Staffan Bennerdt, President and CEO
alternative in a market which is in dire need of a fresh approach and increased competition.
Exploration 20 Risks and factors which can affect Dannemora Mineral 26
The Dannemora share & ownership 27
Four-year overview 29
Board of Directors’ Report 31
Income statements 35
Balance sheets 36
Cash flow statements 38
Additional information and notes 39
Audit report 47
Corporate governance 48
Board, management and auditor 2008 49
Glossary 52
One of Sweden’s oldest mines 54
This annual report is a translation of the original annual report in Swedish. In case of divergence, the Swedish version shall have precedence.
BUSINESS CONCEPT
Dannemora Mineral’s business concept is:
to
• resume operations in the Dannemora iron ore mine, and to operate the mine profitably in a long-term perspective.
to identify other iron mineralisations and
•
develop them into workable ore deposits which create good synergies with the Dannemora operations
to explore for base and precious metal
•
mineralisations 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 number of European steel companies within five years.
Goals
Dannemora Mineral’s goal is to resume operations in the Dannemora mine, establish long-term supply contracts with two to five leading steel companies for the majority of its production and gradually increase the ore reserves in the Dannemora deposit by continuous exploration. It is also the company’s goal to gradually develop known or new deposits of iron ore in other parts of Sweden.
The board has defined the following financial goals for the business:
to
• achieve a positive operating profit within two years of production start
to achieve profitability at least at the level
•
of the industry average within three years of production start
The operational goals can be summarised
•
as follows:
resume operations in the Dannemora mine
•
in summer 2011
achieve full production by autumn 2012
•
substantially increase iron ore reserves by
•
means of exploration in the mine and its vicinity
locate and develop known 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 has constant 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 advantages. The market development will be aimed at the 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 known deposits of iron ore mineralisations is focused on such with geographical and transport advantages and on ore with similar product properties to the Dannemora ore as this brings considerable market synergies from a customer perspective.
New or known 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 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 inherent in different financial solutions.
Structure
Dannemora will be established as a central platform for future mining activity in eastern Bergslagen. The initially extensive 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 a knowledge and administrative context.
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 so that it is able to closely monitor developments in environmental legislation and always take whatever action is required to comply with current legislation.
2008 HIGHLIGHTS
In January, Dannemora Mineral conducted
•
a feasibility study of the planned operations in the Dannemora mine, which showed the project has solid financial viability.
In February, Östhammar Municipality
•
transferred an area of land of approx- imately 400 ha to the Dannemora Group’s newly established subsidiary Dannemora Förvaltnings AB. The purchase gave Dannemora Mineral ownership of build- ings and installations important to mining operations.
On 1 April, Staffan Bennerdt took up
•
his position of President and CEO of Dannemora Mineral.
On 18 June, the Swedish Environmental
•
Court approved Dannemora Mineral’s application to engage in mining activities in Dannemora. The ruling has the force of res judicata and cannot be appealed. The environmental permit is for the mining and processing of up to 2.0 Mt of lump ore and fines annually.
In June, Dannemora Mineral completed
•
a private placement which brought the company proceeds of SEK 155 million before issue expenses. A total of 3,100,000 shares were subscribed for at a price of SEK 50.
In August, preparations for pumping out
•
the mine began. Pumping of the water begins in the second quarter of 2009.
October saw the start of mobilisation
•
DANNEMORA MINERAL AB (PUBL)
DANNEMORA
MAGNETIT AB DANNEMORA
FöRVALTNINGS AB DANNEMORA PROSPEKTERING AB
GROUP STRUCTURE
Dannemora Mineral comprises the parent company Dannemora Mineral AB and the wholly-owned subsidiaries Dannemora Magnetit AB, which is responsible for operation of the Dannemora mine, and Dannemora Förvaltnings AB, which is responsible for the property portfolio. In 2008, the group’s exploration activities were conducted in the wholly-owned subsidiary Dannemora Prospektering AB. This entity’s activities were transferred to Dannemora Magnetit AB with effect from 1 January 2009, after which Dannemora Prospektering AB became a dormant subsidiary.
of the ramp placement work which will connect the mine’s main level with the existing ramp. The actual work began in February 2009.
Dannemora Mineral AB has had intensive
•
discussions with potential customers from Northern Europe during the year. These discussions culminated in the signing of a letter of intent with four steel companies in spring 2009.
Discussions on the renovation of the
•
railway line on the Örbyhus – Dannemora – Hargshamn – Hallstavik section were held in 2008, and resulted in Dannemora Mineral and a number of interested parties signing a declaration of intent with the Swedish Rail Administration in January 2009.
In the second half of the year, the
•
subsidiary Dannemora Prospektering’s activities were concentrated on the iron ore in and around the Dannemora mine in order to prioritise the commencement of mining. With effect from 1 January 2009, exploration was transferred to Dannemora Magnetit, where it now forms a separate division.
Slag separation at blast furnace.
Jernkontorets bildbank.
Photo: Stig Göran Nilsson.
Photo: Peter Svensson
Staffan Bennerdt, President and CEO
A stronger China
provides potential
for Bergslagen
Staffan Bennerdt took up the position of President and CEO of Dannemora Mineral on 1 April 2008. He has a degree in economics and is highly experienced in the mining and construction industries, having held a number of senior positions, the most recent being Boliden.
Why did you take on the job? What attracted you?
– I was fascinated by the challenge of be- ing involved in starting up a brand new undertaking. Our proximity to European steelworks and good access to transport give us a great chance of success. What’s more, we are an experienced team, each of us bringing different skills, who work together in a creative and positive spirit. On a personal note, I enjoy working in a small organisation and getting involved in developing the entire business.
How are falling prices and reduced demand for iron ore affecting Dannemora?
– We have based our calculations on significantly lower prices, and, with the stronger dollar, our capital budget actually looks better than before. However, as you would expect, it is more difficult to borrow money with the global financial markets in such turmoil. In order to satisfy lenders’
requirements for an unbiased insight into the mining project, we have engaged an independent consultant to carry out a due diligence process, which will be completed in spring 2009.
However, loan financing of the mining project is dependent on trial deliveries, which culminate in long-term supply contracts.
With demand for steel falling sharply, our potential customers are anxious to postpone the previously discussed trial deliveries. This will have the effect of delaying the loan financing, which means the mine will not be operational until summer 2011. We expect to be in full production by autumn 2012.
What is your target customer group and what makes Dannemora stand out as a supplier?
– To start with, we are targeting steel works in fairly close proximity; in other words those which obtain their ore from Baltic and North Sea ports. The short distances give us major cost advantages over our competitors from Brazil and the African countries. Our products are sinter fines and lump ore, the latter being particularly attractive on the market. Results from tests have proved positive, which has played an important role in the signing of a letter of intent with four steel companies in Northern Europe.
On 18 June, the Swedish Environmental Court granted us the last remaining funda- mental permit we needed to resume mining operations in Dannemora which were closed down in 1992.
What has been the reaction of the local population?
– Very positive! The inhabitants of Bergs- lagen are fiercely proud of their mining history, which laid the ground for Sweden’s emergence as an industrial nation in bygone days. When we resume mining operations and create new jobs in the area, this will really mean a lot to the people who live here.
In January 2009, you signed a decla- ration of intent with the Swedish Rail Administration on renovating the railway section to Hargshamn. What does this mean to you?
– The railway line gives us smoother logistics and transport to Hargshamn, which is our port of shipment. Although the project initially involves an increased cost of investment, the variable transport costs are reduced at the same time. Overall, it offers much better profitability than the truck alternative we considered. And of course, rail transport has important environmental advantages.
What else is happening this year?
– We shall soon be starting to pump out the mine, and this is expected to be finished in spring 2010. Ore mining and production of materials for trial deliveries to our customers will take place on a gradual basis as the mine is emptied of water. At the same time, work will begin on the new ramp which will connect the existing ramp at Strömsmalmen with the mine’s main level. The new ramp will allow truck traffic access in the entire mine.
The work also includes approximately 700 metres of tunnelling for development prior to the start of production. The new ramp and development headings will generate about 50,000 tonnes of iron ore for trial deliveries.
Do you know the extent of ore reserves in the mine? And how long will they last?
– The proven and probable iron ore reserves in the Dannemora mine have been estimated at just over 28 million tonnes, grading 35.2 percent iron and 1.8 percent manganese.
Looking at an estimated annual production of 1.5 million tonnes of lump ore and fines (approx. 2.45 million tonnes of mined ore), this ore reserve will allow over 12 years of continuous mining. In order to increase the reserves and extend the life of the mine or increase its annual production, we have initiated an iron ore exploration programme.
What is the main indicator that Dannemora Mineral will be a successful company in the future?
– Our geographical location and good logistics give us a clear competitive edge.
We also have a broad bank of expertise and attractive products for which there is market demand. A feasibility study conducted in early 2008 shows the project has sound financial viability over the coming years. In a longer-term context, as the standard of living in China and other parts of the world rises, iron ore will become one of the world’s products in short supply. So having a mine in Bergslagen isn’t such a mad idea!
The financial crisis has shattered many a Swedish industrial dream.
However, Danne-mora Mineral’s President Staffan Bennerdt views the future with a great sense of hope and looks forward to an increasing need for iron ore and raw materials as economies in China and other parts of the world grow stronger.
The goal is to resume operations in the Dannemora mine and establish long-term supply contracts.
IRON ORE
The Dannemora mine lies about 40 kilometres north of Uppsala and 35 kilometres west of the port of shipment (Hargshamn).
Iron ore
Photo: Mikael Eriksson
The Dannemora deposit lies in the muni- cipality of Östhammar, about 40 kilometres north of Uppsala and 35 kilometres west of Hargshamn, from where the shipment of ore is planned. The nearest town is Österbybruk which is about 2 kilometres east of the mine.
ORGANISATION
Following the reorganisation in January 2009, Dannemora Magnetit now has eight employees. Kjell Klippmark, a very experienced mining engineer who has held leading positions in iron ore companies which include LKAB, succeeded Lars Alm as CEO of Dannemora Magnetit. Lars Alm remains as Deputy CEO.
In order make the Group’s focus on iron ore projects clearer, the exploration part was transferred to Dannemora Magnetit at the beginning of 2009.
The geological activities will continue to be concentrated on exploration for iron ore (preferably) in and around the Dannemora mine and on iron ore deposits in Bergslagen In addition, the geological and planning units in the Group are responsible for mine planning, ore reserve calculation and quality control in the mine.
GEOLOGY OF THE DANNEMORA AREA
The dominating bedrock in the Dannemora area consists of steeply dipping layers of metamorphosed supracrustal rocks (formed on the surface), assumed to be about 1.9 billion years old. They are mainly volcaniclastic rocks (fragmented rocks of volcanic origin), carbonate rocks, iron mineralisations and metamorphosed variants of these.
The volcaniclastic rocks were formed during intense volcanic activity from gas- rich and fragment-bearing ash which flowed down, or from material raining down from the cloud of ash thrown up by the eruptions. The carbonate rocks are made up of limestone and dolomite. These rocks are often altered into manganese-rich skarn containing mine- rals such as knebelite and dannemorite, or manganese-poor skarn, dominated by diop- side, actinolite and garnet.
The bedrock in the Dannemora area has experienced relatively little folding, apart from the early folding phase that turned the supracrustal rocks into their present position.
Instead, the tectonics are characterised by a large number of faults, which in some cases have caused considerable displacement.
IRON ORE IN THE DANNEMORA DEPOSIT
The carbonate-bearing and iron-mineralised part of the Dannemora deposit has a length of about 3 kilometres and a width ranging between 400 and 800 metres. Due to the primary mode of formation as well as later tectonisation, the iron mineralisation occurs as a large number of ore bodies along the strike of the deposit and at various depths. In all, some 25 ore bodies were mined until the mine was closed down in 1992.
The ore bodies appear as more or less stratabound layers in the carbonate rocks.
The strike is approximately N30°E and they have a thickness varying from a few metres to The primary goal of Dannemora Mineral’s wholly owned subsidiary
Dannemora Magnetit is the resumption of operations in the Dannemora iron ore mine and profitable operation of the mine in a long-term perspective.
DANNEMORA
Hargshamn
Uppsala
Norrtälje Österbybruk
TOWARDS GÄVLE
TOWARDS STHLM
Length section of the Dannemora deposit showing mined out ore and remaining ore down to the depth investigated by core drilling.
60 metres. Close to the surface, the ore bodies dip steeply to the northwest, while a less steep dip is encountered deeper down (70° to 55°).
In the northern part of the deposit, core drilling has indicated iron ore at a depth of 1,000 metres.
The only economically interesting iron mineral in the deposit is magnetite, which is composed of iron and oxygen (Fe3O4). The magnetite is mostly fine-grained (0.04-0.1 millimetres). It often appears associated with skarn minerals, which also surround many of the ore bodies. As manganese is found in some skarn minerals such as knebelite and dannemorite, several of the Dannemora ore bodies have relatively high total manganese
According to the date on the wea- ther vane, the bell tower in Dan- nemora was erected in 1754..
Photo: Tommy Persson
LENGTH SECTION THROUGH THE DANNEMORA DEPOSIT
Konstäng1-4
Diamanten1
Botenhäll Lyndon
Mellanfält
Myrmalm
Norrnäs
Sjöhag Svea
100 200 300 400 500 600 700 800
4900 4800 4700 4600 4500 4400 4300 4200 4100 4000 3900 3800 3700 3600 3500 3400 3300 3200 3100 3000 2900 2800 2700 2600 2500 2400 2300 2200
Silvbergsmalm 1&2
Main crusher
Skip station
Southern ventilation shaft Northern ventilation shaft LENGTH SECTION (m)
Drifts & shafts
Mined out ore
Remaining ore
S N
Head frame
Strömsmalm
Kruthus Schaktmalm
Diamanten 2
DEPTH (m)
Proven ore reServeS Probable ore reServeS ToTal ore reServeS
Ore Mineralisation Kton % Fe % M n Kton % Fe % M n Kton % Fe % M n
lyndon 1 2 834 37,23 0,77 47 28,95 0,46 2 881 37,09 0,77
lyndon 3 0 - - 0 - - 0 - -
Konstäng 1 -4 1 111 39,65 1,05 126 36,28 1,03 1 237 39,30 1,05
Konstäng 2 -3 2 602 34,94 3,44 114 34,25 3,21 2 716 34,92 3,44
Kruthus 1 896 38,67 0,61 56 38,34 1,08 1 952 38,66 0,62
Kruthus <500m 0 - - 1 401 38,67 0,61 1 401 38,67 0,61
Svea 2 750 37,26 2,44 103 29,61 1,41 2 853 36,98 2,40
Diamanten 2 3 236 36,74 2,82 837 37,15 2,78 4 073 36,82 2,81
Sjöhag 526 33,09 0,31 244 36,50 0,28 770 34,17 0,30
Schaktmalmen 1 512 33,40 0,60 493 27,36 0,64 2 005 31,91 0,61
Ströms 1 642 28,76 1,51 152 31,22 1,51 794 29,23 1,51
Ströms 2 234 27,71 1,14 102 26,75 1,09 336 27,42 1,12
botenhäll 1 464 26,89 1,34 285 26,85 1,53 1 749 26,88 1,37
normäs 1 718 33,28 1.84 1 499 34,27 1,93 2 217 33,95 1,90
normäs 2 1 089 30,03 1,67 691 31,54 1,80 1 780 30,62 1,72
Pillars etc.* 0 - - 1 699 39,00 2,40 1 699 39,00 2,40
ToTal 20 612 35,12 1,78 7 849 35,32 1,69 28 461 35,18 1,76
grades, mostly silicate-bound. All the ore bodies have low phosphorus content (0.001 to 0.007 percent). The sulphur content varies but can amount to a few tenths of a percent in some ore bodies.
MINERAL RESOURCES AND ORE RESERVES
In 2007, Dannemora Mineral commissioned three independent consultancy companies to conduct a feasibility study on production conditions in the Dannemora mine. More detailed information on the feasibility study was reported in the press release issued on 28 January 2008.
The calculations of mineral resources were carried out by Hans-Eric Lundgren (ARRC Geoconsulting AB), who has been approved as a Qualified Person (QP) by SveMin (Swedish Association of Mines, Mineral and Metal Producers). The calculations were carried out in accordance with the recommendations issued by SveMin, which broadly follow the Canadian policy document NI 43-101.
With a cut-off of 30 percent iron, and including lower grade sections which cannot be avoided during mining, the measured mineral resources are 23.6 Mt, grading 38.5 percent iron and 1.9 percent manganese, the indicated mineral resources are 8.0 Mt, grading 35.5 percent iron and 2.2 percent manganese, and the inferred mineral resources are 1.3 Mt, grading 32.4 percent iron and 2.0 percent manganese.
ORE RESERVES IN THE DANNEMORA DEPOSIT, END OF 2007 Ramp development at the 162 metres level, Strömsmalmen.
Photo: Mikael Eriksson
The grades are calculated from older analyses which have been partly checked by re-analysis at the Geo-laboratory of Geolo- gical Survey of Finland (now La- btium Oy), which is accredited according to FINAS TO25 (EN ISO/IEC 17025).
*Based on old data.
2009-01-30: The drilling rig leaves daylight and rolls down into the Dannemora mine.
Photo: Mikael Eriksson
The calculations of ore reserves in the Dannemora mine were carried out by Vattenfall Power Consultant AB. These were based on the calculated mineral resources shown above, also taking into account waste rock dilution and ore losses.
Total waste rock dilution was estimated at 3.0 Mt, grading 5 percent iron (approx. 10 percent of the mineral resources).
Ore losses, which are partly attributable to irregularities in the ore bodies, are estimated at 4.8 Mt, grading 36.9 percent iron and 1.8 percent manganese (approx. 15 percent of the mineral resources).
The proven ore reserves in the Dannemora deposit have been calculated at 20.6 Mt, grading 35.1 percent iron and 1.8 percent manganese, while the probable ore reserves are 7.9 Mt, grading 35.3 percent iron and 1.7 percent manganese (a total of 28.5 Mt, grading 35.2 percent iron and 1.8 percent manganese).
ENVIRONMENTAL PERMIT
In the middle of May, the Environmental Court considered Dannemora Magnetit’s application for an annual production of two million tonnes of saleable iron ore products from Dannemora. On conclusion of the negotiations, the Court indicated that it would announce its decision on 18 June 2008, and on that date the application was granted. The Court’s decision also included what is referred to as leave to issue execution, which means that operations can start even if there is an appeal against the court’s ruling.
All consultation bodies had supported the application. The environmental conditions the court imposed on the operations were as expected and acceptable.
CUSTOMERS
The intention is that deliveries from the planned production in the Dannemora mine will be primarily to steelworks in the region;
in other words, those importing their ore via Baltic or North Sea ports, which gives clear freight advantages.
During spring, chemical, physical and metallurgical tests were performed on Dannemora’s iron ore products; fines and lump ore. The tests continued in the
summer when large-scale sintering tests were conducted.
The results of these test programmes showed that Dannemora’s iron ore products are suitable for the blast furnace processes of future steel customers. The positive test results have also formed the basis of detailed technical discussions with a number of potential customers in Northern Europe.
These discussions have resulted in the signing of a letter of intent between Dannemora Magnetit and four steel companies in Northern Europe. The letter of intent expresses the parties’ intention to negotiate a long-term, binding contract for future iron ore deliveries from the Dannemora iron ore mine.
However, as a result of the economic recession and the steel industry’s reduced production volumes, supply contracts with these steel companies are not expected to be finalised until the first half of 2010.
LAND ACQUISITION AND PROPERTY MANAGEMENT
As part of the planned resumption of mining, on 1 April 2008 Dannemora Mineral AB took possession of an area of land of about 400 hectares which was purchased from the municipality of Östhammar at the beginning of the year. The area encompasses all the land that will be needed to make the mine operational again. The subsidiary Danne-
mora Förvaltnings AB, which is responsible for land and property management, was established in conjunction with the land acquisition. The land transaction also gave Dannemora Mineral ownership of buildings and installations important to mining operations (ore processing plant, mine head frame, workshops, warehouses and office buildings). It also included a number of residential buildings which are so close to the industrial area that the company considered it important to have control over them. The transfer contract also regulates a number of environmental issues, one of which stipulates that the municipality of Östhammar is responsible for any environmental impacts from previous activity. The total purchase
consideration was SEK 13.5 million. A down payment of SEK 0.5 million was made when the company took possession of the land in April. The remaining SEK 13.0 million is due for payment in December 2012.
On 1 September 2008, Dannemora Förvaltnings AB acquired the remaining property required to ensure full control of the planned operational area.
The land acquisition from the muni- cipality of Östhammar has also given Dan- nemora Förvaltnings AB responsibility for 15 residential buildings. In autumn, the company signed an agreement with Lars Eklöf Fastighetsförvaltning for technical management of the Group’s property portfolio.
On 1 June 2008, Lars Alm was appointed CEO of Dannemora Förvaltnings AB, with special responsibility for property matters.
Lars remains as Deputy CEO of Dannemora Magnetit AB.
DESIGNATION OF LAND, BUILDING PERMIT
In December 2008, Dannemora Magnetit AB received a designation of land from the Mining Inspectorate of Sweden for the planned operational area. This means the area of land the company needs for its mining operations has been approved by the authority. The Mining Inspectorate’s decision was facilitated by the fact that Dannemora was the sole owner of the land in question.
The stable buildings in Danne- mora.
Photo: Mikael Eriksson
Passenger lift for pump installa- tion in the main shaft.
Photo: Tommy Persson Connecting the 20 kV high-vol- tage line.
Photo: Mikael Eriksson
The company already has a building permit from the municipality of Östhammar; this designation of land was the last important permit required for the planned mining operations.
ENERGY ACQUISITION
In September, Dannemora Magnetit entered into an energy acquisition consultancy agreement with EME Analys. The acqui- sition, which was completed in autumn, was important in securing the company’s electricity requirements, mainly for ramp placement, development work and draining of the mine.
ELECTRICITY SUPPLY
A 20 kV power supply line to Dannemora’s operational area was connected in autumn 2008 and a new building was erected with switchgear which will distribute the power supply in the area. A high-voltage cable to the ramp in the northern part of the ore field was laid during 2008. In early 2009, the transformers were installed at the inclined drift, which gave the green light for commencement of the development work.
PROJECTS IN PROGRESS Pumping the mine dry
At the end of June, Dannemora Magnetit entered into an agreement on pumping out the Dannemora mine with a consortium made up of ITT Water & Wastewater AB and Contector AB.
The consortium, which began mobilisation in autumn 2008, will start the pumping in 2009. The pumps will be installed in the existing main shaft, followed by draining down to the 465 metre level. A permanent pumping system will then be installed to allow continuous pumping throughout the life of the mine. Dannemora Magnetit already has a permit from the County Administrative Board for pumping out the mine.
In order to make the pumping operation possible, extensive work was carried out in the shaft during autumn 2008. A provisional passenger lift and a 10-tonne hoist have been installed and inspected. The submerged part of the shaft has been surveyed with an
under-water robot. Scaling, safety work and in-spections have been carried out in the part of the shaft which is not submerged.
In addition, surface work on the instal- lation of two sedimentation basins and one clear water basin continues.
Extension of the inclined drift and development of Strömsmalmen In September 2008, Dannemora Magnetit AB entered into an agreement with Berg- teamet AB for ramp development and tunnelling work in the Dannemora mine.
Bergteamet AB is one of Sweden’s leading tunnelling and shaft contractors.
Under the agreement, the existing ramp in the northern part of the mine area will be extended from the 162 metre level to the 350 metre level. The new section of the ramp, which has a length of approximately 1,600 metres and an area of 32 square metres, will allow access to all parts of the mine with heavy vehicles from the surface.
The agreement with Bergteamet covers approximately 700 metres of drift deve- lopment in Strömsmalmen (one of the smaller ore bodies with an ore reserve of 450 thousand tonnes). This will generate approximately 50 thousand tonnes of iron ore. Planning of the new inclined drift and development drifts began in autumn 2008, and in early February 2009 the underground work started.
Drilling for access to ventilation raise.
Photo: Peter Svensson
Planned main ramps and mining ramps in the Dannemora depo- sit.
The ore berth at Hargs Hamn.
Photo: Hargs Hamn
The iron ore tonnage from the develop- ment is intended to be used for trial deliveries to customers. The crude ore will be crushed, screened and processed into lump ore and fines in a simple temporary ore processing facility. The majority of the equipment can be used in the planned ore processing plant.
TRANSPORT TO HARGSHAMN Discussions on the renovation of the rail- way line on the Örbyhus – Dannemora – Hargshamn – Hallstavik section were held in 2008, and resulted in the signing of a declaration of intent between the Swedish Rail Administration, Dannemora Magnetit AB, Hargs Hamn AB, Holmen Papper AB, Östhammar municipality, Norrtälje municipality and the Regional Council of the county of Uppsala in January 2009.
Annual iron ore deliveries from the Dannemora mine are expected to amount to approximately 1.5 million tonnes. After the renovation of the line, the railway will allow goods traffic at speeds of up to 70 kph and an axle load of up to 22.5 tonnes. The traffic control system will also be upgraded to allow efficient management of the increase in traffic.
Under the declaration of intent, the Swedish Rail Administration has undertaken to implement and finance the renovation of the existing line and upgrade the traffic control system. The costs of this work have been estimated at SEK 100 million.
Dannemora Magnetit has undertaken to acquire and implement the upgrading of the branch line from the mine to the main line at a cost of SEK 10 million. The municipalities of Östhammar and Norrtälje have undertaken to provide noise and vibration protection and to strengthen certain level crossings. The costs of this work have been estimated at SEK 5 million.
Although the rail option represents a somewhat higher cost of investment for Dannemora Magnetit, the variable transport costs are expected to fall considerably.
Overall, the rail option is seen as offering much better profitability than the previously considered truck alternative. In addition, the rail option has important environmental advantages.
In March 2009, Dannemora Magnetit also signed a letter of intent with Hargs Hamn AB regarding the receipt, storage and loading of final products on vessels.
FINANCING AND DUE DILIGENCE Throughout 2009, Dannemora Mineral worked to secure financing for the iron ore project. As part of the financing, Dannemora Mineral AB completed a private placement in June 2008, which brought the company proceeds of SEK 155 million before issue expenses.
It is planned to obtain the remaining financing by issuing shares or other financial instruments and by means of bank loans.
Dannemora Mineral AB has engaged Endeavour Financial Ltd as financial adviser for the planned borrowing. Endeavour Financial Ltd, based in London, has 20 years’
experience specialising in natural resources projects.
To satisfy lenders’ need for an unbiased insight into the mining project, the customary technical, legal, environmental and financial due diligence processes were begun in autumn 2008.
Loan financing for the investments in mining operations is conditional on Dannemora Mineral having established customer relationships which ensure sale of its iron ore products. As a result of the steel industry’s reduced production volumes, long- term supply contracts are not expected to be finalised until the first half of 2010. Loan financing agreements are expected to be signed on the basis of this schedule.
PLANNED MINING AND ORE PROCESSING
As a result of the postponed loan financing, the mine and ore processing plant will not be operational until summer 2011, which is a delay of just over one year on the original plans. It is planned that full production, 1.5 million tonnes of iron ore products annually, can be achieved by autumn 2012.
As was the case before the mine was shut down in 1992, the mining method that will be used is sub-level caving. The ore will be
developed and mined with sub-level drifts, but in most cases the wall rock will not cave in. The ore will be transported from different mining points, either directly by truck or via ore chutes to a main level, and then taken to the primary crusher underground. It will then be placed in a storage bin before being hoisted by skip to the surface. However, in the first two years of operation, the ore will be driven up the ramp and crushed above ground, as deliveries and installations of skips and crushing stations have long lead times.
It is planned that the entire ore processing will be dry, by means of of repeated crushing, screening and magnetic separation. Dry processing has many advantages over the conventional two-stage process previously used, which comprised sorting, followed by wet milling, magnetic separation and dewatering.
THE IRON ORE MARKET Steel Production
Steel production fell in 2008, for the first time in 10 years. A total of 1,329.7 million tonnes was produced, which is a decline of 1.2 percent. Production in Asia continued to increase – China by 2.6 percent, South Korea by 3.8 percent and India by 3.7 percent. However, Japanese production fell by 1.2 percent between 2007 and 2008. In the fourth quarter of 2008, steel production fell by almost 20 percent compared with the
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Simplified sketch showing the principle for sub-level caving in the Dannemora mine.
CHARGING
CRUSHER POCkET
BELT CONVEyOR
MEASURING POCkET SkIP STATION NEW SLICE LEVEL
DRILLING
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same period the previous year.
Steel consumption
Steel made a strong start to 2008, with the World Steel Association predicting that steel consumption would grow by 7 percent during the year. Extraordinary events on the financial side and gloomier forecasts for the steel industry’s customers resulted in a rapid decline in the use of steel products.
World Steel decided not to issue its October forecast in the climate of major uncertainty.
Massive financial stimulus packages are being launched in the USA, China, G7 countries and the EU aimed at retaining jobs and generating employment, particularly in infrastructure, creating confidence in banks and restoring stability on the financial markets.
Iron Ore Production
2008 was another year of record iron ore production in the world. World production grew by 4 percent, rising to 1,695 million tonnes from the previous year’s figure of 1,630 million tonnes. Chinese production in 2008 was estimated to be 387* million tonnes, which is an increase from 321* million tonnes in 2007. Three countries, Australia, Brazil and India, together accounted for more than half the production but also 80 percent of export. The export market is dominated by Vale followed by Rio Tinto and BHP Billiton.
IRON ORE TRADE
As a result of the decline in production in the fourth quarter of 2008, trade in iron ore is expected to have fallen during 2008.
Most steel works stopped all shipments from November, although deliveries have been slowly resuming in the early part of 2009.
The largest import market is China. Despite the decline in volumes towards the end of the year, the country imported 444 million tonnes compared with 383 million tonnes in 2007, an increase of 16 percent.
CONSOLIDATION
BHP Billiton’s hostile bid for Rio Tinto was stopped in its tracks by the accelerating
Country Import (Mt)
China 444
eU 25* 156
Japan 140
Korea 48
Taiwan 14
Country Export (Mt)
australia 310
brazil 282
India 100
South africa 31
Canada 28
Sweden 18
Construction of sedimentation basins.
Photo: Tommy Persson Largest iron ore importers in 2008.
Source: Raw Materials Data, Stockholm 2009.
* Estimate.
Major iron ore exporters in 2008.
Source: Raw Materials Data, Stockholm 2009.
* Corrected for iron content to facilitate comparison
The old processing plant in Dan- nemora with conveyor in the foreground.
Photo: Tommy Persson
financial crisis. It is not likely that merger bids will be seen on the Australian continent in the next few years.
Chinese interest in obtaining transparency and better control over its imports of natural resources continues. The latest acquisition of 9 percent of Rio Tinto by Chinalcos gives the Chinese company a 15-percent stake in Rio’s largest iron ore producer Hamersley Iron. The USD 19.5 billion transaction is the largest ever by a Chinese company.
IRON ORE PRICES
Prices rose to record levels for the sixth consecutive year. The strong expansion of
steel production in China was behind the shortage of iron ore, which saw a 65-percent increase in the benchmark price for Brazilian fines to Europe, and an 80-percent increase in the price of Australian fines to Asia. A late attempt by Vale to achieve the same increase as its Australian competitors failed, mainly due to the approaching recession.
The uncertain economic situation has made this year’s price negotiations very slow.
However, one thing is clear – the upward price trend has now been broken. The steel industry claims it needs 40 to 50 percent price reductions for sinter fines and even more for lump ore and pellets. The response from suppliers is not known, although sector analysts are estimating a fall of 20-30
percent in the fines price and a decline in the lump and pellet premium as a reaction to lower demand. We are also beginning to see a question mark next to the benchmark contract price system. The main reason be- hind this is the spot market for Indian iron ore which was established in China. BHP Billiton has declared it will not enter into any new contracts containing pure benchmark clauses. Importers, particularly in Europe, have opted to keep the existing model so far.
Iron ore product trade flows.
Geolog lena landersjö och prospekteringschef Peter Svensson
Photo: Mikael eriksson.
EXPLORATION
The goal is to gradually increase the ore reserves in Dannemora by continuous exploration and to gradually develop known or new deposits of iron ore in other parts of Sweden.
Geological overview map of the area around the Dannemora mine.
yellow = felsic volcanics brown = older intrusive rocks (granitoids)
green = older intrusive rocks (gabbro)
red = younger intrusive rocks (granite)
light blue = sedimentary rocks dark blue = limestone
The map is copied from: Geological Survey of Sweden (SGU) Ser. Ba 47.
ORGANISATION
Dannemora Prospektering AB had six em- ployees during 2008: the CEO, Exploration Manager, three geologists and one geo- physicist. Another geologist was engaged on a consulting basis (80 percent).
At the end of 2008, CEO Lennart Falk, one of the founders of Dannemora Mineral AB, stepped down. However, he still serves on the parent company’s Board.
At the same time, a reorganisation involved personnel in Dannemora Prospektering AB being transferred to form a department for planning and exploration in Dannemora Magnetit AB. Peter Svensson, the former Exploration Manager at Dannemora Pro- spektering AB, was appointed Exploration &
Planning Manager for Dannemora Magnetit AB.
Two of the geologists were given more responsibility in the work relating to the Dannemora mine, while other personnel continued to have the same duties as before.
EXPLORATION ACTIVITY IN 2008 In 2008 Dannemora Prospektering AB focused a major part of its operations in north-west Uppland. In addition, a number of projects in other parts of Bergslagen were investigated.
Till sampling was carried out in three project areas in Uppland. Bedrock mapping and ground magnetic surveys were carried
out in a number of areas. Diamond drilling was carried out in two areas. Dannemora Prospektering AB also worked on compiling and evaluating all available information relating to the Dannemora iron ore mine.
A drilling programme is planned in the northern part of the Dannemora deposit.
During the year, Dannemora Prospekt- ering AB produced information about a number of other iron ore projects. This work has resulted in an application by Dannemora Mineral AB for seven new exploration permits focusing on magnetite skarn ore.
EXPLORATION PERMITS AND
EXPLOITATION CONCESSION In addition to an exploitation concession for the Dannemora deposit, Dannemora Mineral AB had 28 exploration permits at the end of 2008, covering an area of 25 437 hectares.
The permits are distributed among the following counties: 21 in Uppsala, two in Västmanland, two in Värmland, one in Örebro, one in Jönköping and one in Västra Götaland. The company has also submitted four new exploration permit applications to the Mining Inspectorate.
Map showing Dannemora Mineral’s exploration permits and exploita- tion concession (line screened) in the county of Uppland.
Ralby Nr 2
Film
Hälsinggruvan
Ramhäll Ralby Gruvsjön-
Gryttjom
Vigelsbo
Sjötorp Dannemora
Vattholma
Forsmark
Sandby Andersbo Östmora
Frebbenbo
Ursbo nr 1
Österby
INVESTIGATIONS IN THE
EXPLOITATION CONCESSION AND EXPLORATION PERMITS
Geology and mineral deposits in the county of Uppsala
The county’s supracrustal rocks consist mainly of felsic volcanics, with layers of carbonates, which were formed about 1.9 billion years ago. Sedimentary rocks appear to a lesser extent. The intrusive rocks can be divided into two main groups, one from an early stage (1.87 to 1.9 billion years ago) and one from a later stage (1.87 billion years ago) of the Svecokarelian orogeny. It is mainly in the felsic volcanics with carbonate layers that the mineralisations of iron and base and
precious metals occur. Mining operations have focused mainly on the large iron ore deposits. Dannemora, where 36 million ton- nes have been mined, is by far the largest mining area. Zinc, lead and silver have also been mined in the county.
DANNEMORA EXPLOITATION CONCESSION
For some 100 years, from the 1880s until the 1980s, 1,116 diamond drill holes were drilled in the Dannemora deposit. Since then, Dannemora Prospektering has drilled 15 holes. From these drill holes, 470 old drill cores and the 15 new cores are stored in Dannemora. 83 drill cores are stored
in the archive at the Geological Survey of Sweden (SGU) in Malå. All stored drill cores are logged and in many cases re-sampled in order to allow control and new calculations of mineral resources. In conjunction with the logging, 926 mineralised sections were sampled in 2008. A total of 1,954 mineralised sections have been sampled since Dannemora Prospektering AB started the work in 2006.
Extensive planning work was carried out in 2008 in order to optimise implementation of continuing iron ore exploration in the mining area.
In 2008, eight diamond drill holes were drilled on a good electrical conductor in the southern part of the mining area
Open pit in Södra fältet, Danne- mora.
Photo: Mikael Eriksson
Geologist Gunnar Rauseus car- ries out a detailed ground mag- netic survey in the northern part of the Dannemora deposit.
Photo: Mikael Eriksson
(Södra fältet), identified by means of drill hole TEM surveys. All the diamond drill holes encountered a zinc mineralisation which corresponded well with the identified electrical conductor. The best sections are from drill hole 3015 with 3.2 metre drill core section with 12.2 percent zinc (or 18.4 metres with 2.9 percent) and from drill hole 3012 with 7.5 metres drill core section with 4.5 percent zinc (or 18.0 metres with 2.5 percent zinc). A full report on the drilling programme in Södra fältet can be found on Dannemora Mineral AB’s website and in the press release issued on 27 May 2008.
BASE AND PRECIOUS METAL PROJECTS IN THE COUNTY OF UPPSALA
In the Gruvsjön-Gryttjom exploration per- mit, a till sampling programme in 2007 encountered an area with elevated grades of base metals and gold.
The anomaly was followed up in the first half of 2008 by means of bottom till and rock chip sampling. The results show interesting grades also in the bottom till. The project will be evaluated in 2009 before the next exploration phase starts.
In the Vigelsbo, Andersbo and Hälsing- gruvan exploration permits, an area with base metal and gold anomalies was identified in the 2007 till sampling programme. In the first half of 2008, the anomaly was followed
