3 A N N U A L R E P O R T
09
Group offi ce
Dannemora Mineral AB
Visiting address: Svärdvägen 7 Postal address: Box 627 SE - 182 16 Danderyd Tel +46 (0)295-244 400 Fax +46 (0)8-753 43 90
E-mail info@dannemoramineral.se Mine Offi ce
Dannemora Mineral AB Visiting and postal address:
Storrymningsvägen 5 SE - 748 30 Österbybruk Tel +46 (0)295-244 400 Fax +46 (0)295-244 404
E-mail info@dannemoramineral.se
www.dannemoramineral.se
CONTENTS
2009 Highlights 5
Dannemora Mineral in brief 6 CEO's report 8
Corporate governance 10
Risk analysis 11
The Dannemora share & ownership 12
Five-year overview 14
Key fi nancial ratios 15
Board, management and auditor 16
DANNEMORA IRON ORE MINE 20
Due diligence 22 Trial deliveries 23
Products 24
The steel and iron ore markets 26
Our market 31 Geology and iron ore deposits 32
Mineral resources and ore reserves 34
Investment activities in 2009 36 Planned investment activities 39
Sustainability report 40
OTHER ACTIVITIES Exploration/Riddarhyttan fi eld 42 Other exploration permits 44
Other base and precious metal projects 45
Property management 46
FINANCIAL REPORTS - CONTENTS 49
History 75
Glossary 76 A N N U A L R E P O R T
09
REPORTS
INTERIM REPORT January - March 2010 Wednesday 28 April, 2010.
INTERIM REPORT January - June 2010 Wednesday 25 August, 2010.
INTERIM REPORT
January - September, 2010 Wednesday 27 October, 2010.
will be held at 4 p.m. on 3 May 2010, at Wenströmsalen, IVA Conference Centre, Grev Turegatan 16, Stockholm.
ANNUAL GENERAL MEETING
A N N U A L R E P O R T
09
photos Mikael Eriksson & Tommy Persson (unless otherwise indicated) cover photo Jens Andersson, Bergteamet
production Crussell & Company, text Anne Crussell, design Peter Widell printed by Mixi Print
photos Mikael Eriksson & Tommy Persson (unless otherwise indicated) back cover photo Jens Andersson, Bergteamet
production Crussell & Company, text Anne Crussell, design Peter Widell printed by Mixi Print
D ANNEMORA MINERAL 2009 ANNUAL REPORT
09 THE YEAR IN PICTURES
The maintenance workshop was put in order in early February in conjunction with ramp placement.
On 30 January the large drilling rig was transported down into the mine.
The 360-metre level was reached on 23 September.
The Ströms ramp placement got underway in late January/early February.
The fi rst ore is loaded and leaves for Hargshamn on 7 October.
The fi rst trial delivery leaves Hargshamn on 30 November for Voestalpine's steelworks in Linz. In the last week of September, processing of ore for
the trial deliveries started. The picture shows primary crushing of crude ore.
In autumn the crude ore was processed.
G L O S S A R Y
JORC
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
Knebelite
Skarn mineral with the chemical composition (FeMn)
2SiO
4.
Limestone
Rock consisting mainly of the mineral calcite, with the chemical composition CaCO
3.
Lump ore
In this annual report, a product measuring between 5 and 16 mm and containing approx. 50 percent iron.
Magnetic separation
Method of separating minerals from waste rock magnetically.
Magnetite
Mineral with the chemical composition Fe
3O
4. Mined for extrac- tion of iron.
Magnetometry
Method of mapping magnetic variations in the bedrock.
Measured mineral resources
A mineralised tonnage with a stated grade estimated from very reliable information from observations in outcrops, drill holes, trenches and mining activities which clearly show the continuity of the grade and the form and extent of the mineralisation.
Mine head frame
Tower for bring up ore from the mine. One of the purposes of the tower is to obtain a drop for the hoisted up ore.
Mineralisation
Concentration of potentially interesting minerals in the bedrock.
Mining
Extraction of rock or ore. Can be surface or underground mining
Ore
Mineralisation which can be exploited with economic benefi ts.
Ore chute
A chute into which the ore is tipped before being unloaded at a main level.
Pitting
Small mining attempt.
Precious metals
Metals such as gold, silver and platinum.
Probable ore reserve
The calculated quantity and grade of the probable mineral resources for which economic profi tability has been shown (by means of adequate technical, economic and legal studies) with suffi cient reliability to justify investment.
Proven ore reserve
The part of the measured mineral resources for which quantity, grade, and technical, legal and economic factors are known with the highest grade of certainty.
Ramp
Tunnel for descending into/ascending from a mine. Often in a spiral. Also called an inclined drift.
Screening
Separation of grain size fractions.
Shaft
Vertical or near-vertical passage.
Silicate
Mineral containing silicon (Si) and oxygen (O).
Skarn
Silicate minerals which often accompany iron and sulphide mineralisations.
Skip
Lift cage for transporting ore in the shaft.
Sorting
Dry ore processing method which includes magnetic separation and screening.
Sub-level caving
Mining method often used for steeply positioned ores.
Supracrustal rock
Rocks formed on the earth’s surface.
Synclinal
A fold structure in a sequence of rock layers that are progres- sively younger towards the centre of the fold.
Tectonics
Branch of geology dealing with deformation of the bedrock.
Waste rock
Valueless non-metalliferous rock in the mine.
09 THE YEAR IN PICTURES
The maintenance workshop was put in order in early February in conjunction with ramp placement.
On 30 January the large drilling rig was transported down into the mine.
February 2010 saw the start of drilling for an opening slot in the development drift at 162 metres.
Pumping of the mine began on 26 May, starting at the 310-metre level.
The 360-metre level was reached on 23 September.
The Ströms ramp placement got underway in late January/early February.
The fi rst ore is loaded and leaves for Hargshamn on 7 October.
The fi rst trial delivery leaves Hargshamn on 30 November for Voestalpine's steelworks in Linz.
In the last week of September, processing of ore for the trial deliveries started.
The picture shows primary crushing of crude ore.
In autumn the crude ore was processed.
Capital markets day in Stockholm on 10 December
The fi rst ore transportation passes Hamburg in
early December. 77
G L O S S A R Y
JORC
Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves.
Knebelite
Skarn mineral with the chemical composition (FeMn)
2SiO
4.
Limestone
Rock consisting mainly of the mineral calcite, with the chemical composition CaCO
3.
Lump ore
In this annual report, a product measuring between 5 and 16 mm and containing approx. 50 percent iron.
Magnetic separation
Method of separating minerals from waste rock magnetically.
Magnetite
Mineral with the chemical composition Fe
3O
4. Mined for extrac- tion of iron.
Magnetometry
Method of mapping magnetic variations in the bedrock.
Measured mineral resources
A mineralised tonnage with a stated grade estimated from very reliable information from observations in outcrops, drill holes, trenches and mining activities which clearly show the continuity of the grade and the form and extent of the mineralisation.
Mine head frame
Tower for bring up ore from the mine. One of the purposes of the tower is to obtain a drop for the hoisted up ore.
Mineralisation
Concentration of potentially interesting minerals in the bedrock.
Mining
Extraction of rock or ore. Can be surface or underground mining
Ore
Mineralisation which can be exploited with economic benefi ts.
Ore chute
A chute into which the ore is tipped before being unloaded at a main level.
Pitting
Small mining attempt.
Precious metals
Metals such as gold, silver and platinum.
Probable ore reserve
The calculated quantity and grade of the probable mineral resources for which economic profi tability has been shown (by means of adequate technical, economic and legal studies) with suffi cient reliability to justify investment.
Proven ore reserve
The part of the measured mineral resources for which quantity, grade, and technical, legal and economic factors are known with the highest grade of certainty.
Ramp
Tunnel for descending into/ascending from a mine. Often in a spiral. Also called an inclined drift.
Screening
Separation of grain size fractions.
Shaft
Vertical or near-vertical passage.
Silicate
Mineral containing silicon (Si) and oxygen (O).
Skarn
Silicate minerals which often accompany iron and sulphide mineralisations.
Skip
Lift cage for transporting ore in the shaft.
Sorting
Dry ore processing method which includes magnetic separation and screening.
Sub-level caving
Mining method often used for steeply positioned ores.
Supracrustal rock
Rocks formed on the earth’s surface.
Synclinal
A fold structure in a sequence of rock layers that are progres- sively younger towards the centre of the fold.
Tectonics
Branch of geology dealing with deformation of the bedrock.
Waste rock
Valueless non-metalliferous rock in the mine.
A N N U A L R E P O R T
09
Group offi ce
Dannemora Mineral AB
Visiting address: Svärdvägen 7 Postal address: Box 627 SE - 182 16 Danderyd Tel +46 (0)295-244 400 Fax +46 (0)8-753 43 90
E-mail info@dannemoramineral.se Mine Offi ce
Dannemora Mineral AB Visiting and postal address:
Storrymningsvägen 5 SE - 748 30 Österbybruk Tel +46 (0)295-244 400 Fax +46 (0)295-244 404
E-mail info@dannemoramineral.se
www.dannemoramineral.se
CONTENTS
2009 Highlights 5
Dannemora Mineral in brief 6 CEO's report 8
Corporate governance 10
Risk analysis 11
The Dannemora share & ownership 12
Five-year overview 14
Key fi nancial ratios 15
Board, management and auditor 16
DANNEMORA IRON ORE MINE 20
Due diligence 22 Trial deliveries 23
Products 24
The steel and iron ore markets 26
Our market 31 Geology and iron ore deposits 32
Mineral resources and ore reserves 34
Investment activities in 2009 36 Planned investment activities 39
Sustainability report 40
OTHER ACTIVITIES Exploration/Riddarhyttan fi eld 42 Other exploration permits 44
Other base and precious metal projects 45
Property management 46
FINANCIAL REPORTS - CONTENTS 49
History 75
Glossary 76
A N N U A L R E P O R T
09
REPORTS
INTERIM REPORT January - March 2010 Wednesday 28 April, 2010.
INTERIM REPORT January - June 2010 Wednesday 25 August, 2010.
INTERIM REPORT
January - September, 2010 Wednesday 27 October, 2010.
will be held at 4 p.m. on 3 May 2010, at Wenströmsalen, IVA Conference Centre, Grev Turegatan 16, Stockholm.
ANNUAL GENERAL MEETING
A N N U A L R E P O R T
D ANNEMORA MINERAL 2009 ANNUAL REPORT 09
5
Highlights
Agreement with Swedish Rail Administration on railway line renovation
On 13 January a declaration of intent on the renovation of the railway line for iron ore transportation from the Danne- mora mine to Hargshamn was signed with the Swedish Rail Administration. The declaration of intent was replaced by an implementation and fi nancing agreement, which was signed on 31 October.
Exploration moves to Dannemora Magnetit On 1 January, exploration was transferred to Dannemora Magnetit, where it now forms a separate division. The idea is to focus on the commencement of mining in the Danne- mora iron ore mine in order to increase the Group's iron ore reserves, particularly in the vicinity of Dannemora.
Ramp placement and iron ore production underway The beginning of February 2009 saw the launch of the ramp placement project aimed at connecting the 162-metre and 350-metre levels, thereby allowing access to all parts of the mine. The project has generated iron ore and allowed mining of the Ströms ore for trial deliveries.
Letter of intent regarding iron ore deliveries signed with four steel companies
Discussions were conducted with European steelworks for future iron ore deliveries. Following the discussions, a letter of intent was signed with four North European steel companies at the beginning of the year.
New exploration permit safeguards iron ore in the Riddarhyttan fi eld
In February, Dannemora Mineral was awarded a new iron ore exploration permit - Riddarhyttan 3. The new permit and the existing Riddarhyttan 1 permit cover the interesting iron ore reserves in the fi eld, with historically calculated proven and probable iron ore of over 12 million tonnes.
Operational start-up put back six months
In March, the decision was made to put a temporarily hold on all investments after customers indicated trial deliveries would be postponed. The reason was the sharp decline in demand for steel, with North European steel companies making consider- able cut-backs in production. This resulted in the production start-up being put back.
Draining the Dannemora mine
After 11 months of preparation, the pumping project to drain the Dannemora mine from the 310-metre level to the
470-metre level started on 26 May. The draining was complet- ed in February 2010. A total of 2.99 million cubic metres had been pumped out, leaving the water level below 473 metres and the main drift systems at 350 and 460 metres accessible.
Geophysical surveys confi rm more ore in the Dannemora mine
Previous geophysical drill hole surveys indicate an exten- sion of the Norrnäs and Svea ore at depth and good iron ore potential at a depth of 1,000 metres in the northern part of the Dannemora fi eld.
First trial delivery to Austrian steelworks
In November, an agreement was signed with Austrian compa- ny Voestalpine AG for the trial delivery of 10,000 tonnes of iron ore products to undergo full-scale testing in the steel company's blast furnaces in Linz.
Due diligence strengthens the Dannemora mine's potential
To satisfy lenders’ need for an unbiased insight into the project, technical, legal, environmental and fi nancial due diligence processes were carried out in 2009. The report, which was presented in December, shows the project to be realistic and sound, with a good fi nancial base.
Events after the end of the fi nancial year:
More trial delivery agreements
On 5 February 2010 a second iron ore trial delivery was agreed with German company Salzgitter. A third trial delivery agreement was signed with ThyssenKrupp Steel Europe on 8 March 2010, followed by a fourth on 9 April 2010 - this one with German steel company Rogesa. All the trial deliveries are scheduled for the second quarter of 2010.
Private placement
On 25 March 2010, Dannemora Mineral completed a private placement targeting Norwegian and other international inves- tors. The issue contributed capital of
SEK 165 million before issue
expenses. A total of 2,750,000
shares were subscribed for at a
price of SEK 60. At the same
time, the Company began the
process of obtaining a listing
on Oslo Axess.
A D A N N E M O R A M I N E R A L I N B R I E F
Business concept, vision, goals and strategy
Business concept
Dannemora Mineral’s business concept is:
K to resume operation of the Dannemora iron ore mine, and to do so with good long-term profitability and under environmentally sustainable conditions K to identify other iron mineralisations and develop
them into workable ore deposits which create good synergies with the Dannemora operations
K to explore for base and precious metal mineralisa tions in and around Dannemora and develop these into workable deposits
Vision
Dannemora Mineral’s vision is to maximise shareholder value by becoming an established and valued niche supplier of iron ore to a a number of European steel companies within five years of production start-up.
Goals
Dannemora Mineral’s goals are to resume operations in the Dannemora iron ore mine, establish long-term supply contracts with two to five steel companies for the majority of its production and gradually increase the ore reserves in the Dannemora field by continuous exploration. It is also the company’s goal to gradually develop measured or new depos- its of iron ore in other parts of Sweden.
The Board has defined the following financial goals for the business:
K to achieve a positive operating profit within two years of the operational start-up
K to achieve profitability at least in line with the industry average within three years of the operational start-up The operational goals can be summarised as follows:
K to resume operation of the Dannemora iron ore mine within 12 months of the completion of financing.
K to achieve full production within 18 months of the production start-up
K to substantially increase iron ore reserves by means of exploration in the mine and its vicinity
K to locate and develop measured or new iron ore deposits in other parts of Sweden
Strategy
The key elements of Dannemora Mineral’s strategy for achieving its defined goals are as follows:
Organisation
The company has established a well adapted and effective organisation which will be developed in line with growth of the company’s operations.
Personnel
Experienced and highly qualified personnel are vital to the company’s success. With this in mind, the Board and management work actively to ensure the company stands out as an attractive and stimulating workplace. In order to ensure future provision of personnel, the company is engaged in regular dialogue with representatives of the municipal council.
Market
Dannemora will establish a stable, long-term market for iron ore products by focusing on customers and creating added value by providing geographical and transport-related advantages. The market development will be aimed at early establishment of long-term relationships and multi-year supply contracts with a large number of European steel companies. Customers with steel production which is particularly suited to Dannemora's localisation and product properties are prioritised in terms of time and resources.
Exploration for new and measured deposits of iron ore mineralisations is focused on geographical and transport- related advantages and on finding ore with similar product properties to the Dannemora ore, as this brings considerable market synergies from a customer perspective. New or measured mineralisations of base or precious metals may either be processed into workable deposits or sold, if this is considered profitable.
Financing
Resumption of operations in the Dannemora mine and
continuing exploration for new deposits will require capital
contributions. Creation of shareholder value is dependent
on the structure of the planned financing of the production
facilities (internal-external capital ratio) and the capital cost
at which it can be carried out. Alternative market and
Group structure
Dannemora Mineral AB is a mining and exploration compa- ny. The Company's primary goal is to recommence mining operations in Dannemora. The Company also engages in exploration activities to increase the iron ore base locally and regionally, and to explore base and precious metals in several areas in Uppland where the potential for finding mineable deposits is considered good.
The Dannemora Group comprises the parent company Dannemora Mineral AB and its wholly-owned subsidiaries Dannemora Magnetit AB, which is responsible for operations in Dannemora and the Group’s exploration activities, and Dannemora Förvaltnings AB, which is responsible for the property portfolio.
The Group’s most important asset is the iron ore deposit at Dannemora, and activities will initially focus mainly on the planned processing of this deposit.
technical solutions will be considered in relation to different financial solutions in an interactive process. An important part of this process is assessment of the risks associated with different financial solutions.
Structure
Dannemora will be established as a central platform for future mining activity in eastern Bergslagen. The initially broad exploration permits will gradually be concentrated on a smaller number of interesting prospects. It is expected that the Dannemora site will eventually represent the centre of the mining industry in eastern Bergslagen, not only from a technical and production perspective but also in terms of knowledge and administration.
Permits
Official permits and other legal regulations are critical components of the company’s activities. The company will endeavour to minimise time and cost risks with regard to permits and trials, and its operations will be characterised by open and constructive cooperation with the relevant authorities.
Environment
The exploration and mining industry is regulated by extensive and mission-critical environmental legislation. The company has therefore organised its business in such a way as to enable it to closely monitor developments in environmen- tal legislation and take any action required in order to comply with current legislation.
7
When I look back at 2009, two things stand out. The first is Europe's worst crisis since the Second World War – and it is heartening to have that behind us. The second is that it allowed us breathing space to do all our homework properly. The mine is now ready for start-up and we are waiting to sign the first long-term supply contract which will allow us to move into the project's final financing phase.
Recovering economy
The year was dominated by a steel market which moved from the depths of depression to a full recovery in autumn.
The crisis had prompted European steelworks and their customers to reduce their stock levels to a minimum in the first half of the year. However, European demand began to rise again towards the middle of the year. To allow stocks to return to normal, steel companies began to purchase iron ore in summer and autumn. Consequently, we were able to resume our trial delivery negotiations with a number of steelworks in autumn.
We are currently seeing high optimism among our customers and the start of an economic recovery. How fast and strong the recovery will be remains to be seen. This will be largely dependent on consumer demand and the develop- ment of heavy industries such as the construction industry and infrastructure investments.
At the same time, there has been no sign of recession in China, where steel production increased considerably during the year.
The right timing and confidence in the future Demand for iron ore is expected to rise in 2010, while today's spot prices are approximately 100 percent higher than the benchmark prices for 2009. The 2010 benchmark prices are expected to be set on a quarterly basis, and the price defined for the second quarter of the year was almost 100 percent higher than the 2009 price.
Our main market is northern Europe, with an annual consumption of approximately 70 million tonnes of iron ore.
Our proximity to the market gives us a competitive advan- tage in the form of inexpensive and flexible shipment. It is our aim to offer our customers attractive logistics solutions in order to further sharpen our competitiveness.
Investment in time-critical projects
155 million, meant we were able to focus on our work in 2009. Because of the severe economic slowdown, we decided early in the year to put the brakes on investments and concentrate on the most time-critical areas of the project.
Due diligence results indicate profitability
An important and crucial initiative during the year was the engagement of an internationally renowned independent consultant, Micon Ltd, to conduct a due diligence assessment of the Dannemora mining project. They assessed the project from a technical, legal, environmental and financial perspec- tive. The report, which was submitted on 7 December, shows the project to be realistic and sound, with a good financial base.
The report reveals a discounted cash flow (NPV) of around SEK 2 billion, based on the price forecast from Raw Materials Group. It appears that the average price they have calculated for the mine's 13-year life will be achieved even in 2010.
It was important to order a due diligence assessment, as the report will act as support data for the final financing of the project. It also brings the Company three advantages:
1. The market can see that the project has an international stamp of quality and reliability.
2. We save a great deal of time, as the financing support data is in place.
3. We have been forced to go into more depth in several areas, which has given us better data, including a more detailed mining plan and a more accurate estimation of the ore reserves.
Mine ready for production
During the year, we drained the Dannemora mine to the 470-metre level. The work began in May 2009 and was completed in February 2010.
All the required environmental permits are in place without any reservations. This is largely due to the fact that we have decided to return residual mining products to mined out stopes.
Good ore potential
We were awarded a number of important exploration permits during 2009. One of these was the Riddarhyttan field permit.
We conducted more detailed ground magnetic surveys in Film, north of the Dannemora mine. The surveys revealed clear signs of more ore, which confirmed what we had
Dannemora mine ready for take-off
A C E O ' S R E P O R T
C E O ' S R E P O R T F
"A key focus area in the year was our close dialogue with customers."
CEO Staffan Bennerdt
Logistics solution in place
We have worked closely on logistics and infrastructure with the Swedish Rail Administration and the port of Hargshamn in order to create a sustainable logistics solution. A key milestone was the implementation agreement on renovation of the railway line, which we signed with the Swedish Rail Administration on 31 October. Although it was our original intention to freight the ore by truck, we saw several advan- tages of using rail transport. It provides us with a solution that has lower variable costs and is more efficient and environ- mentally friendly.
Strong customer focus brings trial delivery agreements
A key focus area during the year was our persistent dialogue with a number of European steel companies. Even in spring, with the economic situation at its bleakest, our market efforts continued untiringly and we were able to sign letters of intent with four European steel companies expressing an interest in long-term supply contracts.
On 13 November, the first trial delivery was signed with Voestalpine in Austria. After the end of the financial year, more agreements were signed with three German steel companies – Salzgitter in February, ThyssenKrupp Steel Europe in March and Rogesa in April 2010.
A step closer to long-term supply contracts The trial deliveries involve full-scale testing and represent the first step towards several long-term supply contracts.
A long-term supply contract is a strong and clear indication of the customer's confidence that the iron ore quality will suit their future production. Our trial deliveries are therefore strategically important and bring us another step closer to the production start-up.
Stockholm, April 2010
Staffan Bennerdt President and CEO
9
A C O R P O R AT E G O V E R N A N C E & R I S K A N A LY S I S
Corporate governance
The Swedish Code of Corporate Governance (the Code) is included in Nasdaq OMX Stockholm’s rule book for issuers. The Code’s rules represent an addition to the corporate organisation provisions contained in the Swedish Companies Act and the relatively large-scale corporate governance self-regulation which exists.
In formal terms, the Code is not directly applicable to Dannemora Mineral, as the Company’s shares are traded on First North. However, Dannemora Mineral is keen to maintain a high standard of corporate govern- ance which is constantly balanced against the nature and scope of the Company’s activities.
General meeting of shareholders
The general meeting of shareholders, which is the Company’s highest decision-making body, gives shareholders the opportu- nity to exercise their infl uence.
Dannemora Mineral’s annual general meetings are open to all shareholders. The annual general meeting makes decisions on the adoption of the income statement and balance sheet, distribution of the Company’s profi t or loss, discharge of Board members and the CEO from liability and election of the Board members, Chairman and auditor. The meeting also defi nes the level of Board and auditor’s fees.
Board
The Board of Dannemora Mineral is responsible for the organisation and management of the Company’s affairs, and its work is led by the Chairman of the Board. The Board current- ly consists of six members who are appointed by the annual general meeting of shareholders. At present, Board members are elected until the next annual general meeting.
The present Board, which was elected at the annual gener- al meeting held on 4 May 2009, consists of Nils Bernhard, Lennart Falk, Lars-Göran Ohlsson, Nils Sandstedt, Christer Lindberg and Niklas Nordström. Eleven minuted Board meetings were held in 2009. In 2010, fi ve Board meetings
had been held in the period up to the signing of the annual report.
The Board of Dannemora Mineral has the expertise and experi- ence required to support, monitor and control activities in a mining and explo- ration company. Board members’ areas
of expertise include geology, mining,
mineral dress-
ing, licence management, corporate development, PR and fi nancing.
The Board’s activities, the division of responsibility between Board and Management and guidelines for report- ing to the Board are clearly stated in the Board’s formal work plan. The formal work plan is adopted by the Board following the annual general meeting each year. The current work plan was adopted at the Board meeting held on 4 May 2009. The Board has not established a special audit committee or any other permanent committees or working committees.
Group management
The President and CEO Staffan Bennerdt is responsible for the day-to-day management ofthe Company and Group in accordance with a set of CEO instructions and guidelines drawn up by the Board. In addition to the President and CEO, Group management comprises the CEOs of Danne- mora Magnetit AB and Dannemora Förvaltnings AB, the Marketing & Logistics Manager, the Prospecting Manager and the CFO.
Group management holds bi-monthly meetings to discuss the Group's fi nancial performance and position. The meetings also deal with ongoing investments in plant and equipment, marketing and customer development, monitoring of budgets and forecasts and liquidity planning.
Salaries and remuneration of Board members and key management personnel
Salaries and remuneration for the fi nancial year 2009 are reported in note 8 on page 67.
Share market information
The Board of Dannemora Mineral AB is responsible for ensuring that the Company fulfi ls the requirements for infor- mation disclosure to the stock market. Dannemora Mineral’s fi nancial and other communication shall always be conducted in accordance with the relevant First North and Stockholm Stock Exchange rules, legal obligations which may apply to Dannemora Mineral AB and best stock market practice.
The aim is also to maintain a good relationship with the fi nancial market’s participants by providing relevant and timely information in a professional way. Dannemora Mineral publishes an interim report after each quarter, a year-end report and an annual report for the full fi nancial year.
Insider policy and insider rules
The Board of Dannemora Mineral AB has adopted an insider
policy to complement current insider legislation. Each person
to whom the policy applies is notifi ed of this. The policy
regulates procedures for the periods during which there is
a prohibition in trading in shares or other fi nancial instru-
11 All entrepreneurial activity and share ownership in-
volves risks, and a shareholding in Dannemora Mineral is no exception. Even though the Dannemora iron ore is well understood and a due diligence process has been carried out with positive results, a shareholding in Dannemora Mineral should always be regarded as a risk investment. Certain factors the Company consid- ers to be of major signifi cance are described below.
Raising of capital
Resumption of operations in the Dannemora mine and continuing exploration for new deposits will require capital contributions. Creation of shareholder value is dependent on the structure of the planned fi nancing of the production facilities (internal-external capital ratio) and the capital cost at which it can be carried out. Although the due diligence study shows the mining project to have clear fi nancial viability, there are no guarantees that additional venture capital or loans may be forthcoming.
Ore prices and currencies
Key risks, which may also represent opportunities, are associ- ated with the price of iron ore and movements in the USD/
SEK exchange rate. The price of iron ore is set in dollars per percentage of iron content. Until 2009, prices were set during annual negotiations between the major steel producers and iron ore producers. These benchmark prices then represented the standard for other players around the world. The bench- mark price model is now in the process of being abandoned by the large players. There is much to indicate short-term pricing in the future, with the spot market gaining increasing impor- tance.
Customers
Dannemora Mineral has been successful in signing trial deliv-
Risks and factors which
may affect Dannemora Mineral AB
ery agreements and it is the Company's view that these will lead to supply contracts. However, there is a risk that the steel companies may not be ready to enter into a contract, or that they will be willing to do so but under conditions that are not acceptable to Dannemora Mineral.
Personnel
Like many other small and medium-sized enterprises, Danne- mora Mineral is dependent on its personnel. Recruitment of personnel has been successful to date, although the resump- tion of operations will require a signifi cant increase in the workforce, with a considerable need for expertise and specialist knowledge in certain cases.
Environmental requirements
Exploration and mining activities are subject to stringent environmental requirements which can cause consider- able delays and additional expenditure, even to the point of making mining impossible. However, Dannemora Mineral has been granted an environmental permit under the Swedish environmental code to conduct operations in Dannemora. The Company already pursues environmental protection activities aimed at meeting different stakeholder requirements.
Exploration
Exploration activities are aimed at increasing the Group’s iron ore reserves, particularly in the vicinity of Dannemora. Conse- quently, the Group must have the technology, expertise and fi nancial resources to fi nd and explore new mineralisations.
Production technology
The geology of the deposits is well understood, and the mining technology and process technology properties have been fully tested. Nevertheless, problems may arise which can change the project’s technical or commercial outcome.
before publication of fi nancial information.
A list of insiders covered by the insider policy is available on the Company’s website. These individuals’ holdings are reported in this annual report together with the date and size of any changes in their holdings.
Auditing
The auditor’s task is to examine the Company’s annual fi nan- cial statements and accounting and to review the management
of the Company by the Board and CEO. After each fi nancial year, the auditors submit an audit report to the annual general meeting.
Auditors are appointed by the annual general meeting for a term of four years. The Company’s auditor is Öhrlings Price- waterhouseCoopers AB. The Chief Auditor is Annika Wedin,
C O R P O R AT E G O V E R N A N C E & R I S K A N A LY S I S F
A T H E D A N N E M O R A S H A R E & O W N E R S H I P
Dannemora Mineral AB’s class B shares have been listed on First North since 25 May 2007. On the first trading day of the year (2 January 2009), the share was quoted at SEK 12.00. Its highest listing during 2009 was SEK 51.75 on 16 November.
On the last trading day of the year (30 December 2009), the share was quoted at SEK 41.00, which corre- sponds to an increase of 242 percent during the year.
In the same period, the First North All-Share index
rose by 33 percent, while the OMX Stockholm 30 index increased by 37 percent.
During 2009, a total of 4,111,448 shares were traded, which gives an average turnover of 16,380 shares per trading day.
At 19 March 2010, the Dannemora share was quoted at SEK 55.00, which is a year-to-date increase of 34 percent.
In the same period, the First North All-Share index rose by 5 percent, while the OMX Stockholm 30 index increased by 6 percent.
Price development
Share capital
Dannemora Mineral’s total share capital at 31 December 2009 was SEK 1,241,600, divided into 1,200,000 class A
shares and 6,560,000 class B shares. Each share has a par value of SEK 0.16. Class A shares carry
10 votes per share, while B shares carry one vote per share. All shares carry
equal entitlement to a share of the company’s assets and earnings.
In March 2010, the Board of Dannemo-
ra Mineral AB
exercised the mandate granted by the extraordinary general meeting to complete a private placement which brought the Company proceeds of SEK 165 million before issue expenses. A total of 2,750,000 class B shares were subscribed for at a price of SEK 60. After the issue, the Company's share capital amounted to SEK 1,681,600, divided into 1,200,000 class A shares and 9,310,000 class B shares.
The company’s share capital must not be less than SEK 500,000 and must not exceed SEK 2,000,000. This corre- sponds to a minimum of 3,125,000 and a maximum of 12,500,000 shares.
B-Shares
Share price development 02-01-2009 – 19-03-2010
13
Year Transaction Increase in Total share Increase in Total number Share issue share capital, capital, number of of shares price,
SEK SEK shares SEK
Mar 2005 Company founded 100 000 100 000 - 100 000 1.00
Jan 2006 New share issue 22 000 122 000 22 000 122 000 50.00
Jun 2006 New share issue 41 000 163 000 41 000 163 000 369.00
Mar 2007 Bonus issue 358 600 521 600 - 163 000 -
Mar 2007 Share split 20:1 - 521 600 3 097 000 3 260 000 -
May 2007 New share issue 224 000 745 600 1 400 000 4 660 000 61.00
Jun 2008 New share issue 496 000 1 241 600 3 100 000 7 760 000 50.00
Mar 2010 New share issue 440 000 1 681 600 2 750 000 10 510 000 60.00
Share capital development
Incentive scheme
In 2008, an incentive scheme comprising a maximum of 85,000 warrants and 85,000 share options for the President and key management personnel in the Group was adopted.
75,000 warrants and 85,000 share options were allotted.
The subscription period for the warrants is 1 July 2009 to
15 January 2012. The subscription period for the share options is 1 July 2011 to 15 January 2012.
The programme is described in more detail in note 8 on page 67.
The table below shows the ownership structure of Dannemora Mineral at 30 December 2009, based on an extract from Euroclear.
Lennart Falk, directly and via family and companies 600 000 262 750 11.1 33.7
Nils Bernhard, directly and via family 600 000 218 000 10.5 33.5
HQ Strategifond 468 000 6.0 2.5
Mikaros AB 435 000 5.6 2.3
Per-Uno Sandberg 300 000 3.9 1.6
Avanza Pension insurance company 221 704 2.9 1.2
Mikaros Invest AB 155 625 2.0 0.8
Nils Sandstedt 150 000 1.9 0.8
Awake Swedish Equity Fund 129 400 1.7 0.7
Hargs Bruk Holding AB 126 400 1.6 0.7
Proad AB 110 663 1.4 0.6
Nordnet Pensionsförsäkring AB 66 167 0.9 0.4
Ben Hayes 65 000 0.8 0.4
Anna-Karin Sandberg 60 000 0.8 0.3
Nordea Nordic Equity Hedge Fund 59 865 0.8 0.3
Foreign investors* 2 031 588 26.2 11.0
Other 1 699 838 21.9 9.2
Total shares and participating interests 1 200 000 6 560 000 100.0 100.0 Share of A shares B shares Capital, % Votes, %
* Foreign investors are institutions, fund managers and private owners.
T H E D A N N E M O R A S H A R E & O W N E R S H I P F
A F I V E Y E A R S I N S U M M A R Y
01-01-2009- 01-01-2008- 01-01-2007- 01-01-2006- 17-03-2005- 31-12-2009 31-12-2008 31-12-2007 31-12-2006 31-12-2005
Income statement (SEK thousands)
Net sales 5 957 2 866 - - -
Operating expenses -30 022 -30 128 -11 835 -2 754 -96
Net financial items 652 4 564 1 661 124 -
Profit/loss after financial items -23 413 -22 698 -10 174 -2 630 -96
Profit/loss for the year -23 413 -22 698 -10 174 -2 630 -96
Balance sheet (SEK thousands) Assets
Intangible assets 34 073 30 602 22 722 5 659 125
Property, plant & equipment 105 388 56 129 257 102 -
Financial assets 2 131 2 619 115 100 -
Current receivables 1 730 4 915 1 013 500 1 103
Cash & cash equivalents 62 641 146 114 63 706 9 865 2
Total assets 205 963 240 379 87 813 16 226 1 230
Equity and liabilities
Equity 184 945 208 358 82 668 13 103 1 104
Non-current liabilities 13 242 13 000 - - -
Trade payables 3 470 12 440 3 125 1 306 60
Other current liabilities 4 306 6 581 2 020 1 817 66
Total equity and liabilities 205 963 240 379 87 813 16 226 1 230
Cash flow statement (SEK thousands)
Cash flow from operating activities -30 732 -20 497 -7 805 -2 104 27
Cash flow from investing activities -52 934 -47 483 -18 093 -3 762 -125
Cash flow from financing activities - 148 388 79 739 15 729 100
Total cash flow -83 666 80 408 53 841 9 863 2
Group
K E Y F I G U R E S & D E F I N I T I O N S F
151215 Key figures and financial ratios
Definitions of key figures and financial ratios
Return on average total assets: Profit/loss after financial items plus finance costs as a % of average total assets.
Return on average equity: Profit/loss after financial items as a % of average equity.
Equity: Equity at year-end.
Equity/assets ratio: Equity as a % of total assets.
Outstanding shares on balance sheet date before full dilution: Number of shares at year-end.
Outstanding shares on balance sheet date after full dilution: Number of shares at year-end adjusted by the number of shares that can be subscribed for under outstanding incentive schemes.
Average number of shares before full dilution: Average number of shares during the financial year.
Average number of shares after full dilution: Average number of shares during the financial year adjusted by the number of shares that can be subscribed for under outstanding incentive schemes.
Earnings per share, before full dilution: Profit/loss after financial items divided by the average number of shares before full dilution.
Earnings per share, after full dilution: Profit/loss after financial items divided by the average number of shares after full dilution.
Equity per share: Equity at year-end divided by outstanding shares before full dilution.
Share price: Share price at year-end.
Average number of employees: Average number of employees during the year converted to full-time equivalents.
01-01-2009- 01-01-2008- 01-01-2007- 01-01-2006- 17-03-2005- 31-12-2009 31-12-2008 31-12-2007 31-12-2006 31-12-2005
Profit/loss after financial items, SEK thousands -23 413 -22 698 -10 174 -2 630 -96
Return on average total assets, % -10.5 -13.8 -19.6 -30.1 -14.5
Return on average equity, % -11.9 -15.6 -21.2 -37.0 -16.0
Equity, SEK thousands 184 945 208 358 82 668 13 103 1 104
Equity/assets ratio, % 89.8 86.7 94.1 80.7 89.8
Cash & cash equivalents, SEK thousands 62 641 146 114 63 706 9 865 2
Gross investments in intangible assets, SEK thousands 3 720 9 399 17 363 5 534 124 Gross inv. in property, plant & equip, SEK thousands 49 509 56 267 225 118 -
Gross investments in financial assets SEK thousands - 2 504 15 300 -
Shares outstanding before full dilution 7 760 000 7 760 000 4 660 000 163 000 100 000 Shares outstanding after full dilution 7 949 000 8 009 000 4 720 000 163 000 100 000 Average number of shares before full dilution 7 760 000 6 210 000 3 470 347 140 666 100 000 Average number of shares after full dilution 7 949 000 6 377 250 3 530 347 140 666 100 000
Earnings per share before full dilution, SEK -3.02 -3.66 -2.93 -18.70 -0.96
Earnings per share after full dilution, SEK -2.95 -3.56 -2.88 -18.70 -0.96
Equity per share, SEK 23.83 26.85 17.74 80.39 11.04
Share price, SEK 41.00 8.60 31.00 - -
Average number of employees 13 14 8 3 -
A B O A R D
Nils Bernhard
Founder. Elected to the Board 2005.
Lennart Falk
Founder. Elected to the Board 2005.
Christer Lindberg
Elected to the Board 2006.
b. 1947.
M.Sc. (Eng.), B.Sc. (Econ).
Entrepreneur and private investor Other directorships:
Tobii Technology AB et al.
No. of shares and options*: 600,000 class A shares and 218,000 class B shares (directly and through related parties).
b. 1941.
Ph.D. and Geologist. Entrepreneur and private investor.
CEO of Dannemora Prospektering until 2008.
Other directorships: Pajeb Kvarts AB and Svensk Prospekteringskonsult AB.
No. of shares and options*: 600,000 class A shares and 262,750 class B* shares (directly, through related parties and companies).
b. 1948.
B.Sc. (Econ).
CEO Almi Företagspartner Stockholm AB.
Other directorships: Chairman of the Board of Östergrens Holding AB, Board Member of Almi Stockholm Investeringsfond AB, S.E.G Resistor AB, Lightlab AB et al.
No. of shares and options*:
15,699 class B shares.
Niklas Nordström
Elected to the Board 2007.
Nils Sandstedt
Deputy Chairman since 2007. Elected to the
Board 2006.
Lars-Göran Ohlsson
Elected to the Board 2006.
b. 1968.
Senior Consultant at Prime PR AB.
Other directorships: Director of Egenmakt AB.
No. of shares and options*:
3,000 class B shares.
b. 1964.
B.Sc. (Econ).
Corporate finance consultant and private investor.
Other directorships:
Skebo Konferens AB and Rosa & Co AB.
No. of shares and options*: 150,000 class B shares.
b. 1944.
Mining Engineer
CEO of Parent Company from 2006 to April 2008.
CEO of Geo Management AB.
Other directorships:
Chairman of Geo Management AB and Director of Endomines AB.
No. of shares and options*: No holdings.
Photo Jappe Liljedahl
17 G R O U P M A N A G E M E N T A N D A U D I T O R S F
Staffan Bennerdt Kjell Klippmark Lars Alm
Jan Vestlund Niklas Kihl Peter Svensson
Group President and CEO of Dannemora Mineral AB.
b. 1954. B.Sc. (Econ).
Appointed 2008.
No. of shares and options*: 50,000 class B warrants (on full subscription 50,000 shares) and 50,000 class B share options (on full subscription 50,000 shares).
Marketing and Logistics Manager of Dan- nemora Mineral AB.
b. 1947. M.A. (Political Science), B.Sc . Appointed 2007.
No. of shares and options*: 4,000 class B war- rants (on full subscription 4,000 shares) and 10,000 class B share options (on full subscrip- tion 10,000 shares).
CEO of Dannemora Förvaltnings AB and Deputy CEO of Dannemora Magnetit AB.
b. 1947. Mining Engineer.
Appointed 2007.
No. of shares and options*: 100 class B shares.
Prospecting Manager of Dannemora Magnetit AB.
b. 1968. M.Sc . (Geosciences) . Appointed 2007.
No. of shares and options*: 1,000 series B shares.
CEO of Dannemora Magnetit AB.
b. 1954. Mining Engineer.
Appointed 2007.
No. of shares and options*: 15,000 class B warrants (on full subscription 15,000 shares) and 15,000 class B share options (on full subscription 15,000 shares).
CFO of Dannemora Mineral AB.
b. 1964. B.Sc. (Econ).
Appointed 2007.
No. of shares and options*: 100 class B shares.
6,000 class B warrants (on full subscription 6,000 shares) and 10,000 class B share options (on full subscription 10,000 shares).
Öhrlings PricewaterhouseCoopers AB has been the Company’s auditor since 2005.
The Chief Auditor Annika Wedin (b. 1961) is an authorised public accountant (1993) and a member of FAR.
Information on holdings of shares and warrants is correct as at 31 December 2009.
09 O P E R A T I O N S
The goal is to resume operation of the
Dannemora mine, with
an annual production
of 1.5 Mt of processed
iron ore products.
19
A D A N N E M O R A I R O N O R E M I N E
Iron ore reserves will last 13 years
Production will be up and running approximately one year after the financing decisions, with another 18 months before full production is reached. The calculated ore reserves (proba- ble ore reserves) amount to 28.6 Mt and will last for 13 years at the planned level of production.
More ore at depth
Ongoing exploration work in the mine also indicates an extension of the ore mineralisation at depth in the northern and central areas of the mine, which is expected to increase the life of the mine. Other deposits in the region are also being investigated and indicate good iron ore potential.
Operational goal: Profitable mining and development of new iron ore projects
Dannemora Magnetit is a wholly-owned subsidiary of Dannemora Mineral AB. The Company's primary goal is to resume operation of the Dannemora iron ore mine with good long-term profitability, and to increase the ore reserves in the mine by means of continuous exploration. It is also
The goal is to resume operation of the Dannemora mine, with an annual production of 1.5 Mt of processed iron ore products. All the necessary permits for the resumption of operations are in place. The project is awaiting positive results from ongoing full-scale testing at a number of European steelworks and the signing of long-term supply contracts.
The project will then move into the final financing phase.
The Dannemora iron ore mine
the Company's goal to develop new iron ore projects into mineable deposits and engage in exploration in a number of base and precious metal projects.
Knowledgeable mining personnel
The CEO of Dannemora Magnetit, mining engineer Kjell Klippmark, has long experience gained from leading positions in the industry. The Company's Deputy CEO, mining engineer Lars Alm, also has long experience gained from leading positions in the industry. At the end of the year, there were also seven other full-time employees, all with extensive experience and a high standard of education.
Strategic location close to railway and port of ship- ment.
The Dannemora field lies in the municipality of Östhammar,
about 40 km north of Uppsala and 35 km west of the port of
Hargshamn where the ore will be transported by rail for
shipment to customers. The nearest town is Österbybruk
which is about 2 kilometres east of the Dannemora mine.
21
A D A N N E M O R A I R O N O R E M I N E - D U E D I L I G E N C E
Due diligence report confirms
potential of the Dannemora mine project
To satisfy lenders’ requirements for an unbiased and professional insight into the Dannemora mine project ahead of the final financing stage, Micon Ltd has conducted technical, legal, environmental and financial due diligence processes. Their report confirms that there is good potential for engaging in profitable mining operations in Dannemora.
Micon Ltd is one of the world's largest and most renowned technical consultants specialising in mines and has long experi- ence in due diligence processes. The feasibility study presented on 7 December largely confirmed the conclusions from the previous feasibility study.
Sound financial base
The current project plan for the Dannemora mine is consid- ered viable from a technical, environmental and legal perspec- tive. The project rests on a sound financial base and has the potential to generate an attractive return on invested capital.
The mine project's discounted cash flow (net present value, NPV) is estimated at around SEK 2 billion, based on the updated investment and operating expenses and new forecasts regarding iron ore prices and the dollar rate.
Refined mining plans and minor changes to key figures
The plans for the mining project in Dannemora have been gradually refined and certain key figures have therefore been
changed. Total investments are now expected to be SEK 832 million (previously 838 million).
Good potential for increasing ore reserves Dannemora Mineral is working on a number of initiatives aimed at improving the mine project's NPV. There is thought to be good potential for increasing the iron ore reserves, which would increase the life of the mine. Annual production is also likely to be higher than expected, as the iron ore processing plant is projected for an annual capacity of 2 million tonnes, while the NPV is cautiously based on annual production of 1.5 million tonnes.
More details on the due diligence report can be found at
www.dannemoramineral.se
23 D A N N E M O R A J Ä R N M A L M S G R U V A - T R I A L D E L I V E R I E S F
One step closer to off-take agreement
Four letters of intent resulted in four trial delivery agreements – one in the last quarter of 2009 and three in the first half of 2010. The next stage will be long-term supply contracts and final financing.
In the first quarter of 2009, letters of intent were signed with four European steel companies for future iron ore deliveries.
In view of the weak economic situation, the steel companies decided to postpone the trial deliveries in spring. Consequent- ly, Dannemora Mineral decided to delay non-time-critical investments for six months.
Brightening economy and first trial delivery secured With a brightening economic situation, negotiations on trial deliveries were resumed in early autumn. The first trial delivery agreement was signed with Austrian steel company Voestalpine on 13 November for delivery of approx. 10,000 tonnes of iron ore products. The ore was shipped from Hargshamn on 30 November for delivery to Voestalpine's blast furnaces in Linz, where the Dannemora ore underwent full-scale production together with other ore.
Three more trial deliveries
On 5 February 2010, agreement number two was signed with German steel company Salzgitter for delivery of between 13,000 and 18,000 tonnes of iron ore products. The third trial delivery agreement was signed on 8 March with ThyssenKrupp
Steel Europe for between 20,000 and 30,000 tonnes of iron ore, while the fourth was signed with Rogesa on 8 April for delivery of approx. 10,000 tonnes of iron ore. The trial deliveries will be shipped to the customers in the second quarter of 2010.
Trial deliveries strategically important for long-term contracts
Each trial delivery is preceded by thorough analyses aimed at ensuring the quality fits into the steel company's production.
Consequently, a trial delivery agreement is strategically important and indicates the steel company's intention to enter into a long- term supply contract.
Next stage off-take agreements and final financing.
After evaluation of the full-scale tests, the next stage is the
signing of multi-year iron ore supply contracts, referred to as
off-take agreements. When the first off-take agreement has been
signed, the project moves into the final financing phase. Informal
contacts with lenders should give a short lead time for a financ-
ing solution. The production start-up is expected to be one year
after the financing decision, with full-scale production underway
about 18 months later.
A D A N N E M O R A I R O N O R E M I N E - P R O D U C T S
Iron ore products that reflect demand
Dannemora iron ore will be sold as two processed products, namely Dannemora Fines (DF 5), size 0-5 mm, and Danne- mora Lump (DL 16), size 5-16 mm. Dannemora Fines grades 55 percent iron, while Dannemora Lump grades 50 percent iron. 2.45 Mt crude ore will be required to cover full produc- tion of 1.5 Mt of processed products.
The aim is to produce 60 percent lump and 40 percent fines, which is a good reflection of demand in Dannemora's market in Northern Europe.
The interesting iron mineral in the Dannemora field is magnetite.
Because the ore is magnetic, dressing is easy, which means processing is inexpensive. Another positive property is its release of energy on heating (exotherm).
Sub-level caving
The ore is mined using the sub-level caving method. The ore is transported from different caving points, either directly by truck or via ore chutes, to one of the emptying stations at the 350 and 460 metre levels. The ore is then placed in an ore bin and taken to the primary crusher at the 520 metre level. It is then placed in a storage bin before being hoisted by skip to the surface.
However, in the first 18 months of operation, the ore will be brought up via a ramp and crushed on the surface.
Lump ore with fraction
5-16 millimetres
25 D A N N E M O R A I R O N O R E M I N E - P R O D U C T S F
Dry processing brings major advantages
The ore is crushed and undergoes dry processing in the form of two-stage magnetic separation. The advantages of dry processing are that it reduces investment costs and results in processed ore that contains less moisture than products which undergo wet processing. This has a positive effect on freight costs. Ore to be used for the trial deliveries is processed in a temporary processing plant which will eventu- ally be part of the permanent ore processing plant.
1Tunnelling 2Drilling of opening slot
5Caving/blasting
8 Emptying of shaft and loading onto trucks at main level
6Caving (another projection)
9Emptying of trucks into crusher 4Production drilling
(another projection)
7Mucking
3 Production drilling
Fines with fraction 0-5 millimetres
Simplified sketch showing the principle of sub-level caving in the Dannemora mine.
A D A N N E M O R A I R O N O R E M I N E - T H E S T E E L A N D I R O N O R E M A R K E T S
The steel and iron ore markets
The early part of 2009 was dominated by the recession, which resulted in plummeting demand for iron ore during the first half of the year. The market turned more positive after the mid-year point and had largely recovered by December.
Russia 4.9%
India 4.6%
Brazil 2.2%
Rest of world 11.9%
South Korea 4%
Ukraine 2.4%
Japan 7.2%
USA 4.8%
EU27 11.4%
Source: World Steel Association
BRIC
58.3% China 46.6%
Distribution of crude steel production, 2009 Reduced demand for steel in 2009
Global demand for commercial steel fell by 9 percent in 2009. The only exception was China, where demand for steel rose by approximately 19 percent to 525 million tonnes.
Demand in the EU fell by 30 percent.
Decline in global steel production countered by increase in China
Steel production fell for the second year running, amount- ing to 1,220 Mt in 2009, which is a decline of 8 percent compared with 2008 (1,330 Mt). Production fell in virtually every steel-producing country, apart from China and India.
China's steel production increased by 14 percent to 568 Mt.
The country's share of the world market is rising constantly and will soon be on 50 percent. India's steel production increased by 3 percent to 57 Mt. Steel production in the EU fell by 30 percent to 139 Mt.
Market recovery
Steel production on the global market was at its lowest during January-February, but made a slow recovery during the year. By December, production volumes were back at the same level as in 2007. Total world steel production is expected to increase by 10 percent in 2010.
The main reason for the increase in production is the
rising demand in China. The Chinese government is invest-
ing in major construction projects in the western part of the
country and massive infrastructure projects in the east. Also,
Chinese iron ore has a very low Fe content. All these factors
indicate that China will continue to have a very strong need
for steel.
27
Steel consumption in China is on the rise, with investments in massive infrastructure projects in the eastern part of the country.
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