ANNUAL AND SUSTAINABILITY REPORT

2014
A WORLD OF STEEL
Demand for iron ore is driven by the demand for steel, China led to a sharp fall in the spot price of iron ore fines
which in turn is strongly linked to GDP growth, during the year. In contrast, the market is stable for
increasing urbanisation and prosperity in the world’s highly processed iron ore products, like LKAB’s pellets,
emerging economies. The supply of fines in the iron ore as steel manufacturers place increasingly tougher
market increased significantly during the first half of requirements on efficiency and environmental perfor-
2014, while demand, especially from China, declined. mance.
Oversupply in combination with low steel prices in

150 years
is how long steel has been recycled,
47 %
is how much the price of
1.7 GJ
per tonne of steel (HRC) is the amount of
and it can be recycled over and over iron ore fell in 2014, with an average energy that steelworks can save by using
without loss of quality. for the year of USD 97/tonne. blast furnace pellets instead of sinter.

100 %
increase. Global steel consumption
1.3 tonnes
is how much the total weight of a
823 Mt
of steel was produced in
has doubled in 35 years. 40 tonne truck can be reduced if high- China in 2014. That is almost half
strength steel is used in platforms of total world steel production.
and chassis1.
1
www.advantageenvironment.com

50 %
of world steel production
320 kg
less carbon dioxide is emitted per
933 Mt
of iron ore was imported by
is used for buildings and tonne of steel produced (HRC) if blast China. That is a 13.8 percent
infrastructure. furnace pellets are used instead increase from last year.
of sinter.
 FROM SWEDISH OREFIELDS – TO THE WORLD
LKAB operates in northern Sweden amidst Europe’s richest iron For nearly 125 years, LKAB has been a key driver of Sweden’s
ore deposits. Our production, processing and world-leading growth and exports that built up infrastructure, industries and
research and development facilities are located here. We trans- knowledge. We help communities grow and develop and serve as
port finished iron ore products by rail to the ports of Narvik and a safe, secure, attractive employer. At the same time, we affect
Luleå for further transport to customers, primarily in Europe, the the people, environment and other industries in our surround-
Middle East, Asia and the US. The mining of iron ore in northern ings. Our values and Code of Conduct guide us to act responsibly,
Sweden generates considerable socio-economic value. in cooperation with, and with the trust of, the world around us.

26 Mt
was the total amount of iron
83 %
of LKAB’s sales consist of high- 5,000
LKAB AND SOCIETY
GROW SIDE BY SIDE
new homes need to be built in the
mining communities as a result of
ore products LKAB delivered to quality iron ore pellets – blast urban transformation.
customers in 2014. furnace pellets and direct
reduction pellets.
97% of Gällivare’s residents and 96 percent
of Kiruna’s believe that LKAB is very
valuable to the municipality.

25,000 people visited LKAB and were

received by our visitor services in

700
2014. LKAB’s mines are themselves

5,491
major destinations.

MSEK MSEK WITH RESPONSIBILITY

is how much LKAB’s costs will was invested by LKAB during the year. FOR THE ENVIRONMENT
decrease through process MSEK 1,700 in the growth programme
optimisation, new purchasing
agreements, hiring freezes
for new open-pit mines, MSEK 413
in environmental investments.
73 TJ is the total energy savings achieved
through energy efficiency measures.
and staff reductions.
90 % is the degree of purification of flue
gases from the MK3 pelletizing
plant in Malmberget after additional
environmental investments.

77 71,232 2,600 ha of land north of Mertainen is

protected from exploitation by LKAB’s
environmental compensation plan.
%
of LKAB’s iron ore was the approximate number of
tonnes of finished products AS AN ATTRACTIVE
products are exported to
Europe’s steelworks. transported on the Malmbanan EMPLOYER
railway every day during the year.
19.4 % of LKAB’s employees are women. The
percentage is steadily increasing and
the target is 25 percent women by

60 4
2020.

% th 500 employees have been trained so far in

the new Code of Conduct adopted
at the end of 2013.
is how much LKAB increased its LKAB is the world’s fourth-largest
sales of magnetite ore for uses other
than steel production.
pellet producer.
5 th place in Universum’s “Sweden’s Best
Employers” survey.
 CONTENTS 2014
ABOUT LKAB’S ANNUAL AND SUSTAINABILITY REPORT 2014 Events in 2014 1
In accordance with the state’s ownership policy and guidelines for state-owned The year in numbers 2–3
companies, LKAB has prepared an annual report and a sustainability report as
per the Global Reporting Initiative (GRI) guidelines. LKAB has chosen to report LKAB’s objectives 4–5
financial and non-financial (social and environmental) information in the same
report for a better understanding of the company and its operations. The report President’s Report 6–8
structure largely adheres to the reports of the last two years, with LKAB’s
strategy as the basis. The Sustainability Report for 2014 was prepared as per G4,
and a GRI Index with the core scope is found on pages 74–75. The index refers
1 THIS IS LKAB 9
primarily to this report, but some selected informational points refer to a sepa-
rate appendix (GRI Appendix 2014) available on LKAB’s website. LKAB – A global group 10–11

The audited Annual Report includes the Administration report as well as the
Significant sustainable development issues 12–13
Corporate Governance Report on pages 62–67. Customer offering 14
Sustainability information that was reviewed by the auditors is found on pages
4–13, 21–60 and 74–77 as well as in the GRI appendix on LKAB’s website at 2 CUSTOMERS AND MARKETS 15
www.lkab.com.
Iron ore market drivers 16–17
LKAB – An active player in growing niches 18
Market development 19
LKAB Minerals complements the core business 20

3 OBJECTIVES AND STRATEGY 21

Strategic focus areas 22–23
Performance in Ironmaking 24–29
Flexibility 30–35
Safe and resource-efficient production 36–43
Growth 44–48
Urban transformation 49–54
Attractive LKAB 55–60

4 OUR GOVERNANCE AND CONTROL 61

Corporate Governance Report 62–67
Board of Directors 68–69
Group management 70–71
Auditor’s statement on the
Corporate Governance Report 72
Auditor’s Limited Assurance Report
on LKAB’s Sustainability Report 73
GRI Index 74–75
Materiality analysis 76–77

5 OUR FINANCIAL ACCOUNTS 78

Administration Report 80–91
Financial statements 92–100
Notes 101–133
Affirmation by the Board 134
Auditor’s Report 135
Mineral reserves and mineral resources 136
Group overview 137

6 APPENDICES
Glossary 138
Addresses 139
Cover photo: At the Port of Narvik the Frontier Explorer loads 120,000 Annual General Meeting and financial information 140
tonnes of MagnaDense – iron ore processed into aggregate. The delivery is
the single largest shipment made by LKAB Minerals so far. GRI appendix www.lkab.com
 EVENTS IN 2014 1

EVENTS DURING THE YEAR

JAN FEB
SSAB AND RUUKKI MERGE STRONG START TO THE YEAR INVESTMENTS IN NARVIK
22 January. Two important custo- 31 January. LKAB delivered nearly 17 February. LKAB is investing an ad-
mers for LKAB announce that they 2.29 million tonnes of finished pro- ditional SEK 1 billion in a new transport
will form a joint company. ducts in January, which is an annual system from ore stockpiles to shiploa-
mean value of 26 million tonnes. ders in the port of Narvik.

MAR APR
100 MILLION TONNES OF ORE NEW CODE OF CONDUCT NEW CHAIRMAN OF THE BOARD
12 March. New exploration 26 March. LKAB’s Board of Directors 29 April. LKAB’s owner selects Sten
discoveries increase the ore base adopted a Code of Conduct for the Jakobsson as the new Chairman of the
by almost 100 million tonnes of Group. The Code of Conduct is part of Board. He succeeds outgoing chairman
magnetite in two of LKAB’s open- the sustainability strategy and repla- Marcus Wallenberg at LKAB’s AGM.
pit mines in Svappavaara. ces previous ethics policies.

MAJ JUN
AGREEMENT WITH AGREEMENT WITH LKAB MINERALS TURNS 25
GÄLLIVARE MUNICIPALITY KIRUNA MUNICIPALITY 4 June. The anniversary was celebra-
8 May. The Supreme Administrative 14 May. LKAB and Kiruna Municipa- ted by having all staff participate in a
Court did not give leave to appeal the lity enter into a joint agreement on health challenge where together they
cooperation agreement between LKAB urban transformation and relocation walked, ran, swam and bicycled to
and Gällivare Municipality, thereby of City Hall and central parts of the raise EUR 25,000 for WaterAid.
making it legally binding. city of Kiruna.

JUL AUG
PERMIT FOR MERTAINEN READY FOR MINING LOWER IRON ORE PRICES
3 July. In a partial ruling from 18 July. Mining in Mertainen can 15 August. The price of iron ore drops,
the Land and Environment Court begin since the Swedish Agency which affects LKAB’s margins. An enhanced
a permit was issued for planned for Marine and Water Management cost-cutting programme is implemented.
activities in Mertainen including withdrew its appeal to the Supreme
preparatory work, which began Court.
immediately.

SEP OCT
COMPENSATION GETS GREEN LIGHT SUSTAINABILITY
26 September. LKAB’s plan to compensate for nature conserva- REQUIREMENTS FOR SUPPLIERS
tion values at the mine in Mertainen is approved by the Land and 13 October. A new framework for all
Environment Court. The plan is the first of its kind and its approval LKAB suppliers will lead to more sustai-
is the result of a long-term biodiversity project. nable purchasing and strengthen LKAB’s
position as one of the world’s most
resource-efficient mining companies.
NOV DEC
REQUEST FOR BOND ISSUE LEVEÄNIEMI PROCEEDING
INCREASED PRODUCTION 2 December. LKAB conducts a 23 December. LKAB submits additional
12 November. LKAB requests perm- successful SEK 2 billion bond issue information to the Land and Environment
ission to increase pellet production in under its recently established MTN Court regarding ore mining in Leveäniemi
Kiruna from the currently permitted programme. following an opinion from the Swedish
14.8 million tonnes to 16.2 million Environmental Protection Agency. The
tonnes. goal is to receive a favourable decision in
the first quarter of 2015.
2 THE YEAR IN NUMBERS

PROFIT FOR THE YEAR

Operating profit for the year was SEK 570 million (7,639) with an NET SALES AND OPERATING PROFIT
operating margin of 3 percent (32). LKAB’s earnings thereby reflect
SEK million
a significant change in market conditions. An increasing structural
30,000
oversupply of iron ore fines put pressure on the world market price of MSEK 20,615
iron ore during the year. The spot price1 reached its lowest level in the 25,000 Net sales

last five years with a price of USD 66/tonne at the end of 2014. Low 20,000 MSEK 570
steel prices in China and weaker demand for iron ore fines on the spot 15,000
Operating profit

market also contributed to the price decline. Continued strong demand

10,000 2014
for LKAB’s processed, high-quality iron ore products, such as pellets,
Net sales
offers price advantages. It shows that we are well positioned in our 5,000
Operating profit
customer offering with climate-smart iron ore pellets. 0
1
PLATTS IODEX 62% Fe CFR North China 2009 2010 2011 2012 2013 2014

SALES

BY MARKET REGION BY DIVISION

Percent of net sales, SEK million Percentage of net sales, SEK million

Mining Division
The Division’s core business is to mine, process, deliver and sell
high-quality iron ore products for steelmaking, with pellets representing
about 83 percent (83) of the total sales volume. Net sales decreased by
15 percent as compared year-on-year, mainly due to the fall in iron ore
prices.

Minerals Division
%
Europe .............................................................70 The division operates in the industrial minerals market through the
Middle East and North Africa (MENA) ...25 LKAB Minerals subsidiary group. The Division’s companies support the
Other .................................................................. 5 core business by developing other business opportunities for LKAB’s iron
ore outside the steel industry. Net sales for the year amounted to SEK
1,870 million, which is 9 percent of consolidated sales.

Special Businesses Division

The Division is a collection of LKAB’s wholly-owned subsidiaries that
mainly supply products and services within the Group, but also sell
LKAB-developed cutting edge technology to external customers. This
includes essential construction services like sophisticated drilling tech-
nology, rock reinforcement, drifting and explosives expertise, along with
property management, insurance and power transmission. External sales
were SEK 198 million, representing 1 percent of consolidated sales.

BUSINESS CONCEPT VISION

Manufacture and deliver upgraded iron ore products Be perceived by customers as the supplier that
and services for iron manufacturing that create added adds the most value, thus leading the way in our
value for customers on the world market from our base chosen market segments.
in the Swedish orefields. Other closely-related products
and services that are based on LKAB’s know-how and that
support our main business activities may be included in
operations.
 THE YEAR IN NUMBERS 3

PRODUCED AND DELIVERED

25.7IRON ORE PRODUCTS PRODUCED

BY LKAB IN 2014, COMPARED WITH
Mt 26.0 IRON ORE PRODUCTS DELIVERED
BY LKAB IN 2014, COMPARED WITH
Mt
25.3 MILLION TONNES IN 2013 25.5 MILLION TONNES IN 2013

KEY RATIOS

PRODUCTION AND PRODUCTIVITY

Production Production 2014
Productivity, tonnes/average number of employees
FINANCIAL REVIEW
Mt Tonnes/average number of employees
30 12,000 2014 2013
Financial key ratios
25 10,000
Net sales, SEK million 20,615 23,873
20 8,000 Operating profit, SEK million 570 7,639

15 6,000 Operating margin, % 3 32

Profit before tax, SEK million 594 7,768
10 4,000
Tax, SEK million 247 1,736
5 2,000
Profit for the year 347 6,032
0 0 Operating cash flow, SEK million 2,072 2,434
2010 2011 2012 2013 2014
Return on equity, % 0.9 14.7
Net debt/equity ratio, % 0.0 -17.6
PRODUCTION OF IRON ORE PRODUCTS, Mt
Investments in property, plant and equipment, SEK million 5,491 6,141
2014 2013 2012 2011
Net cost of urban transformation, SEK million 3,577 722
Total 25.7 25.3 26.2 26.1
Provisions for urban transformation at end of reporting period, SEK million 11,683 6,304
Of which pellets 23.2 23.1 23.8 22.9
Generated and distributed economic value, SEK million 21,445 24,703
Of which fines 2.5 2.2 2.4 3.2
Non-financial key ratios
Average number of employees 4,539 4,427
DELIVERIES OF IRON ORE PRODUCTS, Mt Of whom women, % 19.4 18.1
2014 2013 2012 2011 Of whom female managers, % 19.9 19.8
Total 26.0 25.5 26.3 25.7 Number of accidents with absence 58 59
Of which pellets 21.7 21.1 22.0 20.9 Energy consumption, kWh/tonne of products 165 167
Of which fines 4.3 4.4 4.3 4.8 Carbon dioxide emissions from pellet production, kton 675 669

OBJECTIVE STRATEGY
The LKAB Group’s overall objectives in the coming years LKAB has a very customer-centric focus, high product
are to reduce costs and increase production to ensure quality and climate-smart iron ore products that
the company’s profitability and competitiveness. enhance our steelwork customers’ production results.
4 LKAB’S OBJECTIVES

SUSTAINABLE GROWTH OBJECTIVES

Sustainability is an integral part of LKAB’s business and a prerequisite for achieving our
long-term financial targets. LKAB’s objective is to create prosperity by being one of the
most innovative, resource-efficient and responsible mining companies in the world. Based
on our business strategy we work with four strategic sustainability target areas: attractive
LKAB, attractive communities, responsible operations and resource-efficient production.

FINANCIAL OBJECTIVES

Net debt/equity ratio Reduced production costs

0 – 20% -20%
until 2015, base year 2012.
(SEK per tonne of products)

Growth from the new open-pit mines increase LKAB’s

The capital structure target is a net debt/equity ratio of 0–20% competitiveness through higher volumes, resulting in a lower
(financial net indebtedness/equity). cost per tonne.
2014 RESULTS 2014 RESULTS

0.0 percent (-17.6) +0.6 percent (+3.7)

RETURN ON EQUITY
Return on equity Return on equity
Required return on equity

12% 40

30
%

20

LKAB needs to be financially strong to meet future commitments. 10

The Group’s profitability target is a return on equity of 12 percent,
previously 10 percent. 0
2009 2010 2011 2012 2013 2014
2014 RESULTS

0.9 percent (14.7)

 LKAB’S OBJECTIVES 5

SUSTAINABILITY OBJECTIVES

Attractive LKAB
2013–2020 TARGETS 2014 RESULTS

The proportion of women at LKAB will be at least 25 percent The proportion of women in the Group was 19.4 percent (18.1).
by 2020. The proportion of female managers was 19.9 percent (19.8).

There should be competition among qualified candidates for There were at least two qualified candidates in 96 percent of
all advertised positions. recruitments in 2014.

Long-term sick leave should continue to be less than Long-term sick leave continues to be low and stood at
0.8 percent. 0.4 percent (0.5).

Accidents with absence should decrease from seven to five The accident frequency was 7.6 (7.9) accidents per million
accidents per million hours worked from 2011 to 2015 and by hours worked.
2020 the frequency of accidents should be no more than 2.5.

Attractive communities
2013–2020 TARGETS 2014 RESULTS

Ensure new ore reserve that produces for at least 20 years. Assurance of the ore reserve is going according to plan.

LKAB will build 200 new housing units each in Kiruna and The accumulated number of flats built by the end of the year
Gällivare Municipalities by 2015 compared with 2011. was 178. Planning for additional housing units continues.

Responsible operations
2013–2020 TARGETS 2014 RESULTS

Emissions of sulphur dioxide from all existing pelletizing Emissions of 1,143 tonnes (2,066) of sulphur dioxide.
plants are to be reduced from about 2,000 tonnes in 2011 A reduction in emissions will occur gradually after the flue gas
to 1,000 tonnes by 2015 and 500 tonnes by 2017. installations are operational.

The annual mean value for falling particulates will Falling particulates were reduced by 17 percent in Kiruna.
decrease by 10 percent by 2015 compared with 2011. The reduction was 47 percent in Narvik. Malmberget showed
an increase of 13 percent due to additional dusting sources.
In Svappavaara there was a 4 percent increase due to an
expansion of operations in the open-pit mines since 2011.

Resource-efficient production
2013–2020 TARGETS 2014 RESULTS

The specific energy consumption will be reduced from 160 kWh Energy consumption was 165 kWh (167) per tonne of finished
per tonne of finished products in 2011 to 130 kWh per tonne of products, a break in the trend and a decrease compared year-
finished products by 2020. on-year. Measurements and actions continue to be taken.

Carbon dioxide emissions per tonne of finished products will Carbon dioxide emissions amounted to 27 kg (27) per tonne of
be reduced from 27 kg in 2011 to 17 kg in 2020. finished products.

New generation of climate-smart pellets produced by 2017. Product development and growth continue and are priorities in
LKAB’s research and development operations with a long-term
goal of developing a new generation of climate-smart pellets.

Maintain our market position as a leading global supplier of LKAB’s market position as a leading global supplier of climate-
climate-smart pellets. smart iron ore pellets remained unchanged during the year.
6 PRESIDENT’S REPORT

PRESIDENT’S REPORT
Long-term competitiveness
in a challenging market
LKAB took important steps in 2014 to secure its long-term
competitiveness. It is critical to our ability to grow in pace with our
customers and continue to contribute to positive social progress
– in Norrbotten, in Sweden and in the global marketplace.

Demand for LKAB’s products is stable. At the same time A changed market situation
our earnings were lower compared to 2013 due to a In recent years, many billions have been invested
sharp decline in iron ore prices, production disruptions globally in increasing capacity in the iron ore industry,
and significant investments in urban transformation. which has led to intense price pressure as a result of
increased volume from the largest producers. That is
From Swedish orebodies to the world market a major contributor to the oversupply of iron ore fines
LKAB is Europe’s largest iron ore producer and one and the sharp fall in prices in 2014. Low steel prices
of Sweden’s largest export companies. For 125 years in China and weaker demand for iron ore fines also
we have grown our business based in the rich mineral caused the spot price to reach its lowest level in five
deposits of northern Sweden. Thanks to high-quality raw years during the last quarter. The lower prices have
materials, leading technological advances and long-term, led several small mining companies with high produc-
close customer relationships, we have built up a strong tion costs to partially or completely halt production
niche position in the market. Demand for our upgraded and close down their operations, while the structural
iron ore pellets is stable, and we see new, climate-smart, oversupply is expected to continue.
pellet-based steel capacity entering the market. Steps were taken during the year to improve our
Magnetite ore from the Swedish orefields not only competitiveness. Variable costs in iron ore production
has a high iron content and purity, but also emits energy decreased by SEK 400 million in 2014 and efforts to
when it is processed into pellets. Having products that reduce costs further were intensified in the autumn.
are both high-quality and climate-smart gives us a com- We have made decisions on measures to increase
petitive edge. Three of the four processing plants in the capacity in our processing plants in Malmberget and
world that generate the least carbon dioxide emissions Kiruna and increased port capacity in Narvik, while we
per produced tonne of pellets are in Sweden and belong continue to increase the efficiency and flexibility of our
to LKAB.1 production processes.
A higher degree of upgrading and quality gives
us the advantage in a changing market. Meanwhile, the Efficiency and cost measures
market situation changes LKAB’s prospects, since the The difficult market situation means that we did not
price drop puts pressure on our margins and has a sub- reach the owner’s profitability target, which led us to
stantial effect on our profitability. step up cost-cutting measures in the autumn. We will
Deliveries of iron ore products during the year cut costs by SEK 700 million in 2015. Measures being
amounted to 26 million tonnes, which is 0.5 million taken throughout 2015 include reducing staff by 400
tonnes more than last year. Similarly, production was positions, introducing a hiring freeze and renegotiating
up 0.4 million tonnes from last year, while at the same purchasing agreements.
time we were hit by major thunderstorms during the Our goal is also to launch the new mines and reduce
summer months and a shortage of raw materials from the risk of bottlenecks in mining production. With the
the underground mines, which had a negative impact on new open-pit mines in operation, we increase our
production. flexibility. The mines get a production structure with a
combination of our own staff and contractors, which
makes us better able to adapt production to develop-
ments in iron ore prices.
1
“Benchmarking of carbon dioxide emissions from iron ore pelletizing”. The report is contract research conducted by Swerea MEFOS
(metallurgical industry research institute) and commissioned by LKAB.
 7

Our objective is
to be one of the most
innovative, resource-efficient
and responsible mining
companies in the world.

LKAB will grow with its customers Unlike virtually all our competitors, LKAB’s main
There is an oversupply in the iron ore fines market, production of ore is in underground mines, which is
which puts pressure on global iron ore prices. LKAB’s a cost disadvantage compared to our competitors.
main market – pellets – is in balance and demand Great demands are placed on this type of large-scale,
remains stable. Global demand for steel is expected to technically-advanced mining with high productivity
rise by 2.5 percent per year until 2020, with emerging and safety. Each link in the chain must be utilised as
countries driving growth. We see growth in our main close to maximum capacity as possible. If we manage
markets in Europe and the Middle East in terms of to keep our costs down while increasing production,
pellets, while we continue to cultivate business in North we are equipped to deliver on our commitments to
America, for both pellets and special products from customers, the local communities and our owner.
LKAB Minerals. Our efforts are currently focused on increasing
To manage our competitiveness in the global iron mining capacity. The goal is three new open-pit mines
ore market, we will develop the very best products that in Svappavaara. Gruvberget is already operational,
provide the most added value to our customers. Our with full production of 2 million tonnes per year. We
strategy is to gain deep knowledge of our customers’ received an environmental permit for the new mine
processes. Working on innovations with customers is in Mertainen in June 2014, and preparations are now
a key activity. Our goal is for customers to achieve a being made to start production in early 2016. We
more efficient and thus more climate-smart production are still waiting on an environmental permit for the
of iron for steelmaking. That is our customer promise, open-pit mine in Leveäniemi. LKAB has built up a
which we call Performance in Ironmaking. business-strategic exploration function with the goal
of having 20 years lead time to ensure access to ore
Equipped for a changing world and development of the surrounding communities. We
Over the last decade LKAB has invested many billions were able to extend the ore base in Leveäniemi and
in the entire value chain, from new main levels in the Gruvberget by an additional 100 million tonnes of ore
mines to processing plants, railways and ports. in 2014.
8 PRESIDENT’S REPORT

Together with employees and society deposits that have the least environmental impact and
LKAB currently employs some 17,000 people through do it with the best technology available. Our dialogue
direct and indirect job opportunities locally and region- with the communities surrounding us is crucial to
ally. This is an important contribution to the region’s maintaining confidence in our operations. Both rein-
and Sweden’s economic development. deer herding and tourism play a major role in keeping
Our goal is to be an attractive company, so it is grati- the region attractive. In 2014, LKAB signed cooperation
fying that LKAB was ranked as one of Sweden’s best agreements with two Sami villages in the Municipality
employers in Universum’s annual survey for 2014. of Kiruna.
We offer employment in over 180 different trades and Long-term sustainability is at the heart of LKAB’s
professions in stimulating workplaces, and our aim approach. We have a planning and investment horizon
is to also be a role model in terms of ethics, equality, extending over several decades, as well as a great re-
diversity, health and safety. The proportion of wom- sponsibility for the operational locations on which we
en in the Group was 19.4 percent at year-end and is are so dependent. Large parts of the communities of
increasing. Absences due to illness at LKAB remain Kiruna and Malmberget will need to be moved in order
low. The accident rate trend has also been positive over for production in our underground mines to continue.
time. The accident rate was 7.6 accidents per million LKAB has many stakeholders to take into account, and
hours worked against our target of no more than 6. We we place great emphasis on our partnerships, especial-
intend to make more of an effort ly with the residents and property owners concerned.
here. Our aim is always safety first Urban transformation took centre stage in 2014. LKAB
and zero accidents. and the Municipality of Kiruna signed an agreement in
Investments for We relate to each other and June covering Phase 2, which means that LKAB can
those in our surroundings who are now compensate the municipality for the infrastruc-
a bigger, stronger LKAB affected by our operations with re- ture, land and properties affected. Construction of new
have been made sponsibility and humility. Our Code housing is under way in several places and ground has
of Conduct, based on the principles already been broken for what will become the new city
of the UN Global Compact, forms centre. In Malmberget, large portions of the total costs
the foundation. The Code of Conduct were incurred during the year. Urban transformation
was implemented in the Swedish units and subsidiar- costs weigh heavy on LKAB’s 2014 earnings.
ies, and significant efforts were made with suppliers
during the year. A more robust LKAB
It is just as important to offer attractive communities Despite major challenges, LKAB stands well prepared
as it is to offer attractive workplaces. The argument for 2015. Large portions of the investments necessary
“no city without the mine” is often heard in our operat- for a bigger, stronger LKAB have been incurred and
ing locations, but we would like to call attention to our our financial position is strong. LKAB issued corporate
interdependency: “no mine without the city”. Therefore, bonds in December 2014, further strengthening our
we are also deeply committed to the development of financial preparedness. As we look ahead, it is now
the communities in which we operate. Examples of a matter of getting returns on our investments and
this are the LKAB Academy, whose objective is to help ensuring trouble-free production in order to increase
the schools in our region to be Sweden’s best, and the deliveries and reduce costs, all in a market with com-
Hjalmar Lundbohm Research Centre (HLRC), a foun- pletely new challenges.
dation at Luleå University of Technology, which funds Swedish iron ore exports mean a lot to very many
research in areas that are strategically important to people and businesses, and it is with humility that I
LKAB. Having an internationally acclaimed university extend warm thanks to all our customers, employees,
nearby means a lot to LKAB’s competitiveness and partners and local residents for their cooperation in
human resources management. 2014. Our objective is to be one of the most innovative,
resource-efficient and responsible mining companies
Sustainability challenges in the world. With the continued trust of the outside
High environmental ambitions are essential to our world, LKAB can also continue to be competitive and
business and are one of LKAB’s strongest competitive contribute to the public good, both locally and globally.
advantages. We understand that the environmental
permit process must take its course, but we cannot
deny that we had hoped to get all three new open-pit Luleå, March 2015
mines into production earlier. Sweden has unique ore
resources and the mining industry contributes signif-
icant benefits to society each year. Sweden is also a
world leader in both strong environmental legislation
and climate-smart technical solutions. It is important
to global development that we continue utilising the Lars-Eric Aaro, President and CEO
THIS IS LKAB
from the Swedish orefields to the world 1
10 THIS IS LKAB

LKAB – A GLOBAL GROUP

30
THIRTY COMPANIES
As the prosperity of more people worldwide
increases, LKAB and its sector grow. The 26
million tonnes of iron ore that we delivered to our
LKAB has operations in 15 countries. Operations
are based in northern Sweden near Europe’s
richest iron ore deposits. Our production and re-
IN THE LKAB GROUP
customers can become new bicycles, washing search and development facilities are all located
machines, bridges or new homes. there. Our iron ore products are transported from

SWEDEN’S SIXTH-LARGEST
6 LKAB’s core business is to mine and process
iron ore for the steel industry. The Group has a
mines and processing plants in Kiruna, Malm-
berget and Svappavaara along the Malmbanan
and Ofotenbanen railways to the ports of Narvik
EXPORT COMPANY
SOURCE: LARGEST COMPANIES broad product portfolio that includes industrial and Luleå for shipment onwards to steelworks
minerals and products that have other fields of customers around the world.

4,539
AVERAGE NUMBER OF EMPLOYEES
application for iron ore.
Highly efficient drilling systems, rockwork and
engineering services, explosives and property
management companies are other parts of the
Group.

PORTS
MINES AND PROCESSING PLANTS
SALES AND/OR PURCHASING OFFICES
LKAB MINERALS AND LKAB WASSARA

Processing plants
Open-pit mines KIRUNA Research and
Rockwork SVAPPAVAARA SVAPPAVAARA development Industrial minerals
LKAB BERG & BETONG AB MALMBERGET PELLETIZING
LKAB MINERALS
IRONMAKING

Explosives
Underground mines LKAB KIMIT AB
KIRUNA
MALMBERGET
 THIS IS LKAB 11

CHAIRMAN OF THE BOARD STEN JAKOBSSON:

WE WANT TO SET AN INTERNATIONAL

EXAMPLE
Sustainable development is central to LKAB’s Board of Directors. To
attain long-term profitability we need to make positive contributions 21,445 MSEK
CREATED AND DISTRIBUTED
to society as well as earn the trust of the world around us. VALUE FOR THE YEAR

As a former member and current chairman of

the board of LKAB, I have personally followed
10,284
SUPPLIER PAYMENTS
MSEK
the international trend towards increasing the

3,682
importance of long-term accountability. The
Board is highly committed to these issues and
MSEK
our owner is sharply focused on sustainability.
EMPLOYEE SALARIES
Environmental, social and economic respon-

3,500
sibility are integral parts of LKAB’s business
strategy and are our key competitive advantag-
MSEK
es. LKAB is known in the global steel market as
DIVIDEND TO OWNER
a company that works innovatively for energy (SWEDISH STATE)
and resource efficiency throughout the value

2,484
chain.
From a global perspective, we contribute to ethics, health and safety, equality and diver-
MSEK
the common good by supplying climate-smart sity. Concretely, it is about people going home REINVESTED IN THE
iron ore that becomes the steel that literally from work as healthy as when they arrived. Or BUSINESS
builds the world’s societies. LKAB’s ambition limiting our environmental impact, and where
is to comply with tougher environmental
standards than any other mining company
in terms of production of raw materials and
appropriate, setting aside funds for remediation
of surrounding areas.
Our task now is to continue to deliver prod-
1,354
DISBURSEMENTS FOR
MSEK

management of the refinement process, ucts that create added value for our customers URBAN TRANSFORMATION
emissions and transportation. From a local in a responsible, cost-efficient manner, which
perspective LKAB employs many people in
our region and we are actively engaged in
the growth and development of the local
also makes us a secure employer and partner.
With profitability, respect for all our stakehold-
ers and continued responsibility for our sur-
112 MSEK
TAXES PAID BY THE
communities. roundings, LKAB will continue to make positive GROUP
We want to set an international contributions to social progress.
example when it comes to the environment,

Rail transport
Workshop Properties Ports
LKAB MALMTRAFIK AB
LKAB MEKANISKA AB LKAB NORGE AS
LKAB FASTIGHETER AB LKAB MALMTRAFIKK AS
PORT OF LULEÅ

Drilling systems
LKAB WASSARA AB
12 THIS IS LKAB

SIGNIFICANT SUSTAINABLE
DEVELOPMENT ISSUES
Identifying and acting on risks and opportunities that affect LKAB’s competitiveness and
stakeholder confidence is critical to our success. LKAB and its stakeholder groups have
together identified a number of significant issues related to activities along our value chain.

Sell and develop Process

SIGNIFICANT ISSUES IN LKAB’s iron ore pellets have environmental After dressing, the iron ore is processed
advantages that provide our customers in LKAB’s concentration and pelletizing
LKAB’S VALUE CHAIN with greater efficiency in their processes. plants into products that give customers
To continue to develop, LKAB must be an environmental and efficiency benefits. With
• Occupational health and safety
attractive employer that attracts the right 1.5 percent of the country’s total electric-
• Impact on and interaction with skills. With a diversity of people, we create ity consumption, however, LKAB is one
the local community a dynamic organisation that enables LKAB of Sweden’s largest single consumers of
to remain at the forefront of research and energy, which means that energy conser-
• Urban transformation development. vation and alternative energy sources are
high priorities. It is also important to reduce
• Biodiversity
Explore environmental emissions to the air and wa-
• Environmental emissions LKAB’s exploration initiatives are the basis ter, which includes the phasing out of coal
for ensuring long-term mining operations. and oil, increased use of surplus heat and
• Resource-efficient use of This presupposes respect for our sur- recycling of mining waste.
raw materials roundings, local livelihoods and the envi-
ronment. We evaluate the impact of new Transport
• Responsible purchasing
mines on biodiversity, taking into account LKAB is a leading logistics company.
• Diversity and non-discrimination the abundance of variation. With respon- Transportation by rail from the mines and
sible urban transformation we secure our processing plants along the Malmbanan
• Product’s environmental benefits future operations. and Ofoten lines to shipping ports of
• Reindeer herders’ interests in Luleå and Narvik is the backbone of
Mine LKAB’s logistics system and business
• Management of viewpoints LKAB mines iron ore, both above and below operations.
on environment and society ground. Directly and indirectly LKAB em-
ploys more than 17,000 people in the Use and utilise
The essential issues are described in the region and has over 4,300 suppliers and The environmental benefits of our products
adjoining text in general terms as relates to the subcontractors. Occupational health and are transferred to the customer by making
value chain, and a more detailed description of
safety is a high priority in our workplaces processes more efficient and production
each issue is found with the materiality analysis
as per GRI G4 on pages 76–77. and in working with our suppliers. more resource-efficient. That is why the
climate wins when as much of the world’s
iron-ore-based steel as possible comes
from LKAB’s mines. Steel products are also
100 percent recyclable and can become
OUR VALUE CHAIN new raw material again.

Sell and develop Explore Mine Process Transport

Existing mines and Above and below ground Dressing – Concentration Train – Ship
new projects Pelletizing
 THIS IS LKAB 13

INTERACTING WITH OUR STAKEHOLDERS

Only by actively managing issues that can affect our business can we cultivate growth
in line with our targets. Our business requires a long-term approach and collaboration.
LKAB wants to be accessible and to interact with stakeholders with responsiveness,
commitment and responsibility.

Customers
CUSTOMERS
LKAB has close customer relationships and
knowledge exchange through various cus- AUTHORITIES
EMPLOYEES AND
tomer-related collaborative projects.
LEGISLATORS
In various forums for individual and joint
meetings, we maintain a continuous
dialogue on the issues that customers per-
ceive as most significant. SUPPLIERS AND
OWNER
CONTRACTORS

Employees
We engage in dialogue our employees in our
daily work at workplace meetings, perfor-
mance reviews, strategy days, safety officer LOCAL
TRADE
meetings and regular employee surveys. RESIDENTS
ASSOCIATIONS

Suppliers and contractors

LKAB has about 4,300 suppliers and con- REINDEER HOSPITALITY Stakeholders are groups or persons who
HERDING
tractors. Through regular meetings and sup- INDUSTRY directly or indirectly can affect or be
plier days we assure a consensus on how affected by the decisions LKAB makes.

we react to the issues that our suppliers

point out as important.

Local residents
Our presence and influence are most Trade associations Owner
evident in our business locations. The need Dialogues are held, usually through LKAB’s owner is the Swedish State,
for contact channels and interaction is consultation meetings, with stakeholder which is represented on the Board
greatest there and we must be accessible organisations on specific issues such as and at the Annual General Meeting.
and nearby. the environment, nature conservation
values and urban transformation. In order Authorities and legislators
Reindeer herding to generate debate around various key LKAB carries on dialogues at all levels,
LKAB wishes to cooperate and aims to sign issues we are a member of Euromines, the both nationally and internationally. Both
cooperation agreements with the Sami com- Swedish Steel Producers’ Association’s public and private meetings are held
munities that are affected by our operations. Environmental Council and trade associ- regularly with relevant authorities, the
ation SveMin, which includes the Mining County Administrative Board and munici-
Hospitality industry Employers’ Association. palities. From a regulatory perspective, the
LKAB also collaborates with other important dialogues are mainly on issues related to
businesses in the region through individual urban transformation, as well as issues
and public meetings where important issues related to climate change, the environment
are addressed. and land and planning issues.

Learn more about our strategic dialogues with selected stakeholders and the prominent issues of our stakeholders in section 3, Goals and strategy, on pages
21–60. Also see Materiality analysis, Sustainable development on pages 76–77.
14 THIS IS LKAB

CUSTOMER OFFERING
LKAB has evolved from being a supplier of high-quality iron ore raw materials to
becoming a high-tech minerals group and is one of the world’s leading manufacturers
of quality processed iron ore products. A unique combination of product and technology
development, high-tech research and customer interaction has broadened our portfolio
of proprietary and innovative technologies, products and knowledge.

IRON ORE PRODUCTS

Blast furnace pellets is LKAB’s largest prod- DR pellets are reduced with natural gas Fines is finely crushed iron ore that is
uct group, delivering significant customer to direct reduced iron (DRI), which is used melted together into cakes (sintered)
value to steelworks’ blast furnaces by means to make steel in an electrosteel furnace. before it is used to produce iron in a blast
of an optimised addition of various minerals LKAB’s high-quality pellets produce less furnace. The high iron content in LKAB’s
like olivine to improve high-temperature waste, lower power consumption, raise pro- fines makes it highly sought after in the
properties. ductivity and lower maintenance and wear market.
in steel production.

INDUSTRIAL MINERALS SPECIAL PRODUCTS

Mica has a very wide range of The Group also supplies con-
applications, including as rein- crete and crushed aggregate to
forcement and heat protection the construction industry and
in plastics and as decorative provides advanced mechani-
elements in ceramic materials. cal engineering services and
Mineral sands are used for contracted assignments.
production of welding rods Due to its shipments on the
Minerals are a part of our and welding wire. Refractory Malmbanan railway, LKAB is
modern lives and are found in minerals are used to produce Sweden’s largest shipping
everything from cosmetics and refractory bricks and casting Some support functions and company. As a service function
paint to fire protection gear and sand. innovative technologies used in to the iron ore business, we
electronics. LKAB is also a leading player our mines are sold externally. also have a property manage-
Magnetite is used for water in the world when it comes to For example, the unique, world- ment company that owns and
treatment, sound and vibration recycling refractory such as patented water-powered drilling manages 2,100 housing units in
damping and as aggregate in refractory bricks and materials system Wassara and the explo- Kiruna and Malmberget.
heavy concrete. Huntite is used, for lining blast furnaces, for sive Kimulux, which offers a wide
for example, as a halogen-free, example. range of applications in the min-
fire-retardant additive in ing and construction industries.
plastics and cables.
CUSTOMERS AND MARKETS
continued stable demand 2
16 CUSTOMERS AND MARKETS

IRON ORE MARKET DRIVERS

Demand for iron ore is driven by the demand for steel, which in turn is strongly linked to
GDP growth, increasing urbanisation and prosperity in the world’s emerging economies.
The market for high-quality upgraded iron ore products, such as LKAB pellets, increases
in line with increases in requirements for efficiency and environmental performance
among steel producers.

A GROWING NEED FOR STEEL

The world population is growing and the movement from an agricultural to an industrial society in the world’s emerging economies
requires huge amounts of steel.

STEEL CONSUMPTION IN CHINA AND THE WORLD GLOBAL STEEL USE BY SECTOR
China Rest of world Mt
Source: World Steel Association Source: World Steel Association

Mt
1,600

%
1,200 Building and construction ..............51
Machinery ....................................... 14.5
800 Metal goods .................................... 12.5
Motor vehicles ...................................12
Other transport ................................... 5
400
Electronics & telecom ....................... 3
Household appliances....................... 2
0
1980 1985 1990 1995 2000 2005 2010 2014
 CUSTOMERS AND MARKETS 17

DRIVEN BY RISING LIVING STANDARDS AND URBANISATION

More and more people are moving to cities. Factories, cities and infrastructure are being built and the demand for capital and consumer
goods is increasing.
GLOBAL GDP PERFORMANCE TOP 10 STEEL PRODUCING COUNTRIES, Mt
Source: The World Bank Source: World Steel Association

USD billion
600,000
NO. COUNTRY 2014 2013 CHANGE, %
1 China 823 815 0.9
450,000 2 Japan 111 111 0.1
3 USA 88 87 1.7
300,000 4 India 83 81 2.3
5 South Korea 71 66 7.5
150,000 6 Russia 71 69 2.6
7 Germany 43 43 0.7
8 Turkey 34 35 -1.8
0
1970 1980 1990 2000 2010 2011 2012 2013 20141 9 Brazil 34 34 -0.7
1
GDP increased 2.6 percent in 2014 as forecast by the World Bank, Global Economic Prospects. 10 Ukraine 27 33 -17.1

LEADS TO INCREASED VOLUMES OF IRON ORE

Strong demand for steel is driving demand for iron ore. This has led to a sharp increase in the supply of iron ore from new mines
in recent years, mainly in Australia. The world’s three largest export countries are Australia, Brazil and South Africa.
IRON ORE SUPPLY AND DEMAND GLOBAL TRADE IN IRON ORE PRODUCTS
Supply Demand
Source: Wood Mackenzie

Mt
2,500

2,000

1,500

1,000

500

0
2000 2005 2010 2012 2013 2014

SUPPLY AND SPOT PRICE DEVELOPMENTS IN THE IRON ORE MARKET

The supply of iron ore in the market increased significantly during the first half of 2014. An oversupply of iron ore in combination with low
steel prices in China led to a sharp fall in the spot price during the year, despite the fact that China increased its imports of iron ore from the
previous year by 13.8 percent to 933 million tonnes. There was an overall decline of 47 percent in the spot price in 2014 and the average for
the year ended at USD 97/tonne.

USD/tonne
IRON ORE PRICE PERFORMANCE
250
January 2009 – 4 February 2015
Source: PLATTS IODEX 62% Fe CFR North China
200

150

100

50

0
2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan
18 CUSTOMERS AND MARKETS

LKAB – AN ACTIVE PLAYER

IN GROWING NICHES
LKAB is Europe’s largest iron ore producer, but is a minor supplier from a global
perspective. LKAB’s main product is pellets, so our competitiveness and market
position are dependent on our being a leading high-tech supplier of high-quality
iron ore products to customers with high product requirements.

The steel market in Europe is a mature market, and unlike strong LKAB’S SALES BY MARKET REGION
Percent of sales, SEK million
growth markets like China, focus is on streamlining and consolida-
tion. Steel producers demand high-quality iron ore products that
allow them to produce as much or more steel from fewer produc-
tion units. This makes LKAB’s pellets a sought-after commodity in
customers’ production processes. Our proximity to Europe also gives
%
us a freight advantage over our competitors and makes Europe a Europe.................................. 77
natural home market. We have developed good, long-term business MENA.................................... 22
relationships in Europe for over 120 years. China ................................... 0.5
USA ...................................... 0.5

Direct reduction with natural gas in MENA and USA

In MENA, access to a good supply of natural gas and a lack of
high-quality scrap means that steelmaking with direct reduced iron
is the most common method of production. Strong demand for our
premium DR pellets for direct reduction and shipping neutrality are
LKAB’S SALES BY PRODUCT AREA
what make MENA our second largest market. The DR process is
Percent of sales, SEK million
also established in the US. Low prices for shale gas in recent years
combined with scrap shortages have created business opportunities
for our DR pellets in North America.

Iron ore market in China dominates %

China is always an important market due to its size and influence on Blast furnace pellets ....... 61
the world market price. Demand in China is currently dominated DR pellets............................ 22
Fines ..................................... 14
by fines products, but progressively more stringent environmen-
Special products ..................3
tal requirements are expected to generate increased demand for
high-quality products like dressed products and pellets. The iron ore
producers that are geographically closer to China, mainly from Aus-
tralia, have proximity and freight advantages compared with LKAB.
Taken together, these factors make China a significant but small
market for LKAB from a sales point of view. The country’s
dominant position makes our presence in the Chinese market GLOBAL PELLET PRODUCTION
Source: CRU
strategically important and we are following developments in the
Mt
world’s second largest economy very closely.
500

TOP FIVE PELLET PRODUCERS IN 2014 400

Source: Wood Mackenzie Long-Term Outlook Q4 2014.

300
NO. COMPANY ANNUAL CAPACITY, Mt
1 Vale 56 200
2 Cliffs 33
3 Samarco 30 100
4 LKAB 27
0
5 Metalloinvest 26 2000 2005 2010 2012 2013 2014
 CUSTOMERS AND MARKETS 19

MARKET DEVELOPMENT
STEEL MARKET AND STEEL DEMAND
Europe USA
Crude steel production in the EU281 increased during the year by Crude steel production in the US increased by 0.9 percent in
1.8 percent. Economic developments in Europe remained weak in 2014. The US market accounted for the most positive signals during
2014. Recovery in the Eurozone slowed further due to geopolitical the year. The US Federal Reserve completed its quantitative easing
unrest in Ukraine and sanctions against Russia, which affected the and announced rate increases as a result of positive economic de-
Eurozone’s growth negatively, mainly through reduced exports. velopments. The domestic steel market remains strong, as demon-
Market signals during the year were mixed from European indus- strated by stable steel prices. In the second half of the year, the US
try, but demand for steel was stable throughout the year. imposed higher tariffs on imported steel products in an effort to
EU28, the European Union’s 28 Member States
1
protect domestic steel production.
Negative developments in oil prices in the fourth quarter increased
Middle East and North Africa (MENA) the uncertainty surrounding several shale gas projects, which US
Production of crude steel in MENA increased during the year by steel producers with exposure to the oil industry are already feeling.
6.7 percent as compared year-on-year. Demand for DR pellets
remained strong in the region, driven by major construction and China
infrastructure projects. The region’s rapid growth is threatened by Crude steel production rose by 0.9 percent in 2014. There were
continued low oil prices, which led the World Bank to issue rec- several negative signals from China during the second half of the
ommendations for several countries in the region to review their year, mainly from declining housing prices, declining housing sales
public spending and investments. and weaker industrial production than expected. This trend was also
seen in Chinese steel consumption, which decreased during the year
by 3.4 percent. Oversupply, weaker steel consumption and higher
steel prices in export markets led to a significant increase in China’s
exports of steel products during the year.

DIFFERENT MARKETS AND PRODUCERS DEMAND DIFFERENT PRODUCTS

Market maturity and availability of reduction methods and types of energy govern
which iron ore products are in demand by steel producers.

EUROPE MENA CHINA USA

Source: Wood Mackenzie Source: Wood Mackenzie Source: Wood Mackenzie Source: Wood Mackenzie

% % % %

Mt Mt Mt Mt
Fines ..............................................80 Fines ................................................ 9 Fines ........................................... 911 Fines ................................................ 4
Lump ore......................................20 Lump ore........................................ 9 Lump ore................................... 121 Lump ore........................................ 0
Blast furnace pellets ................56 Blast furnace pellets .................. 0 Blast furnace pellets ............. 172 Blast furnace pellets ................40
DR pellets....................................... 1 DR pellets.....................................52 DR pellets....................................... 0 DR pellets....................................... 2
20 CUSTOMERS AND MARKETS

LKAB MINERALS COMPLEMENTS

THE CORE BUSINESS
LKAB Minerals complements LKAB’s sales to the steel industry by developing
more and new business opportunities for LKAB’s iron ore in the industrial minerals
marketplace, where the company is a recognised supplier of a portfolio of minerals
for industrial use.

Sales of iron ore, mainly magnetite, to the industrial minerals SALES BY REGION
market is an integral part of LKAB’s growth and flexibility strategy Percent of sales, SEK million

and a key element in LKAB Minerals’ planned growth. The selection

of ore grades can be adapted to customer requirements and
processing is separated from pellet production, leading to more
flexible production processes. This makes it possible to optimise
product mix and production planning and to ensure increased risk
%
diversification within the Group. Europe.................................. 57
Asia ....................................... 28
A leader in innovative mineral solutions USA ....................................... 15
Through organic growth and acquisitions, LKAB Minerals evolved
into a multi-mineral company with mines, quarries and production
facilities in Sweden, Finland, the Netherlands, England, Turkey and
China, and sales offices in Europe, the US and Asia. Today, LKAB SALES BY BUSINESS AREA
Minerals holds a leading position in a number of different product Percent of sales, SEK million
applications and develops innovative mineral solutions in part-
nership with customers, focusing on functionality and usability in
customer processes.

In-demand niche supplier %

Magnetite ........................................... 43
The business focuses on four defined areas. The largest business
Mineral sands ................................... 24
area comprises industrial use of magnetite in the construction Refractory material & foundry .... 19
industry and offshore structures, for example. LKAB Minerals also Polymers & coatings ...................... 14
offers mica, huntite and magnetite for various applications in poly-
mer and coatings. They also supply refractory minerals for foundry
sand and production of refractory bricks, which are also recov-
ered, and they resell mineral sands in Asia. Customers include the
world’s leading companies in various industries all over the world. SALES TREND, TOTAL

Increased sales of magnetite SEK million

3,000
As the need for magnetite and other minerals is strongly linked to
investments in the construction sector and commodities market, 2,500
demand is driven largely by the prevailing price of electricity, gas 2,000
and oil and the general willingness to invest linked to current GDP
1,500
growth in each market. Long-term demand is strong, and in 2014
LKAB Minerals increased sales of magnetite by about 60 percent 1,000

to 800,000 tonnes. A strategic target for LKAB is to sell two million 500
tonnes of magnetite per year for use outside the steel sector.
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
OBJECTIVES AND
STRATEGY
our strategy in action 3
22 STRATEGIC FOCUS AREAS

STRATEGIC FOCUS AREAS

LKAB has identified six strategic areas that are critical to our growth targets. Sustain-
ability is an integral part of our business strategy. The Group’s values are the basis of
its strategy, and overall, they help us to meet our customer promise of Performance in
Ironmaking.

PERFORMANCE
IN IRONMAKING

FLEXIBILITY

SAFE AND RESOURCE-EFFICIENT

PRODUCTION

URBAN ATTRACTIVE
GROWTH
TRANSFORMATION LKAB

COMMITMENT – INNOVATION – RESPONSIBILITY

 STRATEGIC FOCUS AREAS 23

PERFORMANCE IN IRONMAKING GROWTH

We are one of the world’s leading suppliers of For our continued success it is critical for LKAB to be
iron ore pellets to the global steel industry. a major supplier to each of our customers. We are
Performance in Ironmaking is our customer promise doing this by increasing our production and delivery
and means that we consistently provide our capacity, where increased access to ore and efficient
customers with the best added value in the market. We want to be production that is respectful of the surrounding communities and
the innovator that drives development in a growing world market. the environment are crucial.
READ MORE ON PAGE 25. READ MORE ON PAGE 45.

FLEXIBILITY URBAN TRANSFORMATION

The market for our iron ore products is strong in the Our continued mining operations and growth plans
long-term. The new open-pit mines provide us with are dependent on large parts of central Kiruna and
increased volume and production flexibility. But major Malmberget gradually being moved. New open-pit
shifts in the global economy mean that we must be mines in the Svappavaara Field impact the town of
prepared to quickly handle temporary fluctuations in demand. This Svappavaara. Urban transformation is being carried out in close
assumes that the actions we take are flexible – from finished prod- collaboration with all stakeholders in order to come up with long-
ucts, usage areas and markets to customer deliveries. term, sustainable solutions. LKAB and the municipalities involved
READ MORE ON PAGE 31. have a common interest in building and maintaining attractive
communities where development proced deconstruction.
READ MORE ON PAGE 49.

SAFE AND
RESOURCE-EFFICIENT PRODUCTION ATTRACTIVE LKAB

LKAB’s competitiveness is directly linked to the fact Our future competitiveness depends on our ability to
that we make continuous and sustainable improve- attract and retain talent, and that we have dedicat-
ments that increase our efficiency. Safe, smooth, ed, proud supervisors, employees and suppliers. We
uninterrupted production is the backbone of our achieve this through a strong brand and a culture
business, which is large-scale and based on cost-effectiveness. based on clear values, equality and diversity, and a safe, fair
Our production processes are energy intensive, while at the same and stimulating work environment. It is just as important for the
time we have the world’s most energy-efficient manufacturing communities we operate in to be attractive places to live and
process for iron ore pellets. Our continuous efforts to improve work as it is for LKAB to be an attractive employer.
while keeping accountability in focus will benefit both customers READ MORE ON PAGE 55.
and the environment.
READ MORE ON PAGE 37.

OUR VALUES
Our values, Commitment – Innovation – Responsibility,
provide us with a common approach in our daily work,
how we behave both inside and outside the company.
Our Code of Conduct is a framework for how to conduct
oneself in our business relationships and provides guid-
ance on how to act ethically and in accordance with our
values. COMMITMENT INNOVATION RESPONSIBILITY
24 PERFORMANCE IN IRONMAKING

Sampling of crude iron at LKAB’s experimental

blast furnace in Luleå

Our goal is to be the iron

ore producer that provides
customers with the most
added value
 PERFORMANCE IN IRONMAKING 25

A CLEAR-CUT CUSTOMER PROMISE

LKAB’s customers are among the world’s top steel producers.
Our customers drive developments in their respective markets
and place high expectations on products, delivery and service.

LKAB’s ambition is to be an attractive resource-efficient production with less

supplier and partner to the world’s steel environmental impact. Today, 90 percent of Performance
in Ironmaking
producers. Our products are meant to help the world’s crude steel is made in blast fur-
give steelworks customers stable process- naces that emit about two tonnes of carbon Flexibility
es and increased productivity that improves dioxide per tonne of steel produced. A major
their competitiveness and profitability. Our challenge for the world’s steel producers Safe and resource-efficient
goal is to be the iron ore producer that is to reduce carbon emissions and improve production
delivers the market’s best added value – energy efficiency.
from products to delivery and service. That LKAB plays a leading role in the develop-
Urban trans- Attractive
is at the core of our customer promise: ment of new pellet products and processing Growth
formation LKAB
Performance in Ironmaking. concepts for tomorrow’s low-carbon iron
and steel production. In broad research Commitment – Innovation – Responsibility
Quality throughout the value chain collaboration with the steel and mining
Stable operating conditions and predict- industry, as well as national and interna-
able processes are required for efficient tional research centres, we are developing
TARGET AREAS
steelmaking. Therefore, it is crucial to new generations of climate-smart pellets
our competitiveness and market position and reduction technologies to reduce carbon
that we maintain high, consistent product dioxide emissions by up to 80 percent. CUSTOMERS AND MARKETS
quality. This means that we must be able LKAB also has the most energy-efficient 2015 target: Maintain our market
position as a leading global supplier of
to guarantee optimal conditions in our pellet production in the world. More than
climate-smart pellets.1
own processing and delivery processes, half of the energy needed in the pellet
but we must also meet customer requests process is furnished when the magnetite 2014 results: LKAB’s market position as
a supplier of pellets is unchanged.
and requirements for technical support, ore chemically oxidises to hematite. This
development cooperation and exchange of means that the theoretical emissions of
PRODUCTS AND SERVICES
knowledge on iron and steel production. carbon dioxide decrease by up to a third
2015 target: New generation of cli-
compared to competitors’ hematite pellets. mate-smart pellets produced by 2017.1
Partnerships for innovation LKAB’s consistently high-quality pellets
2014 results: Product development and
While the demand for steel has risen also generate business and climate benefits
growth continue and are priorities in LK-
sharply over the past decade, there for steelworks customers through efficient AB’s research and development operations
are increasing requirements for more reduction processes. with a long-term goal of developing a new
generation of climate-smart pellets.

1
Constitutes target in “Resource-efficient pro-
duction” in sustainability strategy. Monitored and
reported quarterly.

Drilling rig in Malmberget mine.

26 PERFORMANCE IN IRONMAKING

Research collaboration The experimental blast furnace has also Hjalmar Lundbohm Research Centre, steel
and knowledge clusters been the hub of a European collaborative producer SSAB and Swerea research
LKAB’s competitiveness is based on project in the iron and steel industry called institute Swerea MEFOS, found a unique
innovation and technological leadership ULCOS, with a view to eventually reduce platform for customer-driven research
through an open flow of knowledge and carbon emissions in blast furnace process- collaboration. Together with national and
long-term strategic research and develop- es by 50 percent. The Course 50 project international players, we develop efficient
ment with customers and external centres aims to reduce carbon emissions from products and processes that reduce cli-
of excellence. Our unique experimental Japanese steelworks by about 30 percent. mate impact, improve customer production
blast furnace in Luleå plays a central role The experimental blast furnace com- results and ensure profitability.
in customer-driven product development bined with our agglomeration and steel
and research on how our pellets perform in research laboratories and proximity to, for
customer blast furnaces. example, Luleå University of Technology,

LKAB plays a leading role

in the development of
new pellet products and
processing concepts for
low-carbon iron and steel
production

LKAB’s climate-smart iron ore pellets.

 PERFORMANCE IN IRONMAKING 27

PRODUCT DEVELOPMENT GIVES AGGLOMERATION

PERFORMANCE IN IRONMAKING LABORATORY
CRUCIAL TO
GROWTH PROJECTS
Customer-driven quality development is crucial to our
customer promise, Performance in Ironmaking. This Understanding and con-
means that we implement customer requirements in a trolling the link between
raw materials, production
structured manner in our innovation efforts and that our
processes and product
products follow customers’ progress into the future. characteristics forms
the basis for successful
pelletizing.
Enhanced, customer-driven product devel- a “fluxed” pellet with high iron content that
opment work was carried out in 2014 with reduces the amount of slag in the blast
Continuous product development is essen-
two customers. They are benchmark furnace. This was not previously pos-
tial if we are to maintain our technological
customers in the feasibility sible because of the increased leadership and continue to evolve with our
study work being done to content of silica (quartz) customers. It is also important to analyse
develop the next gen- in the ores in the world how various product recipes affect our
eration of DR pellets. market. own production process. LKAB’s goal is
Reduction disintegra- to produce pellets with world-class prop-
Testing in the erties that have the market’s best added
tion has emerged
experimental blast value. Therefore, a better understanding
as a very important of how different product recipes affect our
issue, since the furnace
ability to achieve the absolute best quality
stability Besides reducing pellets is of utmost importance. This
of the pellets slag, a low quartz becomes even more important as new
during the reduction content can also and different ore grades from the growth
process is essential improve our own mines in Svappavaara are incorporated
into production.
to high productivity. production process in
Customers predict that the pelletizing plants. Test campaign for open-pit mine ores
future processes will lead Numerous attempts were A test campaign was conducted in 2014 in
to increased pressure and tem- made during the year with which we produced a blast furnace pellet
peratures, which places even greater different compositions that were with ore exclusively from the Svappavara
demands on solid products. tested in laboratory scale at LKAB and with Field. With 70 percent of the ore from Mer-
tainen and 30 percent from Gruvberget we
the customer. Some of these have since
obtained raw materials that worked well in
High iron content and less quartz been tested in baskets in our experimental our refining process. The resulting product
Development partnerships with our cus- blast furnace. If the product is thought to be was then validated in our experimental
tomers are also being conducted in the promising, full-scale trials will be carried blast furnace and the results showed per-
blast furnace pellets product area. The aim out in pelletizing plants and the experimen- formance similar to that of regular blast
is to develop a pellet type that is specially tal blast furnace before full-scale trials take furnace pellets for which the raw materi-
als come from our underground mines.
adapted to all of the customers’ works in place with the customer.
Europe. The goal of the project is to develop From concept to full scale
The refining processes are examined in
the agglomeration laboratory to see how
different raw materials affect the product
and the pellets are exposed to heat, pres-

IMPROVED REDUCTION UNDER LOAD sure and strength tests. In our research
facilities, we can gradually take concepts
and small-scale laboratory research to
full-scale pilot tests. This provides an
An important development and improve- of silica and a changed mix of additives, opportunity to test new ideas
ment focus for R&D during the year con- which stabilised pellet disintegration at without affecting existing production.
centrated on reduced pellet disintegration an acceptable level. Long-term measures New innovations are developed that are
in customers’ reduction processes. After are being evaluated, including improving aimed at streamlining existing processes.
The goal is to seamlessly introduce chang-
analysis, an action plan was introduced the magnetic separator’s efficiency during
es into our own operations.
into operations. A number of measures concentration.
were taken to change the specification
28 PERFORMANCE IN IRONMAKING

Upgrading in a LKAB’s newest pelletizing plant, KK4 in Kiruna

changing market
Increased demand for LKAB’s processed, high-quality iron ore
products shows that we are well positioned in our offering.
Increased refinement also gives price advantages. During
the year, we submitted a request to increase pellet produc-
tion in Kiruna by 1.4 million tonnes to 16.2 million tonnes to
meet market needs. The production increase will be achieved
through process optimisation in the three existing processing
plants.

Environmental requirements drive demand

Weaker demand and stricter environmental requirements led to a Although growth in China is slowing, long-term global demand for
levelling out of steel production in China in 2014. Despite China’s steel is increasing. In LKAB’s main markets – Europe and MENA
reduced steel output and an oversupply of sinter fines in the mar- – demand for our high-quality products remains strong. We sell
ket, tougher environmental and profitability requirements mean everything we can produce and our customers want to increase
that demand for highly processed iron ore products is increasing. volume in 2015. To meet this demand, it is crucial for us to increase
More steel producers are demanding products that improve the the capacity of the processing plants and have access to more iron
efficiency, flexibility and competitiveness of their steel production ore from our new open-pit mines.
processes.

Hot-rolled strip steel (HRC) is the raw material in

everything from ships and vehicles to buildings and bridges.

SHALE GAS OPENS UP AN INTERESTING MARKET IN THE US

The most common steelmaking technique in the US uses electric However, extraction of shale gas through hydraulic fracturing,
arc furnaces with scrap as the main raw material. The shortage of known as fracking, is not entirely uncontroversial, since the method
high-quality scrap and increased availability of shale gas has led impacts the environment with the risk of discharges.
to increased interest in direct reduced iron, often called DRI, as the The EU is investigating the relevance of shale gas and risks as-
input raw material in steelmaking. sociated with potential extraction. We are following these develop-
LKAB, which produces a competitive pellet for direct reduction ments closely. Our business benefits from the availability of natural
to DRI, intends to meet the demand and be a player in this growing gas and we are one of few suppliers that have a sufficiently high
market. DR technology is in itself a reduction method that emits quality pellet product for this steel production process.
less carbon dioxide in the process.
 PERFORMANCE IN IRONMAKING 29

125 YEARS OF INNOVATION

POSITIONS LKAB
LKAB was established in 1890 and celebrates its 125th an- steelworks, however. A full-scale trial with
olivine pellets at SSAB in Luleå was initiat-
niversary as a company in 2015. Its 125 years of customer ed in 1982, and the rest, as they say, is his-
focus, innovation and product development has positioned tory. Fuel consumption in the blast furnace
fell by more than seven percent and the
LKAB and Swedish iron ore products in the world market. olivine pellets became LKAB’s biggest sales
success in the modern era.

LKAB’s history is characterised by foresight Europe’s first pelletizing plant A unique development tool
and bold decisions. Much of the company’s In the optimistic era of the 1950s LKAB The success of the olivine pellets demon-
success lies in its flexibility in relation to decided to start rolling balls of iron ore, strated that pellet optimisation, as well as
market trends and customer preferences. pellets, according to a Swedish patent from understanding and developing customers’
The Malmbanan railway, which connects 1912. The aim was to increase own processes and production systems,
the mines of the orefields with the shipping production and refinement of the fine- would give LKAB a cutting-edge advantage
ports on the coast, was perhaps not an in- grained ore and to facilitate transportation. in stiff global competition. LKAB construct-
novation. But it was the result of great vision It was decided in 1952 that a full-scale ed its experimental blast furnace in 1997,
and great courage. pelletizing plant would be built in Malm- enabling the testing and validation of new
In the spring of 1888, two years before berget with a capacity of 100,000 tonnes products in an environment comparable to
LKAB was formed, the first 40 cars with per year. Three years later, in 1955, the first full-scale industrial production.
1,000 tonnes of ore rolled from the mine in pelletizing plant in Europe was opened. The experimental blast furnace is a
Malmberget to the Port of Luleå. It was the unique tool and a milestone in the research
heaviest train that ever rolled on a railway Olivine pellets improved and development of blast furnace process-
at the time. Even today the Malmbanan line blast furnace process es. Along with steelworks customers, we
is the backbone of LKAB’s logistics system, In the aftermath of the 1970s oil and steel have conducted many successful pro-
transporting about 70,000 tonnes of iron ore crises LKAB did research on the pellet jects in the experimental blast furnace to
products per day to the ports of Narvik and recipe in order to improve and streamline increase the competitiveness of customers,
Luleå. the blast furnace process. There was little thus consolidating LKAB’s position as the
interest in innovative products from the global technology leader in pellet production.

LKAB opened Sweden’s and Europe’s first pelletizing plant in Malmberget in 1955.
30 FLEXIBILITY

Narvik is LKAB’s largest and most important shipping port. The port is ice-free
all year round and deep enough for ocean-going vessels.

The Malmbanan railway and the

ports of Narvik and Luleå are the
backbone of our logistics system
and our business
 FLEXIBILITY 31

ADAPTING TO CHANGE
The market for iron ore products shows long-term, strong
growth. But shifts in the global economy and the global iron
ore markets mean that we must be prepared to quickly handle
temporary fluctuations in demand as well as other changes.

Performance
in Ironmaking

Flexibility

Safe and resource-efficient

production

Urban trans- Attractive

Growth
formation LKAB

Commitment – Innovation – Responsibility

TARGET AREAS

FLEXIBLE PRODUCTION AND

LOGISTICS
2015 target: Allow for larger deliveries
through increased capacity on the Malmba-
nan and Ofotenbanen railways.
In 1983, in the aftermath of the steelworks crisis of the
1970s, all work was halted in the Leveäniemi mine in Svappavaara. Now, more than 30 years 2014 results: More lay-bys will be built
later, the open-pit mine is once again an important part of LKAB’s growth and flexibility strategy. on the Malmbanan and Ofotenbanen lines
after a decision by the Norwegian State
with partial funding from LKAB. Increased
Customers and market presence A strategic goal is to have a marketable axle loads for LKAB’s iron ore cars was
For our main business, we currently have a product portfolio and production process realised, resulting in increased transport
client portfolio that includes steel produc- that follows customer needs and require- capacity.

ers in some 15 countries. Europe is our ments. Highly upgraded pellet products
crucial home market where we have long, that add value and help our customers
strong customer relationships with strate- become more profitable is our primary
gically important partners. At the same means of competition and positions us well
time, we are always pursuing new custom- with our customer offering. Blast furnace
ers and markets so that we can quickly pellets are our main product, but demand
redirect portions of our sales volumes. for DR pellets is growing by about four
For example, the Middle East and North percent per year. LKAB’s product port-
Africa are important markets for our direct folio also includes fines with a high iron
reduction pellets (DR pellets). LKAB also content, which is highly sought after by our
holds sales channels open to markets in customers.
the US and China, and examines ways of
dealing with fluctuations in the market by Other uses of iron ore
increasing sales to customers outside the LKAB is the leader in the market for
steel market. industrial use of iron ore outside the steel
32 FLEXIBILITY

industry through its LKAB Minerals subsid- objective of the purchasing function is to Optimised logistics
iary. Sales of iron ore, mainly magnetite, to achieve lower total costs through shorter Our competitive opportunities in the global
the industrial minerals market is an integral lead times, which reduces business risks marketplace are based on the fact that we
part of LKAB’s growth and flexibility strate- and provides higher quality and fewer are also a leading logistics company, both
gy. LKAB Minerals also has a strong position middlemen. Together, these things facilitate above and below ground. With relatively
in the market for the minerals mica and the production processes and investments few possibilities for interim storage in
huntite, as well as in the recovery of refrac- that ultimately lead to more customers and depots and shipping ports, one of our main
tory bricks. Our customer promise “Mineral more satisfied customers. goals is to get out as much volume at the
Solutions for Our World” communicates our steadiest pace possible. LKAB’s ore trans-
ambition to provide solutions that generate Adaptable production port is by rail from mines and processing
high value for customers, combined with a LKAB has invested heavily in mines, plants along the Malmbanan line to the
strong focus on sustainability. processing plants and transportation since shipping ports at the coast.
2005. We have the production and logistics The Malmbanan railway and the ports of
Flexible purchasing capacity and our efforts are focused on Narvik and Luleå are the backbone of our
Flexible, cost-efficient purchasing is stra- increasing access to iron ore raw material logistics system and our business. Through
tegically important for LKAB’s long-term to fully utilise our processing capacity. those two ports, logistics flows can be opti-
competitiveness. We collaborate annually The new open-pit mines in Svappavaara mised depending on where the customer is
with nearly 4,300 suppliers and subcon- provide us with more production flexibility. located. Two-thirds of seaborne transports
tractors that are an important part of our The new mines are located near existing depart from Narvik, which can accommo-
value chain. The purchasing function signs pelletizing plants and close to the Malm- date the largest ships, and one third leave
contracts with suppliers that can prove that banan railway, which can already handle from Luleå with proximity to our European
they live up to LKAB’s basic requirements increased tonnage. Overall, this gives us customers. Work began during the year to
for sustainability, meet the requirements adaptable production processes with a high build a new quay and shiploader in Narvik,
for quality, good conduct and accountabil- proportion of variable costs and flexibility which will greatly improve flexibility and
ity, and have good working conditions. The in the supply of raw materials. capacity.

The ore trains carry tens of thousands of tonnes of finished products per day from the mines
north of the Arctic Circle to the shipping ports of Narvik and Luleå. Deliveries are made
around the clock, all year round, often in harsh Arctic conditions with snow, cold and ice.
 FLEXIBILITY 33

A flexible market presence

Identifying and acting on risks and oppor- ing the importance of being able to shift PRODUCT MIX IN IRON ORE TRADE
tunities that affect our competitiveness and delivery volumes to other markets that cur- Mt Mt
stakeholder confidence is critical to LKAB. rently have greater demand. For example, 2,000 30.0
Extreme variations in volume is one of LK- signals in the US were positive in 2014 and
1,500 22.5
AB’s biggest business risks. As the demand in the Middle East demand was driven by a
for iron ore is controlled by global demand strong economy and major investments in 1,000 15.0
for steel, which in turn follows fluctuations the construction and infrastructure sector.
500 7.5
in the world economy, it is important to be Our product strategy, with a focus on
able to shift delivery volumes to markets maximising pellet production, is also im- 0 0
that currently have greater demand. portant for our ability to respond to market Global LKAB

Economic developments in Europe trends and customer needs. Fines DR pellets

continue to be relatively weak, demonstrat- Blast furnace pellets Lump ore

FLEXIBLE PURCHASING AND

SUPPLIER PARTNERSHIPS
LKAB’s purchasing covers a variety of needs along the entire value chain, from mine to
port. We have about 4,300 suppliers available in diverse categories such as energy, input
goods, industrial construction, transportation and services. Suppliers are categorised
according to different factors, such as strategic, prioritised and approved. The length of
relationships is affected by delivered quality, delivery reliability, cost and compliance with
sustainability requirements.

Increased focus on Asia

Our suppliers are mainly in Sweden and Europe at this time. Flexibility in the supply chain
is strategically important for competitiveness and reduced risk of dependencies. There-
fore, parts of our supplier base are gradually being moved to Asia where the LKAB Trading
purchasing office was established in Shanghai, China, in 2011. The aim is to broaden our
purchasing market, cut out unnecessary middlemen and reduce the Group’s purchasing
costs. The office operates according to a determined purchasing process and the UN Global
Compact’s ten principles. The Swedish government also has a corporate social responsi-
bility agreement with China, which concerns responsibility for the environment, climate,
labour law, human rights and corruption.

Reduced risks and increased quality

Besides lowering costs, the objectives of the purchasing function are shorter lead times,
reduced business risks and higher quality. Together, these things facilitate the production
processes and investments that ultimately lead to more customers and more satisfied cus-
tomers. LKAB’s purchasing function reviews suppliers on an ongoing basis. Two incidents
of corruption were reported in 2014; read more on page 59.
INCREASED FLEXIBILITY
WITH OPEX
TWOFOLD FOR LKAB KIMIT As part of the move towards greater flexi-
With the new open-pit mines in the Svappavaara Field in full operation, LKAB Kimit will bility in the way we work, from production
double its current explosives production from 20,000 to 40,000 tonnes per year. Coping of finished products to delivery to the world
with the sharp increase in production requires a thorough renovation and expansion of market, LKAB has moved on to a second
existing production facilities. This includes purchasing a new silo for finished products, phase in the Operational Excellence (OpEx)
bringing the total to five. A new station for ammonium nitrate solution and a new produc- efficiency programme. OpEx is an improve-
tion line will also be built. LKAB Kimit will then have three separate production lines, each ment programme for long-term profitability
of which can produce 150 kilograms of explosives per minute. It will then be possible to with a common scheme for trouble-free
simultaneously produce all of the types of explosives used by LKAB for drifting, sublevel production with lower costs and higher
caving and bench mining. profitability.
34 FLEXIBILITY

INCREASED SUSTAINABILITY REQUIREMENTS

FOR SUPPLIERS

President and CEO Lars-Eric Aaro presents new code

of conduct for suppliers at purchasing days in November 2014.

New code of conduct for suppliers to provide

sustainability throughout the value chain
LKAB’s business integrity is well-established. During LKAB’s Global Compact’s ten principles, the principles of the document
purchasing days in November 2014, a new code of conduct for Children’s Rights and Business Principles, the OECD Guidelines
suppliers was presented with a number of new basic require- for Multinational Enterprises and the UN Guiding Principles for
ments. They include zero tolerance for all forms of corruption Business and Human Rights. Being a step ahead when it comes
and fraud and require transparency, integrity and honesty in all to international conventions and frameworks provides suppliers
aspects of our business. We expressly renounce child labour, as well as LKAB with competitive advantages. In 2015, a selec-
forced labour and working conditions that can be seen as tion of LKAB’s suppliers will be invited to prepare a self-decla-
harmful, offensive or downright dangerous. Operations must ration based on the code of conduct for suppliers. We will then
be conducted in such a way that dangerous emissions to land, follow up on some of these self-evaluations. LKAB intends to
water and air are prevented in a systematic manner. only sign contracts and do business with suppliers that can
The new guidelines and requirements are based on interna- certify that they meet all the basic requirements.
tionally recognised declarations and conventions such as the UN
 FLEXIBILITY 35

LOGISTICS GEARS UP LKAB SWITCHES TRACKS

LKAB has invested several
LKAB has set an efficiency target for 2017 4 million tonnes per year. Driving time billion SEK in logistics operations
for which the delivery capacity on the between Kiruna and Narvik is normally 3.5 to increase train capacity for iron
Malmbanan line will increase by 52 percent hours. The entire chain of loading, terminal
ore shipments to 40 million tonnes
from current deliveries of 26 million tonnes times, unloading, meeting times, obstacles
per year.
of finished products per year. This is meant on the track and availability of engines and
to increase flexibility and meet the need cars is, however, complex. For example, that
LKAB is now taking the next step. The
for a total flow of raw materials of over 40 the Swedish Transport Administration and
current agreement with Green Cargo for
million tonnes annually when production the Norwegian National Rail Administration
the stretch between Kiruna and Narvik
and sales of processed iron ore products assign the right train path i.e., where and
was terminated, and as of mid-2015 all ore
increases. when the ore trains may travel along the
traffic to the shipping port of Narvik will be
Malmbanan line, is an important factor when
Increased axle load operated by LKAB.
traffic increases. The railway will be heavily
As part of the upgrade in transport capacity, Training and employing our own engine
trafficked. Other freight and passenger traf-
a series of major investments and projects drivers is a way for LKAB to secure its need
fic is also increasing. Therefore, a number of
in LKAB’s logistics operations are being of key skills for future production increas-
extended lay-bys for the long ore trains are
initiated to enable more efficient utilisation es. Today’s 10 ore trains per day will be
now being built.
of today’s engines and rolling stock. For expanded to 13 and the engine drivers will
example, LKAB and the Swedish Trans- Tough task be an important part of LKAB’s organisa-
port Administration initiated an evaluation While transport capacity increases, energy tion. Depending on how large the increase
project in 2014 in which ore car axle loads consumption should decrease. It is a tough in volume becomes along the Malmbanan
were increased from the current 30 tonnes task and all current streamlining projects line, LKAB will have upwards of 100 of its
to 32.5 tonnes. The trial will last for one also have one or several points in common. own engine drivers.
year on the stretch between Malmberget If this double circulation is to be managed, Our collaboration with Green Cargo
and Luleå. With an increased axle load that is, that a train has time to load, drive will continue. They will still transport ore
the transport capacity per ore train will and unload twice a day, it will require that between Malmberget and the Port of Luleå,
increase by 700 tonnes, equivalent to several of the other ongoing projects also and will also be contracted to transport
work. input goods.

LARGEST SINGLE DELIVERY TO DATE FOR LKAB MINERALS

A ship left the deep harbour in Narvik on 12 November loaded with 120,000 tonnes of iron
LKAB BUILDS
ore that had been processed into the product MagnaDense. After a stop in the Netherlands, IN PORT OF LULEÅ
the goods were delivered to an offshore project off the coast of Canada to be used as loose
In the spring, construction of a new
aggregate in the construction of a new oil drilling platform. This MagnaDense delivery is
the single largest shipment chartered by LKAB Minerals so far.
facility for bentonite milling was
begun at the Luleå ore harbour. The
investment totals SEK 440 million.

BILLIONS TO BE INVESTED IN NARVIK The facility will become operational in 2015

and will replace the existing bentonite facil-
LKAB is investing nearly SEK 1 billion in a new transport system from ore stockpiles to ity from 1967. The new facility will have a
shiploaders in the Port of Narvik – a continuation of ongoing and prior investments. In higher capacity and flexibility for produc-
addition to increased flexibility and reduced vulnerability the ore harbour terminal will have tion and storage that satisfies the need for
a higher total capacity, which ensures the production increase in LKAB’s growth plans. increased pellet volume as LKAB grows and
opens new mines.
From 20 to 30 million tonnes
The investment project, which began in 2014, consists of several parts. A new quay and Bonding agents in pellet production
shiploader raises capacity and flexibility through the ability to load two ships at the same LKAB uses bentonite as a bonding agent
time. The risk of production stoppages and disruptions is also sharply reduced. A new when the pellets are rolled into balls before
screening station for pellets, sampling facilities, new office buildings and a new operations being fired in the pelletizing plants. The
centre will also be built. When everything is finished in 2016, shipment capacity from Nar- bentonite is imported via Luleå, milled and
vik will increase from the current 20 million tonnes to nearly 30 million tonnes. dried to powder form before being shipped
Shipments of ore from Narvik started in 1903 when the railway from Kiruna to Narvik by rail to the production facilities in Malm-
was finished. The harbour is ice-free all year round and the investment consolidates berget, Svappavaara and Kiruna.
Narvik’s position as LKAB’s main link to the global iron ore market.
36 SAFE AND RESOURCE-EFFICIENT PRODUCTION

LKAB’s primary goal is

to develop stable, safe and
predictable processes in
our own value chain

A high transport capacity is

a prerequisite for safe,
cost-effective deliveries.
 SAFE AND RESOURCE-EFFICIENT PRODUCTION 37

A SUSTAINABLE VALUE CHAIN

The goal of sustainable development is echoed in everything
we do. From long-range planning, secure workplaces, safety
consciousness, and efficient energy and resource use to
highly upgraded products that reduce environmental impact
and streamline customers’ processes.

Cost-effectiveness Performance
Our strategy for safe, resource-efficient in Ironmaking
production makes us more competitive Our focus on efficiency improvements
through increased volumes and lower and cost savings gave noticeable results. Flexibility
costs while maintaining product quality and Among other things, more work is being
delivery assurance. done in-house, such as drifting and cave Safe and resource-efficient
drilling in our mines. Variable costs for iron production
Increased access to raw materials ore operations were reduced by SEK 400
Over the past decade we have invested million in 2014. Despite that, total produc-
Urban trans- Attractive
billions in mines, processing plants and tion costs increased by 0.6 percent for the Growth
formation LKAB
logistics. The production structure and to Group as a whole.
some extent staffing have already been LKAB is in a transitional period between Commitment – Innovation – Responsibility
adjusted to accommodate increased two main levels, which strongly affects our
volume in line with LKAB’s growth strategy. ability to streamline and cut costs at the
At the same time, access to more iron ore moment. Progress was made in the reloca-
TARGET AREAS
raw materials from the open-pit mines in tion of production and infrastructure from
Mertainen and Leveäniemi has been de- the old to the new main levels in Kiruna
layed because of protracted environmental and Malmberget in 2014. REDUCED PRODUCTION COSTS
permit matters. 2015 target: Reduce production cost per
Limited access to iron ore currently Additional investments tonne of products by 20 percent, base year
for increased production 2012.1
prevents us from increasing production
volume. The mine in Malmberget includes Additional production-enhancing invest- 2014 results: Total production costs
several scattered orebodies, making it ments were made during the year to opti- increased by 0.6 percent. The full effect
of LKAB’s growth programme has been
difficult to increase capacity. Streamlining mise processes in existing concentration
delayed.
has increased the ore yield in the Kiruna and pelletizing plants. An environmental
mine somewhat and the northern circuit, permit application was submitted for an in- ENVIRONMENT AND CLIMATE
with Svappavaara included, had its best pro- crease in pellet production in Kiruna of 1.4 2015 target: Sulphur dioxide emissions,
duction results ever in 2014 with delivery of million tonnes to 16.2 million tonnes. The falling particulates, energy consumption
30 million tonnes of crude ore. concentration plant in Svappavaara was and carbon dioxide emissions per tonne of
With the three open-pit mines – Gruv- upgraded to receive ore from Mertainen, finished products will all be reduced.2
berget, Mertainen and Leveäniemi – in full and there are plans for trials with biofuel 2014 results: Presented in its entirety on
operation, the processing plants in Kiruna, as an energy source in the pelletizing plant. page 5, Sustainability targets.
Svappavaara and Malmberget can be fully The MK3 pelletizing plant in Malmberget
utilised. Increased access to raw materials was converted to use natural gas as fuel, 1
Constitutes a group-wide financial target.
2
Also constitutes target for “Attractive LKAB” and
is therefore the single most important fac- an investment of SEK 50 million. Construc-
“Responsible operations” in the sustainability
tor for increased volume and resource- tion of a new quay with a transport system strategy. Monitored and reported quarterly.
efficient production. and shiploader was begun in Narvik.
LKAB faces major challenges due to The nearly SEK 1 billion investment will
delays in the supply of raw materials, reduce the risk of delivery disruptions and
sharply declining iron ore prices and high increase loading capacity from almost 20
fixed costs, of which urban transformation to more than 30 million tonnes per year.
is a weighty item.
38 SAFE AND RESOURCE-EFFICIENT PRODUCTION

LKAB PRODUCTION STRUCTURE techniques and methods that extricate more

ore while decreasing the incorporation of
Mines Dressing Concentration Pelletizing Products Harbours unwanted minerals such as waste rock.
LKAB conducts research on various drilling
and blasting techniques to increase ore
Narvik yield and reduce waste rock dilution. Every
Kiruna
percentage of additional ore that can be
extracted while maintaining or increasing
iron content generates hundreds of millions
of SEK in income annually.

Mine safety
Safety always comes first. Underground
mining requires that safety is guaranteed.
In order to measure how mining affects the
Luleå
rock, we have installed a monitoring system
consisting of 133 geophones in Kiruna and
140 in Malmberget. Measurements, analyses
and inspections form the basis for forecasts
on rock stability and recommendations for
rock reinforcement. Rock reinforcement
LKAB has a production structure that is focused on a high degree of upgrading and high flexibility. More ore from the Gruv- plays a critical role in mine safety and our
berget, Mertainen and Leveäniemi open-pit mines makes it possible to reach maximum capacity utilisation in existing pro-
cessing plants. Increased transport capacity on the Malmbanan railway and a new quay and unloader in Narvik give increased
ability to mine the ore.
capacity as well as higher production flexibility and reduced risk of delivery disruptions. Also essential to efficient, safe mining is
that everyone in the mine can be identified
and positioned in real time. Everyone in
Focus on soft values and close we come to achieving exact product LKAB’s mining areas must wear a badge for
stable processes specifications. Most of the deviations are a radio frequency identification, a so-called
Safe and resource-efficient production is few tenths per mille and have no practical RFID tag. If there is any doubt whatsoever,
based on three strongly linked areas of significance in the customers’ processes. blasting does not occur. The system also
improvement. It involves optimisation of Deviation management is, however, crucial includes all contractors.
machinery and facilities to establish clear to our internal control of accuracy and
structures and processes that are systemat- stability in our own value chain. Logistics are crucial
ically directed towards our business objec- LKAB is a leading logistics company both
tives and increasing employee participation Initiatives against fines generation above and below ground. We account for
and responsibility for efficient, safe working One deviation measured in the Q value that about 35 percent of the freight carried on
practices. A large portion of our quality and affects our own profitability is pellet strength Swedish railways, so we are one of Swe-
efficiency gains are the result of dedicated, and resistance to mechanical impact, so- den’s largest freight companies. Around
motivated employees. called fines generation. two-thirds of deliveries are carried on the
The improvement efforts are guided by Fines generation is when a small amount Malmbanan line to the Port of Narvik and a
our values: Commitment – Innovation – of material from the pellet is abraded third to the Port of Luleå. In the 2000s, we
Responsibility. LKAB’s production managers during transport. The loose material is invested more than SEK 4.5 billion in stock
play a key part as role models who lead sifted away before loading in the shipping capacity at the Port of Narvik and on track
the operational work. This involves clearly ports. What remains is called pellet fines. improvements, new terminals and new ore
communicating tasks and goals, ensuring Although it is a high-quality, sought-after cars and engines.
that the right skills are in the right place, product, its economic value has dropped In 2011 LKAB decided to invest an
working in a structured and standardised and it is priced as fines instead of pellets. additional SEK 1 billion on new IORE engines
manner and making sure that operations High fines generation is therefore bad busi- and cars in order to reach a transport
are run according to plan. ness for LKAB and efforts are being made capacity on the Malmbanan line of 40
in research and development to improve million tonnes per year by 2015. The new ore
Quality value measures our profitability the mechanical strength of pellets. cars were made by local company Kiruna
As part of LKAB’s quality efforts, we have Car. With a new design, load capacity has
been measuring a quality value (Q value) Greater ore yield increased by 25 percent per car.
for all product deliveries since 2000. The Q In order for underground mining to be prof-
value is an internal target value based on a itable, the iron content of the ore must be
number of parameters that measure as high as possible throughout the process.
extremely small deviations and indicate how An important focus for LKAB is developing
 SAFE AND RESOURCE-EFFICIENT PRODUCTION 39

Magnetite pellets best choice LKAB’s MK3 pelletizing plant in Malmberget.

for environment and customers

A report by industry research institute Swerea MEFOS confirms
that LKAB’s magnetite pellets emit less carbon dioxide and use less
energy than other iron ore products throughout the entire supply
chain from mine to finished steel. Energy consumption is reduced by
a total of 1.7 GJ per tonne of hot-rolled steel (HRC) when using mag-
netite pellets as the input raw material in blast furnaces compared
with using sintered hematite fines. That is a reduction in energy
consumption of between five and eight percent. Carbon dioxide
emissions in the blast furnace process are reduced by about 320 kg
per tonne of steel, which is 15 percent compared with sinter.
The difference is also significant between hematite and magnet-
ite pellets. Magnetite pellets reduce energy consumption in the blast
furnace process and reduce carbon emissions from mine to finished
steel compared to hematite pellets.

NEW DRILLING AND BLASTING TECHNIQUES IMPROVE ORE YIELD

An increased ore yield while maintaining involving curved boreholes and new blast-
iron content is crucial to LKAB’s profitability. ing techniques for optimising ore yields in
Each additional percentage point of ore that sublevel caving.
can be extracted in production represents LKAB has the world’s largest under-
many millions in income. Today, the average ground iron ore mines and has long been
yield in sublevel caving underground is the leading developer of new mining tech-
about 85 to 90 percent, so development nology. Externally, we work with Swebrec at
potential is great. Luleå University of Technology and the EU
LKAB performs extensive field tests and project I2Mine, where we collaborate with
analyses of ore fragmentation and collapse other European research institutes, mining
in sublevel caving. Among other things, companies and international
research is being conducted on advanced suppliers in the mining industry.
drilling techniques from LKAB Wassara

DISRUPTIONS IN
THE PRODUCTION CHAIN
The increase in production that, despite everything, was expected
during the year through increased ore yields in the northern circuit,
was thwarted by a series of unfortunate but natural circumstances.
LKAB’s production losses totalled 500,000 tonnes of finished iron
ore products in 2014.
Unusually heavy thunderstorms during the summer periodically
disrupted all mines and concentration plants and forced parts of
our production chain to gear down or shut down completely to
avoid breakdowns. The hoisting systems in Malmberget and Kiruna
also suffered from disruptions, which for Kiruna may be regard-
ed as a natural part of the commissioning of a new main level.
Increased moisture in some of the crude ore resulted in problems
with the concentration and refinement processes.
Ore yard in Kiruna
40 SAFE AND RESOURCE-EFFICIENT PRODUCTION

EMPLOYEES KEY TO
PROCESS OPTIMISATION

LKAB’s profitability and

competitiveness lie in the
hands of our employees

Solution-oriented collaboration and guidance towards a common goal. When operators,

mechanics and hydraulic technicians together took responsibility for keeping the
drilling rig going on level 1051, productivity increased by nearly 100 percent compared
to 2013.

LKAB’s Lean programme for process optimisation is all about streamlining

utilisation of all production and logistics chain resources. It is based on
three important improvement and development areas, where employees
are vitally important if we are to successfully reach our targets.

Cost reductions and efficiency improve- will achieve this through improved internal New requirements
ments entail making better use of our efficiency, reduced energy costs and longer mean new leadership
machinery and facilities and establishing time horizons for planned upgrade and Increased participation and respon-
new procedures for management and development projects. Process optimisa- sibility from employees also requires
control. In order for processes to be safe, tion is one of our most important tools for better and innovative leaders. LKAB’s
stable and predictable, a third important achieving smooth, trouble-free production. management training is mandatory for
resource must also be utilised in the best all new managers, and nearly 30 new
way possible. Successful process opti- Small efforts are highly relevant managers are trained annually at the
misation means that every employee at Employee participation is crucial; of over production, section and department head
LKAB must feel concern and responsibil- 400 suggestions for improvement meas- levels. We work with making our values
ity for the entire value chain and perform ures, almost one hundred were imple- even more clear in our leadership and
at the peak of their ability. We have for- mented in the organisation. Efficiency and with improving the culture for construc-
mulated this in our core values: Commit- quality can increase and waste and losses tive feedback between employees and
ment – Innovation – Responsibility. can decrease through collaboration and managers. We want managers who are
LKAB’s profitability and competitiveness changed working practices. Even small good role models, who can deal with
lie largely in the heads and hands of our efforts have proven to be highly relevant. difficult situations and who are good
employees. A single change in our supplier of grinding leaders. This is achieved because our
wheels meant an annual savings of SEK leaders are present out in the field, they
Focus on cost reduction 700,000. Reduced water consumption in get employees involved and highlight
As we face 2015, our objective is to sig- Malmberget’s pellet production saves SEK good examples, lay the foundation for
nificantly reduce our variable costs. We 400,000 per year. a learning organisation, follow up work
and are good communicators.
 SAFE AND RESOURCE-EFFICIENT PRODUCTION 41

SUSTAINABLE FOCUS ON ENERGY

AND THE ENVIRONMENT
energy facilities. We are also a shareholder
Emptying Leveäniemi
in windpower company VindIn AB as a way
to secure a long-term supply of renewable
electricity. Via VindIn, LKAB has invested in
five wind turbines with a capacity of 10 MW.
So far, LKAB has invested in wind energy
that is expected to generate 40 GWh per
year, equivalent to half of the ore transport
energy needs.

Atmospheric emissions
LKAB’s atmospheric emissions come
mainly from the ore processing plants and
consist mainly of carbon dioxide, nitrogen
oxides, particulates and acid gases such
as sulphur dioxide, hydrogen fluoride and
hydrogen chloride. The particulate sources
in the dressing, concentration and pelletiz-
ing plants are encapsulated and connected
to an exhaust system where the incoming
air is purified before being released into
the atmosphere. Starting in 2012, LKAB
Our ambition is to be an industry role model from a has been investing a total of SEK 1.5 billion
on flue gas treatment and particulate
sustainability perspective. Reduced environmental filtering in the Malmberget and Svappa-
impact and resource utilisation lower our costs and vaara pelletizing plants to meet tougher
EU regulations. This requires considerable
enhance our competitiveness. Our own environmental resources and it takes time to install and
policy often extends beyond current legislation. tune this type of technology in large-scale
iron ore pellet production processes. Flue
gas treatment has been fully implemented
LKAB's environmental impact is regulated tion by 100 GWh per year by increasing in Malmberget, while Svappaavaara is in
and limited by current legislation and efficiency, and we participate in the Swedish phase two. In our opinion, LKAB’s newest
environmental permits. LKAB’s regulatory Energy Agency’s programme for energy and largest production facility, KK4 in Kiru-
authority is the County Administrative Board conservation. We also work actively with na, is the world’s cleanest pelletizing plant
of Norrbotten and in some cases the local trying to find alternative energy sources as well as the only one with treatment of
municipalities. All operations that are sub- that are both environmentally and econom- nitrogen oxide emissions.
ject to permit requirements submit annual ically sustainable. The goal is to phase out
environmental reports, which can be read coal and oil as fuel in the long term and to Reduced dusting
at lkab.com. increase fuel flexibility in production. There are no accepted standards, guide-
Energy efficiency improvements for the lines or corresponding provisions when it
Energy efficiency year included the balling discs in the KK4 comes to dusting in the form of falling par-
LKAB is one of Sweden’s largest single pelletizing plant, as well as fine-tuning of ticulates in Sweden. LKAB’s operations in
consumers of energy and accounts for 1.5 the magnetic separator in the KA4 concen- Svappavaara and Mertainen are, however,
percent of the country’s total electricity tration plant. These efficiency improvements now subject to such provisions.
consumption. Since energy constitutes under the OpEx programme are expected to We regularly check for dusting in our
about 10 percent of our total costs, energy result in energy savings of 73 TJ per year. operating locations by measuring falling
issues are of great strategic importance. particulates at a number of measuring
LKAB has therefore developed a long-term Renewable electricity points. There were fewer complaints
strategy for managing both energy supply We participate, for example, together with about dusting this year than last year.
and energy conservation. other players in the commodities industry
Our target is to reduce energy consump- in the BasEl project, which invests in new
42 SAFE AND RESOURCE-EFFICIENT PRODUCTION

Carbon dioxide emissions choose to work actively with energy- and during the year regarding vibrations in
Most of LKAB’s carbon emissions come carbon-reducing technologies. Narvik. Noise measurements are conduct-
from the production of pellets and from ed annually in all business locations. Steps
transportation. Reduced emissions from Discharges to water to reduce noise were taken in Kiruna and
our own processes is a priority and the Ore processing requires large amounts of Svappavaara in 2013 and 2014. However,
target is to reduce emissions by 20 percent water. LKAB recycles about 75 percent of the noise limits for Kiruna were exceeded.
by 2020. the water used in its mining and refine-
LKAB’s pellet production is already en- ment processes. Excess water is returned Waste and stockpiles
ergy-efficient, with greatly reduced carbon to rivers and lakes. Several waterways Most waste from our operations consists of
emissions in comparison with our compet- that we discharge to are branches of or waste rock, the economic term for all rock
itors. Further reductions in emissions from are included in Natura 2000 areas. LKAB types that are not ore. Waste rock separat-
the processing plants requires alternative conducts rigorous biological and water ed in the dressing process is deposited in
fuels to coal and oil. chemistry evaluations of the water quality stockpiles. In addition to waste rock, LKAB
In 2014, we invested SEK 50 million in as part of our self-inspection process. Oth- handles smaller volumes of waste lime/
a full-scale trial using natural gas in the er water from LKAB’s production processes purification waste, scrap, industrial waste
MK3 pelletizing plant in Malmberget. There is led to the municipal sewer systems for and hazardous waste. Waste lime is waste
treatment. from flue gas treatment and handling it is
highly regulated. The risks identified with
LKAB currently has the Vibrations and noise waste management, in addition to specific
world’s most energy-efficient Iron ore operations cause vibrations and and controlled risks relating to hazardous
noise. Blasting in the mines at night causes waste, are linked to the risk of collapse
pellet production process. vibrations that can be felt by local resdents. when stockpiling.
The target going forward is In underground mining, changes and move-
ments in the rock mass near the mining Remediation
to reduce carbon dioxide areas can be felt in neighbouring parts of LKAB closely monitors the deformation
emissions by 20 percent by the communities. LKAB understands that zones and movements in the rock, mine
2020. these events, though natural in mining op- and landscape and is responsible for
erations, can be experienced as unpleasant. dam safety, remediation, and having the
Information about incurred and anticipated smallest impact on important nature
are also plans to try using biofuel in the events is therefore published regularly at conservation values as possible. Remedi-
Svappavaara pelletizing plant. In order lkab.com. We also encourage interaction ation actions are carried out gradually as
to reduce greenhouse gas emissions, a with and comments from local residents. operations in LKAB’s industrial areas close
trading system for carbon dioxide emis- According to a SIFO survey conducted dur- down. It is all about creating new habitats
sions has been in place within the EU since ing the year, the percentage of respondents similar to the surrounding landscape by
2005. LKAB applied for a free allocation who experienced inconvenience in the form establishing vegetation, stabilising and
of emission allowances for its needs, but of vibrations decreased from 18 to 10 per- decontaminating where necessary. All of
did not receive a full allocation. In order to cent in Kiruna and from 32 to 22 percent in LKAB’s five currently active mines have
reduce global emissions of carbon dioxide Gällivare. Ground vibrations have been per- remediation plans and funds earmarked
our position is that a trading system should ceived as disruptive to local residents when for remediation.
be worldwide to be competitively neutral we empty our silo in the Port of Narvik. A
and should reward those companies that total of 46 cases were presented to LKAB

ENERGY CONSUMPTION
ENERGY CONSUMPTION, LKAB GROUP (GWH)
GWh
OTHER LOCA-
KIRUNA SVAPPAVAARA MALMBERGET LULEÅ NARVIK ORE TRAINS TIONS1 TOTAL

Coal 942 261 0 0 0 0 0 1,203

Diesel oil 22 4 32 0 0 0 8 66
Fuel oil 198 45 417 12 6 0 7 685
Electricity 1,199 222 787 16 41 58 16 2,339
Other types of 8 0 2 4 0 0 7 21
energy
TOTAL 2,369 532 1,238 32 47 58 38 4,314 %
1
Other locations where LKAB operates. Subsidiary LKAB Minerals accounts for most of this. Coal ....................................... 28
Diesel oil.................................2
Fuel oil ................................. 16
Electricity ............................ 54
Other types of energy.........0
 SAFE AND RESOURCE-EFFICIENT PRODUCTION 43

ENERGY CONSUMPTION AND CARBON DIOXIDE EMISSIONS PER TONNE RESOURCE CONSUMPTION, PRODUCTION AND EMISSIONS3
2014 2013 2012 2011 2014 2013 2012 2011 2010

Carbon dioxide, kg/tonne of products 27.01 27.01 26.91 27.21 Mined amounts
27.73 Crude ore (magnetite and hematite) 44.4 44.4 41.9 42.7 42.6
Energy consumption, kWh/tonne of 1632 1672 1652 1602 (Mt)
products 1654 Huntite1 (kt) 25.7 1 1 1 1

1
Refers to Kiruna, Svappavaara and Malmberget, excluding emissions from electricity. Dolomite (kt) 2
101 2 2 2 2
2
Refers to facilities in Kiruna, Svappavaara, Malmberget, Luleå and Narvik, excluding sales of surplus
heat to external users. Minerals sold (Mt) 1.09 0.75 0.76 1.49 1.88
3
Refers to facilities in Kiruna, Svappavaara, Malmberget, Luleå, Narvik and electricity to ore trains,
excluding sales of surplus heat to external users. Input goods
4
Calculation including electricity to ore trains. Also refers to facilities in Luleå and Narvik.
Explosives (kt) 20.1 20.0 19.1 19.4 19.2
Additives4 (kt) 859 878 876 852 866
Concrete produced5 (kt) 391 5 5 5 5

Atmospheric emissions
Particulates (t) 743 1826 1965 1839 1545
Sulphur dioxide (t) 1,143 2,066 1,831 2,026 2,282
Hydrogen fluoride (t) 56 138 202 177 221
Hydrogen chloride (t) 404 479 592 590 682
Nitrogen oxide (t) 4,074 3,797 3,911 4,138 4,187
By-products
Barren rock (Mt) 22.9 25.9 20.6 21.0 14.9
Tailings6 (Mt) 4.8 6.2 5.6 6.46 4.86
Waste lime (Mt) 0.051 0.045 0.041 0.042 0.036
Discharges to water9
Nitrogen (t) 4448 466 443 478 290
Total phosphorus (kg) 6028 364 544 767 640
Discharge of trace metals to water9
Chromium (kg) 6.18 7 7 7 7

Cadmium (kg) 0.58 7 7 7 7

Copper (kg) 22.78 7 7 7 7

Nickel (kg) 119.2 8 7 7 7 7

Lead (kg) 0.2 8 7 7 7 7

Zinc (kg) 81.58 7 7 7 7

Arsenic (kg) 9.48 7 7 7 7

TOTAL Trace metals7 (kg) 2408 235 201 262 154

1
Reported as of 2014; preliminary data will be fixed in April 2015. Huntite was mined in Turkey.
2
Dolomite was mined in Masugnsbyn; reported as of 2014.
3
No significant spills were reported during the year. Significant spills comprise spills reported to regulatory
authorities and involve a risk of harm to people and the environment.
4
Additives, bonding agents, coatings etc. LKAB Minerals is included in the calculations as of 2012.
5
Concrete is reported as of 2014.
6
Data was calculated using another method; not comparable to prior years. Improved measurement
All of LKAB’s active mines have methods in 2014 explain the decrease in tailings.
remediation plans for phased down operations. It is all about 7
Trace metals are reported separately as of 2014.
creating new habitats similar to the surrounding landscape by
8
The amount of overflowing water used to calculate discharges to water in Svappavaara is estimated due
to data loss.
establishing vegetation, stabilising and decontaminating where necessary. 9
Data for Malmberget was corrected retroactively from 2010 when the measurement error in the amount
of overflowing water was detected.

CARBON DIOXIDE EMISSIONS

CARBON DIOXIDE EMISSIONS, LKAB GROUP (KT)
kt
OTHER LOCA-
KIRUNA SVAPPAVAARA MALMBERGET LULEÅ NARVIK ORE TRAINS TIONS1 TOTAL

Coal 313 89 0 0 0 0 0 402

Diesel oil 6 1 8 0 0 0 2 17
Fuel oil 55 12 115 3 2 0 1 188
Electricity 7 1 5 0 0 0 0 13
Other types of 1 0 0 0 0 0 2 3
energy
Additives 79 9 17 0 0 0 0 105 %
Carbon in pellets -8 -2 -3 0 0 0 0 -13 Coal ....................................... 55
TOTAL 453 110 142 3 2 0 5 715 Diesel oil.................................2
Fuel oil ................................. 26
1
Other locations where LKAB operates. Subsidiary LKAB Minerals accounts for most of this.
Electricity ...............................2
Other types of energy.........0
Additives.............................. 15
Total emissions include negative emis-
sions of carbon bonded to pellets (-2%)
44 GROWTH

Exploration drilling in the Gruvberget open-pit mine in Svappavaara.

 GROWTH 45

VOLUME SIGNIFICANCE
In order to be competitive and maintain our market position,
we must grow with our customers and be a significant supplier
in terms of volume. This requires increased production and
delivery capacity where access to ore is the key.

Performance
In the long term, global demand for iron Most of the additional iron ore for LKAB’s in Ironmaking
ore is strong but is affected by and follows growth will come from the three open-pit
prevailing short-term economic cycles. mines in the Svappavaara Field, where the Flexibility
LKAB’s competitiveness and market Gruvberget, Leveäniemi and Mertainen
position depend on us growing with our mines have the potential to produce about Safe and resource-efficient
customers and delivering such volumes 2 million, 12 million and 15 million tonnes production
that our products provide clear added value of ore, respectively. That is at least as much
to our customers. Increased access to ore, ore as the mine in Malmberget produces
Urban trans- Attractive
efficiency improvements and investments today. Growth
formation LKAB
in production and logistics are vital to our
growth. Prospecting for growth Commitment – Innovation – Responsibility
By growing, we can meet increased de- A mining company needs long planning
mand from our customers, while lowering horizons. Good knowledge of the mineral
our costs per tonne produced through reserve is a basic requirement for making
TARGET AREAS
economies of scale. Multi-billion-krona major long-term investment decisions. The
investments have been made to extend the mineral reserve’s size and quality are crit-
lifespan and increase production volumes ical to product quality, production volumes ENSURE NEW ORE RESERVE
of existing underground mines and works. and costs. Therefore, exploration plays a 2015 target: Ensure new ore reserve that
produces for at least 20 years.1
This will make more iron ore raw material crucial role in LKAB’s long-term growth,
available for even greater increases in value creation and competitiveness. 2014 results: Assurance of the ore reserve
volume. A larger LKAB becomes a stronger is going according to plan. Also see the
“Mineral reserves and mineral resources”
LKAB.
section on page 136.

1
Also an objective of “Responsible operations” in
Elin Nilsson and Anders Pounu, LKAB Berg & Betong, the Sustainability strategy. Monitored and reported
work in the Gruvberget open-pit mine. quarterly.
46 GROWTH

The main mission of exploration is to company, local community, reindeer herder an industry role model from an environ-
replace the mined ore bed and ensure iron and tourism industry has grown. Different mental and sustainability perspective,
ore raw material for continued growth, interests impact on each other, but we and we support all of the environmental
equivalent to 20 years of production. believe that this impact can be managed requirements placed on the Group’s oper-
Major challenges are the complexity, time through mutual compromises. Crucial to ations.
scale and uncertainty of the exploration whether we are successful or not is that we One of the biggest challenges faced by
process. It takes on average between seven interact with the surrounding community new mining operations is permit handling.
and ten years to go from exploration to and all stakeholders in a trustful, construc- Receiving permits in a timely manner is
commercial mining. Learn more about tive and respectful manner. critical to our business, and it is impor-
our exploration activities on page 47 and tant to keep up the pace of the permitting
about their organisation on page 57. With responsibility for the environment processes. Therefore, we try individually
Mining operations always have an impact and in consultation with trade organisation
Earning the public’s trust on people and the environment, are encom- SveMin and other players to pursue the
LKAB has conducted successful mining passed by strong legislation and require question of how, for example, the mining
operations for well over a hundred years. permits. Awareness of how mining affects industry as a whole can help the relevant
But we cannot conduct mining operations things like ecosystems, biodiversity, the authorities simplify management and
successfully without regard to the world reindeer herding and tourism industries reduce permit processing times.
around us. Over time, our understanding and local residents are issues that are
of the need for interaction between mining included in our plans. Our ambition is to be

Over time, our understanding

of the need for interaction
between mining company,
local community, reindeer
herder and tourism industry
has grown

The deposit in Mertainen has been known of since 1897 and iron ore
was already being open-pit mined here in the 1950s. The planned mining
operations will impact a 1,220-hectare area and protected species.
 GROWTH 47

MERTAINEN – FROM EXPLORATION

TO FINISHED PRODUCT
Opening a new mine is a complicated, complex and time-consuming order to produce a raw material for pellets
where the silica content is balanced, 70
process. The path from ore deposit to finished, marketable product is
percent of the silica-containing magnetite ore
lined with numerous permit and environmental matters, stakeholder from Mertainen was mixed with 30 percent of
consultations, studies, analyses and various feasibility studies and the apatite-containing magnetite ore from
development projects where many departments within LKAB interact Gruvberget. The pellet recipe was tested in
full scale in our own experimental blast fur-
and work in parallel. nace in the autumn of 2014. The tests present
a pellet with the same high quality as our
The mineral deposit in Mertainen has been tainty of exploration. It may take 10 to 20 existing SPBA blast furnace pellet.
known of since 1897. For a few years in the years from plan to production, and of a large
1950s Swedish government steelworks number of interesting objects, it is likely Approved compensation plan
company NJA mined Mertainen’s iron ore that only a handful of them become ready for nature conservation values
in open-pit mines and LKAB explored in mines. One of the most important missions Mertainen is an area with a high nature
the area. However, it would take until the of exploration is therefore to focus resources conservation value that is also adjacent to
mid-2000s before interest in Mertainen was and quickly determine whether a plan is a protected Natura 2000 area. The planned
re-awakened. financially feasible enough to move forward mining operations and their infrastructure
in the process. and buildings will irrevocably impact a 1,220-
Regulated by Swedish mineral Early knowledge of the quality of a poten- hectare area and protected species such as
and environmental legislation tial ore deposit helps LKAB put resources in Ranunculus lapponicus, Saxifraga hirculus
A permit is required from the government place in a timely manner for deposit and and peregrine falcons.
authority Bergsstaten before a mineral de- product development that suit the condition LKAB has submitted a proposal to the
posit can be examined. A work plan must be of the ore. Knowledge of the geological condi- Land and Environment Court on compensa-
prepared and shared with landowners and tions is therefore an important element in tion for the mining operation’s impact. The
other affected stakeholders for comments strengthening LKAB’s long-term growth and compensation plan is designed according to
and consultation before the authority ap- competitiveness. the guidelines of the Business and Biodiver-
proves the plan. If the deposit is considered sity Offsets Programme. The content and
to be economically attractive Bergsstaten Deposit development in early stage proposed measures were discussed with
can issue an exploitation concession and In collaboration with and parallel to ex- stakeholders such as the Gabna and Laevas
land allocation. This requires preparation ploration, the research and development Sami villages and were approved by the
of an environmental impact statement that department works on developing high-qual- County Administrative Board of Norrbotten.
is approved by the municipality and county ity iron ore products from the new ores. By The plan denotes that 2,600 hectares in Ku-
administrative board along with a permit performing laboratory tests on ore from osajänkkä north of Mertainen will be restored
as per the Environmental Code from the core samples early in the process and later and protected from all exploitation.
Land and Environment Court. Throughout in pilot scale from test mining, different The need for a management plan and
the entire exploration and test mining product recipes can be tested and the step to nature conservation compensation is deter-
process, permit decisions by authorities can a productive mine is shortened. This provides mined by the scope, sensitivity, protection
be appealed, which provides greater legal a quick and valuable indication of the quality status, local community diversity benefit, cul-
certainty but can also significantly delay a and the products that can be expected from tural relevance, number of protected species
mining project. the new deposit. and various aspects of risk. Currently, Mer-
The ore in Mertainen has a relatively high tainen is the only area that meets the criteria
Few projects profitable silica content. During the test phase the iron for a protection plan, and site remediation
Other major challenges faced in opening ore concentrate was purified with a new type and restoration work in Kuosajänkkä got up
new mines are time scales and the uncer- of flotation reagent with excellent results. In to full speed in late 2014.

2008 2010 2011 2012 2013 2014 2015

Timeline for Mertainen

EXPLORATION Deposit Deposit Feasibility study, Feasibility Production-scale Preliminary

identification evaluation laboratory-scale study, pilot- test study, test in
ENVIRONMENTAL MATTERS test scale test experimental
Drilling blast Test
programme, Drilling programme, Main court proceed- mining
RESEARCH AND Compilation new block model Environmental furnace
of existing new block Consultation, ings, environmental 240 kt,
DEVELOPMENT extended applica- permit application, permit
materials, field model new block
tion, test mining appeals
work and drilling Environmental Drilling pro- Mining model
programmes approved
impact statement gramme and compensa-
and exploration Drilling programme and tion plan gets
application test mining, 300 kt green light
48 GROWTH

It is important that LKAB’s growth occurs in

cooperation and agreement with the affected
Sami villages.

Conflicting interests can cooperate

Reindeer herding is a central part of the Sami culture and an im- The goal is to achieve consensus
portant industry in the region. It is therefore important that LKAB’s In 2014, LKAB signed cooperation agreements with two Sami villag-
growth occurs in cooperation and agreement with the affected es in Kiruna to ensure good conditions for both reindeer herding and
Sami villages. For example, reindeer overpasses called ecoducts LKAB’s growth in the Svappavaara Field. In Ylipääsnjaska, southwest
are being built over certain roads and railways. LKAB and the Sami of Svappavaara, there is disagreement between LKAB and another
villages also run a project on GPS marking of reindeer that facili- Sami village regarding prospecting and exploration drilling in the
tates the gathering and moving of reindeer herds. The importance area. Discussions and consultations have been going on for some
of collaboration between LKAB and the reindeer industry is more time between LKAB, the County Administrative Board and the Sami
relevant than ever, now that communities are being transformed village in order to reach an agreement.
and new mines are being planned.

OPEN-PIT MINE IN LEVEÄNIEMI COMES BACK TO LIFE

The Leveäniemi mine is an ore deposit just over 40 km south east of Kiruna where mining was done
from 1961 to 1983. When the open-pit mine was closed it was filled with water. Now Leveäniemi is about
to be reborn as one of LKAB’s new open-pit mines in the old mining community of Svappavaara. LKAB
was granted permission by the County Administrative Board of Norrbotten back in 2012 to drain the
open-pit mine of water, and draining was completed in 2014 after just over 30 million cubic metres of
water was pumped out. The County Administrative Board gave LKAB permission in 2014 to test mine
600,000 tonnes of ore. We are now waiting for the final permit from the Land and Environment Court
to mine up to 15 million tonnes of iron ore per year.

LKAB IS PART OF A KNOWLEDGE LARGE DEPOSITS OF IRON ORE

AND INNOVATION COMMUNITY IN SVAPPAVAARA
The EU is investing in making Europe a global leader in innovation, New exploration discoveries have been secured in the
and LKAB has been invited together with other selected partners Leveäniemi mine and Gruvberget. This entails a total of 100
to form a Knowledge and Innovation Community. The investment million tonnes of new ore, which is sufficient to keep production
is an initiative of the European Institute of Innovation and Technol- going for more than 20 years. Both deposits are within LKAB’s
ogy, and its mission is to establish long-term sustainable mining growth area in Svappavaara, 40 kilometres south of Kiruna.
production through collaboration in order to secure the region’s Total investment in the Svappavaara Field’s three new mines is
access to minerals and metals. estimated at SEK 10 billion.
 URBAN TRANSFORMATION 49

DEVELOPMENT PRIOR TO DECONSTRUCTION

LKAB’s continued mining operations and growth are dependent
on central parts of Kiruna and Malmberget gradually being moved.
In consultation with the local municipalities and a large number
of stakeholders, we are working to ensure a feeling of security and
confidence in the process. The ambition is to let development precede
deconstruction. Together, we are building attractive communities
where people want to live and work today and tomorrow.

Performance
in Ironmaking

Flexibility

Safe and resource-efficient

production

Urban trans- Attractive

Growth
formation LKAB

Commitment – Innovation – Responsibility

TARGET AREAS

URBAN TRANSFORMATION
IN GENERAL
2015 target: LKAB will build 200 new
housing units each in Kiruna and Gällivare
Municipalities by 2015 compared with
The so-called Captain’s Pit in Malmberget that 2011.1
resulted from LKAB’s underground mining.

2014 results: The accumulated number

Urban transformation in Kiruna and tions unique are the magnitude and times- of flats built by the end of the year was
178. Planning for additional housing con-
Malmberget is a consequence of mining ex- cale. A total of about 5,000 housing units
tinues. Three areas have been affected by
pansion and the orebodies’ positions. When and 700,000 square feet of residential and housing moves during the year: Western
mining is done at great depths it affects commercial premises will be replaced be- Malmberget, Svappavaara and Ullspiran in
people and communities. We are commit- cause of the impact of mining operations Kiruna. In total, 141 households moved to
ted to propelling developments forward as on the communities. By the end of 2018, new housing during the year.
cautiously as possible, in consultation with the area defined as Kiruna’s first Mine
1
Also an objective of “Attractive Communities” in
the municipalities and all stakeholders. City Park area (GP1), Gruvstadsparken,
the Sustainability strategy. Monitored and reported
Although the urban transformation will have been completely converted into quarterly.
process is extensive in several respects, it a park. If not, there is a risk that iron ore
is not unique in itself. Similar projects have production in the Kiruna mine will come to
occurred and are occurring in other places a halt, which is an unthinkable scenario.
around the world as well. Read more about Gearing up the urban transformation
urban transformation internationally on in both Kiruna and Gällivare is necessary
page 53. for LKAB’s development and is completely
However, what makes current urban according to plan.
transformation in LKAB’s operating loca-
50 URBAN TRANSFORMATION

Only by working together can we

build communities where we give
as much thought to life between
the buildings as we do to the
buildings themselves

Linus Niva, property negotiator, talking with one of

Kiruna’s largest tenant-owner associations.
 URBAN TRANSFORMATION 51

Mine and community side by side

LKAB is dependent on viable, attractive
communities to remain competitive and
to attract talented employees. In turn,
the communities are dependent on us
as an employer and investor. As a mining
company, we have great social and so-
cio-economic responsibility for handling all
issues and challenges that arise from urban
transformation. We also depend on the
trust, understanding and acceptance of local
residents. Pia Lindholm, LKAB, and Christer Vinsa, the
Municipality of Kiruna, symbolically break the
first ground for Kiruna’s new City Hall.
Major investments required
Without more iron ore raw material from
the underground mines, for example, LKAB services and infrastructure completed and for SEK 1,200 million and Malmberget for
loses its competitiveness, profitability and under construction before we responsibly SEK 2,232 million. That is a sharp increase
ability to meet customer demand. It is phase out the former dwellings. over previous years.
crucial to LKAB’s competitiveness and the We want to help make the new commu-
continued development of the communities nities that emerge to become attractive Communication is vital
in which we operate that we succeed in our places with beautiful environments, a good LKAB’s engagement in our operating loca-
urban transformation efforts in cooperation housing and labour market, and a rich va- tions has historically been characterised
with the municipalities involved – at the riety of entertainment, culture, sports and by good relationships. The great challenge
right time, at the right price and with mutual recreation. We also want to assist in finding of urban transformation is not moving
understanding. multiple solutions to the housing issue in cities, it is rather meeting each individual’s
We ask much of the people who have to agreement with residents. LKAB has an questions, uncertainty and in some cases
relocate and we will always do the right ongoing dialogue with the municipalities, concern, with respect. The most common
thing, but with a reasonable financial impact property owners, administrators and con- issues are when the individual will be affect-
on the Group. Costs should not risk our struction companies on the development ed, where the person will be going and how
ability to continue to invest and create jobs of land areas for the production of new the move will be handled. It is often difficult
for continued growth. We planned for the housing. We are also looking for construc- to provide simple, straightforward answers
costs of urban transformation a long time tive solutions for industrial and commercial to those directly affected because of the
ago. They include settlement of claims properties together with the companies. complexity of the process, and it is especial-
for the impact that the mines have on the External dialogues will continue in 2015 ly complicated to provide facts during work
communities and an investment in contin- while LKAB works internally with invento- in progress where not all circumstances are
ued mining operations to increase volume rying needs for replacement dwellings and known. Transparency, accessibility and an
and income. At the same time, it is a large premises. ongoing dialogue are therefore crucial if we
expenditure that encumbers our earnings. are to have the opportunity to make agree-
Changed forecasts for the deformations A strong growth region ments and retain the trust of those around
that mining brings show a slower expansion Norrbotten has enjoyed strong economic us. That is why we hold many different
in Kiruna. That gives us more time for devel- growth over the past ten years. The catalyst channels open for meetings and dialogues.
opment before phase-out, which is positive of this growth is LKAB. We have made sig- We provide information on our website,
for both the communities and LKAB. nificant investments in facilities, infrastruc- distribute the magazine “LKAB Future” to all
ture and new mines in the last decade and households in the mining communities, have
Interaction and confidence will continue to invest heavily in the coming information offices in all operating locations
Urban transformation is a challenge for years to meet demand for our iron ore. and hold regular meetings and information
everyone involved: LKAB, municipalities, Through these investments we are a strong sessions.
landowners, businesses, authorities and driving force for the economy, generating But that is not enough. We also want to
especially the residents. It is important to jobs and positive social development, have an active dialogue with those who do
listen to the affected people’s mixed feelings not only in our operating locations but not read LKAB Future, visit our website or
about the fact that they have to pack up and throughout northernmost Sweden and Arc- attend information meetings. By seeking
move from their homes. LKAB aims to make tic Scandinavia. That means big business out and meeting people individually and in
every possible effort to facilitate the transi- opportunities for contractors and suppliers small groups, we get the chance to discuss
tion for the people who are directly affected when the new Kiruna and Gällivare are personal issues. We also take the initiative
by urban transformation. That will require being built up. to inform and engage in dialogues in other
close cooperation and open dialogues along In 2014, costs for urban transformation forums such as trade fairs and conferences,
with strong mutual trust. One important provisions in the affected areas totalled as well as in contacts with journalists to
aspect is that there should be new housing, SEK 3,432 million, of which Kiruna stood reach out to the general public.
52 URBAN TRANSFORMATION

CONTRACT CONCLUDED
TOGETHER, WE ARE
TAKING THE NEXT STEP IN
KIRUNA’S DEVELOPMENT
In June 2014 LKAB and the Municipality of
Kiruna concluded a contract that settles
compensation for new construction when
the city is moved. The agreement gives new
impetus to the urban transformation pro-
cess, and in September ground was broken
in what will be Kiruna’s new city centre –
completely in line with LKAB’s ambition to “We have a good agreement in place,” says Kristina Zakris-
son, Kiruna’s municipal commissioner. “Now we can build a
put development before phase-out. Kiruna that is smarter, more efficient and more sustainable.”
The Municipality of Kiruna can now build
a new city, which is a unique opportunity.
Schools, the city hall and other locales operating costs, which is favourable for quality and volume in the new Kiruna. The
for municipal operations are being built municipal operations. agreement not only drives urban trans-
according to new standards and using The agreement is for SEK 3.74 billion formation forward, it enables LKAB to
modern technology. This provides good in compensation from LKAB for municipal continue mining the iron ore that slopes in
opportunities for more energy-efficient and infrastructure, land and property in the under Kiruna’s present location, something
customised buildings that are built to fit current city centre, which will cover the that will secure jobs in the mine and the
current needs. The ambition is to reduce costs of building equivalent functionality, community’s growth for years to come.

At the right time, at the right price and with mutual understanding
LKAB is responsible for ensuring that urban transformation occurs at the right time according to the existing main timetables as mutually
agreed upon with the municipalities. This implies in turn that the company manages to make agreements with all property owners and other
stakeholders in the areas affected by continued mining. One of the main missions of LKAB’s urban transformation organisation is therefore to
acquire properties located in areas that need to be utilised to ensure mining operations. Together with the municipalities and other players,
we must also ensure new residential and commercial buildings. LKAB will therefore take on a new role in the urban transformation process.
We plan to take the initiative and take control of more new builds, both to find cost-effective solutions and to secure access to new proper-
ties. In this way we can increase the pace of transformation, meet the individual property owners’ requirements for functionality and also
gain greater control over costs. This means, for example, that LKAB will procure new construction. It is also crucial that more players want
to build in the mining communities in order to increase cost-effectiveness. The goal is for urban transformation to be sustainable in the long
term, that is, acceptable to all stakeholders during the period that LKAB currently can predict that urban transformation will last. A new role
helps our prospects for ensuring that transformation takes place at the right time, with the right quality and at a reasonable cost. Our aim is
to reduce the risk of delays and cost overruns by getting involved in the planning and commissioning of new buildings.

READY FOR MALMBERGET’S CONTINUED STRONG CONFIDENCE

97%
TRANSFORMATION Each year, LKAB examines how the residents of
On 5 May, the Supreme Administrative Court an- Kiruna and Gällivare perceive and have confidence
nounced that the cooperation agreement between in our ability to take responsibility for urban trans-
LKAB and the Municipality of Gällivare is valid, thus formation. In the year’s SIFO survey, 500 people
confirming the Administrative Court of Appeal’s were interviewed in our operating locations. The OF GÄLLIVARE RESIDENTS BELIEVE
THAT LKAB ADDS GREAT VALUE
earlier ruling. As the agreement became legally results show that about 8 out of 10 have first-hand
TO THEIR MUNICIPALITY
binding, LKAB paid out SEK 430 million to the Mu- knowledge of urban transformation and confidence
nicipality of Gällivare as part of the urban transfor- in LKAB remains high. In Kiruna just over 8 out of 10, and in Gällivare almost 9 out
mation process. In four stages until 2032, Western of 10, have great or very great confidence in LKAB. More than 9 out of 10 people in
Malmberget will be phased out, and in dialogues both operating locations also accept the urban transformation regardless of their
with the municipality, work is underway to jointly own personal attitude on the issue. Almost everyone perceives that LKAB adds great
find a good solution for Eastern Malmberget. value to their own municipality.
 URBAN TRANSFORMATION 53

AN INTERNATIONAL PERSPECTIVE
A sustainable community is emerging in a beautiful, wintery Kiruna.

In 2014, LKAB began a collaboration with the international SUSTAINABLE

COMMUNITIES EMERGING
experts at RePlan, who have years of experience with urban
As a result of urban transformation,
transformation for the mining industry. We interviewed their 5,000 new housing units need to be

urban planner Graeme Burt, who visited LKAB’s operations built in the mining communities. In
Kiruna alone, a new commercial city
several times in the last year. centre, 3,000 flats, 200 detached
houses and 200,000 square metres of
public buildings will be erected. And
on 4 September 2014, ground was
Graeme sees urban trans- case is that urban transformation in Kiruna is broken for the new City Hall.
formation as a prerequisite about moving an entire city centre. Something
for LKAB’s future success, that is unusual, especially in developed coun-
just as it is for most mining tries. In this case, moreover, a century-old beau-
companies around the tiful city. It is expensive, places great demands
world. RePlan is currently on collaboration and an ability to meet the many
working on urban trans- needs of stakeholders, according to Graeme.
formation projects related In RePlan’s experience, successful urban
to mining operations in 15 transformation is primarily about engagement
GRAEME BURT
countries, including Canada, at both societal and individual levels. The mining
Among other things, LKAB Fastigheter
the US, Greece, Albania, Turkey and a number of company must have a good relationship and
built 30 new flats in the Glaciären resi-
Latin American and African countries. Through communicate clearly with both. Trust is built by dential area in Kiruna last autumn.
this partnership, LKAB has access to international being engaged, constantly keeping the commu-
practices based on extensive experience. nity and its individuals informed and creating
Often when reading about LKAB’s urban forums for dialogues. Something that RePlan
transformation, it is described as unique and believes that LKAB has been very successful
something that has never been done before. Our with so far.
cooperation with RePlan has provided a new per- LKAB’s vision for community planning is
spective and insight that this type of project is not developing before phasing out, that is, taking
as unusual as one might first think. Internationally, more time to prepare new areas before having
there are many experiences and much knowledge to empty existing ones. The purpose is to build
The five newly built wooden houses
that LKAB can and should learn from. Although no trust, generate enthusiasm and give people a have six flats in each of the buildings
two cases are alike, many of the challenges and picture of the new community that will emerge. spread over two floors, for a total of
lessons are the same. The uniqueness of LKAB’s 30 family flats, of which 10 have three
bedrooms and 20 have two.
54 URBAN TRANSFORMATION

LKAB Fastigheter is building new prefabricated

houses in the Glaciären residential area in Kiruna.

NEW HOUSING GENERATES POSITIVE

MOBILITY IN THE HOUSING MARKET
Urban transformation in Kiruna and Malmberget is under
way in earnest. In particular, increased housing construc-
tion means a wider variety of homes of varying standards
and cost levels. This in turn creates more choice and
greater mobility in the housing market.

It is the goal of LKAB and the municipalities that development procede deconstruction
in urban transformation. For many years, a key issue has been getting housing con-
struction started to increase the range of options. As contracts are concluded with the
municipalities, construction investments in our operating locations are beginning to gain
momentum.

More options
In Kiruna, 30 flats in the Glaciären area and 46 flats in the Jägarskolan area were ready
for occupancy in 2014. Construction of at least 150 flats in the Luossavaara area is
MILESTONES IN 2014 FOR THE MUNICI- expected to begin within the next few years. In Gällivare, 30 flats in the Granbacka area
PALITIES OF KIRUNA AND GÄLLIVARE were also ready for occupancy during the year. In addition, there was a strategic deci-
sion made for the construction of an additional 200 new flats in Gällivare. LKAB acquired
Kiruna/Svappavaara land in the Repisvaara area for housing construction, while other options are also being
evaluated.
• LKAB finances the Swedish Transport Administra-
tion’s initial construction of Road 870 (May)
All in all, the housing situation is starting to lighten at LKAB’s operating locations,
even though the need is still great for new construction. More housing means that the
• Land acquired enabling start-up in Mertainen
residents of the mining communities will have more choices as both new and older
(May)
houses and flats become available. Even when it comes to commercial properties, one
• LKAB signs contract with the Municipality of of LKAB’s goals is for there to be alternatives and personalised solutions.
Kiruna,, the so-called GP2 Agreement (June)
• Occupancy of 46 new flats in New construction is attractive
Jägarskolan area (September)
The ability to upgrade to new, modern housing is attractive to many. There has largely
• Ground-breaking for City Hall in Kiruna’s new city been no new housing construction in the mining communities for the last 20–30 years.
centre (September) One person who chose to move was Rickard Hannu from Kiruna. He sold his one-bed-
• Occupancy of 30 new flats in the Glaciären area room flat and moved into a new rental in the Jägarskolan area. It is bright, with
(December) an open floor plan, wood parquet throughout the flat, a washer and dryer and a large
balcony and patio. There is even a sauna in the 82-square-metre two-bedroom flat.
Gällivare/Malmberget “It feels like a small terraced house,” says Rickard. “I’ll be staying here a long time.”
• Occupancy of 30 new flats in The family-friendly flats in the Granbacka area in Gällivare, with their proximity to a day
Granbacka area (May) nursery and school as well as green spaces and shopping, were highly sought after. The
• Cooperation agreement with the Municipality of open house in March was well attended and the first tenants moved in 1 May. All flats
Gällivare becomes legally binding (May) were rented out almost immediately.
• LKAB acquires land in the Repisvaara area for
housing construction (October) The future is troubling
But the idea of moving is not entirely positive to everyone. Björn Hansson lives in the
Johannesområdet area in Western Malmberget with his dog Cookie. Björn really enjoys
having nature on his doorstep and his spectacular views of Malmberget, Gällivare and
the Aitik mine far off in the distance. But the area will be affected by LKAB’s mining and,
sooner or later, Björn and Cookie will have to move.
 ATTRACTIVE LKAB 55

ATTRACT AND RETAIN EXPERTISE

LKAB’s success depends on the skills and dedication of
our employees. To be an attractive employer, we have to
offer stimulating career opportunities and safe work-
places. We must also help the communities in which we
are located to be attractive places to live.

Performance
Innovative technology, efficiency improve- Focus on internal mobility in Ironmaking
ments and new knowledge requirements In recent years, LKAB has recruited exten-
have fundamentally changed the way we sively and we still have a great need for Flexibility
produce our iron ore products. The breadth expertise in order to achieve our long-term
of expertise needed to operate the world’s growth targets. Meanwhile, the market situ- Safe and resource-efficient
production
largest and most modern underground ation in 2014 has put pressure on profita-
iron ore mines as well as our production bility. This means that going forward LKAB
facilities and logistics is vast. LKAB has will focus even more on internal mobility Urban trans- Attractive
Growth
over 180 specialists in various professional and better resource utilisation. During the formation LKAB
categories – from carpenters, economists second half of the year we reduced recruit-
and machine operators to IT technicians, ment of new staff and introduced a hiring Commitment – Innovation – Responsibility
rockwork technicians and research engi- freeze in February 2015.
neers. Internal mobility and continuing profes-
sional development within the Group is im- TARGET AREAS
Competency management portant for retaining the right skills. In the
and attractiveness long term, educational investments are key PROPORTION OF WOMEN
Our future competitiveness and growth is to securing LKAB’s own human resources, 2015 target: The proportion of women at
based largely on our ability to attract and and schools are also the foundation of an LKAB will be at least 25 percent by 2020.1
retain the right skills through exciting pro- attractive community. We work closely with 2014 results: The proportion of women
fessional challenges, broad career paths schools such as Luleå University of Tech- in the company is 19.4 percent and the
and personal development. That is why nology and continue to be actively involved proportion of female managers is 19.9 per
cent. The annual target for proportion of
we attach great importance to improving in the local compulsory and secondary
women was achieved and the proportion
and developing working conditions, health schools, which include the LKAB upper of women in management positions contin-
and safety, and to prioritising equality and secondary school and the LKAB Academy ues to rise.
diversity. foundation.
QUALIFIED RECRUITS
At the same time, we can offer some-
Commitment, innovation and 2015 target: There should be competition
thing that few other mining companies
responsibility – for a stronger LKAB among qualified candidates for all adver-
are able to: a unique place to live in one tised positions.1
of the world’s most beautiful regions. Our focus on continuous improvement
2014 results: There were at least two
Besides the magnificent wilderness with makes LKAB a company that can ensure
qualified candidates in 96 percent of
its polar nights and midnight sun, there are job opportunities in the long term. Efficien- recruitments in 2014. The target of
vibrant communities with a wide range of cy, health and safety are improved through reaching 97 percent could therefore not
entertainment, culture, sports and outdoor process optimisation when we focus on be fully met.
activities. There are plenty of jobs and a doing things right instead of working faster.
LONG-TERM SICK LEAVE
strong economy alongside the mining oper- Our production targets and an enjoyable
2015 target: Long-term sick leave should
ations, substantial investments in schools and accident-free work environment are
continue to be less than 0.8 percent.1
and education, and a good quality of life for directly linked to each employee’s commit-
2014 results: Long-term sick
our employees and their families. ment and accountability. When everyone
leave continues to be low and stood
takes responsibility, production is more at 0.4 percent (0.5).
stable with fewer disruptions.
1
Also an objectives of “Attractive LKAB” in the
Sustainability strategy. Monitored and reported
quarterly.
56 ATTRACTIVE LKAB

Our values lead the way values, Commitment – Innovation – Re- Continuing professional development
For 125 years, LKAB’s corporate culture sponsibility, and internationally recognised Each of LKAB’s employees is responsible
has been distinguished by committed em- declarations and conventions. These for their own performance, developing
ployees who, responsibly and with great include the UN Global Compact’s ten their skills and the company on an ongo-
openness and pride, work for the Group’s principles, the principles of the document ing basis. By clarifying employees’ own
best, internally as well as with customers, Children’s Rights and Business Principles, roles linked to expectations and strategic
suppliers, owners, the general public and the OECD Guidelines for Multinational goals, we cultivate knowledge, safety and
authorities. LKAB’s ambition is to set an in- Enterprises and the UN Guiding Principles commitment. Our focus on more efficient
ternational example for the mining industry for Business and Human Rights. The new and safer work processes in an educa-
in terms of ethics, health and safety, equal- Code of Conduct is available in Swedish, tional and accountable organisation also
ity and diversity, and today our core values Norwegian and English. In order for LKAB requires a new kind of modern leadership.
and Code of Conduct are the cornerstones to take greater responsibility throughout The objective is to train all new managers
of our business strategy. the value chain a new code of conduct for for a flexible and personal leadership style
A new Code of Conduct for LKAB was our suppliers was also introduced in 2014. based on our values.
adopted by the Board in late 2013. The Read more on page 34.
Code of Conduct is based on our company

Our Code of Conduct

provides guidance on
how to act ethically and
in accordance with our
values

LKAB’s ambition is to set an

international example in the mining industry
– for ethics, health and safety, equality and diversity.
 ATTRACTIVE LKAB 57

DIVERSITY LKAB’s exploration department test drills near the so-called wolf pit in Kiruna.
The work is supervised by ore bed developer Hakan Selldén, geologist Kirsten Holme
and exploration manager Per-Olov Fjällborg.

ENRICHES
A prerequisite for reaching LKAB’s growth
target is to ensure the supply of iron ore
raw materials through the development of
existing deposits and the discovery and de-
velopment of new ones. Specialist expertise
in geology and geophysics is strategically
important to LKAB, and there is tough com-
petition for skilled workers internationally.

Setting an example
for equality and diversity
The exploration department has grown These highly qualified employees come as an attractive employer internationally
rapidly over the last three years and from six different countries and nearly half and that LKAB can successfully compete
consists of more than 30 geologists with of them are women. with other companies for highly skilled
varying backgrounds and nationalities. labour.
This makes exploration a good example Internationally competitive
of LKAB’s objective to be a company that LKAB’s successful exploration department
promotes equality and diversity. recruitments show that LKAB is perceived

IMAGE OF NEW Petra Åhl left the flatlands of Skåne for the rolling landscape
and open expanses of Gällivare.

GÄLLIVARE
ATTRACTED PETRA
After twenty years in Skåne, Petra Åhl
returned home to Gällivare almost a year
and a half ago. Her friends and acquaint-
ances down south could not believe it at
first. When the shock subsided, the ironic
and playful taunts began to flow in the form
of YouTube clips that cultivated the myth of
the empty, barren northern landscape.
“Sure, they were right to some extent,”
says Petra, laughing. “There’s a lot of
land here and not so many people. But here
I have all the space I need for my running
and riding hobbies. Living here is a quality-
of-life issue for me.”
When Petra left Gällivare she was
driven by the urge and desire to see
something different. But over time it was but with automation and high technology. Today I live in a vibrant, expansive region,
homesickness that became the driving With support and help from her have a great job and can also have the
force. Very much due to the positive signals prospective employer Petra could move active leisure time I always dreamed of
she received that something was going on back home to a job as the head of research in this stunning countryside that really
where she once grew up. A new image of and development at LKAB, thereby coming inspires me.”
Gällivare emerged and LKAB was no longer full circle.
synonymous with a hammer and chisel job, “It was a long move, but it was easy.
58 ATTRACTIVE LKAB

NORWAY
PERMANENT EMPLOYEES BY REGION
237
SWEDEN TURKEY

4,123
ENGLAND

35
COUNTRY EMPLOYEES

203
ASIA

57
Sweden 4,123
Norway 237
England 203
Asia 57
Turkey 35
Netherlands 30
Germany 13
USA 6
Belgium 3
Finland 3
France 3
Greece 1
Slovakia 1
Spain 1
Total 4,716

The total number of employees (average), including part-time and fixed-term employees, was 4,539. At year-end, LKAB had 4,361 permanent employees, of whom 1,527 were white-collar
employees and 3,189 were blue-collar employees. There were 48 part-time employees and 355 fixed-term employees. There are options available for full-time and part-time employment for
employees with small children. All LKAB employees in Sweden and Norway are covered by collective agreements, with the exception of Group management.

The 2014 winners of LKAB’s health and safety award were Emelie Herrlin, LKAB MOST ATTRACTIVE
safety officer, and Micael Andersson, production manager. The dressing and
concentration plant operations in Malmberget have not had a single work INDUSTRIAL COMPANY
accident with absence since 2010.
LKAB has recruited heavily in recent years.
Safeguarding our employees’ health and safety,
professional development opportunities and living
situations is essential to LKAB’s future and to its
ability to retain expertise and recruit new talent.
In Universum’s survey “Sweden’s Best Employ-
ers”, employees rate their employers and
LKAB landed in fifth place in the category “Major
employers”, at the top among industrial companies.
This is an acknowledgment that LKAB is an attrac-
tive employer that cares about its employees.

SWEDEN’S BEST EMPLOYERS 2014

1. King reklambyrå
2. Netlight
3. H&M
4. Svensk Fastighetsförmedling

MEASURING THE LINK BETWEEN 5. LKAB

HEALTH AND WORK ENVIRONMENT

LKAB regularly charts workplace health and safety to prevent illness and injury.
Through employee health check-ups, we investigate whether there is a link between
health and work environment.
As part of our prevention efforts, everyone with line management responsibility
receives training on substance abuse and employees are offered rehabilitation if
necessary.
LKAB also offers training and educational opportunities in health and lifestyle
to facilitate and encourage good lifestyle choices among employees.
 ATTRACTIVE LKAB 59

MORE WOMEN AT LKAB NUMBER OF WOMEN AT LKAB

The number of women and female managers at LKAB has Number
risen steadily. One of our sustainability targets is that the 1,000
proportion of women should amount to 25 percent in the
Group by 2020. The proportion of women at LKAB was 19.4 800

percent and the proportion of female managers was 19.9

600
per cent at year-end. This is an improvement of 1.3 and 0.1
percentage points, respectively, over last year. 400

200

SAFETY FIRST! 0

05

06

07

08

09

10

11

12

13

14
20

20

20

20

20

20

20

20

20

20
We are pursuing a systematic effort to bolster our safety culture with the “Safety
First!” programme. The programme aims to create safe workplaces where everyone
contributes to a good safety culture. One of the biggest challenges in terms of PROPORTION OF WOMEN AT LKAB
safety is people’s attitude. It is important that new employees understand how highly Proportion of female managers Proportion of women
we prioritise safety as soon as they start working. Therefore, employees as well %
as contractors and subcontractors undergo approved safety training before being 25
allowed access to LKAB’s industrial area.
The trend for accidents at LKAB is positive and they are slowly declining. In 2014, 20
the decline was limited and the target for the year could not be reached. The accident
rate was 7.6 accidents with absence per million hours worked where the target was 15

no more than 6. The most common causes of sick leave due to accidents remain un-
10
dramatic and are a matter of sprained ankles due to slipping, tripping and missteps
along with accidents related to manipulation of tools or materials. 5

REPORTED INCIDENTS AND RISKS 0

Thord Edman, Kiruna mine

05

06

07

08

09

10

11

12

13

14
Incidents Risks
20

20

20

20

20

20

20

20

20

20
Number
10,000
ACCIDENTS WITH ABSENCE, LKAB GROUP
8,000
Number Number 2014 Frequency/million hours worked
6,000 Number Frequency/million hours worked

4,000 100 20

2,000 80 16

0
60 12
05

06

07

08

09

10

11

12

13

14
20

20

20

20

20

20

20

20

20

20

40 8

ZERO TOLERANCE FOR CORRUPTION 20 4

For LKAB, business ethics means showing respect for the people and places around 0 0

5
us. We strive for long-term business relationships founded on trust and the mutual
05

06

07

08

09

10

11

12

13

14
20

20

20

20

20

20

20

20

20

20

creation of value. That is why we have zero tolerance and work actively to fight all
forms of corruption, including extortion and bribery. So far, three quarters of em-
ployees in our purchasing organisation have attended a five-day training course on
corruption, supplier auditing and human rights. About 500 other employees have re-
ceived raining on our Code of Conduct, which includes an anticorruption component.

Seven incidents registered

Seven cases of corruption were discovered at LKAB in 2014. In two of the cases, both
LKAB employees and contracted suppliers were involved. In one case the contract
with the supplier was terminated and in the other case the supplier’s contract was
suspended for one year. The consequences for the LKAB employees were a written DISCRIMINATION CASES
warning and that one person terminated employment. Other incidents mainly had to WERE REPORTED DURING THE YEAR, OF
do with improper accounting of working hours and generated five written warnings WHICH ONE WAS RESOLVED AND
on reassignment. FOUR CONTINUE TO BE FOLLOWED UP
60 ATTRACTIVE LKAB

LKAB INVESTS IN LATEST TECHNOLOGY IN

EDUCATION OF YOUNG PEOPLE

MALMBERGET
A donation of SEK 1 million from
LKAB Academy to the Industry Pro-
gramme at Välkommaskolan School
in Malmberget enabled them to
invest in a CNC milling machine.
“Our objective is for the school to
be one of the best in Sweden,” says
Bert-Olov Ström, head of the upper
secondary school. “But we have no
financial resources to do that. That’s
why we are incredibly grateful to
LKAB Academy for giving us a head
start. The students now have the
very latest in computer-controlled
machining.”
Andreas Eriksson, a teacher at the
school, is also very supportive of the
investment.
“It’s a dream come true to have
a machine of this calibre. The invest-
ment takes our instruction to a new
level in a collaboration between the
school and industry.”

SUMMER SCHOOL FOR ACTIVE,

INQUISITIVE YOUNG PEOPLE
One of LKAB’s most popular activi-
ties during the year was its summer
school. For four days, young people
David Wettainen, Tommy Ekhorn and William Larsson aged 11–13 tried their hands at
build robots at the space school in Kiruna.
climbing, kayaking, fishing and
crawling in caves. Everything started
off from LKAB’s cabin in Björkliden,
LKAB Academy is a foundation that provides financial just over 100 kilometres west of
Kiruna.
support to preschools, day-care facilities, compulsory LKAB’s summer school has been
schools and upper secondary schools in the Swedish held every year since 2007. Partici-
pation is free and went on for three
mining communities and Narvik. weeks in 2014.
“It was so exciting to show the
LKAB Academy supports educational to strengthen children’s and youngsters’
children of Kiruna and Gällivare
development projects in upper secondary interest in science and technology. Stu-
our beautiful mountains, see them
schools in order to help bolster interest in dents, teaching staff and head teachers can challenge themselves and practice
science and technology while developing submit applications. working together on the activities we
the communities in which LKAB is active. To date, over 100 school projects in the had on the programme,” says Margit
The aim of the project is to develop the mining communities have received support. Andersson Wälimaa, who has led the
skills of teachers and students and to LKAB Academy has supported things such summer school for several years.
hopefully help the overall development of as the purchase of microscopes, a CNC ma- “You have to remember that it’s not
the schools. chine, a lathe and technology boxes, study a given that everyone who lives up
Preschools and compulsory schools may days and a weather balloon experiment. here knows the mountains.”
also apply for funding with the intention
OUR GOVERNANCE
AND CONTROL 4
62 CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE REPORT

CORPORATE GOVERNANCE STRUCTURE
LKAB’s shareholder, the Swedish government, is ultimately responsible for making decisions on corporate governance. At the Annual
General Meeting, the shareholder appoints Board members, the Chairman of the Board and the auditor. The Board is responsible to the
owner for the company’s organisation and the administration of its affairs. The diagram below summarises how governance and control
are organised at LKAB. The company functions are described in more detail on pages 63–65 of the Corporate Governance Report.

BOARD ANNUAL GENERAL MEETING

2 NOMINATIONS 1 STATE-OWNED COMPANY 3 AUDITOR

4 BOARD OF DIRECTORS

REMUNERATION
5 COMMITTEE 6 FINANCE COMMITTEE 7 AUDIT COMMITTEE

Elects/Appoints
8 PRESIDENT AND CEO
Informs/Reports to

1 ANNUAL GENERAL MEETING 4 BOARD OF DIRECTORS

The AGM is LKAB’s highest decision-making body and the forum at The Board of Directors is responsible for the company’s organisa-
which the shareholder formally exercises its influence. At the AGM, tion and manages the company’s affairs on behalf of the owner. The
decisions are made that include adoption of the income statement work of the Board includes continuously monitoring the company’s
and balance sheet, discharge from liability of the Board, election of financial situation and ensuring that the company is organised so that
new Board members and a new auditor, the remuneration of Board accounting, asset management and the company’s financial circum-
members and the auditor and guidelines for the remuneration of stances are otherwise controlled in a satisfactory manner. The Board
senior executives. also appoints the President.
Members of the Riksdag are entitled to attend LKAB’s AGM. The
meeting is also open to the public. 5 REMUNERATION COMMITTEE
The committee prepares decisions on the President’s terms of
2 BOARD NOMINATIONS employment and supports the President’s work on determining the
LKAB does not have a nomination committee. The preparation of salaries of senior executives. The committee also works with succes-
decisions on the nomination of Board members instead takes place sion planning.
through a Board nomination process in accordance with the state’s
ownership policy. The work is coordinated by the Ministry of Enter- 6 FINANCE COMMITTEE
prise, Energy and Communications. The committee prepares and monitors compliance with the compa-
See deviations from Code rules on page 63. ny’s finance policy, including the company’s liquidity management,
borrowings and hedging programmes for currency (USD), electricity
3 AUDITOR prices and iron ore prices.
The auditor is responsible to the shareholder at the AGM and
provides an audit report on the Annual Report and the Board’s 7 AUDIT COMMITTEE
administration of the company. The committee oversees financial reporting by reviewing all critical
The auditors regularly report verbally and in writing to the Audit accounting matters and other factors that could affect the quality of
Committee on how the audit was conducted and on the auditor’s financial reporting content.
assessment of order and control at the company. A summary of the
annual audit is also submitted to the full Board. 8 PRESIDENT
The President is appointed by the Board of Directors. Besides
instructions from the Board, the President is subject to the Swedish
Companies Act and various other laws and regulations relating to the
company’s accounting, asset management and operational control.
 CORPORATE GOVERNANCE REPORT 63

GOVERNING POLICIES, GUIDELINES AND REGULATIONS

The basis for corporate governance at LKAB is Swedish legislation, the Swedish Corporate Governance Code (the Code), the
state’s ownership policy and internal control documents.
In the state’s ownership policy and guidelines for state-owned companies, which are determined annually, the gov-
ernment describes its mission and objectives, applicable frameworks and its position on important principles related to
corporate governance at state-owned companies (see www.government.se).
LKAB’s values are Commitment, Innovation, Responsibility. These values and the company’s Code of Conduct form the
basis for how each person within the Group should act towards internal and external stakeholders. LKAB's business must
be characterised by high levels of business ethics and integrity.
The Group has a number of policies in place, which have been adopted by the Board:

• Code of Conduct
• Quality policy
• Environment and energy policy
• Work environment policy
• Staff policy
• Finance policy
• Information policy

LKAB’s values and policies are described in more detail at www.lkab.com.

The Code forms part of the state’s ownership policy. LKAB’s governance for the 2014 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 this rule is to give shareholders the opportunity to prepare
Publication of information on for the AGM in a timely manner and to have a matter included in the AGM
shareholder’s right of initiative. notice. At state-owned companies it is not necessary for this rule to be applied,
and there is no publication of information on the shareholder’s right
of initiative.

ITEM 1.4 Due to its ownership structure, LKAB does not have a nomination
The company’s nomination committee committee. The Chairman is instead elected at the AGM as per the provisions
shall submit proposals to the Chairman of the Swedish Companies Act and in line with the state’s ownership policy.
at the AGM.

ITEM 2 Due to its ownership structure, LKAB does not have a nomination committee.
The company shall have a nomination The Board nomination process follows the policies outlined in the state’s
committee that represents the compa- ownership policy and is coordinated by the Ministry of Enterprise, Energy and
ny’s shareholders. Communications.
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.

ITEM 10.2 The provision is aimed primarily at protecting non-controlling shareholders in

The Corporate Governance Report shall companies with dispersed ownership. In companies that are wholly owned by
contain information that indicates Board the state, it is not necessary to apply this rule.
members are independent of major
shareholders.
64 CORPORATE GOVERNANCE REPORT

SHAREHOLDERS AND the company’s operations, situation and future challenges. Consid-
ANNUAL GENERAL MEETING eration is also given to the need for qualifications with regard to
sustainability issues. In order to be considered for a Board position,
SHAREHOLDERS a person must have a high level of expertise relevant to current
LKAB is wholly owned by the Swedish Government, represented in business operations, business development, industry expertise,
the government by the Ministry of Enterprise and Innovation. financial issues or other relevant areas. They must also have a high
The government exercises its ownership via an annually estab- level of integrity and the ability to act in the best interests of the
lished ownership policy, nominations to the Board and published company.
reporting guidelines. The government’s requirement for trans-
parency is fulfilled by direct owner representation on the Board. AUDITOR
Reports to the owner are key management tools for the continu- On behalf of the owner, the auditor independently reviews the
ous monitoring and assessment of the companies. State-owned management of the Board and President, as well as the company’s
companies should have at least the same level of transparency as Annual Report and accounts. They also carry out a review of an in-
listed companies. terim report. The election of auditor is decided at the AGM. Auditors
The Board, via the Chairman, coordinates its views on issues of of state-owned companies are appointed for a term of one year.
decisive importance with the owner’s representatives. Such issues In the event that re-election of the auditor is being considered, the
include strategic changes to the company’s operations, major auditor’s work is always evaluated by the owner.
acquisitions, mergers or disposals, as well as decisions affecting At the Annual General Meeting on 29 April 2014, Deloitte AB was
significant changes to the company’s risk profile or balance sheet. re-elected auditor for a period of one year. Authorized Public Ac-
countant Peter Ekberg is the chief auditor. The remuneration of the
ANNUAL GENERAL MEETING 2014 auditor is specified in Note 7 on page 112 of the Annual Report.
LKAB’s Annual General Meeting took place on 29 April 2014 in
Luleå. The meeting was open to the public, who were given the
opportunity to ask questions of the Board and management. The BOARD OF DIRECTORS
AGM was attended by about 100 people. The owner was repre-
sented by Erik Tranaeus, expert advisor at the Ministry of Finance. COMPOSITION AND DIVISION OF
Chairman of the meeting was Board Chairman Marcus Wallenberg. DUTIES OF THE BOARD OF DIRECTORS
The following decisions were made at the meeting: LKAB’s Articles of Association state that the company’s Board of
• A dividend of SEK 5,000 per share, representing a total of SEK Directors shall consist of no fewer than six and no more than elev-
3.5 billion. en AGM-elected members, excluding deputies. The Board consists
• Re-election of Board members Hans Biörck, Maija-Liisa Friman, of seven AGM-elected members. Employees are represented by
Lars-Åke Helgesson, Sten Jakobsson, Hanna Lagercrantz, three members and three deputies in accordance with the Board
Maud Olofsson and Lars Pettersson. Representation (Private Sector Employees) Act. Board members
• Election of Sten Jakobsson as Chairman of the Board. have broad and extensive business experience and most maintain
• Remuneration of SEK 570,000 to the Chairman of the Board other duties as Board members of large companies. The Board’s
and SEK 250,000 to the other Board members elected at the composition is shown in the table on page 68–69.
AGM. Remuneration is not paid to Board members who are The Board annually establishes rules of procedure for the Board,
employed at the Government Offices nor to employee repre- instructions to the President and instructions for financial report-
sentatives. ing. These documents define the basic divisions of responsibility
• Re-election of the registered public accounting firm Deloitte AB and powers between the Board, Board committees, the Chairman
as auditor for a period of one year. and the President.
• Guidelines for remuneration and other terms of employment
for senior executives. CHAIRMAN OF THE BOARD
• Amendment to section 6 of the Articles of Association indicating The duties of the Chairman are subject to the Swedish Companies
that if the Chairman of the Board leaves his/her position during Act, the Code and the ownership policy. They are further specified
the mandate period, the Board shall elect a Chairman inter- in the Board’s rules of procedure. The Chairman’s duties include or-
nally for the period until the end of the next AGM, when a new ganising and leading the work of the Board, ensuring that the Board
Chairman will be elected. fulfils its duties and that its decisions are implemented effectively,
The minutes of the 2014 AGM and other recent years are available and that the Board evaluates its own work annually.
on LKAB’s website, www.lkab.com. Coordination responsibility is a special task assigned to the
chairpersons of state-owned companies. This responsibility means
BOARD NOMINATIONS that the Board, through the Chairman, must coordinate its views
Instead of having a nomination committee, the election of Board with representatives of the owner when the company faces impor-
members is prepared in accordance with the state’s ownership tant decisions or strategic changes to the company’s operation.
policy. The work is coordinated by the Ministry of Enterprise and
Innovation. LKAB’s expertise requirements are analysed based on
 CORPORATE GOVERNANCE REPORT 65

THE WORK OF THE BOARD OF DIRECTORS IN 2014 Finance Committee

During the year, the Board held 12 meetings, including five The Finance Committee has four members: Hans Biörck, Chairman,
telephone meetings and one constituent Board meeting. The meet- Lars-Åke Helgesson, Hanna Lagercrantz and Stefan Fagerkull. The
ings were held at the operating sites in Luleå, Kiruna, Malmberget President, CFO and company treasurer also attend the meetings.
and Narvik, as well as in Stockholm. The Board decided not to take The Finance Committee’s duties include preparing and moni-
a Board trip in 2014. The meetings follow a set agenda to ensure toring LKAB’s liquidity management and borrowing. In 2014 the
the Board’s information needs are met. The first meeting is usually Finance Committee worked with matters such as an update of
an annual accounts session attended by the auditor. At this meet- LKAB’s finance policy, Group financing that entails a new credit
ing, the Board deliberates with the company’s auditor without the facility, a corporate bond programme (MTN) and a commercial
presence of the President or others from executive management. papers programme. The Finance Committee also follows LKAB’s
The Annual Report is discussed at the second Board meeting. The hedging activities and exposure to currency (USD), iron ore prices
third to seventh meetings are devoted to matters such as operation- and electricity prices.
al, strategic and personnel issues, as well as market trends. At the The Committee held five meetings during the year.
last Board meeting of the year, decisions are made on budgets and
operational plans for the coming year. Remuneration Committee
LKAB’s sustainability strategy and Code of Conduct are the bases The Remuneration Committee has four members: Sten Jakobsson,
for work on sustainable development. The sustainability strategy Chairman, Lars-Åke Helgesson, Hanna Lagercrantz and Tomas
and sustainability goals were established by the Board in accord- Strömberg. The Senior Vice President of Human Resources also
ance with the owner’s requirements. Monitoring of sustainability attends the meetings. The Remuneration Committee’s duties
objectives are reported quarterly to the Board and owner. include preparing and evaluating remuneration terms for the Pres-
Board activities in 2014 were characterised by the growth phase ident, establishing salary structure policies for members of Group
that LKAB finds itself in, with the aim of opening three new open-pit management and annually evaluating the company’s employee
mines in Svappavaara and the ongoing cost-effectiveness pro- incentive programme. In 2014, the Committee also worked with
gramme. During the year the Board adopted an updated strategic LKAB’s succession planning and talent management programmes
plan, a revised finance policy, environmental and energy policies in order to ensure that key positions within the company can be
and a new health and safety policy. Other important issues on the filled by competent employees in the future.
Board’s agenda in 2014 were urban transformation and Group fi- During the course of the year, the Remuneration Committee held
nancing, entailing decisions on a corporate bond programme (MTN) four meetings.
and a commercial papers programme.
Deputies to employee representatives participate in Board ASSESSMENT
meetings. The President is not a Board member, but participates
in Board meetings. Board member attendance at 2014 Board and Assessment of the Board of Directors
committee meetings is shown in the table on page 68–69. The Board’s work is assessed once a year with questions on how
the Board as a whole and the Board members individually fulfil
COMMITTEES their duties. The assessment is used in the Board’s internal work.
According to the state’s ownership policy, it is the Board’s respon- The Chairman is responsible for following up the results so that
sibility to assess the need for establishing special committees. they can form a basis for discussions and improvements. The 2014
LKAB’s Board has established an Audit Committee, a Finance Com- assessment was done with the help of an external consulting firm
mittee, and a Remuneration Committee. Committee work is mainly that conducted a survey and individual interviews with each mem-
of a preparatory and advisory nature. However, in special cases the ber of the Board. The results and analysis of the assessment were
Board may delegate decision-making powers to committees. Com- presented to the entire Board as well as to the President, as appro-
mittee members and chairpersons are appointed at the constituent priate. The Chairman of the Board notifies the owner of the results
Board meeting that follows the AGM each year. of the assessment before the election of new Board members.

Audit Committee Assessment of the President

The Audit Committee has four members: Lars-Åke Helgesson, The assessment of the President is a fundamental task of the
Chairman, Hanna Lagercrantz, Hans Biörck and Stefan Fagerkull. Board of Directors. The Chairman prepares a summary of the
The President and the CFO also attend the meetings. The Audit Board’s views that conveys strengths and weaknesses to the Board
Committee’s duties include monitoring the company’s accounting, as well as the President.
financial reporting and risk management, along with preparing
the Board’s proposed appropriation of profits for the fiscal year. In
2014, the Committee also worked with a variety of issues related to
urban transformation in Kiruna and Malmberget, LKAB’s invest-
ment programme and the company’s long-term financial plan.
During the course of the year, the Audit Committee held seven
meetings.
66 CORPORATE GOVERNANCE REPORT

REMUNERATION POLICIES
GUIDELINES GROUP MANAGEMENT AND GROUP
The 2014 AGM decided on remuneration levels for Board mem- MANAGEMENT STRUCTURE
bers and auditors and guidelines for the remuneration of senior LKAB’s business is conducted to a very large extent within the
executives. For the remuneration of Group management, the AGM parent company.
decided that the government’s currently applicable guidelines Group management consists of the President and nine unit
regarding employment terms for senior executives at state-owned managers who work within the parent company. They are the unit
companies are to be applied. Total remuneration is based on fixed managers for Mining & Logistics, Marketing, Technology & Business
remuneration, benefits and pension. No variable remuneration is Development, Research & Development, Energy & Climate, Sustain-
paid to senior executives in Group management. able Development, Finance, Human Resources and Communica-
Note 6 on pages 110–112 of the Annual Report describes the tions.
remuneration of senior executives. In 2014, the following changes in the chain of command were
made:
INCENTIVE PROGRAMME AND OBJECTIVES The Research & Development Unit was formed, moving its oper-
LKAB’s incentive programme for Group employees is designed ations from the Technology & Business Development Unit.
to support the Group’s strategic objectives for production vol- The Finance and Group Control Units were merged into one unit.
ume, health and safety, product quality and production cost. The The Purchasing, Data & IT and Legal Affairs Units were separated
incentive programme is described on page 86 of the Administration from the former Finance Unit and are now included as part of a
Report. staff function reporting directly to the President.
LKAB appointed a Chief Risk Officer (CRO) in 2014 within the
REMUNERATION TO THE BOARD OF DIRECTORS Finance Unit in order to strengthen risk management. The duties of
As resolved at the AGM, the remuneration of AGM-elected Board the CRO are to work with the organisation to identify, monitor and
members totalled SEK 2,050 thousand; see Note 6 on pages report the critical risks that may affect LKAB’s ability to achieve
110–112 for the cost for the year. overall financial and sustainability objectives. In 2014, the sales
office in Singapore was closed and a new office in Dubai was es-
tablished to be in proximity to customers in the MENA region.
LKAB’S MANAGEMENT Governance of the major subsidiaries is through Group manage-
ment members who chair the subsidiaries’ boards. The subsidi-
PRESIDENT aries run their businesses independently in accordance with the
The President’s general responsibilities are stated in the Presi- company’s mission in the Group as formulated in the Articles of
dent’s instructions and the Board’s rules of procedure. These state Association.
that the President’s duties include: Responsibility and authority are assigned to individual execu-
• Leading, planning, developing and controlling the company's tives, rather than groups and committees.
operations in accordance with the Board’s established objec- Information about the President and Group management is
tives and strategies. provided on pages 70–71.
• Ensuring that the company’s accounts are maintained in
compliance with the law and that assets are managed in a
satisfactory manner. INTERNAL CONTROL
• Ensuring that other applicable statutory regulations and OVER FINANCIAL REPORTING
directives are also followed, that the Board’s decisions and
other applicable resolved measures are enforced, and that the The Board’s responsibility for internal governance and control is
company’s operations are appropriately organised and run in regulated by the Swedish Companies Act, Annual Accounts Act and
accordance with the Articles of Association. Code of Corporate Governance. The Board has overall respon-
• Being responsible for presentation and other reporting to the sibility for financial reporting, and its rules of procedure govern
Board. the internal division of duties of the Board and Audit Committee.
• Establishing instructions and function descriptions that are After preparation by the Audit Committee, quality assurance of
deemed necessary, but that were not established by the Board. the company’s financial reporting is handled by the Board, which
• Being responsible for all the company’s regular contact with deals with significant accounting issues and the financial reports
the media. The Chairman is responsible for media contact issued by the company. The Board also deals with issues relating
regarding ownership issues and major structural issues. to internal control, compliance, material uncertainty in carrying
• Being responsible for the induction programme for newly amounts, uncorrected errors, events after the end of the report-
appointed Board members. ing period, changes to estimates and assessments, any identified
The Chairman approves the President’s duties outside the company irregularities and other circumstances that affect the quality of the
as they arise. financial reports.
 CORPORATE GOVERNANCE REPORT 67

CONTROL ENVIRONMENT rules and guidelines in place with regard to accessibility, accuracy,
LKAB’s internal control structure is based on a defined division confidentiality and traceability in the resource planning system.
of responsibilities between the Board, Board committees and the
President. The internal control structure is also based on the com- INFORMATION AND COMMUNICATION
pany’s organisation and the way business is conducted, including LKAB has information and communication channels that promote
well-defined roles and responsibilities, delegation of powers, completeness and accuracy in financial reporting. Comprehensive
steering documents such as policies, and clearly defined planning information about current control structures is available to all em-
and support processes. ployees via LKAB’s intranet. The aim is to regularly review changes
The most important elements of the control environment and the reasoning behind existing controls and to improve them in
concerning financial reporting, including the preparation of the order to maintain effective internal control over financial reporting.
consolidated accounts, are dealt with in Group-wide steering docu- In connection with the review of the control structure, responsibility
ments relating to accounting, financial transactions and regulation is also identified for ensuring that the control structure is in place,
of division of authority. The purpose of Group-wide guidelines and is known and that controls are carried out as intended.
systems for reporting and consolidation of the Group accounts is LKAB’s guidelines for financial reporting and the consolidated
to safeguard the financial reporting and ensure the accuracy of the accounts are updated regularly. Changes are communicated to
consolidated accounts. relevant functions and operations via e-mail, the intranet and at
meetings.
RISK ASSESSMENT There is an information policy for communication with external
LKAB is governed by procedures that have risk management built parties that specifies guidelines for how information should be
into every process. The Group has methods for ensuring that the presented. The purpose of the policy is to ensure that all infor-
risks the company is exposed to are handled according to guide- mation obligations are met in an accurate and complete manner.
lines and methods in order to both assess and mitigate these risks. External financial communications are issued through Annual
As part of the internal governance and control, risks related Reports, interim reports, annual accounts, press releases and via
to financial reporting are identified. Risk analyses are conducted www.lkab.com.
for the most important processes, and where risks are identified,
procedures are established to manage and minimise them. FOLLOW-UP
A number of higher risk areas were identified with regard to the Alone, or with the support of external resources, the Group-wide
financial reporting, such as in relation to accounting and tax issues controller function conducts audit activities relating to the business
linked to urban transformation and the large number of planned processes that are deemed to have a material impact on financial
and ongoing capital expenditure projects. Other more general risks reporting.
are loss or misappropriation of assets and other significant errors A plan for internal control activities is prepared annually by the
in the company’s reporting, such as accounting and measurement Group-wide controller function. In 2014 focus was on monitoring
of balance sheet items, completeness of income statement items prioritised internal processes, including the effectiveness of invest-
or deviations from disclosure requirements. ment projects as well as management and valuation of finished
product inventory.
CONTROL ACTIVITIES The internal reviews in 2014 were mostly carried out in collab-
Key elements of LKAB’s control structure are control of business oration with external independent auditors, where the focus was
transaction approvals (authorisation instructions), division of defined on the basis of a risk assessment for each separate review.
authority descriptions and annual accounts instructions. There The results of the completed reviews were summarised in review
are also specifically established controls regarding the annual reports and feedback was given to the operations concerned.
accounts process and the processes for interim results and the Compliance with measures specified following the completion
Annual Report that deal with more unique risks of errors that may of reviews is followed up regularly by the Group-wide controller
occur in the financial reporting. function.
The Group’s legal entities that conduct business have financial
managers, while reporting units have controllers. They are involved INTERNAL AUDIT
in the forecasting and analysis of earnings at subsidiaries and the The structure for monitoring the internal controls that currently
reporting entities. These analyses cover assets, liabilities, income, exist at LKAB are considered to fulfil the requirements of the Board,
expenses and cash flows. There are also designated controller so no separate internal audit function has been established. The
resources that monitor, analyse, make forecasts, and examine decision on internal audits is reconsidered annually by the Board.
specific issues relating to the financial information for urban
transformation and strategic capital expenditure projects. LKAB Luleå, 20 March 2015
uses a Group-wide consolidation system for the preparation of its
consolidated accounts, where the companies’ CFOs/controllers are The Board of Directors, through the Chairman
responsible for the accuracy of the financial information reported
(outcome, budget and forecasts). Together with the comprehensive
analysis performed at the Group level, the aim is to limit the risk of
material misstatements in the financial reporting.
In order to maintain a high level of information security, there are sten jakobsson
68 THE BOARD OF DIRECTORS

BOARD OF
STEN JAKOBSSON
position: Director
education: MSc Engineering
year elected: 2012, Chairman since 2014

DIRECTORS born: 1949

other directorships: Chairman of the Board of Power
Wind Partners AB. Board Member of Saab AB, Stena
Metall AB, FLSmidth A/S and Xylem Inc.
background: President and CEO at ABB Sweden, Deputy
CEO at Asea Brown Boveri AB Sweden, Business Area
Manager for Business Area Cables, CEO at ABB Cables
AB, CEO at Asea Cylinda, Production Manager at Asea
Low Voltage Division, Asea central staff – Production,
Asea trainee.
remuneration: SEK 465,670 1
board meeting attendance:
Attended 12 of 12 meetings
remuneration committee attendance:
Attended 4 of 4 meetings

1
Appointed Chairman of the Board after the 2014 AGM

HANS BIÖRCK MAIJA-LIISA FRIMAN

position: Advisor to Skanska AB position: Director
education: MSc Business and Economics education: MSc Chemical Engineering, Helsinki
year elected: 2012 University of Technology
born: 1951 year elected: 2008
other directorships: Chairman of the Board of born: 1952
Crescit Asset Management AB. Board Member other directorships: Chairman of the Board
of Trelleborg AB, Bonnier Finans AB, Dunkerska of Ekokem Oy and Helsinki Deaconess Institute.
Stiftelserna and Bure Equity AB. Deputy Chairman at Neste Oil Oyj. Board Member at
background: CFO at Skanska AB, CFO at Autoliv Finnair Oyj and Talvivaara Mining Company Plc.
Inc., CFO at Esselte AB. background: President at Aspocomp Group Oyj
remuneration: SEK 310,000 2004–2007, CEO at Vattenfall Oy 2000–2004, CEO
at Gyproc Oy 1993–2000, various management
board meeting attendance:
positions at Kemira Oyj in Finland, Mexico and the
Attended 11 of 12 meetings
US 1978–1993.
audit committee attendance:
remuneration: SEK 250,000
Attended 7 of 7 meetings
board meeting attendance:
finance committee attendance:
Attended 9 of 12 meetings
Attended 5 of 5 meetings

LARS-ÅKE HELGESSON HANNA LAGERCRANTZ

position: Director position: Deputy Director, Ministry of Enterprise and
education: Stanford Business School (SEP), USA. Innovation
MBA, School of Economics, Gothenburg. Graduate education: MSc Business and Economics, Stockholm
engineer. School of Economics, MPhil Economics, Cambridge
year elected: 2000 University, UK
born: 1941 year elected: 2010
other directorships: Chairman of the Board of born: 1970
Translink Holding AB. Board Member of Ballingslöv other directorships: Board Member of Svenska
International AB, Axel Christiernsson International Rymdaktiebolaget and Fouriertransform AB
AB and Crane Inc., Dalton, MA, USA. Background: Swedish Government Offices since
background: President and CEO of Stora 1992–1998, 2008, Market Analyst and Investor Relations at SEB
Division Manager at Stora 1988–1992, President and 1999–2008, Corporate Finance at S.G. Warburg, UBS
CEO at Haldex 1981–1988. Brunswick Warburg 1994–1998.
remuneration: SEK 330,000 remuneration: SEK 0
board meeting attendance: board meeting attendance:
Attended 11 of 12 meetings Attended 11 of 12 meetings
audit committee attendance: audit committee attendance: Attended 7 of 7 meetings
Attended 7 of 7 meetings finance committee attendance:
finance committee attendance: Attended 5 of 5 meetings
Attended 4 of 5 meetings Remuneration Committee attendance:
Remuneration Committee attendance: Attended 4 of 4 meetings
Attended 4 of 4 meetings

MAUD OLOFSSON LARS PETTERSSON

position: Former Deputy Prime Minister, Minister position: Director
of Enterprise and leader of the Centre Party Education: MSc Engineering Physics
education: Secondary education year elected: 2013
year elected: 2012 born: 1954
born: 1955 other directorships: Board Member of Lund-
other directorships: Board Member of Arise AB, bergföretagen AB, PMC Group AB, Indutrade AB,
Diös Fastigheter AB, ÅF AB and Envac AB. Chair- Uppsala University, Husqvarna AB. Chairman of the
man of the Board of Visita. Board of KP Komponent A/S.
background: Deputy Prime Minister 2006–2010, background: President and CEO at Sandvik AB
Minister for Enterprise and Energy 2006–2011, 2002-2011, CEO at Sandvik Materials Technology,
Head of the Centre Party 2001–2011, Member of 2000–2002, CEO at Sandvik Tooling, 1998–2000,
Parliament 2002–2011, CEO of Hushållningssäll- CEO at Sandvik Coromant 1994–1998.
skapet in Västerbotten 1997–2001, EU Coordinator remuneration: SEK 250,000
for Västerbotten County Administrative Board, Poli-
board meeting attendance:
tical Adviser to Ministry of Employment 1992–1994,
Attended 11 of 12 meetings
Ombudsman for Centre Party and Centre Party
Youth League in Norrbotten 1974–1981.
remuneration: SEK 250,000
board meeting attendance:
Attended 8 of 12 meetings
 THE BOARD OF DIRECTORS 69

THE BOARD’S
STEFAN FAGERKULL / FULL MEMBER
position: Project manager
education: Engineer, Mining and Civil Engineering,
Bergsskolan, Filipstad

EMPLOYEE
year elected: 2011
born: 1963
other directorships: Member of Leaders Club
in Kiruna

REPRESENTATIVES, background: Employee at LKAB 1987–1989 and

since 1995. Studies and UN service 1989–1995.
remuneration: SEK 0
board meeting attendance:

FULL/DEPUTIES Attended 12 of 12 meetings

audit committee attendance:
Attended 4 of 7 meetings 1
finance committee attendance:
Attended 2 of 5 meetings 2

1, 2
Assumed directorship after the 2014 AGM

TOMAS STRÖMBERG / FULL MEMBER JAN THELIN / FULL MEMBER

position: Ore developer position: Welder
education: Secondary education education: Trained international welding specialist
year elected: 2011 year elected: 2010
born: 1967 born: 1955
other directorships: Deputy Chairman of the other directorships: Chairman of the Gruv 12:an
Gruv 4:an Club, IF Metall Malmfälten. Club Kiruna, IF Metall Malmfälten. Board Member
Background: Employee at LKAB since 1987. at LKAB Fastigheter AB.
remuneration: SEK 0 background: Employee at LKAB 1974-1977 and
since 1995. Employed by various engineering firms
board meeting attendance:
1977–1995.
Attended 10 of 12 meetings
remuneration: SEK 0
remuneration Committee attendance:
Attended 4 of 4 meetings board meeting attendance:
Attended 7 of 12 meetings

DAN HALLBERG / DEPUTY BERTIL LARSSON / DEPUTY

position: Unit manager, R&D, Reduction Metallurgy position: Ore harbour worker
education: BSc Chemical Technology, Luleå Univer- education: Secondary education
sity of Technology year elected: 2010
year elected: 2014 born: 1955
born: 1965 other directorships: Chairman of the Svartösta-
other directorships: Board Member of Unionen’s den Club, IF Metall Norrbotten
Club for Luleå and Malmberget, PRISMA (Centre for background: Employee at LKAB 1974-1996 and
Process Integration in Steelmaking) and PROMOTE since 1999. Employed by Dynalite 1996–1999.
(Centre for Management of Innovation and Techno-
remuneration: SEK 0
logy in the Process Industry)
board meeting attendance:
background: Employee at LKAB since 1990
Attended 11 of 12 meetings
remuneration: SEK 0
board meeting attendance:
Attended 5 of 12 meetings 1

1
Assumed directorship after the 2014 AGM.

PENTTI RAHKONEN / DEPUTY

position: Process operator
education: Secondary education
year elected: 2010
born: 1965 AUDITOR
other directorships: Chairman of the Gruv 135:an
Club, IF Metall Malmfälten. Board Member of the Deloitte AB
Mine Workers Industry Forum. Peter Ekberg
background: Employee at LKAB since 1987
Authorised Public Accountant
remuneration: SEK 0
board meeting attendance:
Attended 12 of 12 meetings SECRETARY

Malin Sundvall
Legal Director, LKAB
Secretary of the Board since 2008
70 GROUP MANAGEMENT

GROUP
LARS-ERIC AARO
position: President and CEO 1
education: MSc Mining Engineering, Luleå Univer-
sity of Technology, 1982

MANAGEMENT
year employed: 2001
born: 1956
other engagement: Chairman of the Board at
SKGS, Deputy Chairman at SweMin. Member of the
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.
remuneration: See Note 6 on pages 110–112

1
Neither the CEO nor any natural person or legal
entity related to him has significant shareholdings
or partnerships in companies with which LKAB has
substantial business relationships.

KATARINA HOLMGREN ANDERS KITOK

position: Senior Vice President, Finance 1 position: Senior Vice President, Energy & Climate
education: MSc Business and Economics, Luleå education: MSc Mechanical Engineering, Luleå
University of Technology, 1986 University of Technology, 1982
year employed: 2010 year employed: 1985
born: 1963 born: 1957
background: Kårhuset i Luleå AB 1985–1986, other engagements: Board Member at Progress-
Swedish Tax Agency 1987–1997, Luleå University um AB, Vindin AB
of Technology 1997–2003, LKAB 2003–2007, background: Ericsson 1983–1985
Polarbröd 2007–2010.
remuneration: See Note 6 on pages 110–112
remuneration: See Note 6 on pages 110–112

1
Senior Vice President, Group Control until 1 June
2014, appointed Acting Senior Vice President,
Finance 1 June 2014, appointed Senior Vice Presi-
dent, Finance 15 February 2015.

ANDERS FURBECK FRANK HOJEM

position: Senior Vice President, Sustainability position: Senior Vice President, Communication
education: MSc Business and Economics, School education: Journalist, Poppius School of Journa-
of Economics, Gothenburg, 1985 lism, Stockholm, 2003. Executive education, IFL
year employed: 1985 Stockholm School of Economics, 2013.
born: 1957 year employed: 2012
remuneration: See Note 6 on pages 110–112 born: 1984
other engagements: Board Member at Teknikens
Hus
background: Stiftelsen Sverige i Europa 2003,
Sweden’s Parliament 2005–2006, Swedish Govern-
ment Offices 2006–2011.
remuneration: See Note 6 on pages 110–112

MARKUS PETÄJÄNIEMI GRETE SOLVANG STOLTZ

position: Senior Vice President, Production & position: Senior Vice President, Human Resources
Logistics education: MSc Economics, Luleå University of
education: MSc Urban Planning and Environmental Technology, 1993
Engineering, Luleå University of Technology, 1985 year employed: 2009
year employed: 2005 born: 1970
born: 1959 other engagements: Chairman of the Board at
background: NAB 1985–1988, Kiruna Värmeverk Career Center, Luleå University of Technology.
1988–1995, De-Icing Systems 1995–1996, Sema/ Board Member at SweMin.
Schlumberger/Atos Origin/WMData 1996–2005. background: LKAB 1993–1995, SCA 1995–2008,
remuneration: See Note 6 on pages 110–112 Northland Resources 2008–2009.
remuneration: See Note 6 on ppages 110–112
 GROUP MANAGEMENT 71

PER-ERIK LINDVALL MONICA BELLGRAN

position: Senior Vice President, Technology & position: Senior Vice President, Research &
Business Development Development
education: MSc Mining Engineering, Luleå Univer- education: MSc Engineering, Luleå University of
sity of Technology, 1980 Technology, 1990, Lic Tech 1994, PhD Tech 1998,
year employed: 2001 Linköping University Institute of Technology
born: 1956 year employed: 2014
other engagements: Chairman of the Board at born: 1966
Norrskenet AB and the Bergforsk Foundation. other engagements: Professor of Production
Deputy Chairman at Luleå University of Technology. Development, Mälardalen University. Member of the
Board Member at Botnia Exploration AB. Honorary Royal Swedish Academy of Engineering Sciences.
Doctorate, Luleå University of Technology, 2014. Board Member at Mefor, Bergforsk, SSF (Swedish
background: LKAB 1980–1989, Bergbygg AB Foundation for Strategic Research). Chairman of
1989–1991, Boliden 1991–2000. the Board at SIP STRIM/VINNOVA.
remuneration: See Note 6 on pages 110–112 background: Plannja 1987–1988, Linköping
Institute of Technology 1990–1998, Mid Sweden
University 1996–2005, Volvo CE 2005-2007, Haldex
AB 2007–2011.
remuneration: See Note 6 on pages 110–112

PETER SCHMID
position: Senior Vice President, Marketing & Sales
education: MSc Industrial Economics, Linköping
University Institute of Technology, 1988
year employed: 2011
born: 1958
background: Grindex AB 1988-1991, Dust Control
AB 1991–1992, Ecco Finishing AB 1992–1995,
Swelab Instrument AB 1995–1999, ITT Flygt
1999–2011.
remuneration: See Note 6 on pages 110–112

CHANGES TO GROUP MANAGEMENT

Leif Boström
Senior Vice President, Finance until 1 June 2014
72 AUDITOR’S STATEMENT

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 2014 Corporate Gover-

nance Report and for its preparation in accordance with the Swedish
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. Our statutory review of
the Corporate Governance Report has a different focus and is sub-
stantially smaller in scope than an audit conducted in accordance
with the International Standards on Auditing and generally accepted
auditing practices in Sweden.
It is our opinion that a Corporate Governance Report has been pre-
pared and that its statutory information is consistent with the Annual
Report and consolidated accounts.

Stockholm, 20 March 2015

Deloitte AB

Peter Ekberg
Authorised Public Accountant
 AUDITORS’ ASSURANCE REPORT 73

AUDITOR’S LIMITED ASSURANCE REPORT

ON THE SUSTAINABILITY REPORT

To Luossavaara-Kiirunavaara AB (publ)

INTRODUCTION generally accepted auditing standards in Sweden. The procedures

We have been engaged by the Board of Directors of Luossavaa- performed consequently do not enable us to obtain assurance that
ra-Kiirunavaara AB (”LKAB”) to undertake a limited assurance we would become aware of all significant matters that might be
engagement of the LKAB Sustainability Report for the year 2014. identified in a reasonable assurance engagement. Accordingly, we
The company has defined the scope of the Sustainability Report on do not express a reasonable assurance conclusion.
the page of table of contents. Our procedures are based on the criteria defined by the Board of
Directors and the Executive Management as described above. We
RESPONSIBILITIES OF THE BOARD OF DIRECTORS AND THE consider these criteria suitable for the preparation of the Sustaina-
EXECUTIVE MANAGEMENT FOR THE SUSTAINABILITY REPORT bility Report.
The Board of Directors and the Executive Management are respon- We believe that the evidence we have obtained is sufficient and
sible for the preparation of the Sustainability Report in accordance appropriate to provide a basis for our conclusion below.
with the applicable criteria, as explained on page 74-75 in the
Annual and Sustainability Report, and are the parts of the Sustai-
nability Reporting Guidelines (published by The Global Reporting CONCLUSION
Initiative (GRI)) which are applicable to the Sustainability Report, as Based on the limited assurance procedures we have performed,
well as the accounting and calculation principles that the Company nothing has come to our attention that causes us to believe that the
has developed. This responsibility also includes the internal control Sustainability Report, is not prepared, in all material respects, in
relevant to the preparation of a Sustainability Report that is free accordance with the criteria defined by the Board of Directors and
from material misstatements, whether due to fraud or error. Executive Management.

RESPONSIBILITIES OF THE AUDITOR

Our responsibility is to express a conclusion on the Sustainabi- Stockholm 20 March 2015
lity Report based on the limited assurance procedures we have
performed. Deloitte AB
We conducted our limited assurance engagement in accordance
with RevR 6 Assurance of Sustainability Reports issued by FAR.
A limited assurance engagement consists of making inquiries,
primarily of persons responsible for the preparation of the Sustai-
nability Report, and applying analytical and other limited assurance
procedures. The procedures performed in a limited assurance Peter Ekberg Andreas Drugge
engagement vary in nature from, and are less in extent than for, Authorized Public Accountant Expert Member of FAR
a reasonable assurance engagement conducted in accordance
with IAASB’s Standards on Auditing and Quality Control and other
74 GRI INDEX

FINANCIAL REPORTING PRINCIPLES sustainability report has been reviewed by external auditors. Since
AND GRI INDEX the report has been reviewed in its entirety, external review has
not been reported per disclosure item in the GRI index below. The
Since 2008, LKAB has prepared an annual sustainability report in auditor’s report can be found on page 73.
accordance with the GRI (Global Reporting Initiative) guidelines. As
of the financial year 2014, LKAB applies version G4, in accordance Scope, limitations and appendix
with the Core reporting option. Since 2012, the sustainability report As in the preceding five years, the report largely concentrates on
has been integrated with the annual financial report, which reflects the Nordic activities, with the iron ore operations in Sweden and
the integration of sustainability issues in ongoing activities. The Norway in focus (Mining Division). This represents about 90 percent
report has also taken the Mining and Metals Sector Supplement of the Group’s total sales. The report continuously indicates in
as a guideline. In accordance with the owner’s guidelines, the connection with the reporting of data which units are involved.

INDEX DESCRIPTION PAGE OMISSIONS INDEX DESCRIPTION PAGE OMISSIONS

GENERAL STANDARD DISCLOSURES G4-29 Most recent report Appendix

Strategy and analysis G4-30 Reporting cycle 74, appendix

G4-1 Comments from the CEO 6–8 G4-31 Contact person for the report 75

Organisational profile G4-32 GRI content index 74–75

G4-3 Name of organisation 80 G4-33 Policy and practice with regard to 74, appendix
external assurance
G4-4 Main brands, products and services 14
Governance
G4-5 Location of head office 139
G4-34 Governance structure 62, 63, 65
G4-6 Countries in which the organisation is present 10, 132, 139
Ethics and integrity
G4-7 Ownership structure and corporate form 80
G4-56 Code of conduct 56, 63
G4-8 Markets 18, 20
SPECIFIC STANDARD DISCLOSURES, MATERIAL ASPECTS
G4-9 Size of company 2–3, 10
Economic
58–59,
G4-10 Description of total workforce appendix Economic performance, DMA Appendix

Percentage of total workforce covered by Direct economic value generated

G4-11 collective bargaining agreements 58, appendix G4-EC1 and distributed 11

G4-12 Supply chain 33 The organisation’s defined benefit

G4-EC3 plan obligations 106, 121–122
Significant changes during the
G4-13 reporting period 6–8 Indirect economic impacts, DMA Appendix

G4-14 Application of the precautionary principle Appendix Description of significant indirect

G4-EC8 economic impacts 8, 49–50
G4-15 External charters, principles and initiatives Appendix
Environment
G4-16 Memberships in organisations Appendix
Materials, DMA Appendix
Identified material aspects and boundaries
G4-EN1 Materials used by weight or volume 43
G4-17 Entities included in the report 74, 132
Energy, DMA Appendix
76–77,
G4-18 Process for defining report content appendix G4-EN3 Energy consumption within the organisation 42–43

G4-19 Material aspects 76–77, G4-EN5 Energy intensity 43

appendix
G4-EN6 Reduction of energy consumption 41
G4-20 Material impact within the organisation Appendix
Biodiversity, DMA Appendix
G4-21 Material impact outside the organisation Appendix
Land use in or adjacent to protected areas
G4-22 Corrections from previous reports Appendix G4-EN11 and areas of high biodiversity value 47 Appendix

Significant changes compared with Significant impacts of activities, products

G4-23 previous reports Appendix G4-EN12 and services on biodiversity 46, 47, 77

Stakeholder engagement G4-EN13 Habitats protected or restored 42, 47, 86

G4-24 Stakeholder groups 13, appendix Emission, DMA Appendix

G4-25 Identification and selection of stakeholders 13, appendix G4-EN15 Direct greenhouse gas emissions 43

G4-26 Methods for working with stakeholders 13, appendix G4-EN16 Indirect greenhouse gas emissions 43

Key issues raised through G4-EN21 NOx, SOx and other significant air emissions 43
G4-27 stakeholder dialogue Appendix

Report profile

G4-28 Reporting period Appendix

 GRI INDEX 75

Changes in limitations, scope or measurement methods compared the reporting, in accordance with G4 requirements. The GRI index
with the previous year are explained in the report together with the below states whether the information has been included in the
data. annual and sustainability report and/or in the appendix.
In addition, for the year 2014 there is a separate GRI appendix
available at LKAB’s website in connection to the annual and sus- Contact
tainability report, which includes overall explanations of changes The contact person for LKAB’s sustainability reporting is Senior
and also presents the entire transition process to G4. The appen- Vice President, Sustainable Development Anders Furbeck, anders.
dix contains a detailed description of the process for developing [email protected].
the materiality analysis, which is presented on pages 76-77, and
the more detailed descriptions of sustainability management for
material aspects. The appendix also describes omissions made in

INDEX DESCRIPTION PAGE OMISSIONS INDEX DESCRIPTION PAGE OMISSIONS

Effluents and waste, DMA Appendix Supplier human rights assessment, DMA Appendix

G4-EN24 Total number and volume of significant spills 43 Percentage of new suppliers screened
G4-HR10 using human rights criteria Appendix
Products and services, DMA Appendix
Human rights grievance mechanisms, DMA Appendix
Mitigated environmental impact from
G4-EN27 products and services 39, 40 Grievances about human rights filed
G4-HR12 and addressed Appendix
Compliance, DMA Appendix
Society
Significant fines and other sanctions for
non-compliance with environmental laws and Local communities, DMA Appendix
G4-EN29 regulations Appendix
Significant actual or potential negative
Overall, DMA Appendix G4-SO2 impacts on local communities 49–52

G4-EN31 Total environmental protection expenditures 41, 84 Appendix Anti-corruption, DMA Appendix

Klagomålsmekanism för miljöärenden, DMA Appendix Employees that have received training on
G4-SO4 anti-corruption 59 Appendix
G4-EN34 Environmental grievance mechanisms, DMA 42, appendix
G4-SO5 Incidents of corruption 59
SOCIAL
Grievance mechanisms for impacts on
Employment society, DMA Appendix
Employment, DMA Appendix Grievances about impacts on society filed and
Total number of new hires and G4-SO11 addressed 42, appendix
G4-LA1 employee turnover 58, Appendix MINING AND METALS SECTOR SUPPLEMENT
G4-LA2 Benefits provided to employees Appendix Biodiversity, sector specific DMA Appendix
Occupational health and safety, DMA Appendix Sites requiring biodiversity
Injuries, occupational diseases, lost days, MM2 management plans 42, 47
G4-LA6 absenteeism and work-related fatalities 59, appendix Effluents and waste, sector specific DMA Appendix
Diversity and equal opportunity, DMA Appendix Volume of overburden, rock, tailings and
Diversity within board of directors, MM3 sludges, and risks 42, 43
G4-LA12 management and workforce 59, 110 Appendix Indigenous rights, sector specific DMA Appendix
Supplier assessment for labour practices, Operations adjacent to indigenous peoples’
DMA Appendix
territories, and agreements with indigenous
Percentage of new suppliers screened using MM5 peoples 48, appendix
G4-LA14 labour practices criteria 32, 34 Appendix
Local communities, sector specific DMA Appendix
Labour practices grievance mechanism,
Land use disputes with local communities
DMA Appendix
MM6 and indigenous peoples 48
Grievances about labour practices filed and
Resettlement, sector specific DMA Appendix
G4-LA16 addressed Appendix
Households resettled, and effect on their
Human rights
MM9 livelihoods 49, 51
Non-discrimination, DMA Appendix
Closure planning, DMA Appendix
G4-HR3 Incidents of discrimination 59
42, appendix
Indigenous rights, DMA Appendix MM10 Operations with closure plans in place (DMA)

G4-HR8 Violations of rights of indigenous peoples 48, appendix

76 MATERIAL ANALYSIS

MATERIALITY ANALYSIS
SUSTAINABLE DEVELOPMENT
An open stakeholder dialogue and broad business intelligence is the basis for the
assessment of material issues that influence our business operations and sustainable
development. Material issues are in focus in our sustainability work and the assessment
includes the LKAB Group’s impact on sustainable development.
Assessment of material issues is also the basis of the content of the Sustainability Report. In the materiality analysis, LKAB and the
Group’s stakeholders have identified a number of significant issues which are assessed on the basis of their impact on LKAB as a sustai-
nable business operation. The issues which are most relevant for both LKAB and the Group’s stakeholders, and which control our sustai-
nability work, are in the upper right corner of the matrix. There are many other issues of relevance for sustainability, but those listed here,
but an inventory and prioritization have given this result. LKAB’s ambition is to report on all issues in addition to those given in the lower
left corner of the matrix, although they may not be currently considered critical for sustainable development. The stakeholders also deem
issues concerning suppliers’ work environment issues, emergency preparedness and plans for closure very significant. LKAB intends to
develop reporting on suppliers’ work environment issues more extensively during 2015.

Review of the analysis

Business intelligence, stakeholders’ expectations and possible changes in the nature of our business operations influence assessment of
significant sustainability issues. Therefore, we review the materiality analysis as the need arises. The material issues are described and
categorized under LKAB’s focus areas for sustainability on the following page. Read more about the process for materiality analysis and
control of material issues in the Annual and Sustainability Report and/or in the appendix.

GOVERNANCE AND COMMUNICATION

Our material issues are divided into four

MORE SIGNIFICANT

COMMUNICATE & MONITOR COMMUNICATE & MANAGE

categories, depending on business strategy:

COMMUNICATE & MANAGE

Closure plan Emergency Responsible purchasing Work environment,
Issues that LKAB, as well as stakeholders, preparedness health and safety
consider important for the Group’s impact Suppliers’ work The product’s environ-
environment issues mental benefits Impact/cooperation
on sustainable development. In cooperation with local communities
with stakeholders, LKAB works actively Reindeer herding
Urban transformation
with improvements and development, and Management of
communicates how the company is gover- viewpoints on Biodiversity
environment and
ned, managed and follows up issues. society Environmental
emissions
MANAGE & INFORM Diversity and non-
Importance to stakeholders

discrimination Resource-efficient
Issues that LKAB consider as important use of raw materials
for sustainable development, with ongoing
work in progress and where results are
regularly communicated to stakeholders.

COMMUNICATE & MONITOR WATCH & CONSIDER MANAGE & INFORM

Issues that stakeholders regard as impor-
tant and where LKAB needs to monitor pro-
gress with regard to deviations or negative Transports Union relations Anticorruption Compliance with the
terms of environ-
impact. Issues that shall be communicated Management of views Upcoming Environmental mental permits and
actively and on a regular basis. on environment and legislation investments legislation
society
Impact employment Economic/financial
WATCH & CONSIDER and infrastructure performance
Stakeholders and LKAB regard these issues Energy use
as important, though not critical at present,
Employees and
for sustainable development. They may be employment types
SIGNIFICANT

emerging issues and need further observa-

tion or internal monitoring.

SIGNIFICANT Importance for LKAB MORE SIGNIFICANT

 MATERIAL ANALYSIS 77

LKAB’S FOCUS AREAS FOR SUSTAINABILITY

Responsible operations

Closure plan Reindeer herding Analysis of human rights impacts

When a new mine is planned, a plan for Respect for other industries and ample scope Identification, handling and follow-up of
remediation of the land must be established. for dialogue forms the basis of LKAB’s princip- the operation’s direct and indirect impact
The closure plan also includes plans for les for collaboration and understanding. The on human rights.
managing the consequences of closure for principles include mutual respect and willing-
the community. ness to negotiate, open dialogue and access to Upcoming legislation
information at an early stage., Mining operations are regulated by law.
Emergency preparedness Changes in legislation must be monitored
Preparation and exercises for major accidents. Handling of comments in order to be prepared to adapt to new
Emergency preparedness is a matter of prepa- – environment and society requirements e.g., concerning environ-
ring for and managing the unexpected. Open, systematic and active handling of mental issues.
received comments and viewpoints as to the
Responsible purchasing operation’s impact on environment and the Anti-corruption
Requirements and follow-up of sustainability community. Work to prevent corruption in business,
issues for suppliers. By ensuring responsible via preventive measures, transparent
purchasing, human and labour rights are Emissions to the environment systems and follow-up.
respected and negative impact on the environ- Minimization of negative impact on our en-
ment and society is reduced. vironment and surroundings due to emissions Compliance with the terms of
to air and discharges to water. environmental permits and legislation
Work environment, health and safety Mining operations are regulated and per-
Ongoing and preventive work to ensure a safe Biodiversity mits are required. Impact on communities
work environment and health co-workers. Minimization of negative impact on ecosys- and the environment must be kept within
tems and safeguarding of biodiversity. the limits stipulated in the permits.

Resource-efficient production Attractive communities Attractive LKAB

Resource-efficient use of raw materials Impact/cooperation with Suppliers’ work environment issues
Mining of the natural resources of iron ore local communities Risk assessment and preventive measures,
and minerals. Additives are used in production Collaboration on mutual interests, such as in- so that suppliers assume responsibility for
processes and in rock reinforcement. frastructure, to create attractive communities. a good, safe work environment for their
Consultation concerning parts of the operation employees.
Environmental benefits of products that impact the local community.
and services Labour relations
Due to low carbon dioxide emissions, the Urban transformation Active and constructive dialogues with
products bring environmental benefits when Gradual and responsible relocation of commu- labour union representatives to ensure
used in customers’ processes and are a there- nities in order to ensure conditions for continu- co-determination and that co-workers’
fore a climate-smart choice. Through energy ed mining and create attractive communities. interests are taken into consideration.
efficiency in manufacturing processes, these Includes collaboration with municipalities,
advantages are strengthened. public administrations, the business communi- Diversity and nondiscrimination
ty and local residents. Promotion of diversity and equality of
Transports opportunity, and zero tolerance of discrimi-
Transports give rise to impact on the environ- Impact on employment and infrastructure nation on the basis of gender, age, religion,
ment and surroundings, such as emissions, Jobs are created by the company’s operations, sexual orientation or for other reasons.
dust and noise. as well as directly and indirectly via suppliers.
Other economic benefit accrues to the local Employees and forms of employment
Economic/financial performance community and other businesses. Assuming responsibility as an employer for
Secure the short and long-term profitability of working conditions that ensure good, safe
the business, so as to be able to pay salaries employment.
and suppliers, issue dividends, pay taxes and
make investments.

Energy use
Efficient use of energy in production and other
operations.

Environmental investments
Investment in emissions-treatment facilities
and research to reduce environmental impact.
78 OUR FINANCIAL ACCOUNTS

CONTENTS

ADMINISTRATION REPORT 80 NOTES 101

Note 1 Significant accounting principles 101
FINANCIAL STATEMENTS – GROUP 92 Note 2 Distribution of revenues 108
Consolidated income statement 92 Note 3 Segment reporting 108
Consolidated statement of comprehensive income 92 Note 4 Other operating income 110
Consolidated statement of financial position 93 Note 5 Other operating expenses 110
Consolidated pledged assets and contingent Liabilities 94 Note 6 Employees, employee benefit expenses
and remuneration of senior executives 110
Consolidated statement of changes in equity 94
Note 7 Auditors’ fees and reimbursements 112
Consolidated statement of cash flows 95
Note 8 Operating expenses by type 112
Note 9 Net financial items 113
FINANCIAL STATEMENTS - PARENT COMPANY 96
Note 10 Appropriations 113
Income statement 96
Note 11 Taxes 114
Comprehensive income 96
Note 12 Earnings per share 116
Balance sheet 97
Note 13 Intangible assets 116
Pledged assets and contingent liabilities 98
Note 14 Property, plant and equipment 117
Statement of changes in equity 99
Note 15 Holdings in joint operations 119
Statement of cash flow 100
Note 16 Receivables from group companies 119
Note 17 Financial investments 119
Note 18 Other non-current securities holdings 119
Note 19 Non-current receivables and other receivables 119
Note 20 Inventories 120
Note 21 Accounts receivable 120
Note 22 Prepaid expenses and accrued income 120
Note 23 Equity 120
Note 24 Interest-bearing liabilities 121
Note 25 Liabilities to credit institutions 121
Note 26 Pensions 121
Note 27 Provisions 123
Note 28 Urban transformation 125
Note 29 Accrued expenses and deferred income 125
Note 30 Valuation of financial assets and
liabilities at fair value and categorization 126
Note 31 Financial risks and risk management 128
Note 32 Investment commitments 130
Note 33 Pledged assets and contingent liabilities 131
Note 34 Related parties 131
Note 35 Group companies 131
Note 36 Untaxed reserves 133
Note 37 Statement of cash flows 133
OUR FINANCIAL
ACCOUNTS 5
80 ADMINISTRATION REPORT

ANNUAL REPORT 2014

ADMINISTRATION REPORT 2014 OPERATIONS AND GROUP STRUCTURE

The Board of Directors and the President of Luossavaara- LKAB is wholly owned by the Swedish state and is domiciled in
Kiirunavaara AB (publ), hereinafter LKAB, corporate identification Luleå, Sweden. The company was founded in 1890.
number 556001-5835, hereby submit their annual report and The LKAB Group consists of three operating segments: the
consolidated financial statements for the 2014 financial year. Mining Division, the Minerals Division and the Special Businesses
Division.

LKAB GROUP

LKAB PARENT COMPANY

MINING DIVISION MINERALS DIVISION SPECIAL BUSINESSES DIVISION

MARKET & SALES PRODUCTION & LOGISTICS MINERALS SPECIAL BUSINESSES

Subsidiaries Subsidiaries Parent Company Subsidiaries

LKAB S.A. /Brussels LKAB Norge AS LKAB Minerals AB LKAB Wassara AB
LKAB SCHWEDENERZ GmbH /Essen LKAB Malmtrafik AB LKAB Fastigheter AB
LKAB Malmtrafikk AS LKAB Berg & Betong Group
- LKAB Berg & Betong AB
Subsidiaries - LKAB Mekaniska AB
LKAB Minerals Ltd. - LKAB Kimit AB
- LKAB Minerals Richmond Ltd. (75%) Other companies
LKAB Minerals Oy - LKAB Nät AB
LKAB Minerals, Inc. - LKAB Försäkring AB
LKAB Minerals GmbH - LKAB Trading (Shanghai) Co. Ltd.
REPORTABLE OPERATING SEGMENTS
LKAB Minerals B.V.
OPERATIONAL AND LEGAL ENTITIES LKAB Minerals Asia Pacific Ltd.
LKAB Minerals (Tianjin) Minerals Co. Ltd.
Likya Minerals (50%)

Mining Division in 2017, when the Kiruna mine will be fully commissioned. Until
The Mining Division’s core business is mining, processing, deliv- then, mining will continue in parallel on both old and new main
ering and selling high-quality iron ore products, principally for levels.
ironmaking and steelmaking. Iron ore pellets are the Division’s On the Malmbanan and Ofotenbanen railways, iron ore products
main product, accounting for 83 percent (83) of the total sales are transported with LKAB’s own locomotives and cars to the ports
volume, while fines products accounted for 17 percent (17) in of Luleå and Narvik for loading and further transport by ship to
2014. The products are sold to major national and international customers around the world. An evaluation was begun in 2014 of
customers. LKAB’s market position as a leading global supplier the increased axle load of the ore cars, which increases the annual
of climate-smart iron ore pellets has remained unchanged for the transport capacity on the Malmbanan line by 4 Mt. Construction of a
year, which is a long-term sustainability target. new ore quay and shiploader in Narvik also began during the year.
The Mining Division also includes the logistics unit, with respon- These investments will increase loading capacity in Narvik from
sibility for transporting iron ore products to the shipping ports, and just over 20 Mt per year to nearly 30 Mt of products per year from
the marketing unit, with responsibility for sales and marketing. 2016.
Iron ore is mined in the two underground mines in Kiruna and
Malmberget, and in the Gruvberget open-pit mine in Svappavaara. Minerals Division
The dressed iron ore is upgraded above ground in four concentra- The Minerals Division operates in the industrial minerals mar-
tion plants and six pelletizing plants. Current production capacity is ket through the LKAB Minerals subsidiary group. The Division’s
about 28 Mt processed iron ore products per year. companies support the core business by developing other business
New main levels in both the Kiruna and Malmberget underground opportunities for LKAB’s iron ore outside the steel industry and
mines are gradually being commissioned. Full capacity is expected by recovering, processing and marketing industrial minerals on a
 ADMINISTRATION REPORT 81

global market. Sales to the industrial minerals market, with several MARKET DEVELOPMENT
world-leading companies in the customer base, increase LKAB’s
income, margins and risk diversification. The product portfolio is The steel and iron ore market
broad, but with a focus on application and product development of
a few strategically important minerals such as magnetite, mica and The steel market
huntite. Global crude steel production increased by 1.1 percent in 2014 to
Today, LKAB Minerals holds a leading position in a number of 1,637 Mt and capacity utilisation in steelworks1 reached to 76.7
different product applications and develops innovative minerals percent during the year. Global consumption of steel goods2 is
solutions in partnership with customers, focusing on functionality estimated to have increased by 1.0 percent in 2014.
and usability in customer processes. Through continuous pro- Demand for finished steel goods in China decreased slightly in
duction streamlining and increased focus on the most profitable 2014, largely due to a slowdown in the property development sec-
product lines, both income and margins have been increased. The tor. This development is part of the Chinese government’s attempt
sale of iron ore, mainly magnetite, to the industrial minerals market to make its economy more consumer-driven. Meanwhile, exports of
is an integral part of LKAB’s growth and flexibility strategy and a steel goods from China hit a new record in 2014. Demand for steel
key element in LKAB Minerals’ planned growth. in Europe and the US grew in 2014, with several positive signals
from LKAB’s customers.
Special Businesses Division 1 World Steel Association
2 Department of Industry
The Special Businesses Division is organised in a number of subsid-
iaries whose main task is to act as subcontractors and support the
CHINA Crude steel production1 rose by 0.9 percent in 2014 as compared year-on-
Mining Division and Minerals Division. The companies have their or- year. There were several negative signals from China during the second half
igin in the core business needs of mission-critical and strategically of the year, mainly the decline in housing markets and weaker industrial
production than expected. This trend has also been seen in Chinese steel
important, often highly specialised, products and services. Several consumption, which decreased during the year by 3.42 percent. Oversupply,
of the companies also offer services and LKAB’s proprietary core weaker steel consumption and higher steel prices in export markets led to a
significant increase in China's exports of steel products during the year.
technology on the open market. Examples are drilling equipment,
EUROPE Crude steel production1 in the EU283 increased by 1.8 percent in 2014.
explosives, concrete, tunnelling, rock reinforcement and iron ore Demand for steel was stable during the year, while economic growth in
crushing. Europe was weak. Due to the weak economic recovery in the Eurozone, the
European Central Bank announced a stimulus package in the form of quan-
titative easing starting in March 2015. The geopolitical unrest in Ukraine and
sanctions against Russia had a negative impact on growth in the Eurozone,
The following activities are conducted within the division: primarily through reduced exports.
• LKAB Wassara develops and manufactures water-powered pre-
THE MIDDLE Production of crude steel1 in MENA increased during the year by 6.7 percent
cision drilling systems for mining, construction and exploration EAST AND as compared year-on-year. Demand for DR pellets remained strong in the
drilling along with dam construction and geothermal energy. NORTH region, driven by major construction and infrastructure projects. The region’s
AFRICA rapid growth is threatened by continued low oil prices, which led the World
Customers are located throughout the world. (MENA)
Bank to issue recommendations for several countries in the region to review
their public spending and investments.
• LKAB Berg & Betong does unique rockwork contracting in rock
reinforcement and drifting and is responsible for production in USA Crude steel production in the US1 increased by 0.9 percent in 2014. The
US market accounted for the most positive signals during the year. The
LKAB’s open-pit mines. US Federal Reserve completed its quantitative easing and announced rate
increases as a result of positive economic developments. The domestic
• LKAB Mekaniska develops and manufactures everything from steel market remains strong, as demonstrated by stable steel prices. In
large custom steel structures to small precision-worked the second half of the year, the US imposed higher tariffs on imported
steel products in an effort to protect domestic steel production. Negative
machine components along with providing assembly work and developments in oil prices in the fourth quarter increased the uncertainty
complete maintenance solutions. Customers are primarily in surrounding several shale gas projects, which US steel producers with
exposure to the oil industry are already feeling.
the mining and construction industries.
1
World Steel Association
• LKAB Kimit supplies the Mining Division with expertise in 2
China Iron and Steel Association, CISA
explosives handling, and develops, manufactures and stocks 3
The European Union’s 28 Member States
explosives and related systems and equipment for LKAB’s
mining operations. The company is also responsible for external The iron ore market
purchasing of explosives and selling a certain amount of its The expansion of production capacity has gone according to plan
products and services externally. for the major iron ore producers, while demand growth in China
• LKAB Fastigheter owns and manages residential and commer- has not been as high as expected. The consequence was an over-
cial buildings in the orefields communities and Luleå. The com- supply of iron ore fines in the first half of the year. The supply of
pany also has an important role to fill in helping to construct iron ore in 2014 grew by about 130 Mt as compared year-on-year.
replacement housing as the urban transformation process The oversupply is expected to continue until around 2018, when the
progresses. market should be more in balance.
• LKAB Försäkring is the Group’s internal insurance company. Market trends were also affected by economic developments in
The company works globally with managing the Group’s risks China, mainly the credit crunch experienced by steel companies.
as well as property and business interruption insurance. This had a negative effect on their ability to finance purchases
• LKAB Nät is a local power distribution company with a con- of iron ore on the spot market so steel companies in China were
cession to distribute electricity within a limited area in central forced to rely more on purchases of smaller quantities of iron ore
Kiruna and Malmberget. directly from stocks.
82 ADMINISTRATION REPORT

Oversupply and reduced demand put considerable pressure on GROUP

iron ore prices, which fell by about 47 percent in 2014 (Platts IODEX
62% Fe CFR North China). This negative trend has led several small Net sales and earnings
mining companies with high production costs to partially or com- NET SALES AND OPERATING PROFIT
pletely halt production. In the second half of the year, previously
SEK million
announced expansion projects were reduced or put on hold due to
35,000
current market conditions.
30,000

Iron ore prices 25,000

The price of iron ore pellets is based on the spot price for iron 20,000

ore fines plus a pellet premium. The pellet premium is negotiated 15,000
annually, and since the spot price for iron ore fines fell during the 10,000
year, the fixed pellet premium represented a buffer for LKAB’s 5,000
prices. 0
2009 2010 2011 2012 2013 2014
IRON ORE PRICE PERFORMANCE Net sales Net sales 2014 Operating profit
January 2009 – 4 February 2015
Source: PLATTS IODEX 62% Fe CFR North China GROUP SUMMARY (SEK MILLION) 2014 2013

Net sales 20,615 23,873

USD/tonne
250 Operating profit before urban transformation costs 4,002 8,259

Urban transformation costs -3,432 -620

200
Operating profit 570 7,639

150 Profit from financial items 24 129

Profit before tax 594 7,768

100
Profit for the year 347 6,032

50 Operating cash flow 2,072 2,434

Investments in property, plant and equipment 5,491 6,141

0
Jan 2009 Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 NET SALES BY DIVISION (SEK MILLION) 2014 2013

Mining Division 19,013 22,240

Market outlook for 2015 Minerals Division 1,870 1,661
Demand for steel is expected to grow globally by about three
Special Businesses Division 1,732 1,942
percent in 2015. The outlook for LKAB’s export markets shows
Group eliminations -2,000 -1,970
clear signs of continued strong demand for steel. A strong demand
for steel in the regions that use a lot of pellets indicates a contin- Group 20,615 23,873

ued need for high-quality pellets. The oversupply of iron ore fines OPERATING PROFIT BY DIVISION (SEK MILLION) 2014 2013
is expected to continue in the coming year, despite the growth in
Mining Division 223 6,951
steel demand. In view of the oversupply, the spot price is expected
Minerals Division 212 63
to remain around its current level. Developments in China’s steel
Special Businesses Division 153 277
consumption will be a key factor in the market, especially for spot
price trends. Group eliminations -18 348

Group 570 7,639

The industrial minerals market
Developments in the global market for industrial minerals were Operating profit before urban transformation costs decreased by
mixed in 2014. Europe remained cautious while Asia and North 52 percent to SEK 4,002 million (8,259), equivalent to an operating
America showed a higher potential for growth. margin of 19 percent (35).
LKAB Minerals’ overall sales and profitability increased during Net sales decreased by 14 percent, with lower iron ore prices hav-
the year. The positive result was primarily driven by magnetite ing a negative effect of 19 percent, while volume/product
sales, with increased deliveries of aggregates to offshore struc- mix and currency had a positive effect of four and one percent,
tures. Growth in the building and construction market showed little respectively.
change, although significant inroads were made, for example, in Obligations for urban transformation at year-end amounted to SEK
the Chinese market. The sales trend for water purification minerals 11,683 million. During the year, costs for urban transformation provi-
was positive in both Europe and the US, with increased interest in sions totalled SEK 3,432 million, of which Kiruna stood for SEK 1,200
deliveries in coming years. million and Malmberget for SEK 2,232 million.
Earnings from financial items were lower compared year-on-year,
mainly due to lower income from investments and losses on holdings
of Northland Resources. All holdings in Northland Resources have
been fully written off. A weaker Swedish krona has, however, led to an
exchange gain for the year.
 ADMINISTRATION REPORT 83

Liquidity and financial position LKAB’s financial targets

LKAB needs to be financially strong to meet future commitments.
OPERATING CASH FLOW 2009–2014
The capital structure target is a net debt/equity ratio of 0–20%
SEK million (interest-bearing net indebtedness/equity).
9,000
The Group’s profitability target is a return on equity of
8,000
7,000 12 percent.
6,000
5,000 RETURN ON EQUITY 2009–2014
4,000 Return on equity Required return on equity
3,000
2,000 %
1,000 40
0
-1,000 30
2009 2010 2011 2012 2013 2014
20
Operating cash flow for 2014 was SEK 2,072 million (2,434).
10
The SEK 362 million decrease is explained as follows:
0
2009 2010 2011 2012 2013 2014
OPERATING CASH FLOW (SEK MILLION) 2014 2013 CHANGE

Cash flow from operating activities 5,911 9,423 -3,512

LKAB’S FINANCIAL TARGETS 2014 2013 TARGETS
Change in working capital 1,624 -866 2,490
Capital structure
Capital expenditures (net) -5,463 -6,123 660
Net debt/equity ratio, % 0.0 -17.61 0–20
2,072 2,434 -362
Profitability

Return on equity, % 0.9 14.7 12.0

Cash flow from operating activities was lower than last year, mainly Reduced production costs SEK/tonne,
due to lower iron ore prices. Disbursements for urban transforma- 20% until 2015, base year 2012, % 0.6 3.7 -7.02
tion were also SEK 1,059 million higher than the same period last 1
Calculation method changed compared to 2013.
year, which resulted in lower cash flow from operating activities. 2 Cost target for 2012–2015 represents one target per year at 7 percent.

Lower iron ore prices also resulted in less capital being tied up in
accounts receivable. This, together with lower investment disburse- The planned production increase in the open-pit mines in the Svap-
ments, offset the decline in cash flow. pavaara Field was postponed due to delays in environmental per-
mits, which means that the full effect of LKAB’s growth programme
FINANCIAL POSITION 2014 2013 has shifted. Hence, the cost target cannot be achieved.
Financial investments (SSAB shares), SEK million 563 609
Investments
Liquidity (cash and cash equivalents and investments in securi-
ties), SEK million1 16,863 15,497 Investments for the year totalled SEK 5,491 million, of which SEK
Equity, SEK million2 37,754 41,472 1,700 million concerned investments in the growth programme and
Liabilities to credit institutions 798 -
SEK 1,100 million in the new main level in Kiruna’s underground
mine.
Non-current interest-bearing liabilities 1,995 -

Provisions for urban transformation, SEK million 11,683 6,304

INVESTMENTS INCLUDING ACQUISITIONS (SEK MILLION) 2014 2013
Provisions for pensions, SEK million 1,866 1,610
Mining Division 5,419 5,902
1Acquisition/disposal of financial assets totalled SEK -703 million (2,325)
2Dividends paid totalled SEK -3,500 million (-5,500) Minerals Division 25 24

Special Businesses Division 47 53

Other 162
Besides the issuance of SEK 2 billion in corporate bonds in the
fourth quarter, a number of other activities in LKAB’s long-term Group 5,491 6,141

financing strategy were implemented during the year. LKAB’s

commercial papers programme with a limit of SEK 5 billion was Production facilities
capitalised in the second quarter. Utilisation at the end of 2014 Growth investments in the open-pit mines in the Svappavaara Field
was SEK 798 million. In addition to this, LKAB procured a revolving continued during the year, despite protracted permit processes.
credit facility of SEK 5 billion, in the third quarter, which replaced The formerly water-filled Leveäniemi mine has been drained and
a previous credit facility for the same amount. The credit facility is preparatory work has been carried out before the expected pro-
subject to retention of title. duction start-up in Mertainen. Meanwhile, in the processing plants
in Kiruna, Malmberget and Svappavaara, production-enhancing
investments have been made in order to increase capacity for
producing upgraded products.
At the underground mine in Kiruna, the second of five phases in
84 ADMINISTRATION REPORT

the project’s scope is now in operation. The remaining phases will Safe and predictable mining conditions
be successively taken into operation over the coming years. The LKAB prepares forecasts of ground deformations to enable effective
rock hoist in the Kiruna mine is being renovated in order to ensure urban planning around the mines. A revised forecast, based on defined
that the ore can be raised from the mine to the processing plants. environmental stipulations for Kiruna, was presented in December.
In Malmberget investments are being made in a gas depot as well The new forecast shows that ground deformations caused by mining
as conversion of the MK3 pelletizing plant so as to conduct a full- operations are advancing at a slightly slower pace than was previously
scale test of utilising natural gas as fuel in the pelletizing plants. forecast. This is mainly due to changed mining plans in the Kiruna
In Luleå investments are being made in the bentonite facility that mine. Malmberget does not yet have any environmental stipulations
are of a risk-reducing character but that also provide higher capaci- placed on deformations and an environmental stipulation correspond-
ty and increased flexibility in the facility. ing to that in Kiruna will be considered by the Land and Environment
Court in 2015. Deformations in eastern Malmberget will also be
Environmental investments followed up with additional measurements.
In order to meet stricter environmental stipulations for atmospher- The seismic monitoring systems in the Malmberget and Kiruna
ic emissions, extensive investments are being made in flue gas underground mines are among of the world’s largest systems for
treatment in the pelletizing plants in Malmberget and Svappavaara. monitoring mine seismology. LKAB, together with Luleå University of
Flue gas treatment was fully implemented in Malmberget during Technology, Queens University in Canada and international research
the year. In Svappavaara construction of the second phase is in pro- institutes, is running several projects aimed at reducing the risk of
gress, and decontamination and recovery costs total SEK 61 million. serious seismic events due to mining.
The purpose of the investments is to further treat the emissions
of gas and particulates, which helps reduce acidifying substances. Product development and growth
Investments in environmental protection and flue gas treatment Projects for product development and growth are priorities in
facilities totalled SEK 413 million (770) for the year. LKAB’s research and development operations with a long-term
goal of developing a new generation of climate-smart pellets. A signifi-
Investments in logistics cant portion of these efforts are directed towards product development
In addition to cost savings, it is essential for LKAB to streamline of ore from the Svappavaara Field’s open-pit mines.
and raise delivery capacity. Investments in the expansion of the rail LKAB mines mainly magnetite, but also some hematite. In Svappa-
terminals in Malmberget, Svappavaara and Narvik are part of this. vaara a simplified hematite process was developed and tested in the
Investments are being made in a new shiploader and quay in Narvik, production of a test batch of new sinter fines. The test batch was eval-
including new conveyor logistics and a screening station. These uated by a customer with good performance. The quality of the test
investments are mainly being made to reduce the risk of drop-offs batch meets the product requirements of high iron content (above
in deliveries due to unplanned stoppages and breakdowns, which 67 percent) and low levels of impurities such as phosphorus and alkali.
provides increased flexibility and capacity for transport both on the In addition, a programme and test campaign were carried out to
railway and in port. produce a product based on 70 percent ore from Mertainen and 30
percent ore from Gruvberget. The resulting product was validated by
Exploration tests conducted in LKAB’s experimental blast furnace. The results
The mineral reserve is the most important resource of every show a similar performance as for SPBA, the regular product.
mining company. Good knowledge of the mineral reserve is a basic
requirement for making major long-term investment decisions. The Sustainable development
mineral reserve’s size and quality are critical to product quality, Implementation and establishment of the Group’s Code of Conduct is in
production volumes and costs. progress and 415 employees practiced dilemmas in workshops about
LKAB explores both existing and new deposits. The objective is to the Code of Conduct during the year.
ensure access to iron ore raw material corresponding to a 20 year A special code of conduct for suppliers was developed and, as of
ore bed. Also refer to the “Mineral reserves and mineral resources” 1 January 2015, LKAB only engages suppliers who approve the basic
section on page 136. requirements of the Code.
Exploration efforts increased in 2014 and were the most exten- LKAB’s position on issues of land use has been formulated and
sive since starting in 2011. About 20 different in-house exploration documented in guidelines for land use.
projects are currently under way. A high-priority project during the A deviation analysis for sustainable development, in compliance
year was surveying the Leveäniemi and Mertainen deposits for ex- with the international guidelines set out in the government’s owner-
panded mineral reserves. In Gruvberget the focus was on extended ship policy and guidelines for state-owned companies, also known
deep magnetite reserves. as the owner directive, was implemented during the year. The main
The Sparre/Bergmästaren Nils/Hedvig and Frans projects actions identified for which work has been initiated or planned are:
near the existing mining operations in Malmberget were also prior- • Clarification of the global perspective
itised. • Perform systematic review of human rights (due
diligence)
Research and development • Include supply chain in sustainability work
The Group’s research focuses mainly on the Mining Division. • Include LKAB’s wholly owned subsidiaries in the Group’s
Expenditures for research and development amounted to overall sustainability work
SEK 451 million (360), corresponding to about 2.2 percent (2.1) • Active anti-corruption initiatives
of Group costs.
 ADMINISTRATION REPORT 85

Environmental responsibility work was resumed immediately and mining is expected to gear up
LKAB’s operations give rise to significant environmental impacts. for production in 2015.
The greatest environmental impact factors relate to the changes
in the landscape that mining and urban transformation entail. Svappavaara/Leveäniemi
Landscapes and communities are also affected by emissions to LKAB was granted permission to drain the water from the
water and air, noise and vibrations from ore processing and other Leveäniemi open-pit mine in June 2012. In early 2014 LKAB
operations. Production also requires large amounts of water and submitted an application for full-scale mining in the open-pit mine.
energy. LKAB has a well-developed and certified environmental The main hearing in the Land and Environment Court was held in
management system that meets the requirements of the ISO 14001 February 2015. Drainage was essentially completed in the autumn
environmental management standard. LKAB also met the require- of 2014, when about 30 million m3 of water was pumped from the
ments for the ISO 50001 energy management system certification open-pit mine.
after an audit in autumn 2013. However, certification has been In January 2014 LKAB submitted an application for exploratory
achieved. mining in the Leveäniemi open-pit mine to the County Administra-
tive Board of Norrbotten. The exploratory mining began in Septem-
Sustainability targets ber and is expected to continue until the spring of 2015.

RESPONSIBLE OPERATIONS 2014 RESULTS Kiruna

Emissions of sulphur dioxide from all existing Emissions of 1,143 tonnes (2,066) of sulphur
An application for a temporary permit for increased pellet produc-
pelletizing plants are to be reduced from dioxide. A reduction in emissions will occur tion was submitted to the Land and Environment Court in 2014.
about 2,000 tonnes in 2011 to 1,000 tonnes by gradually after the flue gas installations are
2015 and 500 tonnes by 2017. operational. LKAB is currently permitted to produce 14.8 Mt of pellets per year
in Kiruna and is now seeking permission to produce 16.2 Mt. In
The annual mean value for falling particulates Falling particulates were reduced by 17 per-
will decrease by 10 percent by 2015 compared cent in Kiruna. The reduction was 47 percent parallel with this application, work is underway to apply for a new
with 2011. in Narvik. Malmberget showed an increase
of 13 percent due to additional dusting
permit for the entire Kiruna operation, including increased mining,
sources. In Svappavaara there was a 4 percent processing and deposition.
increase due to an expansion of operations in
the open-pit mines since 2011.
Malmberget
RESOURCE-EFFICIENT PRODUCTION 2014 RESULTS
A hearing was held in the Land and Environment Court in January
The specific energy consumption will be Energy consumption was 165 kWh (167) per
reduced from 160 kWh per tonne of finished tonne of products, a break in the trend and a 2014 for the purpose of obtaining a permit to implement meas-
products in 2011 to 130 kWh per tonne of decrease compared year-on-year. Measure- ures to increase the capacity of the tailings pond in Vitåfors. LKAB
finished iron ore products by 2020. ments and actions continue to be taken.
received the permit in February, which meant that the measures
Carbon dioxide emissions per tonne of Carbon dioxide emissions by 27 kg (27) per
finished products will be reduced from 27 kg tonne of products. could be initiated.
in 2011 to 17 kg in 2020.

Luleå
Permit requirements There were no major permit changes or new permits issued in
In LKAB’s Parent Company as well as in the Swedish subsidiaries 2014.
the Group conducts activities that require permits under the Envi-
ronmental Code. Most of these activities are conducted within the Compliance with permits
Mining Division. Business cannot be conducted without environ- If there are any deviations from existing permits, stipulations or
mental permits. The most extensive environmental permits relate other regulations, the proper authorities are informed immediately.
to large-scale mining and processing facilities for iron ore products Compliance with permits, stipulations and other regulations are
in the orefields, tailings ponds and barren rock deposition. Permits reported in the annual environmental reports for LKAB’s oper-
are also required for gravel and moraine pits and quarries and port ating locations in and around the orefields. The environmental
operations. reports also indicate the impact that LKAB’s activities have on the
environment and how this potential impact is monitored. The 2014
Major environmental permit events in 2014 environmental reports are available at lkab.com.

Svappavaara/Mertainen Examples of monitoring and deviations in 2014

The main hearing on the application for full-scale mining in Mer- • In Kiruna, a number of damping measures were implemented
tainen was held in May 2013 in the Land and Environment Court on dominant noise sources. Measurements in 2014 showed
and a partial ruling with an enforcement order regarding the per- that the actions taken yielded results, as the noise level was re-
missibility of operations and a permit for certain preparatory work duced by 2–4 decibels at the control points. Remaining damp-
was granted. The partial ruling was appealed and operations were ing of the mine ventilation shafts will be addressed in 2015.
suspended. At the end of 2013 the Land and Environment Court • Measurements of vibrations, atmospheric shock waves and
announced a second partial ruling with final operating stipulations, ground deformations have shown that the values are within
but without an enforcement order. Even this partial ruling was specified stipulations in Kiruna, Malmberget and Svappavaara.
appealed. • The stipulations for atmospheric emissions of particulates
The two contested rulings were forwarded to the Land and from the process gas channels in ore processing facilities were
Environment Court of Appeal. A main hearing was held again in late met for all locations.
April and a permit for operations was granted in June. Preparatory
86 ADMINISTRATION REPORT

• However, a few small dust extraction works were at elevated an additional allocation of support resources to work systematically
levels compared to the standard value limit in Kiruna and on the causes of accidents and incidents. Sick leave continues to be
Malmberget. The standard value limit was met again after low, despite an increase in society at large. The sustainability target
corrective measures were taken. of continuing to have a long-term sickness absence of less than 0.8
• The stipulation for suspended materials (organic and percent was exceeded by a good margin.
inorganic particles) was exceeded on one monitoring
occasion during the year. Gender equality, equal opportunities and diversity
• Because of the mild winter in 2014, four measurements The annual target for the proportion of women in the company was
could not be made in Svappavaara’s central boiler plant achieved for 2014 and the proportion of women in management posi-
as stipulated. tions continues to increase. Developments are thereby heading in the
• Biological studies of the water supplies in Svappavaara, Mer- right direction to attain the sustainability target of at least 25 percent
tainen, Masugnsbyn and Malmberget were conducted in 2014. women in the company by 2020.
The hiring freeze begun in February 2015, however, affects the
Remediation prospects of attaining the sustainability targets on the proportion of
LKAB’s activities affect the landscape in several ways, such as with women and that there should be competition among qualified can-
rock piles and open-pit mines. That is why LKAB is responsible for didates for all advertised positions. There were at least two qualified
and obliged to restore the area through planned remediation meas- candidates in 96 percent of recruitments in 2014. The target of reach-
ures and to create new environments that become a natural part of ing 97 percent could therefore not be fully met.
the surroundings. Remediation work can be done gradually and/or Diversity efforts that involve actively seeking new ways to broaden
after operations have ceased and must take into account safety, en- the recruitment base also continue, despite the changed conditions.
vironmental, economic and aesthetic aspects. LKAB works with the
corresponding regulatory authority on designing long-term plans Professional development and future competency management
for remediation of the mining areas. Some examples of measures Efforts to ensure LKAB’s access to a skilled workforce in the long-
taken are levelling, deposition of barren rock, sowing grass and term continue, partly through the LKAB Academy foundation, which
planting trees. Examples of remediation measures in 2014: provides financial support to interdisciplinary programmes in the
• Parts of the old pond area in Malmberget were covered with schools where we operate, and partly through the LKAB upper
turf and sown with industrial seeding. secondary school. The LKAB upper secondary school is run by the
• The lime depot in Svappavaara was reclaimed and covered municipal upper secondary school in collaboration with Luleå Uni-
with moraine. The surface will also be sown with industrial versity of Technology with a focus on providing upper secondary level
seeding in 2015. key programmes for the mining industry. There were also students in
• Barren rock was deposited in the old open-pit mines in Kiruna the natural science programme in 2014. Interest in the LKAB upper
and Malmberget. secondary school and LKAB-relevant university programmes remains
high.
Employees and culture The total number of job applications to LKAB has dropped, since
fewer vacancies were advertised during the year, but the number of
SUMMARY 2014 2013 applications per position remains high. The percentage of positions
Number of accidents with absence 58 59
with fewer than two qualified applicants is stable at around five
percent.
Long-term absence due to illness, % 0.4 0.5

Short-term absence due to illness, % 2.9 2.4

Values, leadership and employeeship
Number of permanent new hires 313 289
Implementation of the Code of Conduct is under way. These efforts
Of whom women 94 78 are based on LKAB’s values: Commitment – Innovation – Responsibili-
Number who left LKAB 184 181 ty. A corruption prevention aspect is also included.
Of whom women 32 15 The training package for new managers is used regularly along
Women in the Group, % 19.4 18.1 with individual psychosocial discussions with new managers. The
Female managers in the Group, % 19.9 19.8
production unit introduced a model called the Leader’s Framework
that provides frameworks for good leadership and a good psychoso-
Outcome of Parent Company’s incentive programme, SEK 19,910 27,982
cial environment in the workplace.
Work continued in 2014 with the results of the 2013 employee
Occupational health and safety survey. Focus on internal communication increased during the year,
The total number of accidents decreased during the year. Never- including the introduction of a new intranet with better opportunities
theless, the sustainability target of no more than six accidents per for interactive communication.
million hours worked could not be achieved. The figure for the year
was 7.6 (7.9) accidents per million hours worked. The accident Deviations
rate target is no more than 2.5 by 2020. The most common causes After the fire in the Kiruna mine in June focus was on areas needing
of accidents continues to be slipping and tripping. Safety culture improvement, including emergency organisation and communication.
efforts continue and operations with many accidents have received
 ADMINISTRATION REPORT 87

Urban transformation Net sales and operating profit

LKAB’s provisions for urban transformation in the mining commu- The Division’s operating profit before urban transformation costs
nities amounted to SEK 11,683 (6,304) million at year-end. Costs for decreased by 52 percent to SEK 3,655 million (7,571), equivalent to
urban transformation provisions totalled SEK 3,432 million (620), an operating margin of 19 percent (34).
of which Kiruna stood for SEK 1,200 million and Malmberget for Net sales decreased by 15 percent, with price having a negative
SEK 2,232 million. Disbursements for the year totalled SEK 1,354 effect of 18 percent, while volume/product mix and currency had a
million (295). positive effect of two and one percent, respectively.
LKAB’s continued mining operations and growth plans depend
on phasing out and moving parts of Malmberget, Kiruna and Production and logistics
Svappavaara. As more land is required for mining operations, LKAB IRON ORE PRODUCTS (MT) 2014 2013
aims to help ensure that the new communities that are built up will Production volume 25.7 25.3
be better than the old existing infrastructure, housing and social
of which pellets 23.2 23.1
functions. A concrete sustainability target is that LKAB will build
200 new homes in both the Municipalities of Kiruna and Gällivare
by 2015, based on construction in 2011. The accumulated number Deliveries
of flats built by the end of 2014 was 178. Planning for additional IRON ORE PRODUCTS (MT) 2014 2013
housing units continues. Delivery volume 26.0 25.5
LKAB is working with relevant stakeholders such as its owner,
of which pellets 21.7 21.1
municipalities, businesses and property owners to find the nec-
Product quality, %
essary urban transformation solutions. In parallel with this work,
Quality value deliveries 93.0 91.2
LKAB is working actively to obtain permits for continued mining
operations and growth plans.
Through the new agreement signed during the year with the The accumulated quality value for product quality in deliveries was
Municipality of Kiruna, urban transformation efforts entered a more 93 percent compared with the 2014 target value of 96 percent.
operational phase, where development goes before deconstruc- The deviation from the target was due primarily to increased fines
tion. LKAB is continually working in close cooperation with the generation and increased reduction disintegration.
municipality and the stakeholders involved to find solutions for the Deliveries were limited during the year by production shortfalls
affected areas of the community. in mines and plants. The year was also characterised by a difficult
The cooperation agreement that was signed in 2012 with summer period with disruptions caused by thunderstorms and raw
the Municipality of Gällivare became legally binding during the materials shortages.
year. LKAB’s work and dialogues with the municipalities is ongoing Stock levels of finished products totalled 1.2 Mt at the start of
in order to manage development in Gällivare and phase-out in the year and 0.8 Mt at the end of the year.
Malmberget.
Through the end of 2014, LKAB had allocated nearly SEK 12 Minerals Division
billion to guarantee its future long-term commitments while the SUMMARY (SEK MILLION) 2014 2013
organisation reviews possible efficiency measures both internally Net sales 1,870 1,661
and with the municipalities. Based on prevailing economic circum-
Operating profit 212 63
stances, the business will be adapted with the aim of continuing
Operating margin, % 11 4
to achieve urban transformation targets and to safeguard LKAB’s
Average number of employees 354 351
mining operations.
Investments 25 24

Emissions trading system

Within the EU there is a trading system (EU ETS) for emission al- Net sales and operating profit
lowances that is intended to reduce carbon dioxide and other emis- Increased sales and improved margins, particularly for magnetite
sions. LKAB’s carbon dioxide emissions, mainly from the pelletizing (iron ore products), contributed to the improved earnings. During
plant and heating of mines, are included in the system. the fourth quarter final delivery of iron ore to a project for ballast-
ing an offshore structure was made. Overall, sales for this type of
DIVISIONS application had a very positive effect during the year and LKAB
Minerals has established itself in the market.
Mining Division
SUMMARY (SEK MILLION) 2014 2013 Special Businesses Division
Net sales 19,013 22,240 SUMMARY (SEK MILLION) 2014 2013

Operating profit before urban transformation costs 3,655 7,571 Net sales 1,732 1,942

Urban transformation costs -3,432 -620 Operating profit 153 277

Operating profit 223 6,951 Operating margin, % 9 14

Operating margin, % 1 31 Average number of employees 336 329

Average number of employees 3,849 3,747 Investments 47 53

Investments 5,419 5,902

88 ADMINISTRATION REPORT

Net sales and earnings Management

The Division recognised lower overall sales and operating profit The chief risk officer (CRO) maps, analyses and submits proposals
than last year. This is mainly due to lower activity and lower mar- on how risks can be avoided or reduced. The LKAB Treasury Centre,
gins for the subsidiary group LKAB Berg & Betong in its assign- the company’s central finance department, is largely responsible for
ments for the Mining Division. the Group’s financial risk management. Financial risk management
is regulated by a Group-wide policy established by the Board. The
Board’s Finance Committee is responsible for ensuring that financial
PARENT COMPANY risks are managed in accordance with the finance policy.

SUMMARY (SEK MILLION) 2014 2013 Market and business risks

Net sales 18,970 22,265
Volume dependency
Operating profit before urban transformation costs 3,520 7,352
To ensure long-term profitability and competitiveness LKAB strives
Urban transformation costs -3,432 -620
to ensure that regardless of economic fluctuations it can always sell
Operating profit 88 6,732
everything it produces. This is achieved through close, long-term
Operating margin, % 0 30 customer relationships, technical partnerships and long-term deliv-
Average number of employees 3,449 3,375 ery scheduling. Despite this, strong economic fluctuations can cause
Investments 4,857 5,682 temporary problems.

Net sales and earnings Management

Operating profit before expenses for urban transformation By ensuring flexibility in product portfolios, customer portfolios, and
decreased by 52 percent to MSEK 3,520 (7,352), equivalent to an production and logistics systems LKAB is better prepared to cope
operating margin of 19 (33) percent. Net sales decreased by 15 with sudden fluctuations in the economy. LKAB always strives to
percent, with price having a negative effect of 18 percent, while consistently offer high-quality products and reliable delivery in order
volume/product mix and currency had a positive effect of two and to create a competitive advantage that gets customers to prioritise
one percent, respectively. LKAB over competing suppliers in downturns.

Price dependent
RISKS AND UNCERTAINTY FACTORS Iron ore is priced in USD. The contracted price is based on the cur-
rent price index for 62% sinter fines CFR with delivery in northern
LKAB is exposed to various risks. Risk management plays a China. The price can be based on an average index for different peri-
vital part in minimising the impact of factors that lie beyond the ods – everything from a short period around delivery up to an entire
Group’s control. The Group employs methods for evaluating and year. Pellets, LKAB’s main product, are priced based on the price of
limiting these risks by ensuring that they are managed according sinter fines, but with an additional pellet premium.
to approved guidelines and methods. Different distances between the shipping ports of mining compa-
Extreme variations in volume are one of LKAB’s most substan- nies and the import ports of steelworks make the price of sea freight
tial risks. Volume variations may arise from disruptions in LKAB’s an additional parameter that is used to definitively determine the
production and delivery capacity. Demand for ore derives from price. The company’s proximity to its main market in Europe means
global steel production, which in turn follows the cycles of the that LKAB always has a proximity advantage and benefits when sea
global economy. freight rates are high. Conversely, distant mines have a competitive
Falling iron ore prices are another significant risk. Since iron ore advantage in Europe when freight rates are low.
is priced in USD, a weak dollar is also a risk.
Cost effectiveness and high, consistent product quality are Management
critical factors for safeguarding our competitiveness. LKAB’s major LKAB works primarily with a variable pricing strategy, which means
competitors mine their ore in open-pit mines, which entails con- that price volatility in the global iron ore market makes LKAB’s
siderably lower production costs. LKAB’s major advantage relative prices change substantially in both the long and short terms. LKAB
to its competitors is its high quality magnetite ore. Higher fees and works actively with financial hedging of both USD and iron ore prices
taxes on energy and increased costs for emission allowances can in order to prevent price changes from impacting earnings in the
also have a clear impact. short term. Read more about financial risks on page 90.
LKAB is expanding its production capacity in the ore
fields. Investments in increased production and the corresponding Customer dependency
urban transformation will require substantial sums of money in The global iron ore and steel market is made up of a small number
the coming years. LKAB needs to have good liquidity and financial of suppliers and customers. This concentration has given each indi-
strength to systematically fulfil these major future commitments. vidual player increased importance and a considerable interdepend-
ence between supplier and customer. The much smaller Minerals
Division has a more diversified customer base and product portfolio
that helps dampen economic fluctuations, since different geographic
regions, segments and minerals have different economic cycles.
 ADMINISTRATION REPORT 89

Management Risk of not achieving expected cost reductions

LKAB continues to develop its long-term customer relationships by LKAB’s major competitors mine their ore in open-pit mines, which
offering high, consistent product quality and delivery predictability entails considerably lower production costs. Competitiveness
combined with value-added products and services to reduce risk is therefore strongly linked to the continuous improvements
exposure. implemented to increase efficiency in all LKAB operations and to
increased delivery volumes.
Operational risks
Management
Risk of production and delivery stoppages Efforts are being made to reduce costs within the framework of
Safe, uninterrupted production is LKAB’s backbone and is based on LKAB’s internal programme, known as OpEx. Another equally
being large-scale with continuous optimisation. important component for achieving the expected lower cost levels
Disruptions to traffic and transport capacity on the Malmbanan is the volume expansion that is in progress. The expansion will
and Ofotenbanen Railways to the ports pose a risk to LKAB’s deliv- make it possible to allocate fixed costs from the major investments
eries. LKAB’s growth strategy requires higher transport capacity. in pelletizing plants, logistics and ports across higher volumes. This
At the same time, other players operate on both the Malmbanan reduces the cost per produced and delivered unit.
and Ofotenbanen lines. Increased capacity requires longer lay-bys, LKAB is now also entering the second phase of its programme to
which will be built on both the Swedish and Norwegian sides over develop and implement OpEx, an established lean concept for the
the coming years. Today, the risk of disruptions in the supply flows industry, along with continued focus on production- and productivi-
relate not only to physical stoppages, but also to disruptions in the ty-enhancing measures.
increasingly important and more extensive IT systems.
Risk of insufficient resources and skilled workers
Management Mining relies on ore resources being utilised. Ensuring operations
LKAB works actively within all operations with the “Safety First” in the long term therefore requires discovering new deposits
programme to protect people from injuries. through exploration. Being able to retain existing employees and at-
The safety levels of all facilities are audited every year relative to tract new ones is a very important prerequisite for LKAB to achieve
LKAB’s requirements and stoppage studies are conducted to deter- its growth targets.
mine the current level of risk in production. Active decisions on how
the risk should be managed are taken based on the results. Histor- Management
ically, stoppages due to fire have resulted in the greatest economic LKAB has applied for and been granted several concessions for ex-
losses, so fire prevention efforts are a top priority. LKAB insures the ploration in the Swedish orefields. Increased activity in recent years
Group’s facilities to protect against any unforeseen events, and the has identified promising new ore bodies. Read more in the section
single largest insurable risks relate to property and stoppages. For on mineral reserves and mineral resources on page 136.
production facilities and ports these risks are covered by compre- Young people in the labour market are willing to move, but
hensive insurance. Insurance is through the Group’s own insurance mainly to areas that are considered attractive. LKAB is strongly
company, LKAB Försäkring AB, and damages in excess of SEK 150 committed to the development of the mining communities so they
million are in turn reinsured in the international insurance market. remain attractive, viable places to live. For example, LKAB provides
LKAB tries to avoid disruptions due to strikes by being an attractive a variety of support to the education of young people in the com-
employer and having an ongoing dialogue with the unions. munities. This increases the possibility of recruiting persons with
To manage the risk that the IT systems cause production stop- the necessary skills
pages, the production and IT departments work closely together in the future.
with clearly documented divisions of duties and responsibilities.
Risk of losing concessions and permits
Risk of environmental impact through emissions The various permit applications are associated with different types
Emissions to the air and water and the generation of noise and of risks. In general terms, the greatest risk is project delays. The
waste, through accidents or temporarily exceeded permit levels or effect is increased costs and/or delays and production disrup-
other applicable regulations, may adversely affect LKAB’s credibili- tions or stoppages. The impact can vary between very serious and
ty and thus its ability to continue to run the business. insignificant, mainly depending on the project’s size and the length
of the delay.
Management
Emission levels are measured systematically to ensure that envi- Management
ronmental impacts are within manageable and authorised levels. Permit issues are crucial to implementation of the growth pro-
For damages to third parties caused by dam accidents, absolute gramme. Large volumes are scheduled to come from new mining.
and unlimited liability applies in Sweden. LKAB has therefore cho- LKAB is now investing considerable resources in the issues of
sen to cover itself with so-called dam liability insurance. applying for and complying with a variety of permits.
90 ADMINISTRATION REPORT

Risk of electricity shortages Cash flow risk in SEK

Increased production at LKAB’s facilities leads to increased use of LKAB’s main cash flow risk in SEK is related to iron ore product
electrical energy. The energy is mainly used in mining operations sales in the Parent Company. Cash flow risk means that fluctua-
and ore processing. Ensuring a supply of electricity at competitive tions in the global iron ore price and exchange rates between USD
prices is of great strategic importance to the Group. and SEK can together have a negative impact on the company’s
At a production rate of 27.5 Mt of finished products the need income statement, balance sheet and/or cash flow. Another signifi-
for electrical energy is estimated to increase from the current 2.3 cant cash flow risk is energy price risk.
TWh/year to 2.4 TWh/year.
Price risk of iron ore products
Management Price volatility in the global iron ore market makes LKAB’s prices
Reducing energy consumption is an objective for both reduced change substantially in both the long and short terms. The price of
environmental impact and cost efficiency. Energy consumption will iron ore products in USD is dependent on future expected prices for
be reduced to 130 kWh per tonne of finished products by 2020 from LKAB’s products, which in turn are dependent on the global com-
the current level of 165 kWh per tonne. According to the forecast modity price and the global pricing mechanism for iron ore.
for energy performance, the target for energy consumption per
tonne of finished product will be nearly met by 2020. Currency risk USD/SEK
LKAB invests directly and indirectly in renewable electricity. The Currency risk exposure stems mainly from Group sales of iron ore
company owns five of its own wind turbines and is a co-owner of where market pricing is in USD.
BasEl and wind power company Vindln AB.
Energy price risk
Inadequate allocation of emission allowances Commodity price risk refers to the change in the price of input
Within the EU there is a trading system (EU ETS) for emission goods and its impact on earnings. It is mainly changes in energy
allowances. The aim is to reduce emissions of carbon dioxide prices that constitute a large commodity price risk for the LKAB
and other greenhouse gases by requiring businesses that have Group.
emissions to buy emission allowances. LKAB has carbon dioxide
emissions, mainly from pelletizing plants and mine heating, so it is Interest rate risk and share price risk
included in the system. These risks concern the negative impact on LKAB caused by inter-
There is a risk that the system will become a distorting compet- est rate and price changes in the financial markets. LKAB is mainly
itive disadvantage for LKAB. The reason is that the main competi- exposed to interest rate risk as regards cash and cash equivalents.
tors on the pellet market are outside the EU, particularly in Brazil,
and they are therefore not affected by the trading system and its Credit risks
costs. For this reason, iron ore pellets have been defined by the EU LKAB’s credit risks are primarily associated with accounts receiva-
as “at risk for carbon leakage”. ble, derivatives and short-term investments.
LKAB applied for a free allocation for its needs, but did not
receive a full emission allowance. The cost and the need to buy ad- Liquidity risks
ditional emission allowances will depend upon a variety of factors, Liquidity risk is the risk that the LKAB Group cannot meet its com-
including future market conditions, opportunities for additional mitments due to lack of liquidity or the inability to raise external
free allocations as LKAB expands its operations and how well the loans for operating activities. Mining legislation and consequent
company’s efforts to cut the specific emissions of carbon dioxide requirements for urban transformation in the mining communities
succeed. place special demands on liquidity.

Management Sensitivity analysis

A programme is being conducted within the framework of the The following sensitivity analysis summarises LKAB’s earnings
sustainability strategy to reduce carbon emissions from the current sensitivity from a hypothetical change in volumes, prices and
level of 27 kg per tonne of finished products to 17 kg by 2020. The currencies. The greatest impact on earnings results in changed
estimated carbon emissions are based on the production forecast delivery volumes and market prices. In the analysis, the delivery
and the forecast for energy performance. The emission level is and price analyses refer to the Parent Company and the remaining
dealt with through ongoing efficiency improvements as well as factors to the entire Group.
finding more environmentally attractive fuel alternatives for coal
and oil.
USD

Financial risks Iron ore price

The following is a brief description of the Group’s financial risks. Delivery volume

For a more detailed description including the management of risks, Employee benefit expenses

see Note 31, Financial risks and risk management. Transport costs

Energy cost

0 500 1,000 1,500 2,000 2,500

 ADMINISTRATION REPORT 91

SENSITIVITY ANALYSIS 2014

Group Change Exposure Effect on earnings, Exposure Effect on earnings,

2014 2014 (SEK million) 2013 2013 (SEK million)

Deliveries of iron ore products, Mt1 10 percent 26.0 1,836 25.5 2,175

Price for iron ore products, SEK million 10 percent 18,665 1,867 21,918 2,192

Employee benefit expenses, SEK million 10 percent 3,684 368 3,415 342

Energy costs, SEK million 10 percent 1,553 155 1,690 169

Transport costs, SEK million 10 percent 516 52 530 53

Dollar rate – with no forward cover, USD million 10 percent 2,997 2,004 3,155 2,080
1Average value calculated on unchanged product mix

GUIDELINES FOR REMUNERATION OUTLOOK FOR 2015

OF SENIOR EXECUTIVES Demand for LKAB’s pellet products is expected to remain stable.
At the 2014 AGM it was resolved to approve the Board’s proposed However, the market is also expected to be characterised by an
guidelines for remuneration and other terms of employment for oversupply of iron ore fines in 2015, putting pressure on spot pric-
senior executives. LKAB’s guidelines follow the government’s es1 and thus on LKAB’s profitability.
currently applicable guidelines regarding employment terms for LKAB’s growth strategy remains unchanged, with a planned
senior executives at state-owned companies as passed on 20 April long-term volume increase of 35 percent, as previously announced.
2009. The guidelines indicate that senior executives should not LKAB aims to increase the volume of processed products. Work on
receive variable pay, that retirement benefits should be through growth investments in the Svappavaara Field continues. The new
defined contribution plans, unless they comply with an applicable mines will provide increased flexibility and will compensate for
collective pension scheme, and that the fee should not exceed 30 any disruptions in the underground mines. Preparatory work for
percent of the fixed salary. The retirement age must not be less starting up production in Mertainen continues. Proceedings in the
than 62 and should not be less than 65. Land and Environment Court on mining in the Leveäniemi mine
The Board proposes that approval of the above-stated guide- are ongoing and there is hope for a positive verdict in the second
lines and conditions be resolved at the AGM on 28 April 2015. The quarter of 2015.
Board’s proposal is designed to ensure that LKAB can offer market The decline in iron ore prices has caused LKAB to take a number
competitive remuneration to attract and retain qualified employees of actions. Ongoing and planned investments for 2015 and 2016
to LKAB’s Group management. Group management’s remunera- were revised and activities meant to reduce tied-up working capital
tion comprises fixed salary, company car, meal and life insurance continue. Costs will be reduced by SEK 700 million. Measures taken
benefits, and pension. The various parts are intended to create a include renegotiation of purchasing agreements, a hiring freeze
well-balanced remuneration and benefit programme that reflects and elimination of 400 positions from the work force by the end of
the individual’s performance and responsibility and the Group’s 2016. The effects of these measures will primarily be felt in 2016.
development. The fixed salary, which is individual and differentiat- Platts IODEX 62% Fe CFR North China
1

ed considering the individual’s responsibility and performance, is

determined based on market principles and is reviewed annually.
Agreements concluded prior to the AGM on 28 April 2015 have SIGNIFICANT EVENTS AFTER
followed the government’s guidelines that were in place at the END OF REPORTING PERIOD
time. For further information regarding the remuneration of senior No events after the end of the reporting period have occurred that
executives, see Note 6 on pages 110–112. materially affect the assessment of earnings, financial position
or cash flow for 2014.

CORPORATE GOVERNANCE
A description of corporate governance is presented in a sepa- PROPOSED DISPOSITION OF
rate Corporate Governance Report in accordance with Chapter 6, UNAPPROPRIATED EARNINGS
Section 8 of the Annual Accounts Act. The report is found on pages The Board and the President propose that the SEK 20,142 million
62–67 of the printable version of the Annual Report. For a descrip- in unappropriated earnings, of which SEK 722 million represents
tion of the key elements of the Group’s system of internal control profit for the year, be allocated as follows:
and risk management in connection with the preparation of con-
solidated financial statements, refer to the Corporate Governance Dividend, 700,000 shares at SEK 199 per share SEK 139 million
Report on page 66 of the printable Annual Report that is available Carried forward SEK 20,003 million
at lkab.com.
Total SEK 20,142 million
92 FINANCIAL STATEMENTS

CONSOLIDATED INCOME STATEMENT

1 January – 31 December

SEK million Note 2014 2013

1
Net sales 2, 3 20,615 23,873
Cost of goods sold 28 -18,781 -14,994
Gross profit 1,834 8,879

Selling expenses -151 -148

Administrative expenses -596 -648
Research and development expenses -451 -360
Other operating income 4 311 219
Other operating expenses 5 -377 -303
Operating profit 3, 6, 7, 8 570 7,639

Financial income 519 611

Financial expenses -495 -482
Net financial items 9 24 129

Profit before tax 594 7,768

Tax 11 -247 -1,736

Profit for the year 347 6,032

Attributable to Parent Company shareholders 347 6,032

Earnings per share before and after dilution (SEK) 12 496 8,617

Number of shares 700,000 700,000

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Profit for the year 347 6,032

Other comprehensive income

Items that cannot be reversed to profit for the year
Actuarial gains and losses on defined-benefit pension plans -284 106
Tax attributable to actuarial gains and losses 62 -23
-222 83
Items that have been reversed or can be reversed to profit for the year
Translation differences on translation of foreign operations for the year 74 -18
Changes in fair value of available-for-sale financial assets for the year -45 -90
Changes in fair value of cash flow hedges for the year -410 72
Changes in fair value of cash flow hedges transferred to profit for the year -67 -226
Tax attributable to components of cash flow hedges 105 34
-343 -228

Other comprehensive income -565 -145

Comprehensive income attributable to Parent Company shareholders for the year: -218 5,887

The items that were reversed to profit for the year in 2014 are recognised in the income statement on the net sales and tax lines.
 FINANCIAL STATEMENTS 93

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December
SEK million Note 2014 2013
1, 30, 31, 34
Assets 15, 32
Non-current assets
Intangible assets 13 228 257
Property, plant and equipment 14 39,529 33,759
Financial investments 17 912 1,075
Non-current receivables 19 62 103
Deferred tax assets 11 44 19
Total non-current assets 40,775 35,213

Current assets
Inventories 20 2,553 2,611
Accounts receivable 21 1,908 3,291
Prepaid expenses and accrued income 22 158 131
Other current receivables 19 876 1,079
Current investments 17, 37 11,505 10,801
Cash and cash equivalents 37 5,358 4,696
Total current assets 22,358 22,609
Total assets 63,133 57,822

Equity and liabilities

Equity 23
Share capital 700 700
Reserves 100 443
Profit brought forward including profit for the year 36,954 40,329
Equity attributable to Parent Company shareholders 37,754 41,472
Total equity 37,754 41,472

Non-current liabilities
Non-current interest-bearing liabilities 24 1,995
Provisions for pensions and similar commitments 26 2,156 1,886
Provisions for urban transformation 27, 28 9,644 4,804
Other provisions 27 1,167 1,167
Deferred tax liabilities 11 3,423 3,813
Total non-current liabilities 18,385 11,670

Current liabilities
Current interest-bearing liabilities 24 798
Trade payables 1,691 1,744
Other current liabilities 1,121 227
Accrued expenses and deferred income 29 1,207 1,103
Provisions for urban transformation 27, 28 2,039 1,500
Other provisions 27 138 106
Total current liabilities 6,994 4,680
Total liabilities 25,379 16,350
Total equity and liabilities 63,133 57,822
94 FINANCIAL STATEMENTS

CONSOLIDATED PLEDGED ASSETS AND CONTINGENT

LIABILITIES
As at 31 December
SEK million Note 2014 2013
Pledged assets 33 808 245
Contingent liabilities 33 149 103

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

SEE NOTE 23 EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS

Reserves

Profit brought
forward
Translation Fair value Hedging including profit
SEK million Share capital reserve reserve reserve for the year Total equity

Opening equity 1 Jan 2013 700 -121 616 176 39,714 41,085

Profit for the year 6,032 6,032

Other comprehensive income for -18 -90 -120 83 -145

the year

Comprehensive income for the -18 -90 -120 6,115 5,887

year

Dividend -5,500 -5,500

Closing equity 31 Dec 2013 700 -139 526 56 40,329 41,472

SEE NOTE 23 EQUITY ATTRIBUTABLE TO PARENT COMPANY SHAREHOLDERS

Reserves

Profit brought
forward
Translation Fair value Hedging including profit
SEK million Share capital reserve reserve reserve for the year Total equity

Opening equity 1 Jan 2014 700 -139 526 56 40,329 41,472

Profit for the year 347 347

Other comprehensive income for 74 -45 -372 -222 -565

the year

Comprehensive income for the 74 -45 -372 125 -218

year

Dividend -3,500 -3,500

Closing equity 31 Dec 2014 700 -65 481 -316 36,954 37,754
 FINANCIAL STATEMENTS 95

CONSOLIDATED STATEMENT OF CASH FLOWS

1 January – 31 December

SEK million Note 2014 2013

1, 37
Operating activities
Profit before tax 594 7,768
Adjustment for items not included in cash flow 6,719 3,404
Income tax paid -48 -573
Disbursements, urban transformation 27, 28 -1,354 -295
Payment to retirement benefit plan 26 -881
Cash flow from operating activities before changes in working capital 5,911 9,423

Cash flow from changes in working capital

Increase (-)/Decrease (+) in inventories 59 -118
Increase (-)/Decrease (+) in operating receivables 1,222 -444
Increase (+)/Decrease (-) in operating liabilities 343 -304
Change in working capital 1,624 -866
Cash flow from operating activities 7,535 8,557

Investing activities
Acquisition of property, plant and equipment -5,491 -6,141
Disposal of property, plant and equipment 28 18
Change in financial assets -109
Disposals/acquisitions (net) in current investments -703 2,434
Cash flow from investing activities -6,166 -3,798

Financing activities
Borrowing 2,793
Dividends paid to Parent Company shareholders -3,500 -5,500
Cash flow from financing activities -707 -5,500

Cash flow for the year 662 -741

Cash and cash equivalents at start of year 4,696 5,437

Cash and cash equivalents at end of year 5,358 4,696

SEK million 2014 2013

Consolidated operating cash flow
Cash flow from operating activities 7,535 8,557
Acquisition of property, plant and equipment -5,491 -6,141
Disposal of property, plant and equipment 28 18
Operating cash flow (excluding current investments) 2,072 2,434
Acquisition/disposal of financial assets (net) -703 2,325
Cash flow after investing activities 1,369 4,759
Cash flow from financing activities -707 -5,500
Cash flow for the year 662 -741
96 FINANCIAL STATEMENTS

INCOME STATEMENT – PARENT COMPANY

1 January – 31 December
SEK million Note 2014 2013
1
Net sales 2, 3 18,970 22,265
Cost of goods sold 28 -17,911 -14,624
Gross profit 1,059 7,641

Selling expenses -69 -67

Administrative expenses -447 -502
Research and development expenses -453 -349
Other operating income 4 72 30
Other operating expenses 5 -74 -21
Operating profit 6, 7, 8 88 6,732

Earnings from financial items:

Earnings from participations in Group companies 228 209
Income from other securities and receivables held as non-current assets -111 45
Other interest income and similar profit/loss items 449 626
Interest expense and similar profit/loss items -195 -367
Profit after financial items 9 459 7,245

Appropriations 10 535 -1,762

Profit before tax 994 5,483

Tax 11 -272 -1,171

Profit for the year 722 4,312

COMPREHENSIVE INCOME – PARENT COMPANY

Profit for the year 722 4,312

Other comprehensive income

Comprehensive income for the year 722 4,312
 FINANCIAL STATEMENTS 97

BALANCE SHEET – PARENT COMPANY

As at 31 December
SEK million Note 2014 2013
1, 30, 31, 34
Assets 32
Non-current assets
Intangible assets 13 36 42
Property, plant and equipment 14 32,813 27,294
Financial assets
Participations in subsidiaries 35 1,768 1,490
Receivables from subsidiaries 16 1,545 1,042
Other non-current securities 18 129 129
Other non-current receivables 19 134 170
Deferred tax asset 11 872 678
Total financial assets 4,448 3,509

Total non-current assets 37,297 30,845

Current assets
Inventories 20 1,940 2,111
Current receivables
Accounts receivable 21 1,385 3,008
Receivables from subsidiaries 16 1,450 2,053
Other current receivables 19 729 814
Prepaid expenses and accrued income 22 115 95
Total current receivables 3,679 5,970

Current investments 37 14,035 14,878

Cash and bank balances 37 2,373 365
Total current assets 22,027 23,324
Total assets 59,324 54,169
98 FINANCIAL STATEMENTS

BALANCE SHEET – PARENT COMPANY

As at 31 December
SEK million Note 2014 2013

Equity and liabilities 1, 30, 31, 34

Equity 23
Restricted equity
Share capital (700,000 shares) 700 700
Statutory reserve 697 697

Non-restricted equity
Accumulated profit 19,420 18,608
Profit for the year 722 4,312
Total equity 21,539 24,317

Untaxed reserves 36 18,144 18,487

Provisions
Provisions for urban transformation 27, 28 9,644 4,804
Other provisions 26, 27 1,490 1,597
Total provisions 11,134 6,401

Non-current liabilities
Bond loans 25 1,995
Total non-current liabilities 1,995

Current liabilities
Liabilities to credit institutions 25 798
Trade payables 1,236 1,406
Liabilities to subsidiaries 883 945
Other current liabilities 420 143
Accrued expenses and deferred income 29 998 864
Provisions for urban transformation 27, 28 2,039 1,500
Other provisions 27 138 106
Total current liabilities 6,512 4,964
Total equity and liabilities 59,324 54,169

PLEDGED ASSETS AND CONTINGENT LIABILITIES

OF THE PARENT COMPANY
As at 31 December
SEK million Note 2014 2013
Pledged assets 33 8081 245
Contingent liabilities 33 669 1271
1Changed in comparison with the year-end report.
 FINANCIAL STATEMENTS 99

STATEMENT OF CHANGES IN EQUITY – PARENT COMPANY

SEE NOTE 23 RESTRICTED EQUITY NON-RESTRICTED EQUITY

SEK million Share capital Statutory reserve Accumulated profit Profit for the year Total equity

Opening equity
1 Jan 2013 700 697 24,108 25,505

Comprehensive income for 4,312 4,312

the year

Dividend -5,500 -5,500

Closing equity
31 Dec 2013 700 697 18,608 4,312 24,317

SEE NOTE 23 RESTRICTED EQUITY NON-RESTRICTED EQUITY

SEK million Share capital Statutory reserve Accumulated profit Profit for the year Total equity

Opening equity
1 Jan 2014 700 697 22,920 24,317

Comprehensive income for

the year 722 722

Dividend -3,500 -3,500

Closing equity
31 Dec 2014 700 697 19,420 722 21,539
100 FINANCIAL STATEMENTS

STATEMENT OF CASH FLOW – PARENT COMPANY

1 January – 31 December
SEK million Note 2014 2013
1, 37
Operating activities
Profit after financial items 459 7,245
Adjustment for items not included in cash flow 5,862 2,900
Income tax paid -62 -416
Expenditures, urban transformation 27, 28 -1,354 -295
Payment to retirement benefit plan 26 -856
Cash flow from operating activities before changes in working capital 4,905 8,578

Cash flow from changes in working capital

Increase (-)/Decrease (+) in inventories 171 -165
Increase (-)/Decrease (+) in operating receivables 2,141 -999
Increase (+)/Decrease (-) in operating liabilities -74 -556
Change in working capital 2,238 -1,720
Cash flow from operating activities 7,143 6,858

Investing activities
Acquisition of property, plant and equipment -4,857 -5,682
Disposal of property, plant and equipment 284 1,112
Shareholder contribution paid -254
Change in financial assets -636 115
Disposals/acquisitions (net) in current investments -610 2,399
Cash flow from investing activities -6,073 -2,056

Financing activities
Borrowing 2,793
Group contribution received 192
Dividend paid -3,500 -5,500
Cash flow from financing activities -515 -5,500

Cash flow for the year 555 -698

Cash and cash equivalents at start of year 4,553 5,251

Cash and cash equivalents at end of year 5,108 4,553
 NOTES 101

NOTES TO THE FINANCIAL STATEMENTS Amendments to IAS 32 Financial Instruments: Classification is intended to clarify the
rules for when financial assets and financial liabilities can be offset.

NOTE 1 6.2 Open-pit mines

SIGNIFICANT ACCOUNTING PRINCIPLES Expenditures on removal of barren rock during the production phase that provide
improved access to ore for future mining are recognised as assets. The calculation model
1 Compliance with standards and laws used to distinguish between costs for the period’s production and costs to improve future
The consolidated financial statements were prepared in accordance with the Inter- access to the ore was revised in 2014. The changed assessment affected consolidated
national Financial Reporting Standards (IFRS) issued by the International Accounting earnings for 2014 by SEK -157 million.
Standards Board (IASB) as adopted by the EU. The Swedish Financial Reporting Board's 6.3 Other operating income and other operating expenses
Recommendation RFR 1 Supplementary Rules for Consolidated Financial Statements Assessment of what income in the Parent Company is to be recognised as other oper-
was also applied. ating income changed as of 2014. Previously, all income not related to ore sales was
The Parent Company applies the same accounting principles as the Group, except recognised as other operating income. As of 2014 exchange gains and losses, capital
where stated below in the Parent Company's accounting principles section. gains on sales of non-current assets, and government subsidies are recognised as other
The Annual Report and consolidated financial statements were approved for issue operating income and expenses. All other income items are recognised in net sales with
by the Board of Directors and President on 20 March 2015. The consolidated income associated costs in each function in the consolidated income statement.
statement, consolidated comprehensive income statement and statement of financial The new assessment resulted in an increase in gross profit compared to the past. The
position and the Parent Company's income statement and balance sheet are subject to comparative figures for 2013 were restated in accordance with the new assessment,
approval at the Annual General Meeting on 28 April 2015. which also affected the comparative figures for 2013 in Notes 1–4.

2 Measurement bases applied in preparing the financial statements 6.4 Provisions for urban transformation
Assets and liabilities are recognised at historical cost, apart from certain financial A boundary for impact-related compensation for mining done to date has been defined
assets and liabilities that are measured at fair value. Financial assets and liabilities by LKAB and designated as the impact boundary. Previously, all damages/compensation
that are measured at fair value consist of derivatives, financial assets classified as claims within the impact boundary were estimated and recognised as provisions and
financial assets measured at fair value via profit or loss, investments held to maturity expensed in the income statement.
or available-for-sale financial assets. A contract boundary was introduced for provisions in Kiruna as of 2014. In cases
where there is an agreement or obvious constructive obligation that defines a commit-
3 Functional currency and presentation currency ment related to a future impact area, the provision is recognised according to the con-
The functional currency of the Parent Company is the Swedish krona (SEK), which tract boundary. The impact boundary will continue to act as the boundary for the impact
is also the presentation currency for both the Parent Company and the Group. This of mining done to date and for when the commitment is expensed.
means that the financial statements are presented in SEK. Unless otherwise stated, all The area between the contract boundary and the impact boundary constitutes a mine
amounts are rounded off to the nearest million SEK. asset as regards future mining operations. The mine asset is expensed with respect to
impact boundary movement, that is, when properties, infrastructure etc. are encroached
4 Assessments and estimates in the financial statements upon by the impact boundary.
Preparing the financial statements in accordance with IFRS requires company man- The effect of the accounting change entails that a mine asset of SEK 3,159 million
agement to make assessments, estimates and assumptions that affect the application was recognised at year-end with a corresponding increase in provisions for urban
of accounting principles and the recognised amounts of assets, liabilities, income and transformation.
expenses.
These estimates and assumptions are reviewed regularly. Changes in estimates are 7 New IFRS that have not yet been applied
recognised in the period in which the change is made if the change only affects that pe- Following is a summary of the new or amended IFRS that take effect in coming
riod, or the period in which the change is made and future periods if the change affects financial years and that are expected to apply to LKAB. None of these standards were
both current and future periods. adopted early.
Assessments made by company management when applying IFRS that have a Applied in
significant effect on the financial statements and estimates that may lead to significant Standards financial year beginning:
adjustments to the following year's financial statements are described in more detail in
Improvements to IFRSs 2010–2012 cycle1 1 July 2014 or later
section 28, Significant estimates and assessments.
Improvements to IFRSs 2011–2013 cycle1 1 July 2014 or later
5 Significant accounting principles applied
The following consolidated accounting principles were applied consistently to all periods Amendments to IAS 19 Employee Benefits 1 July 2014 or later
(Defined-Benefit Plans: Employee Contributions)1
that are presented in the consolidated financial statements, unless otherwise stated.
The consolidated accounting principles were applied consistently in the presentation Amendments to IFRS 11 Joint Arrangements (Account- 1 January 2016 or later
and consolidation of the Parent Company, subsidiaries and joint operations. ing for Acquisitions of Interests in Joint Operations)1
Amendments to IAS 16 Property, Plant and Equipment 1 January 2016 or later
6 Changes for 2014
and IAS 38 Intangible Assets (Clarification of Accept-
6.1 Accounting principles changed due to new or amended IFRS able Methods of Depreciation and Amortisation)1
Described below are changed accounting principles applied by the Group effective 1
January 2014. Other IFRS changes that are effective as of 2014 have had no significant Amendments to IAS 27 Separate Financial Statements 1 January 2016 or later
(Equity Method in Separate Financial Statements)1
effect on the consolidated accounts.
IFRS 10 Consolidated Financial Statements replaces those parts of IAS 27 Consol- Amendments to IFRS 10 Consolidated Financial State- 1 January 2016 or later
idated and Separate Financial Statements that focus on when and how an investor ments and IAS 28 Investments in Associates and Joint
should prepare consolidated accounts. IFRS 10 provides a model to be used when Ventures (Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture)1
assessing whether control does or does not exist for all investments that a company
has. The definition of control includes these three sub-components: a) influence over the Improvements to IFRSs 2012–2014 cycle1 1 January 2016 or later
investee, b) exposure or rights to variable returns from involvement with the investee, IFRS 15 Revenue from Contracts with Customers1 1 January 2017 or later
and c) the ability to use influence over the investee to affect the amount of the investor’s
returns. IFRS 9 Financial Instruments1 1 January 2018 or later
IFRS 11 Joint Arrangements has been applied since 1 January 2014. Joint arrange-
ments are classified as either a joint operation or a joint venture. Classification as a
1
Not approved by the EU.
joint operation or a joint venture is determined by the parties’ contractual rights and
obligations. Interpretations Applied in financial year beginning:
The Group has a joint arrangement in the form of a joint operation, which was previously IFRIC 21 Levies2 17 July 2014 or later
recognised as participations in a joint venture. The transition to IFRS 11 has not led to
any change in the accounting of this holding. 2
Approved by the EU on 17 June 2014, applicable to financial years beginning as at 17
IFRS 12 Disclosure of Interests in Other Entities applies to entities that have interests June 2014 or later within the EU.
in subsidiaries, joint arrangements, associates and unconsolidated structured entities.
IFRS 12 establishes objectives for disclosure and specifies the minimum disclosure that
an entity must provide to meet those objectives.
102 NOTES

New and amended standards that will affect consolidated financial reporting from 2015: trol exists if the Parent Company has influence over the object of investment, is exposed
to or has rights to variable returns from its involvement and can use its influence over
Described below are the new and amended standards and interpretations that are the investment to affect returns. In assessing whether control exists, potential voting
expected to affect the consolidated financial statements in the period to which they are shares and whether de facto control exists should be taken into account.
applied for the first time. Subsidiaries are recognised according to the acquisition method. This method means
IFRS 15 Revenue from Contracts with Customers provides a model for revenue that acquisition of a subsidiary is regarded as a transaction whereby the Group indirect-
recognition for almost any income arising from contracts with customers, except leases, ly acquires the subsidiary’s assets and assumes its liabilities. The acquisition analysis
financial instruments and insurance policies. The purpose of a new revenue standard determines the fair value on the date of acquisition of acquired identifiable assets and
is to have a single principle-based standard for all industries that replaces existing assumed liabilities and any non-controlling interest.
standards and interpretations on revenue. The basic principle for revenue recognition is In the case of business combinations where the transferred consideration, any
that an entity should recognise revenue when all risks and rewards associated with the non-controlling interest and fair value of previously owned participating interest (in the
goods or services are transferred to the customer in exchange for compensation for the case of step acquisitions) exceed the fair value of the assets acquired and liabilities
goods or services. assumed, the difference is recognised as goodwill. When the difference is negative, a
The new standard may have an impact on service agreements, sales of various ele- so-called low-cost acquisition is recognised directly in profit for the year.
ments of goods and/or services, long-term contracts, consulting fees and license-based Non-controlling interest arises in cases where less than 100% of the subsidiary
sales. All businesses will be affected by the new, significantly expanded disclosure is acquired. There are two ways of recognising non-controlling interest. They are
requirements. recognising non-controlling interest as a share of proportional net assets or recognising
Management’s assessment is that the application of IFRS 15 may affect the non-controlling interest at fair value, which means that non-controlling interest has
recognised amounts in the financial statements for consolidated financial assets and a participating interest in goodwill. Choosing between the two options for recognising
liabilities. A detailed analysis of the effects of implementing IFRS 15 has not yet been non-controlling interest can be done separately for each acquisition.
done so the effects can not yet be quantified. 10.2 Transactions that are eliminated on consolidation
IFRS 9 Financial Instruments will replace IAS 39 Financial Instruments: Recogni- Intra-group receivables and liabilities, income or expenses, and unrealised gains or
tion and Measurement: The IASB has completed a whole “package” of amendments losses arising from intra-group transactions between Group companies are eliminated
concerning recognition of financial instruments. The package includes a model for entirely when preparing the consolidated financial statements.
classifying and measuring financial instruments, an expected loss impairment model
and a significantly revised approach to hedge accounting. IFRS 9 is effective from 1 11 Foreign currency
January 2018, provided the EU adopts the standard. The main requirements of IFRS 9 11.1 Foreign currency transactions
are described below. Foreign currency transactions are translated into the functional currency at the ex-
New requirements are introduced for classification and measurement of financial as- change rate in effect on the transaction date. Functional currency is the currency of the
sets. The categories for financial assets found in IAS 39 are replaced by two categories: primary economic environment where companies conduct their operations. Monetary
measurement at fair value or measurement at amortised cost. Amortised cost is used assets and liabilities in foreign currencies are translated into the functional currency at
for instruments held in a business model whose purpose is to receive the contracted the exchange rate in effect at the end of the reporting period. Exchange rate differences
cash flows, which should consist of payments of principal and interest on principal on that arise from translations are recognised in profit for the year. Non-monetary assets
specified dates. Other financial assets are recognised at fair value and the possibility and liabilities that are recognised at historical cost are translated at the exchange rate
of applying the fair value option as per IAS 39 is retained. Changes in fair value are to in effect on the transaction date. Non-monetary assets and liabilities recognised at
be recognised in the income statement, with the exception of changes in value of equity fair value are translated to the functional currency at the rate in effect on the date of
instruments that are not held for trading and which were initially recognised as changes measurement at fair value.
in value in other comprehensive income. 11.2 Financial statements of foreign entities
IFRS 9 will also include parts that affect the classification and measurement of Assets and liabilities in foreign operations, including goodwill and other group-related
financial liabilities. Most of these correspond with the previous rules of IAS 39 apart surpluses and deficits, are translated from the foreign operations’ functional currencies
from financial liabilities that are voluntarily measured at fair value according to the fair to SEK, the Group’s presentation currency, at the exchange rate in effect at the end
value option. For those liabilities, the change in value is divided into changes that are of the reporting period. Income and expenses in a foreign operation are translated to
attributable to a company’s credit rating and changes in the reference rate. SEK at the average exchange rate that constitutes an approximation of the rates that
The new impairment model will require more regular impairment of expected credit applied when the transaction occurred. Translation differences that arise from currency
losses and that they should be recognised from initial recognition of the asset. translation of foreign operations are recognised in other comprehensive income and
The new rules on hedge accounting include simplification of effectiveness tests and accumulated in a separate component in equity called the translation reserve.
an expansion of which hedging instruments and hedged items are allowed. When control of a foreign operation ceases, the accumulated translation differences
Extended disclosure requirements for the period in which IFRS 9 is applied for the attributable to the operation are realised, at which point they are reclassified from the
first time are introduced in IFRS 7. translation reserve in equity to profit for the year.
Management’s assessment is that the application of IFRS 9 may affect the recog-
nised amounts in the financial statements for consolidated financial assets and liabili- 12 Revenue
ties. A detailed analysis of the effects of implementing IFRS 9 has not yet been done so 12.1 Sale of goods and rendering of services
the effects can not yet be quantified. Income from the sale of goods is recognised in profit for the year when the significant
Other new and amended standards and interpretations that have not taken effect are risks and benefits associated with ownership of the goods have been transferred to the
not expected by management to have any significant effect on the consolidated financial buyer. Income from services is recognised in profit for the year based on the stage of
statements when they are applied for the first time. completion at the end of the reporting period. Income is not recognised if it is probable
that future economic benefit will not accrue to the Group. Income is recognised at the
8 Classification etc. fair value of the consideration that is received or is expected to be received, less any
Non-current assets and liabilities consist essentially of amounts that are expected to discounts.
be recovered or paid more than twelve months from the end of the reporting period.
Current assets and liabilities consist essentially of amounts that are expected to be 12.1.1 Sale of iron ore, Mining Division
recovered or paid within twelve months of the end of the reporting period. Iron ore trading is conducted in US dollars. LKAB prices iron ore according to two price
models: a fixed-price model and a variable-price model with an index-linked price based
9 Operating segment reporting on the spot price.
An operating segment is a part of the Group that engages in business operations The sale of iron ore is recognised upon delivery to the customer in accordance with
from which it may generate income and incur expenses and for which independent the sales terms. Sales are recognised less value added tax and translation is at the
financial information is available. An operating segment’s earnings are monitored by current exchange rate. If sales are hedged by forward exchange contracts translation is
the company’s chief operating decision-maker, which is Group management, to assess at the hedged rate.
its performance and to allocate resources to the operating segment. There are three In the variable-price model, quarterly prices are applied and the price is determined
operating segments identified within the LKAB Group: Mining Division, Minerals Division after the end of the quarter. The price is mainly affected by the current quarter’s aver-
and Special Businesses Division. See Note 3 for a further description of the classifica- age of 62% sinter fines CFR in China. This means that income for the quarter is based
tion and presentation of operating segments. on a preliminary price. After the end of the quarter, a price adjustment is made that is
allocated to the quarter.
10 Consolidation principles and business combinations Preliminary invoicing is often done at delivery taking into account the iron and
10.1 Subsidiaries moisture content of the delivery. When final values are confirmed, income is adjusted as
Subsidiaries are companies that operate under the control of the Parent Company. Con- necessary and then fixed. Income is recognised in net sales.
 NOTES 103

12.1.2 Sale of industrial minerals, Minerals Division The measurement of deferred tax is based on how the carrying amount of assets or
The Minerals Division of the LKAB Group trades in a number of different minerals, both liabilities is expected to be realised or settled. Deferred tax is calculated by applying the
minerals in its own possession, such as magnetite, huntite and mica, and external min- tax rates and tax regulations that are set or for all practical purposes set at the end of
erals that are either further processed within the Group or sold on in unchanged form the reporting period.
to the end customer. Trade in industrial minerals occurs either in the country’s local Deferred tax assets related to deductible temporary differences and loss carry-for-
currency or in a major currency like USD or EUR. wards are only recognised to the extent that it is probable they will be utilised. The value
The mineral magnetite is bought from the Mining Division. The prices are agreed of deferred tax assets is reduced when it is no longer deemed probable that they can
upon quarterly and are based on the Parent Company’s global price agreements for iron be utilised.
ore products. Other in-house minerals are priced internally, while external minerals are Any additional income tax arising from dividends is recognised when the dividend is
priced according to individual price agreements with each supplier that can be made recognised as a liability.
annually or at shorter intervals.
Sales of minerals are reported to customers in accordance with agreed upon sales 16 Financial instruments
terms. Sales are recognised less value added tax and translation is at the current Financial instruments recognised in the statement of financial position include assets
exchange rate. If sales are hedged by forward exchange contracts translation is at the such as cash and cash equivalents, loans receivable, accounts receivable, financial
hedged rate. investments and derivatives. Liabilities include trade payables, loans payable and
Invoicing is done on delivery to the customer according to agreed upon prices and derivatives.
payment terms. Income is recognised in net sales. Classification of consolidated financial assets and liabilities is indicated in Note 31
Financial risks and risk management. Recognition of financial income and expense is
12.2 Rental income also discussed in the preceding Principle 14.
Rental income from property is recognised on a straight-line basis in the income state-
ment, based on the terms of the rental agreement. Rental income is recognised in other 16.1 Recognition and derecognition in the statement of financial position
operating income. A financial asset or financial liability is recognised in the statement of financial
position when the company becomes party to the contractual terms of the instrument. A
12.3 Government grants receivable is recognised when the company has delivered and a contractual obligation
Government grants are recognised in the statement of financial position as deferred in- for the counterparty to pay exists, even if an invoice has not yet been sent. Accounts
come when there is reasonable assurance that the grant will be received and the Group receivable are recognised in the statement of financial position when the invoice has
will comply with the terms associated with the grant. Grants are accrued systematically been sent. Liabilities are recognised when the counterparty has delivered and there
in profit for the year in the same way and over the same periods as the costs for which is a contractual obligation to pay, even if the invoice has not yet been received. Trade
the grants are intended to compensate. Government grants related to assets are recog- payables are recognised when an invoice is received.
nised as a reduction in the asset’s carrying amount. A financial asset is derecognised from the statement of financial position when the
13 Leasing contractual rights are realised, expire or the company loses control over them. The
Leases are classified in the consolidated financial statements as either finance leases same applies to a portion of a financial asset. A financial liability is derecognised from
or operating leases. A lease is considered a finance lease when the economic risks and the statement of financial position when the contractual obligation is fulfilled or other-
benefits associated with ownership are, in essence, transferred to the lessee. If this is wise extinguished. The same applies to a portion of a financial liability.
not the case, it is classified as an operating lease. The Group’s leases are essentially A financial asset and a financial liability are offset and the net amount is recognised
operational. in the statement of financial position only when there is a legally enforceable right to
In operating leases lease payments are recognised on a straight-line basis over the offset the amounts and there is an intention to settle on a net basis or to realise the
term of the lease. However, certain variable payments are usually expensed regularly. asset and settle the liability.
Acquisition and disposal of financial assets are recognised on the trade date, which
14 Financial income and expense is the date on which the company undertakes to acquire or dispose of the asset, except
Financial income consists of interest income on invested funds, dividend income, gains in cases where the company acquires or disposes of listed securities when the settle-
from the disposal of available-for-sale financial assets, gains from changes in value of ment date is used. The settlement date is the date on which an asset is delivered to or
financial assets assessed at fair value via profit or loss and gains on hedging instru- by the company.
ments that are recognised in profit for the year. A spot purchase or sale in the fair value option category is recognised on the date of
Interest income on financial instruments is recognised using the effective interest settlement.
method (see below). Dividend income is recognised when the right to receive payment 16.2 Classification and measurement
is established. Earnings from the disposal of financial instruments are recognised when Financial instruments that are not derivatives are initially recognised at cost, cor-
the risks and benefits associated with ownership of the instrument are transferred to responding to the instrument’s fair value plus transaction costs. This applies to all
the buyer and the Group no longer has control over the instrument. financial instruments except those classified as financial assets and liabilities carried at
Financial expenses consist of interest expenses on borrowings, interest expenses on fair value via profit or loss, which are recognised at fair value less transaction costs. A
provisions, interest expenses on defined benefit pension obligations, revaluation losses financial instrument is classified on initial recognition based on the purpose for which it
on financial assets assessed at fair value via profit or loss, impairment of financial was acquired. The classification determines how the financial instrument is measured
assets and losses on hedging instruments that are recognised in profit for the year. after initial recognition as described below.
Borrowing costs are recognised in profit or loss using the effective interest method. Derivatives are initially recognised at fair value, meaning that transaction costs are
Foreign exchange gains and losses are recognised net. charged to profit for the period. Following initial recognition, derivatives are recognised
The effective interest rate is the rate that makes the present value of all estimated as described below. If derivatives are used for hedge accounting and to the extent this is
future payments or receipts during the expected fixed interest term equal to the carry- effective, changes in value of the derivative are recognised in the income statement at
ing amount of the receivable or liability. The calculation includes all fees paid or received the same time and on the same line of the income statement as the hedged item. Even
by the contracting parties that are part of the effective interest rate, transaction costs if hedge accounting is not applied, the value gain or loss on the derivative is recognised
and all other premiums or discounts. as income or expense in operating profit or net financial items, based on the purpose of
15 Taxes the derivative and whether its use is related to an operating item or a financial item. In
Income tax consists of current tax and deferred tax. Income tax is recognised in profit hedge accounting, the ineffective portion is recognised in the same manner as changes
for the year except when the underlying transaction is recognised in other compre- in value of derivatives not designated for hedge accounting.
hensive income or equity, in which case the associated tax effect is recognised in other In accordance with IAS 39, LKAB has chosen not to include the interest component of
comprehensive income or equity. forward exchange contracts in hedging relationships when applying hedge accounting
Current tax is tax to be paid or received for the current year, applying the tax rates in the Group. Changes in value of forward exchange contracts attributable to the interest
that were set or for all practical purposes were set at the end of the reporting period, as component are instead recognised as financial income or expense on the Forward
well as the adjustment of current tax attributable to prior periods. exchange contract – interest component line since the interest component is considered
Deferred tax is calculated using the balance sheet method, based on temporary to be financial in nature.
differences between the recognised and written-down values of assets and liabilities. For option agreements, only the intrinsic value of the option as a hedging instrument
Temporary differences are not taken into consideration in consolidated goodwill is identified. Changes in an option’s time value are recognised in the income statement
nor for differences that arise on initial recognition of assets and liabilities that are not as described above.
business combinations, which on the date of transaction do not affect either recognised Cash and cash equivalents consist of cash on hand and demand deposits with banks
or taxable profit. Temporary differences attributable to participations in subsidiaries and and similar institutions, and short-term liquid investments with maturities of three
associates that are not expected to be reversed in the foreseeable future are not taken months or less from the date of acquisition that are subject to an insignificant risk of
into consideration, either. changes in value.
104 NOTES

16.3 Financial assets measured at fair value via profit or loss 18 Property, plant and equipment
This category consists of two sub-groups: financial assets held for trading and other 18.1 Owned assets
financial assets that the company initially chose to place in this category (according to Property, plant and equipment is carried at cost less accumulated depreciation and any
the fair value option). Financial instruments in this category are measured regularly at impairment.
fair value and changes in value are recognised in profit for the year. The first sub-group Cost includes the purchase price and costs directly attributable to the asset to put it
includes derivatives with positive fair value except for derivatives that are designated in place in working order for use in accordance with the intended purpose. The cost of
and effective hedging instruments. The fair value option category includes financial self-constructed non-current assets includes expenditures for materials, expenditures
instruments that, in accordance with management’s strategy, are held and appraised for employee benefits, and other fabrication costs directly attributable to the asset
based on fair value. where applicable. Property, plant and equipment that consists of parts with different
16.4 Loans and receivables useful lives are treated as separate components.
Loans and receivables are non-derivative financial assets with fixed or determinable The carrying amount of a property, plant and equipment item is derecognised from
payments that are not listed on an active market. These assets are measured at amor- the statement of financial position when the asset is disposed of or retired. The gain or
tised cost. Amortised cost is determined on the basis of the effective interest calculated loss arising from the disposal or retirement of an asset is the difference between the
on the date of acquisition. Receivables are recognised at the amount expected to be selling price and the asset’s carrying amount less direct selling expenses. Gains and
received, that is, less bad debts. losses are recognised as other operating income/expense.

16.5 Investments held to maturity 18.2 Exploration and evaluation expenditures

Investments held to maturity are financial assets that include interest-bearing secu- Greater knowledge of the extent of the iron ore deposits is necessary to secure access
rities with fixed or determinable payments and fixed terms that the company has an to more ore and ensure the future development of operations in the Mining Division. The
expressed intention and ability to hold to maturity. Assets in this category are measured ore body is surveyed and defined by means of exploration drilling, mainly via drifts ad-
at amortised cost. jacent to it. Ore deposit exploration in both existing and future mining areas is expensed.
This principle is also applied in the exploration of areas outside existing mines.
16.6 Available-for-sale financial assets Evaluation of existing mineral assets is carried out to a lesser extent, mainly to pro-
The available-for-sale category includes financial assets that are not classified in any vide a basis for a so-called mine plan for mineral assets, and this work is expensed.
other category or financial assets that the company initially classified in this category.
Holdings of shares and participations not recognised as subsidiaries or associates are 18.3 Underground facilities
recognised here. Underground facilities from which iron ore is extracted can be divided into waste rock
Assets in this category, with the exception of unlisted shares, are measured regularly mining (development phase) and iron ore mining (production phase).
at fair value with changes in value recognised in other comprehensive income and the Waste rock mining consists of work done to expose the ore body in conjunction
accumulated changes in value in a separate component of equity. Changes in value due with the construction of a new main haulage level, facilities pertaining to transport and
to impairment, interest on debt instruments, dividend income and exchange differences maintenance functions such as railways, roads, drifts, shafts, inclined drifts (a system of
on monetary items are recognised in profit for the year. On disposal of the asset the access for vehicle traffic from surface level to the work site underground), and facilities
accumulated gain or loss previously recognised in other comprehensive income is for service and electrical and air supply. Expenditures for facilities intended for use over
recognised in profit for the year. a period of more than one year are capitalised in the statement of financial position.
Unlisted shares whose fair value can not be reliably measured are measured at cost Depreciation occurs systematically over the life of the main haulage level concerned.
with regular impairment testing. Iron ore mining mainly consists of development, cave drilling and loading, haulage
and hoisting of the ore. Expenditures for these activities have a useful life of at most one
16.7 Financial liabilities measured at fair value via profit or loss year, which is why they are expensed as they are incurred.
This category consists of two sub-groups: financial liabilities held for trading and other
financial liabilities that the company chose to place in this category (fair value option). 18.4 Open-pit mines
See the description above under Financial assets measured at fair value via profit or Iron ore mining above ground takes place in so-called open-pit mines. Stripping is done
loss. The first category includes the Group’s derivatives with negative fair values, with to expose the ore body and such things as moraine and barren rock are removed. This is
the exception of derivatives that are designated and effective hedging instruments. called barren rock mining.
Changes in fair value are recognised in profit for the year. The company has no financial During the development phase expenditures are capitalised as part of the cost of the
liabilities in the fair value option category. mine and depreciation occurs systematically over the life of the mine.
Expenditures on barren rock mining during the production phase that provide
16.8 Other financial liabilities improved access to ore for future mining are recognised as assets and are depreciated
Loans and other financial liabilities, such as trade payables, are included in this catego- according to the production-based method.
ry. Liabilities are measured at amortised cost.
18.5 Remediation
17 Derivatives and hedge accounting Future expenditures on dismantling and removing assets and restoring sites or areas
The Group’s derivatives are classified as cash flow hedges of forecasted transactions. where they are located (remediation costs) as relates to ongoing operations are capital-
Risks that the Group is subject to such as exchange rate exposure, changes in iron ore ised. Capitalised amounts consist of the present value of estimated expenditures that
prices and changes in energy prices are hedged. Hedge accounting is applied when the are simultaneously recognised as provisions.
requirements for hedge accounting are met (see below). 18.6 Subsequent expenditures
Derivatives are initially recognised at fair value, meaning that transaction costs are Subsequent expenditures are added to the cost only when it is probable that future
charged to profit for the period. Following initial recognition, derivatives are measured economic benefits associated with the asset will flow to the company and the cost can
at fair value and changes in values are recognised as described below. An embedded be measured reliably. All other subsequent expenditures are recognised as expenses in
derivative is recognised separately unless it is closely related to the host contract. the period in which they arise.
To qualify for hedge accounting under IAS 39, there must be a clear link to the A subsequent expenditure is added to the cost if the expenditure relates to the
hedged item. The hedge must also effectively protect the hedged item; hedging must replacement of identified components or parts thereof. In cases where a new compo-
be documented and its effectiveness measurable. Gains and losses on hedges are nent is created, the expenditure is also added to the cost. Any undepreciated carrying
recognised in profit for the year at the same time as gains and losses are recognised for amounts on replaced components, or parts thereof, are retired and expensed in con-
the items that are hedged. junction with the replacement. Repairs are expensed as incurred.
The derivatives used to hedge highly probable future cash flows are recognised in
the statement of financial position at fair value. Changes in value for the period are 18.7 Depreciation principles
recognised in other comprehensive income and accumulated changes in value are Depreciation is on a straight-line basis over the asset’s estimated useful life; land is not
recognised in a separate component in equity (hedging reserve) until the hedged flow depreciated. The Group applies component depreciation, which means that a compo-
affects profit for the year, at which point the hedging instrument’s cumulative changes nent’s estimated useful life forms the basis for depreciation. Facilities and equipment
in value are reclassified to profit for the year in conjunction with the hedged item’s used in open-pit mines are normally depreciated over the lesser of expected life and the
effect on profit for the year. life span of the mine to which they relate.
The hedged flows can be both contracted and forecasted transactions.
 NOTES 105

The following depreciation periods are applied to property, plant and equipment includ- Expenditures on development, whereby research findings or other knowledge is applied
ing future remediation costs: to produce new or improved products or processes, are recognised as assets in the
Owner-occupied properties, rental properties 15–100 years statement of financial position if the product or process is technically and commercially
feasible and the company has sufficient resources to complete development and then
Machinery and other technical equipment 5–20 years
use or sell the intangible asset. The value includes directly attributable expenditures
Equipment, tools, fixtures and fittings 5–20 years such as goods and services and employee benefits. If the above criteria are not met, the
Underground facilities 12–20 years expenditures must be expensed. Because no such development expenditures have met
Surface mining facilities As ore is extracted these criteria thus far, LKAB expenses all expenditures for development as incurred.

Capitalised remediation costs As space for 19.4 Other intangible assets

waste rock stockpile stockpile is utilised Other intangible assets such as software acquired by the Group are carried at cost less
Capitalised remediation costs – other Estimated life of present produc- accumulated amortisation (see below) and impairment losses.
tion structure. Reviewed once 19.4.1 Emission allowances
new main haulage levels are put LKAB participates in the EU’s system for trade in emission allowances, which grants
into use. the right to emit carbon dioxide. Allowances are allocated across the European market.
The emission allowances are recognised as intangible assets and deferred income on
Owner-occupied properties are mainly classified as buildings, land improvements
allocation, since the company has not qualified for any allowances at the time of issue.
and land. Buildings and land improvements consist of several components that are
Qualification is at the same rate as actual emissions, when a liability to supply
classified on the basis of function, such as roads, surfacing, service facilities, processing
emission allowances arises. The charge is reversed from deferred income to provision
plants etc.
for emissions allowances. The liabilities are measured at the cost of allocated emission
Rental properties consist of several components with different useful lives. The main
allowances. The income is accrued against the cost it is intended to cover.
classifications are buildings and land. Buildings are divided into several components
When emission allowances are reported, an equivalent number of emission
whose useful lives vary.
allowances must be supplied. Thus the intangible non-current asset is exhausted and
The following main groups of components have been identified and form the basis
the provision for discharged emissions is settled. Where a liability to supply emission
for depreciation of rental properties.
allowances exceeds the remaining allocation of emission allowances, the surplus
amounts are carried as a liability measured at the current market value of the number
Frames, foundations and interior walls 100 years of emission allowances necessary to settle the commitment. For information on
Water, sewage, electrical and heating systems 50 years amounts, see Note 27.
Exterior facades 40 years 19.5 Subsequent expenditures
Windows 50 years Subsequent expenditures on capitalised intangible assets are recognised as assets
in the statement of financial position only when they increase the future economic
Interior finishing and appliances 15 years
benefits of the specific asset to which they relate. All other expenditures are expensed
as incurred.
Depreciation methods, residual values and useful lives are assessed at the end of each
year and adjusted as necessary. 19.6 Amortisation principles
Amortisation is recognised in the income statement on a straight line basis over the
18.8 Urban transformation
estimated useful life of intangible assets. Intangible assets that can be amortised are
18.8.1 Acquisition of properties
written off from the date they are available for use. The estimated useful lives are:
When property is acquired as part of urban transformation, the cost is divided into a
building component and a mine component. The distinction is based on the assumption
that the building can be used for temporary rental for a limited period from acquisition Mining rights 30–50 years
to evacuation. The building component is calculated as the present value of the net cash Customer-related intangible assets 3–5 years
flows from the rental. The mine component is defined as the property’s total cost less
Software 5 years
the building component.
The building component is expensed in the period in which the building is expected An asset’s residual value and useful life are tested at the end of each reporting period
to be utilised. and adjusted as necessary.
The mine component is expensed immediately on acquisition of property inside the
impact boundary as LKAB has already consumed the economic benefits of the property. 20 Inventories
When property is acquired outside the impact boundary in an area designated for future Inventories are measured at the lower of cost or net realisable value. The cost of inven-
mining, the mine component is instead expensed when the impact boundary encroaches tories is calculated using the first-in, first-out (FIFO) principle and includes expenditures
upon the property in question so as to match the underlying production/consumption of incurred in acquiring the inventory items and bringing them to their existing location
the economic benefits. and condition. For finished goods and work in progress, cost includes an appropriate
For a further description of urban transformation accounting principles, see Principle share of overheads based on normal operating capacity.
28.1.1. Net realisable value is the estimated selling price in the ordinary course of business,
18.8.2 Mine assets less estimated costs of completion and selling expenses.
Mine assets related to future mining in Kiruna are recognised as of 2014. In cases 21 Impairments
where there is an agreement or a clear, constructive obligation that defines a commit- The Group’s recognised assets are assessed at the end of each reporting period to
ment related to a future impact area, the provision is recognised according to a contract determine whether there is any indication of impairment. At the end of each reporting
boundary. The impact boundary will continue to act as the boundary for the impact of period, previously impaired assets other than financial assets and goodwill are tested
mining done to date and for when the commitment is expensed. for reversal.
The area between the contract boundary and the impact boundary constitutes an
asset for future mining operations. The mine asset is expensed with respect to impact 21.1 Impairment of property, plant and equipment, intangible assets and participations in
boundary movement, that is, when properties, infrastructure etc. are encroached upon subsidiaries
by the impact boundary. If impairment is indicated, the recoverable amount of the asset is calculated. The recov-
erable amount for goodwill is also calculated annually. When testing for impairment, if
19 Intangible assets it is not possible to ascertain essentially independent cash flows for an individual asset,
19.1 Goodwill the assets are grouped at the lowest level at which it is possible to identify essentially
Goodwill is measured at cost less any accumulated impairment losses. Goodwill is independent cash flows (a so-called cash-generating unit).
allocated to cash generating units and is tested annually for impairment; see accounting An impairment loss is recognised when the carrying amount of an asset or
principles in section 21.1. cash-generating unit (group of units) exceeds its recoverable amount. Impairment
19.2 Mining rights losses are charged to the income statement. Impairment of assets attributable to a
Mining rights are measured at cost less accumulated amortisation and any impair- cash-generating unit (group of units) is initially allocated to goodwill, after which other
ments. assets in the unit (group of units) are proportionally impaired.
The recoverable amount is the higher of fair value less selling expenses or value in
19.3 Research and development use. When calculating value in use, future cash flows are discounted using a discounting
Expenditures on research aimed at gaining new scientific or technical knowledge is factor that reflects risk-free interest and the risks associated with the specific asset.
expensed as incurred.
106 NOTES

21.2 Impairment of financial assets from previous assumptions or the assumptions change. Revaluation effects are recog-
At each reporting date, the company assesses whether there is objective evidence that a nised in other comprehensive income.
financial asset or group of assets is impaired. Objective evidence consists of observable When the calculation leads to an asset for the Group, the carrying amount of the asset
events that have occurred and have a negative impact on the ability to recover the cost, is restricted to the lower of the surplus in the plan or the asset restriction calculated
such as breach of contract, late or non-payment by the counterparty, or bankruptcy, and using the discount rate. The asset restriction is the present value of the future economic
a significant or prolonged decline in the fair value of a financial investment classified as benefits in the form of reduced future contributions or a cash refund. In calculating the
an available-for-sale financial asset. present value of future reimbursements or payments, any minimum funding requirement
Impairment of accounts receivable is determined based on historical experience of is taken into account.
customer losses on similar receivables. Impaired accounts receivable are recognised at Changes to or reductions in a defined-benefit plan are recognised on the earliest of
the present value of expected future cash flows. Assets near maturity are not discount- the following dates: a) when the change in the plan or reduction occurs or b) when the
ed. Impairment losses are charged to operating profit/loss in the income statement. company recognises related restructuring costs and termination benefits. The changes/
Upon impairment of an equity instrument classified as an available-for-sale financial reductions are recognised immediately in profit for the year.
asset, previously recognised accumulated gains or losses are reclassified to equity via The special employer’s contribution is part of the actuarial assumptions. Special
other comprehensive income to profit for the year. The amount of the accumulated employer's contributions related to the difference between how the pension obligation is
loss that is reclassified from equity via other comprehensive income to profit for determined in a legal entity and in the Group are recognised as part of the net obligation.
the year is the difference between the acquisition cost and the current fair value, less Provisions and receivables are not calculated to present value. The part of the special
any impairment loss on the financial asset previously recognised in profit for the year. employer's contribution that is calculated based on the Pension Obligations Vesting Act
Impairment of available-for-sale financial assets is recognised in profit for the year in a legal entity is recognised for simplicity’s sake as an accrued expense rather than as
under net financial items. part of the net obligation/asset.
21.3 Reversal of impairment The interest expense/income, net of the defined-benefit obligation/asset, is recognised
An impairment of assets included in the scope of IAS 36 is reversed if there is an indica- in profit for the year under net financial items. Net interest income/expense is based
tion that the impairment no longer exists and there has been a change in the assump- on the interest that arises when discounting the net obligation, that is, interest on the
tions underlying the calculation of the recoverable value when the asset was impaired. obligation, plan assets and the effect of any asset restrictions. Other components are
However, impairment of goodwill is never reversed. An impairment loss is reversed recognised in operating profit.
only to the extent that the asset’s carrying amount after reversal does not exceed the 24.3 Short-term benefits
carrying amount that would have been recognised, less amortisation if appropriate, if no Short-term employee benefits are calculated without discounting and recognised as an
impairment loss had been recognised. expense when the related services are received.
Impairment losses on loans and accounts receivable that are recognised at amor- A current liability is recognised for the expected cost of profit-sharing and bonus
tised payments when the Group has a present legal or constructive obligation to make such
cost are reversed if the previous reasons for impairment no longer exist and full payments as a result of services rendered by employees and the obligation can be
payment from the customer is expected. estimated reliably.
Impairment losses on equity instruments classified as available-for-sale financial
assets and previously recognised in profit for the year are reversed via other com- 25 Provisions
prehensive income instead of profit for the year. The impaired value is the value from A provision differs from other liabilities because there is uncertainty about the date of
which subsequent revaluations are made, which are recognised in other comprehensive payment or the amount required to settle the provision. A provision is recognised in the
income. statement of financial position when there is a present legal or constructive obligation as
a result of a past event and it is probable that an outflow of economic resources will be
22 Equity required to settle the obligation and a reliable estimate of the amount can be made.
22.1 Dividends Provisions are made for the amount, which is the best estimate of the expenditure re-
Dividends are recognised as liabilities once they have been approved at the Annual quired to settle the present obligation at the end of the reporting period. Where the effect
General Meeting. of payment timing is important, provisions are determined by discounting the expected
future cash flow at a pre-tax rate that reflects current market assessments of the time
23 Earnings per share value of money and, if appropriate, the risks specific to the liability.
The calculation of earnings per share is based on consolidated profit for the year
attributable to the Parent Company shareholders and on the weighted average number 25.1 Provisions for urban transformation
of shares outstanding during the year. See section 28.1.1 below.
25.2 Provisions for remediation
24 Employee benefits See section 28.1.2 below.
24.1 Defined-contribution pension plans
Defined-contribution pension plans are those for which the company’s obligation is 26 Contingent liabilities
limited to the amount that it agrees to pay. In such cases the size of the employee’s A contingent liability is recognised when there is a possible commitment arising from
pension depends on the contributions the company pays to the plan or to an insurance past events and whose existence is confirmed only by one or more uncertain future
company and the return on capital generated by the contributions. Consequently it is the events, or when there is a commitment that is not recognised as a liability or provision
employee who bears the actuarial risk (that benefits will be lower than expected) and because it is not probable that an outflow of resources will be required or can not be
investment risk (that the invested assets will be insufficient to meet expected benefits). measured with sufficient reliability.
The company’s obligations for defined-contribution plans are recognised as an expense
in profit for the year as they are earned by the employees performing services for the 27 Parent Company accounting principles
company over a given period. The Parent Company has prepared its annual report according to the Swedish Annual
Accounts Act (1995:1554) and the Swedish Financial Reporting Board’s recommendation
24.2 Defined-benefit pension plans RFR 2 Accounting for Legal Entities. Also applied are the Swedish Financial Reporting
Defined-benefit plans are other plans for post-employment benefits other than Board’s recommendations for listed companies. RFR 2 states that in the annual report
defined-contribution plans. The Group’s net obligation in respect of defined-benefit for the legal entity, the Parent Company shall apply all IFRS and interpretations adopted
pension plans is calculated separately for each plan by estimating the amount of future by the EU as far as possible within the framework of the Annual Accounts Act, Pension
benefit that employees have earned through their service in current and prior periods. Obligations Vesting Act and considering the relationship between accounting and taxation.
This benefit is discounted to a present value. The discount rate is the rate at the end of The recommendation specifies the exceptions from and additions to IFRS that must be
the reporting period on a high-quality corporate bond with a maturity corresponding made.
to the Group’s pension obligations. When there is no viable market for such corporate
bonds, the market rate for mortgage bonds with a similar maturity is used instead. The 27.1 Differences between Group and Parent Company accounting principles
calculation is performed by a qualified actuary using the Projected Unit Credit Method. The differences between Group and Parent Company accounting principles are detailed
The fair value of any plan assets are also calculated at the reporting date. below. The specified accounting principles for the Parent Company were applied consist-
The Group’s net obligation is the present value of the obligation, less the fair value of ently to all periods presented in the Parent Company’s financial statements.
plan assets adjusted for any asset restrictions. 27.2 Changed accounting principles
Revaluation effects consist of actuarial gains and losses, the difference between the Unless otherwise stated below, the Parent Company’s accounting principles in 2014
actual return on plan assets and the amount included in net interest income and any changed in accordance with what is stated above for the Group.
changes in the effects of asset restrictions (excluding interest included in net interest 27.3 Classification and presentation
income). Actuarial gains and losses arise either because the actual outcome deviates The Parent Company uses income statement, balance sheet and cash flow statement for
 NOTES 107

the reports that in the Group are called consolidated income statement, statement of 27.12 Group and shareholder contributions
financial position and statement of cash flows, respectively. The income statement and Group contributions are recognised as appropriations.
balance sheet for the Parent Company are presented in accordance with the Annual Shareholder contributions are recognised as an increase in the participations in sub-
Accounts Act, while the corresponding Group reports are based on IAS 1 Presentation sidiaries item by the donor. The recipient recognises shareholder contributions directly
of Financial Statements and IAS 7 Statement of Cash Flows. The most significant against unrestricted equity.
differences from the consolidated statements relate primarily to recognition of financial
income and expenses, financial assets, equity, and that provisions are recognised under 28 Significant estimates and assessments
a separate heading in the balance sheet. The preparation of financial statements requires management and the Board of Direc-
tors to make assessments and assumptions that affect recognised assets, liabilities,
27.4 Subsidiaries and associates income and expenses and other information provided, such as contingent liabilities.
Participations in subsidiaries and associates are recognised in the Parent Company Listed below are the estimates and assessments that are considered most important
using the cost method. This means that transaction costs are included in the carrying for an understanding of the financial statements, considering the level of significant
amount of holdings in subsidiaries and associates. assessments and uncertainties. Conditions for LKAB’s operations change over time,
27.5 Financial instruments and hedge accounting which means that these assessments also change.
Owing to the relationship between recognition and taxation, the rules on financial 28.1 Provisions resulting from mining operations
instruments and hedge accounting in IAS 39 are not applied in the Parent Company as 28.1.1 Provisions for urban transformation
a legal entity. LKAB has extracted iron ore in Norrbotten for more than 120 years. The techniques
In the Parent Company, financial assets are measured at cost less any impairment used in ore mining in underground mines leads to deformations in the form of fissures
and financial current assets at the lower of cost or market. in the ground where mining is conducted. The deformations are already or will become
Financial current assets are measured at the lower of cost or market. The meas- so extensive that it is necessary to gradually move parts of Kiruna and Malmberget.
urement of interest-bearing securities or shares and alternative investments is done Although there are many similarities between conditions in Kiruna and Malmberget,
at the portfolio level. This means that for instruments in the same portfolio, unrealised the geological conditions differ. In Kiruna there is a gradual spread of deformations
gains are offset against unrealised losses. Excess losses are recognised as a reduction with continuous fissuring, while in Malmberget there is widespread undermining of the
of interest income on the other interest income and similar items line. Excess gains are ground in the city centre. The deformations are a direct result of mining operations. For
not recognised. Malmberget it can be said that the impact area from the mining of several different ore
Liabilities are measured at amortised cost. bodies has essentially encircled central Malmberget, which means that it is not able to
Derivatives used for hedging forecasted cash flows are not carried in the balance function as a normal city centre.
sheet. Changes in value of derivatives are recognised in the same period as the hedged LKAB has already had, and will continue to have, significant expenses related to
cash flows. these urban transformations. For instance, LKAB will incur expenses for the acquisition
When hedging receivables in foreign currencies using forward exchange contracts, of properties and municipal infrastructure such as electricity, water and sewage in the
the spot rate for the hedging date is used to measure the hedged receivable. The differ- affected areas. The expenditures arise from LKAB’s mandatory obligation to compen-
ence between the forward and spot rates at the contract’s inception (forward premium) sate damage resulting from its mining activities.
is accrued over the term of the forward exchange contract. Accrued forward premiums Provisions for the damages caused by the deformations cover damage already
are recognised as interest income or interest expense. confirmed and damage not yet confirmed but that will occur in a few years as a result
Derivatives with negative values are recognised as contingent liabilities in the Parent of mining.
Company.
27.6 Financial guarantees LKAB recognises a provision:
The Parent Company’s financial guarantee agreements consist primarily of guarantees 1. When there is a present legal or constructive obligation towards a third party
that benefit subsidiaries. Financial guarantees mean that the company is committed 2. As a result of past events
to reimbursing the holder of a debt instrument for losses it incurs because a specified 3. When it is expected to result in an outflow of economic resources from the company
debtor fails to make payment when due according to the contractual terms. The Parent at settlement
Company applies one of the easing rules permitted by the Financial Reporting Board, as 4.When a reliable estimate of the amount can be made.
compared with the rules of IAS 39, in its recognition of financial guarantee agreements
issued on behalf of subsidiaries. The Parent Company recognises financial guarantee In cases where there is an agreement or a obvious constructive obligation that defines a
agreements as provisions in the balance sheet when the company has a commitment commitment related to a future impact area, the provision is recognised according to a
for which payment will probably be required to settle the commitment. contract boundary. In other cases, a commitment is only recognised when the so-called
27.7 Anticipated dividends impact boundary encroaches on the property boundary or infrastructure. The impact
Anticipated dividends from subsidiaries are recognised in cases where the Parent boundary is the boundary for impact-related compensation for mining done to date that
Company is solely entitled to decide on the size of the dividend and has decided on the has been defined by LKAB.
size of the dividend before publishing its financial statements. The impact boundary in Kiruna is based on the existing environmental conditions
boundary according to rulings from the environmental court. A two-year conversion
27.8 Property, plant and equipment period is added for a safety zone to cover movement that is expected to occur even if
With reference to RFR 2, IAS 16, par. 4, estimated future expenditures for dismantling mining were to cease as well as for a specific area for the Mine City Park, whose
and removing assets and restoring sites or areas where they are located (remediation conversion period of about seven years will take it from urbanised area to park to
costs) in legal entities are not capitalised. Instead, the provision for these expenditures industrial area.
is made gradually over the useful life. The impact boundary is moved each year to meet the spreading of ground defor-
27.9 Intangible assets mations. The movement of the impact boundary is linked to deformation forecasts in
27.9.1 Research and development order to manage the effect of ground deformations not being continuous. Forecasted
All research and development expenditures are recognised as expenses in the Parent movement according to the current deformation forecast is distributed equally over
Company income statement. the period covered by the forecast. Reconciliation is done against updated forecasts of
27.10 Employee benefits ground deformations.
27.10.1 Defined-benefit plans The amount of the provision is calculated on the basis of objective valuation methods
The Parent Company applies principles other than those described in IAS 19 when esti- for each type of asset (railway, land, municipal infrastructure, houses etc.) and a present
mating defined-benefit plans. The Parent Company complies with the provisions of the value is assigned.
Pension Obligations Vesting Act and the regulations of the Financial Supervisory Author- For the provisions recognised according to the contract boundary, the area between
ity since this is a prerequisite for tax deductibility. The most significant differences from the contract boundary and the impact boundary is defined as a mine asset related to
IAS 19 are how the discount rate is determined, that estimation of the defined-benefit future mining operations.
obligation is based on current salary levels without consideration of future salary in- All damages/compensation claims that are within the area delimited by the impact
creases and that all actuarial gains and losses are recognised in the income statement. boundary are calculated and recognised as an expense in the income statement, in
light of the fact that LKAB consumed the economic benefits that the mining generated.
27.11 Taxes The impact boundary’s movement is expensed each year. The expensing occurs either
In the Parent Company balance sheet, untaxed reserves are recognised without dividing through expensing of the mine asset or through an increase in provisions.
them into equity and deferred tax liabilities, in contrast to the Group. Similarly, the Par- The forecast for ground deformations in Kiruna was updated in December 2014.
ent Company does not allocate any part of appropriations to deferred tax in the income The new measurements show that the deformations are progressing more slowly than
statement. previously estimated. The addition of the safety zone and Mine City Park has been esti-
108 NOTES

mated at 450 metres to date, which corresponds to nine years with a displacement of in production and the ore base are reflected in the applied depreciation method and useful
50 metres per year. The updated forecast estimates the movement at 40 metres per life, which is of particular importance when deciding on new main haulage levels. To
year for a total of 360 metres. The effect of the changed deformation forecast is carried achieve this, reassessment of the useful lives and depreciation methods must be continu-
forward based on the estimated impact boundary as of 31 December 2014. ously reassessed. Changes in assessments could have a material impact on consolidated
For Malmberget there are no environmental conditions as determined by a court earnings and financial position.
of law. As indicated above however, it can be stated that central Malmberget is largely The carrying amount of property, plant and equipment at year-end amounted to
encircled by the impact area from mining operations. Provisions have therefore been SEK 39,529 (33,759) million. Depreciation for the year amounted to SEK 2,865 (2,432)
made for this entire impact area. million.
The impact will continue for many years ahead and there will be uncertainty regard-
ing geological consequences, assumptions about market values, demolition and waste
disposal costs etc.
The uncertainty in the estimates made so far will decrease as the experience gained
is taken into account in future estimates.
Provisions for urban transformation at year-end amounted to SEK 11,683 (6,304) NOTE 2
million. DISTRIBUTION OF REVENUE
28.1.2 Provisions for remediation Group Parent Company
In addition to urban transformation, mining operations also give rise to remediation, SEK million 2014 2013 2014 2013
dismantling and decontamination obligations. These obligations mainly arise as a result Net sales:
of legal environmental requirements. The Group recognises provisions for remediation
Sale of goods – iron ore 18,356 21,745 18,665 21,918
costs for all legal and constructive obligations.
Future expenditures for remediation are those resulting from closed operations and Sale of goods – industrial minerals 1,870 1,660
ongoing operations. The company collaborates with regulatory authorities to devise Other 389 468 305 347
long-term plans for remediation of the mining areas. Provisions for ongoing operations Total 20,615 23,873 18,970 22,265
are based on these remediation plans.
The amount of the provision is calculated based on acreage and an assessment
of future expenditures based on present day technology and general assumptions. The
provision is assigned a present value. Future expenditures for closed operations are
expensed so as to match underlying production/consumption of the economic benefits.
Future expenditures for ongoing operations are capitalised.
Reviewing and updating of provisions is done as needed when the mine assets’ esti- NOTE 3
mated useful lives, costs, technical conditions, regulations or other conditions change. SEGMENT REPORTING
The uncertainty in the estimates made so far will decrease as the experience gained
is taken into account in future estimates. Segment information
Provisions for remediation at year-end amounted to SEK 1,127 (1,067) million. Group management has determined the operating segments based on the information
28.2 Retirement benefits used to make strategic decisions in the business in which LKAB operates. The Group's
Several assumptions are important components in the actuarial methods used to internal reporting system is based on this, and a product and division perspective was
calculate pension provisions, and these may have a significant impact on the recognised chosen. Group management assesses and follows up on business activities in each divi-
net obligation and annual pension cost. The discount rate and expected return on plan sion, and follow-up focuses on the operating profit and operating assets of the business.
assets are two critical assumptions used in the calculation of net pension cost and the Intra-group prices between segments are based on the arm’s length principle, that is,
present value of pension obligations. between parties that are independent of each other, well-informed and with an interest in
These assumptions are assessed annually for each pension plan in each country. completing transactions.
Several factors do not change as often, such as personnel turnover and retirement age. Assets and liabilities are included as directly attributable items in the segments’ profit
For financial and other reasons, actual outcomes often differ from actuarial assump- or loss.
tions. Unallocated items in the income statement relate to net financial items and tax
The discount rate enables the measurement of future cash flows to present value expenses. Assets and liabilities that are not allocated by segment are tax assets and tax
on the measurement date. This rate must correspond to the yield on either high-quality liabilities, financial investments and financial liabilities. Each segment’s capital expendi-
corporate bonds or, if there is no viable market for such bonds, government bonds. A tures on property, plant and equipment include all tangible investments.
lower discount rate increases the present value of the pension provision and the annual
cost. The Group comprises the following operating segments:
To determine the expected return on plan assets, LKAB considers the current and
anticipated categories of the assets as well as historical and expected returns on the Mining Division. The Mining Division mines and processes iron ore into products that are
various categories of assets. used in steelmaking. Its main products are pellets and fines and the number of customers
Provisions for pensions at year-end amounted to SEK 1,866 (1,610) million. is limited to about 20.
28.3 Taxes Minerals Division. The Minerals Division develops, produces and markets industrial miner-
Significant assessments are made to determine current tax assets and liabilities as well al products for a variety of uses, and customers are found in numerous industries all over
as deferred tax assets and liabilities. LKAB must assess the likelihood that deferred the world. The main industries include construction, oil and gas extraction, rubber, plastics
tax assets will be utilised to offset future taxable profits. Actual outcomes may differ and paint industry, chemical industry, automobile industry and foundries. The number of
from the estimates, for instance due to changed tax legislation or the outcome of final customers amount to several thousand.
reviews of tax returns by tax authorities and tax courts. Special Businesses Division. LKAB has several subsidiaries in the Special Businesses
A deferred tax liability (net) of SEK -3,379 (-3,794) million was recognised at year- Division. These companies are at present mainly sub-contractors to the Mining Division
end. The corresponding amount for current tax is a net tax liability of SEK -198 million and Minerals Division. Services provided and goods produced and sold include drilling
(asset SEK 241 million). equipment, explosives, concrete, tunnelling, rock reinforcement, and iron ore crushing.
28.4 Disputes
LKAB is involved in a number of disputes and legal proceedings in the ordinary course
of business. Management consults with legal counsel on matters related to litigation
and other experts both within and outside the company on matters concerning the or-
dinary course of business. Management’s considered opinion is that neither the Parent
Company nor any subsidiary is currently involved in any legal or arbitration proceedings
that are expected to have a material effect on the business, its financial position or
operational earnings.
28.5 The useful life and depreciation method for property, plant and equipment
Depreciation periods for main haulage levels, facilities and equipment in mines is
dependent on future ore extraction and the mine’s life span. It is essential that changes
 NOTES 109

NOTE 3
SEGMENT REPORTING (CONT.)

The segment information provided is as follows:

Operating segment Special Businesses Consolidated adjust-
Group Mining Division Minerals Division Division Total ments and eliminations1 Group
SEK million 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013
External income 18,515 21,962 1,870 1,660 198 251 20,583 23,873 32 20,615 23,873
Internal income 498 278 1 1,534 1,691 2,032 1,970 -2,032 -1,970
Total income 19,013 22,240 1,870 1,661 1,732 1,942 22,615 25,843 -2,000 -1,970 20,615 23,873

Operating profit 223 6,951 212 63 153 277 588 7,291 -18 348 570 7,639
Net financial items 24 129
Profit before tax 594 7,768
Tax -247 -1,736
Profit for the year 347 6,032

Assets 44,680 41,163 1,175 1,102 1,066 1,045 46,921 43,310 -1,668 -2,182 45,253 41,128
Unallocated assets 17,880 16,694
Total assets 63,133 57,822

Liabilities 18,469 12,100 699 553 429 355 19,597 13,008 347 -471 19,944 12,537
Unallocated liabilities 5,435 3,813
Total liabilities 25,379 16,350

Investments in property, plant and equipment 5,419 5,902 25 24 47 53 5,491 5,979 162 5,491 6,141

Significant non-cash items

Depreciation of property, plant and equipment -2,743 -2,291 -27 -26 -63 -70 -2,833 -2,387 -32 -45 -2,865 -2,432
Impairment of property, plant and equipment -16 -1 -1 -16 -1 -16
Provision for urban transformation -3,432 -620 -3,432 -620 -3,432 -620
Unallocated provision (interest) -145 -120
Total provision for urban transformation -3,577 -722

1Refers to intra-Group transactions and Group-related adjustments, including those based on adjustment of the consolidated pension provision under IAS 19 and internal gains.

Operating segments (cont.)

Geographic areas
The vast majority of Group sales are made essentially from Sweden and, therefore, from Swedish companies. Nearly all of the Group’s products are made exclusively in Sweden. Cap-
ital expenditures have mainly been made in Sweden. The carrying amount of assets by country/region is based on where the assets are located and the income is recognised which
in turn is based on where sales, production, delivery and invoicing occur, regardless of where the customers are located.

Sweden Rest of Europe Middle East & Asia Rest of world

Group 2014 2013 2014 2013 2014 2013 2014 2013
SEK million
External income 18,997 22,264 836 956 496 552 286 101
Property, plant and equipment 36,590 31,252 2,920 2,493 18 14 1
Investments in property, plant and equipment 4,827 5,907 660 227 6 4 1

Information about major customers

Under IFRS 8, the company must disclose information about major customers. The LKAB Group has five major customers, each of which represents more than ten percent of Group
sales. Sales to these customers accounted for 18% (15), 17% (16), 13% (11), 11% (14) and 11% (9) and are recognised in the Mining Division operating segment.

Mining Division Minerals Division Special Businesses Division Parent Company total
Parent Company 2014 2013 2014 2013 2014 2013 2014 2013
SEK million
Net sales 18,970 22,265 18,970 22,265

Europe Middle East & Asia Rest of world Parent Company

Parent Company 2014 2013 2014 2013 2014 2013 2014 2013
SEK million
Net sales 13,200 15,421 4,781 5,855 989 989 18,970 22,265
110 NOTES

NOTE 4 NOTE 5
OTHER OPERATING INCOME OTHER OPERATING EXPENSES
Group Parent Group Parent
SEK million 2014 2013 2014 2013 SEK million 2014 2013 2014 2013
Rental income, properties 182 165 Property costs 134 131
Gain on sale of non-current assets 4 Loss on sale of non-current assets 17 4 6
Exchange gain on receivables/liabilities 38 27 9 20 Exchange loss on receivables/liabilities 23 11 13
related to operations related to operations
Rental and leasing income 1 1 Insurance costs 109 97
Other 90 22 63 10 Other 94 60 61 15
311 219 72 30 377 303 74 21

NOTE 6
EMPLOYEES, EMPLOYEE BENEFIT EXPENSES AND REMUNERATION OF SENIOR EXECUTIVES

Average number of Of whom Of whom Of whom Of whom

employees women men women men
Parent Company 2014 2013
Sweden 3,449 20% 80% 3,375 19% 81%
Parent Company total 3,449 20% 80% 3,375 19% 81%

Subsidiaries
Sweden 520 17% 83% 500 15% 85%
China 47 30% 70% 49 31% 69%
Netherlands 28 32% 68% 25 32% 68%
Norway 217 12% 88% 202 10% 90%
United Kingdom 202 23% 77% 193 21% 79%
Germany 18 50% 50% 18 50% 50%
Other countries 58 22% 78% 65 25% 75%
Subsidiaries total 1,090 19% 81% 1,052 17% 83%

Group total 4,539 20% 80% 4,427 19% 81%

Gender distribution in company management as at 31 December

2014 2014 2013 2013

Parent Company Percentage women Percentage men Percentage women Percentage men
Board of Directors 30% 70% 36% 64%
Other senior executives 30% 70% 20% 80%

Salaries and other remuneration of senior executives and other employees

along with social costs in the Parent Company
2014 2013
Senior Senior
executives executives
Parent Company (22 persons) Other (21 persons) Other
SEK million employees Total employees Total
Salaries and other remuneration
Sweden 29 1,831 1,860 26 1,730 1,756
Parent Company total 29 1,831 1,860 26 1,730 1,756
Social costs1 908 1,027
1Of which pension costs 327 495
 NOTES 111

Remuneration of 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 the remuneration of senior executives
The remuneration of the Chairman of the Board and Board members is decided at the Annual General Meeting (AGM). There are additional special fees for committee work.
For the remuneration of Group management, the AGM resolved to apply the most current government employment guidelines for persons in managerial positions and for incen-
tive programmes for employees in state-owned enterprises. Government guidelines were last updated in April 2009.
Preparation and decision-making processes for determining the remuneration of senior executives
Remuneration terms for the President and salary-setting principles for Group management are prepared by a remuneration committee appointed by the Board of Directors. Four
board members make up the committee. The Board takes decisions based on committee proposals. The Chairman of the Board approves the annual salary reviews of other Group
management executives.
Principles for the remuneration of senior executives
The President and other Group management executives are paid fixed salaries. The salaries are pensionable.
President Lars-Eric Aaro’s monthly salary was SEK 400,000. Retirement age for the President is 65. The President’s pension plan is a defined-contribution plan whereby LKAB
makes a yearly provision of 30% of the President’s current fixed annual salary for a pension plan chosen by the President, which may include the ITP plan. The portion of the alter-
native 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 retirement benefits under previous
employment agreements as a vice president are placed in a paid-up policy. The President is entitled to waive salary in favour of further pension provisions up to a maximum level
determined by LKAB.
The retirement age for other senior executives is 65. They have a defined-contribution pension plan to which LKAB allocates 30% of annual fixed salary.
As at 31 December 2012, the former defined benefit plans for other senior executives who joined Group management before 2009 (four persons) were settled by commutation.
The right to the commutation is vested gradually in three equal parts. The first part is considered fully vested upon signing the agreement (31 December 2012). The second part is
considered vested one year after signing the agreement (31 December 2013) and the third part is considered vested two years after signing the agreement (31 December 2014).
Mutual notice of termination is six months for senior executives. Severance pay equivalent to 18 monthly salaries is paid when notice of termination is given by the company.
For further information, see the table Remuneration and other benefits to members of Group management in 2014.

Remuneration and other benefits to the Board

2014 2013
SEK thousand Board fee1 Board fee1
Chairman of the Board Sten Jakobsson 463 250
Board member Hans Biörck 310 310
Board member Maija Liisa Friman 250 250
Board member Lars-Åke Helgesson 330 330
Board member Hanna Lagercrantz2
Board member Maud Olofsson 250 250
Board member Lars Pettersson 250 167
Former Chairman Marcus Wallenberg 197 590
Total 2,050 2,147

1 The fee also includes remuneration for work on the Board’s audit committee and finance committee.
2 No board fees are paid to representatives of the Ministry of Finance.

Remuneration and other benefits to members of Group management in 2014

Other Pension Pension
SEK thousand Basic salary benefits1 cost2 Total obligations
President Lars-Eric Aaro 4 858 99 1 469 6 426 4 652
Vice President Monica Bellgran3 2 015 71 637 2 723
Vice President Leif Boström4 1 000 34 1 384 2 418 3 320
Vice President Anders Furbeck 2 299 13 3 402 5 714 13 587
Vice President Frank Hojem 1 711 87 491 2 289
Vice President Katarina Holmgren 1 982 91 606 2 679 143
Vice President Anders Kitok 2 101 18 1 664 3 783 3 564
Vice President Per-Erik Lindvall 2 654 84 3 178 5 916 16 512
Vice President Markus Petäjäniemi 2 675 91 856 3 622 82
Vice President Grete Solvang Stoltz 1 983 79 608 2 670 36
Vice President Peter Schmid 2 421 154 718 3 293
Total 25 699 821 15 013 41 533 41 896

1Other benefits include car, subsistence and life insurance benefits.

2Pension cost excluding special employer’s contribution.
3From 1 Feb 2014.
4Until 31 May 2014.
112 NOTES

Remuneration and other benefits to members of Group management in 2013

Other Pension Pension
SEK thousand Basic salary benefits1 cost2 Total obligations
President Lars-Eric Aaro 4,647 94 1,437 6,178 4,598
Vice President Leif Boström 2,321 81 1,698 4,100 2,231
Vice President Charlotta Fogde3 1,590 61 662 2,313 40
Vice President Anders Furbeck 2,251 13 3,284 5,548 11,323
Vice President Frank Hojem4 520 7 214 741
Vice President Katarina Holmgren 1,781 95 585 2,461 139
Vice President Anders Kitok 1,938 74 1,577 3,589 2,544
Vice President Per-Erik Lindvall 2,651 84 3,192 5,927 13,987
Vice President Markus Petäjäniemi 2,560 88 882 3,530 68
Vice President Grete Solvang Stoltz 1,937 82 637 2,656 36
Vice President Peter Schmid5 951 71 362 1,384
Total 23,147 750 14,530 38,427 34,966

1Other benefits include car, subsistence and life insurance benefits.

2Pension cost excluding special employer’s contribution.
3Period 1 Jan 2013–10 Dec 2013.
4Period 1 Sep 2013–31 Dec 2013.
5Period 1 Aug 2013–31 Dec 2013.

For additional information including post-employment benefits, see Note 26 Pensions.

NOTE 7
AUDITORS’ FEES AND REIMBURSEMENTS
Group Parent Company
SEK million 2014 2013 2014 2013
Deloitte
Audit engagements 7 7 4 4
Other auditing 0 0
Tax consulting 3 1 2 1
Other services 1 3 1 2

Other auditors
Audit engagements 0 0

Audit engagements refer to statutory auditing of annual and consolidated financial

statements and bookkeeping as well as the Board’s and President’s administration
of the company, along with audits and other reviews performed as agreed upon or
contracted.
This includes other tasks that the company’s auditor is responsible for performing,
as well as consultancy or other assistance resulting from observations made during
such reviews or the performance of such other tasks.

NOTE 8
OPERATING EXPENSES BY TYPE
Group Parent Company
SEK million 2014 2013 2014 2013
Employee benefit expenses 3,684 3,415 2,856 2,892
Material etc. 3,333 3,332 2,446 2,498
Energy 1,553 1,690 1,338 1,451
Transport 516 530 1,712 1,757
Depreciation, amortisation and 2,929 2,448 2,213 1,812
impairment
Other operating expenses 8,341 5,038 8,389 5,153
20,356 16,453 18,954 15,563

Other operating expenses includes SEK 3,432 million (620) related to expenses incurred
due to the effect of mining on communities. The amount is a provision for future
disbursement.
 NOTES 113

NOTE 9 Profit from other Other interest

NET FINANCIAL ITEMS securities and income and similar
receivables held as profit items
non-current assets
Parent Company
Group
SEK million 2014 2013 SEK million 2014 2013 2014 2013
Financial income Interest income, Group companies 40 33 41 41
Assets at fair value (fair value option) Interest income, forward exchange premium 40 58
- Interest-bearing securities – net gain 190 219 Interest income, other 216 255
- Shares and alternative investments – net gain 114 194 Return, shares and alternative investments 73 241
- Shares – dividend 7 31 Dividend, shares 12 7 31
Assets at fair value (held for trading) Impairment of receivables from subsidiaries -153
- Derivatives 6 17 Reversed impairment 2
Forward exchange contracts – interest component 41 65 Exchange rate differences, foreign currency 72
Available-for-sale financial assets – dividend 12 -111 45 449 626
Investments held to maturity – interest 15 9
Dividends on shares that are financial assets refer to holdings in SSAB.
Loan receivables – reversed impairment 2 Interest income and similar profit/loss items includes return on interest-bearing securi-
Return on plan assets 83 28 ties of SEK 205 million (225).
Other interest income 11 36 Interest expense and
Exchange rate fluctuations (net) 50 Parent Company similar profit/loss items
Total financial income 519 611 SEK million 2014 2013
Financial expenses Interest expense on loan facility -16 -13
Investments held to maturity – impairment -125 -22 Interest expense, Group companies -5 -8
Liabilities at fair value (held for trading) Interest expense, pension provision -34
- Derivatives -33 Interest expense, urban transformation -145 -102
Interest expense on provision for urban transformation -145 -102 Interest expense, remediation costs -22 -22
Interest expense on provision for remediation costs -31 -29 Exchange rate differences, foreign currency -178
Interest expense on defined-benefit pension obligation -135 -105 Interest expense, liabilities to credit insti- -6
tutions
Interest expense on interest-bearing liabilities -6
Other financial expenses -1 -10
Interest expense on loan facility -16 -13
-195 -367
Other financial expenses -4 -16
Exchange rate fluctuations (net) -195
As of 2014, the Parent Company does not recognise interest expenses on pension provi-
Total financial expenses -495 -482 sions as vested pension obligations are funded through payment into the pension fund.
Net financial items 24 129 Other financial expenses consist primarily of banking and administration expenses.

Since the forward exchange contracts were signed, a lower interest rate in SEK com-
pared with the USD rate has resulted in a positive effect of SEK 41 million (65) linked to
the interest component of the forward exchange contract item. NOTE 10
The net gains and losses recognised in net financial items under the exchange rate APPROPRIATIONS
fluctuations item refer primarily to cash and cash equivalents. The weakening of the
SEK has led to exchange gains on bank balances during the year.
Parent Company
Other financial expenses refer primarily to banking and administration expenses. SEK million 2014 2013
Profit from participations Difference between recognised deprecia-
Parent Company in Group companies tion/amortisation and depreciation/amorti-
SEK million 2014 2013 sation according to plan:
Land and buildings 1
Dividend 236 214 Machinery and equipment -1,207 -1,039
Impairment -8 -5 Tax allocation reserve, provision for the year -650 -1,858
228 209 Tax allocation reserve, reversal for the year 2,200 1,275
Group contribution received 342 64
Group contribution paid -150 -205
Total 535 -1,762

Deferred tax on appropriations (excluding Group contributions) amounts to

SEK 75 million (-357). Deferred tax on appropriations is only recognised in
consolidated earnings.
114 NOTES

NOTE 11 Parent Company

TAXES SEK million 2014 (%) 2014 2013 (%) 2013
Profit before tax 994 5,483
Tax as per effective tax rate for 22.0% -219 22.0% -1,206
Recognised in the income statement
Parent Company
Group
Non-deductible expenses 3.8% -37 0.3% -15
SEK million 2014 2013
Non-taxable income -5.2% 52 -1.0% 54
Current tax expense (-)
Tax attributable to prior years 0.4% -4 -0.3% 19
Tax expense for the year -483 -1,454
Standard interest on tax alloca- 2.5% -25 0.4% -24
Adjustment of tax attributable to prior years -4 16
tion reserve
-487 -1,438
Other 3.9% -39 0.0% 1
Deferred tax expense (-)
Recognised effective tax 27.4% -272 21.4% -1,171
Deferred tax on temporary differences 240 -298
240 -298
Total recognised Group tax expense -247 -1,736 Tax attributable to other comprehensive income
Group
SEK million 2014 2013
Parent Company Cash flow hedges 105 34
SEK million 2014 2013 Actuarial gains and losses 62 -23
Current tax expense (-) 167 11
Tax expense for the year -461 -1,382
Adjustment of tax attributable to prior years -5 19
-466 -1,363 Tax items recognised directly in equity

Deferred tax expense (-) Group

SEK million 2014 2013
Deferred tax on temporary differences 194 192
Provision for remediation costs – adjusted for retroactive 165
194 192 application
Total recognised Parent Company tax expense -272 -1,171 165

Parent Company
Reconciliation of effective tax SEK million 2014 2013
Group Provision for remediation costs – adjusted for retroactive 155
SEK million 2014 (%) 2014 2013 (%) 2013 application
Profit before tax 594 7,768 155
Tax as per effective tax rate for 22.0% -131 22.0% -1,709
Parent Company
Non-deductible expenses 6.9% -41 0.3% -21
Non-taxable income -0.5% 3 -0.1% 9
Tax attributable to prior years 0.8% -5 -0.2% 16
Standard interest on tax alloca- 4.2% -25 0.3% -24
tion reserve
Other 8.2% -48 0.1% -7
Recognised effective tax 41.6% -247 22.4% -1,736

Recognised in the statement of financial position and the balance sheet

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:
Deferred Deferred
Group tax asset tax liability Net
SEK million 2014 2013 2014 2013 2014 2013
Property, plant and equipment 6 41 -2,511 -2,234 -2,505 -2,193
Current investments -7 -13 -7 -13
Tax allocation reserve 3 3 -1,994 -2,340 -1,991 -2,337
Contingency reserve -93 -99 -93 -99
Pension provisions 352 312 352 312
Provisions for urban transformation 689 441 689 441
Other provisions 50 50 50 50
Cash flow hedges 99 -14 -18 85 -18
Loss carryforwards 26 48 26 48
Other 17 17 -2 -2 15 15
Tax assets/liabilities 1,242 912 -4,621 -4,706 -3,379 -3,794
Offset -1,198 -893 1,198 893
Tax assets/liabilities, net 44 19 -3,423 -3,813 -3,379 -3,794
 NOTES 115

Deferred Deferred
Parent Company tax asset tax liability Net
SEK million 2014 2013 2014 2013 2014 2013
Property, plant and equipment 32 -6 -6 32
Pension provisions 149 163 149 163
Provisions for urban transformation 689 441 689 441
Other 40 42 40 42
Tax assets/liabilities 878 678 -6 872 678

Change in deferred tax in temporary differences and loss carryforwards

Group Balance at Recognised in Recognised against Other Balance at

SEK million 1 Jan 2013 income statement other comprehensive income changes 31 Dec 2013
Property, plant and equipment -1,890 -303 -2,193
Current investments -24 11 -13
Tax allocation reserve -2,218 -119 -2,337
Contingency reserve -99 -99
Pension provisions 354 -19 -23 312
Provisions for urban transformation 316 125 441
Other provisions 10 40 50
Cash flow hedges -51 -1 34 -18
Loss carryforwards 75 -27 48
Other 21 -5 -1 15
-3,506 -298 11 -1 -3,794

Balance at Recognised in Recognised against Other Balance at

SEK million 1 Jan 2014 income statement other comprehensive income changes 31 Dec 2014
Property, plant and equipment -2,193 -312 -2,505
Current investments -13 6 -7
Tax allocation reserve -2,337 346 -1,991
Contingency reserve -99 6 -93
Pension provisions 312 -22 62 352
Provisions for urban transformation 441 248 689
Other provisions 50 50
Cash flow hedges -18 -2 105 85
Loss carryforwards 48 -22 26
Other 15 -8 8 15
-3,794 240 167 8 -3,379

Parent Company Balance at Recognised in Balance at

SEK million 1 Jan 2013 income statement 31 Dec 2013
Property, plant and equipment 33 -1 32
Pension provisions 131 32 163
Provisions for urban transformation 316 125 441
Other 6 36 42
486 192 678

Parent Company Balance at Recognised in Balance at

SEK million 1 Jan 2014 income statement 31 Dec 2014
Property, plant and equipment 32 -38 -6
Pension provisions 163 -14 149
Provisions for urban transformation 441 248 689
Other 42 -2 40
678 194 872
116 NOTES

NOTE 12 Parent Company Mining

EARNINGS PER SHARE SEK million rights Other Total
The number of shares for 2014 and 2013 amounted to 700,000. Earnings attributable to Acquisition value
Parent Company shareholders are SEK 347 million (6,032), thereby, earnings per share Opening balance, 1 Jan 2013 161 86 247
are SEK 496 (8,617). There are no options or potential ordinary shares, so there is no
Change in emission allowances -31 -31
dilution.
Closing balance, 31 Dec 2013 161 55 216

NOTE 13 Opening balance, 1 Jan 2014 161 55 216

INTANGIBLE ASSETS
Change in emission allowances -6 -6
All of the Group’s intangible assets are acquired.
Closing balance, 31 Dec 2014 161 49 210
Group Mining
SEK million Goodwill rights Other Total
Amortisation
Acquisition value
Opening balance, 1 Jan 2013 -161 -13 -174
Opening balance, 1 Jan 2013 198 285 110 593
Amortisation for the year 0 0
Business aquisitions 11 4 15
Closing balance, 31 Dec 2013 -161 -13 -174
Change in emission allowances -31 -31
Disposals and retirements -1 -1
Opening balance, 1 Jan 2014 -161 -13 -174
Other changes -7 -1 -8
Closing balance, 31 Dec 2014 -161 -13 -174
Exchange rate differences for 5 -3 2
the year
Closing balance, 31 Dec 2013 213 275 82 570 Carrying amount
At 1 Jan 2013 73 73
Opening balance, 1 Jan 2014 213 275 82 570 At 31 Dec 2013 42 42
Change in emission allowances -6 -6
Disposals and retirements -10 -10 At 1 Jan 2014 42 42
Exchange rate differences for 25 2 27 At 31 Dec 2014 36 36
the year
Closing balance, 31 Dec 2014 228 277 76 581 Impairment testing of cash-generating units containing goodwill
The LKAB Minerals Ltd cash generating unit, which forms parts of the Minerals Division
Amortisation primary segment, has substantial recognised goodwill value relative to the Group’s total
recognised goodwill value. During the year the goodwill value of LKAB
Opening balance, 1 Jan 2013 -4 -174 -36 -214
Minerals Oy was impaired by SEK 36 million due to deficient profitability.
Amortisation for the year
Business aquisitions -4 -4
SEK million 2014 2013
Other changes 7 7
LKAB Minerals Ltd 138 122
Closing balance, 31 Dec 2013 -4 -167 -40 -211
LKAB Minerals OY 35
138 157
Opening balance, 1 Jan 2014 -4 -167 -40 -211
Units without significant goodwill value,
Amortisation for the year -1 -1 combined 38 43
Exchange rate differences -1 -1 176 200
Closing balance, 31 Dec 2014 -5 -168 -40 -213
The cash generating units’ recoverable amounts are based on the same important
assumptions. Impairment testing is based on measurement of value in use. This value is
Impairment based on cash flow forecasts for which the first three years are based on the three-year
Opening balance, 1 Jan 2013 -9 -93 -102 business plan determined by the management of the Minerals Division. The total length
Closing balance, 31 Dec 2013 -9 -93 -102 of the forecast period corresponds to the useful life of the units’ most important assets.
The cash flows forecast after the first three years were based on annual growth of 2-3%
(2-3), which corresponds to the long term growth rate of the units’ markets. The forecast
Opening balance, 1 Jan 2014 -9 -93 -102 cash flows were calculated to present value with an individual discount rate (WACC). The
Impairment for the year -36 -36 important assumptions in the three-year business plan are described below.
Exchange rate differences -2 -2
Closing balance, 31 Dec 2014 -47 -93 -140 Important variables Method for estimating value
Market growth Demand for these products has historically followed economic
cycles. Expected market growth is based on a transition from
Carrying amount
the prevailing economic situation to the anticipated long-term
At 1 Jan 2013 185 18 74 277 growth.
At 31 Dec 2013 200 15 42 257 Personnel benefit The forecast for personnel benefit expenses is based on expected
expenses inflation and certain real wage growth. The forecast agrees with
previous experience.
At 1 Jan 2014 200 15 42 257
At 31 Dec 2014 176 16 36 228
The recoverable amount of the LKAB Minerals Ltd cash-generating unit exceeds the
Amortisation and impairment are included on the following lines of the income statement carrying amount by SEK 14 million. The discount rate before tax amounts to 12.82%.
Group
SEK million 2014 2013
Cost of goods sold -37 0
Of which impairment -36
-37 0
 NOTES 117

NOTE 14
PROPERTY, PLANT AND EQUIPMENT
Plant Equipment
Group Land Underground and tools, fixtures Construction
SEK million and buildings installations machinery and fittings in progress Total
Acquisition value
Opening balance, 1 Jan 2013 8,698 5,120 19,402 6,598 13,468 53,286
Acquisitions 209 281 40 5,611 6,141
Reclassifications -181 177 8,085 196 -8,277
Disposals and retirements -28 -94 -260 -20 -402
Exchange rate differences -170 -81 -13 -4 -268
Closing balance, 31 Dec 2013 8,528 5,297 27,593 6,561 10,778 58,757

Opening balance, 1 Jan 2014 8,528 5,297 27,593 6,561 10,778 58,757
Acquisitions 8 181 214 32 5,056 5,491
Capitalisation of mine asset and remediation 3,321 12 3,333
Acquisition of subsidiaries 34 34
Reclassifications 438 1,000 3,648 521 -5,607
Disposals and retirements -69 -6 -76 -6 -157
Exchange rate differences 6 24 17 -24 23
Closing balance, 31 Dec 2014 12,266 6,478 31,485 7,055 10,197 67,481

Depreciation
Opening balance, 1 Jan 2013 -2,787 -3,585 -12,154 -2,851 -21,377
Depreciation for the year -366 -163 -1,404 -499 -2,432
Reclassifications 66 -66
Disposals and retirements 17 86 260 363
Exchange rate differences 25 25 5 55
Closing balance, 31 Dec 2013 -3,045 -3,748 -13,513 -3,085 -23,391

Opening balance, 1 Jan 2014 -3,045 -3,748 -13,513 -3,085 -23,391

Depreciation for the year -347 -216 -1,793 -509 -2,865
Expensing of mine asset -144 -144
Reclassifications -1 1
Disposals and retirements 14 9 65 88
Exchange rate differences 9 -21 -20 -32
Closing balance, 31 Dec 2014 -3,514 -3,964 -15,317 -3,549 -26,344

Impairment
Opening balance, 1 Jan 2013 -531 -399 -496 -10 -158 -1,594
Impairment for the year -16 -16
Exchange rate differences 3 3
Closing balance, 31 Dec 2013 -544 -399 -496 -10 -158 -1,607

Opening balance, 1 Jan 2014 -544 -399 -496 -10 -158 -1,607
Impairment for the year -1 -1
Closing balance, 31 Dec 2014 -544 -399 -497 -10 -158 -1,608

Carrying amount
1 January 2013 5,380 1,136 6,752 3,737 13,310 30,315
31 December 2013 4,939 1,150 13,584 3,466 10,620 33,759

1 January 2014 4,939 1,150 13,584 3,466 10,620 33,759

31 December 2014 8,208 2,115 15,671 3,496 10,039 39,529

Capitalised remediation costs amount to SEK 778 million (748) and cumulative depreciation amounts to SEK -514 million (-499). Of the net amount of SEK 264 million (249), SEK 214
million (208) is recognised as land and buildings and SEK 50 million (41) as plant and machinery.
Land and buildings includes a net mine asset of SEK 3,159 million.
118 NOTES

Depreciation and impairment are included on the following lines of the income statement
Group
SEK million 2014 2013
Cost of goods sold -2,828 -2,408
Of which impairment -1 -16
Selling expenses -4 -3
Administrative expenses -13 -16
Research and development -17 -21
Other operating expenses -4
-2,866 -2,448

Plant Equipment
Parent Company Land Underground and tools, fixtures Construction
SEK million and buildings installations machinery and fittings in progress Total
Acquisition value
Opening balance, 1 Jan 2013 5,662 5,126 18,581 940 13,736 44,045
Acquisitions 19 1 259 18 5,385 5,682
Reclassifications -253 177 8,053 190 -8,167
Disposals and retirements -47 -7 -780 -4 -663 -1,501
Closing balance, 31 Dec 2013 5,381 5,297 26,113 1,144 10,291 48,226

Opening balance, 1 Jan 2014 5,381 5,297 26,113 1,144 10,291 48,226
Acquisitions 23 181 268 17 4,368 4,857
Capitalisation of mine asset 3,303 3,303
Reclassifications 419 1,000 3,561 54 -5,034 0
Disposals and retirements -6 -284 -290
Closing balance, 31 Dec 2014 9,126 6,478 29,936 1,215 9,341 56,096

Depreciation
Opening balance, 1 Jan 2013 -1,934 -3,588 -11,740 -634 -17,896
Depreciation for the year -216 -163 -1,298 -119 -1,796
Reclassification 66 -66
Disposals and retirements 23 3 335 4 365
Closing balance, 31 Dec 2013 -2,061 -3,748 -12,769 -749 -19,327

Opening balance, 1 Jan 2014 -2,061 -3,748 -12,769 -749 -19,327

Depreciation for the year -213 -216 -1,680 -104 -2,213
Expensing of mine asset -144 -144
Disposals and retirements 6 6
Closing balance, 31 Dec 2014 -2,418 -3,964 -14,443 -853 -21,678

Impairment
Opening balance, 1 Jan 2013 -530 -399 -496 -9 -158 -1,592
Impairment for the year -16 -16
Disposals and retirements 3 3
Closing balance, 31 Dec 2013 -543 -399 -496 -9 -158 -1,605

Opening balance, 1 Jan 2014 -543 -399 -496 -9 -158 -1,605

Closing balance, 31 Dec 2014 -543 -399 -496 -9 -158 -1,605

Carrying amount
1 January 2013 3,198 1,139 6,345 297 13,578 24,557
31 December 2013 2,777 1,150 12,848 386 10,133 27,294

1 January 2014 2,777 1,150 12,848 386 10,133 27,294

31 December 2014 6,165 2,115 14,997 353 9,183 32,813

Land and buildings includes a net mine asset of SEK 3,159 million.
 NOTES 119

Depreciation and impairment are included on the following lines of the income statement NOTE 18
OTHER NON-CURRENT SECURITIES HOLDINGS
Parent Company
Parent Company
(MSEK) 2014 2013
SEK million 31/12/2014 31/12/2013
Cost of goods sold -2,193 -1,785
Accumulated acquisition value
Of which impairment -16
At beginning of year 129 129
Selling expenses -0
Closing balance, 31 December 129 129
Administrative expenses -3 -6
Research and development -17 -21
-2,213 -1,812 Parent Company
SEK million 31/12/2014 31/12/2013
Specification of other non-cur- Market Carrying Market value Carrying
rent securities holdings value or amount or equivalent amount
NOTE 15 equivalent
HOLDINGS IN JOINT OPERATIONS
SSAB 563 83 609 83
Group Other holdings 46 46 46 46
The Group has a 50 percent co-ownership in Likya Minerals, whose main products are 609 129 655 129
minerals with flame retardant properties (UltraCarb). Likya operates out of Turkey.
Likya is a separate company but co-ownership is still considered to be a joint opera- Other holdings relate primarily to Vindln AB.
tion. The assessment is based on the fact that the co-owners have a commitment to buy
all services that Likya provides and consequently finances Likya’s entire operation in
order to settle its liabilities. NOTE 19
NON-CURRENT RECEIVABLES AND OTHER RECEIVABLES
Group
NOTE 16 SEK million 31/12/2014 31/12/2013
RECEIVABLES FROM GROUP COMPANIES Non-current receivables that are non-current assets
Parent Company Interest-free loan, Jernbaneverket 42 83
SEK million 31/12/2014 31/12/2013 Other non-current receivables 20 20
Accumulated acquisition value 62 103
Opening balance, 1 January 1,042 1,142 Other receivables that are current assets
Lending 793 163 PRI balance 22 22
Amortisation -137 -263 Recoverable VAT 286 190
Closing balance, 31 December 1,698 1,042 Tax assets 8 249
Receivables, credit institutions 441 481
Accumulated impairment Forward exchange contracts (USD) 103
Impairment for the year -153 Derivatives 64
Closing balance, 31 December -153 Tax account 18 6
Receivables from clients 22 19
Carrying amount at year-end 1,545 1,042 Other 15 9
876 1,079

NOTE 17
FINANCIAL INVESTMENTS

Group
SEK million 31/12/2014 31/12/2013
Financial investments held as
non-current assets
Shares and participating interests – available-for-sale assets 614 658
Derivatives – held for trading purposes 28
Interest-bearing securities – held to maturity 10 113
Financial assets for funded pension obligations 288 276
912 1,075
Financial investments held as current assets
Interest-bearing securities – initially measured at fair value 9,222 10,058
Shares and alternative investments – initially measured at fair value 2,179 705
Interest-bearing securities – held to maturity 104 38
11,505 10,801

Shares and participating interests mainly refer to shares in SSAB. The carrying amount of the SSAB shares significantly exceeds the cost of acquisition. Change in value during the
year is recognised directly against other comprehensive income.
Interest-bearing securities held to maturity have a fixed interest rate of between 7% and 15% with a maturity of between two and six years.
An impairment loss of SEK 125 million (22) was taken on a loan receivable that was being held to maturity and a loss of SEK 28 million was taken on derivatives for trading purposes
since the issuer is in bankruptcy.
120 NOTES

Parent Company NOTE 23

SEK million 31/12/2014 31/12/2013 EQUITY
Non-current receivables 2014 2013
Company-owned endowment insurance 92 87 Specification of equity reserves
Interest-free loan, Jernbaneverket 42 83 Translation reserve
134 170 Opening translation reserve -139 -121
Other current receivables Translations differences for the year 74 -18
PRI balance 21 21 Closing translation reserve -65 -139
Recoverable VAT 266 121
Tax assets 193 Fair value reserve 2014 2013
Tax account 0 Opening fair value reserve 526 616
Receivables, credit institutions 441 481 Available-for-sale financial assets:
Other 1 -2 Revaluation recognised directly against -45 -90
729 814 other comprehensive income
Closing fair value reserve 481 526

Parent Company
SEK million 31/12/2014 31/12/2013 Hedge reserve 2014 2013
Non-current receivables Opening hedge reserve 56 176
Accumulated acquisition value Cash flow hedges
At beginning of year 170 185 Recognised directly against other comprehensive -410 72
income
Amortisation -44
Dissolved against income statement -67 -226
Reclassification -22
Tax attributable to revaluations for the year 105 34
Exchange rate fluctuation 1
Closing hedge reserve -316 56
Reversal of impairment 2 0
Change in value of endowment insurance 5 7
Total reserves 2014 2013
Closing balance, 31 December 134 170
Opening reserves 443 671
Change in reserves for the year:
Translation reserve 74 -18
NOTE 20
INVENTORIES Fair value reserve -45 -90
Hedge reserve -372 -120
Group
Closing reserves 100 443
SEK million 31/12/2014 31/12/2013
Raw materials and consumables 1,800 1,019
Work in progress 6 9 Share capital
As at 31 December 2014, the registered share capital comprised 700,000 (700,000)
Finished goods and goods for resale 747 1,583
ordinary shares. The share capital consists of only one type of share and all shares have
2,553 2,611 equal rights.
Holders of ordinary shares are entitled to a dividend that is determined in due
course, and each share entitles the holder to one vote at the AGM. The quota value is
Parent Company SEK 1,000 per share.
SEK million 31/12/2014 31/12/2013
Raw materials and consumables 1,610 832 Translation reserve
The translation reserve covers all exchange rate differences that arise in translating the
Work in progress 0
financial statements of foreign entities whose financial statements were prepared in
Finished goods 330 1,279 currencies other than the Group’s reporting currency. The Parent Company and Group
1,940 2,111 present their financial statements in SEK.

Fair value reserve

NOTE 21 Available-for-sale financial assets
ACCOUNTS RECEIVABLE The fair value reserve includes the accumulated net change in fair value of availa-
ble-for-sale financial assets up until the assets are derecognised from the statement of
Accounts receivable are recognised after taking into account consolidated bad debt financial position. Any impairment is recognised in the income statement.
losses for the year amounting to SEK 1 million (11).
Hedge reserve
The hedge reserve includes the effective portion of the accumulated net change in fair
value of cash flow hedging instruments attributable to hedging transactions that have
NOTE 22
not yet occurred.
PREPAID EXPENSES AND ACCRUED INCOME
Dividend
Group Parent Company
After the end of the reporting period, the Board proposed the following dividend. The
SEK million 31/12/2014 31/12/2013 31/12/2014 31/12/2013 dividend is subject to approval at the AGM on 28 April 2015.
Forward exchange
contracts –
SEK million 2014 2013
interest surcharges 11 21
Ordinary dividend, SEK 199 (3,429) per share 139 2,400
Prepaid premiums 35 35 30 28
Extra dividend, SEK 1,571 per share 1,100
Other prepaid expenses 112 65 74 46
139 3,500
Other accrued income 11 31
158 131 115 95
 NOTES 121

The dividend proposed by the Board is in line with the decisions made at the AGM for the NOTE 26
past two years. PENSIONS
Parent Company
Restricted reserves
Restricted reserves cannot be reduced through distribution of profits. Defined-benefit pension plans
Statutory reserve Group
The purpose of the statutory reserve is to save a portion of net profit that is not used to SEK million 2014 2013
cover losses brought forward. Present value of unfunded obligations 770 1,593
Non-restricted equity Present value of wholly or partially funded obligations 3,413 2,198
Profit brought forward Total present value of obligations 4,183 3,791
Comprises the previous year’s non-restricted equity after any distribution of profits. Fair value of plan assets -2,317 -2,181
Together with profit for the year, it comprises non-restricted equity, that is, the amount
Present value of net obligations 1,866 1,610
that is available as a dividend to shareholders.

Effect of limitation rule for net assets

Net amount in statement of financial position 1,866 1,610
NOTE 24
INTEREST-BEARING LIABILITIES The net amount is recognised in the following
items in the statement of financial position:
Financial investments -290 -276
Group
SEK million 2014 2013 Provisions for pensions, non-current liabilities 2,156 1,886
Non-current liabilities Net amount in statement of financial position 1,866 1,610
Issued corporate bonds 1,995
1,995
Current liabilities
Defined-benefit pension plans
Issued commercial papers 798 Most of LKAB’s pension plans for employees in Sweden are defined-benefit plans, which
798 means that LKAB guarantees pensions based on a percentage of salary. Pension provi-
sions in Sweden are secured by the company via accrued provisions, of which most are
Terms and payback periods
secured through credit insurance from FPG (Försäkringsbolaget PRI Pensionsgaranti). In
2013, an internal company pension fund was started for vested defined-benefit pension
SEK million 2014 2013 plans. Promises of future retirement before the age of 65 are to a certain degree contin-
Maturity Interest Nom. Recog. Nom. Recog. gent upon working underground and are secured by the company via accrued provisions
value value value value without credit insurance.
Bonds – Commitments for retirement pensions and survivor benefits for salaried employees
fixed interest 2019 1.125% 1,600 1,595 in Sweden are secured through insurance policies from Alecta. According to a statement
Bonds 3-month from the Swedish Financial Reporting Board, UFR 3, this is a defined-benefit plan that
– variable interest 2019 STIBOR 400 400 involves several employers. The company has not had access to such information as is
Commercial STIBOR + necessary for recognising this commitment as a defined-benefit plan. The ITP 2 pension
papers 2015 0.01-0.07% 800 798 plan insured via Alecta is therefore recognised as a defined-contribution plan. The
premium for the defined-benefit retirement and family pension is individually calculated
Total interest-
bearing liabilities 2,800 2,793 and depends on factors such as salary, previously earned pension and expected
remaining years of service. Alecta’s surplus can be distributed to the policyholders and/
Financial liabilities are classified as other financial liabilities and are measured at or the insured parties. At the end of 2014, Alecta’s collective reserve surplus amounted
amortised cost using the effective interest method. to 144% (149), which was below the normal spread of 125%-155% stated in Alecta’s
consolidation policy for these insurance policies.
For more information about the company’s exposure to interest rate risk, see Note 31. The premium to Alecta is determined by assumptions about interest rates, longevity,
operating expenses and yield tax, and is calculated so that constant payment of premi-
ums until the retirement date is sufficient for the entire target benefit, which is based on
the insured’s current pensionable salary and which must be earned.
NOTE 25 There is no set of fixed rules for how deficits that may arise should be handled, but
LIABILITIES TO CREDIT INSTITUTIONS losses should primarily be covered by Alecta’s collective solvency capital, and will thus
not lead to increased expenses through higher contractual premiums. There are also no
rules for how any surplus or deficit should be distributed when plans are terminated or
Parent Company a company withdraws from the plan.
SEK million 2014 2013 For employees in Belgium, Norway, the UK and Germany, LKAB has defined-benefit
Non-current liabilities pension plans as a complement to local social insurance. In Belgium pensions are
secured via pension insurance, in the UK via a company-managed pension fund, and
Issued corporate bonds 1,995
in Germany via internal accrued provisions combined with credit insurance. In Norway,
1,995 pensions are secured via a combination of a company-managed pension fund, internal
Current liabilities accrued provisions and credit insurance.
Issued commercial papers 798
798

No liabilities mature later than five years after the end of the reporting period.
122 NOTES

Changes in the present value of obligations for defined benefit plans

Group Cost is recognised on the following lines of the income statement:
SEK million 2014 2013 Group
Obligation for defined-benefit SEK million 2014 2013
plans as at 1 January 3,791 3,829
Cost of goods sold 93 101
Benefits paid -214 -212
Financial income (recognised against net financial items) -83 -28
Cost of service, current period 93 101
Financial expense (recognised against net financial 135 105
Interest expense 135 105 items)
Assumed obligation 125 145 178
Revaluations:
- Actuarial gains and losses on -134
changed demographic assumptions Cost recognised in other comprehensive income

- Actuarial gains and losses on 361 209 Group

changed financial assumptions SEK million 2014 2013
- Actuarial gains and losses on -5 -130 Revaluations:
experience-based adjustments
Actuarial gains (-) and losses (+) 356 -55
Other changes -5
Difference between actual return and return
Exchange rate differences on according to discount rate on plan assets -72 -51
obligation and recognized actuarial loss 27 -102
Net recognised in other comprehensive income 284 -106
Obligation for defined-benefit plans 4,183 3,791
as at 31 December Assumptions for defined-benefit obligations
The most significant actuarial assumptions at the end of
The present value of the Swedish portion of the obliga- the reporting period (expressed as weighted averages)
tion is divided between the plans’ members as follows: Group
- Active members 42% (40) Percent 2014 2013
- Paid-up policy holders 17% (24) Discount rate as at 31 December 2.6 3.8
- Retirees 40% (36) Return on plan assets as at 31 December 2.6 3.8
Future salary increase 3.3 3.5
Employee turnover 3.5 3.5
Future pension increase 2.2 2.5
Changes in fair value of plan assets
Assumptions about future mortality are based on published statistics and mortality
Group rates. The average life expectancy of an individual retiring at age 65 is 23 years for men
SEK million 2014 2013
and 25 years for women.
Changes in fair value of plan assets at 1 January 2,181 1,101 The actual return on plan assets for 2014 was 6.7% (5.2).
Contributions 53 925
Benefits paid -78 -49
Return 83 28
Plan assets assumed 188 Sensitivity analysis
The following table presents possible changes in actuarial assumptions at year-end,
Actuarial gain (+)/loss (-) 72 51
other assumptions being unchanged, and how these would affect the defined benefit
Other -10 obligation. The calculation of the change in pension commitments only includes the
Exchange rate differences on Swedish commitments, which represent 60% of Group commitments.
obligation and recognized actuarial loss 16 -63
Fair value of plan Group Increase in Decrease in
assets at 31 December 2,317 2,181 SEK million assumption assumption
+ (decrease)/- (increase) in debt
Plan assets consist of the following Discount rate (0.5% change) 119 -133
Group Expected mortality (1-year change) -45 45
SEK million 2014 2013 Future salary increase (0.5% change) -86 77
Shares 698 456 Future pension increase (0.5% change) -68 66
Bonds 1,050 569
At 31 December 2014, the weighted average duration of the obligation was
Other interest-bearing assets 289 1,129
20.4 years (19.6).
Alternative investments 280 27
2,317 2,181
Historical information
Group
Cost recognised in profit for the year
SEK million 2014 2013 2012 2011 2010
Group Present value of defined-
SEK million 2014 2013
benefit obligations 4,183 3,791 3,822 3,563 3,309
Current service cost 93 101
Fair value of
Interest expense on obligation 135 105 plan assets -2,317 -2,181 -1,101 -1,033 -1,008
Return on plan assets -83 -28 Net obligations 1,866 1,610 2,721 2,530 2,301
Total net cost in income statement 145 178
The Group estimates that SEK 44 million will be paid in 2015 to funded and unfunded
defined-benefit plans and SEK 5 million is expected to be paid in 2015 to the de-
fined-benefit plans that are recognised as defined-contribution plans.
 NOTES 123

Net liability recognised in balance sheet Assumptions for defined-benefit obligations

Parent Company The most significant actuarial assumptions at the end of
SEK million 31/12/2014 31/12/2013 the reporting period (expressed as weighted averages)
+ Present value of obligation (calculated according to
Swedish principles) as relates to wholly or Parent Company
partially funded pension plans 1,023 970 Percent 2014 2013
- Fair value at end of period for specifically separated Discount rate as at
assets (in pension funds and the like) -999 -943 31 December 3.8 3.8
= Surplus in pension fund or the like Defined-contribution pension plans
(-)/net obligation (+) 24 27
In Sweden, the Group has defined-contribution pension plans for employees that are
+ Present value of obligations (calculated according to fully paid by the companies.
Swedish principles) for unfunded pension plans 563 636 Outside of Sweden, there are defined-contribution plans that are financed partly by
= Net recognised for pension obligations 587 663 the subsidiaries and partly by employee contributions. Payments into these plans are
made regularly in accordance with the terms of each plan.

Changes in net liability

Group
Parent Company Parent Company
SEK million 31/12/2014 31/12/2013 SEK million 2014 2013 2014 2013
Net liabilities at start of year for 663 1,336 Costs for defined-contribution pension plans 241 210 207 175
pension provisions
+ Cost of company-managed pension scheme 30 280 In 2014, no retirement solutions were paid out through insurance plans; the same
excluding taxes as recognised in the income applied to 2013.
statement
- Provision for pension fund -855
- Pension payments -104 -98
+/- Other -2 6 NOTE 27
587 663 PROVISIONS

Fair value of assets in trust by main category Group

Parent Company SEK million 31/12/2014 31/12/2013
SEK million 31/12/2014 31/12/2013 Provisions
Shares 284 Urban transformation 11,683 6,304
Bonds 429 Emission allowances for carbon dioxide 37 40
Other interest-bearing assets 46 856 Remediation costs 1,127 1,067
Other assets 240 87 Other 141 166
999 943 Total 12,988 7,577

Costs relating to pensions Parent Company

Parent Company SEK million 31/12/2014 31/12/2013
SEK million 2014 2013 Provisions
Company-managed pension schemes Urban transformation 11,683 6,304
Cost excluding interest expense 30 240 Emission allowances for carbon dioxide 37 40
Interest expense 34 Remediation costs 800 765
Cost of company-managed pension schemes 30 274 Other 112 148
Pension through insurance policy Total 12,632 7,257
Insurance premiums 207 178
Provision for urban transformation related to commitments for damages in Kiruna and
Subtotal 237 452 Malmberget caused by ground deformations due to mining.
Tax on returns from pension funds 2 For a more detailed accounting, see Note 28.
Special employer's contribution on pension costs 79 69
Cost of credit insurance,
administrative expenses, other 9 5
Recognised net cost attributable to pensions 325 528

Net pension cost is recognised on the following lines of the income statement:
Parent Company
SEK million 2014 2013
Financial expenses 34
Operating expense 325 494
325 528
124 NOTES

Group Urban Emission Remediation Other

SEK million transformation allowances costs provisions Total
Opening balance 2013 5,877 57 1,038 16 6,988
Provisions for the year 528 150 678
Revaluation of prior years’ provisions 224 224
Reversal of provisions -130 -130
Utilised provisions -297 -297
Interest adjustment on liabilities for the year 102 29 131
Emissions for the year 40 40
Settlement of previous years’ emissions -57 -57
Closing balance 2013 6,304 40 1,067 166 7,577
Of which paid out in 2014 1,500 40 1 65 1,606
Of which to be paid out 2015-2021 3,348 307 101 3,756
Of which to be paid out after 2021 1,456 759 2,215

Opening balance 2014 6,304 40 1,067 166 7,577

Provisions for the year 3,375 29 41 3,445
Revaluation of prior years’ provisions 3,188 3,188
Utilised provisions -1,329 -66 -1,395
Interest adjustment on liabilities for the year 145 31 176
Emissions for the year 37 37
Settlement of previous years’ emissions -40 -40
Closing balance 2014 11,683 37 1,127 141 12,988
Of which to be paid out in 2015 2,039 37 4 97 2,177
Of which to be paid out 2016-2022 9,201 314 44 9,559
Of which to be paid out after 2022 443 809 1,252

Parent Company Urban Emission Remediation Other

SEK million transformation allowances costs provisions Total
Opening balance 2013 5,877 57 733 6,667
Provisions for the year 528 10 148 686
Revaluation of prior years’ provisions 224 224
Reversal of provisions -130 -130
Utilised provisions -297 -297
Interest adjustment on liabilities for the year 102 22 124
Emissions for the year 40 40
Settlement of previous years’ emissions -57 -57
Closing balance 2013 6,304 40 765 148 7,257
Of which paid out in 2014 1,500 40 1 65 1,606
Of which to be paid out 2015-2021 3,348 239 83 3,670
Of which to be paid out after 2021 1,456 525 1,981

Opening balance 2014 6,304 40 765 148 7,257

Provisions for the year 3,375 13 30 3,418
Revaluation of prior years’ provisions 3,188 3,188
Utilised provisions -1,329 -66 -1,395
Interest adjustment on liabilities for the year 145 22 167
Emissions for the year 37 37
Settlement of previous years’ emissions -40 -40
Closing balance 2014 11,683 37 800 112 12,632
Of which to be paid out in 2015 2,039 37 4 97 2,177
Of which to be paid out 2016-2022 9,201 241 15 9,457
Of which to be paid out after 2022 443 555 998
 NOTES 125

NOTE 28
URBAN TRANSFORMATION
Provisions for urban transformation
Provisions are recognised on the following lines of the balance sheet:
LKAB has already had, and will continue to have, significant costs related to urban
transformation. Provisions for urban transformation are recognised in accordance with Group and Parent Company
SEK million 31/12/2014 31/12/2013
the criteria of IAS 37.
In order to finance future urban transformation payments, funds are allocated in Current liabilities 2,039 1,500
accordance with the current board-approved financing policy. The purpose of such asset Non-current liabilities 9,644 4,804
management is to ensure LKAB’s ability to pay and that the return on allocated funds 11,683 6,304
will cover inflation over time.
The recognised provision for urban transformation does not include LKAB’s own need
Net cost of urban transformation
to replace properties affected by urban transformation. A decision was made about new
The company’s net cost consists of the following components:
investments in the amount of SEK 383 million to replace the company’s own properties.
Group and Parent Company There will also be subsequent requirements arising from future mining. LKAB regu-
SEK million 2014 2013 larly assesses these future requirements. The assessments are subject to considerable
Costs for urban transformation, current period -290 -528 uncertainty. At the end of the reporting period, LKAB determined that the Group’s actual
Effect of changed assumptions and assessments -3,142 -92 short- and long-term capital commitments for urban transformation are significant.
Since 2006, LKAB has disbursed SEK 3,295 million on expenditures that were set
Effect of present value measurement of provision -145 -102
aside as liabilities in prior years. The corresponding pay-out for 2014 amounts to SEK
-3,577 -722 1,354 million. Urban transformation in the municipalities of Kiruna and Gällivare has
encumbered, and will encumber, LKAB’s earnings and liquidity considerably in the years
to come. LKAB must therefore remain financially strong to meet both existing and future
Net cost of urban transformation is recognised on the following lines of the income urban transformation commitments.
statement:
Group and Parent Company Mine asset
SEK million 2014 2013 Mine assets related to future mining in Kiruna are recognised as of 2014. In cases where
there is an agreement or a clear, constructive obligation that defines a commitment
Cost of goods sold -3,432 -620
related to a future impact area, the provision is recognised according to a contract
Financial expenses -145 -102 boundary. The impact boundary will continue to act as the boundary for the impact of
-3,577 -722 mining done to date and for when the commitment is expensed.
The area between the contract boundary and the impact boundary constitutes an
asset for future mining operations. The mine asset is expensed with respect to impact
boundary movement, that is, when properties, infrastructure etc. are encroached upon
by the impact boundary.
The effect of the accounting change entails that a mine asset of SEK 3,159 million
was recognised at year-end with a corresponding increase in provisions for urban
transformation.

NOTE 29
ACCRUED EXPENSES AND DEFERRED INCOME
Group Parent Company
SEK million 31/12/2014 31/12/2013 31/12/2014 31/12/2013
Electric power 68 72 59 60
Payroll and personnel benefit expenses 712 641 615 550
Accrued trade payables 289 256 242 207
Other 138 134 82 47
1,207 1,103 998 864
126 NOTES

NOTE 30
VALUATION OF FINANCIAL ASSETS AND LIABILITIES AT FAIR VALUE AND CATEGORIZATION

Classification and fair value and level of measurement hierarchy

The following is a summary of the fair values of consolidated financial assets and liabilities with a breakdown by measurement category.
Information is also provided about to which fair value level the respective financial assets and liabilities belong.

Fair value is determined based on three levels.

Level 1: According to prices quoted on an active market for such instruments.

Level 2: According to direct or indirect observable market data not included in Level 1.
Level 3: According to input data that is not observable on the market.

Carrying amount Fair value

Availa-
Held Initially iden- Investments Loans ble-for-sale
Group 2014 for tified at fair Hedging held to and financial Other
SEK million Note trading value instruments maturity receivables assets liabilities Total Level 1 Level 2 Level 3 Total
Financial assets measured at
fair value
Shares, financial assets 17 563 563 563 563
Shares and alternative invest-
ments, current holdings 17 2,179 2,179 2,179 2,179
Interest-bearing, current holdings 17 9,222 104 9,326 9,326 9,326
Cash and cash equivalents (cur- 37 2,735 2,735 2,735 2,735
rent investment)
Derivatives 19 64 64 64 64
64 14,136 104 563 14,867
Financial assets not recognised
at fair value
Shares, financial assets 17 51 51 - - - -
Interest-bearing, financial asset 17 10 10 10 10
Loans 19 62 62 62 62
Accounts receivable 1,908 1,908 - - - -
Other receivables 19 812 812 - - - -
Accrued income 22 158 158 - - - -
Cash and cash equivalents (cash 37 2,623 2,623 - - - -
and bank balances)
10 5,563 51 5,624
Financial liabilities measured at
fair value
Forward exchange contracts for 595 595 595 595
hedging
Other derivatives for hedging 29 26 55 46 9 55
29 621 650
Financial liabilities not recognised
at fair value
Issued commercial papers 24 798 798 - - - -
Issued bond loans 24 1,995 1,995 - - - -
Trade payables 1,691 1,691 - - - -
Other liabilities 471 471 - - - -
Accrued expenses 29 1,207 1,207 - - - -
6,162 6,162
 NOTES 127

Carrying amount Fair value

Availa-
Initially iden- Investments Loans ble-for-sale
Group 2013 Held for tified at fair Hedging held to and financial Other
SEK million Note trading value instruments maturity receivables assets liabilities Total Level 1 Level 2 Level 3 Total
Financial assets measured at
fair value
Shares, financial assets 17 609 609 609 609
Derivatives, financial assets 17 28 28 28 28
Shares, current holdings 17 705 705 705 705
Interest-bearing, current holdings 17 10,058 38 10,096 10,096 10,096
Cash and cash equivalents (cur- 37 4,188 4,188 4,188 4,188
rent investment)
Forward exchange contracts for 19 103 103 103 103
hedging
28 14,951 103 38 609 15,729
Financial assets not recognised
at fair value
Shares, financial assets 17 49 49 - - - -
Interest-bearing, financial asset 17 113 113 113 113
Loans 19 103 103 103 103
Accounts receivable 3,291 3,291 - - - -
Other receivables 19 985 985 - - - -
Accrued income 22 131 131 - - - -
Cash and cash equivalents (cash 37 508 508 - - - -
and bank balances)
113 5,018 49 5,180
Financial liabilities not recognised
at fair value
Trade payables 1,744 1,744 - - - -
Other liabilities 227 227 - - - -
Accrued expenses 29 1,103 1,103 - - - -
3,074 3,074

The carrying amount of accounts receivable, other receivables, accrued income, cash and cash equivalents, trade payables, other liabilities and accrued expenses represent a reason-
able approximation of fair value.
Shares, financial assets not recognised at fair value refers to unlisted holdings, mainly in VindIn AB. Fair value cannot be reliably estimated when there is no quoted market price
in an active market. The shares are measured at cost and are tested regularly for impairment.
For issued commercial papers, the carrying amount represents a reasonable approximation of fair value because of the short time to maturity.
Bond loans were issued in December 2014, so the interest rate terms of the loan contract are considered to be in line with market rates in the credit market. The carrying amount
is therefore estimated to be a reasonable approximation of fair value.
No transfers have been made between Levels 1 and 2.

Fair value calculation Parent Company

The following summarises the methods and assumptions mainly used in determining The following table provides information about the financial assets and liabilities of the
the fair value of financial instruments reported in the table above. Parent Company where there are differences between fair value and acquisition value.
For other assets and liabilities of the Parent Company the carrying amount is estimated
Level 1 to be a reasonable approximation of fair value; see information about the Group above.
The fair values of listed financial assets correspond to the assets’ listed price at the end
of the reporting period. As regards the calculation of fair value, please refer to the description above for the
Group.
Level 2
Interest-bearing instruments
Share index bonds were valued using listed market data from the interest and deriv-
atives market. This category also includes certificates valued on the basis of defined
market-priced yield curves.

Non-current receivables
Non-current receivables are calculated by measuring the present value of capital cash
flows.

Derivatives
The fair values of the derivative contracts is calculated using generally accepted meas-
urement models based on official quotations obtained from Bloomberg.
Derivatives and financial assets are valued on the basis of market data from brokers.
128 NOTES

Carrying amount Fair value

Availa-
Initially iden- Investments Loans ble-for-sale
Parent Company 2014 Held for tified at fair Hedging held to and financial Other
SEK million trading value instruments maturity receivables assets liabilities Total Level 1 Level 2 Level 3 Total
Shares, financial
assets 82 82 563 563
Current investments 14,035 14,035 14,119 14,119
Non-current receivables 42 42 42 42
Derivatives (forward exchange
contracts, USD)1 11 -217 -206 -595 -595
Other derivatives2 9 9 -46 55 9
9 14,035 11 -175 82 13,962

Carrying amount Fair value

Availa-
Initially iden- Investments Loans ble-for-sale
Parent Company 2013 Held for tified at fair Hedging held to and financial Other
SEK million trading value instruments maturity receivables assets liabilities Total Level 1 Level 2 Level 3 Total
Shares, financial
assets 82 82 609 609
Current investments 14,878 14,878 701 14,252 14,953
Non-current receivables 83 83 83 83
Derivatives (forward exchange
contracts, USD)1 21 9 30 103 103
14,878 21 92 82 15,073

1Carrying amount refers to accrued forward premium and measurement of accounts receivable at the forward rate. 2Carrying amount refers to accrued option premium.

NOTE 31 Price risk of iron ore products

FINANCIAL RISKS AND RISK MANAGEMENT Price volatility in the global iron ore market makes LKAB’s prices change substantially
in both the long and short terms. The price of iron ore products in USD is dependent on
Framework for financial risk management future expected prices for LKAB’s products, which in turn are dependent on the global
The Group’s activities expose it to a variety of financial risks. LKAB’s financial risk commodity price and the global pricing mechanism for iron ore.
management is regulated by a finance policy established by the Board. The finance policy Hedging of price risk for iron ore products is done with generally available commod-
provides a framework of guidelines and rules in the form of risk mandates and limits for ity derivatives.
financial activities. The LKAB Treasury Center is the company’s central treasury function, The fair value of derivatives related to price risk of iron ore products amounted to
which manages the Group’s overall financial risk and is also the Group treasury. The SEK 17 million at 31 December 2014, of which SEK 56 million was recognised as assets
Board’s finance committee is responsible for continuously monitoring the management and SEK 39 million as liabilities. Hedge accounting is applied to derivatives with a value
of financial risks, objectives of risk exposure, administration, credit limits, limits and of SEK -26 million, which is recognised in other comprehensive income for 2014. The
reporting procedures, as well as checking that all this is done in accordance with the amount is expected to be recognised in profit for the year for 2015.
finance policy. Currency risks
The Group is exposed to various types of currency risks. The main exposure stems from
Cash flow risk in SEK
Group sales of iron ore where market pricing is in USD. This currency risk in forecasted
The LKAB Group is exposed to a variety of cash flow risks, which can be positively or
and contracted payment flows is called transaction exposure.
negatively correlated. LKAB’s main cash flow risk in SEK is related to iron ore product
Currency risks are also found in the translation of foreign subsidiaries’ assets and
sales in the Parent Company. Cash flow risk means that fluctuations in the global iron ore
liabilities to the Parent Company’s functional currency, known as translation exposure.
price and exchange rates between USD and SEK can together have a negative impact on
the company’s income statement, balance sheet and/or cash flow. Another significant Transaction exposure
cash flow risk is energy price risk. The finance policy governs the framework for hedging; see the Price risk for iron ore
The finance policy describes procedures and regulations for identifying and reporting products section above. Hedging of transaction exposure in USD is done with derivative
total consolidated cash flow risk and the frameworks within which hedging of cash flow contracts that are generally available on the currency market, primarily forward
risks should or may occur. Cash flow risk is quantified on the basis of a rolling cash flow exchange contracts.
forecast. The calculation includes all identified cash flows exposed to market prices and The Group’s transaction exposure in USD at the end of the reporting period amounted
takes into account historical covariance. to USD 2,997 million (3,155).
The Group’s objective is to use hedging activities to obtain a desired level of risk The fair value of forward exchange contracts amounted to SEK 595 million (103) as
relating to the Group’s cash flow, earnings, balance sheet and liquidity. at 31 December 2014. SEK-459 million (-154) was recognised in other comprehensive
The finance policy establishes frameworks for hedging cash flow risk, which includes income for 2014, of which SEK -67 million (-226) relates to transfer from the hedge
a hedging period and a maximum degree of hedging during that period. The flows are reserve via other comprehensive income to profit for the year as part of the sale.
normally hedged against a rolling forecast 12-18 months into the future with a maximum The fair value of currency derivatives is expected to be recognised in profit for the
hedging degree of from 100% down to 60%. It is possible to hedge for longer periods fol- year in 2015.
lowing specific decisions. Hedging is done through a combination of hedging strategies, For other companies within the Group transaction exposure arises principally
agreements and financial contracts. through the purchase of raw materials in foreign currencies. Each subsidiary is respon-
The Group classifies its derivatives that are used for cash flow hedging of forecasted sible for its currency exposure and all forward cover occurs through the LKAB Treasury
transactions in accordance with the regulations of IAS 39. Hedge accounting is applied Center.
when the requirements for hedge accounting are met; see Note 1 Significant accounting The Group’s transaction exposure in other currencies amounts to NOK 465 million
principles, Principle 17 Derivatives and hedge accounting. (610) and EUR 71 million (127).
At 31 December 2014, 34% of the total cash flow forecast in SEK for 2015 was Translation exposure
hedged. LKAB does not normally hedge its translation exposure. The foreign subsidiaries within
For sensitivity analyses concerning cash flow risks, please refer to the Administration Report. the Group operate mainly in their local currencies and investments as well as financing
are mainly done in the local currency in order to reduce translation exposure.
Consolidated net foreign assets are divided into the following currencies (millions of
local currency).
 NOTES 129

Currency 2014 2013 Credit risks in financial activities

The financial activities of the Group entail exposure to credit risks. It is primarily
EUR 11 13
counterparty risks in conjunction with receivables from banks and other counterparties
GBP 29 32 involved in the purchase of financial investments.
USD 3 1 The finance policy contains special counterparty rules stating the maximum credit
SGD 0 0 exposure for various counterparties and for each designated asset portfolio. The Inter-
national Swaps and Derivatives Association’s (ISDA) master agreement is used with all
DKK 221 218
counterparties in derivative transactions.
NOK 834 789 Impairment losses have been taken with respect to bonds classified as held-to-ma-
CNY 25 33 turity investments as the issuer is in bankruptcy. Otherwise there are no assets that
HKD 109 106 have fallen due or have been impaired that resulted in credit losses. LKAB has not
experienced any credit losses in short-term investments over the past five years.
TRL 12
Credit risks in accounts receivable
Consolidated profit for the year includes foreign exchange rate differences of SEK -260 Commercial credit risks are a natural part of the LKAB Group’s business and normally
million (251) in operating profit and SEK 50 million (195) in net financial items. arise from the sale of goods and services. Commercial credit risks are related to the
customer’s or counterparty’s solvency, that is, their credit standing, amount of credit
Energy price risk granted and credit period.
Commodity price risk refers to the change in the price of input goods and its impact on The Group’s finance policy contains a regulatory framework for credit rating that
earnings. It is mainly changes in energy prices that constitute a large commodity price defines the criteria for evaluating new and existing customers from a credit perspective.
risk for the LKAB Group. The Group’s energy costs correspond to 8% (10) of operating The framework includes approval processes, credit limits and monitoring procedures.
expenses. The average collection period on accounts receivable was 33 days (43) in
Hedging of electricity prices occurs through fixed contracts at indexed prices and 2014.
through relevant financial contracts in the electricity market for purchase at variable Based on historical data, LKAB estimates that no impairment of accounts receivable
prices. that are not yet due is necessary as of the end of the reporting period. The majority of
The fair value of derivatives related to electricity price risk amounted to outstanding accounts receivable comprise customers with a good credit standing that
SEK 8 million at 31 December 2014. Hedge accounting is applied, which means that the are known to the Group.
amount is recognised in other comprehensive income for 2014. Offsetting and similar contracts
The fair value of derivatives is expected to be recognised in profit for the Counterparty risk in derivative contracts is reduced through netting agreements (ISDA
year over the 2015-2020 period. agreements), that is, netting of positive and negative values in all derivative contracts
with one and the same counterparty. Netting agreements are supplemented by agree-
Interest rate risk ments on surety for net exposures (Credit Support Annex or CSA agreement). LKAB cur-
Interest rate risk refers to how the return on an interest-bearing asset is affected by rently has ISDA and CSA agreements with all counterparties in derivative transactions.
a change in interest rates. The size of the interest rate risk is affected by the interest ISDA agreements do not meet the criteria for offsetting in the statement of financial
rate’s development and by the asset's sensitivity to interest rates – duration. LKAB is position. Under the master agreements, the parties may only settle their exposures net
mainly exposed to interest rate risk with regard to short-term investments and cash and (that is, assets are offset against liabilities) in cases of severe credit events.
cash equivalents. The information in the following table shows financial assets and liabilities that are
The LKAB Group’s total assets are allocated to three portfolios: liquidity portfolio, subject to a legally binding master netting agreement or similar agreement that is not
urban transformation portfolio and pension portfolio. The finance policy governs the offset in the balance sheet.
maximum average duration in each asset portfolio. The frameworks are set in relation
to each portfolio’s commitment or purpose and in relation to a range of risk measures
and restrictions. Recognised amounts Related amounts that are not offset
LKAB’s interest-bearing investments amounted to SEK 11,935 million (14,177) at the Financial Net amount
end of December 2014. The average duration was 563 days (78). The increase in dura- Group assets/ in statement Collateral Collateral
tion is due to increased allocations to the urban transformation portfolio with longer 2014 liabilities, Offset of financial provided, provided, Net
SEK million gross amounts position securities cash amount
commitments in accordance with the finance policy.
The Group’s policy also contains guidelines/directives for debt management where Financial assets
the duration targets relate to directives for the net debt/equity ratio. Consolidated bor- Derivatives 93 -29 64 64
rowings amounted to SEK 2,793 million at 31 December 2014. The fixed interest term Financial liabilities
for financial liabilities is presented in Note 24.
Derivatives -679 29 -650 408 148 -94
Credit risks Total -586 -586 408 148 -30
LKAB’s credit risks are primarily associated with accounts receivable, derivatives and
short-term investments.
Liquidity risks
Liquidity risk is the risk that the LKAB Group cannot meet its commitments due to lack
Maximum credit risk exposure
of liquidity or the inability to raise external loans for operating activities. Mining legisla-
SEK million 2014 2013 tion and consequent requirements for urban transformation in the mining communities
place special demands on liquidity. The Group’s finance policy defines liquidity targets
Derivatives 64 103 for the purpose of managing the Group’s short- and long-term commitments.
Cash and cash equivalents at year-end amounted to SEK 5,358 million (4,696).
Interest-bearing, financial 10 113
LKAB’s commercial paper programme with a framework of SEK 5,000 million was
assets
capitalised during the year. The programme was utilised with a nominal value of SEK
Interest-bearing instruments, 9,326 10,096 800 million as of 31 December 2014. LKAB also issued five-year corporate bonds during
current holdings
the year under its Medium Term Notes programme. Under this programme, LKAB can
Interest-bearing instruments, 2,735 4,188 issue corporate bonds in SEK or EUR to a maximum of SEK 7,000 million. Outstanding
current holdings (portion of bond loans had a nominal value of SEK 2,000 million at year-end.
cash and cash equivalents)
There is also an unutilised credit facility of SEK 5,000 million.
Accounts receivable and 2,720 4,276 Total available funds amounted to SEK 19,558 million at 31 December 2014.
other current receivables
Non-current receivables 62 103
Accrued income 158 131
Total 15,075 19,010
130 NOTES

Maturity structure of financial liabilities – undiscounted cash flows

2014 2013
Group 3 months– 3 months–
SEK million Total <1 month 1-3 months 1 year 1-5 years >5 years Total <1 month 1-3 months 1 year 1-5 years >5 years
Certificate 798 798
Bond loans 1,995 1,995
Derivatives 650 105 186 359
Trade payables 1,305 1,158 11 136 1,451 1,270 11 170
Other liabilities and
accrued expenses 2,403 502 82 1,819 1,830 366 59 1,405
Total 7,151 1,765 1,077 2,314 1,995 3,281 1,636 70 1,575

The consolidated maturity structure of trade payables, other liabilities and accrued expenses are considered to resemble the Parent Company’s in all material respects. The above
information is taken from the Parent Company.

Maturity structure, interest-bearing securities

Group Total
31/12/2014 carrying Nominal
SEK million <3 months 3-6 months 7-12 months 13-24 months >25 months amount value
Interest-bearing
securities 3,708 1,254 1,775 1,670 3,528 11,935 11,480
Total 3,708 1,254 1,775 1,670 3,528 11,935 11,480

Group Total
31/12/2013 carrying Nominal
SEK million <3 months 3-6 months 7-12 months 13-24 months >25 months amount value
Interest-bearing
securities 6,654 3,111 1,820 1,610 982 14,177 14,100
Total 6,654 3,111 1,820 1,610 982 14,177 14,100

The Group’s maturity structure is considered to resemble the Parent Company’s in all material respects. The information in the maturity structure refers to the Parent Company.

Capital management
LKAB’s financial risk management is regulated by a finance policy approved by the Board. The Board’s finance committee is responsible for continuously monitoring the management
of financial risks, objectives of risk exposure, administration, credit limits, limits and reporting procedures, as well as checking that all this is done in accordance with the finance
policy.
LKAB defines its managed assets as equity in the Group, excluding unrealised changes in value of derivatives that are recognised directly in equity. Assets under management
amounted to SEK 37.4 billion (41.4) at the end of the reporting period.
According to the Board’s finance policy, the Group’s financial objective is to have a good capital structure and financial stability, thereby providing a basis for continued develop-
ment of business activities and future changes in society. The Board’s ambition is to maintain a balance between high returns and the advantages and security offered by a sound
capital structure.
The capital structure target is a net debt/equity ratio of 0-20%. The net debt/equity ratio is defined as the net of interest-bearing liabilities and interest-bearing assets divided by
equity. The net debt/equity ratio was 0 (negative) at the end of the reporting period.
The Group’s profitability target is a return on equity of 12%. The return for 2014 was 0.9% (14.7). In comparison, the average interest income for interest-bearing investments was
1.365% (1.65).
LKAB has a dividend policy in which the dividend to the owner in the long term shall constitute 30% to 50% of earnings after tax and be adjusted to an average earnings level over
a business cycle. The proposed ordinary dividend of SEK 139 million is 40% of consolidated earnings after tax.
No changes were made to the Group’s capital management during the year.
LKAB Försäkring AB is the only company in the Group that has a statutory capital requirement of EUR 3,200,000, which corresponded to SEK 30 million (29) at the end of the
reporting period.

NOTE 32
INVESTMENT COMMITMENTS
At year-end, the Group had contractual commitments to acquire property, plant and equipment. These are forecast at SEK 5,046 million (4,273), of which SEK 4,382 million (2,725) is
expected to be settled in the following financial year. Major projects include a new main level in Kiruna (KUJ 1365) and preparatory work for mining in Leveäniemi and Mertainen.
The Parent Company’s commitments are forecast at SEK 4,000 million (3,747), of which SEK 3,337 million (2,397) is expected to be settled in 2015.
 NOTES 131

NOTE 33 NOTE 34
PLEDGED ASSETS AND CONTINGENT LIABILITIES RELATED PARTIES
Group Parent Company Relationships with related parties
SEK million 31/12/2014 31/12/2013 31/12/2014 31/12/2013 The Group is under the controlling influence of the Swedish state. Other than the close
relationships that the Parent Company has with its subsidiaries (see Note 35), the Group
Pledged assets
also has close relationships with Vattenfall AB and the Swedish Transport Administra-
As pledged assets for tion.
own liabilities and provisions Summary of related party transactions
Company-owned
endowment insurance 92 87 92 87 Parent Company
Relationships with
Deposit of cash and cash related parties
equivalents 159 158 159 158 Purchase
Sale of Interest of goods
Collateral provided, goods to and from Liabilities to Related party
derivatives 557 557 related dividends relatedrelated parties, receivables,
Total pledged SEK million Year parties (net) parties 31 December 31 December
assets 808 245 808 245 Subsidiaries 2014 419 312 3,342 883 2,995
Contingent liabilities Subsidiaries 2013 234 280 3,532 945 3,095
Guarantee commitments,
FPG/PRI 14 13 14 13 Transactions with related parties are priced on market terms. Of related party receiva-
bles, 1,545 (1,042) are loans receivable.
Guarantee commitments,
Through long-term energy agreements with Vattenfall, LKAB has secured a large
GP plan 7 7 5 4
portion of its electricity supply at an indexed price. Other electricity purchases are ex-
Guarantee commitments, posed to the Nordic spot market. The company purchased 2,233 (2,276) GW of electricity.
Swedish Tax Agency 76 24 76 24
LKAB’s mining has impacted the existing railway infrastructure and made it impossi-
Surety given for sub- ble for facilities to remain in their present location. LKAB is compensating the Transport
sidiaries 70 73 Administration for expenditures incurred in conjunction with construction of the new
Derivatives – negative railway infrastructure. Purchases from the Transport Administration amounted to SEK
values 436 137 million (258).
Collateral,
remediation 36 41 58 6
Other 16 11 10 0
Redemption of defined-
benefit pension schemes 7 7 NOTE 35
Total GROUP COMPANIES
contingent liabilities 149 103 669 127

Company-owned endowment insurance covers pension commitments for the President, Parent Company
former President and members of Group management according to the old de- SEK million 31/12/2014 31/12/2013
fined-benefit pension scheme. The value of endowment insurance changes concurrently Accumulated acquisition value
with payment of premiums/pension disbursements. At beginning of year 1,495 1,410
Deposits of cash and cash equivalents are meant to cover future expenses for reme-
Acquisitions 33
diation measures and other restoration measures at mines after mining activities cease.
Guarantee commitments for PRI Pensionstjänst and Gruvplanen corresponded to 2% Reclassification 40
of commitments at the end of the reporting period. The PRI commitment relates to ITP2 Capital contributions 253 45
premiums for salaried employees and irrevocable commitments to collectively affiliated Closing balance, 31 December 1,781 1,495
employees in the mine plan.

Accumulated impairment
At beginning of year -5
Impairment for the year -8 -5
Closing balance, 31 December -13 -5

Carrying amount at year-end 1,768 1,490

Reclassification refers to the participating loan to former associated company Norr-

skenet AB, which was redeemed in 2013 and converted into a conditional shareholder
contribution.
LKAB owns fewer than half of the votes in Norrskenet AB. Even though there is no
direct voting right or board majority, LKAB can exercise controlling influence over the
company. This is primarily based on LKAB’s decision to change the purpose of the hold-
ing in Norrskenet, but also on LKAB’s lending to Norrskenet for investment in a bond
loan in Northland Resources. The Group therefore consolidates its participating interest
in Norrskenet and its two wholly-owned subsidiaries in the same way as other subsidi-
aries. Non-controlling interest in Norrskenet AB does not amount to a significant sum.
The LKAB Fastigheter AB subsidiary merged with its subsidiary Jägarskolan
Fastigheter AB during the year.
132 NOTES

Specification of the Parent Company’s and Group’s holdings of shares in Group companies
The following table does not include dormant Group companies.

Number Share in % Share in % 31/12/2014 31/12/2013

Subsidiary / Corporate ID number / Domicile of shares 2014 2013 Carrying amount Carrying amount
Swedish subsidiaries
Gällivare Mark AB / 556917-5333 / Gällivare 500 100 25
LKAB Fastigheter AB / 556009-8849 / Kiruna 5,000 100 100 32 11
LKAB Wassara AB / 556331-8566 / Stockholm 20,000 100 100 19 13
LKAB Berg & Betong / 556074-8237 / Kiruna 24,000 100 100 156 47
LKAB Nät AB / 556059-9796 / Kiruna 10 100 100 3 2
LKAB Minerals AB / 556223-1786 / Luleå 2,000,000 100 100 365 242
LKAB Försäkring AB / 516406-0187 / Luleå 10,000 100 100 100 100
LKAB Malmtrafik AB / 556031-4808 / Kiruna 208,000 100 100 252 252
Kiruna Stationsfastigheter AB / 556736-3840 / Kiruna 1,000 100 100 0 0
Norrskenet AB / 556537-7065 / Kiruna 2,500 33.3 33.3 40 40

Foreign subsidiaries
LKAB Norge AS / 918 400 184 / Narvik, Norway 300,000 100 100 763 763
LKAB Far East Pte Ltd / 198401144W / Singapore 200,000 100 100 1 1
LKAB S.A. / 403 455 761 / Brussels, Belgium 100 100 100 0 0
LKAB Schwedenerz GmbH / HRB 718 / Essen, Germany 100 100 100 2 2
LKAB Trading (Shanghai) Co., Ltd. / Shanghai, China 100 100 10 10

Indirect holdings via subsidiary LKAB Minerals AB

LKAB Minerals B.V. / 24236591 / Breda, The Netherlands 100 100
LKAB Minerals Inc / 02-0551509 / Cincinnati, Ohio, USA 100 100
LKAB Minerals GmbH / HRB 16692 / Essen, Germany 100 100
LKAB Minerals Asia Pacific Ltd / 876455 / Hong Kong, China 100 100
LKAB Minerals OY / 1934671-4 / Helsinki, Finland 100 100
LKAB Minerals AS / A/S277716 / Nuuk, Greenland 100 100
LKAB Minerals Tianjin Minerals Co / 70051551-5 / Dongli District, Tianjin, China 100 100
LKAB Minerals Limited / 04621769 / Derby, England 100 100
LKAB Minerals Richmond Ltd / 03057111 / Derby, England 100 100

Indirect holdings via subsidiary LKAB Berg & Betong AB

LKAB Mekaniska AB / 556013-3059 / Kiruna 100 100
LKAB Kimit AB / 556190-6115 / Kiruna 100 100

Indirect holdings via subsidiary LKAB Malmtrafik AB

LKAB Malmtrafikk AS / 974 644 991 / Narvik, Norway 100 100

Indirect holdings via subsidiary LKAB Fastigheter AB

Jägarskolan Fastigheter AB / 556594-9095 / Kiruna 100 100 7

Indirect holdings via subsidiary Norrskenet AB

Kiruna Softcenter AB / 556438-3726 / Kiruna 33.3 33.3
Lapland Nonstop AB / 556898-4800 / Kiruna 33.3 33.3
Parent Company total 1,768 1,490
 NOTES 133

NOTE 36 Interest paid and dividend received

UNTAXED RESERVES Group Parent Company
SEK million 2014 2013 2014 2013
Parent Company
SEK million 31/12/2014 31/12/2013 Dividend received 7 43 243 257
Accumulated depreciation in excess of plan: Interest received 52 101 110 162
Land and buildings Interest paid -22 -14 -28 -22
Opening balance, 1 January 4 5 37 130 325 397
Excess depreciation dissolved -1
Closing balance, 31 December 4 4
Adjustments for items not included in cash flow
Machinery and equipment Group Parent Company
Opening balance, 1 January 7,865 5,521 SEK million 2014 2013 2014 2013
Reclassification 1,305 Depreciation 2,866 2,432 2,213 1,796
Depreciation/dissolution in excess of plan 1,207 1,039 Impairment 181 32 144 32
for the year Exchange differences 59 194
Closing balance, 31 December 9,072 7,865
Earnings from sale and 52 0 6
retirement of property,
Construction in progress plant and equipment
Opening balance, 1 January 1,305 Provisions for -34 -114 -71 191
pensions
Reclassification -1,305
Closing balance, 31 December Provision for urban 3,577 722 3,577 722
transformation
Other provisions 32 162 -5 163
Tax allocation reserve
Other non-cash -14 -24 4 -10
Provision for taxation 2009 2,200
items
Provision for taxation 2012 3,600 3,600
6,719 3,404 5,862 2,900
Provision for taxation 2013 2,960 2,960
Provision for taxation 2014 1,858 1,858 Change in working capital
Provision for taxation 2015 650 Consolidated working capital was encumbered by SEK 471 million related to the change
Closing balance, 31 December 9,068 10,618 in hedging reserve that is recognised against consolidated equity. The amount did not
affect the consolidated cash flow and therefore is not included in the change in working
capital in the statement of cash flows. The corresponding amount for 2013 was SEK 149
Total untaxed reserves 18,144 18,487 million.
Group Parent Company
NOTE 37 Tax paid
STATEMENT OF CASH FLOWS SEK million 2014 2013 2014 2013
Tax expense in income -247 -1,736 -272 -1,171
Cash and cash equivalents – Group statement
SEK million 31/12/2014 31/12/2013
Change in tax 439 865 404 947
The following subcomponents are included in assets/liabilities
cash and cash equivalents:
Adjustment for -240 298 -194 -192
Cash and bank balances 2,623 508
deferred tax
Current investments, on a par with
-48 -573 -62 -416
cash and cash equivalents1 2,735 4,188
Acquisition of subsidiaries – Group
Total in statement of financial position The following shows the impact of cash and cash equivalents on the acquisition of
and statement of cash flows 5,358 4,696
subsidiaries.
The amount is included as a portion of change in financial assets in the
Cash and cash equivalents – statement of cash flows.
Parent Company
SEK million 31/12/2014 31/12/2013
The following subcomponents are included in SEK million 2014 2013
cash and cash equivalents: Acquired assets and liabilities
Cash and bank balances 2,373 365 Property, plant and equipment 9
Current investments, on a par with cash and 2,735 4,188 Intangible assets 12
cash equivalents1
Financial assets 155
Total in balance sheet and statement of
cash flows 5,108 4,553 Operating receivables 8
Current investments 12
1Cash and cash equivalents include current investments (interest-bearing securities) Cash and cash equivalents 2
that were classified as cash and cash equivalents based on the following:
Total assets 9 189
• They have an insignificant risk of fluctuations in value.
• They can be easily converted to cash. Non-current liabilities 118
• They have a maximum maturity of three months from date of acquisition. Current operating liabilities 9 14
Total liabilities 9 132
Shares and alternative investments Purchase price: -42 -57
SEK million 31/12/2014 31/12/2013 Less: Other property received as payment
Opening balance 640 1,225 (conversion of loan into conditional shareholder contribution) 40
Acquisitions 1,856 1,615 Purchase price paid: -42 -17
Disposal -406 -2,200 Less: Cash and cash equivalents in acquired business 2
2,090 640 Effect on cash and cash equivalents -42 -15
134 AFFIRMATION BY THE BOARD

THE BOARD’S ATTESTATION

The Board of Directors and the President attest that the Annual Report was prepared in The Board of Directors and the President attest that the consolidated financial state-
accordance with the Annual Accounts Act and RFR 2 Accounting for Legal Entities, and ments were prepared in accordance with International Financial Reporting Standards
gives a fair presentation of the company’s financial position and earnings and that the (IFRS) as adopted by the EU, and give a fair presentation of the Group’s financial position
administration report provides a fair review of developments in the company’s opera- and earnings and that the administration report for the Group provides a fair review of
tions, financial position and earnings and describes significant risks and uncertainties developments in the Group’s operations, financial position and earnings and describes
that the company faces. significant risks and uncertainties that the companies included in the Group face.

Luleå, 20 March 2015

Sten Jakobsson
Chairman of the Board

Hans Biörck Maija-Liisa Friman Lars-Åke Helgesson

Board member Board member Board member

Hanna Lagercrantz Maud Olofsson Lars Pettersson

Board member Board member Board member

Jan Thelin Tomas Strömberg Stefan Fagerkull

Employee representative Employee representative Employee representative

Lars-Eric Aaro
President

As stated above, the Annual Report, consolidated financial statements and sustainability report were approved for publication by the Board of Directors on 20 March 2015.
The consolidated income statement and statement of financial position and the Parent Company’s income statement and balance sheet are subject to approval at the Annual General
Meeting on 28 April 2015.

Our audit report was issued on 20 March 2015.

Deloitte AB

Peter Ekberg
Authorised public accountant
 AUDITOR’S REPORT 135

AUDITOR’S REPORT Responsibilities of the Board of Directors and the President

To the Annual General Meeting of Luossavaara-Kiirunavaara AB (publ) Corporate identity The Board of Directors is responsible for the proposal for allocation of the company’s
number 556001-5835 profit or loss, and the Board of Directors ans the President are responsible for adminis-
tration under the Companies Act.

Report on the annual accounts and consolidated accounts Auditor’s responsibility

We have audited the annual accounts and consolidated accounts of Luossavaara- Our responsibility is to express an opinion with reasonable assurance on the proposed
Kiirunavaara AB (publ) for the financial year 2014. allocation of the company’s profit or loss and on the administration based on our audit.
We conducted the audit in accordance with generally accepted auditing standards in
Responsibilities of the Board of Directors and the President Sweden.
for the annual accounts and consolidated accounts As a basis for our opinion on the Board of Directors’ proposed allocation of the
The Board of Directors and the President are responsible for preparing an annual re- company’s profit or loss, we examined the Board of Directors’ reasoned statement and
port that provides a true and fair view in accordance with the Swedish Annual Accounts a selection of supporting evidence in order to be able to assess whether the proposal is
Act and consolidated accounts that provide a true and fair view in accordance with in accordance with the Companies Act.
International Financial Reporting Standards, as adopted by the EU, and the Swedish As a basis for our opinion concerning discharge from liability, in addition to our audit
Annual Accounts Act, and for such internal control as the Board of Directors and the of the annual accounts and consolidated accounts, we examined significant decisions,
President determine is necessary to enable the preparation of annual accounts and actions taken and circumstances of the company in order to determine whether any
consolidated accounts that are free from material misstatement, whether due to fraud member of the Board of Directors or the President is liable to the company. We also
or error. examined whether any member of the Board of Directors or the President has, in any
other way, acted in contravention of the Companies Act, the Annual Accounts Act or the
Auditor’s responsibility Articles of Association.
Our responsibility is to express an opinion on these annual accounts and consolidated We believe that the audit evidence we have obtained is sufficient and appropriate to
accounts based on our audit. We conducted our audit in accordance with International provide a basis for our opinion.
Standards on Auditing and generally accepted auditing standards in Sweden. These
standards require us to comply with ethical requirements and plan and perform the au- Opinions
dit to obtain reasonable assurance about whether the annual accounts and consolidated We recommend to the Annual General Meeting that the profit be allocated in accordance
accounts are free from material misstatement. with the proposal in the statutory administration report and that the members of the
An audit involves performing procedures to obtain audit evidence about the amounts Board of Directors and the President be discharged from liability for the financial year.
and disclosures in the annual accounts and consolidated accounts. The procedures
selected depend on the auditor’s judgement, including the assessment of the risks of
material misstatement of the annual accounts and consolidated accounts, whether due
Stockholm, 20 March 2015
to fraud or error. In making those risk assessments, the auditor considers internal con-
trol relevant to the company’s preparation and fair presentation of the annual accounts
Deloitte AB
and consolidated accounts 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 policies used and the reasonableness of accounting estimates made by
the Board of Directors and the President as well as evaluating the overall presentation
of the annual accounts and consolidated accounts.
Peter Ekberg
We believe that the audit evidence we have obtained is sufficient and appropriate to
Authorised Public Accountant
provide a basis for our audit opinion.

Opinions
In our opinion, the annual accounts have been prepared in accordance with the Swedish
Annual Accounts Act and provides in all material respects a true and fair view of the
parent company´s financial position of the as of 31 December 2014 and its financial
performance and cash flows for the year in accordance with the Swedish Annual
Accounts Act. The consolidated 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 Group´s financial position as of 31 December 2014 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 statutory
administration report is consistent with the other parts of the annual accounts and
consolidated accounts.
We therefore recommend that the Annual General adopt the income statement and
balance sheet for the Parent Company and the Group.

Report on other legal and regulatory requirements

In addition to our audit of the annual accounts and consolidated accounts, we have also
audited the proposed allocation of the company’s profit or loss and the administration
of the Board of Directors´and the President`s of Luossavaara-Kiirunavaara AB (publ) for
the financial year 2014.
136 MINERAL RESERVES AND MINERAL RESOURCES

MINERAL RESERVES AND MINERAL RESOURCES

MINERAL RESERVES
AS OF 31 DECEMBER 2014 (TO SORTING PLANT)
Quantity, Mt Percent Fe
2014 2013 2014 2013
Kiruna
Proven 521 511 46,9 47,2
Probable 161 145 44,4 44,9

Malmberget
Proven 303 288 43,7 42,1
Probable 35 9 42,2 41,0

Gruvberget
Proven 1 5 54,4 53,0
Probable 1 - 53,5 -

Leveäniemi
Proven 78 - 45,4 -
Probable 37 - 49,9 -

Mineral reserves include minerals within approved mining permits. The mineral
reserve in Kiruna includes minerals above the 1,365 m level. The mineral reserve in
Malmberget includes minerals above 1,250 m level for the Eastern Field. The Western
Field includes minerals above 850 m level. The mineral reserves for Gruvberget in-
clude magnetite minerals above the 220 m level. For Leveäniemi, reserves are inside
the planned pit. When calculating the reserves, the prices in force over the period
2004–2005 were used.

MINERAL RESOURCES BESIDES MINERAL RESERVES

AS OF 31 DECEMBER 2014 (TO SORTING PLANT)
Quantity, Mt Percent Fe
2014 2013 2014 2013
Kiruna
Measured 13 13 48,3 47,8
Indicated 208 208 46,3 46,2
Inferred 83 80 44,5 44,7

Gruvberget magnetite
Measured 15 15 53,7 49,7
Indicated 10 8 53,3 42,9
Inferred 12 - 50,9 -

Gruvberget hematite
Measured 9 - 55,0 -
Indicated 5 - 52,6 -
Inferred 28 - 53,9 -

Leveäniemi
Measured 50 - 41,1 -
Indicated 82 186 45,6 43,6
Inferred 85 11 38,8 36,

Mertainen
Measured 44 106 36,9 36,4
Indicated 159 - 35,9 -
Inferred 190 51 33,0 31,8

Malmberget
Measured 10 23 42,2 42,2
Indicated 96 148 43,6 42,6
Inferred 136 148 43,8 41,9

The mineral resources in Kiruna down to the 1,500 m level are reported, in
Malmberget for the Eastern Field down to the 1,725 m level and the 1,050 m level
for the Western Field. Mineral resources for Gruvberget are reported for magnetite
mineral between the 220 and -80 m levels and for hematite mineral between the
400 and 0 m levels. For Leveäniemi mine, mineral resources is the mineralization
outside the planned pit. The pit design for the Mertainen mine is not finalized, so the
full mineralization is reported as mineral resource.

LKAB reports mineral reserves and resources in compliance with recommended rules adopted
by SveMin (FRB Standard). These are in turn based on an international standard. Håkan Selldén is
Qualified Person accredited by SveMin. He has compiled LKAB’s report.
The summaries of mineral reserves and mineral resources show the current situation. Mineral
reserves comprise granted mining permits, and mineral resources suggest possible future
permits.
 GROUP OVERVIEW 137

GROUP OVERVIEW
INCOME STATEMENTS (SEK MILLION) 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005
Net sales 20 615 23 873 26 971 31 122 28 533 11 558 23 128 16 385 14 615 14 337
Cost of goods sold -18 781 -14 994 -15 183 -15 190 -15 276 -10 029 -12 166 -9 509 -7 706 -7 535
Gross profit 1 834 8 879 11 788 15 932 13 257 1 529 10 962 6 876 6 909 6 802
Selling expenses -152 -148 -249 -223 -213 -202 -200 -178 -178 -174
Administrative expenses -596 -648 -608 -640 -451 -377 -448 -344 -333 -349
Research and development expenses -451 -360 -283 -328 -213 -237 -258 -217 -165 -159
Other operating income/expenses -66 -84 -59 -35 -68 -54 271 11 23 -11
Operating profit 570 7 639 10 589 14 705 12 312 659 10 327 6 148 6 256 6 109
Financial income 519 611 733 503 418 705 575 572 546 550
Financial expenses -495 -482 -345 -407 -349 -172 -513 -376 -420 -208
Profit before tax 594 7 768 10 977 14 801 12 381 1 192 10 389 6 344 6 382 6 451
Tax -247 -1 736 -2 224 -3 842 -3 275 -473 -2 748 -1 665 -1 785 -1 904
Profit for the year 347 6 032 8 753 10 960 9 106 719 7 641 4 679 4 597 4 547
Attributable to:
Parent Company shareholders 347 6 032 8 753 10 960 9106 719 7 641 4 679 4 597 4 547
Planned depreciation on property, plant and equipment 2 865 2 432 1 952 1 891 1 821 1 812 1452 1 168 996 951
BALANCE SHEETS (SEK MILLION)
Intangible fixed assets 229 257 277 269 321 310 428 329 387 477
Property, plant and equipment 39 529 33 759 30 315 26 285 23 087 21 551 19 893 16 702 11 746 7 928
Financial fixed assets 1 018 1 197 1 120 1 124 1 675 1 827 1 094 2 416 2 208 1 393
Total fixed assets 40 775 35 213 31 712 27 679 25 083 23 688 21 415 19 447 14 341 9 798
Inventories 2 253 2 611 2 493 2 449 2 074 2 301 2 715 1 635 1 631 1 423
Accounts receivable 1 908 3 291 3 060 4 593 3 395 2 276 1 946 1 922 1 697 1 846
Other receivables 1 037 1 210 2 007 808 1 515 1 095 612 685 1 214 416
Cash & cash equivalents and current investments 16 861 15 497 18 672 18 201 14 562 6 195 9 643 5 991 6 982 7 091
Total current assets 22 359 22 609 26 232 26 051 21 546 11 867 14 916 10 233 11 524 10 776
Total assets 63 133 57 822 57 944 53 730 46 629 35 555 36 331 29 680 25 865 20 574
Total operating assets 45 254 41 128 38 151 34 405 30 392 27 533 25 594 21 273 16 675 12 090

Equity 1
37 756 41 472 41 085 37 335 32 951 25 375 25 218 22 251 19 076 14 806
Non-current liabilities 18 402 11 670 12 485 11 933 9 555 7 512 6 836 4 963 4 627 3 598
Current liabilities 6 976 4 680 4 374 4 462 4 123 2 668 4 275 2 466 2 162 2 170
Total equity and liabilities 63 135 57 822 57 944 53 730 46 629 35 555 36 329 29 680 25 865 20 574
CASH FLOW ANALYSES
Cash flow before payment of urban transformation
and pension funds and changes in working capital 7 265 10 599 10 700 14 038 13 951 2 931 11 545 7 200 5 688 6 073
Urban transformation payments2 -1 354 -295 -407 -382 NA NA NA NA NA NA
Payment to pension funds -881
Changes in working capital 1 624 -866 980 92 -1 184 -43 -1 201 -124 358 -553
Cash flow from operating activities 7 535 8 557 11 273 13 748 12 767 2 888 10 344 7 076 6 046 5 520
Investment in existing activities -5 491 -6 141 -5 808 -5 126 -3 973 -3 543 -4 682 -5 968 -4 844 -2 648
Disposal 28 18 6 17 97 73 6 14 35 23
Operating cash flow 2 072 2 434 5 471 8 639 8 891 -582 5 668 1 122 1 237 2 895
Acquisition of companies and intangible assets -17 -13 0 -16 -35 -17 -75
Acquisition / disposals in current investments -703 2 434 -3 729 -2 990 -2 952 308 296 -381 217 -1 846
Change financial assets -92 -11 -66 178 133 100
Cash flow after investments 1 369 4 759 1 742 5 649 5 915 -340 5 948 884 1 570 1 074
Borrowing 2 793 -43
Dividend -3 500 -5 500 -5 000 -5 000 -500 -2 800 -2 000 -2 000 -1 500 -520
Cash flow for the year 662 -741 -3 258 649 5 415 -3 140 3 948 -1 159 70 554
Deliveries, Mt 26,0 25,5 26,3 25,7 26,0 18,7 22,7 25,1 23,3 23,2
Deliveries pellets, % 83,2 82,8 83,6 81,7 80,1 76,5 79,0 71,3 68,2 65,9
KEY FIGURES FOR THE GROUP
Net sales, SEK million 20 615 23 873 26 971 31 122 28 533 11 558 23 128 16 385 14 615 14 337
Growth in net sales, % -13,6 -11,5 -13,3 9,1 146,9 -50,0 41,2 12,1 1,9 59,5
Operating margin, % 2,8 32,3 39,3 47,2 43,2 5,7 44,7 37,5 42,8 42,6
Profit margin, % 2,9 32,8 40,7 47,6 43,3 10,3 44,9 38,7 43,7 45,0
Return on total capital, % 1,8 14,3 20,3 30,3 31,0 3,8 33,0 24,2 29,3 38,9
Return on equity, % 0,9 14,7 22,2 30,9 31,5 2,8 32,2 22,6 27,1 36,6
Return on operating assets, % 1,4 19,3 29,2 45,4 42,4 2,5 49 32 43 58
Equity/assets ratio, % 59,8 71,7 70,9 69,5 70,7 71,4 69,4 75,0 73,8 72,0
Average number of employees 4 539 4 427 4 357 4 191 4 030 3 778 4 086 3 885 3 737 3 563

1
reported as non-current and current liabilities from 2004 in accordance with IFRS.
2
Reported on own row of cash flow analysis from 2011
Definitions
Operating assets: Tangible and intangible fixed assets, Inventories, Accounts receivable, Other receivables. Non-financial assets, cash & cash equivalents and current investments.
Operating liabilites: Total liabilities reduced by deferred tax in untaxed reserves, deferred tax liabilities and non-current liabilities.
Growth in net sales: Change in net sales as a percentage of the previous year’s net sales.
Operating margin: Operating profit as a percentage of net sales.
Profit margin: Profit after financial items as a percentage of the year’s net sales.
Return on total capital: Profit after financial items + financial expenses as a percentage of average balance total.
Return on equity: Profit for the year according to the income statement as a percentage of average equity.
Return on operating assets: Operating profit as a percentage of average operating assets.
Equity/assets ratio: Equity as a percentage of total assets.
138 GLOSSARY

GLOSSARY

BARREN ROCK: Rock that is not ore. MAGNETITE: Mineral, magnetic iron ore (Fe3O4), aka black ore.

BURDEN: Materials (ore, slag formers, etc.) that are added (charged) to a furnace, MAIN LEVEL: Transport level in a mine to which the ore is tipped through a chute or
possibly together with fuel, in ironmaking. shaft from overlying mining levels.

CALCITES AND SILICATES: Different minerals. MICA: Mineral.

CONCENTRATION: Beneficiation of finely ground ore by separation into a OLIVINE: Mineral.

concentrate of iron ore powder with very high purity, so-called slurry.
PARTICULATE EMISSIONS: Release of particulate matter into the air.
CRUDE IRON: Molten ore from a blast furnace that is subsequently refined in a
steelworks. PELLETIZING: Process whereby slurry is mixed with binder and rolled together into
“green” balls. The balls are sintered in a pelletizing plant. The finished product is
CRUDE ORE: The untreated ore broken loose from the deposit. pellets.

CRUSHED ORE: Designation for input to ore processing plants. PERFORMANCE IN IRONMAKING: LKAB’s promise to the customer.

DEFORMATION ZONE: Ground area affected by subsidence due, for exemple, to OpEx: LKAB:s programme for ”Operational Excellence”, production- and
mining. Deformation zone boundaries are defined at the point where seismic productivity-enhancing measures.
instruments first indicate disturbance.
Q VALUE: A calculated average quality value of delivered products, based on
DRESSING: Rough sorting of crushed ore. Consists at LKAB of screening of the monthly measurements of a number of fixed parameters.
crushed ore into various fractions, after which the waste rock is separated from the
iron ore by magnetic separators. SEISMIC EVENT: Rock tremor, earthquakes.

FINES: Fines is a finely milled iron ore sand that has to be lumped together SEK MILLION AND MT: Abbreviations for million Swedish kronor and million tonnes,
(sintered) into larger pieces before it is used in steelmills. LKAB produces sinter respectively.
fines in Malmberget (MAF).
SINTERING: Heating of fine-grained ore (fines) until it starts to melt. The ore is then
FLOTATION: Chemical process/method for particle separation, used in beneficiation fused (sintered) into lumps (sinter) that can be used in a blast furnace.
of iron ore.
SPONGE IRON: (= DRI, Direct Reduced Iron). End product of the DR process. Solid,
GRI: Global Reporting Initiative. International reporting body consisting of interest porous iron with some remaining mineral residues and oxygen. HBI (Hot Briquetted
groups that have produced global guidelines for sustainability reporting. Iron) is a compressed form of DRI that reduces the risk of autoignition.

GWH: Gigawatt hour. STRIPPING: Preparation of ground by removal of vegetation and or soil, etc., to
enable access to underlying materials.
HEMATITE: Mineral, iron ore (Fe2O3), aka bloodstone.
SULPHIDES: Chemical compounds containing sulphide ions.
HOT ROLLED COIL (HRC): Steel, often used as raw material in everything from ships
and vehicles to buildings and bridges. TJ: Terajoule.

HUNTITE: Mineral. TWH: Terawatt hour.

INDICATORS: Quantifiable key values as defined by the GRI sustainability areas VALUES: Describe how we behave toward each other and the world in general. They
Economy, Environment, and Society. are guiding principles for everyday life; they help us make decisions and clarify what
is expected of everyone in the company. LKAB’s values: Commitment, Innovation and
INERT WASTE: Material waste that is not reactive and does not decompose after Responsibility.
final placement.
BARREN ROCK: Barren rock is a collective term for waste rock surrounding an ore.
INTACT ORE: When ore is in its original state before being mined it is said to be
intact. WASTE ROCK: Waste rock is an economical term for the rock that is not ore but has
a value. In underground mining, large amounts of other mineral-bearing material
INTEGRATED STEELMILL: Steelmill that covers the entire production chain from ore that is not ore are hauled.
to steel and has both sintering plant and blast furnace.
YIELD: Ore yield = The ratio between the recovered crude ore and the theoretical
LANDFILL: Area in which materials such as tailings or waste rock are stored quantity of intact ore in the ground. The difference is made up of ore losses and is
indefinitely. 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
LANDFILL PLAN: Long-term plan for final placement of waste material. content of the crushed ore entering a plant.

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.
 ADDRESSES 139

ADDRESSES

LKAB INDUSTRIAL MINERALS LKAB Minerals France

Group head office Representative Office, 85 Rue Jean Rache
Box 952 59310 Saméon, France
LKAB Minerals AB
SE–971 28 Luleå, Sweden. Tel +33 320 055 167
Box 952, SE–971 28 Luleå, Sweden.
Tel +46 771 760 000. Fax +46 771 760 001. [email protected]
Tel +46 771 760 400. Fax +46 771 760 401
[email protected]
[email protected]
Lars-Eric Aaro, President and CEO LKAB Minerals Greece
Leif Boström, President and Group CEO
Representative Office, 13, N.Kountouriotou str.,
546 25 Thessaloniki, Greece.
LKAB Minerals Ltd.
IRON ORE Flixborough Industrial Estate, Flixborough,
Tel +30 2310 539073. Fax +30 2310 552882.
[email protected]
North Lincolnshire, DN15 8SF, England.
MARKET AND LOGISTICS Tel +44 1724 277 411. Fax +44 1724 866 405
LKAB Minerals Singapore
[email protected]
LKAB c/o LKAB Far East Pte Ltd
Darren Wilson, President
Nordic Sales Office 300 Beach Road #29–02, The Concourse,
LKAB Minerals Group
Box 952, SE–971 28 Luleå, Sweden. Singapore 199555.
Tel +46 771 760 000. Fax +46 771 760 001 Tel +65 6392 49 22. Fax +65 6392 49 33.
LKAB Minerals Oy
[email protected] [email protected]
Kaivoksentie 300, FI–71800 Siilinjärvi, Finland.
Johan Heyden, Sales Manager Tel +358 17 266 0160. Fax +358 17 266 0161
[email protected]
LKAB S.A. Kari Laukkanen, President SUBSIDIARIES
Chaussée de la Hulpe 150, BE–1170 Bryssel, Belgien.
Tel +32-2 663 36 70. Fax +32-2 675 05 91 LKAB Minerals, Inc. LKAB Wassara AB
[email protected] 2020 Scripps Center, 312 Walnut Street, Elektronvägen 4
Göran Ottosson, President Cincinnati, OH 45202, USA. SE–141 49 Huddinge, Sweden.
Tel +1 513 322 5530. Fax +1 513 322 5531 Tel +46 771-760 100.
LKAB SCHWEDENERZ GmbH [email protected] [email protected]
Bredeneyer Strasse 182, D-45133 Essen, Germany. Mats Drugge, President Stefan Swartling, President
Tel +49 201 879 440. Fax +49 201 879 4444
[email protected] LKAB Minerals GmbH LKAB Berg & Betong AB
Göran Ottosson, President P.O. Box 10 25 54, DE–450 25 Essen, Germany. Box 817, SE–981 28 Kiruna, Sweden.
Tel +49 201 45060. Fax +49 201 4506 490 Tel +46 771-760 200. Tel +46 771-760 201.
LKAB UAE JLT Branch [email protected] [email protected]
Unit 1007 Platinum Tower Thomas Tepper, President Peter Söderman, President
Cluster I
Jumeirah Lake Towers LKAB Minerals B.V. LKAB Mekaniska AB
Dubai Vlasweg 19, Harbour M164, P.O. Box 16, Tel +46 771-760 210. Tel +46 771-760 211.
United Arab Emirates NL–4780 AA Moerdijk, The Netherlands. [email protected]
P.O Box 2610 Tel +31 168 388 500. Fax +31 168 388 599 Peter Söderman, President
Tel +97 145516377 [email protected]
[email protected] Yvonne Dirken, President LKAB Kimit AB
Stig Nordlund, President Tel +46 771-760 220. Tel +46 771-760 221.
LKAB Minerals Asia Pacific Ltd. [email protected]
LKAB Malmtrafik AB 3407 China Resources Building, 26 Harbour Road, Peter Söderman, President
SE–981 86 Kiruna, Sweden. Wanchai, Hong Kong.
Tel +46 771 760 500. Fax +46 771 760 002 Tel +852 2827 3000. Fax +852 2827 5574 LKAB Fastigheter AB
Anders Björnström, President [email protected] SE–981 86 Kiruna, Sweden.
John Engel, President Tel +46 771-760 300. Tel +46 771-760 301.
LKAB Norge AS [email protected]
Postboks 314, NO–8504 Narvik, Norway. LKAB Minerals (Tianjin) Minerals Co., Ltd. Siv Aidanpää Edlert, President
Tel +47 769 238 00. Fax +47 769 449 25 Junyi Industrial Park, Jungliangcheng, Dongli District,
Magne Leinan, President Tianjin, P.R. China 300301. LKAB Nät AB
Tel +86 22 2435 1706. Fax +86 22 2435 1708 SE–981 86 Kiruna, Sweden.
LKAB [email protected] Tel +46 771-760 700. Tel +46 771-760 002.
Luleå malmhamn James Qi, President [email protected]
Box 821, SE–971 25 Luleå, Sweden.
Tel +46 771 760 000. Fax +46 771 760 001 Likya Minelco LKAB Försäkring AB
Sofia Jonsson, Site Manager ITOB Organize Sanay Bölgesi Tekeli Beldesi, Box 952, SE–971 28 Luleå, Sweden.
Menderes, Izmir, Turkey. Tel +46 771-760 600. Tel +46 771-760 001.
Tel +90 232 799 01 60. Fax +90 232 799 01 74 [email protected]
PRODUCTION
LKAB Minerals Slovak Republic LKAB Trading (Shanghai) Co., Ltd.
LKAB Representative Office, Panenska 13, Unit 2007, 889 Yueda Plaza,
SE–981 86 Kiruna, Sweden. SK–81103 Bratislava, Slovak Republic. 1111 Changshou Road,
Tel +46 771 760 000. Fax +46 771 760 002 Tel +421 2 5930 5753. Fax +421 2 5930 5754 Shanghai 200042
[email protected] China
LKAB Marian Zilinsky, Sales Manager Tel +86 21 521 25103. Fax +86 21 521 26029.
Svappavaara E-mail office: [email protected]
SE–981 86 Kiruna, Sweden LKAB Minerals Spain [email protected]
Tel +46 771 760 000. Fax +46 771 760 002 Representative Office, C./Nord no. 2 Ent.5, Anders Lundgren, President
08500 Vic, Spain.
LKAB Tel/Fax +34 93 886 1330
SE–983 81 Malmberget, Sweden. [email protected]
Tel +46 771 760 000. Fax +46 771 760 003
140 ANNUAL GENERAL MEETING AND FINANCIAL INFORMATION

ANNUAL GENERAL MEETING

LKAB’s Annual General Meeting will be held on 28 April 2015 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 e-mail at [email protected]
The printed version of the Annual Report will be available from 28 April 2015.

FINANCIAL INFORMATION
INTERIM REPORTS

28 April
Interim Report, 1st Quarter 2015

14 August
Interim Report, 2nd Quarter 2015

October
Interim Report, 3rd Quarter 2015

February 2016
Interim Report, 4th Quarter 2015, together with Year End Report 2015

CONTACT
Please direct any questions regarding LKAB’s financial information to
Katarina Holmgren, Director of Finance and/or Lars-Eric Aaro, President and CEO.

Please direct any questions regarding LKAB’s sustainablity report to

Anders Furbeck, Director, Sustainable Development.
LKAB’S ANNUAL AND SUSTAINABILITY REPORT 2014
Produced by LKAB in cooperation with Yours kommunikationsbyrå, Rippler and Hallvarsson & Halvarsson.
Translation: Språkbolaget.
Photos: Fredric Alm and Runar Guðmundsson, Alm & ME and LKAB.
Printing: Lule Grafiska.
L K A B , B O X 9 5 2 , S E 9 7 1 2 8 L U L E Å , S W E D E N | + 4 6 7 7 1 7 6 0 0 0 0 | W W W. L K A B . C O M