB has decided to invest in
four new trains and locomotives. The Swedish Transport Administration has prepared a plan for extending
an additional four lay-bys on the Ore Railway to Nar-
vik. The Norwegian side also requires capacity-building measures to be taken on the Ofotbanen Line. The
growth plan requires greater storage capacity in the
Ports of Narvik and Luleå as well.
Five hundred new jobs
The three mines in Svappavaara should provide about
500 new jobs. Besides strengthening LKAB’s position in
the international marketplace, the volumes of the new
open pits will help lower LKAB’s fixed costs per unit
produced.
… when the three planned open pits in Svappavaara are in full production, the amount of iron
that LKAB mines every day will increase from the equivalent of six Eiffel Towers to eight?
Reporting of mineral reserves and
resources
LKAB reports mineral reserves and resources in compliance with recommended rules adopted by SveMin
(FRB Standard). These are based in turn on an international standard.
Håkan Selldén is a specialist in ore-based development and is accredited by SveMin. He has more than 30
years of experience in the mining and minerals industry
and has compiled LKAB’s report.
The summaries of mineral reserves and mineral
resources show the current situation. Mineral reserves
comprise granted concessions, and mineral resources
suggest possible future concessions.
Mineral reserves
Malmberget
Proven
Probable
Gruvberget
Proven
Probable
LKAB prospects continuously for iron ore, both in existing mines and new projects. The ore reserves in Kiruna,
Svappavaara and Malmberget will last for many years
of mining. Currently, mining is ensured until 2030-2035
in Kiruna and until 2023 in Malmberget. Additionally, the
investments in Svappavaara will contribute ore until at
least 2023.
LKAB also has more than 70 ongoing prospecting
objects that are being evaluated. The time span from
prospecting to commercial mining is long, however, at
seven to ten years.
Mineral resources besides mineral reserves
As of 31 December 2012 (to dressing plant)
Kiruna
Proven
Probable
Prospecting for future resources
quantity, mt
2012 2011
As of 31 December 2012 (to dressing plant)
percent fe
20122011
536 590
146 76
48.648.7
46.447.1
168 174
103 105
42.342.4
41.241.2
7
8
53.153.2
- -
--
Mineral reserves include minerals within approved mining concessions.
The mineral reserve in Kiruna includes minerals above 1,365 m from
levelling point. The mineral reserve in Malmberget includes minerals
above 1,250 m from levelling point for the East Field. The West Field
includes minerals above 600 m from levelling point. The mineral
reserves for Gruvberget include magnetite minerals above 220 m from
levelling point. The proportion of broken tonnage of waste rock/ore
in open pits is 1.7. When calculating the reserves, the prices in force
over the period 2004–2005 were used. Iron losses in the processing
operation are about eight percent.
Kiruna
Measured
Indicated
Inferred
quantity, mt
2012 2011
Gruvberget
Measured
Leveäniemi
Measured
Indicated
Inferred
12 93
199 160
76 81
percent fe
20122011
48.848.9
47.145.7
45.644.2
257.0
80
30
-
80
30
-
47.1
47.0
-
47.1
47.0
-
Mertainen
Measured
Indicated
Inferred
106 - 36.4-
-
-
51
157
31.8
34.9
Malmberget
Measured
Indicated
Inferred
17
21
175 175
36 30
41.6
39.8
42.239.8
41.942.7
The mineral resources in Kiruna down to 1,500 m from levelling point
are reported, in Malmberget for the Eastern Field down to 1,725 m
from levelling point and 1,050 m from levelling point for the Western
Field. At deeper levels in the respective drifts there is insufficient data
for estimating grades and quantities. Mineral resources for Gruvberget
are not presented in this report.
upgrading of the Ore Railway
increases delivery reliability
The government’s party leaders held a
press conference in September at LKAB
in Kiruna and proposed that SEK 800
million be allocated in the autumn budget
to renovating the Ore Railway. Marketing
and Logistics Director Markus Petäjäniemi
and LKAB’s CEO Lars-Eric Aaro are also
pictured.
flexibility
growth
attractive lkab
urban
transformation//
40–47
Due to LKAB’s mining in Kiruna, Svappavaara and Malmberget, more and
more land must be claimed for mining operations, which means that the
communities concerned face great changes. There are hardly any comparable situations in the world from which we can learn. That is why there is
a double meaning when we talk about breaking new ground.
This urban transformation is being carried out in close collaboration with
the municipalities, residents and other stakeholders concerned in order to
come up with long-term, sustainable solutions. The aim is to do the work
with good advance planning and clear communication in all phases. Good
relationships with those affected by LKAB’s operations are critical to our
success.
Throughout the entire process, LKAB will take an active role when it
comes to building new, attractive communities with regard to infrastructure, housing and selection. The company has a vested interest in managing the process in a positive way. Maintaining public trust in LKAB over
time is fundamental to our ability to recruit and retain key expertise. It is
also important that we work together with municipalities to create attractive communities where people want to live and work.
In close collaboration with all stakeholders | URBAN TRANSFORMATION | 41
In close collaboration
with all stakeholders
LKAB’s continued mining operations and growth plans are dependent on
large parts of Kiruna and Malmberget gradually being moved. The result
is urban transformations that require consultation with a wide range of
stakeholders. Good communication is essential for the residents of the
towns to feel involved, secure and comfortable throughout the process.
It is based on long-term engagement.
Iron ore and other minerals make up 40 percent of
Sweden’s net exports. In 2011 LKAB was Sweden’s
ninth largest export company. LKAB is now also one
of the country’s major industrial investors. In 2012
the company’s capital expenditures totalled SEK 5.8 billion.
The project that runs until 2015
involves expenditures of about
SEK 20 billion.
Growth engine
LKAB is Norrbotten County’s
largest industrial group of companies. Many of the company’s
capital expenditures will benefit the region. Commitment to
local communities and actively
contributing to community development are important issues
to LKAB.
The company’s major future investments directly
and indirectly generate an economic base for local contractors, consultants and
workers. They play an important
role for LKAB, since they concern
service, repairs, extra work capacity and transportation. Thus,
LKAB is also an impetus for an increase in local small businesses,
private purchasing power and
municipal tax revenues. According to a consultant’s report from
2012, LKAB directly or indirectly
employs nearly 54,000 people in
the region.
Despite the turbulent situation in the financial markets in
2012 caused by the debt crisis in
Europe, LKAB did well due to its
flexible product and sales strategy. This means that LKAB generates considerable
economic value for its stakeholders, including its
owner. The company is also an important catalyst
for growth in Norrbotten County, which is currently
Sweden’s most successful region in terms of growth.
“The really hard
part is getting
all of the many
people who live
in Kiruna and
Malmberget to
feel involved”
communities in TRANSFORMATION
In Malmberget, LKAB has extensive experience with
urban transformation. Its residents have lived with
the urban transformation concept for nearly 60
years. A large number of residences and service facilities have gradually had to be torn down or moved.
The orebodies in Malmberget are scattered, which is
an added complication. LKAB is constantly acquiring
new information through test drilling. We know today
that the ore continues in under the central parts of
the west end of town.
In 2012 LKAB signed a partnership agreement
with the Municipality of Gällivare concerning Malmberget’s future that extends to 2032. The agreement
has been appealed, so LKAB is not continuing with
the process as yet.
During the 1970s the Ön neighbourhood in Kiruna was dismantled and now the deformations are
approaching the city in earnest. LKAB has at various
times informed the municipality of the ore’s distribution and its effects on the central part of town. The
urban transformation now going on in Kiruna started
in 2004.
We know today that the orebody extends beneath large parts of the city and is more than
2,000 metres deep and four kilometres long. We are
currently test drilling to get a better understanding
of the ore’s formation at greater depths and to provide a platform for future main levels in Kiruna. The
deeper LKAB mines the ore, the flatter the angle of
the deformations and the larger the area affected.
The first neighbourhoods affected in Kiruna are
properties owned by LKAB.
Mining at ever greater depths
For more than a century, LKAB has mined the
world’s purest iron ore in Kiruna and Malmberget.
It started in open-pits. Eventually, mining continued
underground. As mining has moved to ever greater
depths, the ore has proved to be purer, richer and
more abundant. No one knows where the orebodies
end. Test drilling in Kiruna has been done down to
2,000 metres and in Malmberget to 1,800 metres.
all ground movements
are measured
LKAB measures all ground movements that occur around the mine.
A large number of survey plinths are
placed around the communities.
Besides their technical function, they
are now being given an artistic touch.
EXTENSION OF THE
MALMBERGET MINING AREA
LKAB and the Municipality of
Gällivare signed a partnership
agreement in April that regulates
urban transformation in Malmber
get over the next 20 years.
However, there are troubling circumstances surrounding future mining: the orebodies slope in under settled areas. The local communities grew up
under the prevailing conditions of the time: beside
the open-pit mines. No one knew that more than 100
years later we would mine ore one kilometre underground and that further mining at greater depths
would take us in under the communities. This type
of mining causes deformations in the surface that
slowly sink. The deformations occur at an angle to
the inclined orebody on the side facing the city.
LKAB’s continued mining operations are dependent on large parts of Kiruna and Malmberget gradually being moved well in advance. The production
rate, that is, how quickly LKAB mines the ore, affects
deformations on the surface. The more ore we take
out, the faster the deformations spread and impact
the communities.
New homes in the Jägarskolan area in Kiruna
As a consequence of mining
going deeper and the mining of
the next main level, 3,000 flats,
200 houses, 380 hotel rooms
and 200,000 square metres of
public space and buildings in
Kiruna will be affected.
…LKAB measures ground deformations
using satellites?
for urban transformation to SEK 7.5 billion. By the end of
2012, payments for urban transformation in Malmberget
and Kiruna (compensatory damages for infrastructure impacts) totalling just over SEK 3.5 billion were made. See
the diagram.
urban
transformation in
progress
The urban transformation that is under way in
Malmfälten is in many ways unique. Even though
populations and communities elsewhere in the
world are also being moved to make way for mines
or dams, each event is unique because it involves
people.
Many eyes are focussed on LKAB to see how we
work together with the municipalities to handle the
various issues that are constantly arising. Swedish
law states that a mining company that affects its
environment must pay for the damage and intrusion caused by the operation. Accordingly, provisions for urban transformation are made annually.
During 2012, an additional SEK 1.2 billion allocated, bringing the total amount earmarked
Payments for urban transformation
(MSEK)
900
Examples of projects completed and commenced in Kiruna
and Malmberget:
The transformation in Kiruna so far has mostly involved
infrastructure:
•New railway including new power converter station and
ten bridges.
•Design of new roads: E10 and V870 with associated approach roads to the city.
•New dam in Luossajärvi.
•New detailed development plans for LKAB’s industrial
area and construction of housing.
•Documentation and planning for relocation of historic
buildings.
•Phased construction of Mine City Park 1.
In Malmberget, urban transformation has been going on for
quite some time:
•New construction of homes in the Mellanområdet area.
•Demolition of 120 houses in the Elevhems area and
construction of Elevhems Park.
•South-East link, replacement road for Bergmansgatan.
•Construction of North-East link – new Kullevägen Road.
•Dismantling historic buildings Johannes 2011.
•“A Nicer Malmberget” project.
800
700
600
500
400
300
200
100
0
2007
2008
2009
2010
2011
2012
Group payments for urban transformation in 2012 totalled SEK 701 million, of
which SEK 356 million was for new railways, including preparatory work.
As a consequence of deeper mining and the next main level
being completed in Kiruna, 3,000 flats, 200 houses, 380 hotel rooms and 200,000 square metres of public spaces and
buildings in the city will be affected. This must be handled
within the framework of the urban transformation partnerships. About a third of Kiruna’s population will be affected. Of the 2,100 flats LKAB owns in Malmfälten, 1,300
are in Kiruna and 800 are in Malmberget. During the year,
47 households were affected by the move, and of them, 22
were in Kiruna and 25 were in Malmberget.
consultation on future solutions
The most difficult issues related to urban transformation concern neither finances nor technology. The
really hard part is getting all of the many people who
live in Kiruna, Svappavaara and Malmberget to feel
involved, secure and comfortable during and after
the process.
Good communication is key to providing insight
into the different phases of the process. In LKAB’s
opinion, you can never have too much information.
LKAB works with all available channels, both analogue and digital. We have a popular website. We
have staffed information centres in both Kiruna and
Malmberget, and another opened in Svappavaara
in February 2013. LKAB also conducts continuous
briefings.
An important channel is the magazine LKAB
Framtid, which is published eight times a year. It is
distributed not only to LKAB’s employees but to all
households in Malmfälten. According to a SIFO survey conducted in 2012, the magazine is read by 88
percent of Kiruna residents and 84 percent in Gällivare. The content is perceived as credible by 79 percent in Kiruna and 75 percent in Gällivare and is considered the most important way to get information
from LKAB about urban transformation.
NY
EN TIDNING FÖR MALMFÄLTEN FRÅN LKAB
NY
DESIGN!
NEW HOUSING
Questions about building new housing, where it will
happen, who will pay for it and how much it may cost
require considerable accountability and consensus.
These are questions that must be resolved through
discussions and negotiations.
A solution that is as integrated as possible and
that has broad support is preferable. At the same
time, there is a major emotional dimension that
must not be underestimated. “What will happen to
the house I have lived in my whole life?” is a common
question. Having to move due to external circumstances is a big adjustment in a person’s life. The fact
that, in the future, you will not even be able to visit the
place where your home once was naturally arouses
strong emotions. Therefore, it is important for LKAB
to give residents time to discuss, reflect and prepare
for the changes ahead. LKAB also works very hard
on documenting the environments and buildings that
must be dismantled in pace with the expansion of the
industrial areas.
Chatta med
Per-Erik Lindvall
om LKAB:s prospektering
DESIGN!
Den 19 juni
kl 14.00-15.00
www.lkab.com/chat
Nr 1
SKATEPARKEN KAN BLI
ETT LYFT I MALMBERGET
PETER SÖDERMAN:
Nu byter KGS namn
NYHETER SID 2–3
FEBRUARI
2012
JUST NU SID 14
517 NYA BOSTÄDER ETABLERAS AV LKAB FASTIGHETER
AIDA LINDQVIST: Ge
oss fler mötesplatser
NYHETER SID 2–3
GÄSTKRÖNIKAN SID 13
Nr 2
Under 2011 lyckades LKAB slå rekord
i lägst antal olyckor, samtidigt som flera
produktionsrekord passerades med råge.
– Bättre säkerhet ger större effektivitet,
konstaterar huvudskyddsombud
Tomas Strömberg.
REPORTAGE SID 8–9
i maktens korridorer
2012
JUST NU SID 14
5 SNABBA SID 15
Nr 3
APRIL
2012
både gasa och bromsa
MALMJAKTEN INTENSIFIERAS
LKAB:s direktreduktionspellets är redan
nu slutsålda för hela 2012 och efterfrågan
i Mellanöstern talar för att bolaget hade
kunnat sälja 50 procent mer om det varit
möjligt att leverera så mycket.
Nya gruvor
kartläggs
– Det intensiva intresset från våra kunder i
Mellanöstern är överväldigande. Det råder
ingen kris på denna marknad, tvärtom,
säger Markus Petäjäniemi, marknads- och
logistikdirektör, LKAB.
NYHETER SID 7
NYHETER SID 4–5
Så många ton sprängämnen
gör LKAB av med varje dygn när
man spränger loss råmalmen ur
berggrunden i Kiruna, Malmberget och Svappavaara.
P-O Fjällborg och Kirsten Holme tittar på prospekteringsobjekt, i bakgrunden syns området för Lappmalmen.
Glädjande för Leveäniemi
Länssytrelsen beviljar prövning av
tömningen av dagbrottet utifrån
förutsättningen att den inte har
någon betydande miljöpåverkan.
Det gör det möjligt för LKAB att
vara igång med brytningen till 2015
som planerat.
VIMMEL SID 15
NYHETER SID 7
NYHETER SID 7
procent av Sveriges totala
sprängämnesproduktion,
eller mer än 20 000 ton
sprängmedel per år, tillverkar
LKAB Kimit.
Kommunalrådet Tommy Nyström och LKAB:s vd Lars-Eric Aaro utlovar ett konstruktivt samarbete i samhällsomvandlingen av Malmberget.
Foto: FREDRIC ALM
30 Unik rökgasrening installeras
Prisad kör och simmerska
En investering på 700 miljoner minskar utsläppen från Malmbergets
pelletsverk med cirka 90 procent.
Ett led i LKAB:s strävan att leverera
världen mest miljövänliga pellets,
menar Monica Quinteiro, LKAB:s
avdelningschef för miljöfrågor.
Nordnorska simmerskan Katharina Stiberg och norrbottniska
kvinnokören Arctic Light är årets
LKAB-stipendiater.
En OS-satsande norska och en
vokal talangfabrik värda att
hylla med diplom och prispeng.
NYHETER SID 4
NYHETER SID 10
ET MAGASIN FOR NARVIK FRA LKAB
Nr 6
200 LÄRARE PÅ STOR
SKOLKONFERENS
MARKUS PETÄJÄNIEMI
om marknadsoron
OKTOBER
2012
NYHETER SID 6
Emma Persson är en av de "förädlade råvaror"
som LKAB-gymnasiet levererat till industrin.
Hon är nu fastanställd på LKAB som så många
av utbildningens elever.
– Det bästa med mitt jobb är att det är fritt
och att jag får ta mycket ansvar, säger hon idag.
Lars Gavelin, skolkontaktansvarig på LKAB, är
mycket nöjd över resultatet:
– Jag törs säga att ingen går arbetslös.
EDEL STORELVMO:
Grenseoverskridende
NY SAMARBEIDSAVTALE
STYRKER NÆRINGSUTVIKLING
GJESTEKRØNIKEN SIDE 13
Malm undersöks
i Tuolluvaara
24
NYHETER SID 6–7
Foto: DANIEL OLAUSSON
Kunglig invigning av M1250
Invigningen av den nya huvudnivån i Malmberget 14 juni får
kunglig glans. Hans majestät
Konung Carl XVI Gustaf närvarar
under ceremonin då både nivån
M1250 och den nya byggnaden
Malmberget Entré invigs.
toppmoderna lägenheter
färdigställs just nu på Jägarskolan i Kiruna med beräknad
inflyttning vid årsskiftet.
NYHETER SID 2
NYHETER SID 6
NYHETER SIDE 4
Nr.1
största utmaning är mental
GÄSTKRÖNIKA SID 17
NYHETER SID 3
Nr 7
NOVEMBER
2012
DR-pellets nästa exportsuccé
Grethe Normark og
Karstein Liland, LKABs
nærmeste naboer, har
begynt å male og lage en
grillplass:
– Vi har hatt den beste
sommeren så langt. Men
det kan bli enda bedre.
Fortsatt må vi tørke bort
støv hver gang vi vil sitte
ute, sier Liland.
Forskaren Ruben Puentedura
inspirerade till en ökad digitalisering av lärandet i Lapplands gymnasium för att nå
målsättningen "Sveriges bästa
skola". LKAB Akademi finansierade skolkonferensen.
NYHETER SID 4–5
NYHETER SIDE 4–5
’’Den beste sommeren’’
Fartygskatastrofen med färjan
Costa Concordia är i dag ett
projekt som kommer att kosta
över två miljarder innan skeppet
är bärgat. Och det är ett bärgningsarbete där LKAB Wassaras
borrteknik har en avgörande roll.
Miljarder investeras i ny och
bättre rökgasrening i tre
pelletsverk. Reningsgraden
blir bättre än 95 procent.
NYHETER SID 5
Kungen kommer på besök till
länet och LKAB. Anledningen
är en satsning från Kungliga
ingenjörsvetenskapsakademien,
IVA, på en inspirationsresa för
företagare och samhällstoppar.
NYHETER SID 3
Ja, det er mulig å
kjøre et tog som
veler 8 500 tonn
fra LKAB Vitåfors til
Luleå uten å bruke
energi.
AKKURAT NÅ SIDE 14
1,5 Sila – fremtidens malmhavn
millioner norske
kroner går LKAB inn
med i Futurum.
NYHETER SIDE 5
Verdensunike SILA i
Narvik er et effektivt
lukket system for
lossing og lasting
som eliminerer
miljøpåvirkningen.
Så påverkar Lappmalmen Kiruna
Kur
rav
aar
avä
ge
n
Klimasmart ecodrift med IORE
Deformationsprognos 600 m
Deformationsprognos 1 000 m
Deformationsprognos 1 400 m
Osäker deformationsprognos på
grund av ofullständig malmbild
Malmkropp
på 600–1 400
meters djup
LUOSSAVAARA
Luossajärvi
NORRMALM
Trafik
verket
s för
esla
gna
dra
gn
ing
DAGENS
CENTRUM
REPORTASJE SIDE 8–9
AlaLombolo
Nu finns de första prognoserna
för hur en framtida brytning av
Lappmalmen skulle påverka
markytan i Kiruna. En nordligare
dragning av E10 skulle gå rakt
över den stora fyndigheten.
a
E10
äg
vv
REPORTAGE SID 8–9
1,5 Kungen besöker LKAB i Kiruna
Ruben Puentedura , världsledande professor inom digitalt lärande, gästade Kiruna folkets hus för att inspirera Lapplands gymnasium.
Foto: FREDRIC ALM
K I I R U N AVA A R A
K I I R U N AVA A R A
Fartyg bärgas med gruvteknik
Foto: FREDRIC ALM
30 Flytten till nytt blev ett lyft
Christina och Bo Olofsson berättar om flytten från Ullspiran och
sitt nya hem.
– Nu när vi väl flyttat hit så
stortrivs vi. Det är liv och rörelse
här säger Christina Olofsson.
nya lägenheter byggs till
hösten på Granbacka i Gällivare.
Totalt blir det fem hus med sex
lägenheter vardera.
NYHETER SID 10
NYHETER SID 4
TVÅ NYA FLYGLINJER
STARTAR FRÅN MALMFÄLTEN
SIVERT SVENSSON:
Bra att ha eget skägg
FEM SNABBA SID 16
NYHETER SID 5
LKAB sysselsätter 54 000 människor i sex samhällen i
tre länder på Nordkalotten. Det visar en konsultrapport
som nu presenteras. Bolagets stora betydelse bekräftas
i Arbetsförmedlingens utsikter för 2013.
KONFERENS I MALMFÄLTEN
Grethe Normark og Karstein Liland, Narvik.
Prospekteringen av Lappmalmen
visar att den fyndigheten i storlek
motsvarar alla tre gruvprojekten
i Svappavaara. Och i Malmfälten
finns en lång rad andra fyndigheter som nu kartläggs. Framtid
har kartan som avslöjar de dolda
NYHETER SID 8–9
miljarderna.
2012
ringen ligger inom felmarginalen för
långsiktiga prognoser.
– Det är ingen dramatisk förändring
och det är viktigt att understryka att
våra prognoser är underlag för Kiruna
kommun vars detaljplaner avgör när
områden ska omvandlas. Det beslutet
fattar inte LKAB, säger Göran Olovsson,
LKAB:s ansvarige för samhällsomvandNYHETER SID 2–3
lingar i Kiruna.
NYHETER SID 13
LOMBOLO
500 m
49
öringar har fiskats upp ur
Luossajärvi under torrläggningen av södra delen av
sjön för dammbygget.
JUST NU SID 18
KUNSKAPSLYFT FÖR SKOLAN
LKAB Akademi har
delat ut 6,9 miljoner
David Wettainen, Tommy Ekhorn och William Larsson
kan nu experimentera med robotar på Rymdgymnasiet
tack vare pengar från LKAB Akademi.
NYHETER SID 4
David Wettainen, Tommy Ekhorn och William Larsson.
Så vill LKAB bygga i Kiruna
LKAB Fastigheters
byggplaner i Kiruna
tar nu fart på allvar.
LKAB Framtid kan
visa skisser på hur
nybyggnationen är
tänkt att bli.
REPORTAGE SID 8–9
Foto: G. RÚNAR GUDMUNDSSON
17
miljoner meter har
LKAB borrat med Wassaratekniken sedan starten
i början på 90-talet.
Öppet hus succé i Malmberget
Det nya forskningscentret och nya
entrén lockade
många när LKAB
hade öppet hus.
Besökarna fick även
en tur ner i gruvan.
VIMMEL SID 15
Nr 8
DECEMBER
2012
– LKAB är en helt avgörande faktor
för sysselsättningen, säger Göran
Nilsson, chef för Arbetsförmedlingen
NYHETER SID 2–3
i Norrbotten.
’’Teknologi är inte
en väg, det ÄR
vägen!’’
NYHETER SID 2–3
Foto: G. RÚNAR GUDMUNDSSON
Nr 5
SEPTEMBER
LKAB sysselsätter 54 000
2012 blir ett rekordår för för LKAB:s direktreduk- stark utveckling för produkten. Allt fler stålverk
tionspellets och behovet på världsmarknaden med direktreduktion där naturgas används i proNYHETER SID 6–7
framförallt i Mellanöstern talar för en fortsatt cessen talar för fortsatt tillväxt.
Den så kallade Vietnammalmen öster om den
gamla Tuolluvaaragruvan i Kiruna har nu identifierats
som en mycket intressant fyndighet. Därför vill LKAB
borra i området för att öka kunskapen.
Prospekteringschef Per-Olov Fjällborg och geolog Céline Debras vill veta mer om vad som finns i marken.
NYHETER SID 6
LKAB SATSAR PÅ
UTBYGGD VINDKRAFT
KARIN NILSDOTTER: Vår
NARVIK
2012
I planene for en kai inngår en moderne skips- fått raske resultater. Nå planlegger vi ytterliutlaster med støvutsug og et nytt støvtett lager. gere steg, kommentarer Magne Leinan, sjef
NYHETER SIDE 2–3
– Vi har satset hardt på miljøforbedringer og
for havna i Narvik.
STØVEUTSLIPPENE:
"Det öppnade dörren för mig," säger Emma Persson om LKAB-gymnasiet.
Lappmalmen nästa gruva!
Nå planlegges storsatsing på miljøet
PROSPEKTERING:
VASSARE WASSARA MED
NYTT TEKNISKT CENTER
SATSNING PÅ UTBILDNING
Stor succé
för LKABgymnasiet
Över 20 fyndigheter kartläggs i Malmfälten med målet att starta brytning på
ett flertal för att möta världens starka
efterfrågan på järnmalm.
Tack vare ett samarbete mellan
Kiruna BK, Friluftsfrämjandet
och LKAB har skidskolan i
Luossabacken kunnat starta
igen efter tre års uppehåll. Linus
Stålnacke och Marie Karlsson
gläds åt nystarten.
Foto: MATTIAS EDWALL.
Copyright: Kungl. Hovstaterna.
NYHETER SID 5
MARKUS PETÄJÄNIEMI
Så omvandlas Malmberget:
50 Skidskola i Kiruna igång igen
besöker LKAB
År 2023 kommer markpåverkan av
gruvbrytningen cirka 100 meter längre
in i Kirunas centrum enligt en uppdaterad prognos. Deformationerna rör sig
med cirka 40 meter per år och juste-
Vi skulle utan
vidare kunna
sälja 50 procent
mer DR-pellets.
Gällivare kommun och LKAB
är överens. Ett samarbetsavtal som reglerar samhällsomvandlingen i Malmberget
är undertecknat.
–Vårt mål är ett attraktivt
samhälle som fortsätter att
utvecklas, säger Lars-Eric
Aaro, LKAB:s vd. NYHETER SID 2–3
Årliga investeringar på fem
miljarder gör att LKAB nu larmar
för leverantörsbrist.
– Vi måste visa upp de möjligheter som finns här nationellt,
säger ekonomidirektör Leif
Boström.
2012
PRINS DANIEL
Ny deformationsprognos för Kiruna
Avtalet klart!
"Produktionsrekord och säkerhet går hand i hand", säger Tomas Strömberg, huvudskyddsombud under jord, IF Metall, i LKAB:s järnmalmsgruva i Malmberget. FOTO: FREDRIC ALM
JUNI
NYHETER SID 5
VD-KOMMENTAR SID 2
REPORTAGE SID 8–9
Fler företag ska etablera sig
Nr 4
KLIMATSMART BIOBRÄNSLE ERSÄTTER OLJA
LARS-ERIC AARO: Vi måste
Efterfrågan ökar i Mellanöstern
NYTT PROJEKT I MALMBERGET
Säkerhet i
världsklass
PETTSON & FINDUS PÅ
TURNÉ I MALMFÄLTEN
FRANK HOJEM: Utsänd
MARS
Foto: FREDRIC ALM
Vibrationer fortsätter minska
Utvecklingen håller i sig, vibrationerna från produktionssprängningarna i Malmberget
har halverats på tio år. "Det är
glädjande att trenden håller i
sig", konstaterar Kjell Harnesk,
chef för bergmekanik, LKAB i
Malmberget. REPORTAGE SID 11
good communication is vital
BOSTADSBYGGANDE
Visionen av
nya Gällivare
Vid foten av Dundret på Repisvaara planeras
nytt bostadsbyggande av LKAB, ett naturnära
boende nära vintersportanläggningarna.
200 bostäder i olika hustyper.
– Vår ambition är allt ska vara klart inom
två år, säger Karl Wikström, ansvarig för samhällsomvandlingen i Malmberget. NYHETER SID 4–5
På området ska byggas flervåningshus, kedjehus, parhus och fristående villor, alla som hyresrätter.
Ett flexiblare företag
LKAB:s vd Lars-Eric Aaro talar
ut om utmaningarna inför 2013
på en orolig världsmarknad i en
stor intervju med Framtid:
– Vi står väl rustade.
INTERVJU SID 8–9
30
nya lägenheter
byggs på Granbacka
i Gällivare.
NYHETER SID 4
Skiss: WHITE ARKITEKTBYRÅ
Stärkt hållbarhetsfokus
LKAB har antagit en ny hållbarhetsstrategi som ska leda till en
fortsatt hållbar utveckling.
– Vi jobbar praktiskt med hållbarhet hela tiden, säger Monica
Quinteiro, chef för kvalitetsavdelningen på LKAB.
NYHETER SID 2
The magazine LKAB Framtid and the website at
www.lkab.com are important information channels for LKAB. At the information offices, visitors
can look over LKAB’s exhibition and information
materials. LKAB also conducts regular information meetings.
LKAB TAKES RESPONSIBILITY
LKAB’s ambition is for urban transformation to occur
without too much disruption for the company or area
residents. If mining is to continue, parts of the communities must be moved and LKAB wants to make
the best of the situation.
There are many things to take into consideration
when the new communities are planned and built.
Although it is a journey taken together, the municipalities ultimately determine where construction will
take place. The main message from LKAB is: Don’t
build on the ore!
For the residents, the transformation represents
an opportunity to create new, improved communities
in terms of public services as well as communication
and housing. It is about offering a high quality of life.
For us at LKAB, urban transformation is not merely
a heavy responsibility. It is above all a challenge and
an opportunity to create something new and better.
Many different stakeholders will collaborate on how
the new communities will emerge. But it is LKAB that
will foot most of the bill. We want to see it as an investment in the future for us as a company and the
residents of our communities.
What is LKAB’s value to the county
(Percentage positive %)
Ongoing dialogues
In order to gather views and issues, LKAB regularly
conducts stakeholder dialogues. Daily meetings and
contacts occur continuously with residents at the information offices and other locations. In 2012 about
100,000 visits were registered at these offices.
LKAB also conducted several individual and joint
meetings, seminars and consultations with various
social agencies, municipal leaders, representatives
of the government and Riksdag, government agencies, schools, land and property owners, representatives of the Sami people, hunting and fishing
organizations, businesses and others. The issues
discussed included sustainable construction and
urban transformation possibilities, property assessment and purchasing, different forms of obligations,
and compensation issues.
Dialogues intended to bring about a comprehensive partnership agreement with the Sami villages
affected by mining activities did not lead to an agreement in 2012, but dialogues continue.
Another focus is on different ways of actively involving area youth in the change process, such as
through reference groups, chats and targeted information.
distributed economic value
(MSEK)
12,000
100
90
10,000
80
70
8,000
60
6,000
50
40
4,000
30
20
2,000
10
0
2010
2011
2012
Norrbotten Kiruna
Gällivare
County MunicipalityMunicipality
In 2012 a SIFO survey was conducted in Norrbotten focusing on Gällivare and
Kiruna. The aim was to get a better feel for people’s attitudes towards LKAB.
The study highlighted several issues, including whether LKAB was perceived
as valuable to the county.
0
2010
Suppliers
2011
Employees
Shareholders
2012
Taxes
The Group’s payments to communities for urban transformation total SEK 407
million. LKAB’s sponsorship in the form of grants, mainly to education, culture
and sports in northern Sweden and Norway, totalled SEK 29 million. In 2012,
a dividend of SEK 5,000 million was paid to the owner (the Swedish state).
Taxes paid in the Group during the year were SEK 3,847 million, of which SEK
3,774 million was paid in Sweden, SEK 32 million was paid in Norway, and
SEK 41 million was paid in other countries. For additional information about
the Group and Parent Company’s generation and distribution of economic
value, please see the Annual Report’s income statements, balance sheets and
cash flow statements.
Vision sketch for Kiruna
LKAB Fastigheter plans to build 150 permanent residence flats at the foot of the ski slope on Mt. Luossavaara. The proposed design and colour scheme relate back to
Kiruna’s building tradition. Sketch: Lars Albinsson.
Vision sketch for Gällivare
The Municipality of Gällivare wants the new residential area to be developed in Repisvaara at the foot of Mt. Dundret. LKAB Fastigheter sketches out exciting blocks of
flats overlooking the landscape and settlements. Sketch: Maestro Management.
flexibility
growth
attractive lkab
attractive
lkab//
48-55
The journey towards a larger, stronger LKAB is in full swing. But the
scope, conditions and pace are largely determined by various agencies, organizations and politicians, both in Sweden and the EU. It is
crucial to their decision-making that they have a thorough knowledge of – and feel for – LKAB as a company and our operation.
A further challenge in the coming years is to attract new, qualified employees. LKAB's growth target cannot be achieved without
employees with specialist skills who sometimes must be sought
outside the company and the region. Parallel to this, a significant
generation shift is occurring.
Crucial to LKAB’s success on this journey is a strong, well-known
brand that conveys our culture and our values. As an employer,
LKAB places great emphasis on good, safe working conditions, a
stimulating work environment, equality and diversity.
A long-term strong brand | ATTRACTIVE LKAB | 49
A long-term
strong brand
LKAB’s planned growth requires that up to 700 new employees
be employed by 2015. Human resources management must be secured with
the help of a strong brand based on a clear-cut customer promise and values,
and a sustainable business in the form of a safe, sound, stimulating work
environment for all employees. It is just as important for the communities we
operate in to be attractive as it is for LKAB to be an attractive employer.
increasing interest
Interest in LKAB has increased in recent years. This is
evident in the number of visits to our business, which
in 2012 totalled 26,000 persons. A large number of decision-makers, including 13 ministers, were among the
visitors. LKAB works proactively to create knowledge
and understanding of our business.
LKAB’s underground Visitor Centre is now one of
Kiruna’s most popular attractions. A large number of
journalists also visited and described different aspects
of LKAB’s operations during the year. LKAB’s attractiveness is also reflected in the fact that the company on
average had about 73 applicants for every advertised
vacancy last year.
important decisions
A number of important decisions were taken in 2012
on implementation of LKAB's future plans. In the government’s autumn budget, investments in the Swedish
part of the Ore Railway were announced that ensure
sufficient capacity for implementing LKAB’s growth programme, LKAB 37. The research and innovation proposition presented in the autumn contained a long-term
mining, mineral and steel research programme. Luleå
University of Technology, which LKAB works closely
with, is on track to evolve into a European Centre of
Excellence. In the first quarter of 2013, both the government and its opposition presented programmes and
strategies for an expanding mining industry. The government’s mineral strategy addresses important issues
like human resources management, research and faster environmental permit processes.
At the European level, the
mining industry’s challenges
were highlighted in the context
of efforts to implement a
strategy for securing raw
material supplies. Sweden
is represented by Lars-Eric
Aaro and Minister for the
Environment Lena Ek in the
high-level group formed by
the European Commission to
address commodity issues.
NEW TOOLS
lkab supports skills and
school development in malmfälten and narvik
Prince Daniel visited Malmfälten in September. He met with students
and teachers at Lapland Upper Secondary School in Kiruna, where
the LKAB Upper Secondary School is a collaboration between LKAB
and the municipal schools in Malmberget and Kiruna. Here, schools
and industry are linked together through things like work placement
and opportunities for holiday work at LKAB.
By creating a more distinct
profile for LKAB, opportunities to raise awareness and
generate positive associations with the company are
improved. Hence, an important step towards a more rational method of promoting the LKAB brand was taken
in 2012. All subsidiaries have switched or are in the process of switching to names that clearly show they are
part of the LKAB Group. Meanwhile, an updated brand
image was launched for better clarity and consistency.
One important tool is a new external website, where
much of the recruitment process is run.
a Visible corporate culture
A brand must be built from within. Ultimately, this is
about strengthening and developing our business to
achieve our goal of a bigger, stronger LKAB.
These values
are meant to support all LKAB
employees in their conduct towards their colleagues and
all other stakeholders: employees, suppliers, the labour
market, customers, owners, the public and authorities.
LKAB’s values Committed – Innovative – Responsible
should govern our behaviour, and it is important that
there are always lively discussions in which the values
are linked to the practical realities of the workplace. An
important way to establish the values was via the new
performance development model that the company introduced for all administrators. In this way, each one gets
a concrete idea of how their role is linked to the strategy
and objectives of the company and the workplace.
Continuous information to all employees is provided
by an in-house magazine in which the current situation
and key issues are touched upon. Eight times a year, the
magazine LKAB Framtid is distributed to all households
in Malmfälten and to selected stakeholders across the
country. In 2012, LKAB’s goals, strategy, customer promise and values were

communicated to employees in different ways. CEO Lars-Eric Aaro held strategy days in the
autumn, for which all employees convened at each place
of business. The current situation and developments
were presented. In dialogue with employees, the Group’s
values and overall goals, linked to workplace goals, were
discussed. A new intranet should be ready for use in 2013.
Training for all employees
LKAB has a target of at least five training days per employee per year. The result in 2012 was
6.1 days (6.7).
Leadership and governance
LKAB works continuously to enhance leadership skills
within the company. As one stage in this process, a new
development programme was established at a senior
level within LKAB in 2012.
A mentoring programme was also started to support new managers. For new managers, this will provide
access to a network of other managers, experience exchanges and support.
Safety is part of the culture
Safety is a priority for LKAB. Each accident is taken very
seriously. For many years, safety initiatives have been
given high priority, from the automation that began in
the 1960s to efforts in the 2000s to systematically invigorate the safety culture of the company. The accidents
that are related to behaviour and attitudes will also be
reduced and completely eliminated in the long term.
The goal is for employees to be actively engaged in the
process and take responsibility for their own safety and
that of their colleagues.. The long-term trend is that accident frequency is decreasing and, most importantly,
that serious accidents with long absences are fewer.
The number of accidents with absence increased in
2012, however.
Most accidents occurred above ground, and the
most common reasons were tripping, slipping and handling of objects and tools.
Since 2006, LKAB has engaged in a systematic effort
to strengthen its safety culture, thus reducing the number of accidents. The work is carried out according to an
established development programme. The focus is on
health and safety values, continuous training, communication, risk management and activity planning on the
crew level. The programme is called Safety First.
As a result of these safety efforts, investments
are also being made in our plants and new machinery.
The objective is for there to be a maximum of five
accidents per million work hours by 2015. By 2020, the
aim is to further halve accidents to a maximum of 2.5
per million work hours. This applies to accidents with
absence.
Safety initiatives cover all staff, including contractors working for LKAB. We expect them to have a sustainability policy that includes safety as well as environmental and social issues.
A long-term strong brand | attractive lkab | 51
Awards earned by LKAB
To broaden its recruitment base, LKAB strives to be
an employer of choice. We want to offer exciting, fulfilling work assignments and career opportunities,
regardless of gender, age, disability, cultural background or sexual orientation.
In 2012, LKAB was given an award from the
Swedish Public Employment Service for its modern, open, cooperative approach to recruitment. The
award was instituted to highlight good examples of
employers that take social responsibility very seriously and that create job opportunities for people that
have been out of the workforce for some time.
During the year, LKAB also received a diploma as
one of Sweden’s leading companies when it comes
to equality. The diploma was presented by employee
union Unionen. LKAB’s own employees nominated
us, which makes the award extra special.
LKAB HAS SWEDEN’S BEST NEGOTIATOR
Purchasing agent Martin Kettunen was named
Sweden’s Best Negotiator 2012 by the Swedish
Association of Purchasing and Logistics.
Incidents and risks
(Number)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2007
Incidents
2008
2009
2010
2011
2012
Risks
Reporting and analysing risks and incidents is important for
avoiding accidents. During the year, 4,426 hazards and 1,799 incidents were reported. LKAB sees risk reporting as an important
acknowledgment of our safety awareness efforts.
Accidents leading to absence
100
Number of accidents
Number of accidents per
million hours worked
20
90
18
80
16
70
14
60
12
50
10
40
8
30
6
20
4
10
0
2
2007
2008
2009
2010
2011
2012
0
Total number of accidents leading to absence in the Group.
(2012)
Number of accidents per million hours worked.
Personnel turnover in the Group
YearPercent
20066.2
20078.0
20088.2
20094.6
201011.6
201116.7
201212.9
Calculated on number of external departures and recruitments in relation to
permanent employees as of 31 December
last year. Personnel turnover divided by
region or age is not disclosed.
Personnel turnover 2012
Percentage of new hires Percentage of departures 9.2%
3.7%
Employee turnover calculated on the
number of permanent employees in the
LKAB Group, excluding subsidiary Minelco
and employees outside Sweden. From
now on, follow-ups of personnel turnover
will be done according to these indicators.
permanent employees distributed by region
Sweden3,596
Asia61
Belgium3
England197
Finland3
Greece0
Greenland0
Netherlands25
Norway171
Poland0
Slovakia1
Turkey39
Germany18
USA5
Total4,119
At the end of the year, LKAB had 4,119
permanent employees, of which 1,340
were white collar and 2,779 were blue
collar workers. There were 47 part-time
employees. There were 331 fixed-term
employees. There are options available
for full-time and part-time employment
for employees with small children.
Recruitment in focus
The many major, concurrent projects LKAB is facing require the pace of human resources management to be
stepped up. Up to 2015, nearly 700 new qualified employees with at least an upper-secondary education will
be recruited.
The recruitment base has gradually broadened
to include the entire country and also outside Sweden. An example of this is LKAB’s participation in the
Swedish Public Employment Service’s project for
national matching. The idea is to bring together foreign academics and employers across the country.
In March 2012, 16 job-seeking engineers and geologists of varying nationalities were invited to visit LKAB
to get information about the mining industry, visit
the Kiruna mine and be interviewed. It went very
well. Several have already signed contracts and a
few more are being considered for employment.
Our recruitment efforts are starting to deliver. The
number of applications is increasing. In 2012, about
300 positions were advertised and we received
21,880 applications.
SPECIALIzED TRAINING
Recruiting locally has always been the base of LKAB's
human resources management. It begins at the school
level. In both Kiruna and Malmberget, specialized
courses are offered at the upper secondary level with
an LKAB profile that are designed in collaboration with
LKAB. These courses provide greater insight into the
company, knowledge that is directly targeted to specific
job roles within LKAB, and many work placements and
close links to our business.
This partnership between LKAB and the municipal
upper-secondary schools in Kiruna and Gällivare has
also helped the technical vocational programmes
(Industrial, Electrical, Automotive, HVAC and Building Programmes) to remain very attractive among
young people in the municipalities. In Kiruna, as many
as 66 percent of young people in 9th form applied to
a technical vocational programme as a first choice
for the 2012 autumn term, and of the girls, 33 percent chose a technical vocational programme as
their first choice.
SUCCESSFUL MATCHING
There is a shortage of skilled labour in the mining
industry, especially for geologists and geophysicists.
Through the Swedish Public Employment Service’s
National Matching Programme, LKAB made contact with
several academics with foreign backgrounds that were
seeking employment. One result of the matching programme is that Noor Zaki Mahmoud was employed as a
geologist in LKAB’s growing prospecting department.
attractive communities
As the dominant employer and economic engine of our
business locations in Malmfälten, LKAB has long operated with the intention of supporting the attractiveness
of its local communities. Ultimately, it is about securing
future talent.
LKAB’s commitment is broad and can be found in these
areas:
• Responsible urban transformation
Housing, historic buildings
• Attractive schools
LKAB upper secondary schools, LKAB Academy, LKAB
Summer School
• Wide selection of leisure activities for children and
young people
Monetary contributions to associations and events,
culture and sport
• Good infrastructure
Health care, communication links, urban planning
• Complementary businesses
Local business development and venture capital
companies
In 2012, LKAB supported the establishment of twoznew
air routes: Kiruna-Copenhagen and Luleå-Gällivare-Kiruna. In addition, an agreement was reached
with business development company Futurum in Narvik, and decisions were taken on construction of about
500 homes in Malmfälten by 2015.
Support for schools
LKAB Academy is a collective name for the financial
resources LKAB dedicated in the form of a foundation
to support the development of schools in Malmfälten
and Narvik, the geographical areas in which LKAB has
its main operations. Preschools, primary schools and
secondary schools can apply to the LKAB Academy for
financial support of development projects and activities. The purpose of the projects should be professional
development or educational development for teachers
and/or students to ensure the school's reputation in
the community. At the primary level, activities should
reinforce interest in science and technology; at the secondary level, support can be given for activities in all
educational programmes and subjects. In 2012, more
than SEK 10 million was distributed, with the biggest
project receiving SEK 2.5 million to purchase technical
equipment at the upper-secondary school level, and the
smallest amounts, a few hundred kronor, went to individual students who carried out major and minor projects in various subjects.
Low absence due to illness
increased diversity
personnel turnover 2012
As for absence due to illness, LKAB’s figures
have been very low compared to the national
average for many years. Long-term absence
due to illness has been stable for several
years at about 0.5 percent and total absence
due to illness lies under 3 percent.
The reason that LKAB has so few longterm illnesses can be largely attributed to our
systematic rehabilitation efforts. The model
was established in the early 2000s in consultation with the unions. A rehab coordinator,
together with the responsible supervisor and
the individual concerned, draws up an action
plan for getting the employee back to meaningful work as soon as is medically feasible.
Historically, LKAB has been a male-dominated workplace. Today LKAB is a company that works actively to increase the
proportion of female employees. The
trend is positive; over the past ten years
the proportion of women has doubled.
The goal is to have increased the proportion
of women by 2020 to 25 percent. Today, 29
percent of all new recruits are women.
A prerequisite for serious equality and
diversity initiatives is a workplace free from
discrimination. LKAB takes harassment and
discrimination allegations very seriously.
During the year, a number of reports of violations were received by company employees.
They were investigated by LKAB’s HR department and handled according to standard procedures.
In 2012, 19 (17) women left LKAB. A total of
144 (194) permanent employees resigned
from the company, which means that 13 percent of them were women (9 percent). Figures
for 2011 are indicated in parentheses.
The proportion of women among those
who left the company was lower than the
proportion of women in the company overall, which is an indicator that more and more
women are choosing LKAB as their workplace. Most of those who resigned, both men
and women, did so because of retirement.
Absence due to illness
Number of women at LKAB Percentage of women at LKAB (%)
5
1,000
4
800
3
600
2
400
1
200
0
0
0
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
(Number)
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
(%)
18
16
14
12
10
8
6
4
20
12
20
11
20
10
20
09
20
08
20
07
20
06
2
Short-term absence due to illness
Long-term absence due to illness
Group – Absence due to illness as a percentage divided into short- and long-term absence.
Absence due to illness in 2012 was the same as
2011: 2.9 (2.9) percent. Long-term absence due
to illness was 0.5 percent and short-term was
2.4 percent. LKAB’s goal is for long-term absence
due to illness to be a maximum of 1.5 percent, a
goal that has been met for several years.
Number of women at LKAB over time
The number of women has steadily increased
in the Group and totalled 720 at year-end. The
goal for 2020 is for the proportion of women in
the Group to be at least 25 percent.
Percentage of women at LKAB
Percentage of female managers
The percentage of women in the LKAB Group
is 17.5 percent. In the Parent Company, where
roughly 80 percent of the employees work,
LKAB follows up the proportion of female
managers that have subordinate staff and the
proportion was 17.8 percent in 2012.
sustainability
strategy &
governance//
56-64
Ambitions for future development | sustainability strategy & governance | 57
Ambitions for
future development
LKAB takes another leap forward in terms of its
sustainability ambitions. During the year an updated
sustainability strategy that builds on earlier work
and is clearly linked to the overall corporate
strategy was launched. The new specific
targets extend to 2020 and will support
our ambition to create prosperity by
being one of the most innovative
and resource-efficient mining
companies in the world.
social
LKAB
generates
prosperity by
being one of the
most innovative and
resource-efficient
mining companies
in the world.
en
vironmental
fin a n c i a l
Sustainability adds value
a comprehensive objective
The basis for LKAB's sustainability work is a belief that it increases our
positive contribution to society, people and the environment, thereby
strengthening LKAB's long-term profitability. At the same time, it helps
LKAB work in a structured manner and minimizes negative impacts
on the outside world.
This work contributes directly to business operations by identifying
and managing risks, increasing competitiveness and strengthening the
LKAB brand. Sustainability issues are directly linked to LKAB’s values:
Committed, Innovative and Responsible.
Our ambition is for LKAB to be one of the leading mining companies
in terms of resource- and climate-efficient production. Our customer
promise is efficient ironmaking (Performance In Ironmaking) and climate-smart LKAB Green Pellets.
LKAB will be an industry leader in research, innovation and new
technology. And LKAB will be an attractive and competent partner to
its customers and suppliers when it comes to product and technology
development.
In addition, LKAB wants to be an international role model in the mining industry in terms of ethics, health and safety, equality and diversity.
LKAB’s operation will enable sustainable community development
and generate prosperity.
Strategic focus areas and key issues
Based on previous work, the issues that emerged from dialogues with
internal and external stakeholders, and with a weighting towards overall Group goals, LKAB identified four strategic focus areas and a number of significant issues within those areas. It is in these areas LKAB
has significant risks and opportunities from a sustainability perspective and as part of its operating activities. For each of the areas, LKAB
STRATEGIC
FOCUS AREAS 2013–2020
formulated a number of specific, measurable, challenging objectives
that pick up where previous goals governed.
For each focus area there are identified ambitions, goals and strategic activities that together constitute LKAB's sustainable development strategy for 2013-2020. Below is a presentation of the goals that
will be included in future reports.
MEASURABLE GOALS 2013–2020
Attractive LKAB
The proportion of women in the company shall reach at least 25 percent by 2020.
By 2020 there shall be competition among qualified candidates for all advertised positions.
Long-term sickness absences shall also continue to be below 0.8 percent.
Accidents resulting in absence shall decrease from seven to five accidents per million work hours from 2011 to 2015.
By 2020, the accident rate shall not exceed 2.5.
Resource-efficient production
The specific energy consumption shall be reduced from 160 kWh per tonne of finished products in 2011 to 130 kWh
per tonne of finished iron ore products by 2020.
Carbon dioxide emissions per tonne of finished products shall be reduced from 27 kg year in 2011 to 17 kg year by
2020.
Maintain our market position as a leading global provider of climate-smart pellets.
New generation of climate-smart pellets developed by 2017.
Responsible operation
Emissions of sulfur dioxide from all existing pelletizing plants shall decrease from about 2,000 tonnes in 2011 to
1,000 tonnes by 2015 and to 500 tonnes by 2017.
Annual average for falling particulates shall be reduced by 10 percent by 2015 compared with 2011.
Secure new ore reserves that last at least 20 years to 2020.
Attractive communities
LKAB will build 200 new homes in the Municipalities of Kiruna and Gällivare by 2015 (compared to 2011).
MEET LKAB AT THE INFORMATION OFFICES
Residents of or visitors to Malmfälten can visit us at our staffed information centres. They are located at Folkets Hus in Kiruna and at Gunillaskolan in Malmberget.
Another information office was opened in Svappavaara School in February 2013..
Stakeholder dialogues
A stakeholder is defined by LKAB as a group that is interested in and affected by
LKAB’s operation. The most important stakeholders are owners, customers, employees, government authorities, suppliers, local residents and the media. The important relationships LKAB has with local communities, local authorities, landowners and reindeer herders are significant to the company.
Dialogues with these groups provide LKAB with an important outside perspective and clearly indicate which sustainability issues stakeholders perceive as important. This formed the basis for our extensive efforts to update our sustainability
strategy in 2012.
Through clear routines, LKAB handles incoming comments, complaints and
questions regarding the business, and where monitoring is an objective. In 2012,
six cases came up concerning the mining operations’ land use in conflict with the
native and local populations, largely related to exploration and production at Mertainen and drainage of the Leveäniemi pit.
LKAB has a variety of meeting forums and interfaces with the Groups different stakeholders, and works increasingly more actively to attend to the issues that
arise. At the end of 2012, LKAB commissioned an in-depth stakeholder dialogue
in the form of telephone interviews with about fifteen representatives of various
interest groups such as owners, customers, suppliers, government agencies, municipalities, industry associations, trade associations and representatives from the
local community. The purpose of the dialogue was to get feedback on and additions
to LKAB's materiality analysis, sustainability report and sustainability efforts. The
results showed that for the stakeholders the consistently most important sustainability issue is interaction with the local community for continued mining and prosperity and the balance between productivity and sustainability.
Significant collaborative forums for various sustainability issues where LKAB is
a member include:
• Euromines
• Svemin, which also includes Gruvornas Arbetsgivarförening, GAF (the Employers'
Association of the Swedish Mining Industry)
• Jernkontoret's environmental committee
Annie Lööf, Minister of Enterprise, and Liv Signe Navarsete, Norwegian Minister of Regional and Municipal Government, visited LKAB in
June and received information mainly about the company's approach
to environmental issues and management of the Ore Railway.
Below are some additional examples of our engagement with stakeholders during the year.
Stakeholder group
Dialogue occasions
Issues
Customers
Collaborative projects, meetings
LKAB Green pellets, delivery reliability
and Performance in Ironmaking pellet quality
Employees
Employee conversations, workshops, training
programs, salary survey,
strategy meetings with the CEO
Safety, professional development, wages, influence
Authorities, County Board and
municipalities
Public and private meetings and consultations,
workshops
Environmental, land and planning issues, urban
transformation
Owner
Individual meetings, board meetings,
Annual General Meeting, ministerial visits to
Malmfälten
Goals and strategies for sustainability, equality,
diversity, corruption, energy efficiency, urban
transformation
Suppliers
Training courses, meetings, contract discussions
Collaboration issues, contracts, health and
safety, environment
Local residents and reindeer herders
Meetings, visits to information centres, partnership agreements, direct distribution of magazine
to all households in Kiruna, Svappavaara, Gällivare/Malmberget, chats
Urban transformation, construction and compensation, dust, noise, vibrations, reindeer migration
trails, winter grazing, plant impact, freedom of
movement, hunting, fishing
The media
Press releases, press conferences, meetings
Urban transformation, financial results, permit
issues
Organization and management
Just like its other operations, LKAB controls its sustainability efforts using the overall guidance of LKAB's business concept, vision and strategies, along with Group-wide goals. But these have also been translated
into relevant and specific sustainability goals linked to the issues that
are most important to LKAB from a sustainability perspective.
Sustainability management aims to guarantee the Group’s commitments and business operations and to establish confidence that
LKAB acts with vision and consistency in all its relationships.
The Group's Board of Directors is ultimately responsible for LKAB's
sustainability management. The Board has made the audit committee responsible for internal follow-up work. Operational responsibility
for sustainability efforts lies with the CEO, who appointed a steering
committee to manage and be responsible for the overall sustainability issues in daily operations. The steering committee consists of the
directors of these Group entities: Finance, Communications, Human
Resources, Urban Transformation, and Technology and Business Development.
The Technology and Business Development Department has had
the role of developing, monitoring, and supporting the Group's sustainability efforts since 2010. A working group that started in 2011 has
responsibility for preparing and verifying the Group's sustainability
information. The working group consists of representatives from the
subsidiaries along with Finance, Communications, Environment, Energy, Human Resources, Urban Transformation, Production and Purchasing. The working group’s efforts are followed by LKAB’s internal quality control auditors. The appointed sustainability manager within the
Quality Control Department is responsible for reporting to the steering
committee.
Governance of Finances
Financial management is based on the owner’s requirements and LKAB’s mission to develop a successful business by mining, processing
and marketing minerals.
Governance of social issues
The human resources director is responsible for strategic personnel
activities. LKAB has decentralised responsibility for operational work
with personnel issues. Personnel matters are also handled in various
forums in the Swedish operation, such as wage committees and rehabilitation and diversity groups.
Work with urban transformation is based on the strategic focus
areas and goals. The director of urban transformation is responsible
for the work.
Governance of environmental work
At LKAB, the CEO has overall responsibility for environmental issues.
The operational environmental initiatives and responsibility are delegated to the divisional and unit heads and on to the general managers. The Quality Control Department handles ongoing issues regarding
external environments in the Group.
Since mining activity is considered to have a major impact on the
environment, it is also highly regulated by laws and ordinances. LKAB
always considers the environmental aspects in decisions and actions
and promotes long-term sustainable and profitable growth.
LKAB’s environmental and energy policy is the basis for environmental governance, and the environmental management system is
certified in accordiance with ISO 14001. The system ensures that improvement-efforts are conducted in a systematic and structured manner throughout the Group.
The Parent Company and subsidiary LKAB Berg & Betong are certified for EN 16001, the European standard for energy. All operations are
certified in accordance with quality standard ISO 9000.
A component of the environmental certification is the risk analyses that take into account the precautionary principle. Its purpose is to
prevent negative environmental impacts. Read more about permits and
self-inspection in the Administration Report on page 87.
Within LKAB in Sweden there is an incident reporting system in
which all environmental incidents are to be reported. Incoming complaints are also to be registered in the system for handling.
2012 results
Through 2012, LKAB worked with previously set sustainability goals.
The table presents these goals along with the main results of the year.
Starting in 2013, LKAB will report on the goals that the new strategy
is based on.
Business ethics, policies and guidelines
LKAB's values and

ethics policy are the collective guidelines for
how everyone within LKAB shall act towards both internal and external stakeholders. The Group's business and everyone's behaviour shall be characterised by great integrity, and there are a number of Group policies and directives, all of which were desided by
LKAB's Board.
LKAB expects suppliers to have a sustainability prepardness that
includes the environment, safety and other social issues like respect
for human rights.
Everyone involved in purchasing at LKAB undergoes a training
program that describes the risks concerning corruption and bribery
and how they should be handled. In 2012, 20 employees attended the
course, and so far 215 persons have attended. LKAB did not need to
take action on any corruption cases during the year and did not terminate any contracts with partners due to corruption offenses.
LKAB’s values
and policies are described on the website at
www.lkab.com.
• LKAB’s core values: Commitment, Innovation, Responsibility
• Quality control policy
•Ethics policy
•Environment and energy policy
•Personnel policy
• Information policy
OBJECTIVE
OUTCOME 2012
ENVIRONMENT
Energy consumption per tonne of pellets produced shall be
reduced by 5% in 2012 compared to 2006.
Energy consumption totalled 0.184 kWh per tonne of pellets compared with 0.186 kWh per
tonne of pellets in 2006. The objective was not attained; there was only a marginal decrease.
The spread of particulates shall be reduced by 10% by 2012
as compared to 2006.
The spread of particulates was down 24% compared with reference year 2006, so the objective was attained.
The proportion of separated waste shall increase to at least
80% by 2012.
The proportion of separated waste increased to 98% from about 50% in reference year
2006. The objective was exceeded by a wide margin, while in Narvik the objective was not
attained with a figure of 42% separated waste in 2012.
COMMUNITIES
Ensure a skilled workforce by building attractive communities in which people want to live and work.
Manage urban transformation so that confidence in LKAB is
maintained and production disruptions are avoided.
LKAB and Gällivare Municipality signed a partnership agreement in April that regulates
urban transformation in Malmberget over the next 20 years. LKAB will engage in separate
negotiations with individual property owners who will be affected by the urban transformation in four stages between 2012 and 2032.
LKAB and Gällivare Municipality have continued working on a new residential area in Repisvaara where LKAB is planning to build 200 new flats in the first stage.
LKAB also acquired the Granbacka area, which includes 93 flats and five development rights.
Thirty new flats are being built there with occupancy planned for the first quarter of 2014.
In Kiruna, LKAB has worked with new zoning and planning for housing in the Jägarskolan
and Luossavaara areas, which is expected to start in 2013.
LKAB has purchased land and buildings from Kiruna Bostäder AB, including development
rights at Terassen and Glaciären, as part of LKAB's goal to build 200 new flats by 2015.
LKAB signed an agreement with Kiruna and Gällivare Municipalities for compensation of
manpower resources for working with urban transformation in the municipalities.
The new railway in Kiruna was completed according to plan and was inaugurated in August.
LKAB worked on the construction of a new information office in Svappavaara, which opened
in February 2013.
LKAB completed the decommissioning of 120 houses in the Elevhemsområdet area in
Malmberget.
Construction of the park is planned for 2013.
LKAB constructed a new road connection between eastern Malmberget and Koskullskulle.
Within the “A Nicer Malmberget” project, LKAB and the municipality continued implementation of civic improvements to maintain and increase well-being during the phase-out.
LKAB and Kiruna Municipality, within the framework of the Mine City Park project, continued
working with construction, documentation and the park's design.
LKAB and Kiruna Municipality announced an architectural competition for the new city hall.
EMPLOYEES
The proportion of women at LKAB shall reach 40% in the long
term.
The proportion of women at LKAB increased to 17.5% (15.9% in 2011).
Of new recruits, at least 30% shall be women.
Among the new recruits, 29% were women. The objective was nearly attained.
The proportion of long-term sickness absences shall not
exceed 1.5%.
Long-term sickness absences totalled 0.5%. Objective attained.
Each employee shall do some form of professional development ten days per year, of which half shall be training days.
Training days 6.1 days per year on average/employee (6.7 days in 2011) as well as professional development in the form of internal experience exchanges, lectures, and participation
in internal and external cooperative forums, such as trade networks and organizations.
LKAB’s assessment is that the objective was attained.
The number of accidents causing absences per million hours
worked shall fall 20% compared with the previous year. The
long-term objective is zero accidents.
The accident rate per million work hours was 9.89, most of which were above ground and
caused by tripping, slipping and handling equipment. Objective not attained.
FINANCE
LKAB shall increase production from 26 million tonnes to
more than 37 million tonnes by 2015.
LKAB delivered 26.3 million tonnes of finished iron ore products. The growth strategy to
increase deliveries to 37 million tonnes by 2015 remains unchanged.
LKAB shall provide its owner with long-term profitability that
meets or exceeds the owner’s requirements. The long-term
rate of return is set at 10% over a business cycle. *
The Board proposes to the AGM an ordinary dividend of SEK 5,000 (7,143) per share totalling
SEK 3,500 million (5,000) and an extra dividend of SEK 2,857 per share totalling SEK 2,000
million.
*New proposals for economic targets will be presented at the 2013 AGM.
Accounting principles and application of GRI
LKAB reports annually in accordance with the Global Reporting Initiative's (GRI) G3 guidelines and the Sustainability Report is integrated
with 2012 Annual Report, which reflects the integration of sustainability issues in everyday operations. Last year’s report was published in
March 2012.
LKAB applied GRI guidelines to determine the content of the report.
The index below includes the core performance indicators from the GRI
guidelines and additional indicators from G3 deemed relevant on the
basis of an analysis of the company’s stakeholders and its most important issues. It also includes selected indicators from the Mining and
Metals Sector Supplement.
The letter “P” indicates partial reporting and “F” indicates full reporting according to GRI guidelines.
In accordance with the guidelines from the owner, the Sustainability Report was reviewed by external auditors; the auditors’ statement
of assurance is given on page 64. LKAB is self-declares GRI’s B+ application level, which is also confirmed by the external auditors.
Scope and boundaries
In keeping with reports from the previous four years, the report fo-
G3
information
Description
Page in Annual
Report and
Sustainability Report
F = Full
P = Partially
GRI index g3
Strategy and profile
1.
Strategy and analysis
1.1
President's statement on sustainable development
CEO
5-7
F
1.2
Impacts, risks and possibilities
5-7, 9, 10, 18, 22,
34, 40, 48, 58-59
F
2.
Organizational profile
2.1
Organization’s name
80
F
2.2
Brands, trademarks, products and/or services
2-3, 13-14, 18
F
2.3
Operational structure, including divisions, operating
companies,
subsidiaries and joint ventures
2-3, 80, 82-84, 125
F
2.4
Location of the organization’s head office
131
F
2.5
Countries in which the organization operates
125, 131
F
2.6
Nature of ownership and legal form
80
F
2.7
Markets
11. 17, 21, 34
F
2.8
Scale of the reporting organization
2-3, 77
F
2.9
Significant changes during the reporting period
regarding size, structure or ownership
No significant
changes.
F
2.10
Awards received in the reporting period
51
F
3.
Report parameters
3.1
Reporting period
62
F
3.2
Date of publication of the most recent report
62
F
3.3
Reporting cycle
62
F
3.4
Contact point for questions regarding the report or
its contents
63
F
3.5
Process for defining report content
58-59, 62
F
3.6
Boundary of the report
62-63
F
3.7
Specific limitations on the scope or boundary of the
report
62-63
3.8
3.9
3.10
Explanation of the effect of any restatements of infor- 62-63
mation provided in earlier reports, and the reasons
for such restatement
F
3.11
Significant changes in
the scope, boundary or measurement methods applied in the report
62-63
F
3.12
GRI Index
62-63
F
3.13
Policy and practice with regard to external assurance
62, 64
F
4.
Governance, commitments and engagement
4.1
Governance structure of the organization
66-71
F
4.2
Indicate whether the Chair of the highest governance
body is also an executive officer
68
F
4.3
The number of members of the highest governance body
that are independent and/or non-executive members
67, 73
F
4.4
Mechanisms for shareholders and employees to
provide recommendations or direction to the highest
governance body or executive management
67-68
F
4.5
Linkage between compensation for members of the
highest governance body and executive management
and the organization’s performance (including social
and environmental performance)
69
F
4.6
Procedures and processes for the highest governance body with respect to conflicts of interest
67-69
F
4.7
Process for determining the qualifications and
expertise of the members of the highest governance body for guiding the organization’s strategy on
environmental topics
67
P
4.8
Statements of mission or values, codes of conduct
and principles relevant to economic, environmental
and social performance
8-9, 60
F
4.9
Procedures and processes of the highest governance
body for overseeing the organization’s identification
and management of economic, environmental, and
social performance, including relevant risks and
opportunities
60
F
4.10
Processes for evaluating the highest governance
body’s own performance, particularly with respect to
economic, environmental and social performance
60, 69
F
4.11
Explanation of whether and how the precautionary approach or principle is addressed by the organization
60
F
4.12
Externally developed economic, environmental and
14, 15, 18, 34, 49
social charters, principles or other initiatives to which
the organization subscribes or endorses
F
4.13
Membership in associations
59
F
4.14
List of stakeholder groups engaged by the organization
46, 59
F
F
4.15
Basis for identification and selection of stakeholders
with whom to engage
59
F
Basis for reporting on joint ventures, subsidiaries and 62-63, 99-100
other entities that can significantly affect comparability
F
4.16
Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group
46, 59
F
Data measurement techniques and the bases of
calculation
F
4.17
Key topics and concerns that have been raised
through stakeholder engagement
46, 59
F
63
Accounting Principles and application of GRI | sustainability strategy & governance | 63
cusses specifically on the Nordic operation and the iron ore operation
in Sweden and Norway. It makes up about 90 percent of the Group’s
total sales. The report clarifies which units are included when data
are reported. Changes concerning boundaries, scope or measurement
methods as compared with previous years are explained in the report
adjacent to the data. A review of the report resulted in the removal of a
number of graphs from this year's report that have little relevance and
no relation to GRI indicators.
Data collection
In 2012, LKAB developed and implemented a collective reporting system for all sustainability data. The system is expected to be put into use
Economic performance indicators
for the 2013 reporting year.
The reporting of consolidated financial information is done in the consolidated accounting system. Personnel data is gathered from personnel
systems, personnel reports, databases and manual procedures, and covers all permanent employees in the Group unless otherwise stated.
External reporting of carbon dioxide emissions according to the
LKAB monitoring system is to an accredited verifier, to the Swedish
Environmental Protection Agency and to the Administrative Board of
Norrbotten County.
Contact
The contact for LKAB's Sustainability Report is Monica Quinteiro, General
Manager, Quality Control (monica.quinteiro@lkab.com).
Social performance indicators
Information on sustainability management
58, 60-61, 70-71
F
EC1
Economic value generated and distributed
46
F
EC2
Financial implications and other risks and opportunities for the organization’s activities due to climate
change
8-9, 10, 24, 27
P
Environmental performance indicators
58, 60-61
F
EN1
Materials used
30
F
EN3
Direct energy consumption by primary energy source
31
F
EN4
Indirect energy consumption by primary energy
source
31
F
EN5
Energy saved due to efficiency improvements
27, 30-31
P
EN6
Initiatives to provide energy-efficient or renewable
energy based products and services, and reductions
in energy requirements as a result of these initiatives
14, 23-24, 27,
30-31
P
EN12
Description of significant impacts of activities,
products and services on biodiversity in protected
areas and areas of high biodiversity value outside
protected areas
30, 34
P
EN16
Total direct and indirect greenhouse gas emissions
30-31
F
EN20
NOx, SO2 and other significant air emissions
24, 30, 61
F
EN21
Total water discharge by quality and recipient
24, 30
P
EN22
Total weight of waste by type and disposal method
30-31
F
EN23
Total number and volume of significant spills
27
P
EN25
Identity, size, protected status and biodiversity value
of water bodies and related habitats significantly
affected by the reporting organization’s discharges of
water and runoff
24, 30
F
EN28
Monetary value of significant fines and total number
of non-monetary sanctions for non-compliance with
environmental laws and regulations
59, 87
F
MM 3
Total amounts of overburden, rock, tailings and
sludges and their associated risks
23, 30-31
F
MM 11
Systems and development related to the use of mate- 23, 27, 30-31
rial in processes and products
F
58, 60-61
F
LA1
Total workforce by employment type, employment
contract and region
52
F
LA2
Total number and rate of employee turnover by age
group, gender and region
52
F
LA7
Rates of injury, occupational diseases, lost days,
absenteeism and number of work-related fatalities
by region
52, 54
F
LA10
Average number of hours of training per year per
employee by employee category
50, 61
F
LA13
Composition of governance bodies according to
indicators of diversity
54, 61, 72-75
F
HR4
Total number of incidents of discrimination and actions taken
54
P
MM5
Operations taking place adjacent to indigenous
peoples’ territories and formal agreements with
indigenous peoples’ communities
34, 46, 59
F
MM6
Number and description of disputes related to land
use and the local population’s or indigenous peoples’
traditions and rights
59
F
MM7
Use of appeal functions to resolve disputes related
to land use and the local population’s or indigenous
peoples’ traditions and rights
59
P
SO1
Nature, scope and effectiveness of any programs
and practices that assess and manage the impacts
of operations on communities, including entering,
operating and exiting
40-46, 59-61
F
SO3
Percentage of employees trained in the organization’s 60
policies and procedures concerning counteraction of
corrupti
F
SO4
Measures taken on grounds of corruption
incidents
60
F
MM9
Number of sites where resettlements took place, the
number of households resettled and the impacts of
resettlement
44
F
Auditor’s Review Report on LKAB’s Sustainability Report
To the readers of LKAB’s Sustainability Report
Our review has, based on an assessment of materiality and risk,
e.g. included the following procedures:
Introduction
We have been engaged by the Board of Directors of LKAB to review
the LKAB Sustainability Report for the year 2012. Our review is limited to sustainability information related to the financial year ended December 31, 2012, and included in LKAB’s Annual Report and
Sustainability Report 2012 on pages 8–38 and 40-63. The Board
of Directors and the Executive Management are responsible for
ongoing activities regarding the environment, health & safety, quality, social responsibility and sustainable development, and for the
preparation and presentation of the Sustainability Report in accordance with the applicable criteria. Our responsibility is to express a
conclusion on the Sustainability Report based on our review.
a.an update of our knowledge and understanding for LKAB’s organization and activities
b.assessment of suitability and application of criteria in respect to
stakeholders need of information
c.assessment of the result of the company’s stakeholder dialogue
d.interviews with responsible management, at group level, subsidiary level and at selected business units with the aim to assess
if the qualitative and quantitative information stated in the sustainability report is complete, correct and sufficient
e.read internal and external documents to assess if the information stated in the sustainability report is complete, correct and
sufficient
f. analytical review of reported information
g.assessment of the company’s stated application level according
to GRI’s guidelines
h.overall impression of the sustainability report, and its format,
considering the information’s mutual correctness with applicable criteria
i. reconciliation of the reviewed information against the sustainability information in the company’s annual report for 2012.
The Scope of the Review
We have performed our review in accordance with RevR 6 Assurance of Sustainability Reports issued by FAR. A review consists of
making inquiries, primarily of persons responsible for the preparation of the Sustainability Report, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with IAASB’s Standards on Auditing
and Quality Control and other generally accepted auditing standards in Sweden. The procedures performed consequently do not
enable us to obtain assurance that we would become aware of all
significant matters that might be identified in an audit. Accordingly,
we do not express an audit opinion.
Our assurance does not comprise ”Reporting of mineral reserves
and resources” and ”Prospecting for future resources” presented on
page 39, or the assumptions used by the Company or whether or not it
is possible for the Company to reach certain future targets described in
the report (e.g. goals, expectations and ambitions).
The criteria on which our review are based are the parts of the Sustainability Reporting Guidelines G3, published by The Global Reporting
Initiative (GRI), which are applicable to the Sustainability Report, as well
as the accounting and calculation principles that the Company has developed and disclosed. We consider these criteria suitable for the preparation of the Sustainability Report.
Conclusion
Based on our review, nothing has come to our attention that causes
us to believe that the information in the LKAB Sustainability Report
2012 has not, in all material respects, been prepared in accordance
with the above stated criteria.
Stockholm 20 March 2013
Deloitte AB
Peter Ekberg
Lennart Nordqvist
Authorized Public AccountantExpert Member of FAR
| corporate governance report | 65
CORPORATE
GOVERNANCE
REPORT//
65–77
Corporate governance report
Corporate governance structure
LKAB’s shareholder, the Swedish State, is ultimately responsible for
making corporate governance decisions. At the Annual General Meeting (AGM), the shareholder appoints board members, the chairman and
auditors. The Board is responsible to the owner for the company’s or-
2. Board nominations
ganisation and administration of the company’s affairs. The diagram
below summarizes how governance and control is organized at LKAB.
Executive and shareholder functions are described in detail on pages
67-69 of the Corporate Governance Report.
1. Annual General Meeting
OWNER The Swedish State
3. External auditors
4. Board of Directors
5. Audit Committee
6. Currency and Finance
Committee
7. Compensation Committee
elects/appoints
8. President and CEO
1. Annual General Meeting
The AGM is LKAB’s supreme governing body and the forum at which the
shareholder formally exercises its influence. At the AGM, decisions are
made that include adoption of the income statement and balance sheet,
discharge from liability of the Board, election of new board members and
auditors, compensation of board members and auditors, and guidelines for
compensation of senior executives. Members of the Riksdag are entitled to
attend LKAB’S AGM. The meeting is also open to the public.
2. Board nominations
LKAB has no nomination committee. Preparation of decisions on nomination of board members occurs instead through a board nomination process
in accordance with the state’s ownership policy. The work is coordinated by
the Ministry of Finance. See deviation from the Code on page 67.
3. External auditors
The auditor is responsible to the shareholder at the AGM and provides an
audit report on things such as the annual report and the Board’s administration of the company. The auditor regularly reports verbally and in writing
to the Audit Committee on how the audit was conducted and the auditor's
assessment of order and control in the company. A summary of the audit is
also submitted to the full Board.
informs/reports
4. Board of Directors
The board is responsible for the company’s organisation and administration of the company’s affairs on behalf of the owner. The work of the
Board includes continuously monitoring the company’s financial situation and ensuring that the company is organized so that accounting,
asset management and the company’s financial condition are otherwize
controlled in a satisfactory manner. The board also appoints the CEO.
5. Audit Committee
The committee oversees the financial reporting by reviewing all critical accounting matters and other factors that could affect the quality of financial
reporting content. The Audit Committee comprizes three board members.
6. Currency and Finance Committee
The committee prepares and monitors things such as the company’s treasury management and hedging programmes. The Currency and Finance
Committee consists of five board members.
7. Compensation Committee
The committee prepares decisions on the CEO’s employment terms and
supports the CEO’s work with determining the salaries of senior executives.
The Compensation Committee comprizes four board members.
8. CEO
The CEO is appointed by the Board. Besides instructions from the Board,
the Companies Act and various other laws and regulations relating to the
company’s accounting, the CEO is responsible for asset management and
operational control.
CORPORATE GOVERNANCE AT LKAB
The basis for corporate governance of LKAB is Swedish legislation, the
state’s ownership policy and internal guidelines. In the state’s ownership policy and guidelines for state-owned companies, which are determined annually, the government describes its mission and objectives,
applicable frameworks and its position on important principles related
to corporate governance of state-owned companies.
The Swedish Code of Corporate Governance (the Code) is part of its
ownership policy.
LKAB's governance for the 2012 financial year differs from the requirements contained in the Code on the following points.
Deviations from the Code
Code rule
Deviation and explanation/comment
Item 1.1
The purpose of the rule is to give shareholders the opportunity to prepare for the AGM in a timely manner and to have
a matter included in the AGM notice. In state-owned companies, is not necessary to apply this rule, and publication of
information on the shareholder's right of initiative does not occur.
Publication of information on shareholders'
right of initiative.
Item 1.4
The company's nomination committee shall
submit proposals to the Chairman at the
AGM.
Item 2
The company shall have a nomination
committee that represents the company's
shareholders.
Item 10.2
The Corporate Governance Report shall
contain information that indicates board
members are independent in relation to
major shareholders.
Due to its ownership structure, LKAB does not have a nomination committee.
Election of the Chairman is instead done at the AGM as per the provisions of the Companies Act and in line with the
state's ownership policy.
Due to its ownership structure, LKAB does not have a nomination committee.
The board nomination process is run according to the policies outlined in the state's ownership policy and is coordinated by the Ministry of Finance. Accordingly, the references to the nomination committee in items 1.3, 1.4, 4.6, 8.1 and
10.2 of the Code are not applicable.
The provision is aimed primarily at protecting minority shareholders in companies with dispersed ownership. In companies wholly-owned by the state, it is not necessary to apply this rule.
SHAREHOLDERS AND GENERAL MEETINGS
Shareholders
LKAB is wholly-owned by the Swedish state, represented in the government by the Ministry of Finance.
The state exercizes its ownership via an annually established ownership policy, nominations to the Board and published reporting guidelines. The state’s requirement of transparency is met by direct owner
representation on the Board. Reports to the owner and board are key
management tools for continuous monitoring and assessment of the
companies. State-owned companies should have at least the same
level of transparency as listed companies.
The Board, via the chairman, coordinates its views on issues of
decisive importance with the owner’s representatives. Such issues
include strategic changes in the company’s operations, major acquisitions, mergers or divestments, as well as decisions affecting significant
changes in the company’s risk profile or balance sheet.
• A dividend of SEK 7,143 per share, representing a total of SEK 5
billion.
• Re-election of board members Marcus Wallenberg, Maija-Liisa
Friman, Lars-Åke Helgesson and Hanna Lagercrantz.
• Election of board members Hans Biörck, Sten Jakobsson and
Maud Olofsson.
• Re-election of Marcus Wallenberg as Chairman of the Board.
• Re-election of public accounting firm Deloitte AB as auditor for a
period of one year.
• Unchanged remuneration of board members: SEK 250,000 per
year to members and SEK 570,000 per year to the chairman. Remuneration is not paid to board members who are employed in
the Government Offices or to employee representatives.
The minutes of the 2012 AGM and other recent years are available
at LKAB’s website (www.lkab.com).
2012 Annual General Meeting
Board nominations
LKAB’s Annual General Meeting (AGM) took place on 20 April 2012. The
meeting was open to the public. About 150 persons attended the AGM.
The owner was represented by Special Adviser Elin Lewold (formerly
Granstrand), Ministry of Finance. Chairman of the meeting was Board
Chairman Marcus Wallenberg. The following decisions were made at
the meeting:
Instead of having a nomination committee, the election of board members is prepared in accordance with the state's ownership policy. The
work is coordinated by the Ministry of Finance. LKAB’s expertise needs
are analysed based on the company’s operation, situation and future
challenges along with the Board’s composition.
External auditors
On behalf of the owner, auditors do independent reviews of the Board’s
and CEO’s administrative duties as well as the company’s annual report
and accounts. The external auditors also carry out a review of an interim
report. Responsibility for election of auditors lies with the owner and
election of auditors is decided at the AGM. Starting in 2011, the auditors
of state-owned companies are appointed for a term of one year. In the
event re-election of auditors is being considered, the auditors’ work is
always evaluated.
At the AGM on 20 April 2012, Deloitte AB was re-elected auditor for a
period of one year. Authorized public accountant Peter Gustafsson was
the company's auditor until 1 September 2012, when authorized public
accountant Peter Ekberg took over the assignment.
The Swedish National Audit Office can, as per the Auditing of State Activities Act, appoint one or more auditors to participate in the annual audit of state-owned companies. Authorized public accountant Filip Cassel
has participated in LKAB’s audits. At the 20 April 2012 AGM, the National
Audit Office did not reappoint Filip Cassel as its company auditor, along
with alternate Carin Rytoft Drangel. No new auditor was appointed by
the National Audit Office.
Remuneration of auditors is stated in Note 7 on page 110 of the
Annual Report.
BOARD OF DIRECTORS
Composition of the Board of directors
As per the articles of association, LKAB’s Board will consist of no less
than 6 and no more than 11 AGM-elected members, excluding deputies. The Board consists of seven AGM-elected members. Employees
are represented by three members and three deputies as per the Board
Representation (Private Sector Employees) Act. Board members have
broad, extensive business experience and most maintain other duties
as board members of large companies. The Board’s composition is
shown in the table on page 73.
Chairman of the Board
Duties of the Chairman are subject to the Companies Act, the Code and
the ownership policy. They are further specified in the Board's rules of
procedure. The Chairman’s duties include organising and leading the
work of the Board, ensuring that the Board fulfils its duties, that its decisions are implemented effectively, that the work of the Board is carried
out effectively and that the Board annually evaluates its own work.
Coordination responsibility is a special task assigned to the chairmen of state-owned companies. This responsibility means that the
Board, through the chairman, is to coordinate its views with representatives of the owner when the company faces important decisions or
strategic changes in the company's operation.
The work of the Board of Directors in 2012
During the year the Board held ten meetings, including two teleconferences. The meetings were held at the places of business in Luleå,
Kiruna and Narvik, and in Stockholm. The Board meeting in November
consisted of a visit to LKAB's customer Tata Steel in Holland.
The meetings follow a set agenda to ensure the Board’s information needs. The first meeting is usually an annual accounts session that
the auditors also attend. The annual report is discussed at the second
board meeting. The third to seventh meetings are devoted to things
such as operational, strategic and personnel issues along with market
trends. At the last board meeting, decisions are made on budgets and
operational plans for the coming year.
Board activities in 2012 were characterized by the growth phase
that LKAB finds itself in, with the goal of achieving an annual production of about 37 million tonnes of finished iron ore products by 2015. A
costefficiency program was started in the summer of 2012 and during
the autumn, the Board worked intensively with the company's strate-
gic plan for 2013–2020. Other issues on the Board's agenda during the
year were occupational health and safety, and urban transformation
in Malmfälten. Among the larger environmental investments that the
Board decided on in 2012 was a complementary addition to the existing
flue gas treatment installation for pelletizing plant MK3 in Malmberget
and the new flue gas treatment installation for the pelletizing plant in
Svappavaara.
Deputies to employee representatives participate in board meetings. The CEO is not a board member, but participates in board meetings.
The Board annually establishes rules of procedure and instructions
to the CEO. These documents define the basic divisions of responsibility
and powers between the Board, board committees, the Chairman and
the CEO.
Board member attendance at 2012 board and committee meetings
is shown in the table on page 73.
Committees
According to the state’s ownership policy, it is the Board’s responsibility
to assess the need for establishing special committees. LKAB’s Board
has established an Audit Committee, a Currency and Finance Committee, and a Compensation Committee. Committee work is mainly of a
preparatory and advisory character. But the Board may in special cases
delegate decision-making powers to committees. Committee members
and chairpersons are appointed at the board meeting that follows the
AGM each year.
Audit Committee
The Audit Committee consists of Lars-Åke Helgesson, Committee
Chairman, Hanna Lagercrantz and Hans Biörck. The CEO and CFO also
attend the meetings.
The Audit Committee’s duties include monitoring the company’s accounting, financial reporting and risk management, along with preparing the Board’s proposed appropriation of profits for the fiscal year.
During the year, the Audit Committee held six meetings.
Currency and Finance Committee
Currency and Finance Committee members are Lars-Åke Helgesson,
Committee Chairman, Marcus Wallenberg, Hanna Lagercrantz, Hans
Biörck and Seija Forsmo. The CEO, CFO and company treasurer also
The Currency and Finance Committee’s duties include preparing and
monitoring LKAB’s currency hedging programmes and treasury management. In 2012, the Board adopted a new financial policy, which was
prepared by the Currency and Finance Committee.
The Committee held six meetings during the year.
Compensation to the Board of Directors
As resolved at the AGM, remuneration of AGM-elected board members
totals SEK 1,980 thousand; see Note 6 for the year’s cost on page 109.
LKAB’S MANAGEMENT
Compensation Committee
The Compensation Committee consists of Lars-Åke Helgesson, Committee Chairman, Marcus Wallenberg, Hanna Lagercrantz and Sten Jakobsson. The CEO and senior vice president of human resources also
The Compensation Committee’s duties include preparing and evaluating compensation terms for the CEO, establishing salary-setting
policies for persons in Group management and annually evaluating the
company’s employee incentive programme.
During the year, the Compensation Committee held four meetings.
Assessment
Assessment of the Board of Directors
The Board’s work is assessed once a year with questions on how the
Board as a collective and individual board members fulfil their duties.
The assessment is used in the Board’s internal work. The Chairman is
responsible for following up the results so they can form a basis for
discussions and improvements. The 2012 assessment was done via a
questionnaire. The entire board may review the assessment as may the
CEO, as appropriate. The Chairman notifies the owner of the results of
the assessment before the election of new members.
Assessment of the CEO
The assessment of the CEO is a fundamental task of the Board. The
Chairman prepares a summary of the Board’s views that conveys
strengths and weaknesses to the Board as well as the CEO.
COMPENSATION POLICIES
Guidelines
The 2012 AGM decided on compensation levels for board members
and auditors and guidelines for compensation to senior executives.
For compensation of Group management, the AGM decided that the
government’s currently applicable guidelines regarding employment
terms for senior executives in state-owned companies will be applied.
Total compensation is based on fixed compensation, benefits and pension. No variable compensation is paid to senior executives in Group
management. In Note 6 on pages 107-109 of the Annual Report, compensation of senior executives is described.
Incentive programme and objectives
LKAB’s incentive programme is designed to support the Group’s strategic goals, which are based on production volume, health and safety,
and product quality, and is described on page 88 of the Administration
Report.
CEO
The CEO’s general responsibility is stated in the instructions for the
CEO and the Board’s rules of procedure. These state that the CEO shall:
• Lead, plan, develop and control the company's operations in accordance with the Board's established goals and strategies.
• Ensure that the company’s accounts are maintained in compliance
with laws and that assets are managed in a satisfactory manner.
• Ensure that other applicable statutory regulations and directives are
also followed, that the Board’s decisions and other applicable resolved measures are enforced, and that the company’s operation is
appropriately organized and run in accordance with the Articles of
Association.
• Be responsible for presentation and other reporting to the Board.
• Establish instructions and functional descriptions that are deemed
necessary, but that were not established by the Board.
• Be responsible for all the company’s regular contact with the media;
for ownership issues and larger structural issues, the Chairman is
responsible for media contact.
• Be responsible for the introduction programme for newly appointed board
members.
The Chairman approves CEO duties outside the company as they
arise. Information on the CEO appears on page 75.
Group Management and Group Management structure
LKAB’s business is conducted to a very large extent in the Parent Company. Some activities are conducted in subsidiaries in Sweden and in
several other countries.
Group Management consists of the CEO and eight divisional and
unit managers who work in the Parent Company. They are the divisional managers from Mining and Marketing & Logistics, and the managers
for Group units Technology & Business Development, Urban Transformation, Finance, Group Control, Human Resources, and Communications.
In 2012, the following change in the chain of command was made:
Group Staff Corporate Services has ceased to exist and the operation
was taken over by the Human Resources and Communications units.
Sourcing has moved from the Mining unit to the Finance unit.
Governance of the major subsidiaries, such as Minelco, LKAB Wassara and others, is through Group management members who chair
the subsidiaries' boards. The subsidiaries run their businesses independently in accordance with the company’s mission in the Group as
formulated in the articles of association.
Responsibility and authority are assigned to individual officers,
rather than groups and committees.
Information on Group management appears on page 75.
INTERNAL CONTROL OVER FINANCIAL REPORTING
The Board’s responsibilities for internal governance and control is regulated by the Companies Act, the Annual Accounts Act and the Swedish
Code of Corporate Governance. The Board has overall responsibility for
financial reporting, and its rules of procedure regulate the Board’s and
audit committee’s internal division of labour. After preparation by the
audit committee, quality assurance of the company’s financial statements is handled by the Board, which deals with significant accounting issues and the financial reports issued by the company. The Board
also deals with issues relating to internal control, compliance, material
uncertainty in reported values, uncorrected errors, events after the balance sheet date, changes in accounting estimates and assessments,
possible improprieties and other circumstances affecting the quality of
financial reports.
Control environment
LKAB’s internal control structure is based on a defined division of responsibilities between the Board, board committees and the CEO. The
internal control structure is based on the company’s organisation and
the way business is conducted, including well-defined roles and responsibilities, delegation of powers, governing documents such as policies, and clearly defined planning and support processes.
The most important elements of the control environment concerning financial reporting, including preparation of the consolidated accounts, is dealt with in Group-wide governing documents relating to
accounting, financial transactions and regulation of division of authority. The purpose of Group-wide guidelines and systems for reporting
and consolidation of Group accounts is to safeguard the financial statements and accuracy of the consolidated accounts.
Risk assessment
LKAB is governed by procedures that have risk management built into
every process. Within the Group there are techniques for ensuring that
the risks the company is exposed to are handled according to guidelines and methods in order to both assess and mitigate these risks.
As part of the internal governance and control, risks related to financial reporting are identified. For the most important processes, risk
analyses were conducted and for identified risks, procedures were established for managing and minimising these risks.
For the financial statements, a number of areas of higher risk were
identified, most notably relating to accounting and tax issues linked to
urban transformation in Malmfälten and the large amount of planned
and ongoing capital expenditures. Other more general risks are loss or
misappropriation of assets and other significant errors in the company’s accounts, such as accounting and measurement of balance sheet
items, completeness of income statement items, or deviations from disclosure requirements.
During the year, an evaluation of internal control and governance
was conducted. Based on the evaluation, improvement efforts were
initiated to develop a framework for internal governance and control.
Control activities
Key elements of LKAB’s control structure are controls of business
transaction approvals (authorisation instructions), division of authority
descriptions and annual account instructions. There are also specifically established controls regarding the annual accounts process and
the processes for quarterly results and the annual report that deal with
more unique risks of errors that may occur in financial statements.
During the year, work began on defining a control structure in accordance with the new finance policy.
The Group’s legal entities that conduct business have financial
managers and reporting units have controllers. They participate in
forecasting and analysis of the subsidiaries and the reporting entities’
earnings. The analyses comprise assets, liabilities, income, costs and
cash flows. There are also designated controller resources that monitor, analyse, make forecasts, and examine specific issues relating to
the financial information for urban transformation and strategic capital expenditures. For preparation of the consolidated accounts, LKAB
has a Group-wide consolidation system where the company’s financial
managers/controllers are responsible for the accuracy of the reported
financial information (outcome, budget and forecasts). Together with
the comprehensive analysis performed at Group level, the purpose is
to limit the risk of material misstatements in the financial statements.
In order to maintain a high level of information security, there are
rules and guidelines established related to accessibility, accuracy, confidentiality and traceability in the resource planning system.
Information and communication
LKAB has information- and communication channels that promote
completeness and accuracy of financial reporting. Comprehensive information on the current control structures is available to all employees
via LKAB’s intranet. The objective is to regularly review changes and
the reasoning behind existing controls and to improve them in order
to maintain effective internal control over the financial statements. In
connection with the review of the control structure, responsibility for
ensuring that the control structure is in place, is known, and that the
control is carried out as intended are also identified.
LKAB’s guidelines for the financial statements and consolidated accounts are updated regularly. Changes are communicated to relevant
functions and operations via email, the intranet and at meetings.
For communication with external parties, there is an information
policy that provides guidelines for how information should be communicated. The purpose of the policy is to ensure that all information
obligations are met in an accurate and complete manner. External financial communications are issued through annual reports, interim
reports, annual accounts, press releases and via LKAB’s website at
www.lkab.com.
Follow-up
There is currently no internal audit function established at LKAB. In
2012, the Board considered the matter and decided not to introduce an
internal audit function. The decision on internal audits is reconsidered
annually.
Alone or with the support of external resources, the Group-wide
controller function implements audit activities relating to the business
processes that are deemed to have a material impact on the financial
statements.
A plan for internal control activities is prepared annually in the
Group-wide controller function. After a number of years of focussing
on monitoring capital expenditures and activities related to ongoing
urban transformation, the focus in 2012 was on monitoring prioritized
internal processes.
The internal reviews in 2012 were mostly done in collaboration with
external independent auditors, where the focus was defined based on
a risk assessment for each separate examination. Results from completed reviews were summarized in review reports and feedback was
given to the operations concerned.
Compliance with resolved measures after completion of reviews is
followed up regularly by the Group-wide controller organisation.
During the year, the IT controller was also audited by an external
party.
STATEMENT 2012
According to statements from the Swedish Corporate Governance
Board, no statement is made about how well the internal control
worked during the year.
Luleå 20 March 2013
The Board, through the Chairman
Marcus Wallenberg
The Board
3
1
2
4
5
The Board's
employee representatives
6
7
8
11
9
10
12
13
2012 board of directors| corporate governance report | 73
The Board
Marcus Wallenberg, 1
Chairman
Position Director
Education Bachelor of Science of Foreign
Service, Georgetown University, Washington
DC USA.
Year elected 2011
Born 1956
Other directorships Chairman, Skandinaviska Enskilda Banken AB, SAAB AB and AB
Electrolux. Member, AstraZeneca PLC, Knut &
Alice Wallenberg Foundation, Stora Enso Oyj,
Investor AB and Temasek Holdings Ltd.
Background 1999–2005 President and
CEO Investor AB, 1993–1999 Executive Vice
President Investor AB, 1990–1993 Director
Stora Feldmühle AG, Düsseldorf. Before 1990,
various positions within SEB Stockholm and
London, Citicorp Hong Kong, S.G. Warburg Co.
Ltd. London, Deutsche Bank AG Frankfurt and
Hamburg, Citibank N.A. New York.
Compensation SEK 590,000
Board meeting attendance
Attended 10 of 10 meetings.
Currency and Finance Committee attendance
Attended 2 of 6 meetings.**
Compensation Committee attendance
Maija-Liisa Friman 2
Position Director
Education MSc Chemical Engineering, Helsinki University of Technology, 1978.
Year elected 2008
Born 1952
Other directorships Chairman, Ekokem
Oy and Helsinki Deaconess Institute. Deputy
Chairman Neste Oil Oyj. Member, TeliaSonera
AB and Finnair Oyj.
Background President Aspocomp Group Oyj
2004–2007. CEO Vattenfall Oy 2000–2004.
CEO Gyproc Oy 1993–2000. Various management positions at Kemira Oyj in Finland,
Mexico and the US 1978–1993.
Not on any committees.
Lars-Åke Helgesson 3
Position Director
Education MBA School of Economics Gothenburg 1971. Graduate Engineer.
Year elected 2000
Born 1941
Other directorships Chairman, TransLink
Holding AB. Member, Ballingslöv International AB, Axel Christiernsson AB, Crane Inc.,
Dalton MAUSA and Crane AB.
Background President and CEO Stora 1992–
1998. Division Manager Stora 1988–1992.
President and CEO Haldex 1981–1988.
Audit Committee attendance
Hanna Lagercrantz 4
Position Deputy director, Ministry of Finance
Education MSc Economics, Stockholm
School of Economics 1993, MPhil Economics,
Cambridge University 1994.
Year elected 2010
Born 1970
Other directorships Member, SBAB Bank
AB and the Swedish Space Corporation.
Background Swedish Government Offices
since 2008. Market Analyst and Investor Rela-
tions SEB 1999–2008.Corporate Finance at
S.G. Warburg Co. Ltd. London, 1994–1998.
Compensation SEK 0
hans biörck
5
Position Advisor for Skanska AB
Education MSc Business and Economics
Year elected 2012
Born 1951
Other directorships Member, Trelleborg
AB, Dunkerska Stiftelserna, SF Bio AB, Bure
Equity AB and Crescit Asset Management AB.
Background CFO, Skanska AB. CFO, Autoliv
Inc. CFO, Esselte AB.
Attended 7 of 10 meetings.*
Attended 2 of 6 meetings. **
sten jakobsson
6
Position Director
Education MSc
Year elected 2012
Born 1949
Other directorships Chairman, Power Wind
Partners AB. Member, Saab AB, Stena Metall
AB, FLSmidth A/S and Xylem Inc.
Background President and CEO ABB
Sweden, Deputy CEO Asea Brown Boveri AB
Sweden, Business Area Manager Business
Area Cables, CEO ABB Cables AB, CEO Asea
Cylinda, Production Manager Asea Low Voltage Division, Asea central staff - production,
Asea trainee.
maud olofsson
7
Position Former Deputy Prime Minister,
Minister of Enterprise and leader of
the Centre Party.
Education Secondary education.
Year elected 2012
Born 1955
Other directorships Member,
Creades AB, Arise Windpower AB and
Diös Fastigheter AB.
Background Deputy Prime Minister 20062010, Minister for Enterprise and Energy
2006-2011, Head of the Centre Party 20012011, Member of Parliament 2002-2011, CEO
of Hushållningssällskapet in Västerbotten
1997-2001, EU Coordinator for Västerbotten
County Administrative Board, Political Adviser
to Ministry of Employment 1992-1994, Ombudsman for Centre Party and Centre Party
Youth League in Norrbotten.
The Board’s employee
representatives, Full
members
Seija Forsmo
8
Position Pelletizing expert
Education MSc Chemical Engineering,
Helsinki University of Technology 1980;
PhD Process Metallurgy, Luleå University of
Technology 2007.
Year elected Deputy member since 2010
Full member since 2011
Born 1955
Other directorships Member, SACO Club
Malmberget-Luleå.
Background Employee at LKAB since 1988.
Previously employed by Outokumpu Oy and
Kemira Oyj.
Compensation SEK 0
Tomas Strömberg
Bertil Larsson
13
Position Ore harbour worker
Year elected 2010
Born 1955
Other directorships Chairman,
Svartöstaden Club, IF Metall Norrbotten.
Background Employee at LKAB 1974–1996
and since 1999. Employed by Dynalite
1996–1999.
Compensation SEK 0
9
Position Ore developer
Education Secondary education
Year elected 2011
Born 1967
Other directorships Deputy
Chairman, Gruv4:an Club. Member, IF Metall Avd 1.
Background Employee at LKAB
since 1987.
Compensation SEK 0
Jan Thelin
Born 1963
Other directorships Member, Leaders Club
in Kiruna.
and since 1995. Studies and UN service
between 1989–1995.
Compensation SEK 0
10
Position Welder
Education Trained international
welding specialist.
Year elected 2010
Born 1955
Other directorships Chairman, Gruv12:an
Club Kiruna, IF Metall Malmfälten. Member,
LKAB Berg & Betong AB.
and since 1995. Employed by various engineering firms 1977–1995.
Compensation SEK 0
Board of
Directors
2012
Auditors and
Secretary
Auditors
Deloitte AB
Peter Ekberg
Authorized public accountant.
Secretary
The Board’s employee
representatives,
deputies
Pentti Rahkonen
Malin Sundvall
Chief Legal Advisor for LKAB,
Secretary of the Board
since 2008.
11
Position Process operator
Year elected 2010
Born 1965
Other directorships Treasurer,
Gruv135:an Club, IF Metall Malmfälten.
Background Employee at LKAB since 1987.
Compensation SEK 0
Stefan FAGERKULL
12
Position Project manager
Education Engineer, Rock and Civil Engineering, Bergsskolan Filipstad.
Year elected 2011
*Appointed to the Board at the AGM on
20 April 2012. Seven meetings were held
after the AGM.
** Appointed to the committee after the AGM
on 20 April 2012.
2
3
4
5
1
7
6
8
9
group management 2012 | corporate governance report | 75
Lars-Eric Aaro
1
President and CEO*
Education:
MSc Mining Engineering, Luleå
University of Technology, 1982.
Year employed: 2001
Born: 1956
Other engagements:
Chairman, SKGS, Deputy Chairman, SweMin. Member, Royal
Swedish Academy of Engineering
Sciences. Honorary Doctorate,
Luleå University of Technology,
2007.
Background:
LKAB 1976, 1981–1984,
Viscaria AB 1984–1987, Boliden
1987–1989, Secoroc 1989–1992,
Boliden 1992–1998, ASSI Domän
1998–2001.
Katarina Holmgren
2
Anders Kitok
3
Leif Boström
Senior Vice President, Group
Control
Senior Vice President, Mining
Division
Education:
MSc, Luleå
Education:
MSc Mechanical Engineering,
Luleå University of Technology,
1982.
Year employed: 2010
Born: 1963
Background:
Kårhuset i Luleå AB 1985–1986,
Swedish Tax Agency 1987–1997,
Luleå University
of Technology 1997–2003,
LKAB 2003–2007,
Polarbröd 2007–2010.
Compensation:
See Note 6, page 109
4
Anders Furbeck
Senior Vice President, Finance
Education:
MSc Economics, Luleå University
of Technology, 1990.
Year employed: 1992
Senior Vice President, Urban
Transformation
Education:
MSc Economics, School of Economics, Gothenburg 1985.
Year employed: 1985
Year employed: 1985
Born: 1959
Born: 1957
Other engagements:
Chairman, Hjalmar Lundbohm
Research Centre and LKAB Excellence Centre at LTU, member,
VindIn AB.
Other engagements:
Member, Progressum AB,
MCC AB. Deputy,
Underhållsföretagen.
5
Born: 1957
Compensation:
Background:
NCC 1980–1992.
Background:
Ericsson 1983–1985.
Compensation:
Compensation:
Compensation:
*Neither the CEO nor any
natural person or legal entity
related to him have significant
shareholdings or partnerships in
companies with which LKAB has
substantial business relationships.
group
management
2012
Lotta Fogde
6
Markus Petäjäniemi
7
Per-Erik Lindvall
8
Grete Solvang Stoltz
9
Senior Vice President, Communications
Senior Vice President, Marketing
& Logistics Division
Senior Vice President, Technology
& Business Development
Senior Vice President, Human
Resources
BA, Denison University, Ohio,
USA, 1989.
Year employed: 2008
Education:
MSc Urban Planning and Environmental Engineering, Luleå
Education:
MSc Mining Engineering, Luleå
Education:
MSc Economics, Luleå University
of Technology, 1993.
Born: 1966
Year employed: 2005
Year employed: 2001
Year employed: 2009
Other engagements:
Member, Teknikens Hus Luleå.
Born: 1959
Born: 1956
Born: 1970
Other engagements:
Chairman, Norrskenet AB and
the Bergforsk Foundation. Deputy
Chairman, Lulea University of
Technology. Member, Botnia
Exploration AB.
Other engagements:
Chairman, Career Centre at LTU.
Member, SweMin.
Background:
Swedish Radio 1991–1995,
Expressen 1996, Government
Offices 1996–2004, self-employed
2005–2008.
Background:
NAB 1985–1988, Kiruna
Värmeverk 1988–1995,
De-Icing Systems 1995–1996,
Sema/Schlumberger/Atos Origin/
WMData 1996–2005.
Compensation:
Compensation:
Background:
LKAB 1980–1989, Bergbygg AB
1989–1991, Boliden 1991–2000.
Compensation:
Background:
LKAB 1993–1995, SCA
1995–2008, Northland Resources
2008-2009.
Compensation:
Auditor’s statement on the Corporate Governance Report
To the Annual General Meeting of Luossavaara-Kiirunavaara AB (plc),
Company registration number 556001-5835
The Board of Directors is responsible for the 2012 Corporate Governance Report and that it is prepared in accordance with
the Annual Accounts Act.
We have read the Corporate Governance Report, and based on this reading and our knowledge of the company and
Group, we believe we have sufficient grounds for our opinion. This means that our statutory review of the Corporate
Governance Report has a different focus and is substantially smaller in scope than an audit conducted in accordance with
the International Standards on Auditing and generally accepted auditing practices in Sweden has.
In our opinion, a corporate governance report was prepared and its statutory information is consistent with the Annual
Report and consolidated accounts.
Stockholm 20 March 2013
Deloitte AB
Peter Ekberg
Authorised public accountant
Group overview | 77
Group overview
Consolidated Statements of Income (SEK million)
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
Net sales26,971 31,12228,53311,558 23,12816,385 14,61514,337 8,9887,466
Cost of goods sold
-15,177
-15,190
-15,276
-10,029
-12,166
-9,509
-7,706
-7,535
-6,180
-5,959
Gross profit
11,79415,932
13,2571,52910,9626,876 6,9096,802 2,8081,507
Selling expenses-249 -223-213-202 -200-178 -178-174 -289-285
Administrative expenses-608 -640-451-377 -448-344 -333-349 -353-247
R&D expenses-283 -328-213-237 -258-217 -165-159 -235-116
Other operating income/expenses
-59
-35
-68
-54
271
11
23
-11
10
64
Operating profit
10,595
14,705
12,312 659
10,3276,1486,2566,1091,941 923
Financial income744 503418705 575572 546550 227181
Financial expenses-316 -407-349-172 -513-376 -420-208 -145-129
Profit before tax
11,023
14,801
12,381
1,192
10,389
6,344
6,382
6,451
2,023
975
Tax-2,234 -3,842-3,275 -473 -2,748-1,665 -1,785-1,904 -456 -286
Profit for the year
8,789
10,960
9,106
719
7,641
4,679
4,597
4,547
1,567
689
Attributable to:
Parent Company shareholders8,789
10,9609,106 7197,6414,6794,5974,5461,568 690
Minority share
1
-1
-1
Includes depreciation according to plan
1,950
1,898
1,836
1,827
1,462
1,166
997
952
1,079
1,049
Consolidated statement of financial position (SEK million)
Intangible assets277 269321310 428329 387477 211182
Property, plant and equipment
30,173
26,285
23,087
21,551
19,893
16,702
11,746
7,928
6,316
6,476
Financial assets1,099 1,1241,6751,827 1,0942,416 2,2081,393 219 245
Total non-current assets31,549 27,67925,08323,688 21,41519,447 14,341 9,798 6,7466,903
Inventories2,515 2,4492,0742,301 2,7151,635 1,6311,423 1,006 976
Accounts receivable3,060 4,5933,3952,276 1,9461,922 1,6971,846 1,1941,198
Cash and cash equivalents plus current investments
18,672
18,201
14,562
6,195
9,643
5,991
6,982
7,091
4,516
2,944
Other receivables1,824 8081,5151,095 612 685 1,214 416 195 316
Total current assets26,072 26,05121,54611,867 14,91610,233 11,52410,776 6,9115,434
Total assets57,621 53,73046,62935,555 36,33129,680 25,86520,574 13,65712,337
Total operating assets
37,849
34,405
30,392
27,533
25,594
21,273
16,675
12,090
8,922
9,148
Shareholders' equity41,671 37,89332,95125,375 25,21822,251 19,07614,802 10,0449,004
Minority interest
43
4
Provisions*
2,209
Non-current liabilities 11,58011,3759,5557,512 6,8364,963 4,6273,598 2,230 2
Current liabilities4,370 4,4624,1232,668 4,2752,466 2,1622,170 1,3801,118
Total shareholders’ equity and liabilities
57,621
53,730
46,629
35,555
36,329
29,680
25,865
20,574
13,657
12,337
Consolidated Statement of Cash Flow
Cash flow before change in working capital
10,699
14,038
13,951
2,931
11,545
7,200
5,688
6,073
2,776
1,782
Payments for urban transformation**
-407
-382
Change in working capital
980
92
-1,184
-43
-1,201
-124
358
-553
79
-556
Cash flow from operating activities
11,272
13,748
12,767
2,888
10,344
7,076
6,046
5,520
2,855
1,226
Investments in existing operations
-5,808
-5,126
-3,973
-3,543
-4,682
-5,968
-4,844
-2,648
-973
-592
Other operating investments
6
17
Operating cash flow5,4718,6398,867 -6555,6621,1081,2022,8721,882 634
Acquisition of operation, minority and asset
-7
0
-9
-35
0
-75
-29
-384
Current investments
-3,729
-2,990
-2,952308303
-381217
-1,846
-1,748
Other 80 7 -8 192 151123
Cash flow after investments
1,742
5,649
5,915
-340
5,948
884
1,570
1,074
105
250
Dividend-5,000 -5,000 -500-2,800 -2,000-2,000 -1,500 -520 -281 -351
Other from financing activities
-43
Cash flow for the year
-3,259
649
5,415
-3,140
3,948
-1,159
70
554
-176
-101
Group key ratios
Net salesSEK million26,971 31,12228,53311,558 23,12816,385 14,61514,337 8,9887,466
Growth in net sales
%
-13.3
9.1
146.9
-50.0
41.2
12.1
1.9
59.5
20.4
44.0
Operating margin %39.347.243.2 5.744.737.542.842.621.6
12.4
Profit margin
%40.9 47.643.310.3 44.938.7 43.745.0 22.513.1
Return on total capital
%
20.4
30.3
31.0
3.8
33.0
24.2
29.3
38.9
16.7
9.2
Return on equity
%22.130.931.5 2.832.222.627.136.616.57.8
Return on operating assets
%
29.3
45.4
42.4
2.5
49
32
43
58
21
11
Equity/assets ratio
%72.3 70.570.771.4 69.475.0 73.872.0 73.673.0
Average number of employees
4,357
4,191
4,030
3,778
4,086
3,885
3,737
3,563
3,482
3,433
* Reported since 2004 as current and non-current liabilities, respectively, as per IFRS.
** Recognized on a separate line in the cash flow statement since 2011.
Definitions:
Operating margin: Operating profit as a percentage of net sales
Profit margin: Profit after financial items as a percentage of net sales
Return on total capital: Profit after financial items + financial expenses as a percentage of average total assets
Return on equity: Net income for the year as per income statement as a percentage of average shareholders’ equity
Return on operating assets: Operating profit as a percentage of average operating assets
Equity/assets ratio: Shareholders’ equity as a percentage of total assets
Financial report | 79
annual
report//
79–126
Contents
ADMINISTRATION REPORT80
CONSOLIDATED FINANCIAL STATEMENTS
Income statement
Statement of comprehensive income
Statement of financial position
Statement of changes in shareholders’ equity
Statement of cash flows
90
90
91
92
93
FINANCIAL STATEMENTS – PARENT COMPANY
Income statement
Statement of comprehensive income
Balance sheet
Statement of changes in shareholders’ equity
Statement of cash flows
94
94
95
97
98
NOTES
Note 1Significant accounting principles
Note 2 Distribution of revenues
Note 3Segment reporting
Note 4Other operating income
Note 5Other operating expenses
Note 6Employees, personnel costs and remuneration
to senior executives
Note 7 Auditors’ fees and compensation
Note 8 Nature of operating expenses
Note 9 Net financial income/expense
Note 10Appropriations
Note 11Taxes
Note 12Earnings per share
99
106
106
107
107
107
110
110
110
111
111
113
Note 13Intangible assets
Note 14Property, plant and equipment
Note 15Participations in joint ventures
Note 16Parent Company participations in associated
companies
Note 17Receivables from subsidiaries and associated
companies
Note 18Financial investments
Note 19Other non-current securities holdings
Note 20Non-current receivables and other receivables
Note 21Inventories
Note 22Accounts receivable
Not 23Prepaid expenses and accrued income
Note 24Equity
Note 25Pensions
Note 26Provisions
Note 27Urban transformation
Note 28Accrued expenses and deferred income
Note 29Significant risks and uncertainties
Note 30Contractual obligations
Note 31Pledged assets and contingent liabilities
Note 32Related parties
Note 33Subsidiaries
Note 34Untaxed reserves
Note 35Statement of cash flows
113
114
116
116
116
117
117
117
118
118
118
118
119
120
121
121
121
123
123
124
125
126
126
Proposed disposition of unappropriated earnings
128
Audit report
129
Glossary130
Addresses131
Annual General Meeting and Financial Information
132
ANNUAL REPORT 2012
ADMINISTRATION REPORT
The Board of Directors and the President of Luossavaara-Kiirunavaara AB (publ.),
hereinafter LKAB, (company registration number 556001-5835) hereby submit
their annual report and consolidated financial statements covering operations for
the 2012 financial year.
OWNER STRUCTURE
LKAB is wholly owned by the Swedish state; the company’s registered office is
in Luleå, Sweden. The number of shares totals 700,000 and consist of one type
only, and all shares enjoy equal rights in the company. The company was founded
in 1890.
CORPORATE STRUCTURE
The consolidated financial statements cover the operations of the Parent Company and its subsidiaries, referred to collectively as the Group. It also includes
ownership interests in joint venture companies. The designation LKAB refers to
the Parent Company. The Group is called the LKAB Group or simply the Group. It is
grouped into three operating segments based on the information Group management uses to take strategic decisions.
ropean economies, largely due to the sovereign debt crisis within the eurozone.
However, critically important Germany enjoyed a more positive trend than the EU
as a whole.
The weak north European steel market reflects the fact that end users have
not increased consumption appreciably. Orders received were at a low level with
short advance notice. As a result of this European steelworks operated at reduced
production capacity and implemented various programmes to reduce costs.
World Steel Association statistics show that global crude steel production
reached a record 1,548 million tonnes (Mt) during 2012, an increase of 1.2 percent
from 2011.
Crude steel production in EU15 states fell during 2012 by just over 5 percent,
while in the USA it rose by just over 2.5 percent during the corresponding period.
The general recovery in the American economy and the increase in the extraction
of natural gas resources (shale gas) contributed to the positive trends in the USA.
China’s crude steel production reached 716.5 million tonnes in 2012, an increase
of 3.1 percentsince 2011.
Capacity utilisation within the steel industry during 2012 was on average 78.8
percent.
Global steel demand is expected to grow by 3.2 percent and reach a record level
of 1,455 Mt.
The price of iron ore
Mining Division
The Mining Division mines and processes iron ore for products for steel making. The principle products are pellets and fines. The products are sold to major
international customers. The Market & Logistics Division also belongs to the Mining operating segment and has responsibility for sales and haulage of iron ore
products to the ports of shipment.
Minerals Division
The development, production and marketing of industrial mineral products takes
place in the Minerals Division, a wholly owned subsidiary group. The company
goes by the name of Minelco in its markets in Asia, Europe and the USA. The most
important areas of application for industrial minerals are within construction and
civil engineering and the plastics, coatings, steel, foundry and chemical industries.
Special Businesses Division
The LKAB subsidiaries within Special Businesses are mainly sub suppliers to the
Mining Division and Minerals Division. Examples of goods and services sold include drilling equipment, explosives, concrete, tunnel driving, rock reinforcement,
and the crushing of iron ore.
The iron ore spot price in Asia recovered during the first quarter of 2012. Following
a period of stability, spot prices fell drastically during the third quarter. During the
last quarter levels rose to reach USD 120 per tonne for 62 percent Fe CFR China.
The price recovery that began during the late autumn in 2012 was primarily
the result of inventory build-up. Market confidence received a boost when China
announced initiatives to support economic growth and uncertainties surrounding
the USA’s budget faded.
Nothing fundamental appears to have changed in the iron ore market for the
long term. Growth in China is expected to require more steel and the country will
continue to be dependent on iron ore imports. As long as the supply of seaborne
iron ore is limited China’s low-grade, high-cost mines should continue to keep
Asian spot prices high.
Development and changes to the iron ore pricing system continue. In order to
meet the wishes of certain customers, LKAB has been using a complementary
price model since the first quarter of 2012. The model provides flexibility for those
customers who wish to move wholly or partially away from fixed prices for a period during the year.
Market outlooks for LKAB remain good, despite a slow recovery and the continuing debt crisis in Europe. Demand for LKAB’s pellets products is high, especially for DR pellets to markets with good natural gas resources. Customers have
confirmed first-half 2013 order volumes to the normal extent.
THE STEEL AND IRON ORE MARKET
At the beginning of 2012 global economic development showed a positive trend.
It abated after the first quarter and worsened further during the second half of
the year. Global market leading indicators began losing steam. Uncertainty grew,
contributing to a continued volatile, wait-and-see market.
The growth in GNP moderated, and growth for the world as a whole fell. Even the
rate of growth in China slowed, and BNP growth dropped back to 7.8 percent, the
lowest since 2004.
During the opening months of the year demand for steel improved in the EU
providing leeway for minor price increases. When demand fell substantially steel
prices began falling again. During the fourth quarter the fall was halted and steel
prices turned around, but continued at low levels. European economic statistics
and the Purchasing Managers Index also confirmed weakening of the major Eu-
The industrial minerals market
Global market potential for Minelco products is estimated at over SEK 20 billion.
Minelco is the European market leader for industrial applications for magnetite
outside the iron and steel industry. Minelco has a leading position for the products
mica and huntite in the plastics and coatings industries and a significant position
in refractory products, above all in the United Kingdom.
Demand for industrial minerals was clearly affected by negative macroeconomic trends during 2012, with weak demand in both Asia and Europe. The broad
exposure toward a great many industries and regions is positive as it involves a
wider spread of risks and a dampening of the influence from fluctuations in individual industries and regions.
ADMINISTRATION REPORT | 81
In 2012 Minelco delivered ballast to an offshore wind farm in Sweden. The market
for ballasting and heavy concrete for offshore construction has great growth potential.
Several political initiatives currently support the expansion of renewable energy.
Resource efficiency and sustainability are two focus areas. More and more
customers are proactive in their demand for information on the environmental
impact of minerals. In some cases there are demands for reclaimed materials to
be included in the end product. The latter is especially noticeable in the refractory materials industry and is anticipated to grow in significance in all industries
where conditions exist for rational materials recovery.
IMPORTANT EVENTS DURING THE YEAR
•
•
•
•
The year 2012 was a record for LKAB in terms of both production and deliver-
ies of iron ore products.
Record deliveries of 26.3 Mt (25.7) iron ore products, of which 22.0 Mt (21.0) were
pellets. LKAB’s ability to switch capacity between continents from the weaker
north European market to the Middle East and China was crucial.
Improved production volume to 26.2 Mt (26.1). The highest volume of finished-
products for more than 35 years. Pellets comprised 23.8 Mt (22.9) of this.
A cooperation agreement was signed at the beginning of the year with Gällivare
municipality in respect of urban transformation in Malmberget.
•Production loss in May due to a stoppage at LKAB’s biggest pelletizing plant,
KK4 in Kiruna. Deliveries were also disrupted by a ten-day train dispatcher strike
on the Ofotbanen line at the of end May and beginning of June.
• The new main level in Malmberget (MUJ 1250) was opened; estimated lifetime
up until 2023.
•Suspension of mining in the Gruvberget open-pit mine in June due to environ mental appeal process. At the end of the year LKAB was informed that mining
could resume according to a ruling in the Swedish Land and Environment Court.
Gruvberget provides the extra mine capacity necessary for using the existing
pelletizing plant optimally.
• LKAB was given permission to drain Leveäniemi mine in Svappavaara, one of three
open-pit mines included in LKAB’s growth strategy, LKAB 37.
• The government’s autumn budget set aside SEK 800 million for upgrades to the
Ore Railway.
• The Swedish Transport Administration and LKAB opened a new 7.5 km rail line behind Mount Kirunavaara at the end of August.
GROUP
The Group in summary Full year 2012 Full year 2011
Net sales
26,971
31,122
Operating profit
10,595
14,705
Income from financial items
428
96
Profit before tax
11,023
14,801
Profit for the year1)8,789 10,960
Operating cash flow 2)5,471 8,639
Investments in property, plant and equipment 2) 5,808
5,126
1)
The SEK 719 million effect of reduced corporation tax in Sweden is included for the 2)
Refer to the statement of cash flow on page 93 for further information.
full year 2012.
SALES AND EARNINGS
Group net sales decreased by 13.3 percent. amounting to SEK 26,971 million
(31,122). The reduction was spread across three factors in iron ore operations:
• Volume/mix +2.8 percent,
• Price –17.5 percent,
• Foreign exchange + 3.4 percent,
Without any US dollar hedges the foreign exchange effect would have amounted
to +2.8 percent.
Group operating profit fell by 28 percent to SEK 10,595 million (14,705). Lower
iron ore prices entailed a reduction in the gross profit margin of 7 percentage
points to around 44 percent. Lower iron ore prices are counteracted by increased
volumes and improved foreign exchange rates. Expenses compared to the same
period for the previous year remain in principle unchanged. The operating profit
was charged with a provision of SEK 1,094 million (1,234) or costs arising from the
effect of mining on communities.
Income from financial items reached SEK 428 million (96). Foreign exchange
gains/losses amounted to SEK –52 million (-29). Net interest income/expense
amounted to SEK –23 million (50). Net interest income/expense for the year includes a liability for urban transformation in the amount of SEK –87 million (0).
Return on market portfolios and interest-bearing instruments totalled SEK 533
million (105). Net pension expense came to SEK –77 million (–75). Dividends received from listed shares amounted to SEK 56 million (54).
Reduced corporation tax in Sweden affected earnings positively by SEK 719 million.
During the year, the inflow of US dollars from the sale of iron ore amounted to
USD 3,806 million (4,061), of which USD 1,840 million (2,260) was hedged under
forward exchange contracts at an average rate of SEK 6.83 (6.82) The average
exchange rate on the spot market was SEK 6.78 (6.50) per USD during the same
period.
At year end, USD 1,040 million was hedged under forward exchange contracts at
an average rate of SEK 6.90 per USD. At the same time the previous year, hedging
contracts amounted to USD 970 million at an average rate of SEK 6.76 per USD.
INVESTMENTS
Investments for the year amounted to SEK 5,808 million (5,126) of which SEK
2,176 million is in respect of the new main level in the Kiruna underground mine.
During the year investments in flue gas scrubbing equipment for just over SEK
1,500 million at three pelletizing plants were approved and begun.
Production facilities
Commissioning investments for the new main level in Kiruna. KUJ 1365, was in
progress during the end of the year. They are in respect of the first links in the production chain comprising trains, chutes, discharging stations, crushes and mine
hoists. Commissioning will take place during the first quarter of 2013. Operations
will gradually come on stream in the remaining stages during the years ahead.
During 2012 the main project activities consisted of rock works in the so-called
Sjömalmen, the sinking of shafts and construction work and installations in fixed
facilities.
The investment in the ‘New Main Level’ in Malmberget, was inaugurated in June,
2012. The work continues with the completion of the remaining links in the production chain and the construction of workshops and service areas. The main
level is expected to be fully completed by end of year 2013/beginning 2014.
In Svappavaara, investments aimed at improving the work environment and
safeguarding production capacity were carried out in additives handling in the
concentration plant and in haulage to the pelletizing plant.
Construction work is under way in Kiruna on a new dam in Lake Luossajärvi to
enable drainage of areas affected by mining; this is necessary in order to safeguard continued mining operations. The planned raising of existing dam walls in
Malmberget and Svappavaara was completed during the year.
Investments in increased capacity in the KK4 pelletizing plant in Kiruna and
preparatory works for the installation of new production systems in the new Mertainen and Leveäniemi open-pit mines are under way in accordance with growth
strategy.
Environmental investments
Investments in flue gas scrubbing improvements have begun at three pelletizing
plants in Malmberget and Svappavaara. The purpose is to clean the emissions of
flue gases and particulates while contributing to a reduced impact from acidifying
substances.
Logistics
During the year the Minerals Division invested SEK 38 million (21) in property,
plant and equipment, and the Special Businesses Division SEK 106 million (39).
Many major deposits have been found close to the surface in Sweden’s northern
ore fields. At the same time there is great potential to find new, deep deposits with
the aid of modern prospecting methods.
The LKAB prospecting portfolio includes around 30 identified projects. All of the
items are in the vicinity of the existing mines. The potential for small to medium
deposits close to the surface in the vicinity of existing infrastructure and processing
plants is great. One prospecting objective is to enable the development within ten
years of a number of medium-sized satellite mines that contribute significantly to
increased production in accordance with LKAB’s strategy.
The prospecting is aimed at around ten projects. The best projects are in the vicinity of old workings such as Tuollouvaara, PerGeijer, Malmberget West and Malmberget North (Kaptenshöjden), all in the middle of active mining districts. Four or
five of the different projects have extremely good potential, while the remainder are
greenfield sites.
LIQUIDITY AND FINANCIAL POSITION
RESEARCH AND DEVELOPMENT
Operating cash flow for the Group amounted to SEK 5,471 million (8,639) in 2012.
Cash flow for the year was affected negatively by the lower earnings level and
higher investment expenditures, and positively by reduced working capital tied up
in accounts receivable in comparison with 2011. Cash flow for the year amounted
to SEK -3,259 million (649). A dividend of SEK 5,000 million (5,000) was paid to the
owner. Liquidity (cash, cash equivalents and current investments) amounted to
SEK 18,672 million (18,201) at year end.
Equity amounted to SEK 41,671 million (37,893) at year end. The LKAB Group’s
equity/assets ratio rose to 72.4 percent(70.5).
Provisions for urban transformation in Kiruna and Malmberget amounted to
SEK 5,877 (5,103) at the end of 2012.
Long-term financial investments in the form of SSAB shares reduced in value
during the year by SEK 50 million and amounted to SEK 616 million at year end.
Pension provisions amounted to SEK 2,721 million (2,529) at year end. More information is presented in Note 25, Pensions.
The Group’s research is aimed mainly at the Mining Division. The year’s expenditures for research and development amounted to SEK 283 million (328), equivalent to around 1.7 (1.9) percent of Group expenses.
The strategy is for LKAB to retain its position as a world-leading supplier of iron
ore pellets. Because this position must be strengthened by growing together with
customers, research efforts are concentrated on increasing our capabilities within
the production chain from mine to customer, with a focus on our promise to the
customer of “Performance in Ironmaking”.
A much-appreciated experimental blast furnace programme in Luleå was carried out on behalf of Course50, which is a major Japanese research programme
with the participation of that country’s entire steel industry. The programme’s
overall objective is to reduce CO2- emissions from steel production.
The development of applications with European customers strengthened our
competitive ability during the years and consolidated LKAB pellets as a significant
proportion of customer raw material matrices.
In June a new agglomeration laboratory was opened in Malmberget, where
LKAB has gathered all researchers in the pelletisation field. World-class material
characterisation instruments provide new abilities to evaluate how the group’s
new deposits are affected in the pelletizing process and the product quality level
that can be achieved. Ore from the new Mertainen deposit has been analysed in
full scale tests in Svappavaara ore processing plant with promising results.
Focus in the mining technology field has been on taking measures to increase
the iron yield without increasing the waste rock content. One of these projects
concerns marker tests that provide LKAB with valuable knowledge about sublevel caving which lies at the heart of mining operations.
A new rail route around Kiruna came into operation in August. The investment
entailed infrastructure work within the LKAB area. Investments in new roads,
drainage channels, ponds, pumping stations and dams were put into operation
during the year.
Deliveries continued of new wagon sets needed to meet volumes arising from the
growth strategy. Just over half of the ore wagons for the four wagon sets ordered
during 2011 have been delivered. The remaining deliveries will take place successively until 2015.
Investments in a new shiploader and quay are under way in Narvik.
Other investments
PROSPECTING
Mineral reserves are a mining company’s most important resource. Good knowledge of the mineral reserve’s size and quality is a fundamental precondition for
major long-term investments. LKAB needs long-term planning horizons. The reserve has crucial significance for product quality, production volumes and costs.
Good access to iron ore raw materials is a precondition for LKAB’s strategic growth
target. Hence, prospecting plays a central role in LKAB’s long-term development.
The task is to ensure iron ore raw materials equivalent to 20 years’ ore base
(ore base = mineral reserve + mineral resource). Prospecting is therefore enjoying
strong growth with its budget almost doubling annually in recent years. In 2013 it
amounted to SEK 93 million. Prospecting currently employs 12 (3) people.
Current situation and conditions
The development of existing deposits takes place through ongoing prospecting
toward deeper levels in the two underground mines in operation in Kiruna and
Malmberget.
Prospecting in regard to the three new mines at Gruvberget, Mertainen and Leveäniemi concerns operational geology in the stage 1 development of their mineral
reserves and mineral resources. Focus is shifting to the development of deposits
in stage 2. The potentials for stage 2 are:
• Gruvberget – hematite close to the surface and also underground magnetite
mining.
•Mertainen – tracing the extension of the central orebody to the south west, and
investigating the entire anomaly complex in the area which in addition to
iron also has the potential for gold and copper.
• Leveäniemi – to establish the scope and mineralogy of the ore-bearing breccia.
URBAN TRANSFORMATIONS
LKAB’s provisions for urban transformation in the northern orefields amounted to
SEK 5,877 million (5,103) at the end of 2012. Earnings for the year were charged
with expenses totalling SEK 1,181 million (1,234) for the effects of mining on communities.
The expansion of mining is enlarging the gradual propagation of the deformation zones. The result is that the shape of communities must be adapted and
change over the long term. The deformation zones are and will become so extensive that it will be necessary to successively phase out and relocate sections
of Kiruna and Malmberget. LKAB is working together with such affected parties
as the state (owner), municipalities, companies, property owners and others concerned to find the necessary solutions for structural transformation. Meanwhile,
LKAB is working proactively to obtain licences for continued mining operations.
Urban transformation in the ore fields has impacted, and will continue to impact, LKAB’s earnings and liquidity by considerable amounts in the years to come.
Therefore LKAB must continue to be a financially strong company with good earnings abilities in order to continue meeting the obligations urban transformation
entails.
MINING DIVISION
During the year stocks of finished products fell from an opening level of 1.6 Mt
to a 2012 year-end stock of 1.2 Mt.
Mining Division (SEK million)
2012
2011
Net sales
25,144
28,335
Iron ore products (Mt)
2012
Operating profit
10,127
13,624
Delivery volume
26.3
25.7
Operating margin
40.3%
48.1%
- of which pellets
22.0
21.0
3,686
3,535
Product quality (Deliveries)
2012
2011
Quality value
96.3
96.7
2011
Operations
The division’s core operation is the production and sale of high-quality iron ore
products to the steel industry. During 2012, iron ore was mined in two underground mines and for part of the year in one open-pit mine. Processing took place
in six pelletizing plants and other facilities above ground.
Current production capacity is about 28 Mt of processed iron ore products per
year. Iron ore pellets are the division’s main product and accounted for about 83
(81) percent of sales volume in 2012.
The Marketing & Logistics Division also belongs to the Mining operating segment
and has responsibility for sales and haulage. Iron ore products are hauled on the
Ore Railway by LKAB’s own locomotives and trains to the to the ports in Luleå and
Narvik where they are loaded onto ships for export to customers around the world.
Net sales decreased by 11 percent for the year. LKAB’s production and deliveries
reached record levels, but the global fall in iron ore prices impacted sales and
earnings negatively. With external sales of SEK 24,909 million (28,024), the Mining
Division accounted for 92 (90) percent of Group sales.
Operating profit amounted to SEK 10,127 million (13,624). Expenses for the year
remained at the same level as the previous year. Lower iron ore prices entailed a
gross profit margin around 8.5 percentage points lower at 43.5 percent. A dollar
exchange rate that was higher than average affected the margin positively.
Production
LKAB Malmtrafik AB
Together with its wholly owned Norwegian subsidiary LKAB Malmtrafikk AS, LKAB
Malmtrafik AB handles all ore haulage between LKAB’s mines and the ports of
Narvik and Luleå. The company also takes care of terminal handling (loading and
unloading) in the mining areas and harbours.
The company owns all rolling stock (locomotives and wagons) and has its own
maintenance operation and associated workshops divided between locomotives,
wagons, tracks & signalling and fixed installations.
During the year LKAB Malmtrafik AB received its own B Licence, which means
the company is treated as a train operator in accordance with EU regulations. The
licence is crucial for LKAB Malmtrafik operations and a prerequisite for continued
haulage licences.
LKAB Malmtrafikk AS
The company is a wholly owned subsidiary of LKAB Malmtrafik with whom it handles all ore haulage between LKAB’s mines and the port of Narvik. The company
also takes care of terminal handling (loading and unloading) in Narvik.
All rolling stock (locomotives and wagons) is owned by LKAB Malmtrafik AB.
However, the Narvik terminal and its associated rail facilities and fixed installations (loading and unloading) are owned by LKAB Malmtafikk AS. The company
also has its own drivers for trains running between Kiruna and Narvik.
MINERALS DIVISION
The year’s production volume increased to 26.2 Mt (26.1), which is the highest
volume of finished products for more than 35 years. A total of 23.8 Mt (22.9) pellets
were produced. A production stoppage at LKAB’s biggest pelletizing plant, KK4 in
Kiruna, resulted in a drop in production in May.
Minerals Division (SEK million)
2012
2011
Net sales
1,762
2,628
Operating profit
132
603
Iron ore products (Mt)
2011
Operating margin
7.5%
22.9%
360
358
2012
Production volume
26.2
26.1
- of which pellets
23.8
22.9
Deliveries
Operations
During the year 26.3 Mt (25.7) were produced, of which 22.0 Mt (21.0) were pellets. During the fourth quarter deliveries reached a record level of 7.6 Mt (6.8),
equivalent to an annual capacity of 30 Mt. LKAB’s ability to switch capacity from
the weaker north European market to the Middle East and China was crucial for
reaching the record high delivery volumes.
The product quality value in the deliveries amounted to 96.3 compared to a
target of >96 for 2012. This success was due to focused efforts throughout the
production chain all the way to the customer. Work is under way to reduce the
quantity of fines in DR pellets to customers, who have clearly indicated that a
potential for improvement exists.
Deliveries were limited during the second quarter by two factors – the mantle
ring breakdown at the KK4 pelletizing plant and a ten-day train dispatcher strike
on the Ofotbanen line at the of end May and beginning of June. This resulted in an
unplanned increase in product stocks. The ability to ship these volumes to the ports
was limited by Ore Railway capacity. Stocks were back to normal by years end.
A major planned maintenance shut-down was completed on the Narvik shiploader during the second quarter; the maintenance work proceeded well and
down time was shorter than planned, which meant deliveries could resume sooner than scheduled.
Minelco is a value provider that not only supplies raw materials but also technical
know-how and expertise in mineral processing, which enables the development of
applications and the adaptation of a product’s (a mineral’s) function to customer
requirements – value in use.
Minelco offers a broad portfolio of supplementary products to the industrial
minerals market. However, the focus is on a few strategically important minerals – magnetite (iron ore), mica and huntite. The business is based on control of
the entire process from the raw material source to end user. Minelco’s business
operation supports the iron ore business by identifying and commercialising other
application areas for LKAB magnetite. Magnetite is produced, processed and refined to a high product value for a range of customers aside from those in the
steel industry. Customers are in construction and civil engineering (in applications
where the minerals provide properties that are suitable for such things as ballast, heavy concrete, radiation shielding), the plastics and coatings industry (flame
retardants, density, torsional stiffness), steel and foundry industries (refractory
properties) and the chemicals industry (water purification).
LKAB Kimit AB
Net sales decreased by around 33 percent, mainly due to lower deliveries of magnetite products. Deliveries of magnetite to our pipe coating customer EUPEC, on
an assignment from Nordstream, were completed in October, 2011. With external
sales of SEK 1,760 million (2,623), the Minerals Division accounted for 7 (8) percent of Group sales.
Operating income for 2012 was SEK 132 million (604). The difference is attributable to two causes – lower magnetite sales volumes and a one-time item in 2011
of SEK 197 million for the closure of the Minelco mine on Greenland.
The company is a subsidiary of LKAB Berg & Betong AB. Its aim and purpose is
to supply LKAB with explosives handling expertise and to produce and sell explosives and associated charging vehicles. LKAB Kimit is also responsible for the purchase of external explosives products, stock management and the development
of explosives and associated systems. LKAB Kimit also sells its products to other
companies, mainly on the Nordic market. The volume has remained stable at the
21,000 tonne level. The production volume is anticipated to double when LKAB’s
new open-pit mines begin production.
LKAB Fastigheter AB
SPECIAL BUSINESSES DIVISION
Special Businesses Division (SEK million)
2012
2011
Net sales
2,350
2,523
Operating profit
230
405
Operating margin
9.8%
16.1%
311
298
The company administers homes and business premises in the northern orefields and Luleå. Its holding comprises around 2,200 apartments and single family
homes and around 35,000 sq m of commercial premises, mainly in the Jägarskola
area of Kiruna.
A decision was taken during the year for the production of 30 apartments in Gällivare, plus 70 and 30 respectively in the Terrassen and Glaciären districts of Kiruna.
LKAB Nät AB
Operations
The Special Businesses Division is home to several LKAB subsidiaries. The companies have their origin in LKAB’s know how as a manufacturer and user of products and services. These companies are mainly suppliers to the Mining and Minerals Divisions, but also have external customers.
The company operates an electricity grid and has a concession as a local electricity distributor.
LKAB Försäkring AB
The company is LKAB’s internal insurance company: it works globally to provide
the LKAB Group with liability, property and business interruption insurance.
Net sales and profit
Net sales fell during 2012 by around 7 percent to SEK 2,350 million. Special Businesses Division accounts for around 1 (2) percent of Group sales. Operating profit
amounted to SEK 230 million.
LKAB Wassara AB
The company develops and markets drill systems based on its unique expertise in
water-driven drilling for global customers in the civil engineering, mining, exploration drilling, dam construction and geoenergy segments. Marketing and sales
to customers outside the LKAB Group is mainly through independent distributors.
Collaboration with seven new distributors began during the year.
A Drill Technology Center has been set up in Malmberget. The objective is to
increase the R&D tempo to streamline extraction efforts.
LKAB Berg & Betong AB
LKAB Berg & Betong AB crushes and produces mineral products and concrete and
carries out rock contracting in the form of rock reinforcement and tunnelling. The
company is also responsible for production in LKAB’s open-pit mines.
The production of concrete continued to be high, even if deliveries fell somewhat as rock contracting work in the new main levels was completed.
During 2012 a total of 11 Mt of landfill ore was reclaimed, crushed and processed. This resulted in the production of 2.5 Mt of processable crushed ore. The
plant will be moved to a more sheltered area with the aim of reducing environmental impact, mainly the diffusion of dust. A reinvestment in equipment to improve the environment will also be made.
RISKS AND UNCERTAINTY FACTORS
LKAB is exposed to different financial risks. Risk management is an important
part of operations in order to minimise the effect of factors that are outside the
Group’s control. The Group has methods for assessing and limiting these risks
by ensuring that they are managed according to fixed guidelines and procedures.
Drastic fluctuations in volume are LKAB’s biggest risk. The demand for iron ore
stems from global steel production. The volume of steel produced depends in turn
on fluctuations in the global economy. Other significant risks are falling iron ore
prices and a weak US dollar. Raised energy fees and taxes and increased costs for
emission allowances can also have distinct impacts.
LKAB’s biggest competitors extract ore in open-pit mines and therefore have
significantly lower production costs. High, uniform production quality and cost effectiveness are critical factors for the company’s ability to compete. LKAB’s greatest advantage compared to its competitors is the high quality of its magnetite ore.
Below is a description of the operational and financial risks that have the greatest significance for LKAB.
Operating risks
Secure, Safe, Lean Production
LKAB’s competitive ability is directly linked to its making continual improvements
to increase operational efficiency. A cost-cutting programme was launched during
the year.
Secure, lean, uninterrupted production is the backbone upon which LKAB creates economies of scale and constant streamlining. Throughout all of its operations LKAB operates under the Safety First banner.
LKAB Mekaniska AB
A subsidiary of LKAB Berg & Betong AB, the company develops and manufactures steel structures for major projects and technically advanced mechanical
components for the engineering, mining and civil engineering industries, as well as
assembly and full maintenance packages that create added value for customers,
principally LKAB.
Major projects during the year included a new roller press for the LKAB pelletizing plant and crusher and skip feeds in the new Kiruna main level.
Human resources and skills supply
LKAB’s planned development continues with the recruitment of almost 1,000 new,
qualified employees between 2013 and 2015. The ability to retain the existing
workforce and attract and recruit new employees is an extremely important condition for LKAB’s ability to achieve its established growth targets.
High investment levels
Investment projects in progress and LKAB’s future plans will entail major investments and thus large expenditures over the next few years. LKAB must therefore
remain financially strong and maintain a good earning ability to meet its future
obligations.
Ore Railway
Disruptions to traffic on the Ore Railway and Ofotbanen line constitute a risk for
LKAB deliveries.
Volume dependence
The demand for iron ore pellets is more volatile compared to fines in times of
changing prices and economic circumstances. LKAB’s sales, with an approximate
82 percent proportion of pellets, are more sensitive to prevailing economic circumstances that its competitors as the consumption of fines by steelmakers with their
own sintering plants is more stable and often forms the foundation for their production. LKAB has usually been able to sell all of its products, but the company must
improve its preparedness for future cyclical fluctuations, among other means by
greater flexibility in iron ore production, its products, sales and financial strength.
Price dependence
Trade in iron ore is priced in US dollars. Market prices depend on supply and
demand. Final prices are mostly set in bilateral negotiations between suppliers
and purchasers. However, there is a certain element of variable pricing with a
degree of fixed agreed components. The shift in the global centre of gravity of iron
ore trade toward China and other parts of Asia means that today there are more
ways to determine iron ore prices than previously, e.g. fixed prices for extended
periods of up to one year (annual prices), spot prices for individual loads, and indexed monthly and quarterly prices. LKAB prefers that the majority of customers
have fixed pricing for periods of up to one year to achieve long-term operational
planning benefits and to avoid spasmodic monthly variations in deliveries. The
price of pellets is based on global sinter fine prices plus a pellet premium. Ocean
freight costs are a major factor for steelmakers. Freight is part of the total cost
a customer must pay for the delivery of materials. Customers evaluate suppliers
based on the total price picture in relation to the added values the iron ore creates in connection with steelmaking, or the use of the completed steel products.
Distances to Europe mean that LKAB is favoured in the European market when
ocean freight prices are high, while distant mines become more competitive when
freight prices are low. This proximity advantage is assessed when prices are set.
Other operating risks
Availability of electricity
Increased production at LKAB facilities leads to an increase in the consumption of
electricity. Electricity is used principally in mining operations and ore processing.
Within a few years annual consumption is calculated to rise from around 2.2 TWh
in 2011 to just over 3 TWh from 2020.
Market prices on the Nordic electricity exchange have risen dramatically since
deregulation. Securing deliveries of competitively priced electricity is therefore of
great strategic importance for the Group. LKAB has developed a long-term strategy for managing energy procurement and energy efficiency.
Allocation of emissions allowances in the trading system
The EU has a trading system for emissions allowances aimed at reducing carbon
dioxide emissions.
LKAB’s principle competitors on the pellets market are located outside Europe,
mainly in Brazil. They are not affected by the EU trading system. This distorts
competition to LKAB’s disadvantage.
A new trading period for emissions allowances begins in 2013. New allocation
principles for emission allowances will be applied. LKAB has therefore applied for
a free allocation that will only partially cover emissions for the whole period. The
outstanding emission allowance requirement must be purchased. Iron ore pellets,
along with other industrial sectors, have been defined as being “exposed to the
risk of carbon leakage.” This means the licensing authority perceives there to be
a risk of an increase in carbon dioxide emissions outside the EU if the sector is
disadvantaged in relation to installations outside the EU trading system that have
higher emissions levels. These circumstances may aid LKAB in the upcoming allocation. An EU commission decision is expected in the beginning of 2013.
Concessions and licences
Customer dependence
The global iron ore and steel market is undergoing structural changes, and the
number of players has diminished. LKAB has relatively few customers and it
prioritises growing together with existing customers. This means that each individual customer increases in importance. Long-term customer relationships
and a customer structure spread across different markets have a certain stabilising effect on deliveries and risk exposure. Consistently high product quality, a
geographical logistics advantage in combination with value-adding products and
services are important risk-mitigating factors. The Minerals Division has a diversified customer base and product portfolio aside from magnetite that to a certain
degree cushions market fluctuations since different geographical areas, customer
segments and minerals have different economic cycles.
Urban transformations in the orefields
LKAB’s expansion in the orefields entails a successive expansion of deformation
zones caused by mining activities. The Group is therefore dependent on a gradual
migration of the Kiruna and Malmberget communities taking place. LKAB sets
aside significant sums to meet its obligations in this regard where legal or informal commitments to external parties exist, or may arise. There is a degree of
uncertainty around the cost evaluations made and the size of the necessary provisions – they may prove to be insufficient. The timetable for urban transformation
depends on a large number of operators in addition to LKAB. It is therefore not
possible to say that the transition can take place at the pace and scope necessary
for uninterrupted mining in both areas.
Urban transformation in the ore fields has impacted LKAB’s earnings and liquidity by considerable amounts, and will continue to do so in the years to come. LKAB
must therefore remain financially strong and maintain a good earning capacity to be
able to meet the existing obligations that urban transformation entail. In addition to
this there will also be subsequent demands resulting from future mining.
Various licence applications are associated with different types of risks depending
of the type of project and licence applied for. The risks may vary between the insignificant and extremely serious, but in general terms there may be risks for project delays that can entail cost increases or production disruptions or stoppages
in mines and processes. The licensing issue is crucial for the implementation of
LKAB 37 – a pivotal condition for future cost-effective production.
Financial risks
LKAB is exposed to various types of financial risks. These risks are associated with
fluctuations in the company’s earnings and cash flow as a result of fluctuations
in currency exchange rates, interest rates, refinancing and credit risks. Financial
risks are managed according to Group policies established by the LKAB’s Board of
Directors. LKAB has a centralised finance department, the LKAB Treasury Center.
The centre manages the majority of the Group’s financial risk management. A selective strategy is applied, whereby potential costs and benefits are balanced, the
aim being to minimise and neutralise risks in commercial flows. The LKAB Treasury
Centre also acts as the Group’s internal bank and supports subsidiaries with financing, investment and currency trading, and it functions as an advisor with respect to
financial issues.
Currency risks
Both LKAB’s future payment flows (transaction exposure) and revaluation of receivables and liabilities in foreign currencies (translation exposure) are exposed to
risks associated with fluctuations in exchange rates. Foreign subsidiaries within
the Group operate primarily in their local currencies and investments and financing alike are made mainly in the local currency with the aim of reducing translation exposure.
Transaction exposure
The greatest transaction exposure within the LKAB Group is within the Mining Division. All iron ore prices are set in US dollars and the transaction risk is therefore
high without hedging. The exact magnitude of this risk is difficult to determine far
in advance, since it is largely dependent on the market price of iron ore, which
is usually set annually. During 2012, transaction exposure amounted to approximately USD 3,806 million (4,061), and the effect of a difference of SEK 0.1 in the
USD/SEK exchange rate on LKAB’s operating profit, without hedging, is therefore
about SEK 381 million (406). LKAB applies cash-flow hedge accounting for forecast transactions in USD.
The objective of LKAB’s currency policy is to minimise as far as possible the
impact of exchange rate fluctuations on the income statement by means of selective hedging. The value of future transaction exposure is periodically hedged
under forward exchange contracts. The Board of Directors has set up a currency
and finance committee that convenes four to six times per year. Among other
things the committee advises the Board on decisions regarding the management
of Mining Division currency risks, within a framework established by the Board.
Hedging takes place mainly for estimated US dollar flows for the forecast period
concerned, which usually has a rolling twelve-month horizon. As a framework for
future estimated exposures in US dollars hedged levels may at a maximum reach
80, 60 and 50 percent of estimated net flows for 12, 24 and 36 months ahead
respectively. No hedging may take place more than 36 months ahead without approval from the Board of Directors. During 2012 hedges were at the 48 percent
level of transaction exposure.
Transaction exposure for other companies in the Group arises mainly when raw
materials are purchased in foreign currencies. Each subsidiary is responsible for
its own currency exposure and all forward exchange contracts must be through
the LKAB Treasury Centre.
Translation exposure
LKAB does not normally hedge its translation exposure, since the latter is not
substantial and a hedge over time adds no value for the Group.
Interest risks and share-price risks
LKAB’s financing sources are shareholders’ equity, provisions and current operating credits, which means that LKAB is mainly exposed to interest rate risks
with regard to investments of cash and cash equivalents. LKAB’s finance policy
governs the maximum permitted average duration in each respective asset portfolio. For example, in our urban transformation liabilities portfolio the duration
of money-market instruments may not exceed the duration of the commitment
+/– 24 months. As of December 31, 2012, LKAB’s investments in money-market
instruments amounted to SEK 15,871 million (15,591), and the duration 110 (105)
days. A one percent increase in the market rate as of closing day would have
affected income by SEK 49 million (46). LKAB invests a proportion of cash and
cash equivalents that have an investment horizon longer than five years, mainly
to cover that share of LKAB’s pension liabilities not covered by other assets, in
share-related securities. As of December 31, 2012, the market value of LKAB’s
investments in shares excluding SSAB shares amounted to SEK 1,316 million
(1,065). A ten percent average decrease in the market value of shares as of closing day, would affect income negatively by SEK 132 million (107).
owned by the Swedish state, county councils, municipalities, municipal companies
or companies with high credit ratings. No departures from the investment policy
took place during 2012. As of closing day, 33 (32) percent of investments in moneymarket instruments were issued by the Swedish state and Swedish banks. LKAB
has had no bad debt losses in current investments in the past five years. LKAB
uses several different banks with high credit ratings for derivative transactions.
Liquidity risks
LKAB maintains good financial preparedness by following guidelines that regulate
risk-taking and the investment horizon. LKAB has a high proportion of cash and
cash equivalents and no debt. LKAB has an unutilised loan facility of around SEK
5,000 million. Cash and cash equivalents amounted to SEK 5,437 million (8,695) on
December 31. The equity/assets ratio on closing day was 72 (70) percent. A good
balance between short and long investment horizons will meet the long-term
financing need. Cash and cash equivalents are invested mainly in the Swedish
money market in securities with high liquidity. LKAB works with short-term and
long-term liquidity forecasts.
Insurance coverage
LKAB insures its interests including the Group’s facilities throughout the world
to protect against unforeseen circumstances. The largest single insurable risks
concern property and disruptions. In this regard, production facilities and harbours are covered by a comprehensive insurance policy. Insurance is provided by
the Group’s own insurance company, LKAB Försäkring AB. Liabilities in excess of
SEK 300 million are reinsured on the international insurance market. LKAB works
actively and systematically to prevent damage and interruptions in production.
Historically, production interruptions due to fire have resulted in the greatest financial losses. Preventive work in this area has high priority.
In Sweden, liability for damage to third parties as a result of dam accidents is
strict and unlimited. LKAB has therefore taken out so-called dam liability insurance.
Other insurance coverage includes liability insurance, product liability insurance, medical and business travel insurance, transport insurance and liability insurance for the President and Board of Directors.
Sensitivity analysis
The sensitivity analysis shown below summarises the sensitivity of outcomes in
the Parent Company to hypothetical fluctuations in interest rates and market prices Parent Company delivery volumes and price influence are determining factors
for the Group’s income. Delivery volumes are not comparable in different sectors.
The sensitivity analysis is divided into two parts; the delivery and price analysis
concerns the Parent Company and the remaining part relates to the entire Group.
SENSITIVITY ANALYSIS, 2012
GroupEffect on
Exposure Change
Deliveries of iron ore products
earnings
26,3 Mt 1 MtSEK 487 million1)
Price of iron ore products
10 percentSEK 2,518 million2)
Personnel costsSEK 3,474 million
10 percentSEK 347 million
Energy costsSEK 1,687 million
Credit risks
Transport costsSEK 2,384 million
LKAB’s credit risks are mainly associated with trade receivables, derivatives and
current investments. In the case of credit risks in trade receivables, LKAB prioritises long-term customer relations, which means that the majority of the customers are well-established. During 2012, the five largest customers accounted for
60 percent (61) of net sales in the Parent Company. Export letters of credit are
used if necessary. During the year LKAB suffered bad debt losses of SEK 66 million following the bankruptcy of a customer. During 2012, the average collection
period for accounts receivable remained around 47 (38) days. According to LKAB’s
investment policy, current investments may only be made to borrowers with high
creditworthiness and high liquidity such as the Swedish state, companies wholly
SSAB sharesSEK 698 million
10 percentSEK 70 million3)
US Dollar rate – w/o forward
contractsUSD 3,806 millionSEK 0.10SEK 381 million2)
Money market investmentsSEK 15,871 million
1 percentSEK 49 million4)
1)
Average value, calculated on unchanged product mix
2)
During 2012 total exposure was USD 3,806 million of which USD 1,840 million
was hedged. 3)
Change in value is reported in other comprehensive income.
4)
Change in value is reported in the income statement on existing portfolio.
SUSTAINABILITY, external ENVIRONMENT
General
LKAB’s work must be characterised by concern for the environment. To this end
LKAB has adopted an environmental and energy policy that governs LKAB’s actions while affirming the company’s objective of maintaining financially sound and
successful business operations. The policy is published on www.lkab.com.
November, 2012. They were adjourned when the Environmental Protection
Agency submitted new material in the case, in direct connection with the pro ceedings. Possible new proceedings and a ruling are expected in 2013.
Operations in Luleå
• New bentonite facility in Luleå – licence issued during 2012.
Licensable operations – existing licences
Internal inspections and deviations during 2012
The Group conducts licensable operations as described by the Environmental
Code via the Parent Company LKAB and its Swedish subsidiaries. The factor that
affects the environment most is the impact from mining operations on the landscape and urban environments in the orefields. Other factors are emissions to air
and discharges to water arising from ore processing, dust, vibration and energy
consumption from operations.
The most important environmental licences refer to large scale mining and processing plants for iron ore products in the orefields. There are also a number of
minor licences for e.g. quarries and gravel pits.
Examples include:
• A licence for mining in the Kiruna underground mine.
• Two licences for ore processing in Kiruna and Svappavaara.
• A single licence covering both mining and ore processing in Malmberget.
• A licence for the mining of additives used in ore processing.
• LKAB’s dams are affected by a number of licences that govern water levels and
run-off.
• Two licences are for handling iron ore products and binding agents that impact
the environment mainly through the release of particulates and dust at the har bour facilities in Luleå and Narvik. One licence covers LKAB KIMIT AB’s explo sives production in Kiruna which impacts the environment mainly through the
release of compounds of nitrogen to the municipal sewers.
Internal inspections are mandatory and an aid to meeting the requirements of the
environmental licences and the various decisions from the supervisory authorities
in licensing matters.
LKAB regularly performs internal inspections and a large number of measurements and surveys to ensure compliance with licences in the various operations.
The outcomes of internal inspections are summarised in environmental reports
from the different operations which are then sent to the County Administrative
Board, the supervisory authority. The reports are also available on the website at
www.lkab.com.
Measurements carried out in 2012 showed that conditions for vibrations from
blasting in Malmberget and Kiruna were met.
Prescribed noise standards were exceeded in Kiruna. The County Administrative Board has been informed and LKAB has taken action to ensure a survey of
noise from operations is carried out.
Conditions for emissions to atmosphere in Kiruna, Malmberget and Svappavaara were met in 2012.
The standard for particulates was exceeded a number of times in operational
areas. With the exception of an installation in Luleå, all of the cases have been reported, remedied and approved following remeasurement. Particulate conditions
at the Gruvberget crusher were met following two remeasurements. However, the
County Administrative Board decided to file proceedings regarding the breach of
content limits in the conditions.
current state of licenses
Remediation/decontamination
Gruvberget in Svappavara
•Mining began in the open-pit mine in May, 2010. Mining was stopped during
the summer of 2012. Behind the stoppage was an appeal from the Swedish
Environmental Protection Agency that was upheld by the Swedish Land and
Environment Court, and which came into force when the Supreme Court denied
LKAB’s leave to appeal.
• The Environmental Protection Agency asserted that LKAB’s application for the original licence was too narrowly defined. The application for Gruvberget has
run along parallel lines. In the summer of 2012 LKAB added to its previously
submitted application for Svappavaara processing operations so that it also
covered operations at Gruvberget. Proceedings were held in November regard-
ing a separate ruling for Gruvberget, which resulted in a temporary licence
for mining during 2013. A final environmental ruling for Gruvberget and other operations in Svappavaara are expected by the end of June, 2013.
LKAB cooperates with the environmental authorities regarding how plans for statutory long-term remediation for the mining areas will be prepared. During 2012
LKAB’s waste rock piles were sown with grass and planted with trees.
Leveäniemi open-pit mine
• In June LKAB was granted permission to begin draining the open-pit mine. In
September pumping began into the stream system that drains into the Torne
River. Drainage is expected to take just over 2 years.
Mining in Mertainen
• Proceedings regarding the application for full-scale mining in Mertainen will
take place in May, 2013.
Operations in Kiruna
•Conditions for the release of nitrogen in the form of ammonia from the compa ny’s settling basin in Kiruna to the repository was approved by the Environ mental Court in 2009. LKAB appealed the ruling. The Land and Environment
Court did not grant leave; however, the Supreme Court did. The case referred
back to the Land and Environment Court. Initial proceedings were held in
PERSONNEL
Statistics2012 2011
Number of accidents with absence
73
48
Accident rate per million working hours
9.89
6.79
Long-term absence due to illness, %
0.5
0.5
Short-term absence due to illness, %
2.4
2.4
Number of individuals, open-ended employment
359
397
Of whom women
104
111
194
Number who left LKAB
144
Of whom women
19
17
Proportion of women in the Group, %
17.5
16.7
15.9
Proportion of female managers in the Group, %
17.8
Number of in-service training days per person/year
6
7
Outcome of Parent Company reward system, SEK 33,763
60,000
Work environment/health
During 2012 LKAB continued the efforts to reduce the number of accidents in the
Group. To a certain degree these efforts have had the desired effect – the number
of accidents resulting in long absences has fallen, as has the number of accidents
without absences. On the other hand, accidents with short absences (1–3 days)
have increased, which means the year’s target of a 20 percent reduction was not
achieved. Overall the accident rate (the number of accidents with absence per
million working hours) increased to 9.89 compared to the target of 5.4. Thanks to
long-term, systematic work with preventive health initiatives and rehabilitation,
long-term and short-term absences remain at low levels.
Recruitment, retirements
LKAB’s goal is for 30 percent of new recruits to be women; the outcome was 29
percent, i.e. just under target. This means the proportion of women continued to
increase but at a lower rate than intended. The majority of individuals leaving the
Group did so in conjunction with retirement and the proportion of women leaving
the Group was 13 percent, which is lower than the proportion of women working
in the company.
Equality, non-discrimination and diversity
There is an aspiration for a more even gender distribution and increased diversity
in all recruitment activities and during 2012 the proportion of women continued
to increase. A diversity survey was carried out in 2011, and during 2012 an action
plan with activities was prepared. One activity was a diversity seminar open to
all employees, another was an equal opportunities plan that formed the basis for
discussions at the workplaces. LKAB also participated in the MER (DCR – Diversity,
Commitment, Respect) project, a County Administrative Board initiative aimed at
increasing understanding of the importance of diversity in the region. LKAB also
took part in the National Matching project in collaboration with the national employment agency in which newly arrived university graduates with foreign backgrounds are matched to a job in Sweden. This resulted in two people who had not
previously had work within their professional areas finding such work at LKAB.
competence development and the future skills supply
Skills enhancement remained in focus, with just over 6 training days per employee
per year, which is higher than the targeted 5 days. Training initiatives carried out
within the work environment area continued, among other things an obligatory
LKAB safety drivers licence was introduced in 2012 for all employees. Work on
operational development according to a shared model continued in the Group, and
managers and employees covered by PTK (Council for Negotiation and Co-operation) underwent supplementary training in performance development according to
a model jointly created by PTK unions describing how performance reviews and
employee development should be pursued.
LKAB’s in-house rock worker training remains attractive and continued during
2012. The LKAB Academy has provided support for more than 100 different projects in Kiruna and Gällivare municipalities, from preschools to upper secondary
schools. In all just over SEK 8 million was spent during 2012 in support of various
projects. Sums varied from a few hundred kronor for a pupil project to SEK 2.5
million for modern equipment for an upper secondary school. During the year
the Academy also arrange a lecture by the 2011 Nobel chemistry laureate Dan
Schechtman, who addressed upper secondary students from the region.
Incentive scheme
The Parent Company’s incentive scheme was introduced in mid-2000. The subsidiaries LKAB Malmtrafik AB, LKAB Malmtrafikk AS, Minelco AB and LKAB Norge
AS are also included in the scheme. The President and other senior executives
are not included.
The system, which follows the owner’s guidelines for incentive schemes, is
based on three factors; quality, work environment and production targets. The incentive was maximised, as of January 1, 2010, at SEK 60,000 per full-time employee per year for the years 2010-2012. Incentives are conditional upon positive
results in the operations that are included the scheme. In 2011 all parameters led
to incentive payments, The outcome for 2012 was SEK 33,291 per full-time employee with full attendance.
CORPORATE GOVERNANCE
A description of corporate governance is presented in a special corporate governance report in accordance with Chapter 6 Section 8 of the Annual Accounts Act.
The report is included on pages 65-71 of this document For a description of the
more important features in the Group’s system for internal inspections and risk
management in connection with the preparation of the consolidated accounts we
refer to the control environment section of the corporate governance report on
page 70 of the print version of the annual report, available at www.lkab.com.
Board of Directors during 2012
During 2012, the Board of Directors consisted of seven members elected by the
Annual General Meeting, plus three members and three deputies appointed by the
employees. Four board members were re-elected and three new members elected at the AGM. The three new board members are Maud Olofsson, Hans Biörck
and Sten Jakobsson.
The Board of Directors’ Rules of Procedure
The Board of Directors establishes its rules of procedure annually. The Board held
ten meetings during the 2012 financial year. The meetings follow a set annual
calendar aimed at satisfying the Board’s need for information and are otherwise
governed by the special rules of procedure followed by the Board. Normally, seven
meetings are held each year.
A board meeting held immediately after each quarter considers the latest financial statements and the outlook for the calendar year. This allows the Board to
make an ongoing assessment of strategies and delegations to the President and
to take up-to-date positions on specific investment projects.
The first meeting of the year usually concerns the closing of accounts, and
LKAB’s auditors also participate. At the second meeting, the annual report is reviewed. Among other things, meetings three through six take up operational and
strategy matters, personnel issues and market development while at the year’s
final meeting, decisions are taken regarding the budget and operational plans for
the coming year.
The work of the Board is evaluated once per year. A written survey is prepared
annually and covering issues such as how the Board collectively, and each member individually, has fulfilled its assignment. The evaluation report is used internally by the Board as a support tool. The Chairman is responsible for following up
the results, which form the basis for discussions and improvements. The work of
the Chairman is normally assessed by the owner, but this may also be part of the
work of the Board.
GUIDELINES FOR REMUNERATIONS TO SENIOR EXECUTIVES
The 2012 AGM adopted the Board’s proposal for guidelines concerning remuneration and other employment terms for senior executives. The LKAB guidelines follow government guidelines for employment terms for senior executives in stateowned companies adopted on April 20, 2009. Among other things the guidelines
state that variable salary may not be paid to senior executives, that pensions must
be defined contribution plans unless they are part of a pension plan under a collective agreement, and that the premium should not exceed 30 percent of the
fixed salary. The pensionable age shall not be less than 62 years and should be
at least 65.
The Board proposes that the Annual General Meeting of April 29, 2013 resolve
to apply the above-mentioned guidelines and terms when new senior executives
are employed and when the salaries of senior executives currently employed are
renegotiated. The Board’s proposal is designed to ensure that the LKAB Group is
able to offer remunerations at competitive market rates sufficient to attract and
retain qualified senior executives to LKAB’s Group Management. Group Management remunerations include fixed salaries, allowances for cars, board, life insurance and pension benefits. The components are intended to create a well-balanced
remuneration and benefits package that reflects the individual’s performance, responsibility and the LKAB Group’s growth. The fixed salary, which is determined
individually and differentiated on the basis of the individual’s responsibility and
performance, is set according to market principles and is reviewed annually.
Agreements entered into before the Annual General Meeting of April 29, 2013
have complied with current government guidelines. For further information concerning remuneration to senior executives, see Note 6. Employees, personnel
costs and remuneration to senior executives.
EVENTS AFTER CLOSING DAY
No significant events have taken place since the closing date.
EXPECTATIONS REGARDING FUTURE DEVELOPMENT
The iron ore market is growing and demand for DR pellets for gas-based iron
and steel production in particular is expected to grow in the next few years. To
continue to be a so-called preferred supplier, LKAB must be able to grow with its
customers.
The strategy for the next few years includes a volume increase of just over 35
percent to reach an annual capacity of 37 Mt iron ore products by 2015. Growth
enhances LKAB’s competitiveness through higher volumes, which mean lower
costs per tonne. Growth requires an increasing availability of iron ore to process
into high-quality, climate-smart iron ore products, mainly pellets. The major part
of the additional iron ore must come from new mines, mainly three open-pit mines
in the so-called Svappavaara orefield.
In December 2012 production was able to resume in the Gruvberget open-pit
mine following a six-month wait for an environmental licence. Production in Gruvberget is planned to contribute 2 Mt iron ore during 2013.
In June 2012, the Norrbotten County Administrative Board granted LKAB permission to drain the Leveäniemi open-pit mine. Draining began in September 2012
and is expected to be complete in 2014, during which time additional orebody
surveys will take place. An application for a mining licence for Mertainen was
submitted to the Land and Environment Court in the beginning of March. The timetable for the planned expansion of LKAB’s mine capacity is entirely dependent on
obtaining an environmental licence. The risk that the necessary licences for the
three open-pit mines in Svappavaara will not be issued in time has decreased.
Prospecting for additional iron ore deposits is under way in the mines and the
immediate surroundings of the existing operational areas. The prospecting organization is being strengthened and total prospecting costs are calculated to reach
SEK 93 million during 2013.
The growth strategy necessitates an Ore Railway haulage capacity of 40 million
tons of iron ore products in 2015. This will require longer passing sidings on the
track between Luleå and Narvik. The Swedish Transport Administration is extending four passing sidings along the Ore Railway. This is necessary, especially since
there are also other operators that traffic and plan to traffic the route.
LKAB’s exposure on the electricity market is increasing. The overall growth
strategy will lead to the increased consumption of electricity despite major energy efficiency initiatives. A long-term strategy for both energy procurement and
energy efficiency has been prepared to manage future price developments and
increased energy consumption.
LKAB’s research centre in Malmberget opened in 2012. A one-of-a-kind experimental blast furnace has been in operation in Luleå since 1997 – an important aid
to LKAB’s customer relations. Continued investments to safeguard world-class research and development is a necessity if LKAB is to retain its technological world
leadership in iron ore pellets.
Investment projects in progress and LKAB’s future plans will entail major investments and thus large expenditures over the next few years. Furthermore, continued underground mining in Kiruna and Malmberget and the start of new mines
in the Svappavaara orefield will entail major costs for their impact on communities in all three areas. LKAB must therefore remain financially strong and maintain
a good earning ability to meet the future obligations that structural change will
entail.
Consolidated income statement
January 1 – December 31
SEK million
Note
2012
2011
1
Net sales
2, 326,97131,122
Cost of goods sold
27
-15,177
-15,190
Gross profit
11,794
15,932
Selling expenses
-249
-223
Administrative expenses
-608
-640
Research and development expenses
-283
-328
Other operating income
4539366
Other operating expenses
5-598-403
Operating profit 3, 6, 7, 8
10,59514,705
Financial income
Financial expenses
Net financial income/expense
9
744
503
-316
-407
42896
Profit before tax
11,023
14,801
Tax
11
Profit for the year
-2,234
8,789
- 3,841
10,960
Attributable to:
Parent company’s shareholders
8,789
10,960
Earnings per share after dilution (SEK)
1212,55515,657
Consolidated statement of comprehensive income
Profit for the year
8,789
10,960
Other comprehensive income
Exchange rate differences on translation for foreign entities for the year
-18
Change in fair value of available-for-sale financial assets
-50
Change in fair value of cash flow hedges
226
Changes in fair value of cash-flow hedges transferred to profit for the year
65
Actuarial gains and losses
-214
Tax attributable to components of cash flow hedges and actuarial gains and losses
-20
-10
-646
-65
-218
-172
94
Total comprehensive income attributable to:
Parent company’s owner
-11
-1,017
8,778
9,943
The items transferred during the year to Net income for the year are reported in the income statement partly under Net sales and partly under Tax.
Consolidated financial statements | 91
Consolidated statement of financial position
As of December 31,
SEK million
Note
2012
2011
1, 32
Assets
15, 30
Non-current assets
Intangible assets
13277270
1430,17326,285
Participations in associated companies
0
1
Financial investments
18, 29
993
1 038
Non-current receivables
20106 85
Total non-current assets
31,549
27,679
Current assets
Inventories
212,5152,449
Accounts receivable
223,0604,592
Prepaid expenses and accrued income
23 93144
Other current receivables
201,732 665
Current investments
18, 29, 3513,235 9,506
Cash and cash equivalents
355,4378,695
Total current assets
26,072
26,051
Total assets
57,621 53,730
Shareholders’ equity and liabilities
Equity22, 24
Share capital
700
Reserves
671
Retained earnings including profit for the year
40,300 Equity attributable to Parent Company shareholders
41,671
Total shareholders’ equity
41,671
700
515
36,678
37,893
37,893
Non-current liabilities
Provisions for pensions and similar commitments
252,9702,775
Provision for urban transformation
26, 274,9344,664
Other provisions
26160161
Deferred tax liability
113,5163,775
Total non-current liabilities
11,580
11,375
Current liabilities
Trade payables
1,760
1,982
Other liabilities
192
570
Accrued expenses and prepaid income
281,4181,241
26, 27943439
Other provisions
26 57230
Total current liabilities
4,370
4,462
Total liabilities
15,950
15,837
57,621
53,730
Pledged assets and contingent liabilities for the Group
As of December 31,
SEK million
Pledged assets
Contingent liabilities
Note
31/12/2012
31/12/2011
31239243
319651
Consolidated statement of changes in shareholders’ equity
Equity attributable to Parent Company shareholders
Reserves
SEK million
Note
1
Opening equity January 1, 2011
Share capital
Translation
reserve
Fair value
reserve
Hedge reserve
700
-93
1,313
160
Profit for the year
24
Comprehensive income for the year
700
Total equity
30,871
32,951
10,960
10,960
-10
-647
-208
-153
-1,018
-10
-647
-208
10,807
9,942
-5,000
-5,000
36,678
37,893
Dividend
Closing equity December 31, 2011
Profit brought
forward
incl.profit for
the year
-103
666
-48
Equity attributable to Parent Company shareholders
Reserves
SEK million
Note
1
Share capital
Translation
reserve
Fair value
reserve
Hedge reserve
700
-103
666
-48
-18
-50
224
-18
-50
224
Profit for the year
24
Dividend
700
-121
616
176
Profit brought
forward
incl. profit for
the year
Total equity
36,678
37,893
8,789
8,789
-167
-11
-8,622
8,778
-5,000
-5,000
40,300
41,671
Consolidated financial statements | 93
Consolidated statement of cash flow (indirect method)
SEK million
Note
2012
2011
1, 35
Operating activities
Profit before tax
11,023
14,802
Adjustment for items not included in cash flow 2,845
3,268
-3,169
-4,032
Income tax paid
Cash flow from operating activities before changes in working capital
10,699
14,038
Disbursements for urban transformation
26, 27
-407
-382
Cash flow from changes in working capital
Increase (-) / Decrease (+) in inventories
-66
Increase (-) / Decrease (+) in operating receivables
1,412
-366
Increase (+) / Decrease (-) in operating liabilities
11,272
-375
-463
930
13,748
Investing activities
Acquisition of property, plant and equipment
-5,808
Disposal of property, plant and equipment
6
Divestments/acquisitions (net) in current investments
-3,729
Cash flow from investment activities
-9,531
-5,126
17
-2,990
-8,099
Financing activities
Dividends paid to Parent Company shareholders
-5,000
Cash flow from financing activities
-5,000
-5,000
-5,000
-3,259
649
Cash and cash equivalents at beginning of year
Cash and cash equivalents at year end
8,695
5,437
8,046
8,695
Consolidated operating cash flow
(SEK million)
Investments in property, plant and equipment
Operating cash flow (excluding current investments)
Current investments (net)
Cash flow after investment activities
Cash flow from financing activities – dividend paid
2012
11,273
-5,808
6
5,471
-3,729
1 741
-5,000
-3,259
2011
13,748
-5,126
17
8,639
-2,990
5 649
-5,000
649
Income statement – Parent Company
SEK million
Note
2012
2011
1
Net sales
2, 3 25,054 28,282
Cost of goods sold
27
-14,145
-13,579
Gross profit
10,909
14,703
Selling expenses
-153
-138
-468
-508
Research and development expenses
-271
-318
Other operating income
4466219
5-395-379
Operating profit 6, 7, 8
10,08813,579
Income from financial items:
Income from participations in Group companies 324
43
Income from participations in associated companies 1
0
Income from other securities and receivables held as non-current assets
140
147
Other interest income and similar profit/loss items
520
380
Interest expense and similar profit/loss items
-231
-123
Profit after financial items
9
10,84214,026
Appropriations
10-2,358-2,373
Profit before tax
8,485
11,653
Tax
11-2,216-3,046
Profit for the year
6,269
8,607
Statement of comprehensive income – Parent Company
Profit for the year
6,269
-
6,269
8,607
8,607
Financial statements – Parent Company | 95
Balance Sheet – Parent Company
As of December 31
SEK million
Note
31/12/2012
31/12/2011
1, 32
Assets
30
Non-current assets
Intangible assets
137358
1424,67521,165
Financial assets
331,4101,410
1601
171,1421,296
Receivables from subsidiaries
Receivables from associated companies 170
Other non-current securities holdings
19, 29129127
Other non-current receivables
20, 29185170
11486288
Deferred tax asset
Total financial assets
3,352
3,292
Total non-current assets
28,100
24,516
Current assets
Inventories
211,9461,879
Current receivables
Accounts receivable
222,9184,146
Receivables from subsidiaries
171,3981,570
Other current receivables
201,352 688
Prepaid expenses and accrued income
237080
Total current receivable
5,738
6,484
Current investments
18, 3517,88317,073
35457830
Total current assets
26,024
26,266
Total assets
54,124 50,782
Balance Sheet – Parent Company
SEK million
Note
31/12/2012
31/12/2011
1, 32
Shareholders’ equity and liabilities
Equity
24
Restricted equity
Share capital (700 000 shares)
700
700
Statutory reserve
697
697
Non-restricted equity
Retained earnings including profit for the year
18,390 Profit for the year
6,269
Total shareholders’ equity
26,056
Untaxed reserves
14,782
8,607
24,786
3416,86614,509
Provisions
26, 274,9344,664
Other provisions
25, 261,6161,777
Total provisions
6,550
6,441
Current liabilities
Trade payables
1,394
1,398
Liabilities to Group companies
991
1 906
Other current liabilities
99
255
Accrued expenses and prepaid income
281,2251,048
26, 27
943
439
Total current liabilities
4,652
5,046
54,124
50,782
Pledged assets and contingent liabilities – Parent Company
As of December 31
SEK million
Pledged assets
Note
31/12/2012
31/12/2011
31236240
31126153
Financial statements – Parent Company | 97
Statement of changes in shareholders’ equity – Parent Company
see Note 24
SEK million
Restricted equity
Share
capital
Statutory
reserve
Retained
earnings
700
697
19,783
SEK million
-5,000
700
697
14,782
8,607
Share
capital
Statutory
reserve
Retained
earnings
700
697
23,390
Dividend
Profit for
the year
697
18,390
24,786
Total equity
24,786
6,269
6,269
6,269
26,056
-5,000
700
8,607
-5,000
Restricted equity
Total equity
21,180
8,607
Dividend
Profit for
the year
-5,000
Statement of cash flow – Parent Company (indirect method)
SEK million
Note
2012
2011
1, 35
Operating activities
Profit after financial items
10,842
14,026
Adjustment for items not included in cash flow 2,475
2,982
Income tax paid
-3,020
-3,841
Cash flow from operating activities before changes in working capital
10,297
13,167
Disbursements for urban transformation
27
-407
-382
Cash flow from changes in working capital
Increase (-) / Decrease (+) in inventories
-67
Increase (-) / Decrease (+) in operating receivables
1,353
-897
Increase (+) / Decrease (-) in operating liabilities
10,279
-407
-630
1,285
13,033
Investing activities
Acquisition of property, plant and equipment
-5,419
439
Acquisition of subsidiary
-
Disposal of financial assets
138
Divestments/acquisitions (net) in current investments
-3,655
Cash flow from investment activities
-8,497
-4,652
778
-10
-368
-3,150
-7,402
Financing activities
Dividend paid
-5 000
Cash flow from financing activities
-5,000
-5 000
-5,000
-3,218
631
Cash and cash equivalents at beginning of year
Cash and cash equivalents at year end
8,469
5,251
7,838
8,469
Notes to the financial statements | 99
Notes to the financial statements
Note 1 Significant accounting principles
1 Conformity with norms and legislation
The consolidated accounts were prepared in accordance with International Financial
Reporting Standards (IFRS) as published by the International Accounting Standards
Board (IASB), and the interpretations by the International Financial Reporting Interpretations Committee (IFRIC) as approved by the EU. In addition the Swedish Financial
Reporting Board’s recommendation RFR 1 Supplementary Rules for Consolidated
Financial Statements was applied.
The annual accounts and consolidated accounts were approved for issue by the
Board of Directors and President on March 20, 2013. The consolidate income statement, statement of financial position and the Parent Company’s income statement and
balance sheet will be the subject of approval at the Annual General Meeting on April
29, 2013.
2 Measurement bases applied when preparing Parent Company
and consolidated financial statements
The main principle is that assets and liabilities are reported at historical cost. A certain
few financial assets and liabilities are reported at fair value. Financial assets and
liabilities that are reported at fair value consist of derivative instruments, financial assets classified as financial assets reported at fair value via the income statement or as
financial assets available for sale.
3 Functional currency and presentation currency
The Parent Company’s functional currency is Swedish crowns (SEK), which is also
the Parent Company’s and Group’s presentation currency. This means that financial
statements are presented in SEK. All amounts are rounded to the nearest SEK million,
unless otherwise specified.
4 Assessments and estimates in the financial reports
Preparing the financial statements in accordance with IFRS requires Company
Management to make assessments, estimates, and assumptions that influence the
application of accounting principles and the reported amounts of assets, liabilities,
income and expenses.
The estimates and assumptions are reviewed regularly. Amendments to estimates
are reported in the period in which the change is made if the change only affects this
period, or in the period in which the change is made and future periods if the change
affects both the period concerned and future periods
Assessments of accounting principles made by Company Management that have a
substantial impact on the financial statements and estimates made and which may
lead to significant adjustments in the financial statements of subsequent years are
described in more detail in section 28, Significant estimates and assessments.
5 Important applied accounting principles
The below-mentioned accounting principles for the Group were applied consistently
for all periods presented in the consolidated financial statements, unless otherwise
specified. The accounting principles for the Group were applied consistently in the
preparation and consolidation of the Parent Company, subsidiary and joint venture
company reports.
6 New and changed standards and interpretations for 2012
The following standards came into force in 2012 and have been applied by LKAB for the
2012 financial year. Changes to IFRS 7 Financial Instruments Disclosures (disclosures when transferring financial assets) and an amendment to IAS 12 Income Taxes
(Deferred tax: Recovery of Underlying Assets). These changed standards have had no
effect on consolidated financial statements for 2012. No new interpretations from IFRS
IC have come into force for the 2012 financial year.
7 New and changed standards and interpretations
which have not yet come into force
The International Accounting Standards Board (IASB) has published the following new
and changed standards which have not yet come into force:
Standards
To be applied to the
financial year beginning:
Changes to IAS 1 Presentation of Financial Statements
(Presentation of items in other comprehensive income)
July 1, 2012 or later
Changes to IAS 19 Employee benefits
January 1, 2013 or later
IFRS 13 Fair Value Measurement
Annual Improvements to IFRSs 2009-2011 cycle*
Changes to IFRS 7 Financial Instruments
Disclosures (Offsetting financial assets and
financial liabilities)
Changes to IAS 32 Financial Instruments:
Classification (Offsetting financial assets and
financial liabilities)
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosures of Interests in Other Entities
Changes to IFRS 10, IFRS 11 and IFRS 12
(Provisional regulations)**
Changes to IAS 27 Separate Financial Statements
Changes to IAS 28 Investments in Associates and
Joint Ventures
Investment Entities
(changes to IFRS 10, IFRS 12 and IAS 27)*
IFRS 9 Financial Instruments and subsequent
changes to IFRS 9 and IFRS 7*
* As yet not approved for application within EU.
** As yet not approved for application within EU. According to IASB, IFRS 10, IFRS 11,
IFRS 12, IAS 27 and IAS 28 come into force from the financial year beginning January
1, 2013, but they will not come into force within the EU until the financial year beginning
January 1, 2014 or later.
IFRS Interpretations Committee (IFRIC) has published the following new interpretation, which has not yet come into force:
Standards
To be applied to the
financial year beginning:
IFRIC 20 Stripping Costs in the Production Phase
of a Surface Mine
The above new and changed standards and interpretations have not yet come into
force.
New and changed standards which will affect consolidated
financial statements from the beginning of 2013:
Changes to IAS 1 Presentation of Financial Statements requires additional disclosures in
other comprehensive income so that items in are grouped in two categories: a) items
that will not be transferred to earnings and b) items that will be transferred to earnings
if certain criteria are met. In the opinion of company management the changes to IAS
1 will affect and change the presentation of items reported in other comprehensive
income but not affect the financial position and results reported.
Current mining operations in the LKAB Mining Division are carried out in underground mines. During 2013 mining was begun in the Gruvberget open-pit mine in Svappavaara, and this is currently LKAB’s only open-pit mine. Operations in the open-pit
mine were limited during 2012. The company’s financial position and results in 2012
would not have been reported differently had IFRIC 20 been applied in 2012.
The changes in IAS 19 changes the reporting of defined-benefits pension plans
and compensation on termination. Because LKAB already reports actuarial gains and
losses in other comprehensive income, the change to IAS 19R, which removes the socalled corridor method, will have no significant effect on LKAB.
Furthermore, interest expenses and anticipated return on plan assets are replaced
with “net interest income”, which must be calculated using the same discount rate used
when calculating the defined-benefits pension obligation. The change means that net
financial income/expense would have been negatively affected by around SEK 11 million and other comprehensive income would have increased by the same amount.
IFRS 13 Fair Value Measurement establishes rules for valuation at fair value when
so required by other standards. The standard is applicable to valuation to fair value
of both financial and non-financial items. Fair value is defined as the price that would
have been received for the sale of an asset or the compensation that would be paid for
transferring a liability in a normal transaction between market players at the time of
valuation (exit price). IFRS 13 requires several quantitative and qualitative disclosures
about valuation to fair value. The changes will not entail any significant changes to
LKAB’s results and financial position.
8 Classifications etc.
Non-current assets and non-current liabilities consist chiefly of amounts that are
expected to be recovered or paid more than twelve months from the closing day. Current assets and current liabilities consist chiefly of amounts that are expected to be
recovered or paid more within twelve months from the closing day.
9 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 discrete financial
information is available. An operating segment’s result is reviewed regularly by the
company’s most senior executive decision maker, which is Group Management, to
assess its performance in order to allocate resources to the operating segment. There
are three identified operating segments within the LKAB Group: the Mining Division,
Minerals Division and Special Businesses Division. Refer to Note 3 for a presentation of
operating segments and a more detailed description of their division.
10 Consolidation principles
10.1 Subsidiaries
Subsidiaries are companies which operate under the controlling influence of the Parent
Company. Controlling influence means a direct or indirect right to decide a company’s
financial and operational strategies with the objective of gaining economic benefits.
When assessing whether a controlling influence exists, the existence of shares with potential voting rights that are currently exercisable or convertible should be considered.
Subsidiaries are reported according to the purchase method, which means that the
acquisition of a subsidiary is regarded as a transaction in which the Group indirectly
acquires the subsidiary’s assets and assumes its liabilities and contingent liabilities.
The Group acquisition value is determined in an acquisition analysis in connection
with the acquisition. The analysis establishes the acquisition value of the participation
or business operation, the fair value on the day of acquisition of acquired identifiable assets and assumed liabilities and contingent liabilities. The acqusition value of
subsidiaries’ shares or business consists of the sum of the fair values on the date of
acquisition of the assets, accrued or assumed liabilities and emitted equity instruments
given in payment for the acquired net assets. The difference between the acqusition
value, the value of the minority and the fair value of earlier holdings and the fair value
of the acquired identifiable assets, liabilities and contingent liabilities are reported as
goodwill.
A subsidiary’s financial statements are included in the consolidated accounts from
the acquisition date until the date when controlling influence no longer exists.
10.2 Joint ventures
For accounting purposes, joint ventures are companies in which the Group shares a
controlling influence over operational and financial management through collaboration agreements with one or more parties. Holdings in joint ventures are reported in
the consolidated accounts according to the proportional consolidation principle. This
principle requires the Group’s share of a joint venture’s income, expenses, assets and
liabilities to be reported in the consolidated statement of financial position and income
statement. This is done by combining the joint owner’s share of assets, liabilities,
income and expenses in a joint venture item-by-item with corresponding items in
the joint owner’s consolidated accounts. Only equity accrued after the acquisition is
reported in the Group’s equity. The proportional consolidation principle is applied from
the point in time at which the joint controlling influence is obtained until said influence
ceases to exist.
of the primary economic environment where companies conduct their operations.
Monetary assets and liabilities in foreign currency are translated to the functional
currency at the exchange rate prevailing on the closing day. Exchange rate differences
that arise from translations are reported in the income statement. Non-monetary assets and liabilities reported at historic cost are translated at the exchange rate on the
transaction date. Non-monetary assets and liabilities reported fair value are translated
to the functional currency at the exchange rate prevailing at the time the fair value was
measured and reported in the income statement.
11.2 Financial statements of foreign operations
Assets and liabilities in foreign operations, including goodwill and other Group-related
surpluses and deficits, are translated from the foreign operations’ functional currencies to SEK, the Group’s presentation currency, at the exchange rate prevailing on the
closing day. Revenues and expenses in a foreign operation are translated to SEK at the
average exchange rate that constitutes an approximation of the rates applying when
the transactions occurred. Translation differences that arise from currency translation
of foreign operations are reported under other comprehensive income and accumulated in a separate designated translation reserve. When divesting a foreign operation, the
accumulated translation differences attributable to the divested foreign operation are
reclassified from equity to net profit/loss for the year as a reclassification adjustment
at the time profit or loss from the sale is reported.
12 Revenues – sale of goods
12.1 Sale of goods
Revenue from the sale of goods is recognised in the income statement when significant
risks or benefits associated with ownership of the goods have been transferred to the
buyer. Revenue is not recognised if it is probable that future economic benefit will not
accrue to the Group.
12.1.1 Sale of iron ore, Mining Division
Iron ore trading is conducted in US dollars and there are three different ways of setting
iron ore prices, i.e. annual price, spot price and indexed price. Normally, an agreement
between one of the major mining companies and the Asian or European steel industry
sets a global benchmark, after which LKAB concludes agreements with its customers.
The timing of agreements regarding the global price varies; some years agreement
is reached early and other years later, for which reason prices for the new year must
almost always be an estimate until they are agreed.
Latterly the proportion of iron ore sales at spot or indexed prices has increased on the
global market. LKAB has hitherto mostly sold iron ore at annual prices. In order to meet
the wishes of certain customers, LKAB has been using a complementary price model
since the first quarter of 2012. The model provides flexibility for those customers who
wish to move wholly or partially away from fixed prices for a period during the year.
The sale of iron ore is reported upon delivery to the customer in accordance with
the sales terms. Sales are reported with deductions for value added tax and currency
translations take place at the current exchange rate. If sales are hedged by forward
exchange rate contracts currency translations take place at the hedged rate.
Preliminary invoicing often takes place at the time of delivery in respect of the
iron and moisture content of the delivery. When final confirmed amounts have been
obtained, revenues are adjusted as necessary and confirmed. Revenues are reported
in net sales.
10.3 Transactions eliminated on consolidation
Intra-Group receivables and liabilities, income and expenses, as well as unrealised
gains or losses arising from transactions between subsidiaries, are eliminated in their
entirety when preparing the consolidated accounts.
Unrealised profits arising from transactions with jointly controlled companies are
eliminated to an extent that corresponds to the Group’s shareholding in the company.
Unrealised losses are eliminated in the same way as unrealised profits, but only where
there is no indication that an impairment loss is necessary.
12.1.2 Sale of industrial minerals, Minerals Division
The LKAB Group’s Minerals Division carries out trade in a number of different minerals
comprising both minerals in owned by the division such as magnetite, huntite and mica,
and also minerals that are either processed within the Group or sold on untreated to
final customers. Trade in industrial minerals either takes place in local currency or one
of the major currencies such as USD and EUR.
The mineral magnetite is purchased from the Mining Division; prices are agreed
quarterly are based on the Parent Company’s global price agreements for iron ore
products. Other in-house minerals are priced internally, while external minerals are
priced according to agreements with the suppliers concerned and may take place annually or at shorter intervals.
Sales of minerals are reported to customers in accordance with agreed sales terms.
Sales are reported with deductions for value added tax and currency translations take
place at the current exchange rate. If the sale is hedged currency translations take
place at the forward exchange rate contract rate.
Invoicing takes place on delivery to the customer according to agreed prices and
payment terms. Revenues are reported in net sales.
11 Foreign currency
11.1 Transactions in foreign currency
Foreign currency transactions are translated into the functional currency at the
exchange rate prevailing on the transaction date. Functional currency is the currency
12.2 Rental income
Rental incomes from investment properties are reported on a straight-line basis in the
income statement, based on the terms of the rental (lease) agreement. The income is
reported in other operating income.
13 Leasing
Leases are classified in the consolidated accounts as either finance leases or operating
leases. A finance lease exists when the economic risks and benefits associated with ownership are, in essence, transferred to the lessee; where this is not the case, it is classified
as an operating lease. The Group’s leasing agreements are essentially operational.
In operational leasing, leasing fees are reported on a straight-line basis over the
period of the lease. However, some fees are usually expensed on a continuous basis.
14 Financial income and expenses
Financial income and expenses include interest income from bank assets, receivables
and interest-bearing securities, interest expenses related to loans, interest expenses
on defined-benefit pension plans, dividend income, unrealised and realised gains on
financial investments, and derivative instruments used in financial operations.
Interest income from receivables and interest expenses related to liabilities are
estimated using the effective interest method. Effective interest is the rate of interest
which renders the current value of all estimated future payments and disbursements
during the expected fixed-interest term to be equal to the carrying amount of the asset
or liability. Interest income and interest expense include periodised amounts of transaction expenses and any discounts, premiums and other differences between the original carrying amount of the receivable or liability, and the amount received or settled on
maturity. Dividend income is reported once the right to receive payment is approved.
Income from the sale of financial investments is reported when the significant risks
and rewards associated with ownership of the instruments have been transferred to
the buyer and the Group no longer controls the instruments.
Exchange rate gains and losses are reported on a net basis.
15 Taxes
Income taxes consist of current tax and deferred tax. Taxes are reported in the income
statement except when the underlying transaction is reported directly under other
comprehensive income or in equity, in which case the related tax effect is also reported
in other comprehensive income or in equity.
Current tax is tax to be paid or received in respect of the year concerned by applying
the tax rates that have been decided or which have been decided in practice as of the
closing day; this also includes adjustment of current tax attributable to earlier periods.
Deferred tax is calculated according to the balance sheet method, on the basis of temporary differences between carrying amounts of assets and liabilities and their values for
tax purposes. The following temporary differences are not taken into account; for temporary differences that arise with the initial reporting of goodwill, initial reporting of assets
and liabilities which are not business combinations and at the time of the transaction do
not affect either reported or taxable profit. Nor are temporary differences attributable
to participations in Group companies and associated companies that are not expected
to reverse in the foreseeable future taken into account. The calculation of deferred tax
is based on how the carrying amount of assets or liabilities is expected to be realised or
settled. Deferred tax is calculated in accordance with the tax rates and tax rules that have
been established or have been established in practice by the closing date.
Deferred tax assets in respect of deductible temporary differences and loss carryforwards are only reported to the extent that it will be possible for these to be used.
The value of deferred tax assets is reduced when it is no longer considered likely that
they can be used.
Any additional income tax arising from dividends is reported at the same time as
when dividend is reported as a liability.
The effect of the reduction in corporation tax in Sweden from 26.3 percent to 22
during 2013 is included in tax for the year with a positive effect of SEK 719 million for
the full year. Deferred tax assets and liabilities have been recalculated according to the
new tax rate.
16 Financial instruments
Financial instruments reported as assets in the statement of financial position, on the
assets side, liquid assets, loans, accounts receivable, financial investments, and derivatives. Liabilities include accounts payable, borrowing and derivatives.
16.1 Recognition and derecognition in the Statement of financial position
A financial asset or financial liability is recognised in the statement of financial position
when the Group becomes a party to the contractual terms of the instrument. A receivable is recognised when the Group has performed and a contractual obligation for the
counterparty to pay exists, even if an invoice has not yet been sent. A trade receivable
is recognised in the statement of financial position when an invoice has been sent. A
liability is recognised when the counterparty has performed and there is a contractual
obligation to pay, even if the invoice has not yet been received. Trade accounts payable
are recognised when an invoice is received.
A financial asset is removed from the statement of financial position when the rights
in an agreement are realised, expire or the company loses control over them. The same
applies for a portion of a financial asset. A financial liability is removed from the statement of financial position when the undertakings in the agreement have been fulfilled
or otherwise extinguished. The same applies for a proportion of a financial liability.
A financial asset and a financial liability are offset and reported in the statement of
financial position as a net amount only when there is a legal right to offset the amount
and an intention to adjust the items with a net amount or, at the same time, realise the
asset and settle the liability.
Acquisition and divestment of a financial asset are reported on the trade day, i.e. the
day upon which the company undertakes to acquire or dispose of an asset, except in
cases when the company acquires or divests listed securities when settlement date
reporting is applied.
A spot purchase or sale in the fair value option category is reported on the day of
settlement. LKAB has no liabilities valued according to fair value option.
Liquid assets are cash and balances immediately available in banks and similar
institutions and current investments with a maturity of less than three months from
acquisition date that are exposed only to very marginal risks of fluctuations in value.
16.2 Classification and measurement
Financial instruments are initially reported at a cost corresponding to the fair value of
the instrument with an addition for transaction expenses for all financial instruments,
except those categorised as financial assets and liabilities reported at their fair value
in the income statement, which are reported at their fair value excluding transaction
expenses. A financial instrument is classified on initial reporting based on the purpose
for which the instrument was acquired. Classification determines how the financial
instrument is measured after the initial report, as described below.
Derivative instruments are initially reported at fair value, meaning that the transaction costs impact income for the period. After the initial entry, the derivative is reported
in the manner described below. If derivative instruments are used for hedge accounting, changes in value of the derivative instruments are reported in the income statement, to the extent the derivative is effective, at the same time and on the same line
as the hedged item. Even if hedge accounting is not applied, increases or decreases in
the value of the derivative are reported as income or expenses in the income statement
or as net financial income/expense, based on the intended use of the derivative instrument and whether that use relates to an operating item or to a financial item. In hedge
accounting, the ineffective part is reported in the same way as changes in the value of
derivatives not used in hedge accounting.
In accordance with IAS 39, LKAB has chosen not to include the interest component
in forward exchange contracts in hedging conditions when applying hedge accounting
within the Group. Changes in value in forward exchange rate contracts attributable
to the interest component are reported instead as financial income or expenses on
the line “Interest rate component in forward exchange contract” as the interest rate
component is considered financial in nature.
16.3 Financial assets appraised at fair value in the income statement
This category consists of two sub-groups; financial assets held for trading and other
financial assets in which the company initially decided to invest in this category (according to the so-called fair value option). Financial instruments in this category are
appraised at fair value on a continuous basis and changes in fair value are reported
in the income statement. The first sub-group includes derivatives with positive fair
values, with the exception of derivatives that are identified, effective hedging instruments. The fair value option category includes financial instruments that are appraised
and reported at fair value. For further information on which financial instruments are
included, see Note 29.
16.4 Loans and receivables
Loans and receivable are non-derivative financial assets with fixed payments or determinable payments, and which are not quoted on an active market. These assets are
measured at amortised cost. Amortised cost is determined based on the effective rate
of interest calculated on acquisition. Accounts receivable are reported in the amount at
which they are expected to be received, less doubtful receivables.
16.5 Financial assets available for sale
The available-for-sale category includes financial assets that are not classified in any
other category or financial assets that the company initially classified in this category.
Shares and participations not reported as subsidiaries, associated companies or joint
ventures are reported here. Assets in this category are appraised at fair value on a
continuous basis, with changes in value reported in other comprehensive income, but
not changes resulting from impairment losses, interest on debt instruments, dividend
income or exchange rate differences on monetary items; these are reported in the
income statement. On disposal of the asset the accumulated gain or loss previously
reported in other comprehensive income, is reported in the income statement.
16.6 Financial liabilities appraised at fair value in the income statement
This category consist of two sub-groups: financial liabilities held for trade and other
financial liabilities that the company has chosen to place in this category (the so-called
fair value option); see description under Financial assets measured at fair value in the
income statement, above. The first category includes the Group’s derivatives with negative fair values, with the exception of derivatives that are identified, effective hedging
instruments. Changes in fair value are reported in the income statement.
16.7 Other financial liabilities
Loans and other financial liabilities, e.g. accounts payable, are included in this category.
Liabilities are measured at amortised cost.
17 Derivatives and hedge accounting
The Group’s derivative instruments were acquired as a hedge against interest rate and
exchange rate risks to which the Group is exposed. An embedded derivative is reported
separately unless it is closely related to the host contract. Derivatives are initially
reported at fair value, meaning that the transaction costs impact income for the period.
After the initial entry, derivative instruments are reported at fair value and changes in
value are reported as described below.
To comply with IAS 39 requirements concerning hedge accounting, there must be
a clear link to the hedged item. Furthermore, the hedging instrument must effectively
protect the hedged item; hedging must be documented and its effectiveness measurable. Hedging gains and losses are reported in the income statement at the same point
in time as gains and losses for the hedged items.
17.1 Cash flow hedges
Derivative instruments used to hedge future cash flows are reported in the statement
of financial position at fair value. Changes in value are reported directly against other
comprehensive income and accumulated changes in value are reported as a separate
component in shareholders’ equity until the hedged flow is reported on the balance
sheet, whereupon the hedging instrument’s accumulated changes in value are transferred to the income statement to meet and match the profit/loss effects of the hedged
transaction. The hedged flows can be both contracted and forecast transactions.
18 Property, plant and equipment
18.1 Owned assets
Property, plant and equipment are reported in the consolidated accounts at cost after
deductions for accumulated depreciations and any impairments. Cost includes the
purchase price and expenses directly attributable to the asset, such as those associated with delivery and installation of the asset for use as intended by the acquisition.
Examples of directly attributable expenses that may be included in cost are those for
delivery and handling, installation, title deeds, consulting services and legal services.
The cost of self-constructed property, plant and equipment includes expenditures for
materials, payroll expenditures, other fabrication costs directly attributable to the asset
where applicable, and estimated costs of disassembly and estimated expenses for the
removal of the assets and the remediation of the site or area in which it was used.
Component parts of property, plant or equipment that have different useful lives are
treated as separate components of said property, plant or equipment.
The carrying amount of property, plant and equipment is removed from the statement of financial position when the asset is retired or disposed of. Gain or loss arising
from the disposal or retirement of an asset is the difference between the selling price
and the asset’s carrying amount with deductions for direct selling expenses. Gain or
loss is reported as other operating income/expense.
18.2 Underground installations
Installations underground, whence iron ore is extracted, can be divided into waste
rock mining and iron ore mining. Waste rock mining consists of work done to expose
the orebody in connection with the construction of a main haulage level, construction
pertaining to transport and maintenance functions such as railways, roads, tunnels,
shafts, inclined drifts (a system of access for vehicle traffic from surface level to the
work site underground), and facilities for service and electrical and air supply. These
expenses referring to installations intended for use for a period longer than one year,
are activated on the statement of financial position. Depreciation takes place systematically during the lifetime of the main level concerned.
Iron ore mining consists mainly of activities including development, cave drilling, and
loading, haulage and hoisting of the ore. Expenses for these activities have a useful life
of at most one year, which is why they are expensed as they are incurred.
18.3 Open-pit mines
Iron ore mining above ground takes place in so-called open-pit mines. In order to expose the orebody stripping often takes place where such things as moraine and waste
rock are removed. During the development phase expenditures are activated as part of
the cost of the mine and depreciation takes place systematically during the lifetime of
the mine. The expenditures are expensed during the actual production phase.
18.4 Prospecting and evaluation work
Greater knowledge of the extent of the iron deposits is necessary to secure access to
more ore and ensure the future development of operations in the Mining Division. The
orebody is surveyed and defined by means of exploration drilling, mainly via drifts
adjacent to it. Ore deposit explorations in both existing and future areas of the mines,
is expensed. This principle is also applied with respect to areas outside the existing
mines.
Evaluation of existing mineral assets is carried out to a lesser extent, mainly to provide a basis for a so-called mine plan for mineral assets, and this work is expensed.
18.5 Additional expenditures
Additional expenditures are added to cost if it is probable that future economic benefit
associated with the asset will accrue to the company, and if cost can be calculated in
a reliable manner. All other additional expenditures are reported as expenses in the
period in which they arise.
Additional expenditures are added to cost if the expenditures are related to the
replacement of identifiable components or parts thereof. In cases where a new component is created, the expenditure is also added to cost. Any undepreciated carrying
amounts on replaced components, or parts thereof, are retired and expensed in connection with the replacement. Repairs are expensed on a continuous basis.
18.6 Depreciation principles
Assets are depreciated on a straight-line basis over their useful life; land is not depreciated. The Group applies component depreciation, whereby the estimated useful life
of the component constitutes the basis for depreciation. Installations and equipment
utilised in open-pit mines are usually depreciated either over their estimated lifetime
or the lifetime of the mine they pertain to, whichever is the shorter.
Estimated useful life:
– Operating properties, investment properties
– Machinery and other technical plant
- Inventories, tools and installations
- Underground installations (average)
15–100 years
5–20 years
5–20 years
12 years
Operating properties are classified mainly as buildings, land improvements and land.
Buildings and land improvements consist of several components that are classified on
the basis of function; e.g. roads, surfacing, service facilities, processing plants, etc.
Investment properties consist of several components with different useful lives.
The main classifications are buildings and land. The buildings are divided into several
components whose useful lives vary. The estimated useful lives of these components
range from 15 to 100 years.
The following main groups of components have been identified and form the basis
for depreciation of investment properties.
- Frames, foundations and interior walls
- Water, sewage, electrical and heating systems
- Facades
- Windows
– Interior finishing and white goods
100 years
50 years
40 years
50 years
15 years
If a property is acquired outside the impact boundary but within the future mining area
the depreciation time is adapted to the time the impact boundary encroaches on the
property concerned.
An asset’s residual value and useful life are evaluated at the close of each reporting
period and adjusted as necessary.
19 Intangible assets
19.1 Goodwill
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated among cash-generating units and is tested annually for impairment; see accounting principles in section 21.1. The difference between the cost of a business acquisition
and the fair value of the identifiable acquired assets, assumed liabilities and contingent
liabilities is reported as goodwill.
19.2 Mineral rights
Mineral rights are reported at cost less accumulated amortizationand any impairments.
19.3 Research and development
Expenditures for research aimed at acquiring new scientific or technical knowledge are
expensed in the period in which they arise.
Development expenditures, i.e. expenses for research of which the results or other
knowledge is applied to realise new or improved products or processes, are reported
as an asset in the statement of financial position if the product or process is technically
and commercially viable and the company has sufficient resources to complete the
development and subsequently use or sell the intangible asset. The value includes
directly attributable expenses such as goods and services and remuneration to
employees. If the above criteria are not fulfilled, the costs must be expensed. Because
no such development expenditures have met these criteria thus far, LKAB expenses all
expenditures for development as they arise.
An impairment is reported when the carrying amount of an asset or cash-generating
unit (group of units) exceeds its recoverable amount. Impairment losses are charged
to the income statement. Impairments of assets attributable to cash generating units
(group of units) is allocated to goodwill in the first instance, after which a proportional
impairment of other assets in the unit (group of units) is carried out.
The recoverable amount is fair value less selling expenses or value in use, whichever
is the greater. When calculating value in use, future cash flows are discounted using a
pre-tax discount rate that reflects risk-free interest and the risks associated with the
specific asset.
19.4 Other intangible assets Other intangible assets such as software acquired by the Group are reported at cost
less accumulated amortization(see below) and impairments.
21.2 Impairment of financial assets
On each reporting occasion, the company assesses whether there is objective evidence
that a financial asset or group of financial assets requires impairment. Objective
evidence constitutes observable circumstances that have had an adverse impact on
the potential to recover the amortised cost such as breach of contract, late or defaulted
payment from a counterparty or bankruptcy, or a significant or long-term decrease in
the fair value of a component of a financial investment classified as a financial asset
available for sale.
The recoverable amount of assets belonging to the categories held-to-maturity securities and accounts receivable reported at amortised cost, is calculated as the current
value of future cash flows, discounted at the original effective interest rate calculated
when the asset was first reported. Short-duration receivables are not discounted.
Impairment losses are charged to operating profit/loss in the income statement.
If an impairment in fair value of a financial asset classified as available for sale has
previously been reported directly against comprehensive income and there is objective
evidence that there is need for an impairment, the accumulated loss reported in comprehensive income must be removed from comprehensive income and entered in the income statement, even if the financial asset has not been eliminated from the statement
of financial position. The eliminated loss relates to the difference between cost and
current fair value, after deduction for any previous impairment of the financial asset.
19.4.1 Emissions allowances
LKAB participates in the EU’s system for trade in emissions allowances. LKAB received
carbon-dioxide emissions allowances for 2012 in February. An emission allowance
grants the right to emit carbon dioxide and is therefore an intangible asset. Allocations
are entered against deferred income as the company has not yet qualified for any
allowances at the time of issue; qualification takes place at the same pace as actual
emissions. When emissions are made a liability arises for the delivery of emission
allowances to cover said emissions. This liability is classified as an emission. The
liabilities are measured at the cost of the allocated emission allowances. The income
is distributed against the cost it is intended to cover. When emission allowances are
reported an equivalent number of emission allowances must be delivered. Thus the
intangible asset is used and the provision for emissions made is settled. Where a
liability to deliver emission allowances exceeds the remaining allocation of emission
allowances the excess amount is carried as a liability measured at the current market
value of the number of emission allowances necessary to settle the obligation. For
information regarding amounts, see Note 26.
19.5 Additional expenditures
Additional expenditures for capitalised intangible assets are reported as assets in the
statement of financial position only when they increase the future economic benefits for
the specific asset to which they pertain. All other expenditures are expensed as they arise.
19.6 Amortization principles
Amortizations are reported in the income statement in a straight-line across the estimated useful life of the intangible assets. Amortizable intangible assets are written off from
the date upon which they are available for use. The estimated periods of useful life are:
- Mineral rights
- Tenancy rights
- Customer-related intangible assets
- Software
30–50 years
10 years
3–5 years
5 years
An asset’s residual value and useful life are tested at the close of each reporting period
and adjusted as necessary.
20 Inventories
Inventories are reported at the lower of cost or net realisable value. The cost of inventories is calculated on the basis of the first-in, first-out (FIFO) method and includes
expenditures arising from the acquisition of the inventory assets and their transport
to their current location. In the case of manufactured goods and work in progress, cost
includes a reasonable proportion of indirect costs based on normal capacity.
Net selling price is the estimated selling price in current operations, after deductions
for estimated costs of completion and for realising a sale.
21 Impairments
The Group’s reported assets are tested on every closing date to ascertain whether any
impairment requirement is indicated. Every closing day a test is carried out on previously impaired assets other than financial assets and goodwill as to whether a reversal
should take place.
21.1 Impairment of property, plant, equipment, intangible assets and participations
in subsidiaries, associated companies and joint ventures
If an impairment requirement is indicated, the recoverable value of the asset is calculated. The recoverable amount for goodwill is calculated annually. If it is not possible
to ascertain essentially independent cash flows attributable to a single asset when an
impairment requirement is assessed, assets are grouped at the lowest level at which it
is possible to identify essentially independent cash flows (a so-called cash-generating
unit).
21.3 Reversal of impairments
Impairments of assets included in the IAS 36 application area are reversed when there
is an indication that impairment is no longer necessary and there has also been a
change in the assumptions which formed the basis of the calculation of the recoverable amount when the asset was impaired. However, impairment of goodwill is never
reversed. A reversal is only made to the extent that the asset’s carrying amount after
reversal does not exceed the carrying amount that the asset would have had, with a
deduction for amortization, if no impairment had been carried out.
Impairments of securities, loans receivables and accounts receivable, which are
reported at accrued cost, are reversed if a subsequent increase in recoverable amount
can be related objectively to an event occurring after the impairment was made.
Impairments of equity instruments classified as available-for-sale financial assets
that were previously reported in the income statement, may not subsequently be
reversed through the income statement but rather in other comprehensive income. The
impaired value is the amount on which subsequent revaluations are based and which
are reported in other comprehensive income Impairments of interest-bearing instruments classified as available-for-sale financial assets are reversed through the income
statement if the fair value increases and the increase can objectively be attributed to
an event that occurred after the impairment was carried out.
22 Equity
22.1 Dividends
Dividends are reported as a liability once they have been approved by the Annual
General Meeting.
23 Earnings per share
Calculation of earnings per share is based on the Group’s profit for the year attributable to Parent Company shareholders and the weighted average number of shares
outstanding during the year.
24 Employee benefits
24.1 Defined-contribution pension plans
Defined contribution pension plans are classified as those plans under which the company’s obligation is limited to the contributions the company has undertaken to pay.
Under such plans the size of an employee pension is based on the contributions the
company pays to the plan or to an insurance company and the capital yield generated
by the contributions. Consequently, it is the employee who bears the actuarial risk (that
the payment will be lower than expected) and the investment risk (that the investment
assets will be inadequate to provide the expected benefits). The company’s obligations in respect of contributions to defined-contribution plans are reported as a cost in
the income statement as they are earned by the employees performing work for the
company during the period.
24.2 Defined-benefit pension plans
The Group’s net obligation for defined-benefit plans is calculated separately for each
plan by estimating the future compensation that employees have earned through employment in present and previous periods; this compensation is discounted to present
value and the fair value of any plan assets is deducted. The discount rate is the interest
rate on the closing day for a first-class corporate bond with a maturity corresponding
to the Group’s pension obligations. When there is no active market for such corporate
bonds, the market interest rate on government bonds with an equivalent maturity is
used instead. The calculation is made by a qualified actuary using the Projected Unit
Credit Method. In addition, the fair value of plan assets as per closing day is calculated.
Actuarial gains and losses may arise when the present value and the fair value of
plan assets are determined. These arise either as a result of outcomes deviating from
assumptions previously made or revisions to the said assumptions.
In previous years the corridor rule was applied when reporting actuarial gains and
losses. From 2011, all actuarial gains and losses are reported directly in other comprehensive income.
The carrying amount for pensions and similar obligations shown in the consolidated
statement of financial position represents the present value of the obligation at the end
of the financial year, less the fair value of plan assets and unreported costs relating to
employment in earlier periods.
When the calculation leads to an asset for the Group, the carrying amount of the
asset is limited to net unreported costs for employment in previous periods as well as
the current value of future repayments from the plan or reduced future payments to it.
When the compensation in a plan improves, the portion of the increased compensation
attributable to the employees’ services in previous periods is reported as an expense
in the income statement on a straight-line basis over the average period until the compensation is fully vested. If the compensation is fully vested, an expense is reported
directly through the income statement. When there is a difference in how the pension
cost is determined for a legal entity and the Group, a provision or receivable for the
special employer’s contribution is reported based on this difference. No calculation is
made for the present-value of the provision or receivable.
Net interest of pension provisions and expected yield from associated plan assets are
reported in net financial income/expense. Other components are reported in the income
statement.
27 PARENT COMPANY ACCOUNTING PRINCIPLES
The Parent Company has prepared its annual report in compliance with the Swedish
Annual Accounts Act (1995:1554) and Swedish Financial Reporting Board recommendation RFR 2 Reporting for Legal Entities. Statements issued by the Swedish Financial
Reporting Board for publicly listed companies are also applied. RFR 2 means that in
preparing the annual accounts for the legal entity the Parent Company must apply all
IFRS and statements approved by the EU as far as is possible within the framework of
the Swedish Annual Accounts Act and Swedish Pension Obligations Vesting Act taking
into account the relationship between reporting and taxation. The recommendation
specifies the exceptions from, and additions to, IFRS that must be made.
The amendments to RFR2 Reporting for Legal Entities that have come into force and
which are applicable in the 2012 financial year have had no significant impact on the
Parent Company’s accounts.
The Swedish Financial Reporting Board has published a change in RFR 2 regarding
reporting Group contributions, which comes into force for the financial year beginning
January 1, 2013 or later. The change means that companies may choose between
reporting Group contributions according to the recommendation’s main rule or an
alternative rule. According to the main rule the parent company reports Group contributions received from subsidiaries as financial income and Group contributions paid to
subsidiaries as an increase in shares in Group companies. According to the alternative
rule Group contributions the parent company receives from, or pays to, subsidiaries
are reported as appropriations. LKAB has chosen to report all Group contributions as
financial income in 2012.
24.3 Short-term employee benefits
Short-term employee benefits are calculated on an undiscounted basis and reported as
an expense when the related services are received.
A provision is made for the expected cost of profit-sharing or bonus payments when
the Group has a legal or informal obligation to make such payments as a result of services being rendered by employees and a reliable estimate of the amount can be made.
27.3 Financial instruments and hedge accounting
Owing to the relationship between reporting and taxation, the rules referring to financial instruments and hedge accounting in IAS 39 are not applied in the Parent Company
as a legal entity. Non-current financial assets are measured in the Parent Company
at cost less any impairments, or as current financial assets, whichever is the lower.
Valuation of shares and money market investments is done at the portfolio level. This
means that for instruments included in the same portfolio, unrealised gains are offset
against unrealised losses. Surplus losses are reported as reduction in interest income
on the line Other interest income and similar items. Surplus gains are not reported.
Liabilities are measured at amortised cost.
25 Provisions
A provision differs from other liabilities because of prevailing uncertainty about payment date or the amount required to settle the provision. A provision is reported on the
statement of financial position when there is an existing legal or informal obligation
due to a past event, it is probable that an outflow of economic resources will be required to settle the obligation, and that the amount can be reliably estimated.
A provision is made in an amount that is the best estimate of what is required to
settle the existing obligation on the closing date. When the effect of payment timing is
important, provisions are calculated by discounting the forecast future cash flow at a
pre-tax interest rate that reflects current market estimates of the time value of money
and, where appropriate, the risks associated with the liability.
25.1 Restructuring
A provision for restructuring is reported when a detailed, formal restructuring plan has
been established and the restructuring has either begun or been publicly announced.
No provision is made for future operating losses.
25.2 Remediation expenses
Provision for remediation expenses is made when the Group has a legal or informal
obligation where, for example, the environmental court requires a financial guarantee
for expanded operations.
25.3 Provisions resulting from mining operations
See item 28 in Note 1.
26 Contingent liabilities
A contingent liability is reported if there is a possible commitment stemming from
events evidence of whose occurrence is dependent on one or more uncertain future
events as well as when there is a commitment that is not reported as a liability or
provision because it is unlikely that an outflow of resources will be required.
27.1 Differences between Group and Parent Company accounting principles
Differences between Group and Parent Company accounting principles are detailed below. The Parent Company accounting principles specified below have been consistently
applied to all the periods presented in the Parent Company’s financial reports.
27.2 Subsidiaries, associated companies and joint ventures
Participations in subsidiaries, associated companies and joint ventures are reported
by the Parent Company according to the cost method. This means that transaction
expenses are included in the carrying amount for holdings in subsidiaries, associated
companies and joint ventures.
27.3.1 Derivatives and hedge accounting
Currency exposure in respect of forecast future flows are hedged through forward
exchange rate contracts. Forward exchange contracts that protect the forecast flow are
not reported on the balance sheet. Changes in value in forward contracts are reported
in the same period as the forecast flow occurs.
The hedged volume in US dollars is matched against the estimated net inflow of US
dollars. If the hedged volume exceeds the value of the expected net inflow and there is
an unrealised exchange loss, it is reported as a financial expense. If there is an unrealised exchange gain, it is not reported.
Accrual of forward exchange discounts and premiums on US dollar hedges take
place in accordance with Swedish Accounting Standards Board recommendation No. 7
The interest component is considered financial in nature and it is reported in the Parent
Company’s Net financial items. The difference between the average exchange rate and
the year-end rate on binding forward exchange contracts is reported as a contingent
liability if the year-end rate is higher than the average rate of the forward exchange
contract.
27.4 Financial guarantees
The Parent Company’s financial guarantee agreements mainly consist of guarantees
that benefit subsidiaries. Financial guarantee agreements mean that a company has
a commitment to remunerate the bearer of a debt instrument for losses incurred as a
result of the failure of a given debtor to make full payment on due date in accordance
with the terms of the agreement. The Parent Company applies one of the relief rules
permitted by the Swedish Financial Reporting Board, compared with the rules in IAS
39, in its reporting of financial guarantee agreements made out for the benefit of subsidiaries. The Parent Company reports financial guarantee agreements as a provision
in the balance sheet when the company has an obligation for which settlement will
probably require payment.
27.5 Anticipated dividends
Anticipated dividends from subsidiaries are reported in cases where the Parent Company has sole right to decide the size of the dividend and has decided on the size of the
dividend before the publication of its financial statements.
27.6 Intangible assets
27.6.1 Research and development
All research and development expenditures are reported as expenses in the Parent
Company income statement.
27.7 Employee benefits
27.7.1 Defined-benefit plans
The Parent Company applies principles other than those described in IAS 19 when calculating defined-benefit plans. The Parent Company complies with the provisions of the
Swedish Pension Obligations Vesting Act and Swedish Financial Supervisory Authority
regulations since this is a condition for tax deductibility. The essential differences, compared to IAS 19, are the way in which the discount rate is determined, that calculation
of defined-benefit commitments is based on current salary levels without assuming
any future salary increases, and that all actuarial gains and losses are reported in the
income statement as they arise.
27.8 Taxes
In the Parent Company, deferred tax liabilities are reported as part of untaxed reserves.
In the consolidated accounts, untaxed reserves are divided between deferred tax liabilities and equity.
27.9 Group contributions and shareholders’ contributions for legal entities
Group contributions paid and received by the Parent Company are reported as financial
items. Shareholder contributions are transferred directly against equity and activated
in shares and participations with the donor, to the extent that impairments are not
required.
28 Significant estimates and assessments
In presenting the financial reports, the Company Management and the Board of Directors must make certain estimates and assumptions that affect the reported amounts
pertaining to assets, liabilities, income and expenses, and other disclosures such as
contingent liabilities.
Estimates and assessments that are considered to be of greatest importance for an
understanding of the financial statements in regard to degrees of significance and uncertainty, are presented below. Conditions for LKAB’s operations change continuously,
which means that these assessments also change.
28.1 Provisions resulting from mining operations
LKAB has extracted iron ore in Norrbotten for more than 120 years. The technology
used for ore extraction in underground mines leads to deformations in the form of
fractures in the land where mining is pursued. The deformation zones are, or will be,
so extensive that it will be necessary to successively relocate sections of Kiruna and
Malmberget.
LKAB has already made, and will continue to make, significant expenditures in respect
of these urban transformations. For instance, LKAB will incur expenses for the acquisition of real estate and municipal infrastructure such as electricity, water and sewage in
the affected areas. The expenditures arise from LKAB’s mandatory obligation to compensate damage resulting from mining activities.
Provisions for the damages that the deformations cause cover damage already
confirmed and damage not yet confirmed but which will occur after a year or more’s
delay as a result of existing mining.
These state that LKAB must report a provision when:
1. A legal or informal obligation toward an external party exists,
2. as a result of events
3. that the company anticipates an outflow of economic resources to settle the
obligation,
4. and that the amount can be reliably estimated.
A limit to impact-related compensation has been defined by LKAB and designated as
the impact boundary.
The impact boundary in Kiruna, which moves gradually forward, is based on the
existing environmental terms boundary according to rulings from the environmental
court. Additions are made for a safety zone for operations that are expected to come
about even if mining were to cease (100 m) and for an area designated as a Mine City
Park (350 m), equivalent to around seven-years conversion time from built-up area to
mine city park to industrial area. The basic rule is that an undertaking is not reported
until the impact boundary encroaches upon the real estate boundary or infrastructure
concerned.
Even though there may be major similarities between conditions in Kiruna and
Malmberget the geological conditions differ, and in the case of Malmberget there are
no environmental conditions established in the courts. In Kiruna the gradual spread
of deformations takes place through continuous fracturing, while in Malmberget a
widespread undermining is taking place of the surface where the community’s central
parts are located. The deformations are the direct result of mining operations. In the
case of Malmberget it can be shown that the impact area from mining operations from
several orebodies has largely encircled Malmberget’s town centre. Under prevailing
circumstances Malmberget’s central areas can be described as communities that are
no longer functional.
The impact will continue for many years ahead and there will be uncertainty regarding e.g. geological consequences, assumptions about market values, demolition and
waste disposal costs, etc. The uncertainty present in calculations made hitherto will fall
as new experience gained is taken into consideration in future calculations.
The size of provisions was calculated based on objective valuation methods for each
sort of asset (railway, land, municipal infrastructure, etc.) and priced at present value.
A deciding factor in how damages caused by LKAB mining activities must be handled
for accounting purposes is where the impact boundary is located at any given time. All
damages/compensation claims that lie within the impact boundary will be calculated
and reported as provisions and expensed in the income statement. This must be seen
in the light of LKAB’s already having consumed the economic benefits generated by
mining.
If an acquired property inside the impact boundary is expected to be let temporarily over a period from the acquisition until evacuation, its value in use is calculated. If
the calculation indicates a positive net cash flow the amount is activated as a building
component instead of being expensed. The building component is depreciated over the
period during which it is expected to be let.
28.2 Pension benefits
Several assumptions are important components in the actuarial methods used to calculate pension obligations, and these may have a significant impact on reported net liability and annual pension expense. The discount rate and the estimated return on plan
assets are two critical assumptions used in calculating the year’s pension expense and
the current value of pension obligations.
These assumptions are revised each year, for each pension plan, in each country.
Many factors do not change as often, such as personnel turnover and retirement age. For
financial and other reasons, actual outcomes often differ from actuarial assumptions.
The discount rate enables the measurement of future cash flows to current value
on the measurement date. This rate must correspond to yields on either high-quality
corporate bonds or, if there is no active market for such bonds, government bonds.
A lower discount rate increases the current value of the pension obligation and the
annual pension cost.
In order to determine the expected rate of return on plan assets, LKAB considers
the current and anticipated categories of plan assets as well as historic and expected
returns on the various categories.
Compared to the previous year, the average discount rate is 3.2 (3.7) percent.
28.3 Taxes
Significant estimates are made to determine current tax liabilities and current tax assets, and for deferred tax liabilities and deferred tax assets. LKAB has to determine the
probability of deferred tax assets being utilised to offset future taxable profits. Actual
outcomes may differ from these estimates, for instance due to changed tax legislation,
or the outcome of final reviews of tax returns as yet unconcluded by tax authorities
and tax courts. Deferred tax assets and liabilities have been recalculated with regard to
the new corporate tax rate in Sweden, which falls from 26.3 percent to 22 in 2013. The
effect of the changed tax rate amounts to SEK 719 million.
28.4 Disputes
LKAB is party to a number of disputes and legal proceedings in the course of dayto-day business. Management consults with legal experts on issues related to legal
disputes and with other experts internal or external on issues related to the ordinary
course of business. Management’s considered opinion is that neither the Parent Company, nor any subsidiary, is currently involved in legal proceedings or arbitration that
may be deemed to have a material negative effect on the business, its financial position
or profit/loss in operations.
Note 2 Distribution of revenues
GroupParent Company
SEK million 2012201120122011
Net sales:
Sale of goods – iron ore
24,909
28,024
25,054
28,282
1,760
2,623
Sale of goods – industrial minerals
Other 302
475
26,971
31,122
25,054
28,282
Total
Note 3 Segment reporting
Segment information
Group Management has set up business segments based on the information used to
make strategic decisions in LKAB’s business operations. The Group’s internal reporting
system is based on this, as are its product and division perspectives. Group Management assesses and follows up business activities in the respective divisions, and
follow-up is focused on operating income and operating assets in business activities.
Intra-Group prices between segments are set based on the arm’s length principle,
i.e. between parties that are independent of each other, well-informed and have a stake
in the implementation of the transaction.
Income, assets and liabilities for the segments include directly attributable items.
Non-distributed items consist of net financial income and expense and tax expenses.
Assets and liabilities not allocated to segments include income tax receivables and
payables, investments and financial liabilities. The segments’ investments in property,
plant, equipment and intangible assets include all investments with the exception of
those in current inventory and inventory of minor value.
Special Businesses Division. The majority of LKAB’s subsidiaries are in the Special
Businesses Division. These companies are mainly suppliers to the Mining Division and
the Minerals Division. Examples of goods and services sold include drilling equipment,
explosives, concrete, tunnel driving, rock reinforcement, and crushing of iron ore.
The following segment information is reported:
The Group consists of the following business segments:
Mining Division. The Mining Division mines and processes iron ore products for steel
making. The main products are pellets and fines, and the number of customers is
limited to about twenty.
Minerals Division. The Minerals division develops, produces and markets industrial
mineral products for several application areas and customers in many different industries throughout the world. The most important industries are construction and civil
engineering, oil and gas extraction, rubber, plastics and paint, chemicals, automotive
and foundries. There are several thousand customers.
Operating segments
GroupSpecial
Mining DivisionMinerals Division
Businesses Division
TotalEliminations***
Group
SEK million
201220112012201120122011201220112012201120122011
External revenues
24,90928,024 1,760 2,623 302 47526,97131,12226,97131,122
235 310
2
52,0492,0482,2862,363-2,286-2,363
Intra-Group revenues
Total revenues
25,14428,334 1,762 2,628 2,350 2,52329,25733,485 -2,286 -2,36326,97131,122
Operating profit/loss per operating segment10,127 13,624
132
603
230
405
10,489
14,632
10,489
14,632
106
73
Group-related adjustments*)
Operating profit
10,595
14,705
428
97
Profit before tax
11,023
14,802
-2,235
-3,842
Tax
Profit for the year
8,789
10,960
37,68533,682 1,076 1,324 1,051 1,12039,81236,128 -1,963 -2,02137,84934,105
Assets
Unallocated assets
19,772
19,625
Total assets
57,621, 53,730
Liabilities
11,982
11,881551676417610
12 950
13,167-516
-1,106
12,434
12,061
Unallocated liabilities
3,516
3,776
Total liabilities
15,950
15,837
Capital expenditures **)
Depreciations
Impairments
5,6635,066 38 21 106 395,8085,1265,8085,126
1,8501,805 28 28 68 581,9461,8911,9461,891
11 - - - -1111
*) refers to e.g. an adjustment in Group pension liabilities as per IAS 19, internal profits and other group-related adjustments
**) refers to property, plant & equipment
***) refers to Intra-Group transactions
Operating segments (cont.)
Geographic areas
Group sales are mainly made from Sweden and thus by the Swedish companies. Manufacturing of the Group’s product took place almost exclusively in Sweden. Investments were
made principally in Sweden. The carrying amount of assets per country/region are according to where the assets are located, and revenues are reported on the basis of where sales,
production, delivery and invoicing take place, regardless of where the customers are located.
GroupSweden
Rest of Europe
Asia
Rest of World**)
SEK million
20122011201220112012201120122011
External revenues
25,219
28,8651,0111,257 6561,000 85
27,574
23,799
2,867
2,7479912
Assets*)
Capital expenditures *)
5,531
4,637
276
433110 *) refers to property, plant, equipment
**) countries not part of Europe or Asia
Information about major customers
According to IFRS 8, companies must provide information about major customers. The LKAB Group has three major customers, each of which accounts for more than ten percent of
the Group’s sales. Sales to these customers amounted to 15 (18 ) percent, 14 (11) percent,11 (10) percent and are reported in the operating segment Mining Division.
Parent CompanyMining DivisionMinerals DivisionSpecial Businesses DivisionParent Company
SEK million
20122011201220112012201120122011
Net sales
25,054
28,282
25,054
28,282
Parent CompanyEurope
Asia
Rest of World**)Parent Company
SEK million
20122011201220112012201120122011
Net sales
16,803
19,2207,0847,9001,1671,162
25,054
28,282
**) countries not part of Europe or Asia
Note 4 Other operating income
SEK million Rental incomes, buildings
Gain on sale of fixed assets
Exchange rate gains on receivables/liabilities
related to operations
Insurance compensation
Rental and leasing income
Other
Note 5 Other operating expenses
GroupParent Company
2012
2011
2012
2011
162
154
14
0
2
4
0
0
28
90
13
15
-
0
-
6
12
7
11
341106432193
539366466219
SEK million Exchange rate losses on receivables/liabilities
related to operations
Property expenses
Loss on sale of fixed assets
Other
GroupParent Company
2012
2011
2012
2011
7
38
-
115
103
-
3
4
3
473258392379
598403395379
Note 6 Employees, personnel costs and remuneration to senior executives
Average no. employees
of whom
of whom
of whom
of whom
Parent Company
2012women men 2011women men
Sweden
3,31719%81%
3,16617%83%
Total Parent Company
3,31719%81%
3,16617%83%
Subsidiaries
Sweden
480
13%
87%
472
12%
88%
China
48
29%
71%
43
21%
79%
The Netherlands
25
32%
68%
22
32%
68%
Norway
198
10%
90%
201
11%
89%
UK
208
21%
79%
208
21%
79%
Germany
18
50%
50%
17
47%
53%
Other countries
63
27%
73%
62
26%
74%
Total in subsidiaries
1,040
17%
83%
1,025
16%
84%
Total, Group
4,357
18%
82%
4,191
17%
83%
Gender distribution in Company Management as of December 31
2012201220112011
PercentagePercentagePercentagePercentage
Parent Companywomen menwomen men
Board of Directors40%60%50%50%
Other senior executives
33%
67%
33%
67%
Salaries and other remunerations distributed among senior executives and other
employees together with social costs in the Parent Company.
Parent Company 2012
2011
SeniorOther TotalSeniorOther Total
executives
employees
executives employees
(19 people)
(21 people)
SEK million
Salaries and other remunerations
241,6771,701 211,5821,603
Sweden
Parent Company total
241,6771,701 211,5821,603
907
907
Social costs1
1
of which pension costs
361
348
Remuneration to senior executives
Senior executives
Senior executives refers to Board members, the President and other senior executives.
Other senior executives refers to salaried employees who are members of Group
Management together with the President.
Guidelines for remunerations to senior executives
Remuneration to the Chairman and Board members is decided by the Annual General
Meeting. In addition, remunerations are paid for committee work.
The AGM has decided that government guidelines current at any given time for
employment terms for employees in senior management positions and for incentive
schemes for employees of state-owned companies shall apply to remunerations to
Group Management. Government guidelines were updated in April 2009.
Preparation and decision processes for setting remunerations
to senior executives
Compensation for the President and salary-setting principles for Group Management
executives are prepared by a compensation committee appointed by the Board of
Directors. The committee consists of three board members. The Board of Directors
takes decisions based on committee proposals. The Chairman of the Board approves
the annual salary reviews of other Group Management executives.
Principles for remuneration to senior executives
The President and the other Group Management executives are paid fixed salaries. The
salaries are pensionable.
Company President Lars-Eric Aaro’s monthly salary was SEK 360.000 per month.
Retirement age for the President is 65 years. The President’s pension plan is a
defined-contribution plan whereby LKAB makes a yearly provision of 30 percent of the
President’s current fixed annual salary for a pension plan chosen by the President,
which may include the ITP plan. That part of the alternative ITP premium that is not
used to cover premiums for the ITP plan can be used by the President for a complementary pension plan. Accrued pension benefits from earlier employment agreements
are vested benefits. The President is entitled to decline salary in favour of additional
pension provisions up to a maximum level decided by LKAB.
The retirement age of other senior executives who joined Group Management prior
to 2005
(2 people) is 60 years. Pension is payable at 65 percent of the pension-carrying salary
(defined according to ITP plan, and free car benefit) at the time of retirement for the
period up to the age of 65. The pension commitment is secured via an endowment
policy taken out by LKAB with an insurance company. The pension commitment is
benefit-defined and vested. From the age of 65, pension is payable in accordance with
the ITP plan with a supplement for salary segments between 30 and 50 base amounts.
The supplement is 32.5 percent of the pensionable salary (defined according to the ITP
plan). Obligations additional to the general pension plan are secured via an endowment
policy taken out by LKAB with an insurance company. In addition to the ITP plan’s family pension (survivor annuity), a special family pension is payable (extended survivor
annuity). Any bonus paid on endowment or pension insurance policies accrues in its
entirety to the senior executives as increased pension. The above pensions terms were
settled by commutation for these two individuals as of 31/12/2012 The right to the
commutation is earned successively in three equal parts. The first part is considered
fully earned upon signing the agreement. The second part is considered earned one
year after the signing of the agreement, and the third is considered earned two years
after the signing of the agreement. From January 1, 2013, the policy is a defined contribution plan to which LKAB allocates 30 percent of the fixed annual salary per year.
Retirement age is 65 years.
The retirement age of other senior executives who joined Group Management between
2005–2008 (3 people) is 62 years. In addition to pension benefits regulated by collective
agreements (defined according to ITP plan), 14–18 percent of basic annual salary is
allocated as a pension premium. As of December 31, 2012, the above pension terms
were settled for two senior executives by commutation. The right to the commutation is
earned successively in three equal parts. The first part is considered fully earned upon
signing the agreement. The second part is considered earned one year after the signing
of the agreement, and the third is considered earned two years after the signing of the
agreement. From January 1, 2013 the policy is a defined contribution plan to which
LKAB allocates 30 percent of the fixed annual salary per year. Retirement age is 65
years.
The retirement age of other managers who became senior executives from January
1, 2009 onwards (3 people) is 65 years. The policy is a defined contribution plan to
which LKAB allocates 30 percent of the fixed annual salary per year. Mutual notice
of termination is six months for senior executives. Severance pay equivalent to 18
monthly salaries shall be paid when notice of termination of employment is given by
the company.
For further information, refer to the table Remuneration and other benefits to Group
Management executives, 2012.
Remuneration and benefits to Board members
2012
2011
SEK thousands Director’s fee 1) 3) Director’s fee 1) 3)
Chairman of the Board Marcus Wallenberg
583 302
207
Board member Hans Biörck 4)
Board member Maija Liisa Friman
250
250
Board member Lars-Åke Helgesson
323
480
167
Board member Sten Jakobsson 4)
Board member Hanna Lagercrantz2)
167
Board member Maud Olofsson 4)
Board member Stina Blombäck
83
250
Board member Per-Ola Eriksson
173
103
310
Board member Anna-Greta Sjöberg
Board member Egil M. Ullebö
83
250
1,966
2,015
Total
The remuneration includes fees for work on the Board’s Audit committee and the Currency and Finance Committee.
No remuniration or benefits are paid to the (government) Finance Department representative.
3) The Board fee for 2012 refers to expenses according to a new accounting principle. The Board fee for 2011 refers to an amount paid out in compliance with the AGM.
4) Refers to expense 2012. To be paid out in 2013..
1)
2)
Remuneration and other benefits to Group Management executives during 2012
VariableOtherPensionPension
Totalobligations
SEK thousandsSalary
remuneration
benefits 1)expense 2)
President Lars-Eric Aaro 4,471
103
1,361
5,935
4,544
Vice President Leif Boström
2,356
89
1,922
4,367
212
Vice President Anders Furbeck
2,273
17
4,445
6,735
4,862
Vice President Grete Solvang Stoltz
1,952
79
589
2,620
27
Vice President Per-Erik Lindvall 2,588
75
4,920
7,583
7,320
Vice President Anders Kitok
1,942
86
1,854
3,882
643
Vice President Charlotta Fogde
1,505
74
597
2,176
38
Vice President Katarina Holmgren
1,790
86
541
2,417
134
Vice President Markus Petäjäniemi
2,410
72
815
3,297
53
Total
21,287 68117,04439,01217,833
1) Other benefits include car, board and life insurance benefits.
2) Pension costs excluding special contribution tax.
Remuneration and other benefits to Group Management executives during 2011
VariableOtherPensionPension
Totalobligations
SEK thousandsSalary
remuneration
benefits 1)expense 2)
President Lars-Eric Aaro
4,219
101
1,333
5,653
4,499
Vice President Leif Boström
2,060
91
857
3,008
196
Vice President Anders Furbeck
2,010
70
1,429
3,509
4,297
Vice President Grete Solvang Stoltz
1,731
87
554
2,372
18
Vice President Per-Erik Lindvall 2,207
94
1,996
4,297
6,441
Vice President Anders Kitok
1,706
93
879
2,678
618
Vice President Charlotta Fogde
1,491
75
553
2,119
39
Vice President Katarina Holmgren
1,539
91
496
2,126
129
Vice President Markus Petäjäniemi
2,049
79
774
2,902
41
Accrued salaries, Group Management, undistributed
970
970
Total
19,982
781
8,871
29,634
16,278
1)
2)
Other benefits include car, board and life insurance benefits.
Pension costs excluding special contribution tax.
For information on post-employment benefits, etc; see Note 25 Employee benefits.
Note 7 Auditors’ fees and compensation
GroupParent Company
SEK million 2012
2011
2012
2011
Deloitte Audit assignment
7543
Audit additional to audit assignment
1
0
0
0
1
0
1
0
Tax advice Other services
1010
Other auditors
Audit assignment
0
3
-
3
Tax advice 7
2
6
1
Other services
5352
Audit assignments involve examination of the annual report and financial accounting
as well as the administration by the Board of Directors and the President, other tasks
related to the duties of the company’s auditors together with consultation or other
services that may result from observations noted during such examinations or the
implementation of such other tasks.
Note 8 Nature of operating expenses
SEK million Personnel costs Materials, etc.
Energy
Transport
Depreciations
GroupParent Company
2012
2011
2012
2011
3,474
3,261
2,713
2,603
3,7234,1672,5472,340
1,6871,5891,5291,449
2,3842,4623,1753,197
1,9531,8981,4691,483
3,694
3,406
4,000
3,851
16,91516,78315,43314,923
The operating profit was charged with a provision of SEK 1,181 million (1,234), of which
SEK 1,094 million (1,234) to the operating profit, for costs arising from the effects of
mining. The amount is a provision for future expenditures.
Note 9 Net financial income/expense
Financial expenses
Interest rate component in forward exchange contracts
Interest expense provision for urban transformation
-88
Interest expense on defined-benefit pension obligations
-120
Interest expense on loan facility
-39
Net profit/loss
Financial assets appraised at fair
value in the income statement (fair value option)
- return on share portfolios (excl. dividends)
revaluation of financial assets
-1
Closure of subsidiary
Other financial expenses
-15
Exchange rate differences (net)
-53
-316
Total financial expenses
428
-122
-48
-194
0
-2
-12
-29
-407
96
Net profit/loss reported in net financial income/expense under exchange rate differences refers mainly to revaluation of cash and cash equivalents. Return on assets
managed refers to net return on plan assets. The return on assets managed is not an
actual return, but an anticipated rate of return on funded obligations. Closing-day price
data is used for share portfolio valuations. No interest incomes or interest expenses
refer to items that are not reported at fair value.
Interest income includes returns on money-market instruments and bonds amounting to SEK 362 million (300).
Since the contracts were signed, lower interest rates in SEK compared to USD have
had a positive effect of SEK 83 million (84), which is coupled to the item interest rate
component in forward exchange contracts.
Limit fees amounting to SEK 39 million (48) in respect of loan facilities impact net
financial income/expense.
Revaluation of financial assets is done with discounted cash flows based on available
market rates. During 2012 revaluation affected net financial income/expense by SEK
0.9 million (0.5).
The strengthening of the Swedish crown has entailed exchange-rate losses during
the year on assets and bank balances.
Other financial expenses relate mainly to bank and administration costs.
Parent Company
Income from Income from
participations in
participations in
subsidiaries
associated companies
SEK million 2012
2011
2012
2011
Dividend/Group contributions
322
43
1
-
Group
SEK million
2012
2011
Parent Company
Income from otherOther
Financial income
securities and re-
interest income
Interest income
391
319
ceivables held as
and similar
Interest rate component in forward exchange contracts
83
84
non-current
profit/loss items
Closure of associated company
1
assets
Dividend SEK million 2012
2011
2012
2011
Financial assets available for sale 25
25
Interest income, subsidiaries
35
36
33
34
Financial assets appraised at
Interest income, forward exchange premiums
80
86
fair value (fair value option)
30
28
Interest income, other
385
315
Return on assets managed
43
47
Return on share portfolio
72
2
Net profit/loss
Dividends, shares
25253028
Financial assets appraised at fair
Sale of other securities
1
value in the income statement (fair value option)
140147520380
- return on share portfolios (excl. dividends)
171
Total net profit/loss
171
Dividends on shares that are financial assets refer to holdings in SSAB.
Total income from financial items
744
503
Interest income and similar income statement items include returns on money-market
instruments and bonds amounting to SEK 362 million (300).
Parent Company
Interest expenses and Note 11 Taxes
similar profit/loss Reported in income statement
items
Group
SEK million
2012
2011
SEK million
2012
2011
Interest expense, limit fee on loan facility
-40
-48
Current tax expense (-)
-13
-18
Interest expenses, subsidiaries
Tax expense for the year -2,443
-3,197
Interest expenses, pension liabilities
-34
-35
-73
-6
Adjustment for taxes attributable to previous years
-87
Interest expenses, urban transformation
-2,516-3,203
Impairment loss, financial assets
-1
-1
Deferred tax expense (-) Exchange rate differences, foreign currency
-45
-13
Deferred tax in regard to temporary differences
282
-638
Interest expenses, other
-3
-3
282-638
Other
-7-5
Total reported tax expense in Group
-2,234
-3,841
-230-123
Interest expenses on pension liabilities were calculated at an interest rate of 4.2 (4.5)
percent. The impairment of financial assets is in respect of a claim against Jernbaneverket.
Other financial expenses relate mainly to bank and administration costs.
Income from financial instruments reported in operating income is shown
in the following table:
GroupParent Company
SEK million 2012
2011
2012
2011
Exchange rate gains/losses from accounts receivable
and trade accounts payable
7
113
13
15
Net gains/flosses on derivatives
reported in operating income
57
615
57
615
The derivatives reported in operating income refer mainly to hedging of accounts
receivable.
Note 10 Appropriations
Parent Company
SEK million
2012
2011
Difference between book depreciation and
appreciation according to plan:
Installations underground, in progress
-1,305
0
1
1
Buildings and land
Machinery and inventories
506
-184
-2,960
-3,600
Tax allocation reserve, provisions for the year
Tax allocation reserve, reversal for the year
1,400
1,410
-2,358-2,373
Total
Deferred tax on appropriations amounted to SEK -519 million (-624). Deferred tax on
appropriations is only reported in the consolidated income statement.
Parent Company
SEK million
2012
2011
Current tax expense (-)
Tax expense for the year -2,341
-3,008
-73
-7
Adjustment for taxes attributable to previous years
-2,414-3,015
Deferred tax expense (-)
Deferred tax in regard to temporary differences
198
-31
198-31
-2,216
-3,046
Total reported tax expense in the Parent Company
Reconciliation of effective tax
20122011
Group
SEK million
(%)
2012
(%)
2011
Profit before tax 11,023
14,801
Tax according to current tax rate
26.3%
-2,899
26.3%
-3,893
for Parent Company
Non-deductible expenses
0.3%
-31
0.3%
-43
-0.2%
26
-0.1%
16
Tax-exempt income
Tax attributable to previous years
0.7%
-73
0.0%
-6
Standard interest on tax allocation reserves
0.2%
-26
0.4%
-46
Effect of changed tax rates
-6.5%
719
-0.5% 50-0.9% 131
Other
Reported effective tax rate
20.3%
-2,234
26.0%
-3,841
Parent Company 2012
2011
SEK million
(%)
2012
(%)
2011
Profit before tax
8,485
11,653
Tax according to current tax rate
for Parent Company
26.3%
-2,232
26.3%
-3,065
Non-deductible expenses
0.2%
-14
0.3%
-38
Tax-exempt income
-1.9%
165
-0.5%
54
Tax attributable to previous years
0.9%
-73
0.1%
-7
Standard interest on tax allocation reserves
0.3%
-26
0.4%
-46
Effect of changed tax rates
1.1%
-95
-0.7% 59-0.5% 56
Other
Reported effective tax rate
26.2%
-2,216
26.1%
-3,046
Tax attributable to other comprehensive income
Group
SEK million
Cash flow hedges
Actuarial gains/losses
2012
2011
-67
75
47
19
-2094
Reported in statement of financial position and the balance sheet
Reported deferred tax assets and liabilities
Deferred tax assets and liabilities refer to the following:
DeferredDeferred
Group
tax asset
tax liability
Net
SEK million
201220112012201120122011
Buildings and land
36
34
-45
-29
-9
5
5
92-1,992-2,083-1,987-1,991
Pension provisions
442469442469
6
7-2,224-2,261-2,218-2,254
Tax allocation reserves
Contingency reserves-99
-118-99
-118
Cash flow hedges
17
-51
-51
17
Loss carryforwards
93789378
Provisions, urban transformation
316
316
Current receivables
17
17
Current investments-24 -3-24 -3
Other
21 7 -221 5
919 721-4,435-4,496-3,516-3,775
Tax assets/liabilities
Offset
-919-721919721
Tax assets/liabilities, net-3,516-3,775-3,516-3,775
Reported deferred tax assets and liabilities
Deferred tax assets and liabilities refer to the following:
DeferredDeferred
Parent Company
tax asset
tax liability
Net
SEK million
201220112012201120122011
Buildings and land
29
33
29
33
4
92
4
92
Pension provisions
131156131156
316
316
Other
6767
Tax assets
486288486288
Change in deferred tax in temporary differences and loss carryforwards
Reported in Reported against
Group
Balance as of
Income
otherOther
Balance as of
SEK million
Jan 1, 2011
statement
comp. income
changes
Dec 31, 2011
Buildings and land
-3
8
5
-1,893
-98
-1,991
Pension provisions
456-501944
469
-1,690
-564
-2,254
Contingency reserve
-118
-118
Cash flow hedges
-58
75
17
Loss carryforwards
67
11
78
Current receivables
17
17
Current investments
-55
52
-3
Other
6 3-4 5
-3,271
-6389440
-3,775
Reported in Reported against
Balance as of
Income
otherOther
Balance as of
SEK million
Jan 1, 2012
statement
comp. income
changes
Dec 31, 2011
Buildings and land
5
-14
-9
-1,991
4
-1,987
Pension provisions
469
-74
47
442
-2,254
36
-2,218
Contingency reserve
-118
19
-99
Cash flow hedges
17
-1
-67
-51
316
316
Loss carryforwards
78
15
93
Current receivables
17
-17
-3
-21
-24
Current investments
Other
519 -321
-3,775 282 -20
-3-3,516
Reported
Balance as of
in income
Balance as of
Parent Company
SEK million
Jan 1, 2011
statement
Dec 31, 2011
33
0
33
Buildings and land
94
-2
92
Pension provisions
185
-29
156
Other
77
319 -31288
Reported
Parent Company
Balance as of
in income
Balance as of
Jan 1, 2012
statement
Dec 31, 2012
SEK million
Buildings and land
33
-4
29
92
-88
4
Pension provisions
156
-25
131
316
316
Other
7-1 6
288198486
Note 12 Earnings per share
The number of shares totals 700,000 for 2012 and 2011. Net income attributable to
Parent Company shareholders amounts to SEK 8,789 million (10,960). Earnings were
thus SEK 12,555 (15,657) per share. No options or potential common shares exist, for
which reason there is no dilution.
Note 13 Intangible assets
All of the Group’s intangible assets were acquired.
GroupMineral
SEK million
Goodwill
rightsOther
Total
Accumulated acqusition value
Opening balance January 1, 2011
196
289
148
633
Change, renewable energy certificates -5
-5
Change in emissions allowances
-50
-50
Reclassifications
4 4
Exchange rate differences for the year
3
-4
-1
Closing balance December 31,2011
203
285
93
581
203
285
93
Change, renewable energy certificates 1
16
-5
0
Closing balance December 31, 2012
198
285
110
581
1
16
-5
593
Accumulated amortizations
-182
-29
-211
Amortization for the year
-0
-3
-3
Reclassifications
-4-4
Adjustment to earlier years
9
9
Closing balance December 31, 2011 -4
-173
-32
-209
-4
Exchange rate differences for the year Closing balance December 31, 2012
-4
-173
-32
0
-4
-1
-174
-36
-209
-4
-1
-214
Accumulated impairment losses
-8
-93
-101
-1
-1
Closing balance December 31, 2011 -9
-93
-102
-9
-93
-9
-93
-102
-102
Carrying amounts
As of December 31, 2012
188
14
119
321
190
19
61
270
As of January 1, 2012 190
19
61
270
185
18
74
277
Amortization and impairments are reported in the following lines in the income statement
SEK million
Cost of goods sold
2012
-4
-4
Group
Parent CompanyMineral
Other
SEK million
rights Accumulated acqusition value
161
124
Change, renewable energy certificates -5
-50
161
69
2011
-7
-7
Total
285
-5
-50
230
161
Change, renewable energy certificates Change in emissions allowances
161
69
1
16
86
230
1
16
247
Accumulated amortizations Opening balance January 1, 2011
-161
Amortizaion for the year
-161
-8
-3
-11
-169
-3
-172
-161
-161
-11
-2
-13
-172
-2
-174
Carrying amounts
As of January 1, 2011
116
58
116
58
As of January 1, 2012
58
73
58
73
Impairment requirements for cash-generating units containing goodwill
The following cash-generating units, which form parts of the primary segment Minerals
Division, have significant amounts of goodwill in relation to the Group’s total carrying
amount of goodwill:
SEK million
2012
2011
Minelco Ltd
111
123
Minelco OY
34
35
145 158
Units without significant amounts
40
32
of goodwill, compiled
185 190
Assessment of the recoverable amounts of cash-generating units is based on the same
important assumptions.
The impairment test is based on value in use. This value is based on cash-flow
forecasts where the first three years are based on the three-year business plan
established by the Minerals Division’s company management. The total forecast period
corresponds to the useful life of the unit’s most important assets. The cash flow
forecast after the first three years was based on an annual growth rate of 2–3 percent
(2–3), which corresponds to the long-term growth rate of the unit’s markets. The
forecast cash flows have been appraised at present value with an individual discount
rate (WACC). Important assumptions with respect to the three-year business plan are
described below.
Important variablesMethod of estimating value
Market growthHistorically, demand for these products has followed economic cycles. Expected market growth is based on a transition from the
prevailing economic situation to the expected long-term growth.
Personnel costsPersonnel cost forecasts are based on the expected rate of inflation and certain real wage/salary increases. The forecast is in agreement with previous experience.
Note 14 Property, plant and equipment
Group
Machinery
and other
InventoriesConstruction
Buildings
Installations
technical
tools and
in progress
SEK million
and landundergroundinstallationsinstallationsinstallations
Total
Acquisition value
7,365
4,249
19,200
3,177
8,792
42,783
Acquisitions
90169567
4,859
5,126
37489666 48
-1,239
Reclassifications
Disposals and retirements
-8
-46
-40
-1
-95
Exchange rate differences
1
2
7,484
4,754
19,916
3,252
12,411
47,816
Acquisitions
Reclassifications
7,484
4,754
19,916
3,252
12,411
47,816
91 59 1455,5135,808
725373474 89
-1,661 0
-1
-1
-27
-41
-4
-74
230617
37
8,322
5,126
20,429
3,446
16,266
53,589
Depreciations
-2,129
-3,247
-10,703
-2,027
-18,106
Depreciations for the year
-273
-181
-1,144
-293
-1,891
2
37
19
59
-1
-1
-2,400
-3,428
-11,811
-2,301
-19,939
-2,400
-3,428
-11,811
-2,301
-19,939
-290
-161
-1,143
-352
-1,946
2
23
39
64
-5
-5
-2,692
-3,589
-12,931
-2,614
-21,826
Impairments
-424
-399
-496
-10
-261
-1,590
Impairments for the year
-1
1
-425
-399
-496
-10
-261
-1,591
-425
-399
-496
-10
-261
-1 591
-1
-1
1
1
-425
-399
-496
-10
-261
-1,591
Carrying amounts
January 1, 2011
4,812 6038,0011,1408,531
23,087
4,659
926
7,609
941
12,150
26,286
December 31, 2011
January 1, 2012
December 31, 2012
4,659
5,205
926
1,138
7,609
7,002
941
822
12,150
16,005
26,286
30,173
Depreciation and impairments are included under the following items in the income statement
Group
SEK million
2012
2011
Cost of goods sold
1,924
1,853
Of which impairments
11
Selling expenses
3
22
11
12
Research and development
9
5
1,946
1,892
Parent CompanyMachinery
and other
Inventories,Construction
Buildings
Installations
technical
tools and
in progress
SEK million
and land
under ground
installations
installations
installations
Total
Acquisition value 5,028
4,249
17,682
765
7,668
35,392
Acquisitions
71164432
4,489
4,652
36489666 47
-1,238
Reclassifications
-23
-7
-778
-808
5,135
4,754
18,369
837
10,141
39,236
5,135
4,754
18,369
837
10,141
39,236
Acquisitions
682158
5,272
5,419
464373195 65
-1,098 0
Reclassifications
-1
-4
-21
-439
-465
5,667
5,126
18,581
940
13,876
44,190
Depreciations
-1,585
-3,247
-9,656
-541
-15,029
-182
-181
-1,057
-59
-1,479
22
7
29
-1,767
-3,428
-10,691
-593
-16,479
-1,767
-194
-1,961
-3,428
-161
1
-3,588
-10,691
-1,053
4
-11,740
-593
-59
18
-634
-16,479
-1 467
23
-17,923
Impairments
-426
-399
-495
-9
-261
-1,590
-1
-1
-427
-399
-495
-9
-261
-1,591
-427
-399
-427
-399
-495
-9
-261
-1
-496
-9
-261
-1 591
-1
-1.592
Carrying amounts
January 1, 2011
3,017
603 7,531
215
7,407
18,773
December 31, 2011
2,941
926
7,183
236
9,880
21,166
January 1, 2012
December 31, 2012
2,941
3,279
926
1,139
7,183
6,345
236
297
9,880
13,615
21,166
24,675
Depreciation and impairments are included under the following items in the income statement
Parent Company
SEK million
2012
2011
Cost of goods sold
1,457
1,453
Of which impairments
1
1
Selling expenses
0
20
2
3
Research and development
9
4
1,468
1,480
Note 15 Participations in joint ventures
Note 16 Parent Company participations in associated companies
Group
The Group has a 50-percent interest in the joint venture company Likya Minelco, whose
main products are minerals with flame retardant properties (UltraCarb).
Specification of the Parent Company’s and Group’s ownership of participations in joint
ventures.
Parent Company
SEK million
31/12/2012
Accumulated costs
At beginning of year
2
Closing balance December 31
1
Indirect holding via the subsidiary
Minelco ABShares, %Shares, %
20122011
Likya Minelco / Izmir, Turkey
50
50
In the consolidated financial statements, the following items comprise the Group’s
share of the joint venture company’s assets, liabilities, income and expenses.
Accumulated impairment losses
-1 Closing balance December 31
-1
SEK million
Net sales
Expenses
Financial items
Profit
Carrying amount at year end 0
31/12/2011
2
2
-1
-1
1
2012
2011
20
18
-13-12
0
0
76
Non-current assets
Current assets
Total assets
8
13
21
5
10
15
Current liabilities
Non-current liabilities
Total liabilities
Net assets
0
0
0
21
-1
0
-1
14
Note 16 Parent Company participations in associated companies (cont.)
Specification of the Parent Company’s direct ownership of participations in associated companies
Associate company Corp. ID No. and registered office
2012
2011
Votes andCarryingVotes andCarrying
Totalequity
amountequity
amount
shares
share, %
(SEK million)
share, %
(SEK million)
Swedish associated companies
Progressum AB/556540-0768/Kiruna 12042.8 042.8 0
2,50033.30.3533.30.35
Norrskenet AB/556537-7065/Kiruna
Expandum AB/556252-3281/Gällivare
1,66533.30.0233.30.02
MCC AB/556644-8295/Kiruna -
-
-
20.0
0.20
Foreign associated companies
Futurum AS/-/Narvik, Norway
500
23.8
0
23.8
0
Note 17 Receivables from subsidiaries and associated companies
Parent Company
Receivables from Receivables from
subsidiaries
associated companies
SEK million31/12/201231/12/201131/12/201231/12/2011
Accumulated costs
Opening balance January 1
1,297
992
0
0
Lending-
400-Amortization-155 -95
-
Closing balance December 31 1,142
1,297
0
0
Carrying amount at year end 1,142
1,297
Current receivables from subsidiaries and associated companies increased during the year and amounted at year end to SEK 1,826 million (1,570).
0
0
Note 18 Financial investments
Group
SEK million
31/12/2012
31/12/2011
Financial investments that are assets
Financial assets available for sale
Shares and participations
745
793
248
245
Financial assets relating to reserves for pension commitments
9931,038
Short-term investments that are current assets
Financial assets appraised at fair value in the income statement (fair value)
1,316
1,065
Interest-bearing securities
11,919
8,441
13,2359,506
Financial investments that are fixed assets refer largely to shares in SSAB appraised at fair value as of Dec 31, 2012 in accordance with IAS 39. The carrying amount of SSAB shares
significantly exceeds their cost. Changes in value for the year are reported in other comprehensive income.
Parent Company
31/12/2012
31/12/2011
Specification of securitiesMarket valueCarryingMarket valueCarrying
SEK million
or equiv.
amount
or equiv.
amount
Money-market instruments
16,67816,65816,01916,008
Listed shares, mutual funds
1,316
1,225
1,065
1,065
17,99417,88317,08417,073
The table below describes the maturity profile of discount instruments and government bonds.
Group
Total
Carrying
Nominal
31/12/2011
SEK million < 3 months 3–6 months7–12 months13–24 months > 25 months
amount
amount
13,376
1,284323323285
15,591
15,578
Interest-bearing securities
Total
13,376
1,284323323285
15,591
15,578
Group
Total
31/12/2012 Carrying
Nominal
SEK million
< 3 months 3–6 months 7–12 months13–24 months > 25 months
amount
amount
Interest-bearing securities11,540 1,109 516 794 1,91215,87115,795
Total11,540 1,109 516 794 1,91215,87115,795
Surplus liquidity is managed according to the financial policy established by the Board. The Group’s maturity profile is considered to be broadly similar to the Parent Company’s.
The information in the maturity profile is from the Parent Company.
Note 19 Other non-current securities holdings
Note 20 Non-current receivables and other receivables
Parent Company
SEK million
31/12/2012
31/12/2011
Accumulated costs
127 123
Acquisition
24
129
127
Group
SEK million
31/12/2012
31/12/2011
Non-current receivables that are assets
Interest-free loan, Jernbaneverket
105
85
Other
1
10685
Other receivables that are current assets
PRI balance 21
20
VAT asset
229
285
Tax asset 951
299
Forward exchange contracts (USD)
360
Other
17161
1,732665
The change for the year of SEK 2 million refers to shareholder contributions to Vindin AB.
Specification of other non-current securities holdings.
Parent Company
31/12/2012
31/12/2011
Market valueCarryingMarket valueCarrying
SEK million
or equiv.
amount
or equiv.
amount
SSAB
698 83749 83
Other
46464444
744129793127
Parent Company
SEK million
31/12/2012
31/12/2011
Company-owned endowment insurance
80
85
Interest-free loan, Jernbaneverket
105
85
185170
Other receivables (current)
20
19
PRI balance VAT asset
213
249
Tax asset 985
380
Other
13440
1,352688
Parent Company
SEK million
31/12/2012
31/12/2011
Accumulated costs
170 111
2269
Lending
Amortizations
00
-2-1
Impairments
Change in value of endowment insurance
-5
-9
185
170
Total reserves
2012
Opening reserves
515
Change in reserves for the year:
-18
Translation reserve
Fair value reserve
-50
224
Hedge reserve
Closing reserves
671
2011
1,380
-10
-647
-208
515
Share capital
As of December 31, 2012, the registered share capital comprised 700,000 (700,000)
common shares.
The holder of common shares is entitled to a dividend that is decided by the AGM,
and each share entitles the holder to one vote. The quota value is SEK 1,000 per share.
Note 21 Inventories
Group
SEK million
Raw materials and consumables
Work in progress
Finished products and goods for sale
31/12/2012
31/12/2011
1,552
1,565
26
24
937
858
2,5152,447
Parent Company
SEK million
Raw materials and consumables
Work in progress
Finished products
31/12/2012
31/12/2011
1,356
1,308
0
0
590
571
1,9461,879
Note 22 Accounts receivable
Accounts receivable are reported taking into account bad debts that have arisen in the
Group amounting to SEK 66 million (1).
Not 23 Prepaid expenses and accrued income
SEK million
Insurance premiums
Other
GroupParent Company
2012201120122011
31/1231/1231/1231/12
5
6
88138 70 80
93144 70 80
The Group’s specification of the shareholders’ equity item reserves
2012
-103
-18
-121
Fair value reserve
Financial assets available for sale
The fair value reserve includes the accumulated net change in fair value of availablefor-sale financial assets up until the assets are removed from the statement of financial position. Any impairment is reported in the income statement.
Hedge reserve
The hedge reserve includes the effective share of the accumulated net change in fair
value of cash-flow hedging instruments attributable to hedging transactions that have
not yet occurred.
Dividend
After the closing date, the Board has proposed the following dividend, which is subject
to approval by the AGM on 29 April 2013.
SEK million
Ordinary dividend SEK 5,000 (7,143) per share
Extra dividend SEK 2,857 (-) per share
2012
2011
3,500
5,000
2 000
5,5005,000
The dividend proposed by the Board has been approved by the Annual General Meeting
for the past two years.
Parent Company
Restricted reserves
Restricted reserves may not be reduced through dividends.
Statutory reserve
The purpose of the statutory reserve is to save a part of the net profit that is not used
to cover loss brought forward.
Note 24 Equity
Translation reserve
SEK million
Opening translation reserve
Translation differences for the year
Closing translation reserve
Translation reserve
The translation reserve covers all exchange rate differences that arise in the translation of financial reports of foreign operations whose accounts are reported in currencies other than the Group’s reporting currency. The Parent Company and consolidated
accounts are reported in SEK.
2011
-93
-10
-103
Fair value reserve
2012
Opening fair value reserve
666
Financial assets available for sale: Revaluations reported directly in other comprehensive income-50
Closing fair value reserve
616
2011
1,313
Hedge reserve
2012
Opening hedge reserve
-48
Cash flow hedges
Reported directly in other comprehensive income
226
Dissolved through income statement
65
Tax attributable to revaluations for the year
-67
Closing hedge reserve
176
2011
160
-647
666
-65
-218
75
-48
Profit brought forward
Comprises the previous year’s non-restricted equity after any dividend has been paid.
Together with net profit for the year, it makes up non-restricted equity i.e. the sum that
is available for payment as a dividend to shareholders.
Capital management
LKAB’s management of financial risks is regulated by a financial policy approved by the
Board. The Currency and Finance Committee prepare and follow the company’s hedging programme and financial guidelines. LKAB defines capital under management as
shareholders’ equity in the Group, less unrealised exchange loss/profit on outstanding
USD futures/options. In 2012 LKAB’s capital under management amounted to SEK 40.7
billion (37.7).
According to Board policy, the Group’s financial goal is to maintain a good capital
structure and financial stability, and thereby secure a foundation for continued growth
of business operations and future changes in the community. The Board’s ambition
is to maintain a balance between high yield and the benefits and security afforded by
a sound capital structure. The Group’s objective is to achieve a return on equity of 10
percent. In 2012, return on equity was 22.1 (30.9) percent. In comparison, the average
interest income on interest-bearing investments was 2.35 (2.59) percent.
LKAB’s dividend policy means that the dividend to the owner will, over the long term,
amount to 30 to 50 percent of profit after tax and be adapted to the average earnings
level over one business cycle. The proposed ordinary dividend of SEK 3,500 million
amounts to 39.8 percent of the company’s after-tax earnings, in addition to which an
extra dividend of SEK 2,000 million is proposed. No changes to Group capital management were made during the year.
LKAB Försäkring is the only subsidiary with a statutory capital requirement which on
closing day amounted to EUR 3,200,000, equivalent to SEK 28 million (29).
Note 25 Pensions
Defined-benefit pension plans
Group
SEK million
Present value of unfunded obligations
Present value of wholly or partially funded obligations
Total present value of obligations
Fair value of plan assets
Present value of net obligation
2012
2,560
1,269
3,829
-1,101
2,728
2011
2,395
1,154
3,549
-1,026
2,523
Effect of limitation rule for net assets
Net amount in statement of financial position
-7
2,721
7
2,530
The net amount is reported in the following
statement of financial position items:
Provisions for pensions, non-current liability
-249
2,970
2,721
-245
2,775
2,530
Defined-benefit pension plans
Most of LKAB’s pension plans for employees in Sweden are defined-benefit plans,
which means that LKAB guarantees pensions based on a certain percentage of salary.
Pension commitments in Sweden are secured by the company mainly via provisions reported in the statement of financial position, whereof most are secured through credit
insurance in FPG (Försäkringsbolaget Pensionsgaranti). Promises of future retirement
before the age of 65 are to a certain degree contingent upon underground work and are
secured by the company via provisions, in the statement of financial position, without
credit insurance.
Commitments for retirement pensions and survivor benefits for salaried employees
in Sweden are insured by Alecta. According to a pronouncement from the Swedish
Financial Reporting Board, UFR 3, this is a defined-benefit plan that involves several
employers. The company has not had access to such information as is necessary for
reporting this obligation as a defined-benefit plan. The ITP pension plan insured via
Alecta is therefore reported as a defined-contribution plan. Alecta’s surplus can be
distributed to the policyholders and/or the insured parties. At the end of 2012, Alecta
reported a plan surplus of 129 percent (113), which was below the normal spread of
125–155 percent stated in Alecta’s consolidation policy for these plans.
For employees in Belgium, Norway, the UK and Germany, LKAB has defined-benefit
plans as a complement to social insurance. In Belgium, pensions are secured via
pension insurance; in the UK, via a company-managed pension funds and in Germany
via provisions reported in the balance sheet and through credit insurance. In Norway,
pensions are secured via a company-managed superannuation fund, via provisions
reported in the balance sheet and through credit insurance.
Changes in present value of obligations for defined-benefit plans
Group
SEK million
2012
Net obligation for defined-benefit
plans as of January 1
3,549
Compensation paid
-213
Costs for employment during current period
124
Interest expenses
89
Actuarial losses
265
Other changes
29
Exchange rate differences on obligations
-14
and reported actuarial loss
Net obligation for defined-benefit
plans as of December 31
3,829
2011
3,311
-191
76
122
178
25
28
3,549
Changes in fair values of plan assets
Group
SEK thousand
Fair value of plan assets as of January 1
Charges from the employer
Compensation paid
Anticipated return
Assumed obligation
Actuarial gain (+) loss (-)
Exchange rate differences on obligations
and reported actuarial loss
Fair value of plan assets as of
December 31
2012
1,027
43
-62
45
-
51
2011
1,008
65
-56
46
25
-73
-3
12
1,101
1,027
Of plan assets funded through funds in England and Norway in 2012, 30 percent was
invested in shares and 70 percent in interest-bearing securities. The actual return in
2012 amounted to SEK 95 million (-26).
Cost reported in income statement
Group
SEK million
2012
2011
Costs in respect of employment during current period
91
76
Interest expense for obligation
120
122
Anticipated return on plan assets
-43
-47
Limitation rule assets
-
8
Effect of premium-based mine policy and adjustments in
Norway2
Total net cost in income statement
170
159
The costs are reported on the following lines in the income statement:
Group
SEK million
2012
2011
Cost of goods sold
93
84
Income from financial items
-43
-47
(reported in net financial income/expense)
Financialexpenses
(reported in net financial income/expense)
120
122
170159
Assumptions for defined-benefit obligations
Significant actuarial assumptions as of closing day
(expressed as weighted averages)
Group
Percent
Discount rate as of December 31
Assumed return on plan assets,
as of December 31
Future salary increases
Employee turnover
Future pension increases
20122011
3.2
3.7
4.3
3.0
3.5
1.75
5.0
3.0
3.5
2.0
Assumptions refer to the Swedish liability
Assumptions concerning future mortality rate is based on published statistics and
mortality figures. The average life expectancy (years of life remaining) for an individual
who retires at 65 years of age is 23 years for men and 25 years for women.
The true return on plan assets for 2012 was 8.6 percent (-2.5).
Sensitivity analysis discount rate
Group
SEK million
Change in pension obligations 2012
1%
210
1%
190
Only Swedish pension obligations are included in calculations of changes in pension
obligations.
Historical information
Group
SEK million Present value of defined-benefit
obligations
Fair value of plan
assets
Net obligations
20122011201020092008
3,8223,5633,309 3,4373,156
-1,101-1,033-1,008-1,022 -975
2,7212,5302,3012,4152,181
Historical information, Group (cont.)
SEK million Empirical adjustments in
respect of plan assets
Empirical adjustments in
respect of defined-benefits obligations
Note 26 Provisions
20122011201020092008
51
-73
20
-41
-141
265
186
16
17
88
The historical information for 2008 has not been adjusted for the removal of the
corridor method. The Group estimates that SEK 42 million will be paid to funded and
unfunded defined-benefit plans in 2013, and an estimated SEK 43 million will be paid to
the defined-benefit plans that are reported as defined-contribution plans.
Parent Company pension obligation
SEK million
2012
2011
PRI
608586
Other provisions subject to Pension Obligations Vesting Act
212
227
Provisions not subject to Pension Obligations Vesting Act
595
590
1,4151,403
Of which credit guarantees via FPG/PRI
820
813
Capital value of pension obligations under the company’s own management
Parent Company
SEK million
2012
Capital value of pension obligations at beginning of year
1,403
Cost excluding interest expense charged to income statement 83
Interest expenses
34
Pension disbursements
-105
Capital value of pension obligations at year end
1,415
2011
1,351
103
35
-86
1,403
Group
SEK million
31/12/2012
31/12/2011
Provisions
5,877
5,103
Emission allowances for carbon dioxide
57
230
Remediation expenses
144
144
Other
1616
Total
6,0945,493
Parent Company
SEK million
Provisions
Emission allowances for carbon dioxide
Remediation expenses
Total
31/12/2012
31/12/2011
5,877
5,103
57
230
144
144
6,0785,477
Provisions for urban transformations relate to compensation expenses in Kiruna and
Malmberget caused by ground deformations attributable to mining thus far. Compensation expenses are reported in the income statement under cost of goods sold.
GroupOthers
UrbanEmissionProSEK million
transformation allowances visions
Opening balance January 1 2011
4,251
75
160
Provisions for the year
1,649
Emissions for the year
155
Settlement of previous year’s emissions Costs associated with pensions
Reversal of provisions
-415
Parent Company
Utilized provisions
-382
SEK million
2012
2011
Closing balance December 31 2011
5,103
230
160
Company-managed pension schemes
Of which paid out during 2012
439
230
Expenses excluding interest expenses
83
103
Of which for payment during 2013-2019
4,664
Interest expenses
34
35
Of which for payment after 2019
160
Costs for company-managed pension schemes
117
138
Insured pension schemes
5,103
230
160
Insurance premiums
190
162
1,230
Subtotal
311300
87
Interest-bearing liabilities for the year
Capital gains tax on pension funds
3
3
57
Special contribution tax on pension expenses
77
70
Settlement of previous year’s emissions
-230
Expenses for credit insurance, administrative expenses, other 7
9
-135
Reported net expense attributable to pensions
395
382
Utilised provisions
-407
5,878
57
160
The net pension expenses are reported on the following lines in the income statement:
Of which for payment during 2013
943
57
Parent Company
2,275
160
SEK million
2012
2011
2,659
Financial expenses (reported in net financial income/expense) 34
35
Operating expense
361
347
Refer to Note 1 item 28 for information regarding urban transformation expenses.
395382
The financial costs are calculated at an interest rate of 4.2 percent.
Assumptions for defined-benefit obligations.
Significant actuarial assumptions as of closing day (expressed as weighted averages)
Parent Company
Percent
20122011
3.8
3.8
Discount rate as of December 31
The Parent Company estimates that SEK 7 million will be paid to defined benefit plans
during 2013. The assumptions are calculated based on the wage levels applicable on the
closing dates concerned.
Defined-contribution pension plans
In Sweden, the Group has defined-contribution pension plans for which the company
assumes full cost. In foreign subsidiaries, defined-contribution plans are financed
partly by the companies and partly by contributions paid by the employees.
Premiums for these plans are paid on a current basis in accordance with regulations
for each plan.
GroupParent Company
SEK million 2012
2011
2012
2011
Expenses for defined contribution pension plans 185
170
182
167
No retirement solutions were paid out through insurance plans during 2012. In 2011
SEK 1 million was disbursed.
Total
4,486
1,649
155
-415
-382
5,493
669
4,664
160
5,493
1,319
87
57
-230
-136
-409
6,094
1,000
2,435
2,659
Parent CompanyOther
UrbanEmissionProSEK million
transformationallowances
visions
Total
4,251
75
144
4,470
1,649
1,649
155
155
Settlement of previous year’s emissions Reversal of provisions
-415
-415
Utilised provisions
-382
-382
5,103
230
144
5,477
Of which paid out during 2012
439
230
669
4,664
4,664
144
144
5,103
230
144
5,477
1,230
1,319
Interest-bearing liabilities for the year
87
87
57
57
Settlement of previous year’s emissions
-230
-230
-135
-136
Utilised provisions
-407
-409
5,877
57
144
6,078
Of which for payment during 2013
943
57
1,000
2,275
144
2,419
2,659
2,659
Note 27 Urban transformation
LKAB has, and will continue to have, significant expenses in respect of urban transformations. As and when impact due to mining activities (economic/physical damage to
property) is incurred, LKAB reports a provision in accordance with the criteria in IAS 37.
In addition, LKAB allocates funds to finance future expenditures for urban transformation in accordance with the approved finance policy of the Board at that time. The
purpose of such asset management is to ensure LKAB’s ability to pay and that the
rates of return on allocated funds will cover inflation over the period.
The company’s net expenses for urban transformation consist of the following components.
Parent Company
SEK million
Expenses for employment during current period
Effect of changed estimates and assumptions
Effect of present value appraisal of provision, ref 2011
Net expense for urban transformation
2012
-1,094
-
-87
-1,181
2011
-1,649
415
-1,234
Net expenses for urban transformation are reported on the following lines in the
income statement:
Parent Company
SEK million
2012
2011
Cost of goods sold
-1,094
-1,234
Financial expenses
-87
-1,181-1,234
The following balance sheet items are attributable to urban transformation:
Parent Company
SEK million
2012
Provisions, urban transformation – short term
943
Provisions, urban transformation – long term
4,934
5,877
4,934
Current investments/Cash and cash equivalents-
943
Allocated funds, urban transformation
5,877
0
The reported provisions for urban transformation do not include LKAB’s need to
replace its own buildings affected by urban transformation. A decision was taken
concerning new investments in the amount of SEK 383 million to replace the company’s
own buildings.
In addition to this there will also be subsequent demands resulting from future mining. LKAB makes ongoing assessments of such future requirements. The assessments
are subject to significant uncertainty. On the closing date LKAB’s assessment is that
the Group’s actual short and long-term capital obligations toward urban transformation amount to significant sums.
Since 2007, LKAB has disbursed SEK 1,612 million corresponding to expenses set
aside as liabilities in previous years. The corresponding expenditure for 2012 was SEK
407 million.
The urban transformation in Malmfälten has impacted LKAB’s earnings and liquidity
by considerable amounts, and will continue to do so in the years to come. LKAB must
therefore remain financially strong to meet both existing and future obligations that
urban transformation will entail.
Note 28 Accrued expenses and deferred income
SEK million
Electricity
Payroll and personnel costs
Accrued accounts payable
Other
GroupParent Company
2012-2011-2012-201131/1231/1231/1231/12
77656657
677
665
631
590
564
414
486
391
100974210
1,4181,2411,2251,048
2011
439
4,664
5,103
4,664
439
5,103
0
Note 29 Significant risks and uncertainties
In addition to the information below, see the Financial Risks section in the Report of the Board of Directors for further information.
The Group’s transaction exposure is distributed over the following contract currencies:
2012
2011
CurrencyEffect onEffect onEffect onEffect on
AmountChangeprofit/loss
equity AmountChangeprofit/loss
equity
USD
3,806SEK 0.10
381
56
4,061SEK 0.10
406
49
NOK
880SEK 0.10
88
594SEK 0.10
59
EUR
61 SEK 0.10
6
26SEK 0.10
3
GBP
5SEK 0.10
0.5SEK 0.10
Transaction exposure in US dollars during 2012 was hedged to 1,840 (2,260) or 48 (56) percent via currency derivatives. No ineffectiveness in hedging during 2012 affected the
financial result negatively. The effect on equity due to changes in the underlying currency exchange rates is calculated based on a model using prices from Reuters.
Outstanding on closing day, including forward exchange contracts
(selling contract) reported in revenue.
recent years due to the expansion of the Minerals Division. Translation exposure in the
Group refers to foreign net assets within the Group.
MaturityUSD millionHedging rate
2013
-1,0406.85
Revaluation exposure (millions, local currency)
Group
EUR
GBP
USD
SGD
DKK
NOK
CNY
HKD
The Group applies hedge accounting for USD and classifies its forward contracts used
to hedge forecast transactions as cash flow hedges. The fair value of forward exchange
contracts used to hedge forecast flows amounted to SEK 176 million (-48) as of December 31, 2012.
Translation exposure
LKAB does not normally hedge its translation exposure as this is not considered to add
any value for the Group over time, even though the level of exposure has increased in
20122011
1210
3133
11
11
215215
687698
3235
123115
Fair value
Carrying amounts and fair value of financial instruments in the Group are stated below:
Group 2012
SEK million
Items reported at
fair value via
earnings
Financial
assets
fair value
option
Held
for
sale
Derivatives
used in
hedge
accounting
Trade
loan
receivables
Shares, financial assets
Shares, current holdings
Interest-bearing instruments, current holdings
745
745
1,316
11,919
11,919
11,919
106
106
106
4,792
4,792
5,437
5,437
176
176
4,792
5,437
176
93
18,778
176
4,885
745
1,760
Other liabilities
Accrued expenses
Total
Total
fair
value
745
Other accrued income
Trade payables
Total
carrying
amount
1,316
Total
Other liabilities
1,316
Trade and other receivables
Cash and cash equivalents*
Financial
assets
available for
sale
1,760
93
93
24,584
24,584
1,760
1,760
192
192
192
1,418
1,418
1,418
1,610
3,370
3,370
Other liabilities
Total
carrying
amount
Total
fair
value
* Cash and cash equivalents including cash-equivalent current investments.
The maximum credit risk exposure on closing day December 31, 2012 amounted to SEK 22,513 million.
LKAB has no financial assets that have reached maturity or impairments that have resulted in credit losses.
LKAB’s SEK 5 billion credit facility remained unutilised as of December 31, 2012.
Group 2011
SEK million
Items reported at
fair value via
earnings
Financial
assets
fair value
option
Held
for
sale
Derivatives
used in
hedge
accounting
Trade
loan
receivables
Financial
assets
available for
sale
793
793
1,065
1,065
1,065
Interest-bearing instruments, current holdings
8,441
8,441
8,441
86
86
86
Trade and other receivables
4,958
4,958
4,958
Cash and cash equivalents*
8,695
8,695
8,695
793
Other accrued income
Total
144
23,245
Trade payables
144
48
1,982
Other liabilities
Accrued expenses
Total
793
1,982
48
* Cash and cash equivalents including cash-equivalent current investments.
The maximum credit risk exposure on closing day December 31, 2011 amounted to SEK 22,324 million.
LKAB has no financial assets that have reached maturity or impairments that have resulted in credit losses.
LKAB’s SEK 5 billion credit facility remained unutilised as of December 31, 2011.
144
144
24,182
24,182
48
48
1,982
1,982
377
377
377
1,241
1,241
1,241
1,618
3,648
3,648
Maturity analysis, liabilities
Group 2012
SEK million
Trade payables
Other liabilities
Accrued expenses
Total < 1
1–3
3–12
monthmonthsmonths Total
1,078
10
1
1,089
113
185
298
565236326
1,127
1,756246512
2,514
Group 2011
< 1
1–3
3–12
SEK million
monthmonthsmonths Total
Trade payables
1,571
28
1
1,600
53
3
56
Forward exchange contracts
Other liabilities
95
863
958
626167303
1,096
Accrued expenses
Total 2,292
248
1,170
3,710
The Group’s maturity profile is considered to be broadly similar to the Parent Company’s. The information above is from the Parent Company. Forward transactions in
USD had a deficit value of 176 compared to the previous year’s surplus value of SEK 48
million. Maturity is 12 months.
Securities
For listed financial assets, fair values correspond to the asset’s buying rate on the
closing date.
Derivative instruments
Forward exchange contracts are calculated at current market prices by using quoted
market prices. The discount rate used is the market interest rate on similar instruments quoted on closing day.
Other receivables and liabilities
The carrying amount of other receivables and liabilities is equivalent to fair value.
Note 30 Contractual obligations
At year-end, the Group’s remaining contractual obligations to acquire property, plant
and equipment amounted to SEK 2,939 million (4,471). Of these obligations,
SEK 2,221 million (2,538) is expected to be settled during the following financial year.
The Parent Company’s obligations amounted to SEK 2,459 million (3,568), of which SEK
1,830 million (2,131) is expected to be paid during 2013.
Other information on financial instruments
The following tables show how the fair value was determined in financial instruments
reported at fair value in the statement of financial position. A breakdown of how fair
value is determined is carried out on three levels.
Level 1:
Level 2:
Level 3:
according to prices quoted on an active market for such instruments.
according to direct or indirect observable market data not included
in level 1.
according to input data that is not observable on the market.
Group 2012
Level 1 Level 2 Level 3
Total
SEK million
745
745
1,316
1,316
Interest-bearing instruments
11,667
252
11,919
93
93
5,437
5,437
176
176
Total
19,341 52119,686
Group 2011 SEK million
Level 1 Level 2 Level 3 Total
793
793
1,065
1,065
Interest-bearing instruments
8,071
370
8,441
86
86
8,695
8,695
-48
-48
Total
18,624 40819,032
The category ‘interest-bearing instruments’ (Level 2) refers to bond obligations that are
reported at prices quoted on the bond and derivatives market. Non-current receivables
(Level 2) are valuated at present value of capital cash flows. Forward exchange contracts (Level 2) are calculated based on a model using prices from Reuters.
Fair value calculation
The following is a summary of the principal methods and assumptions used in determining the fair value of financial instruments reported in the table above.
Note 31 Pledged assets and contingent liabilities
GroupParent Company
2012-
2011-
2012
2011SEK million
31/1231/1231/1231/12
Assets pledged
– in the form of pledged assets for own
liabilities and provisions.
Property mortgages
1
1
Company mortgages
2
2
Company-owned endowment insurance
79
85
79
85
Deposit of cash and cash equivalents
157
155
157
155
Total pledged assets
239
243
236
240
Guarantees, FPG/PRI 14
12
14
12
Guarantees, GP-plan
3433
Sureties for the benefit of subsidiaries
65
76
Other
65353032
Redemption of defined benefits pension policy 14
14
Forward exchange contracts
30
Total contingent liabilities
96
51
126
153
Company-owned endowment insurance covers pension obligations for the President,
former President and Group management according to the earlier defined-benefit pension agreement. The value of endowment insurance decreases as pension payments
are disbursed.
The deposit of cash and cash equivalents is intended to cover remediation costs and
other costs associated with the eventual closure of mine operations.
Guarantee undertakings for PRI Pensionstjänst and the Mine Pension correspond to
2 percent of the obligations on the closing date. The obligation in PRI relates to ITP2
premiums for salaried employees and the vested obligation to employees participating
in the mine pension being carried as liabilities.
Note 32 Related parties
Close relationships
The Group is subject to the controlling influence of the Swedish state. Aside from the close relationships that the Parent Company has with its subsidiaries (see Note 33), the Group
has related-party transactions with Vattenfall AB and the Swedish Transport Administration.
Summary of related-party transactions
Interest andPurchase of
Liability to Receivable from
GroupSale of
Related party
goods to
dividend
goods from
related party
related party
SEK millionYear
related party
(net)
related party
December 31
December 31
Associated companies
2012
6-
40
2011
13-
40
Interest andPurchase of
Liability to Receivable from
Parent CompanySale of
goods to
dividend
goods from
related party
related party
Related party
SEK millionYear
related party
(net)
related party
December 31
December 31
Subsidiary
2012 234 3783,6051,4192,970
Subsidiary
2011 310 953,5981,9062,867
2012
6
40
2011
13-
40
LKAB has secured a major part of its electricity deliveries at indexed prices through signing long-term energy agreements with Vattenfall in 1998 and 2005. One third of the Vattenfall agreement portfolio matured at the beginning of 2010 and this volume of electricity is exposed to the Nordic spot market. Electricity purchases totalled 2,305 (2,189) Gw.
LKAB’s mining activities have affected the existing railway installations and has made it impossible for the installations to remain in their current location. LKAB compensates the
Swedish Transport Administration for expenditures arising from the construction of new railway installations. Purchases from the Swedish Transport Administration amounted to
SEK 174 million (350).
In 1997 LKAB made a participating loan with a nominal amount of SEK 40 million to the associated company Norrskenet AB.Interest is paid annually and amounted to SEK 372
thousand (444) in 2011.
Transactions with key individuals in leading positions are reported in Notes 6 and 25.
Transactions with related parties are priced and conducted in accordance with commercial principles.
Note 33 Subsidiaries
Parent Company
SEK million
31/12/2012
31/12/2011
Accumulated costs
1,410 1,400
Capital contribution
10
1,410
1,410
Specification of the Parent Company’s and Group’s ownership of participations in subsidiaries
31/12/2012
31/12/2011
Number ofShares, %Shares, % CarryingCarrying
Subsidiary / Comp. reg. No. / Registered office
shares 2012
2011
amount
amount
Swedish subsidiaries
5,000
100
100
0
0
LKAB Fastigheter AB / 556009-8849 / Kiruna
LKAB Wassara AB / 556331-8566 / Stockholm
20,000
100
100
10
10
24,000
100
100
47
47
LKAB Berg & Betong / 556074-8237 / Kiruna
LKAB Nät AB / 556059-9796 / Kiruna
10
100
100
0
0
Minelco AB / 556223-1786 / Luleå
2,000,000
100
100
225
225
LKAB Försäkring AB / 516406-0187 / Luleå
10,000
100
100
100
100
208,000
100
100
252
252
LKAB Malmtrafik AB / 556031-4808 / Kiruna
Kiruna Stationsfastigheter AB / 556736-3840 / Kiruna
1,000
100
100
0
0
Foreign subsidiaries
300,000
LKAB Norge AS / 918 400 184 / Narvik, Norway
LKAB Far East Pte Ltd / 198401144W / Singapore, Singapore
200,000
LKAB S.A. / 403 455 761 / Brussels, Belgium
100
LKAB Schwedenerz GmbH / HRB 718 / Essen / Germany
100
LKAB Trading (Shanghai) Co., Ltd. / Shanghai / China
Total Parent Company
100
100
100
100
100
100
100
100
100
100
100
100
763
1
0
2
10
1,410
763
1
0
2
10
1,410
Indirect ownership via the subsidiary Minelco AB
100
100
Minelco B.V. / 24236591 / Breda, The Netherlands
Minelco Inc / 02-0551509 / Cincinnati, USA
100
100
Minelco GmbH / HRB 16692 / Essen, Germany
100
100
Minelco Asia Pacific Ltd / 876455 / Hong Kong, Hong Kong
100
100
Microfine Minerals Ltd / 0245817 / Welton, England
100
100
Minelco OY / 1934671-4 / Helsinki, Finland
100
100
Minelco AS/A / S277716 / Nuuk, Greenland
100
100
Minelco Tianjin Minerals Co / 70051551-5 / Dongli District Tianjin, China
100
100
Likya Minelco / Izmir, Turkey
50
50
100
100
Minelco Limited / 04621769 / Derby, England
Microfine Minerals Ltd / 00103751 / Derby, England
100
100
Quay Minerals Ltd / 02732626 / Flixborough, England
100
100
Tianjin Jindalai Mineral / 60089030-X / Dongli District Tianjin, China
0
100
Fergusson Wild & Co Ltd / 2529921 / West Sussex, England
100
100
Fordamin Company Ltd / 00925517, England
100
100
Minelco Specialities Ltd / 1151578 / Derby, England
100
100
Microfine Hellas A.E. /-/ Thessaloniki, Greece
0
100
Indirect participation via subsidiary
LKAB Mekaniska AB / 556013-3059 / Kiruna
100
100
LKAB Kimit AB / 556190-6115 / Kiruna
100
100
Indirect participation via the subsidiary LKAB Malmtrafik AB
LKAB Malmtrafikk AS / 974 644 991 / Narvik, Norway
100
100
Indirect participation via subsidiary
LKAB Fastigheter AB
Jägarskolan Fastigheter AB / 556594-9095 / Kiruna
100
100
Indirect participation via the subsidiary Wassara AB
100
100
Wassara Limitada / Santiago / Chile
Note 34 Untaxed reserves
Interest paid and dividends received
GroupParent Company
Parent Company
SEK million 2012
2011
2012
2011
SEK million
31/12/2012
31/12/2011
55
53
588
229
Dividends received
Accumulated depreciations in excess of plan:
Interest received
112103171171
Buildings and land
-43-52-56-70
Interest paid
6
7
124104703330
Depreciations in excess of plan for the year
Accelerated depreciations dissolved -1
-1
Adjustments for items not included in cash flow
5
6
GroupParent Company
SEK million 2012
2011
2012
2011
Depreciations
1,9501,8981,4691,483
6,027
5,843
1 1
Impairments
-507
184
Depreciations for the year/ dissolution in excess of plan
-32
-21
5,521
6,027
-20
-69
Change in financial assets
Income from sale and retirement of
Underground installations
3
20
property, plant and equipment
0
0
Provisions for pensions
-43
25
12
52
Disposals, retirements and dissolution
0
0
1,182 1,234
1,182
1,234
Depreciations in excess of plan, assets under construction 1,305
Other provisions
-174
155
-174
155
1,305
0
Other items that do not affect liquidity
-22
26
-14
57
2,8453,2682,4752,982
Allocated at 2006 assessment
0
1,400
Change in operating capital
1,275
1,275
2,200
2,200
Group operating capital was affected by SEK – 299 million relating to a change in a
3,600
3,600
hedge reserve reported in Group equity. The amount did not affect the Group’s cash
2,960
flow and is therefore not included in change in operating capital in the cash flow stateClosing balance December 31
10,035
8,475
ment. The corresponding amount for 2011 was SEK 271 million.
Total untaxed reserves
16,866
14,508
Note 35 Statement of cash flows
Cash and cash equivalents – Group
SEK million
31/12/2012
31/12/2011
The following sub-components are included in cash and cash equivalents
643
1,056
Current investments equivalent to
4,7947,639
cash and cash equivalents l1)
Total according to the statement of
financial position and statements of cash flows
5,437
8,695
Tax paid
SEK million Tax expense according to income statement
Change in tax assets/liabilities
Adjustment to provisions for taxes
Adjustment for deferred tax
GroupParent Company
2012
2011
2012
2011
-2,517
-3,203
-2,216
-3,046
-652
-829
-606
-826
0
0
-198
31
3,169-4,032-3,020-3,841
Acquisition of subsidiaries
No new acquisitions were made during the year.
Cash and cash equivalents – Parent Company
SEK million
31/12/2012
31/12/2011
The following sub-components are included in cash and cash equivalents
457
830
Current investments equivalent to
4,7947,639
cash and cash equivalents l1)
Total according to the balance sheet and
statements of cash flows
5,251 8,469
1)
Cash and cash equivalents include current investments (money-market instruments)
that have been classified as cash equivalents according to the following
• They entail insignificant risk of value fluctuations
• They can be easily converted to cash
• They have a maturity of at most three months from date of acquisition.
SEK million
31/12/2012
31/12/2011
Opening balance
1,065
1,259
Purchase of shares and participations
2,002
2,246
Sale of shares and participations
-1,842
-2,440
Shares and participations according to balance sheet
1,225
1,065
128 | Distribution of earnings
Proposed disposition of unappropriated earnings
The Board of Directors and President propose that unappropriated earnings of SEK
24,659 million be distributed as follows:
Dividend, 700,000 shares @ SEK 7,143 per shareSEK 5,500 million
Funds to be carried forwardSEK 19,159 million
TotalSEK 24,659 million
Affirmation by the Board of Directors
The Board of Directors and President hereby affirm that the Annual Report has been
prepared in accordance with the Annual Accounts Act and RFR 2.1. Accounting for legal
entities, and provides a true and fair view of the company’s financial performance and
position and that the Report of the Board of Directors provides a true overview of the
activities, results and financial position of the company and describes the significant
risks and uncertainties to which the company is exposed.
The Board of Directors and President hereby affirm that the Consolidated Financial
Statements have been prepared in accordance with International Financial Reporting
Standards (IFRS), as adopted by the EU, provide a true and fair view of the activities,
results and financial position and that the Report of the Board of Directors provides a
true overview of the activities, results and financial position of the Group and describes
the significant risks and uncertainties to which the company is exposed
Luleå March 20, 2013
Marcus Wallenberg
Chairman
Hans BiörckMaija-Liisa Friman
Board member
Board member
Lars-Åke Helgesson
Board member
Sten JakobssonHanna LagercrantzMaud Olofsson
Board member
Board member
Board member
Seija Forsmo
Tomas Strömberg
Jan Thelin
Employee representativeEmployee representativeEmployee representative
Lars-Eric Aaro
President
The annual report, the consolidated financial statements and the sustainability report were, as stated above, approved for publication by the Board of Directors on March 20, 2013.
The consolidate income statement, statement of financial position and the Parent Company’s income statement and balance sheet will be the subject of approval at the Annual
General Meeting on April 29, 2013.
Our Audit Report was submitted on March 20, 2013
Peter Ekberg
Deloitte AB
Auditors’ Report | 129
auditor’s report
To the Annual General Meeting of Luossavaara-Kiirunavaara AB
Company registration number 556001-5835
Report on the annual accounts and consolidated financial statements
We have audited the annual accounts and consolidated financial statements for
Luossavaara-Kiirunavaara AB (publ) for the 2012 financial year. The company’s annual
accounts and consolidated financial statements are included in the print version of this
document on pages 78-128.
Report concerning other legal requirements and enactments
In addition to our audit of the annual accounts and the consolidated financial statements we carried out an audit of the proposals regarding the allocation of the
company’s profit or loss and the Board of Directors’ and President’s administration of
Luossavaara-Kiirunavaara AB (publ) for the 2012 financial year.
The Board of Directors’ and President’s are responsible for the annual accounts and the
consolidated financial statements.
The Board of Directors and the President are responsible for preparing an annual
report that provides a true and fair view in accordance with the Swedish Annual Accounts Act and consolidated financial statements that provide a true and fair view in
accordance with International Financial Reporting Standards as adopted by the EU
and the Swedish Annual Accounts Act, and for internal controls deemed by the Board
of Directors and President as necessary for the preparation of an annual report and
consolidated financial statements that are free of material misstatement, whether due
to fraud or error.
The Board of Directors’ and President’s responsibility
The Board of Directors is responsible for the proposal for allocation of the company’s
profit or loss and the Board of Directors and the President are responsible for administration under the Companies Act.
The auditor’s responsibility
Our responsibility is to express an opinion on the annual accounts, the consolidated
financial statements based on our audit. We conducted our audit in accordance with
International Standards on Auditing and auditing standards generally accepted in
Sweden. These standards require us to comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance that the annual report and consolidated financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts
and disclosures in the annual report and consolidated financial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of
the risks of material misstatement of the annual report and the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the company’s preparation and fair presentation of the annual report and consolidated financial statements 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. An audit
also includes evaluating the appropriateness of accounting principles applied and the
reasonableness of accounting estimates made by the Board of Directors and President,
as well as evaluating the overall presentation of the annual report and the consolidated
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our qualified opinion.
Qualified Opinion
In our opinion the annual accounts have been prepared in accordance with the Swedish
Annual Accounts Act and provide in all material respects a true and fair view of the
parent company’s financial position as of December 31, 2012 and its financial performance and cash flows for the year in accordance with the Swedish Annual Accounts
Act. The consolidated financial statements have been prepared in accordance with the
Swedish Annual Accounts Act and provide in all material respects a true and fair view
of the parent company’s financial position as of December 31, 2012 and its financial
performance and cash flows for the year in accordance with International Financial
Reporting Standards as adopted by the EU and the Swedish Annual Accounts Act. The
administration report is consistent with the other parts of the annual accounts and the
consolidated accounts.
We therefore recommend that the Annual General Meeting adopt the income statement and balance sheet for the Parent Company and Group.
The auditor’s responsibility
Our responsibility is to express an opinion with reasonable assurance on the proposed
allocation of the company’s profit or loss and on the administration based on our audit.
We conducted the audit in accordance with auditing standards generally accepted in
Sweden
As a basis for our opinion on the Board of Directors’ proposed allocation of the
company’s profit or loss, we examined the Board of Directors’ reasoned statement
and a selection of supporting evidence in order to assess whether the proposal is in accordance with the Companies Act.
As a basis for our opinion concerning discharge from liability, we examined, in
addition to our audit of the annual accounts and consolidated financial statements
significant decisions, actions taken and circumstances of the company in order to
determine the liability, if any, to the company of any board member or the President.
We also examined whether any board member or the President has, in any other way,
acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of
Association.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our qualified opinion.
Qualified Opinion
We recommend to the Annual General Meeting that the profit be allocated as proposed
in the administration report and that the members of the Board of Directors and the
President be discharged from liability for the financial year
Stockholm 20 March, 2013
Deloitte AB
Peter Ekberg
130 | Glossary
GLOSSARY
Alkaline pH: pH value above seven.
Mt: Abbreviation for million tonnes
Barren rock: Rock that is not ore.
Olivine: Mineral.
Burden: Materials (ore, slag formers, etc.) that are added (charged) to
a furnace, possibly together with fuel, in ironmaking.
Particulate emissions: Release of particulate matter into the air.
Calcites and silicates: Different minerals.
Concentration: Beneficiation of finely ground ore by separation
into a concentrate of iron ore powder with very high purity, so-called
slurry.
Crude iron: Molten ore from a blast furnace that is subsequently
refined in a steelworks.
Crude ore: The untreated ore broken loose from the deposit.
Crushed ore: Designation for input to ore processing plants.
Deformation zone: Ground area affected by subsidence due, for
example, to mining. Deformation zone boundaries are defined at the
point where seismic instruments first indicate disturbance.
Dressing: Rough sorting of crushed ore. Consists at LKAB of screening of the crushed ore into various fractions, after which the waste
rock is separated from the iron ore by magnetic separators.
Flotation: Chemical process/method for particle separation, used in
beneficiation of iron ore.
GRI: Global Reporting Initiative. International reporting body consisting
of interest groups that have produced global guidelines for sustainability reporting.
GWh: Gigawatt hour.
Hematite: Mineral, iron ore (Fe2O3), aka bloodstone.
Huntite: Mineral.
Indicators: Quantifiable key values as defined by the GRI sustainability areas Economy, Environment, and Society.
Inert waste: Material waste that is not reactive and does not decompose after final placement.
Intact ore: When ore is in its original state before being mined it is
said to be intact.
Integrated steelmill: Steelmill that covers the entire production
chain from ore to steel and has both sintering plant and blast furnace.
Landfill: Area in which materials such as tailings or waste rock are
stored indefinitely.
Landfill plan: Long-term plan for final placement of waste material.
Leachate: Water containing elements that are present in the material
through which it has passed. For example, when precipitation falls on
a heap of rock or stone. Leachate is caused principally by precipitation
percolating through waste deposited in a landfill.
Magnetite: Mineral, magnetic iron ore (Fe3O4), aka black ore.
Main level: Transport level in a mine to which the ore is tipped
through a chute or shaft from overlying mining levels.
Mica: Mineral.
Pelletizing: Process where slurry is mixed with binder and rolled
together into “green” balls. The balls are sintered in a pelletizing plant.
The finished product is pellets.
Performance in Ironmaking: LKAB’s promise to the customer.
Q value: A calculated average quality value of delivered products,
based on monthly measurements of a number of fixed parameters.
Seismic event: Rock tremors, earthquakes.
Sintering: Heating of fine-grained ore (fines) until it starts to melt.
The ore is then fused (sintered) into lumps (sinter) that can be used in
a blast furnace.
Spill: Release of water from a pond.
Spillway: Device for controlled discharge of water from e.g., a tailings pond.
Sponge iron: (= DRI, Direct Reduced Iron). End product of the DR
process. Solid, porous iron with some remaining mineral residues and
oxygen. HBI (Hot Briquetted Iron) is a compressed form of DRI that
reduces the risk of autoignition.
Stripping: Preparation of ground by removal of vegetation and or
soil, etc., to enable access to underlying materials.
Sulphides: Chemical compounds containing sulphide ions.
TJ: Terajoule.
TWh: Terawatt hour.
Value-in-use: Lowest possible cost for iron and steel production with the least possible disruptions. LKAB pellets increase blast
furnace efficiency, reduce e.g. emissions, the formation of slag and
energy consumption.
Values: Describe how we behave toward each other and the world
in general. They are guiding principles for every day life; they help
us make decisions and clarify what is expected of everyone in the company. LKAB’s values: Commitment, Innovation and Responsibility.
Yield: Ore yield = The ratio between the recovered crude ore and the
theoretical quantity of intact ore in the ground. The difference is made
up of ore losses and is dependent on the workability of the ore, i.e.
how economical it is to mine. Weight yield = The ratio between the iron
content of the finished product and the iron content of the crushed ore
entering a plant.
Addresses | 131
LKAB ADDRESSES
LKAB
Group head office
Box 952
SE–971 28 Luleå, SWEDEN
Tel +46 771 760 000. Fax +46 0771 760 001.
info@lkab.com
Lars-Eric Aaro, President and CEO
INDUSTRIAL MINERALS
Minelco Ltd.
Flixborough Industrial Estate, Flixborough,
North Lincolnshire, DN15 8SF, England.
Tel +44 1724 277411. Fax +44 1724 866405.
minelco.ltd@minelco.com
Robert Boulton, President and Group CEO
Minelco Group
IRON ORE
MARKETING AND LOGISTICS
LKAB
Sales office, Scandinavia
Box 952, SE–971 28, Luleå, Sweden.
Tel +46 771 760 000. Fax +46 0771 760 001.
lkab.norden@lkab.com
Johan Heyden, Sales Manager
LKAB S.A.
Chaussée de la Hulpe 150, BE–1170 Brussels, Belgium.
Tel +32 2 663 36 70. Fax +32 2 675 05 91.
lkab.sa@lkab.com
Göran Ottosson, President
LKAB SCHWEDENERZ GmbH
Bredeneyer Strasse 182, D–45133 Essen, Germany
Tel +49 201 879 440. Fax +49 201 879 4444.
lkab.se@lkab.com
Göran Ottosson, President
LKAB FAR EAST Pte. Ltd
300 Beach Road #29-02, The Concourse,
Singapore 199555.
Tel +65 6392 49 22. Fax +65 6392 49 33.
lkab.fe@lkab.com
Stig Nordlund, President
LKAB Malmtrafik AB
SE–981 86 Kiruna, Sweden.
Tel +46 771 760 500. Fax +46 771 760 002.
Markus Petäjäniemi, President, pro tem
LKAB Norge AS
Postboks 314, NO–8504 Narvik, Norway.
Tel +47 769 238 00. Fax +47 769 449 25.
Magne Leinan, President
Minelco AB
Tel +46 920 381 60. Fax +46 920 190 88.
minelco.ab@minelco.com
Roger Johansson, President
Minelco Oy
Kaivoksentie 300, FI–71800 Siilinjärvi, Finland
Tel +358 17 266 0160. Fax +358 17 266 0161.
minelco.oy@minelco.com
Kari Laukkanen, President
SUBSIDIARIES
Minelco GmbH
P.O. Box 10 25 54, DE–450 25 Essen, Germany.
Tel +49 201 45060. Fax +49 201 4506 490.
minelco.gmbh@minelco.com
Thomas Tepper, President
Box 817, SE–981 28 Kiruna, Sweden.
Tel +46 771 760 200. Fax +46 771 760 201.
peter.soderman@lkab.com
Peter Söderman, President
Minelco B.V.
Vlasweg 19, Harbour M164, P.O. Box 16
NL–4780 AA Moerdijk, The Netherlands.
Tel +31 168 388 500. Fax +31 168 388 599.
minelco.bv@minelco.com
Yvonne Dirken, President
LKAB Mekaniska AB
Tel +46 771 760 210. Fax +46 771 760 211.
Minelco Asia Pacific Ltd.
3407 China Resources Building, 26 Harbour Road,
Wanchai, Hong Kong.
Tel +852 2827 3000. Fax +852 2827 5574.
saleschina@minelco.com
John Engel, President
PRODUCTION
Likya Minelco
ITOB Organize Sanay Bölgesi Tekeli Beldesi
Menderes, Izmir, Turkey.
Tel: +90 232 799 01 60. Fax: +90 232 799 01 74.
LKAB
SE–983 81 Malmberget, Sweden.
Tel +46 771 760 000. Fax +46 771 760 003.
Minelco Singapore
c/o LKAB Far East Pte Ltd
300 Beach Road #29-02, The Concourse,
Singapore 199555.
Tel +65 6392 49 22. Fax +65 6392 49 33.
christina.cheong@minelco.com
LKAB Wassara AB
Rosenlundsgatan 52
SE 118 63 Stockholm.
Tel +46 771 760 000.
peter.schmid.wassara@lkab.com
Peter Johansson, President
Minelco (Tianjin) Minerals Co., Ltd.
Junyi Industrial Park, Jungliangcheng, Dongli District,
Tianjin, P.R. China 300301.
Tel +86 22 2435 1706. Fax +86 22 2435 1708.
mail@minelco.sina.net
James Qi, President
LKAB
Svappavaara
Tel +46 771 760 000. Fax +46 771 760 002.
Minelco Greece
Representative Office, 13, N.Kountouriotou str.,
546 25 Thessaloniki, Greece.
Tel: +30 2310 539073. Fax +30 2310 552882.
sakis.hatzinikolaou@minelco.com
Minelco, Inc.
2020 Scripps Center, 312 Walnut Street,
Cincinnati, OH 45202, USA.
Tel +1 513 322 5530. Fax +1 513 322 5531.
minelco.inc@minelco.com
Mats Drugge, President
LKAB
Luleå malmhamn
Tel +46 771 760 000. Fax +46 0771 760 001.
Lars Andersson, General Manager
LKAB
Tel +46 771 760 000. Fax +46 771 760 002.
Minelco France
Representative Office, 85 Rue Jean Rache
59310 Saméon, Frankrike
Tel: +33,320,055,167
robert.egea@minelco.com
Minelco Slovak Republic
Representative Office, Panenska 13,
SK–81103 Bratislava, Slovak Republic.
Tel +421 2 5930 5753. Fax +421 2 5930 5754.
marian.zilinsky@minelco.com
Marian Zilinsky, Sales manager
Minelco Spain
Representative Office, C./Nord no. 2 Ent.5,
08500 Vic,Spain.
Tel/Fax +34 93 886 1330
albert.senyer@minelco.com
LKAB Kimit AB
Tel +46 771 760 220. Fax +46 771 760 221.
LKAB Fastigheter AB
SE –981 86 Kiruna, Sweden.
Tel +46 771 760 300. Fax +46 771 760 301.
siv.aidanpaa-edlert@lkab.com
Siv Aidanpää Edlert, President
LKAB Nät AB
SE– 981 86 Kiruna, Sweden.
Tel +46 771 760 700. Fax +46 771 760 002.
agneta.engberg@lkab.com
LKAB Försäkring AB
Tel +46 771 760 600. Fax +46 0771 760 001.
magnus.forsberg@lkab.com
LKAB Trading (Shanghai) Co., Ltd.
Unit 2007, 889 Yueda Plaza,
1111 Changshou Road,
Shanghai 200042
China
Tel: +86 21 521 25103. Fax: +86 21 521 26029.
Email, office: hui.huang@lkab.com
anders.lundgren@lkab.com
Anders Lundgren, President
132 | Annual General Meeting and Financial Information
ANNUAL GENERAL MEETING
LKAB’s Annual General Meeting will be held on Monday, April 29, 2013 at 15:00 in Luleå.
PARTICIPANTS
The AGM is open to the public
NOTICE TO ATTEND
Notice to attend the AGM; financial information and other information is available at www.lkab.com.
Printed financial information may be ordered by email at info@lkab.com
The printed version of the Annual Report will be available from April 29.
FINANCIAL INFORMATION
INTERIM REPORTS
April 29
Interim Report, 1st Quarter, 2013
August
Interim Report, 2nd Quarter, 2013
October
Interim Report, 3rd Quarter, 2013
February 2014
Interim Report, 4th Quarter together with Year End Report, 2013
Contact
Please direct any questions regarding LKAB’s financial information to Leif Boström,
CFO and/or Lars-Eric Aaro, President and Group CEO.
Please direct any questions regarding the Sustainability Report to Monica Quinteiro,
Head of Department, Quality and Environment.
LKAB Integrated report. Annual and Sustainability Report, 2012
Produced by LKAB in collaboration with Vinter and Hallvarsson & Halvarsson.
Photos: Fredric Alm, Andreas Lundberg and LKAB.
Print: Lule Grafiska.
L K A B , B o x 9 5 2 , SE - 9 7 1 2 8 L u l e å | p h o n e + 4 6 7 7 1 - 7 6 0 0 0 0 | w w w. l k a b . c o m

Annual and sustainability Report, 2012

Transcription

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