LKAB Steps Up Adaption Measures

Continued oversupply of iron ore and low prices for iron ore fines in the global
market, puts pressure on LKAB´s profitability. With a new cost efficiency
programme, LKAB will cut costs for 2017 by an amount that exceeds last years
realized cost savings of MSEK 800. The operating result for the fourth quarter
was a loss of MSEK -351 (205).
OCTOBER – DECEMBER 2015

  · Net sales totalled MSEK 4,252 (4,662)
  · Underlying operating profit[1] was MSEK 128 (46)
  · Operating loss was MSEK -351 (205)
  · Loss for the period was MSEK -235 (-17)
  · Deliveries of iron ore totalled 6.8 (6.7) Mt

JANUARY – DECEMBER 2015

  · Net sales totalled MSEK 16,200 (20,615)
  · Underlying operating profit[1] was MSEK 1,548 (4,002)
  · Operating loss was MSEK -7,156 (570)
  · Impairment loss on property, plant and equipment had a negative effect on
operating profit of MSEK 7,136
  · Loss for the period was MSEK -5,686 (347)
  · Deliveries of iron ore totalled 24.2 (26.0) Mt
  · The Board proposes to the AGM that no dividend is paid to the owner

[1]. Underlying operating profit is defined as operating profit excluding costs
for urban transformation provisions and impairment of property, plant and
equipment.
[2]. Platts IODEX 62% Fe CFR North China

“Although the underlying operating result[1] is positive, LKAB is reporting a
loss for 2015 – which underlines the importance of adapting our operations. The
current market situation and the future prospects mean, however, that we must
reduce annual costs further, and we are now planning new actions,” says Jan
Moström, President and CEO.

In 2015, a cost-cutting and efficiency program was carried out that reduced
costs by MSEK 800. For 2016, costs have been further trimmed. In addition,
further efficiency improvements are needed to secure our competitiveness. A new
efficiency program is being formed focused on providing a cost reduction that
exceeds that implemented previously. It is planned to be presented during the
second quarter of 2016 and to be fully effective in 2017.

Combined with the fact that the supply of iron ore increased during the year,
the price of iron ore has fallen dramatically. In December 2015 the spot
price[2] for iron ore fell to a historic low of USD 38/tonne. The average spot
price for the quarter was USD 47/tonne.

Demand for LKAB’s processed iron ore products remains good and the premium for
pellets provides price advantages in a challenging market. However, LKAB needs
to do more to secure increased volumes and more stable production.

During the year, production was disrupted by difficulties with the supply of raw
materials from the underground mines and the replacement of a mantle ring in one
of the pelletizing plants in Kiruna. Production and delivery volumes returned to
normal during the fourth quarter and amounted to 6.8 (6.7) Mt, with the
proportion of pellets at 82 (83) percent.

LKAB’s strategy to maximize pellet production remains in place. However, the
target volume of 37 million tonnes will be moved forward in time. The new open
pit mines at Svappavaara will primarily supply raw materials to existing
processing plants.

Access to land is crucial for all mining operations, while at the same time
mining has an impact on the communities where LKAB operates. Close cooperation
is key, and at the beginning of the year, compensation principles were presented
in connection with property acquisitions for urban transformation in Kiruna and
Malmberget.

“There is only one way to go if we are to secure long-term sustainable mining
operations in Malmfälten. We have to enhance productivity – in other words,
produce more with fewer employees – and we have to cut costs by working smarter.
Focusing on the core business, we are now increasing the momentum as we adapt
LKAB to the realities of the market,” concludes Jan Moström.
Contact: Bo Krogvig, Acting Senior Vice President of Communications at LKAB,
Tel: 46 (0)8 429 34 45. E-mail:bo.krogvig@lkab.com
LKAB is an international high-tech minerals group that mines and upgrades the
unique iron ore of northern Sweden for the global steel market. Sustainability
is core to our business and our ambition is to be one of the industry’s most
innovative, resource-efficient and responsible companies. The group had sales of
more than SEK 16 billion in 2015 and employs about 4,000 people in 15 countries.
Other group business include industrial minerals, drilling systems, rail
transport, rockwork services and property management.