ANNUAL REPORT AND SUSTAINABILITY REPORT 2 …...#1 Europe’s largest iron ore producer #2 The world’s second-largest pellet manufacturer 1,250 M e T res 1,365 e T res underground,

A N N U A L R E P O R T A N D S U S T A I N A B I L I T Y R E P O R T

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C O N T E N T S

L KAB , BOx 952 , SE 971 28 LU L Eå , SwEDEN www. l k ab . com

LKAB 2010

Overview of the past year 4

President’s report 6

Group strategies 10

L K A B ’ S A N N U A L R E P O R T 1 2

Market and economic trends 13

International iron ore trade 15

Capacity and logistics 17

Ore reserves and mineral resources 19

Research and development 20

S U S TA I N A B I L I T Y R E P O R T 2 2

Stakeholders and sustainability issues 24

Value creation 25

Urban transformation, Kiruna and Malmberget 27

Environment 31

Significant events during the year 33

Environment per operating location 34

Energy 37

Atmospheric emissions 39

waste 41

water 44

Deformations 45

Seismic events/rock mass displacements 45

Site remediation 46

Co-workers 47

Sustainability Management 110

GRI index 112

Auditors’ statement of assurance,

Sustainability Report 114

C O R P O R AT E G O V E R N A N C E R E P O R T 5 2

Board of Directors and Group Management 56

Auditors’ Report on the Corporate Governance Report 59

F I N A N C E 6 0

Group overview 60

Report of the Directors 62

Financial reports and notes 72

Proposed disposition of unappropriated earnings 108

Auditors’ Report 109

Glossary 115

Addresses 116

Annual General Meeting and financial information 117


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LKAB 2010



Group strategies 10









Value creation 25


Environment 31



Energy 37


waste 41

water 44

Deformations 45


Site remediation 46

Co-workers 47


GRI index 112






F I N A N C E 6 0

Group overview 60





Glossary 115

Addresses 116


EnvironmEntal gains with “lKaB grEEn PEllEts”Total carbon dioxide emissions from the production of crude steel, about 2,000 kg CO2/tonne, are reduced when LKAB pellets are used as the iron raw material. The manufacture of LKAB pellets generates one seventh of the carbon dioxide emissions as compared to sintering at the steelmill, and one-third as compared to hematite-based pellet manufacture. The reduction is about 215 kg and 95 kg CO2/tonne crude steel, respectively.

Fe3o4 4,100EmPloYEEs

thE high-gradE magnEtitE orE From lKaB’s minEs is somE oF

thE world’s BEstmorE than 200 tradEs and ProFEssions

distriBution oF womEn and mEn in lKaBLKAB’s ambition is to be an attractive employer for all individuals, regardless of gender, disability, cultural background or sexual orientation.

lKaB PEllEt Production 2010 Most of LKAB’s products are iron ore pellets with an iron content of 66%. Carefully tested and measured additives in pellet manufacture increase productivity, reduce energy input, result in lower wear and lead to lower slag volumes in steelmaking.

14% are women

86% are men

66%Iron content

For thE saKE oF thE EnvironmEnt In the ULCOS project (Ultra-Low Carbon dioxide Steelmaking), Europe’s steel and mining industries have joined forces in research collaboration to find solutions for tomorrow’s environmentally friendly, ultra-low carbon dioxide steelmaking.

38kg CO2/tonne

110kg CO2/tonne

250kg CO2/tonne

LKAB PELLETS

HEMATITE-BASED PELLETS SINTER

Other products

13%

PELLETS 87%

SHARE OF PELLETS/ OTHER PRODUCTS IN

LKAB’S PRODUCT RANGE

a rEcord! lKaB Posts an oPErating ProFit For 2010 oF

twElvE thousand two hundrEd and EightY onE million Kronor.

lKaB’s logistics in FigurEsLKAB delivered a total of 26 million tonnes of finished iron ore products during 2010.

Ore harbor in Luleå:

5.8 mt(437 vessels)

Ore harbor in Narvik:

17.2 mt(215 vessels)

Other deliveries to customers and stocks, 3.0 Mt. Payload/train:

6,800 tonnes

68 cars/train, so-called long train.

Payload/car:

100 tonnes

towards thE toPOne aim of LKAB’s sponsorship strategy

is to offer broad sponsorship that contributes to active recreation, and to attract and assist talented young

athletes to reach the elite level. By giving

110%the trio of young wrestlers Johanna

Mattsson, Hanna Johansson and Sofia Mattsson from Gällivare have won

several gold, silver and bronze medals in national, European and world

championships, and their sights are set on winning medals in the 2012 Olympics.17% of LKAB’s managers are women. In 2000 the corresponding figure was 4.6%.

rEducEd atmosPhEric EmissionsAlthough pellet production has more than tripled in the past 30 years, LKAB has managed to halve discharges of particulates and emissions of sulfur dioxide and fluorides.

This dramatic reduction has been achieved thanks to improved efficiency in production, new technologies and improved knowledge of processes. The goal is further reductions.

More information on emissions, including carbon dioxide, is given on pages 39-41.

In the past 30 years LKAB’s production has

increased by more than

300%while emissions of sulfur

dioxide and fluorides and discharges of particulates

have decreased by

50%

EMIS

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TON

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PELL

ETS

PRO

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189 g/tonne pellets

103 g/tonne pellets

70 g/tonne pellets

31 g/tonne pellets

10 g/tonne pellets

NITROGENOXIDE

SULFUR DIOXIDE PARTICULATES HYDROGEN

CHLORIDEHYDROGENFLUORIDE

50% lowEr co2-Emissions

LKAB Annual Report 2010.Produced by LKAB in collaboration with Vinter.The Sustainability Report has been produced in collaboration with Hallvarsson & Halvarsson.Photo: Fredric Alm, Andreas Lundberg and LKAB.Printed by: Luleå Grafiska.

L KAB 2010

LKAB is one of Sweden’s oldest industrial companies. Founded in 1890, the company has played a vital role in Sweden’s export industry and industrial development for more than a century. And for just as long, the company has been a reliable supplier and partner to the European steel industry. The rich, high-grade iron ore from the North has been complemented with other natural minerals. LKAB is now an international, high-tech

minerals group with large-scale operations on a globally competitive market, and a reliable resource that is constantly developing and aiming for the future.

The largesT sTeel-producing counTries, 2010

r&d supporTs lKaB’s growThA mineral is called ore when it can be mined profitably. R&D activities including process development create ore and contribute to LKAB’s profitability and competitiveness. The growth target is more than 37 million tonnes of iron ore products per year by 2015.

26Million Tonnes

lKaB’s deliveries of iron ore producTs in 2010, of which 21 Million Tonnes was pelleTs.

high qualiTy in producTionDuring 2010 LKAB’s deliveries achieved a quality value of 95.2%. That is the best full-year Q value since quality rating according to this system was adopted in 2000.

The highest quality value,

100%was achieved in December 2010.

2010: 67.0

2009: 60.0

+11.7%

#4 RUSSIA Mt

2010: 80.6

2009: 58.2

+38.5%

#3 USA Mt

2010: 66.8

2009: 62.8

+6.4%

#5 INDIA Mt

2010: 58.5

2009: 48.6

+20.3%

#6 SOUTH KOREA Mt

2010: 43.8

2009: 32.7

+34.1%

#7 GERMANY Mt

2010: 33.6

2009: 29.9

+12.4%

#8 UKRAINE Mt

2010: 32.8

2009: 26.5

+23.8%

#9 BRAZIL Mt

2010: 4.8

2009: 2.8

+72.8%

#29 SWEDEN Mt

2010: 626.7

2009: 573.6

+9.3%

#1 CHINA Mt

2010: 109.6

2009: 87.5

+25.2%

#2 JAPAN Mt

lKaB 2010Luossavaara-Kiirunavaara AB (plc). LKAB is wholly owned by the Swedish state.

President and CEO: Lars-Eric Aaro

Chairman of the Board: Björn Sprängare

Corp. ID No.: 556001-5835(Source: worldsteel, January 2011)

perforMance in ironMaKingLKAB is a high-tech minerals group whose success is driven by world-class research, development and production.

#1 Europe’s largest iron ore producer

#2 The world’s second-largest pellet manufacturer

1,25

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1,36

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underground, The MalMBergeT

Mine’s new Main level is Being BuilT

underground, The Kiruna Mine’s new

Main level is Being BuilT

In a research and optimization project during 2010, LKAB’s R&D department increased capacity at the MK3 pelletizing plant in Malmberget by

10%(Source: Sifo, LKAB Framtid, Nov. 2009)

120years of Bel ief in The fuTure

urBan TransforMaTionIn the company’s financial statements for 2010, LKAB allocated 2,997 million kronor towards urban transformation in Kiruna and Malmberget. According to a SIFO survey, 97% of the population of Gällivare and 96% of residents in Kiruna accept the urban transformation in the orefields communities as a consequence of the new main levels.

90%are sympathetic towards the urban transformation, according to SIFO

>

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J A N F E B M A R C H A P R I L M A Y J U N E

Lars-Eric Aaro is appoint-ed President as of Jan 1. Bolagshotellet in Malm-berget is closed. Derail-ment at Sjöbangården in Kiruna disrupts the de-livery flow. A damaged roof at the old apatite plant in Kiruna causes water and debris to flow down, creating problems loading trains from rock chutes.

LKAB elects to sign an-nual price agreements for its iron ore products, while many major pro-ducers switch to quarter-ly pricing. Construc-tion begins on a stra-tegically important pellet research centre, AggloLab, in Malmber-get. A further SEK 75 million over three years is allocated for the pros-pecting programme to enable exploration of some 50 deposits around the present operating lo-cations. Environmen-tal permits are granted for Gruvberget in Svap-pavaara. Mining begins.

LKAB announces plans for three new open pit mines in the Svappa- vaara area. Ten million tonnes of products have been delivered to Qatar Steel. Skiers Marcus Hell-ner and Charlotte Kalla, then LKAB employ ees, take individual Olym-pic golds in Vancouver. The Malmberget mine re-ports a record month for delivery to the process-ing plants.

The Board votes on a new strategy plan that will include LKAB 37, tar-geting growth of about 35 per cent to 37 mil-lion tonnes of iron ore products per year. Test drilling in Malmberget shows that the Prinzsköld orebody extends at depth. This bodes well for operations in the long term, but will have an im-pact on central Malm-berget. Magne Leinan is appointed president of LKAB Norge AS.

The first modernized, en-vironmentally friendly ter-minal locomotive, T46, is in service. Despite occa-sional problems due to se-vere cold, the interim re-port shows an operating profit of SEK 1,361 mil-lion and a quarterly deliv-ery record of 6.3 million tonnes. LKAB’s athlet-ics and culture grants are awarded to Sofia Matts-son and Agge Theander, respectively.

E V E N T S O F T H E Y E A R I N B R I E F

Four-year summary

SEK MILLIONS 2010 2009 2008 2007 Net sales 28,533 11,558 23,128 16,385Operating profit 12,281 659 10,327 6,148- operating margin, % 43.0 5.7 44.7 37.5 Profit after financial items 12,350 1,192 10,389 6,344- profit margin, % 43.3 10.3 44.9 38.7Tax - 3,267 –473 –2,748 –1,665Net income for the year 9,083 719 7,641 4,679Non-current assets 25,083 23,688 21,414 19,447Current assets 21,546 11,867 14,915 10,233Shareholders’ equity 33,419 25,375 25,218 22,251Cash flow for the year 5,415 –3,140 3,948 –1,159 Return on equity, %* 30.9 2.8 32.2 22.6Equity/assets ratio, % 71.7 71.4 69.4 75Capital expenditures** 3,973 3,543 4,716 5,968Average number of employees 4,030 3,778 4,086 3,885

* After tax ** property, plant and equipment

significanT evenTs 2010:LKAB adopts a new strategy that will include LKAB 37, targeting growth of about 35 per cent to 37 million tonnes of iron ore products per year. Gruv-berget, the first of three planned new open pit mines in Svappavaara, opens in May. A delivery record of 26 million tonnes of iron ore products is set.

L K A B G R O U P

significanT evenTs 2010:A delivery record is set for magnetite products.Production and delivery records are set for huntite products. Investment for manufacturing more refractory and recycled product in England.Robert Boulton, new president, Minelco Group.

SEK MILLIONS 2010 2009

Sales 2,814 2,141Operating profit 433 –95Operating margin, % 15.4 –4.4Operating assets 1,264 1,352Operating liabilities 721 1,029Investments* 10 13Depreciation* 30 47Impairments* 0 317Average number of employees 380 384

* property, plant and equipment

Financial highlights – Minerals

M I N E R A L S D I V I S I O N

Europe is the Group’s biggest market.

Sales per market region (%)

Others 7%

Europe 66%

Middle East/ Asia 27%

Europe is Minelco’s home market. However, most of the growth is taking place on other markets.


Middle East/ Asia 34%Others 8%

Europe 58%

2005 2006 2007 2008 2009 2010

50

40

30

20

10

0

Return on equity (after tax)

Target return on equity (after tax)

The targeted return on equity is 10 per cent over a business cycle.

Return on equity (%)

2005 2006 2007 2008 2009 2010

30,000

25,000

20,000

15,000

10,000

5,000

0

Net sales increased by 147 per cent and amounted to SEK 28,533 million (11,588). Operating profit amounted to SEK 12,281 million (659).

Net sales ( 2010) Operating profit

Net sales and operating profit (SEK MILL IONS)

Test drilling for iron ore begins near Tuollujärvi, Kiruna. One billion tonnes of iron ore products have been shipped via the Nar-vik harbour since opera-tions began. An informa-tion office is opened in Malmberget.

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J U L Y A U G S E P T O C T N O V D E C

A new sales office, Villa Schwedenerz, is opened in Essen, Germany. Branding project begins. Operating profit after the second quarter is 6.4 billion kronor.

The president’s debate ar-ticle, Future climate-smart technology is punished by the EU, is published in DN, Sweden’s biggest national daily. Applica-tion is submitted for test mining of 300,000 tonnes at the Mertainen near Svappavaara. Strömsnes Station on the Ore Railway reopens with an extended siding for meeting trains. Operating profit of SEK 11,173 mil-lion is reported after the first three quarters.

Markus Petäjäniemi is appointed Senior Vice President Sales & Marketing, and Robert Boulton becomes President of the Minelco Group. As of 12 Dec., LKAB can only operate the new, 30 per cent more efficient trains on the Ore Railway. LKAB celebrates its 120th anniversary. Total iron ore deliveries for the year amount to 26 Mt, the best result since the mid-1970s.

LKAB sponsors a children’s and youth arena at Kirunafestiva-len. A switchgear fire at the Torneträsk station disrupts traffic on the Ore Railway.

As part of the future recruiting drive, LKAB par-ticipates in Career Days, in Stockholm. International speakers and customers from throughout the world visit the LKAB Dry Bulk Shipping Symposium in Narvik. A new mountain cabin is opened at Ritsem and can be booked by all LKAB employees.

LKAB holds press confer-ences on the search for more iron ore and the new main level in Malm-berget. In collaboration with Norrbottensteatern, LKAB sponsors children’s and youth theatre in the orefields communities for three years. A monthly record for delivery of iron ore products (2.65 Mt) is reached, of which 1.9 Mt is shipped via Narvik, also a monthly record.

significanT evenTs 2010:KGS assumes responsibility for operations and the sorting process at LKAB’s Gruvberget mine, Svappavaara. FAB starts construction on 28 new apart-ments at Bäckåsen in Gällivare, the first of 230 planned new dwellings in the area.

SEK MILLIONS 2010 2009

Sales 1,861 1,098Operating profit 244 168Operating margin, % 13.1 15.3Operating assets 1,121 1,063Operating liabilities 449 375Investments* 55 55Depreciation* 56 39Impairments* 0 0Average number of employees 274 236


Financial highlights – Special Businesses

D I V I S I O N

S P E C I A L B U S I N E S S E S

significanT evenTs 2010:The two newest pelletizing plants in Kiruna and Malmberget set production records. The underground mines in Kiruna and Malmber-get also set production records. The best quality value for deliveries since thequality rating system was adopted in 2000.

SEK MILLIONS 2010 2009Sales 25,908 9,613Operating profit 11,524 537Operating margin, % 44.5 5.6Operating assets 29,331 27,862Operating liabilities 10,031 1,029Investments* 3,908 3,461Depreciation* 1,735 1,741Impairments* 300 0Average number of employees 3,376 3,158– of which Parent Company 2,998 2,800Production, Mt 25.3 17.7Deliveries, Mt 26.0 18.7Stocks, Mt 1.1 1.6


Financial highlights – Mining

Production per operating location 2010 (Mt)

Iron ore productsPellets Kiruna 12.2Pellets Svappavaara 3.4Pellets Malmberget 6.5Special products Kiruna 0.9Fines Malmberget 2.3Total 25.3

Shipped 2010 Mt

From Narvik, 215 vessels 17.2From Luleå, 437 vessels 5.8

Other deliveries to customers and stocks, 3.0 Total 26.0

Production of iron ore products Mt

2010 2009 2008 2007 2006Pellets 22.1 14.7 19.9 18.8 16.9Fines* 3.2 3.0 3.9 5.9 6.4Total 25.3 17.7 23.8 24.7 23.3

* incl. special products

Deliveries 2010 Mt

Pellets 20.8Fines* 5.2Total 26.0

* incl. special products

1,500

1,200

900

600

300

0

Global iron ore exports and production of crude steel (Mt )

Global iron ore exports (prel. 2010)

World production of crude steel ( 2010)

(Source: CRU, December 2010, worldsteel, January 2011)

1960 1970 1980 1990 2000 2010

S A L E S & M A R K E T I N G D I V I S I O N M I N I N G D I V I S I O N

Europe is the home market for LKAB’s blast furnace products, and direct reduction products are sold to the Middle East and North Africa.

Production, Mt ( 2010)

Productivity, tonne/employee

2005 2006 2007 2008 2009 2010

30

25

20

15

10

5

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Production and productivity

12 000

10 000

8 000

6 000

4 000

2 000

0

Mt Tonne/employee


Others 7%

Europe 66%

Middle East/ Asia 27%

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record year wiTh a focus on growThThe Group posted a profit for 2010 of 12.3 billion kronor, our best financial outcome on record. It is especially pleasing to report that this historic result was achieved during a year when LKAB celebrated its 120th anniversary. This gave us an assurance of LKAB’s success as an enduring, long-term operation in which, despite occasional problems, we have maintained a steadfast belief in our products and continued to develop our business while keeping pace with change and the demands of customers and society. The year’s result would never have been possible without the strategic investments in research and development in recent decades which have laid the foundations for LKAB’s position as the world’s technology-leading manufacturer of iron ore pellets. Expansion of production capacity during the 2000s has equipped the company to meet the strong de-mand which has characterized the market during 2010. Growth continues in the form of further expansion in increased capacity.

econoMic perspecTivesFinancial outcomes have fluctuated dramati-cally in the past three years. This reflects LKAB’s heavy dependency on customers, and sensitivity to world events and economic cycles. When things go well for the compa-ny’s customers, they also go well for LKAB. To mitigate the effects of excessive fluctua-tions and to ensure greater long-term stability in our business, LKAB has elected to sign an-nual contracts with customers. Many other large suppliers have, instead, switched to shorter contracts. The signed contracts imply that LKAB’s iron ore prices for 2010 rose to the same level as in the boom year 2008.

The development of a pricing system for iron ore continues, but is far from complete. Dur-ing the first quarter, LKAB will continue dia-logue with customers concerning price mod-els and will decide on contracts for 2011. The programme of cost-cutting and efficiency improvement that began in 2009 continues. The aim is to reach 2007 cost levels. LKAB has invested 30 billion kronor during the 2000s and now has six pelletizing plants and an efficient logistics system. Production capacity in our processing plants is about 28 million tonnes (Mt) of iron ore products per year and transport capacity exceeds 30 Mt. Without disruptions, the year’s production result, 25.3 Mt of iron ore products, and re-cord deliveries of 26 Mt could have been sur-passed. The bottleneck in the chain of pro-duction is now access to crude ore. In June 2010 the Board established new targets and strategic activities for the years to come. The plan is for LKAB to grow with its customers. Our objective is to continue to be a preferred supplier to each of our custom-ers, so as to maintain high-volume deliveries. This is essential if we are to achieve the earn-ings levels necessary to cover all costs while continuing to invest around SEK 5-6 billion per year. Earnings must also suffice to give our own-er a reasonable return on equity and to fi-nance costs associated with the urban trans-formation of Kiruna and Malmberget, a process that will span several decades. The identified strategic activities focus on areas that are vital for the company’s growth. As LKAB’s customers grow, we grow with them, both to retain market shares and to in-crease them. We estimate that, within five years, we will have reached a production and

delivery capacity of more than 37 Mt of iron ore products, hence the working title LKAB 37. This growth, which is in excess of 35 per cent, requires access to more iron ore that can be upgraded to our high-quality prod-ucts. During the year, LKAB has therefore opened the first of three new open pit mines in what we refer to as the Svappavaara field. Gruvberget was inaugurated in May, and over the next two to three years, LKAB also plans to begin mining in Mertainen and Leveäniemi, provided the necessary environ-mental permits are granted within a reason-able time period. Within a few years, the sup-ply of crude ore from the two underground mines in Kiruna and Malmberget will also increase when the new main levels are in full production.

social perspecTivesOne of the most important strategic tasks for the period 2010–2012 is to reduce the num-ber of accidents leading to absence by at least half. 2010 was a poor start. The frequency of accidents per million work hours increased by 23 per cent, and the worst thing that can happen in our operation also occurred. Two employees of a contractor died while working on the construction of the new main level in Malmberget. Now, work on Safety First will be intensified with a programme entitled Or-der and Upkeep. Safe workplaces are a nec-essary condition for attracting new co-work-ers to LKAB. On a positive note, absence due to illness remains at a relatively low level, at an average of 2.6 per cent. Long-term ab-sence due to illness stands out at a mere 0.4 per cent. We are also pleased to report that our efforts to improve diversity are also show-ing results. The proportion of women em-

P R E S I D E N T ’ S R E P O R T 7

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record year wiTh a focus on growTh

ployed in the Group rose during the year to 14.3 per cent, and the share of women in managerial positions to 17.8 per cent. Hu-man capital is the key to LKAB’s success; an ongoing programme of competence develop-ment is therefore an important ingredient in LKAB’s recipe for success. The number of training days per employee increased during the year to 4.6. The target is 5 training days per employee and year. The urban transformation that is a conse-quence of mining in Kiruna and Malmberget entails considerable social challenges with respect to LKAB’s present and future opera-tion. For LKAB, these issues are a high prior-ity in our strategic work, and they must be managed responsibly and with a long view in dialogue and mutual understanding with all parties concerned. The respective municipali-ties plan and decide how urban areas will be decommissioned, as well as how new ones are to be designed and how they will func-tion. LKAB takes an active part in this work and funds a large part of the transformation. To date, LKAB has paid out more than SEK 1.9 billion towards urban transformation in the orefields communities and, during 2010, nearly SEK 3 billion was earmarked for the damage we have so far caused. Communica-tion is an important success factor in the day-to-day work with urban transformation. During the year LKAB has distributed ten issues of the magazine LKAB Framtid to all households in the municipalities of Gällivare and Kiruna, and we have opened an informa-tion office in Malmberget. An office will also be opened in Kiruna during the first half of 2011.

LARS-ERIC AARO PRESIDENT AND CEO

P R E S I D E N T ’ S R E P O R T8

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sources of energy and has invested in five wind turbines with a combined output of 27.4 GWh. This represents only a small por-tion of LKAB’s total energy requirement, but there may be great potential for windpower. Up until 2015, LKAB plans to build 150 wind turbines.

The ouTlooK for The fuTureLKAB’s ambition is to grow with its custom-ers and, by 2015 at the latest, to have the ca-pacity to deliver 37 Mt of iron ore products. The growth strategy requires a haulage ca-pacity on the Ore Railway of at least 40 Mt. In addition, there are indications that other parties wish to traffic the line. Increased use of the railway will necessitate more and lon-ger sidings along the entire line between Luleå and Narvik, and LKAB is depending on Trafikverket (the Swedish Transport Adminis-tration) to include this in its infrastructure planning. LKAB will also have to acquire more of the new, energy-efficient and cli-mate-adapted locomotives and 100-tonne cars of the type we have purchased in recent years. In total, the major strategic investments in future mining and production capacity entail disbursements of about SEK 5–6 billion per year over the coming years. A share of this is attributable to compensation associated with changes at surface level as a result of the new main levels in Malmberget and Kiruna. LKAB’s continued underground mining plac-es high demands on the Group’s capacity to generate strong financial outcomes and cash flows over the coming years. The growth strategy will also entail new and continuous research and development efforts, and a safe, developmental and attrac-tive workplace for those currently employed by LKAB as well as the many new co-workers that will be recruited. Living environment and housing in the operating locations in the orefields are critical factors for recruiting. When new mines are opened, a factor of un-certainty is the burden imposed by the appli-cation process for environmental permits. The Swedish Environmental Protection Agency’s appeal of the permit for the open pit mine at Gruvberget, which opened in May 2010, will entail an even more extensive and time-consuming permit process.Processing of the environmental permit ap-

environMenTal perspecTivesLKAB offers its customers climate-smart products. Our main product is iron ore pel-lets manufactured from magnetite. During pellet manufacture, magnetite oxidizes to he-matite, resulting in the liberation of large amounts of energy that can be utilized in the pelletizing process. Therefore, the process requires significantly less fossil fuel, such as coal and oil, as compared to competing pro-cesses based on, for example, hematite. This means that global carbon dioxide emissions are dramatically reduced if LKAB’s pellets are used in steelmakers’ blast furnaces. Emis-sions are as low as one seventh of the emis-sions resulting from sintering of fines at the steelmills. Even though it is a well-documented fact that LKAB has the world’s most carbon-diox-ide-efficient plants, LKAB’s competitive ad-vantages are jeopardized by the EU’s system of trade in carbon dioxide emissions rights. During 2010, allocation principles for the trading period 2013–2020 were presented by the EU Commission. Owing to the nature of the implementation process, LKAB risks be-ing allocated considerably fewer emissions rights than for the current period. Since the trade system is not global, but applies only to EU member states, LKAB is the only manu-facturer of iron ore pellets to risk being hit by higher costs for emissions rights. This would distort competition to the advantage of pro-ducers of less climate-smart iron ore products. The energy issue is a high priority for LKAB. Planned production increases imply a greater demand for electricity. Within a few years, annual consumption is expected to rise from about 2.2 to 2.8 TWh. Securing delivery of competitively priced power is therefore strategically important. The current long-term energy contracts will expire successively. A third of our portfolio of energy agreements expired a year ago, and the corresponding vol-ume is now open to exposure on the Nordic spot market. There, market prices have risen dramatically since deregulation, and LKAB is working with financial price reductions in an attempt to retain price stability. We rely on stable prices and stable supply 24 hours a day, 365 days a year. As part owner in VindIn AB, LKAB is par-ticipating in a project to harness renewable

plication for Gruvberget took 22 months. The long permitting process is cause for great concern. Being proactive on the market re-quires stable conditions for doing business, and that includes a foreseeable timeframe for environmental permitting. Following a ruling by the Environmental Court of Appeal on March 10, 2011, a new permit application for Gruvberget will be submitted. LKAB will lodge an appeal with the Supreme Court, while at the same time including operations at Gruvberget in the ongoing permitting pro-cess for pellet production in Svappavaara. If the Supreme Court chooses not to grant leave to appeal, operations at Gruvberget will cease until a new environmental permit has been granted. LKAB therefore risks not being able to achieve a planned increase in delivery capacity, and thereby falling behind other global suppliers of iron ore products. This threatens the company’s long-term market position. Despite this situation, LKAB looks to the future with cautious optimism. Demand for iron ore is stronger than ever, even though there are always dark clouds on the horizon, such as political unrest or natural disasters, which can influence the world economy. To-day, the window of opportunity for supplying more iron ore to the world is open. By ex-ploiting the Svappavaara field and ramping up prospecting activities in the vicinity of ex-isting operations in Norrbotten, we plan to secure LKAB’s capacity to grow with custom-ers, in a cost-effective way, even beyond LKAB 37. With our logistics and processing systems in top form, there is a good possibil-ity that we will be able to achieve greater vol-umes and maintain good profitability by opening new mines. LKAB’s record profit in 2010 provides a good foundation for the future-oriented in-vestments that have already been initiated.

March 2011

Lars-Eric Aaro, President and CEO

K O N C E R N S T R A T E G I 9

10

120 yeArs

of Be L i e f in the fu ture

our main markets while at the same time strengthening the company’s long-term com-petitiveness internationally. Together with new mining capacity, the strategic invest-ments in production and infrastructure made during the 2000s give LKAB the means to increase production of upgraded iron ore products by about 35 per cent. To reach the ambitious growth target, annual production of more than 37 million tonnes by 2015, LKAB has identified six strategically impor-tant areas.

G R O U P S T R A T E G Y10

10

QuALity PoLiCy LKAB will exceed customers’ present and future expectations by involving all employees in the process of continuous improvement. We will strive for zero defects in everything we do, and each employee is responsible for the quality of his or her own work.

enVironMent AnD enerGy PoLiCy

through continuous improvement of the work environment, the natural environ-ment and energy use, LKAB’s operations will promote long-term sustainability and profitable development.

ethiCs PoLiCy LKAB will strive to be perceived by its stakeholders as a company that conducts a sound and successful business operation with integrity and rectitude.

PersonneL PoLiCy LKAB’s personnel policy will contribute to making LKAB a company that is an attractive employer and is perceived as such.

inforMAtion PoLiCy LKAB’s employees will always be well informed with respect to the company’s operations, its business environment, goals, strategies and results, and of their own workplace and their role in the company’s operations. LKAB’s external stakeholders will be given, on an ongoing basis, timely and correct information that provides a representative view of the company and its operations.

f inAnCiAL PoLiCies Credit Policy, Currency Policy and Policy for Managing financial Assets and Liabilities; see www.lkab.com.Dividend Policy; see Corporate Governance.

for the complete policies, see www.lkab.com

L K A B ’ s P O L I C I E S I N B R I E F

lKaB aiMs for annual producTion of 37 Million Tonnes of iron ore producTs

LKAB is a high-tech, international minerals group and a technology-leading supplier of iron ore pellets. the company manufactures highly developed products that are the result of research and development on all fronts. LKAB’s principal strategy is to grow with the market and to secure the company’s position as the supplier that creates the greatest added value and business benefit for its customers.

Over 120 years, LKAB has evolved from a raw-materials producer to a world-leading supplier of upgraded iron ore pellets. During the past decade, to meet customers’ demands and expectations on deliveries, product quality and service, LKAB has invest-ed determinedly in human capital, infrastruc-ture and production facilities. LKAB delivers “performance in ironmaking” of absolute world class and is a respected brand among customers, suppliers and competitors. For LKAB, it is critical to be able to keep pace with customers’ growth and thereby maintain the position we have achieved on

G R O U P S T R A T E G Y 11

10

L K A B ’ s M I S S I O N

L K A B ’ s S T R A T E G I C A R E A S

L K A B ’ s V I S I O N

G R O W T H

Grow, together with customers, both through business development and organically via prospecting and opening new iron ore mines to increase access to raw material. Invest in production structure and ef-ficiency improvement. Create added value from mineral resources and human capital, including subsidiaries.

G R E A T E R F L E x I B I L I T Y

Secure the position of iron ore pellets for the steel industry as LKAB’s main product. Always deliver a part of annual production in the form of fines products, and always reserve products for new markets with an aim to keeping pace with trends in the industry.

P E R F O R M A N C E I N I R O N M A K I N G

With the customer in focus, deliver the best “value-in-use” and have a fundamental understanding of customers’ production processes and product features. Develop new pellet products that continue to contrib-ute to carbon-dioxide-reduced and carbon-dioxide-neutral steelmaking. Increase the internal exchange of knowledge, for better understanding of our own production processes.

S A F E A N D R E S O U R C E - E F F I C I E N T P R O D U C T I O N

Conduct world-class production and provide assured deliveries. Make effective and efficient purchases, invest in our own energy supply and improve energy efficiency. Work for environmental sustainability, based on our own high degree of expertise, and maintain competitive cost levels in production.

U R B A N T R A N S F O R M A T I O N

With responsible solutions, work to create attractive communities and foster good relations with those affected by LKAB’s operations. Work with a long-term perspective, and communicate clearly and openly. Collaborate with the municipalities and other stakehold-ers to create sustainable long-term solutions. Work proactively to ensure that economic impact on LKAB is acceptable.

A T T R A C T I V E L K A B

Focus on healthier co-workers and safe jobs with an aim to reduc-ing accidents by 50 per cent. Be an attractive employer that pro-motes human-resources development and attractive communities, which are an assurance for the supply of human capital. Strengthen LKAB’s brand and position as the climate-smart alternative. Improve the level of knowledge of LKAB among decision-makers.

LKAB’s mission is, based on the Swedish orefields, to manufacture and deliver to the world market upgraded iron ore products and services for ironmaking that create added value for customers. Other closely related products and services that are based on LKAB’s know-how and support the main business can also be included in the company’s operations.

LKAB will be perceived by customers as the supplier that delivers the greatest added value and is thereby the leader in its selected market segments.

L K A B ’ s A N N U A L R E P O R T 12

10

LKAB’s products build Europe’s vehicle industry.


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lKaB and The iron ore MarKeT2010 was a year of strong growth for the global mining and steel industries. LKAB de-livered 26 million tonnes of finished iron ore products during the year, a record volume for the 2000s. World steel consumption reached an all-time high and the great demand for steel pushed iron ore prices to record levels. Rapidly growing economies with major infra-structure projects, such as China, were the main drivers of this market development.

The iron ore market followed the trend from the final quarter of 2009, continuing strong into the first quarter of 2010. There was a reversal during the autumn, when glob-al steel production, which drives demand for iron ore, saw a general lapse. This is ex-plained partly by the fact that economic stim-ulus packages presented during the financial crisis were exhausted. Despite a decline in the third quarter, total world crude steel pro-duction was record-high during 2010, amounting to about 1.4 billion tonnes, an in-crease of 15 per cent over 2009.

Even though the decline in steel produc-tion was felt mainly in Europe, a weaker trend was also evident in China, where iron ore imports were reduced in October and November.

However, the decline is largely explained by domestic energy and environmental regu-lations, which restricted steel production,

and not by lower demand.The statistics show that Chinese imports of iron ore tapered off and that China imported a lower volume of iron ore, just over 618 Mt during 2010, as compared to the 2009 record tonnage of nearly 628 Mt.

Industry analysts are of the opinion, how-ever, that China’s reduced import of iron ore is only temporary and that demand for steel remains high in that country.

Despite the decline in the iron ore market during the third quarter, the price of iron ore did not fall. There are several reasons. India reduced its iron ore exports, since the coun-try has an ever-growing need for iron ore for its own steel production. In China, lower iron content in domestic ores led to a dra-matic increase in production costs. Lower sea-freight rates therefore made it advanta-geous to import iron ore, despite high spot prices.

Sea freight costs, which rose up to four times between 2007 and 2008, were at about the same level in 2010 as they were in 2006. In the coming years, shipping capacity, main-ly to ports in Asia and China, is expected to increase by 50 per cent in terms of dead-weight tonnage. The huge oversupply indi-cates a stable, and perhaps even a further downward trend, in sea freight rates.

Mixed Trends in The sTeel indusTryOutside of Asia, demand for steel is increas-ing, even though recovery after the recession of 2008 is moving slowly, mainly in Europe and the USA. On the weaker markets, eco-nomic development is varied; in Europe, Sweden and Germany have solid finances and are experiencing strong growth while sev-eral countries in southern Europe, as well as Ireland and England, have huge budget defi-cits, which inhibit growth. While the USA has had better success in adapting steel pro-duction according to demand, parts of the steel industry in Europe and the Middle East are struggling to show a profit. Development in the infrastructure and building construc-tion sectors remains weak, and oversupply is pressing the price of steel in relation to the cost of iron ore and finished steel products and consumer goods.

Steelmills in the Middle East, for example, deliver about 70 per cent of their steel to the construction industry and have not yet re-sumed pre-2008 levels.

While some regions are showing weak growth, others are booming. Germany’s rapid economic recovery and growth is strongly tied to that country’s steadily-growing me-chanical engineering and vehicle industries.

Although statistics for new-vehicle regis-tration in Europe as a whole showed a small decline at the close of the 2010, an ever-

LKAB

Others

The diagram shows the flow of iron ore from producer countries to recipient countries.(Source: LKAB, CRU)

(Source: CRU, December 2010

Largest exporting countries

AustraliaBrazilIndiaSouth AfricaCanadaSweden

Global trade in iron ore

Largest importing countries

ChinaJapanEUSouth KoreaMiddle East


10

and driving up oil prices. In China, inflation has approached alarmingly high levels and economic recovery is slow in parts of the western world.

In other words, there are some dark clouds on the horizon, even though the market out-look still appears to be good.

LKAB, a smal l i ron ore producerThe world’s three largest iron ore suppliers are Vale, Rio Tinto and BHP Billiton. Together, they accounted for about 31 per cent of the world’s estimated iron ore production in 2010 (approximately 1800 Mt). In the same year, LKAB manufactured 25.3 Mt of iron ore products, which corresponds to about 1.4 per cent of global production. World iron ore exports in 2010 reached an estimated 1000 Mt. Most of LKAB’s deliveries, 21 Mt of 26 Mt in 2010, were exported. That represents a world market share of around two per cent.

LKAB, the world’s second-largest pel let manufacturerWith a capacity of about 45 Mt pellets per year, Vale, in Brazil, is the world’s largest pellet supplier. The sec-ond-largest is LKAB, with a capacity of about 25 Mt, depending on the product mix, i.e. LKAB also produc-es about 3 Mt of fines per year. The third-largest pellet manufacturer is Samarco, in Brazil, with a capacity of about 22 Mt pellets per year. The company is owned by Vale and BHP Billiton.

T R A D E I N I R O N O R E

growing demand for new vehicles in China and Asia has kept the German steel and ve-hicle industries running at high capacity.

For LKAB, the single most important growth factor is a continued recovery and a competitive steel industry in Europe.

Most of LKAB’s steelmill customers are in northern Europe; in Germany, England and Holland.

Turkey has also emerged as a highly inter-esting market with strong growth. Swedish steel production and manufacturing have re-sumed much the same levels as before the recession, though with somewhat weaker de-velopment for strip steel and with lower prof-itability.

Similar conditions prevail on LKAB’s Finn-ish market.

Despite setbacks, the outlook for the Euro-pean steel industry for the coming years is considered good, though the growth rate is expected to remain slow.

difficulT To increase voluMes on The iron ore MarKeTOwing to the tremendous demand for iron ore, most of the world’s iron ore producers are now trying to increase capacity. Some 250 iron ore development projects were un-der way at the start of 2011. If all of these reach fruition, the supply of iron ore may be expected to rise by about 50 per cent in the

During 2010 most of the world’s iron ore producers de-cided not to sign yearly contracts with their customers and switched, instead, to quarterly prices based on an index price for iron ore that is strongly influenced by the spot price for sinter fines in Asia.

Since the spot price of iron ore in Asia is based on the most expensive tonne produced in China, it is cheap-er for Chinese steelmills to import seaborne iron ore.

Advantageous sea-freight rates and strong global de-mand for iron ore helped to push up prices on the Asian iron ore market.

Even though the entire global trade in iron ore was heavily influenced by variable index prices, LKAB nego-tiated and signed annual contracts with its customers for 2010. For LKAB’s iron ore business, stability is impor-tant, both from a customer perspective and a production perspective.

In terms of production, fluctuations in volume in com-bination with a variable price cause imbalance in the

flow from mine to customer. On a spot market, custom-ers try to buy as much as possible when the price is low, which means that LKAB must compensate for fluc-tuations in its own chain of supply. With relatively lim-ited possibilities for intermediate storage in stockpiles and at harbours, LKAB’s most important goal is to ship the largest possible volumes at the most even rate of delivery. Therefore, annual contracts enable maximum utilization of LKAB’s mining, production, logistics and shipping facilities.

Most of LKAB’s iron ore production is sold on the Eu-ropean market to customers with whom LKAB has been doing business for decades. LKAB has always striven to maintain long-term, stable business relations based on partnership. Signing yearly contracts for delivery volumes based on a long-term price model is a way of achieving stability and credibility in a business relation-ship with balanced risk-sharing. While the world market price is essentially based on iron content and quality

parameters, the price models have continued to develop since 2008. LKAB’s approach is to discuss price models as a part of the overall business agreement. LKAB’s customers who have thus far preferred the stability implicit in annual contracts appreciate this. The dialogue on the pric-ing system, with an element of flexibility, continues.


10

coming decade. However, there are many in-dications that many of these projects will be delayed and that iron content is lower than expected, which means that the volume in-crease will be realized after 2013.

At the same time, the world’s leading iron producers in Brazil and Australia have had difficulty in achieving the expected volumet-ric increases. At the close of 2010, produc-tion volumes at Vale and Rio Tinto were at about the same levels as before the recession in 2008. Despite strong global demand for iron ore, little, if any, extra capacity has been introduced on the market for seaborne trade in iron ore products, which therefore remains narrow and highly priced.

By the time the increased iron ore volumes are finally realized, it is believed that the market will have cooled down and that the iron ore price will have begun to slowly de-cline around 2012–2013. Contrary to this view, it seems that, over the long term, steel consumption will continue to increase in growth economies such as China and India. A falling world-market price will also render many of the ongoing iron ore development projects unfeasible, which will result in re-duced supply and, probably, push the price up.

Current political unrest in the Middle East and North Africa is having a negative effect on demand for steel products in the region

MARKUS PETäJäNIEMI Senior Vice President Sales & Marketing, LKAB

LARGE VOLUMES AT AN EVEN RATE OF DELIVERY, THE KEY TO LKAB’S PROFITABIL ITY

Drilling at LKAB’s Gruvberget open-pit mine in Svappavaara.

High del iver y volumeLKAB delivered 26 million tonnes of upgraded iron ore products in 2010. This is the highest delivery volume in 25 years. Most of it was pellets (20.8 Mt) and the rest fines, incl. special products (5.2 Mt).

High product ionIn total, LKAB produced 25.3 million tonnes of iron ore products, of which 22.1 Mt pellets, 2.3 Mt fines and 0.9 Mt special products. The two newest of LKAB’s six pelletizing plants set production records: KK4 in Kiruna, with 4.7 Mt and MK3 in Malmberget, with 3.3 Mt. Both underground mines set production records. 26.7 Mt of crude ore was produced in Kiruna and 16.1 Mt in Malmberget, totalling 42.8 Mt.

High qual i tyDuring 2010 LKAB’s deliveries achieved a quality rating of 95.2 per cent. That is the best full-year Q value since quality rating according to this system was adopted in 2000. Then, the Q value was 89.3 per cent. The top rating, 100 per cent, was achieved in December 2010.

High avai labi l i tyIn the Svappavaara plant, the oldest of LKAB’s pel-letizing plants, production was very stable during 2010. There, personnel broke the record for the greatest number of days without a production stop.

L K A B I N F I G U R E S 2 0 1 0cent is destined for steel used in the vehicle industry, 25 per cent is made into steel for other consumer, industrial and engineering products, and 50 per cent becomes steel for use in infrastructure, building construction and civil engineering projects.

Iron ore products delivered to customers outside the steel industry are sold by LKAB’s wholly owned subsidiary Minelco. Minelco supports LKAB’s iron ore business and sells about one million tonnes of iron ore annu-ally, mainly for use as ballast in heavy con-crete, for example, in pipe coating for the gas and oil industry, and as a coagulant in water treatment. For many years Minelco has delivered magnetite products for radia-tion shielding applications in, for example, radiation oncology and the nuclear power industry.

In the coming years there will continue to be business opportunities outside the steel industry; these include deliveries to projects in pipe coating, construction and civil engi-neering, and the manufacture of water treat-ment chemicals.

During 2010 Minelco delivered 600,000 tonnes of magnetite as heavy concrete bal-last for the 1,220-km-long Nord Stream gas pipeline, which will carry Russian natural gas across the Baltic Sea to Europe. Minelco has delivery contracts for an additional 410,000 tonnes in 2011 before the conclu-sion of the project.

Digital infrastructure has long played an important role in LKAB’s competitive busi-ness. Since the 1960s, LKAB has striven to

achieve a high degree of automation and process control in the produc-

tion apparatus by means of IT systems. Profitability depends on a high, even flow of delivery, which is why production stops lead quickly to a marked loss of revenue. LKAB’s IT department fulfils an important function in creating and building systems and infrastructure solutions that support LKAB’s strategic goal to produce 37 million tonnes of fin-ished iron ore products per year. Various forms of IT support enable major efficiency improve-ments in day-to-day operations. For example, we can now remotely control production

processes, safely and securely, in the newest pelletizing plant, MK3 in Malmberget. Instead of sending a techni-cian from Luleå to Malmberget to solve a problem, it can be fixed directly via the internet. This saves a lot of money in reduced downtime. Another important parameter for reaching production targets is the ability to make full use of the production structures in the mines. To improve the efficiency of min-ing operations in Kiruna, LKAB is investing about 40 million kronor to improve, among other things, entrance control and the possibilities for communication via one of Europe’s most extensive wireless networks. Today, the communications system in Kiruna consists of several different overlapping systems and standards. With the new wireless network, frequencies and commu-nication underground can be standardized, so the sepa-rate systems do not cause interference. The intention is to use the wireless system for all voice communication and to integrate IP telephony with, for example, radio and other information systems to enable more efficient control and management. The greatest advantage with the Kiruna mine’s new

wireless network is the personnel entrance control and positioning system. Before blasting in the mine, it is nec-essary to know the exact location of all personnel. Pre-cise positioning is therefore of paramount importance, and it can save tens of millions of kronor in improved production efficiency. When fully operational, the Kiruna mine’s wireless network will consist of 1,500 access points, allowing ex-cellent possibilities for accurate positioning. Eventually, it will be possible to tag everything that moves in the mine, such as vehicles, machinery and personnel, with RFID tags. This presents possibilities for interesting future appli-cations whereby, for example, logistics can be planned according to the position of people and equipment in real time, or ventilation systems can be controlled as required, depending on where people are in the mine.

IT MAxIMIZES UTIL IZATION OF THE PRODUCTION STRUCTURE


10greaTer flexiBiliTy provides sTaBiliTyMost of LKAB’s annual production is deliv-ered in the form of pellets, mainly to the nearby market in Europe. To respond to rap-id changes in demand, strengthen customer relationships and open new business chan-nels, LKAB is working to broaden its prod-uct portfolio and to deliver to more geo-graphic market regions.

By always producing and delivering a por-tion of annual production in the form of fines products, regardless of the business cycle, LKAB broadens its product offerings. Volumes are secured and sensitivity to fluc-tuations in the business cycle is reduced. A permanent presence in, for example, Chi-na, allows LKAB to follow, at close range, market trends, customer demands and tech-nical developments that have a bearing on LKAB’s own production and research and development.

LKAB also has an interest in the sectors to which our steelmill customers deliver their products, for example, steels for the manufacturing industry, consumer goods and the building construction and infra-structure sectors.

By delivering iron ore products that are used to produce a diversity of steel products, instead of supplying one or a few market segments, we can reduce the impact on LKAB of a possible economic downturn.

Of LKAB’s sales of iron ore products to the European steel industry, about 25 per

DANIEL BERGLUND IT Manager, LKAB

fines, special products

Pelletizing plantssorting and concentrating plants

skip hoisting

shipping

rail transport

Pellets

Crushing

Loading

Drilling/blasting

train/truck haulage in the mine

From underground mine to ship


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cade, LKAB has therefore invested some SEK 30 billion to upgrade processing capac-ity and logistics. The two newest pelletizing plants, MK3 in Malmberget and KK4 and its adjoining con-centrating plant KA3 in Kiruna, have boosted LKAB’s pellet capacity by nine million tonnes per year. Longer trains with new locomotives and cars are now able to haul 60 per cent more on a yearly basis on the Ore Railway. With the completion in 2009 of SILA, the refurbished harbour facility in Narvik, annual shipping capacity at Narvik has increased from 16 to 19 million tonnes.

Most of the ongoing investment in the chain of processing and logistics will be completed during 2011, after which a phase of fine-tun-ing for maximum efficiency, growth and con-solidation will begin. The goal is to realize the full potential of plant and systems, so as to reach maximum capacity and return on capital, even via additional investment. Heavy investment in capacity for process-ing and logistics has shifted the bottleneck to the raw-material supply end of the operation i.e., access to crude ore. Consequently, LKAB’s focus is now on current and planned investments in upgraded mining capacity.

increased processing and haulage capaciTyLKAB’s strategy is to be a principal supplier and a flexible partner that creates maximum benefit for customers. Therefore, LKAB is investing in a major production increase with the aim of growing by 35 per cent and deliv-ering 37 Mt per year by 2015. Increased capacity in raw-material supply, processing, other production structures and logistics is the key to reaching LKAB’s growth target. In the early-2000s LKAB could mine more ore than the company was able to process and deliver. Over the past de-


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Ore reserves

per December 31, 2009 (to dressing plant)

Quantity, Mt Per cent Fe 2010 2009 2010 2009KirunaProven 579 598 48.7 48.6Probable 79 76 46.2 46.4

MalmbergetProven 270 298 42.5 43.8Probable - 52 - 37.8

GruvbergetProven 10 11 53.2 53.2Probable - - - -

Ore reserves include ore within the granted mining concessions. The ore reserve in Kiruna includes ore above 1,365 metres (from levelling point). The ore reserve in Malmberget includes ore above 1,250 meters (from levelling point) in the Eastern Field. For the Western Field, ore above 600 meters is included. Ore reserves for Gruv-berget include magnetite ore above 220 metres. The ratio of mined waste rock to ore in open-pit mines is 1:7. Prices at the turn of the year 2004–2005 have been applied in calculations of ore reserves, which are expected to be valid for duration of the working life of a main level. Iron losses in the upgrading process are about eight per cent.

Mineral resources in addition to ore reserves

per December 31, 2009 (to dressing plant)

Quantity, Mt Per cent Fe 2010 2009 2010 2009Kiruna Measured 95 94 49.0 48.4Indicated 159 153 45.2 44.9Inferred 81 82 46.5 46.8

LeveäniemiMeasured 80 80 47.1 47.1Indicated 30 30 47.0 47.0Inferred - - - -

MalmbergetMeasured 116 51 43.4 42.8Indicated - 2 - 44.1Inferred - 20 - 39.4

Mineral resources in Kiruna down to 1,500 meters (from leveling point) are reported. Mineral resources in Malm-berget are reported for the Eastern Field down to 1,250 metres and between 600 and 800 metres for the Western Field. At deeper levels, there is insufficient data to enable an estimate of grades and quantities. Mineral resources for Gruvberget are not reported in this report. LKAB also has a mining concession for Mertainen.


10

In Sweden, anyone wishing to conduct exploration and exploitation of certain mineral deposits on land, regard-less of the ownership of the land, is subject to the pro-visions of the Minerals Act. The Act defines to which mineral substances its provisions apply; these are known as concession minerals. The supervisory authority is the Mining Inspectorate of Sweden (Bergsstaten), the agency responsible for compliance with the Minerals Act. It re-ports to and receives administrative and other support from the Geological Survey of Sweden (SGU).

In Sweden, exploration for ore may be carried out only by the holder of an exploration permit, for which ap-plication must be made. An exploration permit entitles the holder to exclusive right to undertake exploration work, the right of access to the land and preferential right to an exploitation permit (concession). The permit is issued by the Chief Mining Inspector, head of the Mining Inspector-ate of Sweden.

If the mineral deposit is deemed economically viable, the Chief Mining Inspector issues an exploitation conces-sion. An exploitation concession entitles the holder to mine ore in a deposit for 25 years, and to renew the permit. When the Environmental Court has approved the mining operation, the Mining Inspectorate regulates any remuneration to the landowner via a so-called designa-tion of land.

Sweden has a long mining history and is one of the EU’s leading ore and metals producers.

When it comes to iron ore, we are Europe’s largest producer. Sweden’s national interest in minerals exploita-tion derives from the fact that it provides raw materials for domestic industry and creates employment and export incomes.

Permits handled by the Mining Inspectorate relate mainly to iron ore and other base metals such as copper, zinc and gold. During 2010 more than 200 permit appli-cations for projects throughout Sweden were processed. To an increasing degree, applications for exploitation of rare earth elements (used in e.g., the vehicle and elec-tronics industries) are submitted.

LKAB, for example, is investigating the possibility of recovering rare earth metals and apatite from tailings at the company’s production sites.

The economic downturn meant that the total land area for valid exploration permits was significantly less at the close of 2009 than during the previous year. However, for the full year 2010, this area increased by more than 200 square kilometres compared to the previ-ous year, which is indicative of the mining industry’s rapid recovery.

It is both exciting and pleasing to report that the Swedish mining industry is experiencing a strong upward trend. At the same time, it is a highly specialized indus-try with a demand for unique expertise. The industry as a whole therefore faces a great challenge with respect to the recruitment of personnel, both to meet new demands and to offset future attrition due to retirement.

ÅSA PERSSON Chief Mining Inspector, Mining Inspectorate of Sweden

MeeT deMand and secure access To raw MaTerialLKAB has the capacity to process about 28 million tonnes of finished iron ore products per year. After extensive investment in the logistics structure, LKAB can handle 30 mil-lion tonnes or more, if additional investments are made to eliminate bottlenecks in the chain of production and supply. Therefore, LKAB is planning for a major boost in mining capacity, for example, in the Svappavaara area, with open-pit mines at Gruvberget, Mertainen and Leveäniemi.LKAB is also doing extensive prospecting work in the vicinity of the present operating locations. Over a three-year period beginning in 2012, LKAB will spend SEK 75 million on prospecting. On May 27, 2010, the first new mine, Gruv-berget, was officially opened. Mining and sorting at Gruvberget are managed by LKAB’s subsidiary KGS. When fully operational, the mine will deliver two million tonnes of crude ore to the Svappavaara pelletizing plant. Re-sults from test drilling at Mertainen, which is expected to be operational in 2013, are now being analyzed. A production start at the

Leveäniemi open pit is also forecast for 2013. However, production in the Svappavaara field is contingent upon the granting of environ-mental permits within a reasonable time. In-vestments are also being made in the two ex-isting underground mines, where new main levels will augment LKAB’s ore supply and assure access to raw material for decades to come. Overall, the drive to increase mining ca-pacity will lift LKAB’s annual production of finished products from 28 million tonnes by an additional 10 million tonnes within five to ten years. Initially, the additional ore will be used to meet production peaks in the existing six pelletizing plants, but will also ensure a sufficient supply of material for fines products. LKAB also foresees opportunities for creat-ing significant added value and broadening its business by supplying other minerals on markets beyond the steel industry. One ex-ample is the possibility of extracting the min-eral apatite, which is used in the production of artificial fertilizers, and/or recovering rare earth elements from the sand material that is a by-product of iron ore processing.

B I L D S K A

VA R A

Å S A

P E R S S O N

LKAB reports ore reserves in compliance with recommendations adopted by SveMin. Sections of the recommenda-tions correspond to the Ontario Securities Commission’s (OSC) National Instrument 43-101, which stipulates how ore reserves and mineral resources are to be reported. Håkan Selldén, specialist in ore-base development, is recognized as a ‘Qualified Person’ by SveMin. He has more than 30 years of experience in the mining and minerals industry and has compiled LKAB’s figures.

STRONG UPWARD TREND FOR MINING

The refurbished ore harbour in Narvik, with silos built into the bedrock, has boosted shipping capacity and improved the environment.


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LKAB’s direct reduction pellets give the steel industry the market’s best value-in-use.

20

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PROCESS DEVELOPMENT BUILDS COMPETITIVENESS AND PROFITABIL ITY

A mineral is called ore when it can be mined profitably. Process development

creates ore. With greater efficiency in beneficiation and production processes, LKAB can achieve prof-itability and maintain its competi-tive advantage. LKAB’s R&D de-partment supports the Group’s growth strategy: to maximize yield in the existing production structure towards the target of producing 37 million tonnes of iron ore products per year. During 2010 R&D com-pleted a project of which the aim was to optimize the comminution process at the

concentrating plant in Malm-berget. By replacing the steel

grinding balls that are used to

break down the ore into finer pieces with a somewhat smaller grinding medium, capacity at the concentrator has been increased by 10 per cent. The new grinding balls are somewhat more expensive, but stronger, which means lower consumption and, ultimately, lower costs. Improved efficiency and higher capacity also reduce energy con-sumption by about two per cent per tonne produced. Fine-tuning of the grinding process in Malmberget has resulted in increased production without the need for costly investments in new plant and equipment. Instead, the in-vestments have been made in knowledge, expertise and human capital. The optimized grinding process in Malmberget is one good example of LKAB’s continuous effort to realize the full potential of production processes and maximize the yield on capital employed. Trials are also under way to optimize the grinding process in Kiruna and in KA3, the newest concentrating plant, where another grinding method, au-togenous grinding, is used. It is expected that the results of this project will be presented during 2011.

In the MK3 pelletizing plant in Malmberget, R&D has op-timized pellet manufacture with a system for computer-aided process modelling. MK3 is a successful pilot project where-by mathematical process models can be used to develop new control and regulation principles off-line and to fine-tune processes before they are introduced into production. The stabilized pellet manufacturing process has boosted MK3’s capacity by more than 10 per cent. The efficiency improvement has also resulted in environmental gains, thanks to improved function in the off-gas treatment system. The ambition is to adopt the same approach to improve pellet processes and maximize production in all of LKAB’s pelletizing plants towards the realization of LKAB 37.

coMpeTiTive advanTage Through perforMance in ironMaKingLKAB’s upgrading of iron ore is characterized by focus on the customer and a will to under-stand each and every customer’s processes and needs. World-leading research in combi-nation with customer-driven, practical experi-mentation results in high-quality iron ore products with unique added values. Deliver-ing “performance in ironmaking” and, in all situations, meeting the customer’s expecta-tions on product specifications, quality and full service is one of LKAB’s main competi-tive advantages. LKAB is the world’s second-largest pellet manufacturer, and an international leader in iron ore pellet research and development. LKAB’s pellets for direct reduction improve productivity, reduce energy demand, slag products and wear on equipment, and give the steel industry the market’s best value-in-use. As of 2012, LKAB will also have a model for quantifying value-in-use, even for blast furnace pellets. The fact that LKAB’s pellets have less environmental impact than other pellet products on the market is becoming ever more important. The general consensus among iron ore pro-ducers and in the steel industry is that the share of pellets will increase successively.

The reason is that customers are placing higher demands on efficiency in steelmaking. LKAB’s ambition is to be the global leader in pellet manufacture and to be perceived as such by the customer, a position that will as-sure LKAB’s long-term competitiveness.

world-class researchFor more than 55 years LKAB has worked to achieve a world-leading position in iron ore pellet research and development. Research is conducted in close collaboration with Luleå University of Technology, via two founda-tions: the Hjalmar Lundbohm Research Cen-tre and the LKAB Excellence Centre in Min-ing and Metallurgy. To further widen the company’s technological lead, LKAB has a long-range plan to create a complete “LKAB Research Centre” in northern Sweden. LKAB is the only iron ore producer that is able to carry out tests in its own, world-unique experimental blast furnace. The EBF is located in Luleå. This also gives customers a unique opportunity, in joint projects with LKAB, to develop new products, fine-tune blast furnace processes and perfect new tech-nologies that lead to better profitability. The AggloLab research laboratory, which will be operational in Malmberget during 2011, brings together all of the expertise and

resources that LKAB needs to perfect the pellet process – from mine to finished prod-uct – via interdisciplinary research in areas such as mineral sciences, chemistry, metal-lurgy and control and automation. There are also long-term plans for securing even more knowledge with, for example, an experimental pelletizing plant and a research mine.

At LKAB’s experimental blast furnace in Luleå, iron ore products are optimized

in close collaboration with customers.

KENT TANO R&D Manager, LKAB


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a long-TerM and susTainaBle road Towards growThAs one of sweden’s largest industrial groups, LKAB influences and is influenced by the world around it, both locally and globally. in its dealings with the surrounding world, LKAB’s intention is to be a role model for the industry, to assume responsibility for the impact it causes, and to promote an enduring and sustainable development of the company and its surroundings.

2010 was a successful year for LKAB. LKAB delivered 26 million tonnes of iron ore prod-ucts, the highest volume during the 2000s. Together with record-high iron ore prices, this meant that LKAB posted one its best fi-nancial outcomes ever: a profit of more than SEK 12 billion. LKAB’s expressed strategy is to keep pace with customers’ growth and thereby maintain the position we have achieved on our main markets and strengthen the company’s long-term competitiveness. Increased production also increases LKAB’s impact on people and the environment. The expansion of mining operations has consequences for many resi-dents in Kiruna and Gällivare, and it increas-es environmental and climate impact, which must be minimized both locally and globally. Many co-workers will be affected by LKAB’s efforts in areas including health, safety and work environment. A growing labour demand makes LKAB’s image as an attractive employ-er and the company’s efforts towards greater diversity even more important than ever. During 2010 absence due to illness was at the same level as in 2009. However, the fre-quency of accidents increased, which meant that the targeted 20 per cent reduction over the previous year’s accident rate was not met.

Safety and work environment are high-priori-ty areas in which LKAB works, strategically and with a focus on people, towards the vi-sion of zero accidents. A fatal accident in Malmberget, in which two employees of a contractor died, was a tragic reminder of how important it is to fo-cus even harder on safety training, work-envi-ronment assessments and risk awareness among employees and subcontractors. In-house training and competence devel-opment within LKAB 2010 gained momen-tum during 2010 and reached virtually all set objectives. The proportion of women em-ployed in the group continues to increase, even at managerial level, and the number of women applying to LKAB secondary-school programmes in Malmberget and Kiruna is record high. Despite significantly higher production compared to 2009, per-tonne emissions of particulates were reduced, thanks to system-atic environmental work and an even rate of production. Decommissioning of Minelco’s olivine mine in Greenland has been realized in con-sultation and agreement with local authori-ties and no environmental hazards have been identified.

S U S T A I N A B I L I T Y R E P O R T17

1022

10Gruvberget and the other two planned open-pit mines Leveäniemi and Mertainen are important

for realizing LKAB’s growth plans.

S U S T A I N A B I L I T Y R E P O R T 23

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sTaKeholders and prioriTized susTainaBiliTy issuesIn light of the considerable impact of LKAB’s operations, the company has identified the most important issues for sustainability man-agement and reporting in order to contribute to long-term sustainable development. These are: the urban transformations, health and safety, environmental and climate impact, and equality and diversity. The re-sults of the company’s sustainability manage-ment are reported here. LKAB has defined a stakeholder as a group with which the company has a reciprocal re-lation by way of LKAB’s operations. Accord-ing to an updated analysis, the most impor-tant stakeholders are the owner, customers, employees, public authorities, suppliers and contractors, people in the local communities and the media. Especially characteristic in the case of LKAB are the close relations with local residents, public authorities, landown-ers and the Sami minority. During 2010 LKAB has communicated


10with a large number of stakeholders in all of the defined stakeholder groups. This has tak-en place via direct dialogue and meetings, surveys, joint projects and seminars with the participation of LKAB and individual stake-holders, as well as via digital channels such as the LKAB chat on lkabframtid.com.Digital communications make LKAB more accessible and enable broader, more detailed stakeholder dialogues. More information about these stakeholder dialogues is given under the respective sections.

urBan TransforMaTionLKAB’s mining is the lifeblood of Kiruna and Malmberget, but it also has a great impact on the local communities. LKAB’s continued op-eration means that buildings and infrastruc-ture must be relocated or replaced. LKAB is funding much of the costs associated with the transformations and is conducting an on-going dialogue with affected stakeholders via various forms of consultation. Read more on page 27.

healTh and safeTyDespite prioritization and concerted efforts, LKAB was not fully able to reach all set tar-gets concerning health, safety and work envi-ronment. Short-term absence increased somewhat, but long-term absence due to ill-ness remains at the same level as in 2009. The targeted 20 per cent reduction in acci-dent frequency was not realized. The group-wide effort to change attitudes to safety and to prevent workplace accidents was therefore intensified. Read more on page 47.

environMenTal and cliMaTe iMpacTLKAB is the world leader in the development of iron ore pellets for steelmaking with re-duced environmental and climate impact. With the aid of LKAB’s experimental blast furnace, European steel-industry partners in the ULCOS project have taken a further step towards a 50 per cent reduction in carbon dioxide emissions. “LKAB Green Pellets” are a unique climate-smart offer to customers that strengthens LKAB’s competitive advan-tage globally. Read more on page 35.

LKAB has an impact on the communities of Kiruna and Malmberget. Pictured here, an aerial view of Malmberget, with Kaptensgropen in the middle of the image.

suppliers BenefiTTo be able to produce iron ore pellets, the company must purchase equipment and ser-vices from many suppliers globally, which supports employment in many countries. At the same time, local suppliers play an impor-tant role in LKAB’s operations, particularly with respect to service, repairs and transpor-tation. LKAB depends on local contractors who deliver specialist knowledge, equipment and extra manpower. A large number of engineer-ing consultants assist LKAB with develop-ment and project planning. These local suppliers benefit financially from the growing Swedish mining industry that LKAB represents. During 2010 LKAB paid out a total of SEK 11,696 million to its suppliers.


10equaliTy and diversiTyLKAB’s ambition is to improve gender equality and increase diversity within the company. The proportion of women in the group is in-creasing, and more and more young women want to work with us and pursue a career with LKAB. A diversity reference group works ac-tively with diversity issues and an equality plan has been produced. LKAB strives to be an at-tractive employer for all individuals, regardless of gender, age, cultural background, disability or sexual orientation. Read more on page 48.

an econoMic BacKBone for all of norrBoTTenLKAB is one of Norrbotten’s largest indus-trial groups. During 2010 LKAB invested nearly four billion kronor, which is about eight per cent of total industry investments in Sweden for the year. Many of these invest-ments were of direct benefit to the local com-munities and the region. Directly and indi-rectly, LKAB’s major growth constitutes an economic base for subcontractors and labour throughout the county, contributing to small enterprise, consumer buying power and mu-nicipal tax revenues. This means that LKAB creates enormous economic value for its stakeholders and is one of the most important drivers of local and regional economic growth. For example, during the financial crisis of 2008–2009, LKAB continued to invest heavily throughout the downturn. This helped Norrbotten to weather the recession better than any other region in the country. During 2010 LKAB paid out salaries and social security contributions for its employees amounting to SEK 2,907 million. Taxes paid by the Group amounted during the year to SEK 2,575 million, of which SEK 2,506 mil-lion was paid in Sweden, SEK 31 million in Norway, and SEK 38 million in other coun-tries. Dividends of SEK 500 million for the year 2009 were paid out to the owner (the Swedish state) during 2010. But others be-sides the owner have benefited financially from LKAB’s yield. Many other parties that are a part of the LKAB Group’s operations have derived benefit through their relations with LKAB. Of direct economic value amounting to SEK 29,273 million generated by LKAB’s operations in 2010, SEK 17,678 million was distributed to different stake-holder groups and SEK 11,595 million was reinvested in the Group. For 2010, profit after financial items amounted to SEK 12,350 million and the Board proposes that dividends of SEK 5,000 million be paid to the owner.

CO-WORKERS

OWNER

LOCAL COMMUNITIES

CUSTOMERS

SUPPLIERS

PUBLIC AUTHORITIES LKAB

MEDIA

Stakeholder dialogue

Of direct economic value amounting to SEK 29,273 million generated by LKAB’s operations in 2010, SEK 17,678 million was distributed to different stake-holder groups and SEK 11,595 million was reinvest-ed in the Group. The calculation model has been changed somewhat since 2009, which has a certain impact on distribution.

Generated and distributed economic value (SEK MILL IONS)

Suppliers 11,696 (6,602)

Employees 2,907 (2,484)

Shareholders 500 (2,800)

Taxes 2,575 (473)


10sponsoring and coMMuniTy invesTMenTsThe Group’s disbursements for commu-nity investments relating to the urban transformation amounted to SEK 727 million, of which SEK 595 million con-cerns new rail infrastructure including preparatory work; SEK 18 million relates to impact on properties in Malmberget and SEK 31 million to new building con-struction. LKAB’s sponsorship in the form of do-nations, mainly to education, culture and athletics in northern Sweden and Norway, amounted to SEK 17 million.

local and inTernaTional coMMiTMenTRegardless of the operating location, ac-tive participation in and commitment to social development in local communities is an important issue for LKAB. For example, LKAB has ownership interest in the busi-ness development companies Progressum in Kiruna and Expandum in Gällivare, as well as in the venture capital company Norr-skenet AB. In Kiruna, LKAB participates in KIRSAM, an association of local employers that is con-cerned with personnel and work environment issues. Among other initiatives, KIRSAM ar-ranges an annual fitness festival to encourage Kiruna residents to exercise more. LKAB also sponsors science and technol-ogy activities in schools and for youths via the HjärnQulan project. Among other contri-butions, this includes donations towards spe-cial equipment, field trips to LKAB and other science-related activities such as the Teknik-ens hus science centre in Luleå, and the Ber-zelius days in Stockholm. In the countries in which LKAB’s subsidiary Minelco operates, there are several initiatives to promote positive development. In England, Minelco supports organizations that work with the care of seriously ill children and youths, as well as organizations that promote sporting activities for the physically disabled. In Hong Kong, used computers are donated to local charities, and in Turkey, Minelco con-tributes to local infrastructural investment in the vicinity of the mineral deposits.

sponsoring wiTh a focus on culTure and aThleTicsThe aim of LKAB’s sponsorships is to strengthen the LKAB brand and to benefit the recipient and the local community. In the operating locations, LKAB mainly sponsors culture and athletics, which contributes to improvements in public health and makes Kiruna and Gällivare more attractive as towns in which to live and work. The strategy is to provide broad sponsoring that promotes active lifestyles, and attracts and helps young talents to reach the top. Several examples are world-elite wrestlers Sofia and Johanna Matt-son and Hanna Johansson, and the Olympic cross-country skiing gold medalists, Charlotte Kalla and Marcus Hellner. In 2010, a three-year contract was signed with Norrbottensteatern for sponsorship of children’s and youth theatre. Sponsorship of the theatre gives children and youths richer opportunities for leisure through drama training and play, as well as increasing the number of theatrical and music productions in the operating locations in the orefields.

In 2010, a three-year contract was signed with Norrbottens teatern for sponsorship of children’s and youth theatre in LKAB’s operating locations. From top left: Jerker

Johansson, activity leader, Gällivare; Karin Paulin Ek, Norr-bottensteatern; Kjell Henriksson, Gällivare drama society. From bottom left: Lasse Andersson, Kiruna drama society;

Margareth Lidström, pre-school advisor, Kiruna; Karin Enberg, Norrbottensteatern and Lotta Fogde, LKAB.

Olympic double gold medalist Marcus Hellner was also awarded the Svenska Dagbladet Gold Medal.


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LKAB is investing heavily to increase produc-tion. The search for more iron ore means that much of Kiruna and Malmberget will be affected to an ever-increasing degree and will undergo change in the coming years. For LKAB, urban transformation is a high prior-ity and must be managed responsibly and with a long view in dialogue and mutual un-derstanding with all parties concerned. Throughout LKAB’s 120-year history, the company’s commitment to local initiatives has been strong. This has fostered good com-munity relations and trust in the company, a standing that LKAB wishes to maintain.LKAB is playing a very active role in urban transformation, but the respective municipali-ties plan and decide how urban areas will be decommissioned, as well as how new ones are to be designed and how they will function. In addition to LKAB and the municipali-ties, several public authorities are involved in

A focus on urban transformation as LKAB grows

the urban transformations, including the County Administrative Board of Norrbotten, the Swedish Transport Administration, the Swedish National Board of Housing, Build-ing and Planning, and the Swedish National Heritage Board, as well as many private-sec-tor entities and companies. The urban trans-formations are generating new opportunities for business and development, and LKAB is working to increase the attractiveness of the operating locations for private investors. Good communication and up-to-date infor-mation are essential for establishing assur-ance and credibility surrounding LKAB and the municipalities’ work with the urban transformations. The goal is to build good long-term relations. When major projects are proposed, consultative meetings are held with parties affected by the changes. The need for information is steadily in-creasing. During 2011 the company will open

an information office in Kiruna, in addition to the one that was opened in Malmberget in 2010.

urBan TransforMaTion is a sTraTegic focus areaUrban transformation is a priority area for sustainability management. In November 2010 a special group-management unit was set up to deal specifically with matters con-cerning urban transformation.This unit is represented in LKAB’s executive management, where the urban transforma-tions have long been a priority issue. The im-pacts of mining on the communities differ in Malmberget and Kiruna, but in so far as it is possible, LKAB sees a great value in estab-lishing a working method that can be applied in both locations.

Urban transformation is one of LKAB’s six strategic focus areas. Pictured here, the old Kiirunavaara open pit with the town of Kiruna in the background.


10coMpensaTion is paidSwedish legislation dictates that a mining company that causes impact to its surround-ings is liable for the damage and interference caused by its operations. Payments made up until the close of 2010 for the urban trans-formations and reparations for infrastructural impact in Malmberget and Kiruna amounting to more than SEK 1.9 billion are presented in the diagram below. In closing the accounts for 2010, LKAB made a provision of almost SEK 3 billion towards the urban transforma-tions.

Kiruna, a Town in TransiTionSince the orebody in Kiruna extends under the community at an incline, the town has undergone several transformations during its 110-year history. The detailed municipal plan approved by Kiruna’s municipal council in 2007 is currently being revised. Here, consid-eration must be given to whether planning for possible future main levels in LKAB’s un-derground mine and mining of other known ores in the vicinity should be included. Current planning takes into account the changes that will result from mining via the new main level, KUJ 1365, from which ore can be mined until 2030–2035, depending on the rate of production. The position of the ore also has a bearing on the urban lake, Lake Luossajärvi, and LKAB is seeking approval to reduce the pres-ent-day water surface area of the lake by one third, westward from the railyard. The lake has previously been drained at intervals, and during 2010 LKAB began negotiations with the Environmental Court concerning a fur-ther reduction in water volume. This is a necessary safety measure to prevent possible seepage into the mine as mining at present and future levels successively approaches the lake.

successive iMpacT on The groundIn the operating locations, on an ongoing ba-sis, LKAB monitors ground displacements that are a result of mining. LKAB does not mine ore under areas in which people live or are active. In the process of urban transfor-mation, safety and confidence are the prime concerns for LKAB. In both Kiruna and Malmberget, sophisti-cated measurement equipment placed in dif-ferent locations identifies displacements in the ground and bedrock. Normally, it takes10–15 years from the first identifiable movements until the first visible faults appear.

Municipal plans are aMendedLKAB participates actively in the municipali-ties’ work with action plans for municipal de-tailed (comprehensive) plan amendments. Before LKAB requests amendment of a municipal plan, the company purchases property that will be affected. When the amendment is adopted, buildings, other fa-cilities and infrastructure are decommis-sioned and the area is re-zoned as parkland, so-called mine city parks. Parks will create a soft transition from urban to industrial land and act as a buffer zone between settlements and areas in which LKAB operates. Planning for the first mine city park in Kiru-na has been under way for about two and a half years, while work on a similar concept in Malmberget is being carried out in coopera-tion with the Municipality of Gällivare. In Malmberget, historically, detailed mu-nicipal plans have been amended several times to enable the continuation of mining, most recently in 2007. The decision to amend the plan for Kiruna was finalized on February 21, 2011, on which date a proposal for an agreement concerning “plan area 1” was approved by Kiruna’s municipal council. In both operating locations, an ongoing need for amendments to municipal plans arises as mining proceeds.

“don’T Build aBove The ore”For LKAB, it is important that the urban transformation is realized with concern for people, and that relocation of residents and their homes is done responsibly and with minimal disruption. When Kiruna decides on where the new town is to be built, consideration must be given to the fact that the orebody dips east-ward toward the town and the Lappmalmen orebody north of Kiruna. To minimize future urban impact, LKAB strongly discourages

construction of the new town on land area that may be subject to the effects of future mining. The first dwellings to be affected are in LKAB’s own residential area, Ullspiran, with about 150 apartments. Decommissioning of this area is planned for 2013. In total, there are about 300 apart-ments belonging to LKAB within the area designated for the first mine city park. The areas in which LKAB intends to build dwell-ings will not be subject to the effects of fu-ture mining. During 2010 LKAB submitted an applica-tion for an exploitation permit for a small section of the orebody (the north lake ore) in Kiruna to enable LKAB to continue mining via the existing main level northward towards the location of the present-day railway.

a new railway for a BeTTer environMenTConstruction of a rail bypass around Kiruna, financed by LKAB, to replace the old stretch of railway line, began during 2009. The new railway will allow all through traffic to bypass central Kiruna, which, together with a re-duced number of train movements at the Kiruna ore yard, will reduce noise and dust. The rerouting of the railway was conditional upon the granting of a permit for construction of a new dam on the existing tailings pond within the mine area. In June 2010, the Envi-ronmental Court approved the construction of a new dam. As of 2010, the Swedish Transport Administration had completed about half of the work on the new railway bypass. A new access road for heavy-vehicle high-way traffic entering Kiruna opened in Octo-ber 2010. The so-called southern entrance reduces environmental impact on the com-munity, thanks to a significant reduction of carbon dioxide emissions, dust and noise. The number of heavy vehicles entering cen-tral Kiruna daily is thereby reduced by about 200. Some of these vehicles carry hazardous materials. Vattenfall has rerouted the main power supply and the Municipality of Kiruna has replaced the old sewer system within the de-formation zone. LKAB has paid compensa-tion for these projects.

MalMBergeT has Been Moved Many TiMesOre has been mined in Malmberget since the 1700s. When the Ore Railway was inaugu-rated in 1888, the mining industry began to boom and, as the industry has grown, urban impact has increased. Buildings have been relocated or demol-ished during many periods throughout Malm-

2007Previous

Payments for urban transformations (SEK MILL IONS)

2008 20102009

800

700

600

500

400

300

200

100

0

Payments since the start amount to SEK 1,929 million.


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THE URBAN TRANSFORMATION GIVES US THE CHANCE TO BUILD A MODEL TOWN

As LKAB grows, Kiruna also changes and grows. And as more land is needed for mining, new housing areas must be built. In the first phase of urban transformation, Gruvstadsparken 1 (mine city park), impact is limited.However, the municipal authority must plan far into the future, when all of central Kiruna and its 18,000 residents will be affected. We have established a good level of cooperation and good relations between the municipality and LKAB. In our view, LKAB has a good understanding and knowledge of the issues relating to municipal planning and local residents’ perspectives of the urban transformation. Naturally, the Municipality of Kiruna and LKAB have different points of departure in discussions surrounding the urban transformation, but a mutual understanding and respect allows us to reach consensus. This is be-cause the municipality and LKAB share a common goal: that Kiruna should remain an attractive community in which to live and work. That is something that benefits us all. Many questions related to the urban transformation, for example, con-

cerns about crack formation, relocation to new housing, future rental costs, etc. have been dealt with mainly by LKAB. LKAB personnel have been readily available for consultation and the company has published information via a range of channels, such as the lkabframtid.com website and the LKAB Framtid newsletter. There can never be enough information, so we who represent the municipality are now looking at ways of increasing the flow of information concerning our areas of responsibility, such as formal planning matters and explanations for certain municipal decisions. These are important concerns that must be addressed in a future perspective, when the urban transformation will affect people’s private property and homes to an even greater degree. Then, as the municipal executive management, it will be our task to provide clarity and assurance for local residents. Despite uncertainties and all of the questions that must be answered, the urban transformation is very positive. As an inland community, Kiruna faces many of the prob-lems other inland communities face, for example, out-

migration. LKAB’s intention to mine ore for many years to come is decisive for the future of our town. The urban transformation now gives us the opportunity to think in completely new ways as we plan to build the new Kiruna. We now have the chance to build a model town that meets the needs of residents and is based on principles of sus-tainability. We avoid the need to adapt to outmoded solutions, and we actually have a chance to improve everything.

STEFAN HäMäLäINEN Municipal Chief Executive, Kiruna

The new railway will allow all through traffic to bypass central Kiruna, resulting in, among other improvements, reduced noise and dust.

LKAB uses several channels and forums to meet the great need for information. An information office has been set up in Malmberget and another will soon open in Kiruna. Other channels are press confer-ences and public meetings. The internet is an increas-ingly important tool for greater access to information, reaching more stakeholders, providing more timely information and creating productive dialogues. The website lkabframtid.com is a source of the latest information on what is happening in Kiruna and Gällivare, and visitors have been able to chat, via the site, with LKAB’s executive management and experts on several occasions. The newsletter LKAB Framtid (LKAB Future) has been distributed monthly to all households in the orefields communities since winter 2009. Reader surveys indicate that the publication is highly ap-preciated. During 2010 LKAB held press conferences in Kiruna and Malmberget with the intention of using the news media to spread information about the future of the communities to as broad an audience as possible. A public information meeting was held in Kiruna during the year to discuss the urban transforma-tion and other social and environmental issues. In addition, other consultative and information meetings were held with municipal and government representatives, the County Administrative Board, the Sami reserves, non-profit organizations and at workplaces.

F O R I N F O R M A T I O N A N D

C O M M U N I C A T I O N

S E V E R A L C H A N N E L S


10berget’s history. The Malmberget mine con-sists of about 20 orebodies. About ten of these are currently mined. During 2010 LKAB submitted an applica-tion for an exploitation permit for continued mining in Malmberget. LKAB announced in February 2010 that eastern Malmberget is not of current interest for mining. This means that LKAB will leave ore in the exploitation con-cession to prevent deformations from impact-ing land within this area. An extensive road-building project was initiated during the year between eastern and western Malmberget, since mining divides the town in two. Since LKAB plans to continue mining the Printzsköld orebody, a study of the conse-quences this will have for Malmberget was conducted. The results were presented in the summer of 2010, and additional information was provided in February 2011. The results show that parts of central Malmberget will also be affected by continued mining. During the first half of 2011 LKAB and the Municipality of Gällivare will present a joint agreement on the next phase of urban transformation in Malmberget.

LKAB was granted an exploitation permit for the Fabian orebody in 2007. This affects nearly 160 properties in the Elevhemsområ-det district, and by the summer of 2012, all area residents will have moved. The area will be successively remediated and fenced. Throughout the restructuring process, LKAB has attempted to satisfy individual requests as much as possible. Normally, LKAB pur-chases homes to enable their owners to buy new ones. In some cases, new houses have been offered to those who wished to relocate but whose homes could not be moved due to technical difficulties.

lKaB Builds susTainaBle housing in gällivareLKAB cooperates with the Municipality of Gällivare on long-term planning for housing. Construction of 28 apartments at Bäckåsen in Gällivare, which began during 2010, is ex-pected to be completed by the spring of 2011. These are the first of about 230 dwell-ings that LKAB plans to build over a five-year period. In this way, the company contributes to maintaining the attractiveness of Gällivare

as a good place in which to live and work. LKAB is investing about 340 million kronor in housing projects to meet the expected housing need that will arise when LKAB’s residential properties in the Johannes and Hermelin districts of western Malmberget are decommissioned. LKAB’s property management company FAB must meet requirements for sustainabil-ity. Together with FAB, LKAB has invited var-ious experts, mainly in the field of energy, to workshops in which the local housing author-ity and representatives of the Municipality of Gällivare have also participated. The inten-tion has been to improve knowledge of sus-tainable building preparatory to construction at Bäckåsen and future sites. The Municipality of Gällivare is conduct-ing a project entitled “The New Gällivare”. In some 3,000 individual meetings, with an aim to initiating dialogue and gathering knowl-edge, municipal authorities have invited local residents to voice their opinions as to how the future community should look. LKAB, the County Administrative Board and the EU are funding the project jointly.

The Lindborg family working in the garden of their new home in Tallbacka, Malmberget.


10

landowners, industry associations, the Sami reserves, other companies in the industry, and representatives for research and develop-ment organizations. LKAB participates in several national and international organiza-tions and joint projects of which the aim is to manage and mitigate the environmental im-pact of industrial operations. Examples in-clude water conservation organizations and a consortium whose objective is to find new technologies for reducing steel-industry car-bon dioxide emissions.

Energy – reduce energy consumption, improve energy

efficiency and secure the energy supply

Atmospheric emissions – reduce impact on the surrounding environment

and for local residents

Discharges to water – assure the quality of recipients

Waste – increase the degree of recycling and ensure the

safety of landfills

Impact on landscape – manage the consequences of mining

I S S U E S F O R L K A B

K E Y E N V I R O N M E N T A L

Active efforts to reduce environmental and climate impact

LKAB strives to achieve greater efficiency in processing and to produce products that re-duce energy input in steelmaking processes. Together with customers, LKAB develops new formulas for more energy-efficient and process-efficient steelmaking. Magnetite ore gives LKAB and the steel industry environmental advantages. In the pellet manufacturing process, energy is liber-ated when magnetite oxidizes naturally to he-matite. The recovered heat is recycled in the pelletizing process and used for heating. In Kiruna, residual heat is used to heat build-ings and ventilation air. The surplus is sold as heat for district heating and amounted in 2010 to about 19 GWh.

“lKaB green pelleTs” reduce carBon dioxide eMissionsMagnetite ore allows LKAB to manufacture the world’s most climate-smart pellets.Thanks to the energy from oxidation, the in-put of fossil fuel in LKAB’s pellet process is far less compared to, for example, hematite-based pellet manufacture. With LKAB’s pel-lets, the total amount of carbon dioxide per tonne of steel produced is thereby reduced. LKAB therefore markets its pellet products as “LKAB Green Pellets” and is now the world leader in the development of climate-smart pellet products with unsurpassed val-ue-in-use for the steel industry. The strategy is to maintain LKAB’s head start on competitors. LKAB will develop new technologies and launch new generations of iron ore products with which LKAB can con-tribute to reducing carbon dioxide emissions from the iron and steelmaking industry.

environMenTal advanTages, even in oTher operaTionsLKAB’s subsidiary Minelco upgrades mineral products and creates new business opportu-nities by offering products with environmen-tal advantages. Olivine, for example, lowers energy consumption in steelmaking and re-duces carbon dioxide emissions. Huntite can replace environmentally hazardous alterna-tives in flame retardants and, similarly, mica can be used in building applications to re-place asbestos. Minelco also sells magnetite for use in wa-ter treatment processes and desulphurization of coal. Several of Minelco’s products are re-cyclable and, in England, recovered refrac-tory materials are an alternative to new mate-

rial. The subsidiary Wassara AB also creates opportunities for sustainable business, thanks to its technology for water-powered drilling. This technology makes it possible to tap renewable sources of energy. Noise and dust are also reduced with the use of Was-sara’s water-powered drilling technology.

iMporTanT sTaKeholders in The susTainaBiliTy efforTMining operations and the impact they have on the environment and the surroundings af-fect many parties. Two important stakeholder groups are the residents of the communities in which LKAB operates and the supervisory authorities who handle all of LKAB’s environ-mental permits and related matters. The County Administrative Board and the mu-nicipalities are LKAB’s supervisory authori-ties, and the Environmental Court decides on permitting. LKAB strives to meet as much of the need for information among stakeholders as pos-sible. For those who are directly affected, LKAB arranges special forums. Among the most important of these are the consultative meetings at which participants have an op-portunity to ask questions, voice their views and receive information. In 2010, about 50 such meetings were held in Malmberget, Kiruna, Narvik and Svappavaara. Other important stakeholder groups are

LKAB Green Pellets.


10


10

iMproveMenTs in energy efficiencyThe energy issue is a high priority for LKAB. In 2006, it was decided that an energy man-agement system would be introduced, and the work of energy-efficiency improvement has been reorganized for clearer delegation of responsibility. The energy aspect is factored into planning and the purchase of new mate-rials. Since energy accounts for about 10 per cent of LKAB’s total costs, careful energy planning and conservation of resources is es-sential. LKAB is participating in the second round of the Swedish Energy Agency’s pro-gramme for improving energy efficiency in energy-intensive industries (PFE).

parTiculaTesLKAB regularly measures and monitors dif-fuse dust generation in areas around the company’s operating locations. At the same time, LKAB works on an ongoing basis to re-duce the spread of particulate matter by im-plementing dust control measures such as dust extraction and watering. A dust reduc-tion programme was presented to the County Administrative Board and the Municipality of Kiruna in spring 2010, and a project engineer has been hired to deal with the dust problem in all of the company’s operating locations.

MeasureMenT of air qualiTyIn Kiruna, over a 12-month period during 2009–2010, LKAB and the municipality measured injurious particulate matter (PM10), nitrogen oxides and volatile organic compounds. Measurements were also taken in Koskullskulle, Malmberget and Gällivare during 2008 and 2009. The studies show that no environmental quality standards have been exceeded during the measurement peri-ods. The risk of possible future excess emis-sions is considered minimal. In Svappavaara, continuous monitoring of particulates (PM10 and PM2.5), nitrogen oxides, acid gases (sulphur dioxide, fluoride and chlorine) and volatile organic com-pounds began during 2010. Measurements will be carried out over a calendar year and the results will be assessed according to envi-ronmental quality standards. Results for 2010 indicate low levels that do not exceed the quality standards.

noiseLKAB’s facilities in Kiruna, Malmberget and Svappavaara have previously exceeded set re-quirements with respect to noise levels; there-fore, measurements and surveys have been ex-tended. During 2010, noise-reduction measures were implemented in Kiruna, and surveys indicate that requirements with re-spect to noise levels have been met. Excessive noise levels, due to extensive construction work in preparation for mining, were recorded at Gruvberget in Svappavaara during the au-tumn of 2010. Subsequent measurements taken in January 2011 under more normal op-erating conditions indicated that noise-level requirements had been met. With the opening of Gruvberget, LKAB has begun a new noise survey. This will provide a comprehensive view of the situation that will serve as a basis for implementing appropriate measures.

cerTificaTion audiTIn October 2010 a recertification audit of the environmental management system and a fol-low-up audit of the quality and energy man-agement system were conducted. The audit identified no significant deficiencies. SP, the Technical Research Institute of Sweden, which performed the audit, recommended that LKAB be granted renewed certification, which it was.

decoMMissioning in greenlandMinelco decided in 2009 to wind down its operation in Seqi, Greenland, due to poor

TargetReduce the spread of particulate matter by ten per cent as compared to 2006 levels, up to and including 2012.

Per formanceDue to abnormally high levels of particulate matter in Svappavaara during the base year 2006, caused by problems with dust extraction equipment, the 10 per cent reduction target has already been met. During the period 2006 to 2010, emissions of particulate matter from all of LKAB’s facilities have been reduced by 77 per cent, particulate fallout by 14 per cent, and particulate matter in snow samples by 25 per cent. LKAB’s assessment is that there is further potential for improvement.

P A R T I C U L A T E S

Significant events in LKAB’s environmental management during 2010

Loading of iron ore products to vessels in Narvik.

LKAB’s newest pelletizing plant, KK4 in Kiruna.

profitability, and decommissioning proceeded during 2010. The operation consisted of an open-pit olivine mine, processing plant, workshops, a laboratory, a tank facility and accommodation for personnel. Denmark’s National Environmental Re-search Institute (DMU) has conducted ongo-ing surveys of environmental impact in the vicinity and has reported its findings to the Bureau of Minerals and Petroleum (BMP) and Minelco. An environmental risk assess-ment was performed and no environmental risks were identified. Decommissioning has been realized in consultation with local au-thorities. Minelco has transferred the mine and infrastructure to BMP and the quay to the municipal authority. This has been done at the request of, and in agreement with,

Appealed environmental permit rulings concerning LKAB’s operations

Year Location Issue Claimant2009/2010 Kiruna Review of permit conditions for Kiirunavaara – discharge of nitrogen to water LKAB2010 Svappavaara Permit for mining and processing or iron ore at Gruvberget Naturvårdsverket2010 Kiruna Application for permit to build a new dam on Lake Luossajärvi Private individual


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Raw materials

2010 2009 2008MiningCrude ore (Mt) 42.6 27.4 41.3Explosives (ktonne) 19.2 15.4 18.1Additives (ktonne)1 866 569 666

MineralsRaw materials (Mt) 1.9 1.2 2.5Additives (tonnes) 59 68 242Packaging material (tonnes)2 0 1 410 0

1) Olivine, dolomite, bentonite, lime and quartzite.

2) Previous figures for 2008 are omitted due to a change in

calculation principles.

local authorities and is deemed to entail no hazard to human health or the environment.

noTice of inTended prosecuTionThe County Administrative Board brought le-gal action against LKAB in 2009 concerning unauthorized use of water resources at Lake Luossajärvi and contravention of terms for vi-bration levels in Kiruna. During 2010 LKAB was fined SEK 125,000 in both instances. In March 2009 LKAB halted landfilling of waste rock at Kaptensgropen in Malmberget, since seismic activity in the area posed a po-tential risk for the drivers who were hauling the material. The County Administrative Board brought legal action against LKAB in February 2010 for purported neglect of regu-lated site remediation of Kaptensgropen. Lat-er in the year, the case was dismissed and, since October 2010, LKAB has used the old open pit at Tingvallskulle as the main landfill site for waste rock. Since the permit specifies Kaptensgropen as the waste rock landfill, LKAB will apply for an amendment of the permit terms.

perMiTTing during 2010For LKAB, permits are of central importance for maintaining and developing operations as well as for managing the effects of mining. In this regard, one of the most important objec-tives for LKAB is to obtain the necessary en-vironmental permits within a reasonable time. LKAB is a member of the mining in-dustry association SveMin, which is working to speed up the permitting process.

svappavaaraIn May 2010 the Environmental Court grant-ed a permit for mining and processing of two million tonnes of iron ore at Gruvberget in Svappavaara. Operations at Gruvberget have proceeded since May 2010 on the basis of the enforcement order issued to LKAB by the Environmental Court.

ministrative Board for a permit to allow drainage of the open pit at Leveäniemi in or-der to resume mining. A permit application for permanent mining is being prepared for submission during the first quarter of 2012.

KirunaIn June 2010 LKAB was granted a permit to build a new dam adjacent to the tailings pond behind Kiirunavaara and beyond the process-ing plants, so as to enable construction of a railway bypass around the town. The expan-sion of mining operations causes deforma-tions that have an impact on Lake Luossa-järvi. LKAB must therefore build a new dam and drain a section of the lake that will even-tually fall within the deformation zone. Due to forecasted ground deformations in the cur-rent discharge area to the south and the fact that the dam is a Class 1B dam (implying that spillways must be designed for a 10,000-year return period i.e., a 1:10,000 year rain-fall event), application was made for changes in the area to the north of the lake. Negotia-tions with the Environmental Court began on December 1. A positive ruling was pronounced in Janu-ary, but was appealed. In July 2010 a permit was granted for landfilling of non-hazardous waste at the so-called lime dump in Kiruna. MalMBergeTDuring 2010 LKAB was granted a permit to raise the level of the existing tailings pond, and to build a spillway at the Vitåfors indus-trial site in Malmberget. Raising the dam lev-el of the tailings pond is necessary for LKAB to be able to continue to dump concentrator tailings sand from processing operations. At the same time, a new spillway from the pond is being constructed to handle estimated maximum outflows. According to the terms for LKAB’s permits for operations in Vitåfors, waste rock is to be

The Swedish Environmental Protection Agency lodged an appeal with the Environ-mental Court of Appeal, which pronounced a ruling on March 10, 2010. This meant that the permit granted by the Environmental Court was rescinded. However, the enforce-ment order was not rescinded. LKAB will lodge an appeal with the Su-preme Court before the ruling gains force on April 7, 2011. An environmental permit ap-plication for Gruvberget is included in the ongoing permitting process for the Svap-pavaara operation in its entirety. In accordance with the enforcement order, LKAB is proceeding with operations at Gruv-berget until such time as the Supreme Court has decided whether the issue of LKAB’s ap-plication should be tried in court or has pro-nounced a ruling on the matter of fact. Dur-ing 2010 LKAB also submitted an application to the County Administrative Board for a per-mit to test mine iron ore at Mertainen, about 10 km from Svappavaara. According to plan, test mining will commence during the first quarter of 2011. A permit application for permanent mining at Mertainen is being prepared for submis-sion to the Environmental Court in 2011. LKAB has also applied with the County Ad-

REACH (Registration, Evaluation, Authorisation and Restriction of Chemicals) is an EU regulation on chemicals and their safe use. All iron ore pellets, and the pig iron from the experimental blast furnace (EBF) is registered and approved in compliance with REACH. Most of Minelco’s products are naturally occurring minerals and are not chemically modified. The few products that are chemically modified were registered prior to 2010. Safety data sheets for iron ore pellets, pig iron and Minelco’s products are being prepared. The safety data sheets must conform to EU regulations for classification, labelling and packaging (CLP) and the globally harmonized system of classification and labelling (GHS).

R E A C H


10landfilled at Kaptensgropen. Due to in-creased rock mass displacements, which en-tail increased risk to contractors, waste rock landfilling at Kaptensgropen was discontin-ued in 2009. Since October 2010, the old open pit at Tingvallskulle has been used as the main waste rock landfill. Underground operations in the vicinity of the Tingvalls-kulle pit have been discontinued, thereby making the area suitable for landfilling. An application for amendment of permit terms will be submitted.

luleåLKAB has a facility for handling bentonite at Svartön in Luleå. The company now plans to move this to a location that is better suited to industrial activity. For among other reasons, this is because homes have been built near the facility and LKAB wishes to minimize the impact on the surroundings. The permitting process for this project began during 2010.

ulcosSince 2004, LKAB has been involved in the European research project ULCOS, which stands for Ultra Low CO2 Steelmaking. ULCOS is a consortium whose participating members represent a large number of EU mining and steel industry companies. The aim is to reduce energy consumption and carbon dioxide emissions in steelmaking by 50 per cent by 2050. The first phase of the project, with a budget of about 700 million kronor, was concluded in 2010 and was funded jointly by the European mining and steel industries and the EU. In ULCOS, four interesting technologies for reducing carbon dioxide emissions have been identified. One of these is a modified blast furnace process by which carbon diox-ide is separated from the blast furnace off-gas. The remaining gas is then recirculated in the process. Testing and verification of the technology has been performed in LKAB’s experimental blast furnace in Luleå. The ex-perimental blast furnace was modified with a system for carbon dioxide separation and top-gas recirculation. Following successful testing, the project is continuing with the conversion of a produc-tion-scale blast furnace in France. Within ULCOS, work is now under way to test an-other of the technologies. A new plant for smelting reduction of iron ore was built in the Netherlands during 2010. The aim of tri-als is to test and verify whether energy con-sumption can be reduced in comparison to conventional ironmaking processes.

ironManIronman is another project in which LKAB is participating with an aim to reducing energy consumption and carbon dioxide emissions in ironmaking. The project is being conducted in Norway, where LKAB, Höganäs AB and Statoil are studying conditions for building a module for producing sponge iron (direct-reduced iron, DRI). DRI is produced using natural gas and iron ore pellets. In this pro-cess, carbon dioxide is also separated from the off-gas. The intention is to store carbon dioxide at depth in geological formations.Ironman, which has demonstrated the pos-sibility of reducing carbon dioxide emissions by as much as 80 per cent, was shelved in

late-2010, since external partners have left the project. Discussions with the Norwegian government are now under way to decide how the project can be resumed.

1. iron ore pellets and coke are fed into the blast furnace.2. the top gas that forms during the process is ventilated out.3. the gas, containing carbon monoxide and carbon dioxide (Co2 ), is separated in a Co2 separator.4. the carbon dioxide can then be collected and removed for sequestration underground.5. the carbon dioxide is recirculated to the blast furnace, thereby reducing the need for coke in the process.6. the hot metal is tapped.

Iron ore pellets Coke

SVENSKA GRAFIKBYRÅN

2,200°Ccoke combusts

FurnaceBlast

1,400–1,800°Cthe reduced iron ore melts

CO2 -rem

oval unit

1,500°Chot metal is tapped

ULCOS Project

Mined quantities of minerals

2010 2009Iron ore, Sweden (Mt) 42.6 27.4Dolomite, Sweden (ktonne) 104.4 138.6Olivine, Greenland (ktonne) 0 284.0Huntite, Turkey (ktonne) 17.2 16.0


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ULCOS LOOKS INTO THE FUTURE OF STEELMAKING

At LKAB’s experimental blast furnace in Luleå, LKAB and its customers conduct research to develop the optimal iron ore product.

ULCOS is currently researching four different candidates for tomorrow’s ultra-low-CO2 steelmaking: a blast fur-nace process with top-gas recirculation (TGR-BF), smelt-ing reduction (HIsarna), electrolysis (ULCOWIN and ULCOLYSIS), and direct reduction (ULCORED). So far, the top-gas recirculation project, TGR-BF, has been the most successful. By separating the carbon dioxide from the reduction gases, recirculating the gas in the blast furnace process, and finally storing the carbon dioxide in bedrock, emissions can be reduced by 50–60 per cent. The steel industry in the EU accounts for about five per cent of Europe’s total carbon dioxide emissions. If we can reduce emissions by half, that would be a very significant improvement. The project is now entering the next phase: the conversion of a production-scale blast furnace in Lorraine, France. Preparations are under way and the conversion will be made in late 2013. Accord-ing to plan, the TGR process will be operational by mid 2014, and it is expected that underground storage of carbon dioxide will be realized by the close of 2015. Underground storage of carbon dioxide entails the use of well-tried and tested technologies that oil and gas companies have been using for years. The technique that seems most suitable for the steel industry involves storage of the carbon dioxide, compressed at about 120 bar, at a depth of between 1000 and 1500 metres.One of the most important objectives of taking the UL-COS project TGR-BF to full industrial scale is to establish the cost of putting such a facility in place. Once we have an idea of the costs, we will have a clearer picture of

the economic prerequisites for converting Europe’s steel-mills. LKAB’s experimental blast furnace, the EBF, has been a key component in the development of the full-scale TGR process. LKAB and MEFOS’s longstanding experi-ence and in-depth knowledge of blast furnace opera-tion, as well as the experience of all of the partners in the European steel industry, has contributed to the suc-cess of the ULCOS research projects. Being able to test the new TGR process in the experimental blast furnace has helped us to avoid large and costly mistakes and is an essential step before the TGR project can be taken to a full-scale conversion. Whether the TGR technology is economically viable for the steel industry is strongly dependent on global political agreements concerning the price of carbon di-oxide. But that is beyond the scope of ULCOS. Our job is to find technical solutions that will enable tomorrow’s sustainable steel production. The TGR process is the solu-tion for carbon dioxide reduction that is most likely to be introduced in the medium term. It will take longer before the other technologies that are being researched in the ULCOS programme become a reality.

DOMINIQUE SERT, ArcelorMittal Maizières Research SA

MARK HATTINK, Tata Steel RD&T


10The energy issue – critical for the environment and business

One of LKAB’s competitive advantages is the energy that is liberated naturally from mag-netite during pellet manufacture. This means that LKAB’s input of energy from external sources in the manufacture of iron ore prod-ucts is less than that of competitors. Even so, LKAB is highly dependent on energy, which makes the company sensitive to increasing prices on the energy market. LKAB’s production and energy use in-creased during 2010. Increased consumption and a larger share of the power supply with spot-market exposure, from about five to 30 per cent, contributed to significant cost in-creases. This shows how LKAB is affected when a large portion of the electricity de-mand is subject to the Nordic power market’s price fluctuations. To mitigate the effect of fluctuations in the power price, one of the most important tasks in 2010 was to develop a strategy for long-term and sustainable energy supply. The ob-jective is for LKAB to participate in the de-velopment of windpower, so that it may provide an increasing share of LKAB’s future electricity demand. LKAB is one of Sweden’s largest electricity consumers. The company accounted in 2010 for about 1.5 per cent of Sweden’s total elec-

tricity consumption. The total energy require-ment in the production plants, in the form of electricity, fossil fuels and recovered surplus heat, amounted to about 4.1 TWh in 2010. Nearly half, 2.2 TWh, was electricity. Energy costs and an awareness of the cli-mate impact from fossils fuels mean that LKAB is working actively to reduce energy demand. The target is to reduce energy con-sumption by five per cent per tonne of pellets produced by 2012 and to reduce energy costs by SEK 200 million. Systematic weekly fol-

TargetReduce energy consumption per tonne pellets produced by five per cent, as compared to base year 2006, up to and including 2012.

Per formance(Excl. residual heat and subsidiaries)Energy consumption increased in 2010 by 1.1 TWh as compared to 2009. The specific energy consump-tion i.e., per tonne of pellets produced, actually fell by10 per cent in 2009–2010. This was due to a more even rate of production. Compared to the base year 2006, the specific energy consumption for all of LKAB has declined by 1.1 per cent.

E N E R G Y C O N S U M P T I O N

Energy consumption per tonne pellets (MWh/tonne pel le ts )

2005 2006 2007 2008 2009 2010

0,25

0,20

0,15

0,10

0,05

0

Efficiency improvements will contribute to a reduction in energy consumption in relation to the number of tonnes of pellets produced.

Refers to Kiruna, Svappavaara, Malmberget, Luleå and Narvik, excluding subsidiaries and sales to external end users.

Surplus heat recovered internally (GWh)

2005 2006 2007 2008 2009 2010

400

350

300

250

200

150

100

50

0

Refers to Kiruna, Svappavaara and Malmberget.Pellet production

Oil Coal Electricity

Refers to Kiruna, Svappavaara, Malmberget, Luleå and Narvik, excluding subsidiaries and sales to external end users.

2005 2006 2007 2008 2009 2010

27

24

21

18

15

12

9

6

3

0

Energy consumption

4,500

4,000

3,500

3,000

2,500

2,000

1,500

1,000

500

0

GWh Mt

low-up is necessary for reaching this goal.During 2010 LKAB has systematized work processes and formalized delegation of re-sponsibility for the energy conservation ef-fort. Energy coordinators have been hired and the organization has a budget. In a work-ing committee known as the Energy Forum, representatives from various areas of opera-tion discuss energy-related matters on an on-going basis.

huge gains in reduced energy consuMpTionSince 2004, LKAB has participated in the Swedish Energy Agency’s programme for im-proving energy efficiency in Swedish energy-intensive industries (PFE). Participation in the programme entitles LKAB to an energy tax rebate of SEK 0.05 per kWh. Significant economic gains can therefore be realized through reduced energy consumption; partly through lower tax, and partly through lower purchase prices for energy. Entitlement to the energy tax rebate requires LKAB to work systematically with energy issues and to im-plement documented energy-efficiency mea-sures. LKAB applied in 2009 for renewed participation in the programme for another five years.

By participating in the programme, LKAB is committed to working actively to reduce en-ergy consumption in its own operations and to choose energy-efficient alternatives when purchasing. LKAB’s production generates surplus heat that can be utilized by the company. During 2010 LKAB utilized 393 GWh and sold 19 GWh to Kiruna’s district heating system.

energy and cliMaTe are prioriTy issues for lKaBLKAB is working actively to secure a sustain-able and long-term energy supply. The Flexi-Fuel project is an example of a long-term project of which the aim is to identify and enable the use of renewable or semi-renew-able fuels in processing and boiler plants. Work with energy from renewable sources is another important area. More information is given in the following text.


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ANDERS LUNDKVIST General Manager Energy and Climate, LKAB

Fuel consumption 2010 (TJ)

Coal Crude oil Petrol Diesel Fuel oil Natural- Electricity 1

gas

Kiruna Pelletizing plants/Boiler plants 3,015 0 0 0 904 0 -Transport 0 0 0 388 0 0 -Total 3,015 0 0 388 904 0 4,032

Svappavaara Pelletizing plants 1,046 0 0 65 73 0 -Boiler plants/Transport 0 0 0 0 0 0 -Total 1,046 0 0 65 73 0 742

Malmberget Pelletizing plants 0 0 0 0 1,298 0 -Boiler plants/Transport 0 0 0 268 0 0 -Total 0 0 0 268 1,298 2,639

Luleå 0 0 0 0,4 20 0 57Narvik 0 0 0 2 23 0 150Minelco 0 0 0 53 38 4,0 6,8

1) Electricity purchased from Vattenfall is based on an energy mix of 51 per cent hydropower, windpower and biofuel power (renewable energy

sources), 48.7 per cent nuclear power, and 0.3 per cent coal, oil and peat (fossil fuels), based on Vattenfall’s power sales in 2009. Refers to

electricity use in Kiruna, Svappavaara, Malmberget, Luleå and Narvik, excluding subsidiaries and sales to external end users.

LKAB conducts successful and in-novative projects to reduce

climate- and environmental impact. One example that has attracted international attention is Arctic Boreal Climate Development (the ABCD project), a joint initiative of LKAB and the Swedish forestry industry. The aim is to promote forest growth, so as to increase the availability of renew-able forest biomass for biofuel, and to develop methods to close the cycle by producing biogas and organic nutrients from society’s waste.Enhanced forest growth

binds even more carbon

dioxide than forest growing under normal conditions, thereby creating so-called carbon sinks. LKAB and its project partners will develop a system of trade whereby companies can purchase emissions reductions from for-est owners who sequester carbon dioxide in forests and vegetation. The project complements LKAB’s group-wide effort to reduce carbon dioxide emissions and is cur-rently an effective means of reducing the company’s climate impact. LKAB is also cooperating with external parties in ini-tiatives to develop alternative energy sources. Together with about twenty other primary-industry companies, LKAB has an ownership interest in the companies BasEl i Sverige AB and VindIn AB. LKAB’s interest in these com-panies allows LKAB to participate in several different projects, for example, in windpower. BasEl was started in 2005 to pursue projects that will boost the supply of competitively-priced electricity in Sweden. The work includes power production in Swe-den and abroad, as well as capacity for power transmis-sion. VindIn AB was established in 2006. The company operates several different windpower projects and is engaged in a long-term effort to increase the share of

renewable energy in LKAB’s portfolio and to secure the supply of power. So far, via VindIn, LKAB has invested in five wind tur-bines with a capacity of 10 MW. During 2010 these turbines produced 28.4 GWh. This represents only a small portion of LKAB’s total energy requirement, but there is great potential for windpower. During 2011, for example, there are plans for construction of a wind park on land owned by Holmen near Trattberget, west of Örn-sköldsvik. The park will consist of 24 wind turbines, each with a capacity of 2.3 MW. Up until 2015, LKAB plans to participate in the construction of 150 wind turbines. LKAB’s share in these will account for about 6.5 per cent of LKAB’s total consumption. Windpower investments affect the indigenous people, the Sami, since wind turbines are built on reindeer graz-ing lands used by the Sami. LKAB is working to minimize the consequences for the Sami, and has applied social impact assessments in the projects.

RENEWABLE ENERGY


10

LKAB works actively to reduce atmospheric emissions from the company’s operations. Although pellet production has more than tri-pled, LKAB has managed to halve discharges of particulates and emissions of sulphur diox-ide and fluorides in the past 30 years. The reductions are the result of greater ef-ficiency in production, new technologies and increased knowledge and awareness. LKAB’s ambition is to reduce emissions even further. LKAB is now conducting a pilot project to study how combustion of different fuels con-tributes to the formation of nitrogen oxides (NOx) and how this influences the production process, as well as how nitrogen oxides can be minimized in the combustion of fossil fuels. As a consequence of the market situation in 2009, low and uneven pellet production resulted in a poorer degree of off-gas treat-ment. During 2010 the total specific dis-charge and emission i.e., in g/tonne pellets, of particulates and sulphur dioxide was lower. This was due partly to a more even rate of production and LKAB’s systematic effort to optimize the function of off-gas treatment equipment. Emissions of fluorides and chlo-rides increased somewhat. See diagram on page 41.

fine-Tuning of off-gas TreaTMenT sysTeMsProblems in meeting requirements for sul-phur dioxide emissions at some of the pellet plants in Kiruna and Malmberget persisted in 2010. The problems that arose during 2009 were largely a result of uneven production due to fluctuations in the iron ore market. Even though efforts to improve the effective-ness of off-gas treatment systems in Kiruna and Malmberget have been successful, cer-tain problems remain.

The sysTeM of Trade in eMissions righTsWith an aim to reducing greenhouse gases, the EU has introduced measures including a system of trade in carbon dioxide emissions rights. In the system of trade, which is lim-ited to EU member nations, LKAB is the only pellet manufacturer. The company’s main competitors in Brazil and Australia are not subject to the system during the trading pe-riod 2008–2012, which distorts competition to LKAB’s disadvantage. Increased production in LKAB’s facilities leads to increased carbon dioxide emissions and to a deficit of emissions rights. The defi-cit in 2010 can be partly offset by the surplus

Reduced atmospheric emissions, despite increased production

Drilling at LKAB’s Gruvberget open pit mine at Gruvberget.

Atmospheric emissions

2010 2009Particulates (tonnes) 1,551 1,652sulphur dioxide, SO2 (tonnes) 2,282 1,684Hydrogen fluorides, HF (tonnes) 221 166Hydrogen chlorides, HCI (tonnes) 682 400 Nitrogen oxides, NOx (tonnes) 4,187 2,597 Carbon dioxide, CO2 (ktonnes) 696 460

Refers to operations in Kiruna, Svappavaara and Malmberget.

For particulates, Luleå and Narvik are also included.

Carbon dioxide emissions do not include emissions from own vehicles or

emissions from indirect energy use.

of emissions rights that arose due to lower production in 2009. During 2010, allocation principles for the trading period 2013–2020 were presented by the European Commission. LKAB’s pellet production is exposed to competition from countries that are not subject to carbon diox-ide restrictions, outside of the EU’s system of trade in emissions rights. This means that LKAB receives a certain free allowance of emissions rights. LKAB reports the compa-ny’s carbon dioxide emissions to the EU and to the Swedish Environmental Protection Agency, and complies with the agency’s regu-lations for trade in emissions rights.


10


10

The single largest by-product generated by LKAB’s operation is waste rock from ore pro-cessing. Waste rock is classed as non-hazard-ous waste. Since October 2010, waste rock from operations in Malmberget has been landfilled at Tingvallskulle instead of Kap-tensgropen. LKAB has permits for its landfill sites from the County Administrative Board and will apply for an amendment of the terms for the site Tingvallskulle. The waste rock contains residues from un-detonated explosives, which raises the con-tent of nitrogen in leachate. LKAB is there-fore working with more efficient use of explosives in order to minimize the discharge of nitrogen to lakes and waterways. Ore is an economic term. Because of the current market situation, what was once con-sidered waste rock and landfilled is now re-garded in another light. Some waste rock is so high in iron content that it can be mixed with ore from the mines and recycled. In the concentrating plants the crude ore undergoes grinding and magnetic separation preparatory to subsequent pellet manufac-ture. In Kiruna, Malmberget and Svap-pavaara, a residual product in the form of

Recycling of waste creates new business

fine-grained waste rock called tailings is also generated. Owing to rising world market pric-es, LKAB is conducting a project of which the aim is to recover apatite and rare earth ele-ments from the tailings.

oTher wasTe producTsThe other categories of waste products, lime, scrap, site waste and hazardous waste, consti-tute considerably lower volumes in relation to the amount of waste rock, and handling of these waste products is highly regulated. LKAB is working actively to develop new technologies for improving the efficiency of landfill management. The lime waste contains, among other sub-stances, unreacted lime, chlorides and par-ticulate iron and poses little hazard to human health and the environment. LKAB complies with laws and regulations pertaining to land-filling. The waste is handled in closed sys-tems and is covered with waste rock. The site is surrounded by seepage collection ditches, and any seepage discharges to a tailings pond. LKAB’s ambition is to increase the degree of sorting of site waste. Site waste is sorted as combustible, non-combustible, unsorted waste, and reclaimable paper. About 80 per cent of the employees have completed a

Sinter Hematite- based pellets

LKAB pellets

CO2 emissions from sintering and pelletizing (kg C02/tonne)

300

250

200

150

100

50

0

Total carbon dioxide emissions from the production of crude steel, about 2,000 kg CO2/tonne, are reduced when LKAB pellets are used as the iron raw material. The manufacture of LKAB pellets generates one seventh of the carbon dioxide emissions as compared to sintering at the steelmill, and one-third as compared to hematite-based pellet manufacture. The reduction is about 215 kg and 95 kg CO2/tonne crude steel, respectively.

Particulates

Sulphur dioxide

Hydrogen fluoride

Pellet production ( 2010)

LKAB’s capacity expansion is taking place in keeping with strict environmental standards. Since 1980, emissions of particulates, sulphur dioxide and fluorine have been more than halved at the same time as pellet production has more than tripled. Refers to operations in Kiruna, Svappavaara and Malmber-get. For particulates, Luleå and Narvik are also included.

80 90 95 00 05 10

25

20

15

10

5

0

Atmospheric emissions

5,000

4,000

3,000

2,000

1,000

0

Emissions in tonnes Pellets Mt

85

Emissions per tonne pellets produced (g/tonne pel le ts )

2005 2006 2007 2008 2009 2010

250

200

150

100

50

0

Nitrogen oxide Carbon dioxide, kg/tonne

Particulates Hydrogen chloride

Sulphur dioxide Hydrogen fluoride

Emissions from ore processing in Kiruna, Svappavaara and Malmberget.

There has been a marked increase in the total proportion of sorted waste. This is because systems and procedures for sorting and recycling have become more widely adopted in the operation. In Narvik, the degree of sorting has resumed normal levels following the completion of the SILA project.

100

90

80

70

60

50

40

30

20

10

0

2008 2009 2010

Proportion of sorted waste in iron ore operations (%)

Kiruna Malm-berget

Svappa-vaara

Luleå Narvik

The flooded Leveäniemi open pit mine in Svappavaara.

waste-management training programme, and the goal is for all LKAB co-workers to receive training in waste management. LKAB’s scrap consists of various types of scrap iron and other scrap metal. Scrap metal generates income, since it can be sold as a commodity. During 2010 LKAB sold scrap valued at more than SEK 5 million.

TargetIncrease the proportion of sorted waste to at least 80 per cent by 2012 from about 50 per cent in 2006.

Per formanceLKAB has increased the total share of sorted waste by 11 per cent since 2009 and by 39 per cent since the base year 2006. 89 per cent of the total amount of waste is now sorted.

W A S T E S O R T I N G


10LKAB contracts Stena Recycling AB for man-agement of both site waste and hazardous waste, of which the latter consists mostly of lubricant residues and waste oil. Other mate-rials are other forms of oil or oil-contaminat-ed material, and aerosols, paint, lubricants, lead-acid batteries, electronics scrap and lamps containing mercury. Stena is autho-rized to handle and treat hazardous waste. The subsidiary Minelco mines and process-es the mineral huntite in Turkey, which gen-erates relatively small quantities of waste rock and overburden material. This material is landfilled according to approved plans and local regulations. In England, to minimize waste, Minelco recycles refractory materials. Environmental advantages due to shorter transport distances

The subsidiary KGS’s crushing plant in Kiruna.

Waste rock landfill in Kiruna.

Treated waste (rounded off to nearest whole number)

KIruNa SvaPPavaara MaLMbErGEt LuLEå NarvIK MINELCo SuMMa

2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2010 2009

Dry waste rock ktonnes 10,282 6,127 733 0 3,845 4,562 14,860 10,689

Wet waste rock ktonnes 3,162 1,383 516 337 1,315 1,047 4,993 2,767

Lime waste ktonnes 29 18 4 3 3 3 36 24

Site waste tonnes 2,299 1,164 106 122 706 548 776 15 235 353 4,011 8,133 2,202

Scrap tonnes 4,135 3,817 58 1,636 26 1,676 2,531 10 80 246 116 6,946 7,385

Hazardous waste tonnes 892 373 27 130 269 165 10 7 42 36 3 1,243 711

Hazardous waste

(including scrap) % 13 7 14 7 27 7 0.3 22 34 6 7 8 7

Process waste tonnes 0 0 0 0 0 0 0 0 0 0 3,929 3,929 0

are realized, since the raw material is sourced locally and there is less need for new material and transport thereof. New products have been created by processing used refractory materials. Landfill costs and penalties give an eco-nomic incentive to increase the degree of waste sorting. LKAB’s general managers monitor the degree of waste sorting at some 20 sites throughout the company’s iron ore operations. LKAB now sorts about 90 per cent of generated waste, a good result that is largely due to individual commitment among co-workers and contractors. All contractors operating within LKAB’s sites are required to receive information con-cerning waste management and related safety procedures.


10

TOWN

Precipitation

MOUNTAIN

MINE

SORTING, CONCENTRATING

AND PELLETIZING PLANTS

TAILINGS POND1

2

4

3

Mine water pumped up from mine SETTLING POND

Surplus water discharged to lakes/rivers

INNER CIRCULATION

Recirculation of water in outer system (approx. 75%)


10

Ore processing requires large volumes of wa-ter. LKAB recycles about 75 per cent of the water that is used in mining and upgrading processes. Surplus water is returned to rivers and lakes after careful inspection of water quality. Process water comes from two main sourc-es: water that is pumped from the under-ground mines and water from precipitation. In Malmberget, LKAB is authorized to with-draw water at a maximum of 28 cubic metres per minute from the Lina River. In Svap-pavaara, LKAB is also authorized to take out one million cubic metres of water per year from the Kalix River. These sources are not negatively affected by the withdrawal, since withdrawal is relatively small compared to the total water volume. The water system in LKAB’s processing plants is divided into an outer and an inner water system. The inner water system con-

sists of flocculators/separators, pump stations and pipelines that supply the processing plants with process water, wash water and clarified water. Water from the inner system is treated with the addition of a flocculant in a flocculator, close to the processing plant, after which tailings are separated from the water. The outer system consists of pipelines from the concentrating plant, tailings pond and reserve settling pond, pump stations and re-

Recirculation secures water quality in the process

Discharges to water

2010 2009 2008Nitrogen, N (tonnes) 201 206 370Total phosphorus, P (kg) 440 702 388Trace metals (kg) 1, 2 88 250 410

1) Chromium, cadmium, copper, nickel, lead, zinc and arsenic.

2) including Narvik, 2008

Dam reinforcement work in Kiruna.

turn pipelines. In the outer system most of the solid matter (tailings) is separated via sedimentation in a tailings pond, after which the water is led to a settling pond where fur-ther sedimentation and a certain degree of natural, biological purification also take place.

waTer qualiTyThere has been no indication of negative en-vironmental impact caused by water dis-charged from LKAB’s operations to nearby water bodies due to temporary overload in the systems. The surplus water contains some nutrient substances, such as nitrogen and phosphorus, and buffering substances, for example, carbonates, calcium and magne-sium. The water also contains relatively low levels of metals. Several of the recipient wa-ter bodies are lakes, rivers, or tributaries of the latter, that are protected under Natura 2000. To verify the quality of the recipient water systems, LKAB performs tests includ-ing chemical and biological analysis. These tests are part of LKAB’s self-monitoring programme. Sewage water from LKAB’s operations in Kiruna and Svappavaara, and water from ex-plosives manufacture, is discharged from the industrial sites to the municipal sewer sys-tems. In Malmberget, the sewage water is treated in sludge separators and filtration beds of sand. This water is also subject to LKAB’s self-monitoring programme to monitor bacte-ria content discharged to the Lina River.

Water Cycle


10

Mining and processing of minerals results in changes to the surrounding landscape. To manage and minimize these changes, LKAB conducts thorough studies to predict conse-quences and monitors processes continu-ously, and remediation is considered an im-portant responsibility. Mining affects the surrounding landscape in several different ways. Open pits, defor-mation zones and waste rock piles are evi-dence of this, as are ponds for tailings and process water. Current mining operations and the decision to build new main levels in Malmberget and Kiruna will have an impact on the immediate area. More land must be used and buildings must be relocated. To-gether with concerned parties, LKAB is seek-ing solutions that will meet the needs of the different stakeholders and contribute to posi-tive outcomes for the urban transformations.

MoniToring of displaceMenT in rocK Mass, Mines and landscapeLKAB monitors changes due to mining that include rock mass displacements and impact at surface level. Based on measurements and analyses, forecasts of rock stability are pro-duced and recommendations for rock rein-forcement measures are issued.

deforMaTions Monitoring of ground displacement in Kiruna is done with GPS technology, whereby dis-placement is registered using 334 plinths as reference points (an increase from 281 in 2009). Readings are recorded and compared with the new deformation terms established by the Environmental Court of Appeal and are reported quarterly to the relevant supervisory authorities. A corresponding measurement system was installed during 2009 in Malmber-get, where there are now 216 plinths. Surveys of ground deformations are being conducted to determine specific conditions in Malmber-get with an aim to establishing fair and repre-sentative permit terms for deformation. The first results were reported to the relevant su-pervisory authorities in the autumn of 2010.

seisMic evenTs/rocK Mass displaceMenTs Via geophones placed around the mine sites and in the surrounding settlement areas, rock displacements including seismic events and vibrations are registered. All major events are analyzed, nearby areas are inspected by rock engineers, and the findings are documented in special reports. The information is distrib-uted internally and to external stakeholders via LKAB’s website and other channels. The seismic monitoring systems have in recent years been expanded to cover all of the mine sites in Kiruna and Malmberget. In Kiruna, the system now includes a total of 133 geo-phones, and in Malmberget the system has 140 geophones.

daM safeTyThe dams surrounding LKAB’s tailings ponds in Kiruna, Malmberget and Svappavaara are designed in accordance with GruvRIDAS (the Mining Industry’s Guidelines for Mining Companies’ Dam Safety). Similarly, settling ponds, which contain mostly process water, are designed according to RIDAS (the Power Industry’s Guidelines for Power Dam Safety).As of autumn 2008, LKAB’s tailings ponds

The mines shape the landscape

Pond in Svappavaara. The tracks are from vehicles carrying test equipment.


10

are also subject to regulations on mine waste. Work is under way to adapt existing facilities to meet the requirements and must be com-pleted by April 30, 2012. As part of the application process towards the expansion of mining operations at new levels, LKAB has applied to increase capacity in the form of reserve dam capacity. This will place new requirements on dam safety in terms of inspection intervals and discharge volumes.

regulaTed siTe reMediaTionWhen a mineral deposit is mined out, the site must be remediated to remove any contami-nants and promote revegetation. Measures include backfilling of open pits and tree planting. Site remediation is required by law, and LKAB formulates plans for successive reme-diation in consultation with supervisory au-thorities. LKAB is required to reserve funds

to cover the future costs of remediation. LKAB has completed remediation measures during 2010 at a cost of about SEK 8 million. This has included the first phase of remedia-tion of the old tailings pond in Malmberget, backfilling of waste rock in old mine pits, and decontamination of oil-contaminated soil. Bank guarantees have been pledged for fu-ture remediation following beneficiation and pelletizing operations in Kiruna (SEK 68 mil-lion); for operations in Malmberget (SEK 45 million); for quarrying and water operations in Masugnsbyn (SEK 1 million), and for test drilling at Gruvberget, Svappavaara (SEK 36.1 million). For Minelco’s operations in Greenland and Turkey, remediation plans have also been approved by supervisory authorities in the respective countries. Following decom-missioning of the olivine mine in Seqi, Green-land, the site has been remediated according to plan during 2010. Minor adjustments will be completed by summer 2011.

proTecTed naTure and BiodiversiTyLKAB has operations in the vicinity of pro-tected areas and Natura 2000 designated ar-eas. These are areas which are classed as hav-ing particularly high biodiversity values. In Norrbotten County some 23 per cent of the land and water area is protected as national parks or nature reserves, and LKAB works ac-tively to ensure that its operations have as lit-tle impact as possible on sensitive natural ar-eas. LKAB’s primary mining operations are conducted in areas which are in the vicinity of reindeer grazing lands traditionally used by the indigenous population, the Sami. Therefore, the company engages in ongoing dialogue and consultation with the Sami concerning, for example, environmental impact or changes in land use. The close proximity to, and impact on, protected areas is always an important consideration in the day-to-day operations and the permitting process. At present, LKAB’s op-erations are not considered to affect protected areas to any significant extent.

View of the Kiirunavaara open pit.


10

healTh and safeTySafety First, the group’s campaign to promote a safe and healthy work environment, contin-ued during 2010. The objective is to influ-ence co-workers’ behaviour and to focus on preventive risk management, as well as to in-vestigate risks, incidents and accidents. With a new working method, the workplac-es in the parent company are able to assess, themselves, where they stand in terms of the work environment effort. Based on the re-sults of these assessments and the conditions in each workplace, co-workers can establish action plans with activities. In this way, the workplaces are themselves able to work to-wards realization of the vision of zero acci-dents. New training concepts for behaviour- based safety are also tested. To guide and drive the work environment effort within the subsidiary Minelco, a proj-ect group whose task is to work actively with Safety First has been formed. This work in-volves introducing, and gaining consensus for, the work environment assessments that LKAB has developed. The purpose of these assessments is to expose risks and to raise the level of risk awareness among employees. Training is an important component of safety work, and all employees must be involved in a continuous effort to improve safety. Since August, much has been done to im-prove the work environment for the employ-ees of Minelco Tianjin Minerals Ltd in Chi-na. Measures have included extensive renovation of the office building, and an HR manager has been hired to work with person-nel development and related issues.

accidenTs in The worKplaceIn May 2010, in a tragic accident in the mine in Malmberget, two employees of a contrac-tor died. The accident occurred during the construction of the new main level in the mine. Crisis support was provided by LKAB and the contractor to assist the families and co-workers. The accident was investigated by LKAB and independent agencies including the Swedish Work Environment Authority and the Swedish Prosecution Authority. For LKAB, work environment and safety have the highest priority, and efforts to improve them must never cease. In the event of a serious accident or inci-dent, LKAB’s own personnel in the major op-erating locations in Sweden are ready to se-

cure the workplace, contact the authorities and assess the need for crisis support. Crisis support can be provided for the injured party and his or her family, co-workers and supervi-sors. Even if the injured party is not employed by LKAB, but by a contractor, this service can be provided in the event that the contractor lacks the necessary means of crisis support. The frequency of accidents remained at a relatively stable level during 2008 and 2009, but increased in 2010. The number of acci-dents leading to absence in the group amounted during the year to 77, as compared to 58 during 2009. The frequency of acci-dents i.e., the number of accidents per mil-lion work hours, increased from 9.1 to 11.3. Unfortunately, the targeted 20 per cent re-duction from the previous year was therefore not met. For LKAB, every accident is a failure. In recent years LKAB has experienced dramatic fluctuations in the business cycle, generation shifts are now taking place and new co-work-ers are joining the company. Therefore, the safety and work environment programme is being prioritized and developed even more, with the long-term goal of zero accidents. The strategy plan set in 2010 specifies that the number of accidents must be halved by 2012. Special emphasis is placed on intro-ductory safety training for new employees and for employees who change jobs.

aBsence due To illnessAbsence due to illness during 2010 remained at the same level as the previous year, 2.6 per cent. The rate of long-term absence due to illness was 0.4 per cent, the same as in 2009. Short-term absence due to illness was 2.2 per cent, as compared to 2.1 per cent the previ-ous year. In 2008 a target was set: long-term absence due to illness should not exceed 1.5 per cent. This target was met in 2008, 2009 and 2010. One reason for the low rate of sick leave is systematic work with rehabilitation. In the parent company, rehabilitation coordi-nators investigate cases where individuals have been absent due to illness for more than 28 days. Together with the individual and the responsible supervisor, they establish a plan of action to get the person back to work as soon as it is medically appropriate. This work is done in Sweden in close cooperation with the Swedish Social Insurance Agency and with corresponding agencies in other countries.

Our co-workers are paving the way for LKAB’s future

Health and safety in the workplace

“our conviction about safety”

• All injuries and work-related illnesses can be prevented.• Safety at work is a condition for employment and cont-

ract work.• Each of us is responsible for preventing work-related in-

juries and illnesses.• All of us are visibly and clearly involved in improving

the work environment.• All deficiencies in safety must be quickly remedied.• Ongoing safety training for all employees is essential for

creating a safe workplace.• Safety is just as important outside of work as it is at

work.• Preventing work-related injuries and illnesses is good

for business.

Jonas Segerlund empties a furnace used by LKAB for test manufacturing of iron ore pellets.


10healTh and a drug-free worKplaceLKAB has a programme of preventive health measures whereby employees in the major operating locations are given the opportunity for health and fitness activities close to the workplace. Employees are able to exercise, free of charge and during their leisure time, at both company-owned and external fitness centres. The objective is to increase the num-ber of fitness training occasions by five per cent per year. During 2010 fitness activities increased by 19 per cent compared to 2009. Since corporate health and fitness activities in Sweden are tied to tax regulations, no sim-ilar programmes have been introduced in other countries. The results of work environment surveys and employee health check-ups show that employee health within LKAB is generally good. Employees receive training in knowl-edge of the work environment, including er-gonomics and the psychosocial work environ-ment. Via the company’s occupational health unit, all employees in Sweden and Norway can undergo regular medical examinations. In all other LKAB Group companies, manda-tory medical examinations are a minimum requirement. For a company such as LKAB, for safety reasons, a drug and alcohol-free workplace is essential. Since 2006, LKAB has conducted compulsory training programmes on alcohol and drug-related problems for all supervisors and safety officers. LKAB was one of the first companies in Sweden to introduce random drug testing. Prevention of alcohol and drug abuse is conducted in collaboration with lo-cal trade unions. If an employee tests posi-tively for the presence of prohibited sub-stances, rehabilitation is offered. The goal is

to eliminate the drug abuse and keep the employee.

equaliTy and diversiTyThe actual number of women in the LKAB Group increased during the year, totalling 530 at year end. The proportion of women also continued to increase and was 14.3 per cent at the close of 2010, as compared to

13.4 per cent a year previously. The increase was due to the fact that more men than women retired. The proportion of women in managerial positions increased during the 2000s from 4.6 in 2000 to 13.3 per cent in 2008 and 17.8 per cent at the close of 2010. The Swedish anti-discrimination legislation was amended in 2009. An Equal Treatment Plan has replaced the former Gender Equality Plan.

Björn Olofsson, physiotherapist, and Jana Bjuhr, health & wellness promoter.

5

4

3

2

1

02004 2006 2007 2008 2009 2010

Absence due to illness (%)

Short-term absence due to illness Long-term absence due to illness

LKAB Group; short-term and long-term absence due to illness, as percentage of total absence due to illness.

2005

8,000

7,000

6,000

5,000

4,000

3,000

2,000

1,000

0

Incidents and risks (Total )

Incidents and risks Incidents Risks

2005 2006 2007 2008 2009 2010

Prior to 2006, risk reports were included in “incidents”. Minelco is not included.

Total number of accidents resulting in absence, Group. ( 2010)

Total accidents per million work hours.

2005 2006 2007 2008 2009 2010

25

20

15

10

5

0

100

80

60

40

20

0

Total accidents Million work hours

Workplace accidents resulting in absence


10LKAB’s ambition is to counteract discrimina-tion in the workplace and to facilitate recruit-ing by being an attractive employer for all in-dividuals, regardless of gender, disability, cultural background or sexual orientation. An Equal Treatment Plan was introduced in 2010. Work with diversity issues is aided by a diversity reference group. Cases of harass-ment were reported during 2010. These have been investigated and LKAB has taken cor-rective measures in accordance with estab-lished procedures. According to established practice and in compliance with Swedish legislation, LKAB does not register ethnic origin, religion or sexual orientation, and cannot therefore pres-ent those diversity parameters. Salaries are reviewed regularly to ensure that there are no unjustifiable differences in remuneration to women and men in the com-pany. No such survey was conducted in 2010, due to late salary revision. In Sweden, the results of salary reviews are sent every third year to the Equality Ombudsman (DO).

exTernal recruiTing and personnel TurnoverAt year end, the LKAB Group had 3,713 permanent employees. During 2010, 222 people, of which 54 women, were recruited externally to the group. 229 people have left the company, the majority of whom retired. Personnel have been recruited during the year to many areas of operation in more than 30 different staff categories. About one hundred people have also moved between different companies within the group.Owing to the large number of retirements and LKAB’s plans for expansion, the labour demand is increasing. To meet the future

recruitment demand, LKAB participated in, among other events, the largest Nordic ca-reers fair for active professionals and recent graduates, Career Days, at Stockholm’s Er-icsson Globe. In May 2010 LKAB opened a new open pit mine at Gruvberget, outside of Svap-pavaara. The mine is operated by the subsid-iary KGS. During 2010 the company em-ployed 23 people in various staff categories to work at Gruvberget. Active competence-development has taken place during the lat-ter half of the year to ensure that the new co-workers are adequately qualified. LKAB employed a large number of tempo-rary employees and students to fill holiday and summer job vacancies during the year. As of July 31, 2010, there were 927 tempo-rary employees, of which more than 30 per cent were women. Planning and selection were carried out for the fourth round of LKAB’s year-long trainee programme, which began in ear-ly-2011. Eight candidates are chosen for the programme, and the ambition is that half should be women. The second round of LIM (LKAB’s inter-national management programme), with 16 participants, began during 2010. The par-ticipants are employed in different subsid-iaries, divisions and operating locations throughout the LKAB Group. The purpose of the programme is to create a common leadership identity for LKAB; to provide im-portant knowledge about the group and management practice, and to promote the formation of networks and exchange of ex-perience. An HR process that is aligned with LK-AB’s strategic plan has been developed to

Number of women in LKAB (Total )

600

500

400

300

200

100

0

Number of women in LKAB over time

2000

2010

2001

2002

2003

2004

2005

2006

2007

2008

200960–

600

500

400

300

200

100

0

Age structure (excl . Minerals abroad)

Men Women

The average age of permanent employees in Sweden and Norway is 43.6 years.

55–5950–54

45–4940–44

35–3930–34

25–2920–24–19

18

16

14

12

10

8

6

4

2

0

Proportion of women in LKAB (%)

Proportion of women in LKAB Proportion of women in managerial positions

2000

2010

2001

2002

2003

2004

2005

2006

2007

2008

2009

Proportion of women is calculated for the LKAB Group; proportion of women in managerial positions in the parent company.

enable better conditions for fulfilling strate-gic business objectives. The main aim is for all co-workers to identify with the business objectives and to develop in accordance with these objectives.

coMpeTence developMenTLKAB works on an ongoing basis to develop the competencies of employees in more than 200 different occupations within the group. All types of training, from on-the-job techni-cal training, training related to the develop-ment of process and operations, and manage-ment training are conducted within the company. A major challenge in 2010 was to secure sufficient numbers of qualified employees to fill temporary vacancies. Since virtually no temporaries were hired in 2009, owing to the market situation, an unusually large propor-tion of temporaries in 2010 were completely new to the company and even within their re-spective occupations. Therefore, more re-sources were devoted to obligatory training in the areas of work environment and safety. All holiday temporaries underwent a computer-aided, interactive safety-training programme that is normally intended specifically for con-tractors and subcontractors working within LKAB. The number of training days increased during 2010. Even though the target of five training days per employee and year was not quite reached, the number of training days per employee rose to 4.6, as compared to 4.0 the previous year. A very important training activity, conduct-ed by LKAB since 2008, is the rockwork training programme. Mine rockwork techni-cians constitute an important occupational


10group for LKAB and the need for training is considerable, since many qualified people are approaching retirement. Rockwork technicians were trained during 2010, for LKAB’s subsidiary KGS, for work at LKAB’s new open pit mine (Gruvberget) in Svappavaara.

fuTure coMpeTence Like LKAB, the entire mining industry in Sweden is in a phase of expansion. Since LKAB will continue to need qualified labour for its operations, measures are taken on an ongoing basis to secure the future supply of human capital. The activities are directed to-wards schools at all levels from elementary school to university. At the elementary level, the company ar-ranges activities to encourage interest in technology among children, one of which is LKAB’s annual summer school for children aged 11-13 in Kiruna and Gällivare. LKAB cooperates with the municipal secondary schools in Gällivare and Kiruna, where voca-tional programmes include special LKAB-ori-ented courses. Contacts with elementary and secondary schools are concentrated in the municipalities in which LKAB has its most personnel-inten-sive operations. Collaboration with the ore-fields municipalities, which are relatively small in terms of population, is an excellent way to

ensure both future employment opportunities and LKAB’s supply of human capital. “The LKAB high school”, which is arranged in cooperation with the municipal secondary schools in Kiruna and Malmberget, offers at-tractive programmes for young people and im-proves the conditions for reaching LKAB’s ob-jectives with respect to equality. In autumn 2010 the proportion of girls enrolled in the LKAB high school in Malmberget was a re-cord-high 60 per cent. In Kiruna, 40 per cent of those enrolled were girls, which is also a high figure in comparison with other voca-tional programmes in both municipalities and in the country as a whole. Many graduates of previous programmes are now permanently employed by LKAB. To encourage young people who have ties with LKAB to pursue post-secondary engineer-ing studies, LKAB awards scholarships (LKAB Framtidsstipendium). Children of LKAB Group employees are eligible for the scholar-ships, and the requirement is that the study or degree programme must be in engineering and industry-oriented. During 2010 there were 40 scholarship holders who, up until the age of 25, each receive 20,000 kronor per study year (per 60 accredited university credits). At the post-secondary-school level LKAB mainly supports Luleå University of Technol-ogy, which offers specialist degree and study programmes in areas that are vital for LKAB,

SPECIALIZED STUDY PROGRAMMES STRENGTHEN LKAB’S COMPETITIVE ADVANTAGE

Education and training are important pri-orities for LKAB. Broadening and deepen-

ing our co-workers’ competencies and securing the future supply of human capital is an important part of LKAB’s strategy for maintaining global com-petitive advantage and the compa-ny’s position as one of the world’s leading pellet manufacturers. LKAB is a technology-intensive company. Therefore, it is essential to encourage an interest in tech-nology among more young peo-ple and to give them the means to acquire vocational skills that are relevant for LKAB, but also attrac-tive on the open labour market. One route to achieving this is the longstanding collaboration between LKAB and the second-ary schools in Gällivare and Kiruna.

The LKAB high schools, as they are commonly known, offer specialized vocational study and training pro-grammes in areas that are relevant to LKAB’s operations. Students who have graduated from these programme are now permanent employees of LKAB and other com-panies. Some students from the LKAB high schools con-tinue their studies at the post-secondary level. The prac-tical experience they gain through vocational studies, summer jobs and internship at LKAB equips them well for future careers, for example, as engineers. Interest in secondary-school vocational programmes in Kiruna and Gällivare has increased. It is also pleasing to note a more even gender distribution in the technical vocational programmes. In the spring term of 2010, 6 of 10 first-year students at the LKAB high school in Gälli-vare were girls. In Kiruna, the corresponding figure was 4 of 10. This shows that, for young people, regardless of gender, LKAB is perceived as an attractive employer and that the technical vocational programmes provide a good foundation for employment. LKAB also invests heavily in vocational training un-der its own management, mainly within fields that are

relevant for the company’s core business. One very im-portant programme is the mine rockwork technician pro-gramme, in which we give our students the fundamentals they need to work with drilling, charging, rock reinforce-ment or scaling. The programme has been developed to give all students standardized, quality-assured training based on the working methods and the specific environ-ment in LKAB’s own mines. The mine rockwork technician course is very popu-lar. For 2010 autumn term admission there were more than 400 applicants for four places. To each class, both women and men are admitted, which supports LKAB’s programme to promote diversity and equality and the objective of being an attractive company for all. Strengthening the occupational role of the mine rock-work technician through training and competence devel-opment will continue to be a priority and will contribute to a good, safe work environment in LKAB’s mines.

JOHANNA NORDINEducation Manager, LKAB

Average number of employees* distributed per region 2010

Men WomenSweden 2,946 502Norway 193 18Turkey 31 2Asia 40 17Holland 7 8Germany 10 10USA 2 2Finland 2 1England 166 44Greenland 16 0Belgium 1 2Total 3,424 606

There are no longer any employees in Slovakia.

*Permanent and temporary employees included.

Personnel turnover in the Group

Year Percent2006 6.22007 8.02008 8.22009 4.62010 12.2

Calculated on the basis of terminated employment and recruitments in

relation to number of permanent employees per December 31 of the

previous year. Personnel turnover by region and age category is not

reported.


10such as metallurgy and mining engineering. LKAB also welcomes interns and students do-ing thesis projects from several different schools and universities and within a range of disciplines including everything from ergo-nomics and health and fitness to mining and metallurgical engineering.

Travel and environMenTDuring 2010 the subsidiary Minelco presented a global travel policy. The policy applies to all employees and specifies that travel must be as efficient as possible in terms of environment, time and cost.

decoMMissioning in greenlandDuring 2010 Minelco’s operation in Green-land, where the company has operated since 2005, was decommissioned. For economic rea-sons, it was no longer viable to continue min-ing. Decommissioning, including termination of employment, has been realized in consulta-tion with local authorities. In addition to the decommissioning of op-erations in Greenland, cutbacks have also been made in Minelco’s German sales com-pany. Employment has been terminated in compliance with applicable agreements and legislation.

negoTiaTions aT The heighT of a BooMIn 2010, at the height of a business boom, LKAB engaged in Swedish salary negotiations. The 2010 negotiations stood in strong contrast to the previous year’s, when it was a matter of responsible crisis management in the after-math of a global recession. In Sweden, the central agreement between labour market par-ties, which provided the basis for the 2010 sal-ary revision, was marked by the crisis year 2009. For LKAB, at the local level, this en-tailed particular challenges: negotiating sala-ries in a company that is experiencing a major boom while at the same time respecting a cri-sis agreement. However, talks did result in local bargaining agreements with Metall (Swedish Metalwork-ers’ Union), Unionen and Sveriges Ingenjörer (Swedish Association of Graduate Engineers). No agreement was reached with Ledarna (Swedish Organization for Managers), who left the bargaining table and discontinued all ne-gotiations with LKAB. Local trade-union club activities were resumed in February 2011.

Joakim Selberg, Ingela Olsson and Peter Erkki, employed by Minelco in Luleå, on their way in to work.

THE SWEDISH STATE

AUDIT COMMITTEE

COMPENSATION COMMITTEE

CURRENCY AND FINANCE

COMMITTEE

B O A R D

ANNUAL GENERAL MEETING

NOMINATION PROCESS

OWNERSHIP POLICY

EXTERNAL AUDITORS

REPORT AND CONTROL

OBJECTIVES AND STRATEGIES

C O R P O R A T E G O V E R N A N C E R E P O R T52

10

corporaTe governance reporT 2010

generalLKAB is wholly owned by the Swedish state. The basis for corporate governance of LKAB is Swedish legislation, guidelines from the state and internal guidelines. The Govern-ment’s framework for ownership administra-tion and the state ownership policy are de-scribed in detail in the annual reports of state-owned companies. These dictate that the Swedish Code of Corporate Governance (the Code) must serve as part of the govern-ment’s framework for ownership administra-tion.

lKaB’s operaTionsLKAB’s operations are capital intensive. Compared to other iron ore companies, near-ly all of which mine their ore in open pits, LKAB has a heavier capital burden, since un-derground mining demands more extensive investments. The operation is also strongly dependent on business cycles. Therefore, LKAB must have substantial financial strength to be able to cope with cyclical fluctuations over several years and to be able to finance the heavy in-vestments that will secure the company’s fu-ture and to meet commitments with respect

to the urban transformation of Kiruna and Malmberget. Due to this background, the long-term re-quirement on rate of return on operating as-sets has been set by LKAB at 10 per cent (af-ter tax), measured as an average over a business cycle. During the years 2006-2010, return on operating assets has been 45, 32, 41, 3 and 40 per cent, respectively. LKAB has a high proportion of cash and cash equivalents and there is currently no re-quirement for external financing. Cash and cash equivalents are invested primarily on the Swedish money market in securities with high liquidity and low credit and interest-rate risk. The goal is that the rate of return on managed cash assets should exceed the mon-ey market index over the long term. LKAB is currently in a strong growth phase, and the aim is to meet customers’ de-mands and maintain our position on the pel-let market while at the same time strengthen-ing the company’s long-term competitiveness. The determined and extensive programme of investment that have been implemented en-able conditions for continued growth, and the plan is to increase production and deliv-eries by 35 per cent by 2015.

ownerLKAB is wholly owned by the Swedish state, represented by the government via the Minis-try of Finance. The state exercises its ownership via an es-tablished ownership policy, nominations to the Board and requirements for financial and other reporting. The state’s requirement of insight is assured by direct owner representa-tion on the Board. Reports to the owner are important steering instruments for the ongo-ing monitoring and assessment of the compa-nies. State-owned companies should have at least the same level of transparency as listed companies. The Board, via the Chairman, coordinates its views on issues of decisive importance with the owner’s representatives. Such issues include strategic changes in the company’s operations, major acquisitions, mergers or divestments, as well as decisions affecting significant changes in the company’s risk pro-file or balance sheet.

annual general MeeTingLKAB’s Annual General Meeting is open to the public. Notice of the Annual General Meeting is made via LKAB’s website and via

C O R P O R A T E G O V E R N A N C E R E P O R T 53

10newspaper advertisements. The public is en-titled to present questions to the AGM. Questions to the AGM may also be presented via the website. AGM minutes from most years are posted on LKAB’s website (www.lkab.com). The meeting decides, in addition to what is specified in the articles of the Swedish Com-panies Act, on remuneration to the Chairman and other board members, any remuneration for committee work, and guidelines for sala-ries and other remuneration to senior execu-tives. The Annual General Meeting for 2010 was held on April 29. About 75 people attended the meeting.

noMinaTions/appoinTMenT of The Board and audiTorsSince LKAB is wholly state-owned, it does not have a nomination committee per se, as defined by the Code. The nomination process is in accordance with the State ownership policy. The chair of the meetings is appointed by the owner’s representative at the meeting.

Board of direcTorsAccording to LKAB’s Articles of Incorpora-tion, the Board of Directors, will consist of not less than six and not more than 11 mem-bers without deputies. The President is re-

sponsible for ensuring that newly elected board members undergo an introductory course. Normally, six ordinary meetings are held each year: in February, April, June, August, October and December. The meetings follow a fixed calendar to ensure that the Board’s need for information is satisfied. A board meeting held at the end of each quarter considers the interim financial report for the most recent quarter as well as the forecast for the current year. This allows the Board to make an ongoing assessment of strategies and delegations to the President and to decide on specific investment projects. Normally the first meeting of the year is at the year-end closing, when LKAB’s auditors also participate. The second board meeting addresses the annual report. The third and fourth meetings address issues pertaining to operations, strategy and personnel. The em-phasis of the fifth meeting is on the market situation. At the final meeting, the budget and business plan for the coming year are de-cided. Each year, the Board of Directors estab-lishes its rules of procedure.

coMposiTion of The Board The Board of Directors of LKAB has consist-ed during the year of eight and, subsequently,

nine members who have no relation to the company or its senior management and have been elected by the Annual General Meeting, plus three members with three deputies ap-pointed by the employees. Deputies of the employee representatives also participate in board meetings. The President is not a mem-ber of the Board, but attends meetings of the Board. The Chairman is elected, as are the other board members, by the general meeting of shareholders, for one year.

The worK of The Board of direcTors during 2010During the year, the Board has held eleven meetings, three of which via telephone. Meetings are normally held in locations where LKAB has operations, in Stockholm, or in conjunction with visits to LKAB’s mar-ket regions. Attendance of the members of the Board at board meetings in 2010 is pre-sented in the table below.

Board coMMiTTeesCURRENCY AND FINANCE COMMITTEE

The Board has appointed a currency and fi-nance committee that prepares and oversees the hedging programme and financial guide-lines. The committee, led by the Chairman of the Board, Björn Sprängare, included in 2010 board members Anna-Greta Sjöberg,

15/2 24/2 24/3 29/4 29/4 16/6 13/8 24/8 26/10 29/10 15/12 Currency Compen- Audit telephone Statutory telephone telephone and finance sation committee meeting committee committee

Björn Sprängare X X X X X X X X X X X 8 of 8 5 of 5 Christer Berggren X X X X X X X X X X X 6 of 8 5 of 5 7 of 7Stina Blombäck X X X X X X X X X X X 1 of 5 Per-Ola Eriksson X X X X X - X - X X X Maija-Liisa Friman X X - - - X X X X - X Part of meeting Lars-Åke Helgesson X X X X X - X X X X X 5 of 5 7 of 7Anna-Greta Sjöberg X X X X X X X - X - X 8 of 8 7 of 7Egil Ullebö X X X X X - X X X - X Part of meeting Hanna Lagercrantz* - - - - - X X X X X X 2 of 8 3 of 5 4 of 7Hans Fängvall X X X - - - - - - - - Tomas Nilsson X X - - - X - - X X X Thomas Kohkoinen X X X X X X X X X X X 4 of 8 Harry Rantakyrö X X - - - - - - - - - Torsten Thorneus X - X - X - - - - - - Karl Wikström X X X - X - - - - - - 3 of 8 Jan Thelin - - - - - X X X X X X Seija Forsmo - - - - - X X X X - X Bertil Larsson - - - - - X X X X X X Pentti Rahkonen - - - - - X X X X X X

* Effective 29/4 2010

C O R P O R A T E G O V E R N A N C E R E P O R T54

10Christer Berggren, Hanna Lagercranz (after AGM) and Karl Wikström (employee repre-sentative), who was succeeded after the AGM by Thomas Kohkoinen. Also participating in committee meetings during the year were Lars-Eric Aaro, President and CEO, Leif Boström, Senior Vice President Finance and CFO, Lars Lund, Manager Treasury. The committee held eight meetings during 2010. Minutes and reports from the meetings are submitted to LKAB’s Board.

COMPENSATION COMMITTEE

Compensation for the President as well as salary setting principles for members of Group Management are drafted and deter-mined by a compensation committee that is appointed by the Board. The committee in-cludes the Chairman of the Board, Björn Sprängare, and board members Christer Berggren, Lars-Åke Helgesson and Hanna Lagercranz (after AGM). The Board votes on the proposals of the committee with respect to terms of compensation to the President and CEO. The Chairman of the Board ap-proves the annual salary review of other members of Group Management. The com-mittee held five meetings during 2010.

AUDIT COMMITTEE

The Board is responsible for the company having a formalized and transparent system which ensures that the established principles for financial reporting and internal control are complied with and that functional rela-tions with the company’s auditors are main-tained. The committee, led by board member Lars-Åke Helgesson, also includes board members Anna-Greta Sjöberg, Christer Berg-gren and Hanna Lagercranz. Leif Boström, Senior Vice President Finance and CFO, also participates in the committee’s meetings. The committee held seven meetings during 2010. Minutes and reports from the meetings are submitted to LKAB’s Board.

assessMenT of The worK of The BoardA written survey of the Board’s work, pre-pared annually, includes questions concern-ing how the Board collectively, and each member individually, has fulfilled the tasks at hand. The evaluation report supports the work of the Board. The Chairman is respon-sible for following up the results, which form a basis for discussion and improvement. The work of the Chairman is normally assessed by the owner, but this may also be part of the work of the Board. This assessment is either by questionnaire

survey or by an in-depth interview with each AGM-elected board member and the employ-ee representatives. The entire Board has ac-cess to the results of this evaluation, as does the President, where applicable. Via the Chairman of the Board, the owner sees the results of the assessment prior to the nomi-nation process.

assessMenT of The worK of The presidenT and ceoEvaluation of the work of the President and CEO is a fundamental task of the Board. A summary of the Board’s views is made by the Chairman, who presents a detailed outline of the President’s strengths and weaknesses as identified by the Board.

exTernal audiTorsThe Annual General Meeting of April 26, 2007 appointed as the company’s auditors KPMG AB until the close of the Annual Gen-eral Meeting of 2011. The Chief Auditor is Caj Nackstad. A decision was taken in 2006 on the ap-pointment of an auditor and deputy auditor from the Swedish National Audit Office. The National Audit Office has appointed autho-rized public accountant Filip Cassel to act as auditor of LKAB until the AGM of 2013. To act as deputies for Cassel, authorized public accountants Per Redemo (before AGM 2010) and Carin Rytoft Drangel (after AGM 2010) have been appointed. Remuneration to the auditors is stated in Note 7 of the Annual Report. External auditors have been engaged to re-view the interim reports.

execuTive ManageMenTThe executive management group has been increased from seven to nine persons, owing to the reorganization within the Finance unit, where the position of Vice President, Group Control, has been established. A new appointment to the position of Vice Presi-dent, Sales & Marketing has also been made during the year. The President’s duties and obligations are stated in the instructions for the President and the formal work plan for the Board. According to these, the President shall:- manage, plan, develop and control the com-

pany’s operations in accordance with goals and strategies established by the Board;

- make provisions to ensure that the compa-ny’s accounting complies with the law and that financial assets are managed in a satis-factory manner;

- oversee the company’s operations with re-spect to compliance with legislation and regulations, ensure that the decisions of the Board and other decided measures pertain-ing to the operation of the company are im-plemented, and that the company’s opera-tions are organized in a functional manner and conducted in accordance with the Ar-ticles of Incorporation;

- assume responsibility for presentations and other reporting to the Board;

- establish instructions and functional de-scriptions that are deemed necessary but have not been established by the Board;

- assume responsibility for the company’s on-going media contacts; Media contacts with respect to issues pertaining to ownership and major structural considerations are the responsibility of the Chairman;

- ensure that introductory courses are pro-vided for newly elected members of the Board.

The Chairman of the Board approves any di-rectorships held by the President outside of the company.

inTernal conTrol According to the Swedish Companies Act and the Swedish Code of Corporate Gover-nance, the Board of Directors is responsible for internal control, the quality of which shall be independently assured by the Board. Re-view of internal control is also in consulta-tion with the company’s auditors, who nor-mally attend the first board meeting of the year. To ensure the quality of the financial state-ments, the Board considers all critical ac-counting questions and the financial reports presented by the company. The Board also considers issues of internal control, compli-ance with regulations, significant uncertain-ties in reported values, non-remedied errors, events after closing day, changes in estimates, any possible improprieties, and other condi-tions affecting the quality of financial report-ing.

conTrol environMenTThe basis of internal control is the control environment within LKAB. The company’s structure for internal control is based on a defined distribution of responsibilities among the Board, the board committees and the President and CEO. Management of the company is governed by the composition of the organization and the manner in which business activities are conducted. This in-

C O R P O R A T E G O V E R N A N C E R E P O R T 55

10cludes clearly defined roles and areas of re-sponsibility, delegation of authority, control documents such as environmental and qual-ity policies, and clearly defined planning and support processes. The most significant aspects of the control environment with respect to the financial re-porting are taken up in joint group control documents concerning accounting, financial transactions and regulation of authority. The purpose of guidelines and systems for report-ing and consolidation of the Group’s ac-counts is to ensure the reliability of financial reporting.

risK assessMenTLKAB is controlled via processes in which risk management is an implicit part of each separate process. Within the group there are methods for ensuring that the risks to which the company is exposed are managed accord-ing to established guidelines and methods, as well as for assessing and limiting these risks. LKAB works on an ongoing basis to iden-tify and evaluate risks in the processes that are linked to financial reporting and Group accounting. For the most significant processes, risk analyses have been performed and proce-dures have been established for managing and limiting identified risks. For financial re-porting, several areas of high risk have been identified; these concern, among other as-pects, accounting and tax issues associated with the urban transformation in the ore-fields communities and the huge volume of planned and ongoing investment projects. Other, more general risks which exist are loss or misappropriation of assets, and other sig-nificant errors in the company’s reporting, for example, with respect to accounting and evaluation of balance sheet items, complete-ness with respect to income statement items, or deviation from disclosure requirements.

conTrol acTiviTiesImportant aspects of LKAB’s control struc-ture are authorization manuals, descriptions of authorities, and instructions for year-end financial reporting. In addition, there are specific control procedures, for the year-end financial reporting and interim reporting pro-cesses that enable management of unique risks of errors in financial reporting. All of the LKAB Group’s legal entities that conduct business operations have their own chief financial officers or controllers. These participate in forecasting and analysis of the business units’ financial outcomes. Analyses

include assets, liabilities, income, costs and cash flow. For the urban transformation and for the strategic investment projects, control resources have been assigned for follow-up, analysis, forecasting and investigating spe-cific issues concerning financial reporting. For preparation of the Group accounts, LKAB has an entity-wide consolidation sys-tem whereby the company’s financial manag-ers/controllers are responsible for ensuring the reliability of reported financial informa-tion (financial outcomes, budget and fore-casts). Together with the overall analysis at group level, these analyses help to minimize the risk of significant errors in financial re-porting. Within the entity-wide control function, a plan for internal control activities is estab-lished each year. In recent years considerable emphasis has been placed on follow-up of the major ongoing investment projects and of ac-tivities related to ongoing urban transforma-tion. During 2010, internal control of selected ongoing investment projects and projects re-lated to ongoing urban transformation has been conducted. Controls have been con-ducted in collaboration with independent ex-ternal auditors and the nature of the control activities has been decided on the basis of a risk assessment for each separate object of control. The results of conducted controls are summarized in control reports and re-ferred back to the relevant business units. Compliance with remedial measures estab-lished after completed controls is followed up by the group-wide financial control organiza-tion. Throughout the year, ongoing IT controls are performed to ensure the validity of LK-AB’s IT system for financial reporting. During 2010, IT controls have been reviewed by ex-ternal auditors together with LKAB’s IT man-ager.

inforMaTion and coMMunicaTionInformation on the applicable control struc-ture is available in databases to which all em-ployees have access. The aim is to be able to regularly review the changes in, and underly-ing reasons for, the existing controls, and to develop these so that good internal control of financial reporting can be maintained. In conjunction with review of the control struc-ture, responsibility for ensuring that the con-trol structure is in place and is known, and that controls are carried out in the manner prescribed, is identified. LKAB’s guidelines for financial reporting and consolidated ac-

counts are updated on an ongoing basis. The relevant functions and business units are no-tified of changes via e-mail, the intranet and at meetings. Communication with external parties is governed by guidelines presented in a com-munication policy. The purpose of the policy is to ensure that all disclosure obligations are fulfilled correctly and completely. Financial information is communicated via annual re-ports, interim reports, press releases and via LKAB’s website, www.lkab.com.

MoniToring and follow-upFinancial reports for the LKAB Group are presented monthly and include reporting to Group management. Financial reports are presented to the Board on a quarterly basis and for the entire fiscal year. Each unit manager and the president of each subsidiary is ultimately responsible for the current follow-up of financial informa-tion for the respective unit/subsidiary. The information is also followed up per division by Group functions, by Group management and, finally, by the Board. LKAB’s audit com-mittee also fulfils an important function in the follow-up of financial reporting.

sTaTeMenT 2010In accordance with pronouncements by the Swedish Corporate Governance Board, the Board of Directors will not express an opin-ion on how well the internal control has functioned during the year. LKAB has at present no internal auditing function. The Board finds that the existing structures for follow-up and evaluation of the internal con-trol provide a satisfactory basis for the Board’s assessment of the internal control. For certain special audits, external auditing work may also be done. The decision is re-viewed annually.

Luleå, March 23, 2011For the Board of Directors of LKAB,

Chairman

Björn Sprängare

B O A R D O F D I R E C T O R S A N D G R O U P M A N A G E M E N T56

10Board of Directors

CHAIRMANBJÖRN SPRäNGARE(1940)

Director

Board Member since 1997.Graduate Forester ,1967; Dr. of Forestry Skogshögskolan, 1973.CEO Mo och Domsjö AB 1981-1986; President and CEO Trygg Hansa1986–1994; Governor of the Royal Palaces 1996–2004.Other directorships: Chairman, Stiftelsen Skogssällskapet, SJR in Scandinavia and Martinson Group;Board Member, the Royal Swedish Academy of Engineering Sciences; Board Member, Royal Swedish Academy of Agriculture and Forestry.

CHRISTER BERGGREN(1944)

Deputy Director, Ministry of Finance

Deputy Board Member 2001, elected to the Board in 2002.MA Pol. Sci., Stockholm University, 1972.Employed with Statens Pris- och Kartellnämnd (SPK) 1971–1978 and the Government Offices since 1978.Other directorships: Board Member, SP Swedish National Testing and Research Institute.

STINA BLOMBäCK(1951)

Director, Sustainability and Energy, Billerud AB

Board Member since 2002.MSc Chem. Eng., Royal Institute of Technology, 1974.Various positions in the Swedish forestry industry 1974–1999: ASSI Karlsborg, Billerud Gruvön, ASSI Kraftliner, ÅF-IPK and AssiDomän.Director of Research AssiDomän 1999–2001, President Billerud Karlsborg 2001–2010 and Director, Sustainability and Energy, Billerud AB since 2010.Other directorships: Board Member, Luleå Energi, Kalix Vindkraft AB, Part AB and Norrlandsfonden.

PER-OLA ERIKSSON(1946)

Governor, County of Norrbotten

Member of the Board of LKAB 1991–1999 and since 2004.Member of Parliament 1982–1998; Parliamentary Group Leader, Centre Party 1991–1998; Chairman of the Standing Committee on Finance 1991–1994 and Vice Chairman 1994–1998; Chairman, Landshypotek AB 1994–2005; Director General, NUTEK 1999–2003; Chairman, Teracom AB 2001–2003, and Governor of Norrbotten County since 2003.Other directorships: Chairman of Längmanska företagarfonden and Norrbottens läns Hushållningssällskap.

EGIL M. ULLEBØ(1941)

Director

Board Member since 2001.MSc Norges tekniske høgskole; MSc Bus. Adm. Norges Handelshøgskole, and studies at Tempelton College, Oxford.Orklakoncernen 1970–2006.Other directorships: Chairman, Østfold Energi AS and Deltagrup-pen AS; Board Member, Store Norske Spitsbergen AS, Store Norske Spitsbergen Grubekompani AS, Nordic Mining ASA and Borg Havn IKS.

ANNA-GRETA SJÖBERG(1967)

President, Crispa AB

Board Member since 2005.MSc Economics, Handelshögskolan Stockholm, 1989.Sandvik de Mexico 1989–1991; Bergaliden AB 1993–1998 (President 1997–1998); Royal Bank of Scotland, Nordic Region 1998–2011, positions including CFO and Managing Director.Other directorships: Chair, ST Eriks Vårdbolag AB; Board Member, Hufvudstaden AB.

MAIJA-LIISA FRIMAN(1952)

Director

Board Member since 2008.MSc Chemical Engineering, Helsinki University of Technology, 1978.CEO Aspocomp Group Oyj 2007–2004; President Vattenfall Oy 2000–2004;President Gyproc Oy 1993–2000; various management positions in KemiraOyj in Finland, Mexico and the USA 1978–1993.Other directorships: Chair, Ekokem Oy; Vice-Chair, The Finnish Medical Foundation; Board Member, TeliaSonera AB, Metso Oyj, Helsinki Deaconess Institute and Neste Oil Oyj.

LARS-ÅKE HELGESSON(1941)

Director

Board Member since 2000.Graduate Engineer; MBA, Handelshögskolan Göteborg, 1971.President and CEO, Haldex 1981–1988; Division Manager, Stora 1988–1992; President and CEO, Stora 1992–1998.Other directorships: Chairman, Translink Holding AB; Board Member, British-Swedish Chamber of Commerce, Ballingslöv International AB, Axel Christierns-son AB, Crane Inc, Dalton MA USA, and the Royal Swedish Academy of Engineering Sciences.

HANNA LAGERCRANTZ(1970)

Desk Officer, Ministry of Finance

Board Member since 2010.MSc Economics, Handelshögskolan Stockholm 1993; MPhil Economics, Cambridge University, 1994.Corporate Finance, S.G. Warburg, UBS, Brunswick-Warburg 1994–1998; Market Analyst and Investor Relations, SEB 1999–2008.Government Offices since 2008.Other directorships: Board Member, OAO Dom Shvetsii, SBAB Bank AB, Svenska Rymdaktiebolaget.

B O A R D O F D I R E C T O R S A N D G R O U P M A N A G E M E N T 57

10Employee representatives. Board Members Auditors and Secretary

AuditorsKPMG ABCAJ NACKSTADAuthorized public accountant, Chief Auditor

Appointed by the Swedish National Audit Office FILIP CASSELAuthorized public accountant

SecretaryMALIN SUNDVALLChief Legal Advisor, LKAB Secretary of the Board since 2008

Changes in Group Management

Lars-Eric Aaro, President and CEO, effective January 1, 2010 and acting Senior Vice President Sales & Marketing Division until November 14, 2010.

Katarina Holmgren, Senior Vice President Group Controlling, Finance, effective May 17, 2010 and Group Control, effective February 3, 2011.

Markus Petäjäniemi, Senior Vice President Sales & Marketing Division, effective November 15, 2010.

TOMAS NILSSON(1965)

Ore developer

Board Member since 2004. Secondary school and Runöskolan.Employed with LKAB since 1985.Other directorships: Chairman, klubb Gruv 4, Malmberget, IF Metall Malmfälten.

TOMAS KOHKOINEN(1965)

General Manager, Projects.

Deputy Board Member since 1999, elected to the Board in 2010.Secondary engineer, el/tel and studies in electrical engineering/design, maintenance.Employed with LKAB since 1986.

JAN THELIN(1955)

Welder

Board Member since 2010.Trained international welding specialist.Employed with LKAB 1974–1977 and since 1995.Employed with various engineering firms 1977–1995.Other directorships: Chairman, klubb Gruv 12, Malmberget, IF Metall Malmfälten; Board Member, KGS AB.

PENTTI RAHKONEN(1965)

Process operator

Deputy Board Member since 2010.Secondary school and trade-union training programmes. Employed with LKAB since 1987.Other directorships: Treasurer, klubb Gruv 135, IF Metall Malmfälten.

SEIJA FORSMO(1955)

Senior Researcher and expert in particle science since 2010

MSc Chemical Engineering, Helsinki University of Technology, 1980; PhD Process Metallurgy, Luleå University of Technology, 2007.Formerly employed with Outokumpu Oy and Kemira Oyj. Employed with LKAB since 1988.Other directorships: Board Member, SACO-klubben Malmberget-Luleå, and programme boards of the Mining Research Programme (Vinnova) and CAMM (LTU).

BERTIL LARSSON(1955)

Ore harbour worker

Deputy Board Member since 2010.Secondary school.Employed with Dynalite 1996–1999, and with LKAB 1994–1996 and since 1999.Other directorships: Chairman, klubb Svartöstaden, IF Metall Norrbotten.

Employee representatives. Deputy Board Members

10B O A R D O F D I R E C T O R S A N D G R O U P M A N A G E M E N T58

Group Management

ANDERS FURBECK(1957)

Senior vice President, urban transformation

Education: MSc Economics, Handelshögskolan Göteborg, 1985.Employment: LKAB since 1985. Directorships: Board Member, VindIn AB.

ANDERS KITOK(1957)

Senior vice President, Mining Division

Education: MSc Mechanical Engineering, Luleå University of Technology, 1982.Employment: Ericsson 1983–1985; LKAB since 1985.Directorships: Board Member, Progressum AB and MCC AB.

KATARINA HOLMGREN(1963)

Senior vice President, Group Control

Education: MSc, Luleå University of Technology, 1986.Employment: Kårhuset i Luleå AB 1985-1986; Skatteverket (Swedish Tax Agency) 1987–1997; Luleå University of Technology 1997– 2003; Polarbröd 2007–2010; LKAB 2003–2007 and since 2010.

LOTTA FOGDE(1966)

Senior vice President, Communications

Education: BA, Denison University, Ohio, USA, 1989.Employment: Swedish Radio 1991–1995; Expressen 1996; Government Offices of Sweden 1996–2004, and LKAB since 2008. Directorships: Board Member, Teknikens Hus, Luleå.

LARS-ERIC AARO(1956)

President and CEo

Education: MSc, Luleå University of Technology, 1982.Employment: LKAB 1976–1986; Boliden 1988–1989 and 1992–1998; Secoroc 1989–1992; ASSI Domän 1998–2001, and LKAB since 2001.Directorships: Vice Chairman SweMin; Board Member, Royal Swedish Academy of Engineering Sciences. Honorary Doctorate, Luleå University of Technology, 2007.

GRETE SOLVANG STOLTZ(1970)

Senior vice President, Human resources

Education: MSc Economics, Luleå University of Technology, 1993.Employment: LKAB 1993–1995; SCA 1995–2008; Northland Resources 2008–2009 and LKAB since 2009.Directorships: Chair, Karriärcen-trum LTU. Board Member, SweMin.

LEIF BOSTRÖM(1959)

Senior vice President, Finance and CFo

Education: MSc, Luleå University of Technology, 1990.Employment: NCC 1980–1992 and LKAB since 1992.Directorships: Chairman, Hjalmar Lundbohm Research Centre and LKAB Excellence Centre at LTU.

MARKUS PETäJäNIEMI(1959)

Senior vice President, Sales & Marketing Division

Education: MSc Urban Planning and Environmental Engineering, Luleå University of Technology 1985.Employment: NAB 1985–1988; Kiruna Värmeverk 1988–1995; De-Icing Systems 1995–1996; Sema/Sclumberger/AtosOrigin/WMData 1996–2005 and LKAB since 2005.

PER-ERIK LINDVALL(1956)

Senior vice President, technology & business Development

Education: MSc, Luleå University of Technology, 1980.Employment: LKAB 1980–1989; Bergbygg AB 1989–1991; Boliden 1991–2000; LKAB since 2001.Directorships: Chairman, Norrskenet AB and Stiftelsen Bergforsk; Vice Chairman, Luleå University of Technology.

10A U D I T O R ’ S R E P O R T O N T H E C O R P O R A T E G O V E R N A N C E R E P O R T 59

To the Annual General Meeting of Luossavaara-Kiirunavaara AB (plc)Corp. ID No. 556001-5835

Engagement and responsibilityWe have reviewed the corporate governance report on pages 52-56. The Board of Directors is responsible for the corporate governance report and that it has been pre-pared in accordance with the Annual Accounts Act. Our responsibility is to express an opinion on the corporate governance report based on our audit.

Scope of the auditWe conducted our audit in accordance with FAR’s auditing standard RevU 16 The auditors’ examination of the Corporate Governance Statement. Those standards require that we have planned and performed the audit to obtain reasonable assurance that the corporate governance report free of material misstatements. An audit includes examination, on a test basis, of evidence supporting the information included in the corporate governance report. We believe that our audit procedures provide a reason-able basis for our opinion as set out below.

Statement of assuranceIn our opinion, the corporate governance report has been prepared and is consistent with the annual accounts and the consolidated accounts.

Luleå, March 23, 2011

KPMG AB

Caj Nackstad Filip CasselAuthorized public accountant Authorized public accountant Appointed by the Swedish National Audit Office

Auditor’s Report on the Corporate Governance Report

10G R O U P O V E R V I E W60

Consolidated Statements of Income (SEK mIllIOnS) 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000net sales 28,533 11,558 23,128 16,385 14,615 14,337 8,988 7,466 5,186 4,870 4,882Cost of goods sold –15,307 –10,029 –12,166 –9,509 –7,706 –7,535 –6,180 –5,959 –4,515 –4,383 –4,150Gross income 13,226 1,529 10,962 6,876 6,909 6,802 2,808 1,507 671 487 732Selling expenses –213 –202 –200 –178 –178 –174 –289 –285 –135 –86 –80Administrative expenses –451 –377 –448 –344 –333 –349 –353 –247 –192 –246 –218R&D expenses –213 –237 –258 -217 –165 –159 –235 –116 –101 –116 –93Other operating profit/expense –68 –54 271 11 23 –11 10 64 50 28 132Operating profit 12,281 659 10,327 6,148 6,256 6,109 1,941 923 293 67 473Income from financial items 418 705 575 572 546 550 227 181 191 125 198Financial expenses –349 –172 –513 –376 –420 –208 –145 –129 –88 –130 –80Profit after financial items 12,350 1,192 10,389 6,344 6,382 6,451 2,023 975 396 62 591Tax –3,267 –473 –2,748 –1,665 –1,785 –1,904 –456 –286 –96 –15 –179net income for the year 9,083 719 7,641 4,679 4,597 4,547 1,567 689 300 47 412 Attributable to: Parent Company shareholders 9,083 719 7,641 4,679 4,597 4,546 1,568 690 305 54 421minority share 1 –1 –1 –5 –7 –9 Includes depreciation according to plan 1,836 1,827 1,462 1,166 997 952 1,079 1,049 994 954 920 Consolidated Balance Sheets (SEK mIllIOnS) Intangible assets 321 310 428 329 387 477 211 182 22 8 8property, plant and equipment 23,087 21,551 19,893 16,702 11,746 7,928 6,316 6,476 6,583 7,056 6,970Financial assets 1,675 1,827 1,094 2,416 2,208 1,393 219 245 322 261 328Total non-current assets 25,083 23,688 21,415 19,447 14,341 9,798 6,746 6,903 6,927 7,325 7,306Inventories 2,074 2,301 2,715 1,635 1,631 1,423 1,006 976 870 870 707Accounts receivable 3,395 2,276 1,946 1,922 1,697 1,846 1,194 1,198 724 711 635Cash and cash equivalents plus current investments 14,562 6,195 9,643 5,991 6,982 7,091 4,516 2,944 3,045 2,780 3,060Other receivables 1,515 1,095 612 685 1,214 416 195 316 117 245 317Total current assets 21,546 11,867 14,916 10,233 11,524 10,776 6,911 5,434 4,756 4,606 4,719Total assets 46,629 35,555 36,331 29,680 25,865 20,574 13,657 12,337 11,683 11,931 12,025 Shareholders’ equity 33,419 25,375 25,218 22,251 19,076 14,802 10,044 9,004 8,673 8,609 8,789minority interest 4 3 4 3 46 41Provisions* 2,209 2,154 2,160 2,096non–current liabilities 9,087 7,512 6,836 4,963 4,627 3,598 2,230 2 2 41 66Current liabilities 4,123 2,668 4,275 2,466 2,162 2,170 1,380 1,118 851 1,075 1,033Total shareholders’ equity and liabilities 46,629 35,555 36,329 29,680 25,865 20,574 13,657 12,337 11,683 11,931 12,025 Consolidated Statements of Cash Flow Cash flow before change in working capital 13,951 2,931 11,545 7,200 5,688 6,073 2,776 1,782 1,356 978 1,340Change in working capital –1,184 –43 –1,201 –124 358 –553 79 –556 –172 –19 –51Cash flow from operating activities 12,767 2,888 10,344 7,076 6,046 5,520 2,855 1,226 1,184 959 1,289Investments in existing operations –3,973 –3,543 –4,682 –5,968 –4,844 –2,648 –973 –592 –532 –1,050 –952Operating cash flow 8,794 –655 5,662 1,108 1,202 2,872 1,882 634 652 –91 337Acquisition of operation, minority and assets –7 0 –9 –35 0 –75 –29 –384 –41 Current investments –2,952 308 303 –381 217 –1,846 –1,748 Other 80 7 –8 192 151 123 Cash flow after investments 5,915 –340 5,948 884 1,570 1,074 105 250 611 –91 337Dividend –500 –2,800 –2,000 –2,000 –1,500 –520 –281 –351 –254 –233 –233Other from financing activities –43 –92 44 –145Cash flow for the year 5,415 –3,140 3,948 –1,159 70 554 –176 –101 265 –280 –41

Group key ratios net sales (SEK mIllIOnS) 28,533 11,558 23,128 16,385 14,615 14,337 8,988 7,466 5,186 4,870 4,882Growth in net sales % 146.9 –50.0 41.2 12.1 1.9 59.5 20.4 44.0 6.5 –0.2 22.5Operating margin % 43.0 5.7 44.7 37.5 42.8 42.6 21.6 12.4 5.6 1.4 9.7Profit margin % 43.3 10.3 44.9 38.7 43.7 45.0 22.5 13.1 7.6 1.3 12.1Return on total capital % 30.9 3.8 33.0 24.2 29.3 38.9 16.7 9.2 4.1 1.6 5.7Return on equity % 30.9 2.8 32.2 22.6 27.1 36.6 16.5 7.8 3.5 0.5 4.8Return on operating assets % 42.4 2.5 49 32 43 58 21 11 3 1 6Equity/assets ratio % 71.7 71.4 69.4 75.0 73.8 72.0 73.6 73.0 74.3 72.5 73.4Average number of employees 4,030 3,778 4,086 3,885 3,737 3,563 3,482 3,433 3,078 3,172 3,210 * According to IFRS, reported as current and non-current liabilities.DefinitionsOperating margin: Operating profit as a percentage of net sales for the year.Profit margin: Income after financial items as a percentage of revenue for the year.Return on total capital: Income after financial items + financial expenses as a percentage of average total assets.Return on equity: Income for the year as a percentage of average shareholders’ equity.Return on operating assets: Operating profit as a percentage of average operating assets.

Group overview

Financial RepoRt

ADMINISTRAT ION REPORT 62

CONSOL IDATED F INANCIAL STATEMENTSStatement of income 72Statement of comprehensive income 72Statement of financial position 73Statement of changes in shareholders’ equity 74Statement of cash flow 75 F INANCIAL STATEMENTS – PARENT COMPANYStatement of income 76Statement of comprehensive income 76Balance sheet 77Statement of changes in shareholders’ equity 79Statement of cash flow 80 NOTESNote 1 Accounting principles 81Note 2 Distribution of revenues 88Note 3 Segment reporting 88Note 4 Other operating income 89Note 5 Other operating expenses 89Note 6 Employees, personnel costs and remuneration to senior executives 89Note 7 Auditors’ fees and compensation 92Note 8 Nature of operating expenses 92Note 9 Net financial income/expense 92Note 10 Appropriations 93Note 11 Taxes 93Note 12 Earnings per share 95Note 13 Intangible assets 95Note 14 Property, plant and equipment 96Note 15 Participations in joint ventures 98Note 16 Parent Company participations in associated companies 98Note 17 Receivables from subsidiaries and associated companies 98Note 18 Financial investments 99Note 19 Other non-current securities 99Note 20 Non-current receivables and other receivables 99Note 21 Inventories 100Note 22 Accounts receivable 100Note 23 Prepaid expenses and accrued income 100Note 24 Equity 100Note 25 Pensions 101Note 26 Provisions 102Note 27 Accrued expenses and prepaid income 103Note 28 Significant risks and uncertainties 103 Note 29 Contractual obligations 104Note 30 Pledged assets and contingent liabilities 105Note 31 Related parties 105Note 32 Group companies 106Note 33 Untaxed reserves 107Note 34 Statement of cash flow 107 Proposed disposition of unappropriated earnings 108Auditors’ Report 109Sustainability Management 110GRI Index 112Statement of Assurance 114Glossary 115Addresses 116Annual General Meeting and Financial Information 117

C O N T E N T S 61

10C O N T E N T S

ADMINISTRATION REPORTThe Board of Directors and the President and CEO of Luossavaara-Kiiru-navaara AB (publ.), hereinafter LKAB, (Corp. ID No. 556001-5835) hereby submit their annual report and consolidated financial statements covering operations for the 2010 financial year.

OwNER STRucTuRELKAB was founded in 1890 and is wholly owned by the Swedish state; the company’s registered office is in Luleå, Sweden. The total number of shares is 700,000 and share capital amounts to SEK 700 million.

ThE LKAB GROuPThe consolidated financial statements cover the 2010 operations of the Par-ent Company and its subsidiaries, referred to collectively as the Group. It also includes ownership interests in joint venture companies. The Group is organised operationally in divisions – Mining, Minerals and Special Busi-nesses. The designation LKAB refers to the Parent Company; the group is called the LKAB Group.

SIGNIFIcANT EVENTSLars-Eric Aaro took up his position as President and Group CEO on January 1, 2010. A tragic construction site accident took place in the Malmberget mine on May 18 when two contractors were killed when a workman’s basket fell down a mineshaft. Gruvberget, the first of LKAB’s three planned open-pit mines in the Svap-pavaara area was inaugurated on May 27. During the second half of the year LKAB applied for environmental permits for test mining in Mertainen and draining the water from the Leveäniemi mine. During the summer LKAB presented the results from prospecting that showed that the Printzsköld orebody in Malmberget increases in size with depth, which is good for upcoming production, but will also influence central parts of the community. A switchgear fire at Torneträsk station in July affected transport capacity on the ore railway. During November record deliveries totaling 2.65 Mt iron ore products, of which 1.9 Mt from Narvik. This is equivalent to an annual rate of 30 Mt. LKAB has been running 750 m long trains since December 12 on southbound and northbound round trips, i.e. between production locations and the har-bours in Luleå and Narvik. LKAB celebrated its 120th anniversary on December 18.

MINING DIVISIONLKAB’s core business is iron ore products for the steel industry. This operation belongs to the Mining Division. During 2010, iron ore was mined in two un-derground mines and one open-pit mine. Processing takes part in six pelletis-ing plants and other facilities above ground. The products are transported by rail to seaports and loaded onto ships for onward transport to customers around the world. Iron ore pellets are the division’s main product and ac-counted for about 80 (76) per cent of sales volume in 2010.

The price of iron oreThe global iron ore price is set in US dollars. LKAB chose to continue entering into annual contracts with its steelmill customers in 2010 even though many major iron ore suppliers switched to quarterly contracts instead. The first con-tracts in regard to 2010 were signed in May and June and iron ore prices for the year were at the level of those in 2008. The spot price for iron ore in Asia varied during 2010, and had an upward

trend toward the end of the year. Increased demand and limited supply, particularly from India, but also of seaborne iron ore has contributed to price increases in recent months. Industry analysts estimate that this situation will continue in 2011. The spot price level is also significant for the price agree-ments LKAB will sign with customers during 2011.

The steel and iron ore marketDuring 2010 the Asian markets were strong and promoted growth while the markets in Europe and the USA were more moderate. Globally, conditions improved in comparison to 2009, but the world’s financial difficulties are far from over. The industrialised nations are seeing generally weak labour and housing markets and it is expected that cutbacks in public sector spending and private sector debt settlement will continue over an extended period. Economic growth was strong during the first half of the year in much of the world. This had a positive impact on steel production, where capacity utilisation was high. Recovery in the west slackened off during the second half of the year, mainly due to the end of stimulus measures and the post-crisis upswing. Global steel production, for which the raw materials are steel scrap and iron ore, remained at even higher levels during 2010 than during the record year, 2008. This is mainly explained by the strong growth in Chinese steel production in recent years. On the other hand, steel production in Europe, North America and East Asia fell. According to the World Steel Association (worldsteel), global production of crude steel, which drives demand for iron ore, reached 1,414 million tonnes in 2010, which is 15 per cent higher than in 2009. This followed a 6.6 per cent decline in 2009. For 2011, worldsteel foresees a continued rate of growth in global steel demand of 5.3 per cent, which would mean a record volume of 1.5 billion tonnes. China’s high domestic demand for steel slowed somewhat during the sec-ond half of 2010, but recovered during the fourth quarter. During the second half of the year, the Chinese government imposed restrictions on energy use, which impacted steel production negatively. These restrictions were imposed due to the electricity shortage the government had to contend with earlier in the year. In addition, requirements for reduced emissions restricted energy production at plants with inadequate pollution-control equipment. Restrictions were partially lifted towards the end of the year, which also brought about a consolidation of the Chinese steel industry. The rate of growth is expected to slow further during 2011 to about 5 per cent. Despite the decline, steel consumption will remain at a high level during 2011 and it is estimated that China will account for about 45 per cent of the world’s steel use. In European Union countries, steel consumption fell by nearly 36 per cent during 2009. Hardest hit were Spain, Italy and the UK owing to a collapse of the building sector in these countries. Since 2009 recovery has been stronger than expected thanks mainly to exports of industrial goods, which rose dramatically in 2010, particularly from Germany. In the rest of Europe, inventories at many steel mills grew and profitability fell. In an attempt to boost prices, certain steel producers have cut back production. A cautious recovery of the steel market is anticipated during 2011 and one sign of this is the recent dramatic rise in scrap prices. The long range forecast for the global iron ore market remains positive. De-mand for seaborne iron ore for export is rising constantly, with the effect that more and more new iron ore projects are being planned all over the world. In the short term, however, the outlook is unclear, owing primarily to factors such as the floods in Australia, which have affected the supply of coal (coke) and driven up prices of both coal and steel. India’s restrictions on iron ore ex-ports and certain limitations in access to seaborne iron ore affects the market. China’s imports of iron ore stopped rising during 2010; the country im-

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annUal RepoRt 2010

ported just over 618 Mt of iron ore in 2010 (627.8 Mt in 2009). Even though China’s imports of iron ore are no longer increasing, demand for the com-modity in the rest of the world has rebounded since the major drop in 2009, which has meant an increase in total seaborne trade in iron ore to around one billion tonnes in 2010. Industry analysts believe that global steel production and seaborne trade in iron ore will remain at a stable, high level. China’s restrictions on energy use and its lower volume of imported iron ore in 2010 are believed to be only temporary. Analysts maintain that there will be a slow recovery in Europe and the USA, while growth in e.g. Brazil and India will be faster. Demand for LKAB’s iron ore products was strong throughout 2010 and remained so into 2011 in markets for blast furnace products in Europe, and direct reduction products in the Middle East and Asia.

Operations Delivery volume was 26.0 Mt (18.7) iron ore products, the best result during the 2000s. The proportion of pellets was 20.8 Mt (14.3), equivalent to 80 per cent (76) of total volume. During the year 25.3 Mt (17.7) were produced, of which 22.1 Mt (14.7) were pellets. Delivery and production targets for 2011 are 27 Mt (26) . High demand for iron ore in the 2000s has allowed the Mining Division to keep pace with customers’ growth and to expand capacity through in-vestment in two new pelletising plants, an upgraded logistics structure for 30-tonne axle loads, and a highly-efficient, environmentally friendly ore han-dling berth in Narvik. During the 2000s, annual production capacity has risen to around 28 Mt iron ore products. Following investments in processing plants and logistic the bottleneck in iron ore operations has shifted to the mines, i.e. the crude ore extraction rate. Production capacity of the two underground mines in Kiruna and Malm-berget was restricted during the year owing to safety works in the form of reinforcements in production areas and a temporary halt in operations due to the risk of so-called seismic activity, i.e. rock movements that usually occur with changes in rock stresses. A cost reduction and capital rationalisation programme was begun in 2009 with a target of reducing costs by a total of SEK 600 million during 2009–2010. The programme included efficiencies in the form of increased competitive exposure, energy savings, and reduced capital expenditures for materials and external services. The programme target was reached at the end of 2010; constant efficiency initiatives continue. LKAB’s focus is on building a long-term future by increasing the lifetime of its iron ore mines and ensuring that as a pellets supplier it continues to be the world technological leader providing its customers with the most competitive offer in terms of quality, price, technical support and overall value. The target is to maintain volumes at maximum levels, improve efficiency and reduce costs, in order to manage investments and urban transformations with our own funds. In June the Board of Directors adopted a strategic plan whose focus is on six strategically important areas. During the year focus was chiefly directed at supporting the secure production strategy, ensuring the future supply of qualified personnel and creating growth through the opening of new iron deposits. In addition to this, intensive efforts were carried out to find and in-troduce new methods of taking responsibility for and managing the damages caused by mining to date in the surrounding community, including buffer zones with mine city parks so that nobody will have to live in the vicinity of the mining area. In May 2010, LKAB opened the first of three planned open-pit mines in the Svappavaara area, i.e. Gruvberget. An additional supply of crude magnetite was also obtained by crushing old ore from stockpiles at Tingvallskulle in Malmberget and southwest of the old Kiirunavaara open-pit mine. In total the additional supply from Gruvberget and the marginal ore stock-pile made up 6 per cent of total production during 2010. A tragic, deadly accident took place in the Malmberget mine in May, 2010. Two employees from an outside contractor were killed in connection with the construction of the new main level in the mine.

The work environment programme, Safety First, and rock reinforcement work were intensified and supplemented with the “Order and Upkeep” pro-gramme. Improved reinforcement systems were introduced in Kiruna and Malmber-get. Guidelines for dynamic reinforcements (against seismic activity) were prepared. LKAB is participating in collaboration with Luleå University of Tech-nology and other companies in a rock reinforcement project in order to im-prove understanding about dynamic reinforcement Field studies were begun during the year. LKAB is also participating with national and international companies in a collaborative project concerning rock reinforcement in mines led by Rock Tech Centre (RTC). Seismic activity resulting from mining is monitored continually and reported on regularly by means of weekly and monthly reports. The monitoring systems are completely built and in full operation in Kiruna and Malmberget.

InvestmentsThe programme for the future logistics structure and capacity increases in rail operations, with new locomotives, 30-tonne axle load cars and upgraded terminal facilities including the harbour in Narvik were largely completed in 2010. LKAB took delivery of four new mainline locomotives during the year. Final deliveries of the 10 sets of the new type F050 ore cars ordered took place during the year. This means that 750 cars have been put into operation and a further 10 cars have been supplied as a reserve. LKAB has been running 750 m long trains since December 2010 on southbound and northbound round trips, i.e. between production locations and the harbours in Luleå and Narvik. LKAB's target growth toward 37 Mt iron ore products by 2015 will mean a requirement for further locomotives and rolling stock. Construction work for the new M1250 main level and extension of main level M1000 continues in the Malmberget mine. The first skip shaft, truck workshops and parts of the main level will be commissioned in 2011. Tun-neling in the central area is almost finished. The major part of the construc-tion work is the completion of the skip shaft and the remaining infrastructure such as workshops, offices and suchlike. In Kiruna, work is proceeding on the new KUJ 1365 main level; main ac-tivities during the year were rockwork, project planning and procurement. By the end of 2010, just over 50 per cent of all rockwork had been completed and around 25 per cent of the total project budget expended. Approximately 35 per cent of the works were sub contracted. The level is expected to be partially operational in 2013. An agglomeration laboratory (AggloLab) has been under construction in Malmberget during the year. Intensive planning has taken place in respect of suitable premises and equipment. Because standard solutions and standard equipment that meet LKAB requirements and standards are seldom available, considerable efforts were required both from researchers and other personnel who will be working in the new location. Operations are expected to take place in stages during quarters two and three in 2011. Investments in property, plant and equipment amounted to SEK 3,908 mil-lion 3,461).

Research and development LKAB has achieved the position of a world-leading iron ore pellet supplier. The strategy for maintaining and strengthening this position together with our customers is to concentrate research efforts on increasing our expertise in the chain of production from mine to customer. Back in 1997 LKAB built the experimental blast furnace in Luleå as the first part of the LKAB Ironmaking Research Centre. The second stage began construction during 2010, i.e. the AggloLab in Malmberget. The third stage is an experimental shaft furnace for product research and development in the area of direct reduction of pellets using natural gas and a logical future fourth stage would be an experimental pelletising plant. Together these tools will create the conditions for continued technological leadership within the pellets segment. Important complementary research concerns reduction of global climate impact, and rock mechanics and mining technology that will

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ensure more efficient, safer and sustainable mining operations in LKAB’s suc-cessively deeper underground mines. The R&D strategy includes close collaboration with Luleå University of Tech-nology where two foundations – the Hjalmar Lundbohm Research Centre for Mining and Metallurgy (HLRC) and the LKAB Excellence Centre in Mining and Metallurgy at LTU – have received an SEK 150 million contribution from LKAB. Doctoral candidates and scientists work together with LKAB’s own sci-entists on research projects that support LKAB’s strategies and future competi-tiveness on the world market. In mining technology, research concerns rock stability and safety, and meth-ods of rock reinforcement. One important initiative was the construction of a system for the continuous gathering of seismic data and the creation of analyti-cal models for predicting future events. Important research into rock mechanics to improve knowledge of local seismology is also being carried out. Measurement technology, modeling and process control are research ar-eas that are vital for meeting demands for consistently high product quality from LKAB installations. Process models were developed during the year in a operators's simulator that is an important tool in increasing production rates, reducing disruptions, evening out inconsistencies in the process and making pellets handling simpler for operators at the MK3 pelletising plant in Malmberget. The availability and function of the gas treatment system was improved significantly. Exhaust gas furnace function regarding heat recovery was also improved. The results show a production increase of 2 kiloton/day, equivalent on an annual basis to more than 0.5 Mt pellets. Simulation of a new type of grinding medium was introduced in Malmberget in 2010 and re-sults show a production increase of around 10 per cent, and pulverisation ca-pacity is estimated to be sufficient for a production increase in Malmberget. A new pair of combustion chambers was developed and installed in the MK3 pelletising plant. Results today indicate significant reductions in oxides of ni-trogen (NOx) to meet the more stringent environmental requirements imposed. The European steel industry collaborative project ULCOS (Ultra-Low CO2 Steelmaking) continues its efforts toward finding new methods and technolo-gies for reducing carbon dioxide emissions in steelmaking – an important part of the puzzle in reducing global warming. Among other things, LKAB provides the use of its globally unique experimental blast furnace (EBF) in Luleå, where research and joint experimentation are conducted. Theoretical trials show that carbon dioxide emissions from blast-furnace-based steelmak-ing can be lowered by 60 to 70 per cent. A study of a new direct reduction process is also taking place in ULCOS, with a potential for reducing CO2

emissions by up to 80 per cent while reducing energy input. In 2010 LKAB also participated in a preliminary study for a direct-reduc-tion ironmill (DRI) in Norway with the world’s lowest carbon dioxide emis-sions. This project has been mothballed owing to external partners quitting. Projects together with external partners continue regarding the sequestra-tion of carbon dioxide in gangue and growing forests. Expenditures for research and development amounted to SEK 201 million (221), equivalent to around 1.4 (2.0) per cent of Group expenses.

ProspectingIn order to increase its ore base LKAB carries prospecting assignments and does so in the vicinity of its operations locations. LKAB invested SEK 9 million during 2010 and will invest around SEK 66 million during 2011–2012 in charting 50 or more iron deposits.

urban transformationsSince its inception more than 120 years ago LKAB mining in Norrbotten has had an impact on the surrounding communities. Up until now it was mainly LKAB’s own areas that were affected by mining, but from now on built-up areas and infrastructure inside Kiruna will also be affected as were those in Malmberget earlier. The underlying reason for the effects on the surface of the land are that ore bodies slope beneath the communities and that the technology used in mining causes fractures in the ground. This affect has been present ever since the 1950s when underground ore mining began,

and therefore changes in the structure of local communities are inevitable in the long term. Thus mining entails a necessary change in the environment surrounding the company where people live and lead their lives. This is a strategically prioritised issue where LKAB actively participates in work concerning the transformation of the existing communities and development of new ones. LKAB has hitherto had, and will continue to have, significant expenses of a compensatory nature relating to these urban transformations. The direct cause of the expenditures is LKAB’s legal responsibility as concessionaire to compensate damages arising from mining activities. Deformations are caused by mining past and present and will continue for a few years even if mining were to cease. Therefore some areas would need to be evacuated even if mining were to cease completely today. Based on the damages caused by mining to date LKAB has calculated the future expen-ditures and costs of around SEK 3 billion in the 2010 accounts. Significant adjustment to amounts attributable to mining to date may take place. LKAB’s dialogue with stakeholders is a crucial factor in how well the com-pany succeeds in creating security and confidence. Several different chan-nels and forums are used to fulfil the information requirement. There is an information office in Malmberget and a similar office will be set up in Kiruna in 2011. The journal LKAB Framtid (LKAB Future) will have 10 issues deliv-ered annually to households in the two locations and a web portal has been set up with basic information for urban transformation stakeholders. Together with other concerned parties, such as the state/owner, municipalities, public authorities, other companies, property owners and other stakeholders, LKAB is working actively to create a good working climate and thus identify joint solutions for urban transformation in the orefield communities. During 2010 a new organisation was especially set up under the direction of the President to manage assignments regarding urban transformations in the orefields.

Profit/lossNet sales increased by 170 per cent and amounted to SEK 25,908 million (9,613). This healthy upswing is mainly attributable to price rises and an increase in delivered volumes. With external sales of SEK 25,413 million (9,376), the Mining Division accounted for 89 (81) per cent of Group sales. Earnings for the year were impacted by SEK 2,997 million for costs arising from urban transformations in Kiruna and Malmberget due to the effects of mining. Operating profit amounted to SEK 11,524 million (537).

MINERALS DIVISION Industrial minerals operations are organised in the Minerals Division, which operates on the market under the company name Minelco. The company de-velops, produces and markets industrial mineral products for many different industries and areas of application. The most important industries are con-struction and civil engineering, oil and gas, rubber, plastics and paint, chemi-cals, automotive, foundries and the manufacture of refractory materials. Minelco has about 380 employees, most of them outside Sweden, with around 200 in England. With representation in Europe, Asia and the USA, the operation covers much of the world.

The industrial minerals marketGlobal market potential for Minelco products is estimated at over SEK 20 billion. Minelco is the European market leader for industrial applications for magnetite outside the iron and steel industry. Demand in the environmental and energy sectors has been good over re-cent years. In other industries recovery after the recession is taking place at a slower pace. The automotive industry picked up speed during the last part of 2010 and prices for industrial minerals have increased generally. Europe is Minelco’s home market and accounts for more than half of the division’s sales. However, most of the growth is taking place in other mar-kets, above all in Asia. Europe’s relative significance is therefore expected to diminish and give way to a more even geographical distribution. Asia is a growth market for the company’s products and there are also good oppor-

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tunities for growth in North America e.g. in the environmental sector. New business opportunities for Minelco’s minerals are created via efforts directed towards the development of applications. Minerals continue to have good potential for replacing synthetic materials.

OperationsThe division’s business operation supports the iron ore business by identify-ing and commercialising other application areas for iron ore from LKAB. Magnetite is produced, processed and refined to a high product value for a range of customers aside from those in the steel industry. Because demand for the group’s iron ore products was great during 2010, Minelco has created a contribution through sales of previously mined iron ore stored in stockpiles. Minelco’s product portfolio includes many different industrial minerals. The core business is limited to a number of strategically important minerals; mag-netite, mica and huntite. The business strategy for strategically important min-erals is based on controlling the process from raw-material source to end user – “From Mine To End User”. The development of applications for these core minerals is prioritised. The division’s expertise in minerals, processes, appli-cations and markets provides synergies with other strategic business areas. During the year, a new sales organisation was put into effect with the aim of increasing and improving the efficiency of sales efforts on the market. Minelco AB has received environmental certification according to ISO 14001. Capac-ity utilisation increased, partly due to an increase in volumes and also through improved coordination between countries and the different production units. The decision to wind up operations on Greenland was taken in 2009 for reasons of profitability. The closure was for the most part concluded in 2010 with just a few additional measures to be taken during the summer of 2011.

InvestmentsInvestments in property, plant and equipment totaled SEK 10 million (13).

Profit/lossNet sales increased by around 31 per cent to SEK 2,814 million (2,141), mainly due to larger deliveries of chiefly magnetite throughout the year. Operating profit amounted to SEK 433 million (–95). Earnings for 2009 were impacted by closure expenses of SEK –317 million on LKAB’s olivine operation in Greenland. Earnings for the year were impacted by a further SEK 10 million as a result of the decision to wind up operations on Green-land. The division’s earnings were also affected by a goodwill impairment in Germany of approximately SEK 10 million during the fourth quarter. With external sales of SEK 2,777 million (1,948), the Minerals Division accounted for 10 per cent of Group sales.

SPEcIAL BuSINESSES DIVISION The Special Businesses Division is home to several LKAB subsidiaries. The companies have their origin in LKAB’s know how as a manufacturer and user of products and services. These companies are mainly suppliers to the Mining and Minerals Divisions. The companies also have external customers.

wassara ABThe company offers mining and civil engineering industries complete systems for efficient drilling in soil and rock, based on its core expertise within water-powered drilling. The international recession of 2009 meant that sales were extremely low and had a negative effect on earnings even during the first half of 2010. However, a distinctly positive order entry trend improved the situa-tion significantly during the second half of the year. Development efforts have proceeded well and a number of new or improved products are anticipated for launch during 2011. The subsidiary Lindgrens Mekaniska has merged with the Parent Company.

KGS GroupAB Kiruna Grus & Stenförädling (KGS) KGS delivers products and services mainly for use within the LKAB Group.

The company processes road and concrete ballast, blasts, crushes and trans-ports mineral products, processes concrete and works with rock reinforce-ment. Concrete production continues to increase due e.g. to the construc-tion of LKAB’s new main levels in the Malmberget and Kiruna mines. KGS is today’s largest producer of shotcrete. Operations began at LKAB’s new open-pit mine in Svappavaara during the year and investments in drilling equipment and loaders concluded. KGS has recruited and trained around 30 rockwork technicians for mining operations in Svappavaara and for tun-neling contracts in LKAB’s Kiruna mine in 2011. Comprehensive crushing and blasting work was carried out for the laying of new railway track and dams in Kiruna. Ore recovery from LKAB’s waste rock stockpiles in Kiruna and Malmberget increased in scope during the year and is expected to increase further during 2011.

KGS Mekaniska ABThe company is a subsidiary of KGS and manufactures technically advanced steel structures and mechanical components for the engineering, mining and construction industries, as well as performing assembly and maintenance for primary industries in the orefields. Today the company is one of the largest engineering firms in northern Sweden and has a one-third interest in the Kiruna Wagon consortium, which was contracted to manufacture LKAB’s new ore cars in collaboration with K-Industrier AB. Three cars were completed each week and at the end of the year 770 of a total of 834 cars ordered had been delivered.

Kimit ABThe company is a subsidiary of KGS and its main business is to supply LKAB with effective and efficient explosives and related services, as well as purchasing products from other manufacturers, and stocking and developing explosives and associated systems. Kimit also sells its products to other com-panies, mainly on the Nordic market. The explosives manufacturing opera-tion continued to proceed well during the year and production volumes will increase compared to the previous year.

Fastighets AB Malmfälten (FAB) The company manages residential and other properties in Kiruna, Malm-berget, Koskullskulle, Gällivare and Luleå. Its holding comprises around 2,200 apartments and houses and around 35,000 m2 of other premises. FAB has taken over the operations and maintenance of Group proper-ties outside of the industrial sites. During 2009 LKAB took a policy deci-sion to build 200 apartments in Gällivare. The new development is ne-cessitated mainly by the closure of LKAB-owned residential properties in the so-called Company Area, due to expansion of the deformation zone. Construction of the mine city park in Kiruna will commence in 2011, and by stages will form a barrier between built up areas and industrial areas when the latter move toward the community. There are around 300 apartments within this area today. The FAB residential area Ullspiran comprising a total of 148 apartments will be affected first.

LKAB Nät AB The company operates an electricity grid and has a concession as an electric-ity distributor.

LKAB Försäkring AB The company is LKAB’s internal insurance company: it works globally to provide the LKAB Group with liability, property and business interruption insurance.

Profit/lossNets sales in the Special Businesses Division increased by 70 per cent to SEK 1,861 million (1,098) attributable to the increase in crushing operations in Gruvberget, Kiruna Sydvästra, Tingvallskulle and the new Kiruna railway. An increase in cement production and rock reinforcement influence earnings


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positively. Operating profit amounted to SEK 244 million (168). Investments totaled SEK 55 million (69).

ThE LKAB GROuPSales and earningsNet sales increased by 147 per cent and amounted to SEK 28,533 million (11,558). The increase is attributable to higher prices and increased deliver-ies within the Mining Division. The increase is distributed across the following factors; price 61 per cent, currency 13 per cent and volume/mix 26 per cent. Excluding forward exchange contracts in US dollars, the currency effect was 10 per cent. The Group’s operating profit increased to a total of SEK 12,281 million (659), mainly as a result of increased prices, deliveries and exchange rate gains in the Mining Division. Earnings for the year were impacted by SEK 2,997 million for costs arising from urban transformations in Kiruna and Malmberget due to the effects of mining. Income from financial items reached SEK 69 million (533). Exchange gains/losses amounted to SEK –138 million (144). Net interest income/ex-pense amounted to SEK –28 million (–19). Return on market portfolios and interest-bearing instruments totaled SEK 283 million (423). Net pension ex-pense came to SEK –75 million (–72). Dividends amounted to SEK 30 million (65). Net financial income/expense was affected by exchange rate losses on receivables and bank deposits due to the strong Swedish currency.

InvestmentsThe Group’s investments in property, plant and equipment amounted to SEK 3,973 million (3,543). Expenditures for the new main levels in Malmber-get and Kiruna dominated expenditures. Current investments of SEK –2,952 million (308) had an impact on investing activities (net).

Financial positionBoth production volume and share of pellets increased as a result of continu-ing high demand during the year. Existing contracts meant that LKAB’s 2010 iron ore prices were at the same level as 2008. Earnings for the year were impacted by SEK 2,997 million for costs associ-ated with the community transformations in Kiruna and Malmberget due to the effects of mining. The positive cash flow is mainly attributable to operating profits.Cash flow from operating activities amounted to SEK 8,867 million (–648). Cash flow amounted to SEK 5,415 million (–3,140). Cash and cash equiva-lents totaled SEK 14,562 million (6,195). Cash flow was impacted by in-creased trade receivables, current investments, and higher tax disbursements during the fourth quarter. A dividend of SEK 500 million (2,800) was paid to the owner. During the year, the net inflow of US dollars from the sale of iron ore amounted to USD 3,200 (million 1,422), of which USD 1,940 million (1,485) was hedged under forward exchange contracts at an average rate of SEK 7.82 (6.65) per USD. The average exchange rate on the spot market was SEK 7.21 (7.87) per USD during the same period. At the close of the year, USD 880 million was hedged under forward ex-change contracts at an average rate of SEK 7.23 per USD. At the same time last year, hedging contracts amounted to USD 800 million at an average rate of SEK 8.17 per USD.

RISKS AND uNcERTAINTY FAcTORSAs an international group, LKAB is exposed to various risks. Risk manage-ment is an important part of operations in order to minimise the effect of fac-tors that are outside the group’s control. There are methods within the group for ensuring that the risks to which the company is exposed are managed according to established guidelines and methods, as well as for assessing and limiting these risks. Fluctuations in the world economy can influence global steel production which in turn directly affects demand for iron ore. Other risks can be a weak-

ening dollar, falling pellet prices, higher expenses for taxes and energy and increased costs for emission allowances. In contrast to LKAB, the company’s biggest competitors extract ore from open-pit mines and have therefore significantly lower production costs. High, even production quality and cost effectiveness on the part of LKAB are critical factors for its ability to cope with competition. Its greatest advantage com-pared to its competitors is the high quality magnetite ore. Below is a description of the operational and financial risks that are of significance for LKAB.

Operating risksVolume dependenceThe demand for iron ore pellets is more volatile compared to fines in times of changing prices and economic circumstances. LKAB’s sales, with an approxi-mate 82 per cent proportion of pellets, are more sensitive to prevailing econom-ic circumstances that its competitors as the consumption of fines by steelmakers with their own sintering plants is more stable and often forms the foundation for their production. LKAB has usually been able to sell all of its products, but the company must improve its preparedness for future cyclical fluctuations, among other means by greater flexibility in iron ore production, its products, sales and financial strength.

Price dependenceIron ore trading is conducted in US dollars based on supply and demand. Fi-nal prices are set in bilateral negotiations between suppliers and purchasers. Among other things, a shift in the centre of gravity toward Asia within global iron ore trade means that today there are in the main three different ways of setting iron ore prices – annual prices, spot prices and quarterly indexed prices. The price of pellets is based on ore fine sinter prices plus a pellet premium. The price of direct reduction pellets (DR pellets) has always been higher than that of blast furnace pellets. The cost of ocean freight is of great importance for steelmakers as it is included in the total price to the customer. Customers evaluate suppliers based on the total price of materials delivered together with the added value that the products create in connection with their use. Thus LKAB is favoured in the European market when freight prices are high, while distant mines become more competitive when freight prices are low. This proximity advantage is assessed when prices are set.

Customer dependenceThe global iron ore and steel market is subject to ongoing structural changes, and the number of players has diminished. The Mining Division has relatively few customers and it prioritises growth through existing customers, which means that each individual customer increases in importance. Long-term cus-tomer relationships and a customer structure spread across different markets have a certain stabilising effect on deliveries and risk exposure. Consistently high product quality, a geographical logistics advantage in combination with value-adding products and services are important risk-mitigating factors. The Minerals Division has a diversified customer base and product portfolio aside from magnetite that to a certain degree cushions market fluctuations since different geographical areas, customer segments and minerals have different economic cycles.

Urban transformations in the orefields LKAB’s expansion in its orefield operating localities entails a successive ex-pansion of deformation zones resulting from mining activities, and therefore changes in the structure of local communities are inevitable in the long term. Together with other concerned parties, such as the state/owner, municipali-ties, public authorities, other companies, property owners and other stake-holders, LKAB is working actively to identify joint solutions for the transforma-tion of orefield communities. As and when impact due to mining activities (economic/physical damage to property) is incurred and where legal or informal commitments to external parties exist, LKAB allocates funds for such commitments (see Note 26).


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Hitherto most of the impact has occurred within LKAB’s own sites. Today, however, local communities and infrastructure beyond these areas are also affected. The deformation zones are, or will be, so extensive that it will be necessary to successively relocate sections of Kiruna and Malmberget perma-nently. A key issue in respect of the management of these commitments will be the size of the associated expenses and how the latter are to be assessed and distributed over the accounting period to which they belong. LKAB has therefore applied for a preliminary ruling from the Council for Advance Tax Rulings concerning certain questions relating to the provision that was made for 2010. The provision was based on the Board of Directors’ and company management’s best assessment on generally accepted accounting principles, and may be expected to guide financial reporting in the years ahead. Urban transformation in the ore fields has impacted LKAB’s earnings and liquidity by considerable amounts, and will continue to do so in the years to come. LKAB must therefore remain financially strong and maintain a good earning capacity in order to shoulder the existing obligations that urban transformation entails. In addition to this there will also be subsequent de-mands resulting from future mining.

Concessions and permitsVarious permit applications are associated with different types of risks de-pending of the type of project and permit applied for. The risks may vary between the insignificant and extremely serious, but in general terms may be risks for project delays that can entail cost increases or production disrup-tions or halts in mines and processes.

Other operating risksLKAB’s operations are energy-intensive, which is why constant efforts to find energy-efficient solutions and secure deliveries of competitively priced elec-tricity are prioritised. LKAB participates in the EU’s system for trade in emis-sion allowances for carbon dioxide, which entails increased direct and indi-rect costs for LKAB. LKAB’s principal competitors in Brazil and Australia are not affected by this during the 2008–2012 trading period for such systems, which distorts competition to LKAB’s disadvantage.

Financial risksLKAB is exposed to various types of financial risks. These risks are associ-ated with fluctuations in the company’s earnings and cash flow as a result of fluctuations in currency exchange rates, interest rates, refinancing and credit risks. Financial risks are managed according to Group policies established by the LKAB’s Board of Directors. LKAB has a centralised finance function, LKAB Treasury Centre, which manages most of the Group’s financial risks. A selective strategy is applied, whereby potential costs and benefits are bal-anced, the aim being to minimise and neutralize risks in commercial flows. The LKAB Treasury Centre also acts as the Group’s internal bank and sup-ports subsidiaries with financing, investment and currency trading, and it functions as an advisor with respect to financial issues. Currency risksBoth LKAB’s future payment flows (transaction exposure) and revaluation of receivables and liabilities in foreign currencies (translation exposure) are exposed to risks associated with fluctuations in exchange rates. Foreign sub-sidiaries within the Group operate primarily in their local currencies and investments and financing alike are made chiefly in the local currency with the aim of reducing translation exposure.

Transaction exposureThe greatest transaction exposure within the LKAB Group is within the Mining Division. All iron ore prices are set in US dollars and the transaction risk is therefore high without hedging. The exact magnitude of this risk is difficult to determine far in advance, since it is largely dependent on the market price of iron ore, which is usually set annually. During 2010, transaction exposure amounted to approximately USD 3,200 (1,422), and the effect of a differ-

ence of SEK 0.1 in the USD/SEK exchange rate on LKAB’s operating profit, without hedging, is therefore about SEK 320 million (142). LKAB applies cash-flow hedge accounting for forecast transactions in USD. Because the goal of LKAB’s current currency policy is to minimise as far as possible the impact of exchange rate fluctuations on the income statement by means of selective hedging, the value of future transaction exposure is peri-odically hedged under forward exchange contracts. The Board of Directors has set up a currency and finance committee that convenes four to six times per year among other things to advise the Board on decisions pertaining to the management of Mining Division currency risks, within a framework es-tablished by the Board. Hedging takes place mainly for estimated US dollar flows for the forecast period concerned, which usually has a rolling twelve-month horizon. As a framework for future estimated exposures in US dollars hedged levels may at a maximum reach 80, 60 and 50 per cent of estimated net flows for 12, 24 and 36 months ahead respectively. No hedging may take place more than 36 months ahead without approval from the Board of Directors. During 2010 hedges were at the 60 per cent level of transaction exposure. Transaction exposure for other companies in the Group arises mainly when raw materials are purchased in foreign currencies. Each subsidiary is responsi-ble for its own currency exposure and all forward exchange contracts must be through the LKAB Treasury Centre.

Translation exposureLKAB does not normally hedge its translation exposure, since the latter is not substantial and a hedge over time adds no value for the Group.

Interest risks and share-price risksLKAB’s financing sources are shareholders’ equity, provisions and current operating credits, which means that LKAB is mainly exposed to interest rate risks with regard to investments of cash and cash equivalents. According to LKAB’s investment policy, the average duration of money-market investments may not exceed three years. As of December 31, 2010, LKAB’s investments in money-market instruments amounted to SEK 11,708 million (4,245) and the duration was 111 (259) days. A one per cent increase in the market rate as of closing day would have affected income by SEK 30 million (29). LKAB invests a proportion of cash and cash equivalents that have an investment horizon longer than five years, mainly to cover that share of LKAB’s pension liabilities not covered by other assets, in share-related securities. As of De-cember 31, 2010, the market value of LKAB’s investments in shares excluding SSAB shares amounted to SEK 1,049 million (977). A ten per cent average decrease in the market value of shares as of closing day, would affect income negatively by SEK 105 million (98).

Credit risksLKAB’s credit risks are mainly associated with trade receivables, derivatives and current investments. In the case of credit risks in trade receivables, LKAB prioritises long-term customer relations, which means that the majority of the customers are well-established. During 2010, the five largest customers accounted for 71 per cent (61) of net sales in the Parent Company. Export letters of credit are used if necessary. LKAB has not had any substantial bad debt losses in the past five years. During 2010, the average collection period for accounts receivable has remained stable at around 40 (42) days. According to LKAB’s investment policy, current investments may only be made to borrowers with high creditworthiness and high liquidity such as the Swed-ish state, companies wholly owned by the Swedish state, county councils, municipalities or companies with high credit ratings. No departures from the investment policy took place during 2010. As of closing day, 37 (97) per cent of investments in money-market instruments were issued by the Swedish state and Swedish banks. LKAB has had no bad debt losses in current invest-ments in the past five years. LKAB uses several different banks with high credit ratings for derivative transactions.


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Liquidity risksLKAB maintains good financial preparedness by following guidelines that regulate risk-taking and the investment horizon. LKAB has a high proportion of cash and cash equivalents and no debt. LKAB has an unutilized loan facil-ity of SEK 5,000 million. Cash and cash equivalents amounted to SEK 8,046 million (2,631) on December 31. The equity/assets ratio on closing day was 72 (71) per cent. A good balance between short and long investment hori-zons will meet the long-term financing need. Cash and cash equivalents are invested mainly in the Swedish money market in securities with high liquidity. LKAB works with short-term and long-term liquidity forecasts.

Insurance coverageLKAB insures its interests including the Group’s facilities throughout the world to protect against unforeseen circumstances. The largest single insurable risks concern property and disruptions, where production facilities and harbours are covered by the Group’s own insurance company, LKAB Försäkring AB. Liabilities in excess of SEK 300 million are reinsured on the international in-surance market. Active and systematic efforts are continually made to prevent damage and disruptions in production. Historically, stoppages due to fire have resulted in the greatest financial losses, which is why preventive work in this area has high priority. In Sweden, liability for damage to third parties as a result of dam accidents is strict and unlimited and LKAB has therefore taken out so-called dam liability insurance. Other insurance coverage includes liability insurance, product liability insurance, medical and business travel insurance, transport insurance and liability insurance for the President and Board of Directors. Sensitivity analysis The sensitivity analysis shown below summarises the sensitivity of outcomes in the Group to hypothetical fluctuations in interest rates and market prices. Parent Company delivery volumes and price influence are determining fac-tors for the Group’s income. Delivery volumes are not comparable in different sectors. The sensitivity analysis is divided into two parts; the delivery and price analysis concerns the Parent Company and the remaining part relates to the entire Group.

SENSITIVITY ANALYSIS 2010 Group Exposure Change Effect on earningsDeliveries of iron ore products 26 Mt 1 Mt SEK 647 million1

Price of iron ore products 10 per cent SEK 2,588 million2

Personnel costs SEK 2,845 million 10 per cent SEK 284 millionEnergy costs SEK 1,543 million 10 per cent SEK 153 millionTransport costs SEK 1,627 million 10 per cent SEK 162 millionSSAB shares SEK 1,292 million 10 per cent SEK 129 million3

Dollar rate – without USD 3,200 million SEK 0.1 SEK 320 million2

forward contractsMoney market investments SEK 11,708 million 1 per cent SEK 30 million4

1) Average value, calculated on unchanged product mix.2) During 2010 the total exposure was USD 3,200 million of which USD 1,940 million was hedged. 3) Change in value is reported in other comprehensive income.4) Change in value is reported in the income statement on existing portfolio.

SuSTAINABILITYInformation on LKAB’s work with environmental and work environment issues and issues concerning urban transformation in orefield communities is also presented in the Sustainability Report.

ENVIRONMENTAL INFORMATIONGeneralLKAB’s work must be characterised by concern for the environment. To this end LKAB has adopted an environmental and energy policy that governs LKAB’s actions while affirming the company’s objective of maintaining finan-cially sound and successful business operations. The policy is published on www.lkab.com.

Licensable operations; permitsThe Group conducts licensable operations as described by the Environmental Code via the Swedish Parent Company and its subsidiaries. Two environ-mental permits refer to the handling of iron ore products and binders at the harbour facilities in Luleå and Narvik. These operations affect the external environment mainly through emissions of particulates and dust. LKAB holds permits for oil depot operations and for the operation of an experimental blast furnace in Luleå. Several environmental permits concern large-scale mining and facilities for processing iron ore products. One permit licences underground mining in Kiruna and Svappavaara and another licences open-pit mining in Svappavaara. In the case of Svappavaara there is also an old permit that licences open-pit mining but which is not currently used. Two permits concern ore processing in the Kiruna and Svappavaara locations. There is a single permit for mining and ore processing in Malmberget. One permit refers to mining of additives used in ore processing, and several others also govern water management in connection with LKAB’s dam facilities. The factors that impact the environment the most are alteration of the landscape due to mining; emissions to air and discharges to water arising from ore processing, dust, noise and vibration, and energy consumption from opera-tions. In addition to these, there are a number of permits that are made use of either partially or infrequently such as permits for quarries and gravel pits. Two licences concern Kimit AB’s manufacture of explosives. The operation affects the environment mainly through discharges of nitrogen compounds to the municipal sewage system. A new operating licence for a chalk landfill in Kiruna was granted by the County Administrative Board. In 2008 LKAB applied to the Environmental Court for a permit to mine 2 Mt or iron ore per year from Gruvberget in Svappavaara. A permit was granted in May, 2010 and operations began later that month. During 2010 LKAB ap-plied to the County Administrative Board for a permit for test drilling for iron ore in Mertainen. Tests will begin in 2011 according to plan. LKAB also ap-plied to the County Administrative Board for a permit to drain the Leveäniemi open-pit mine in Svappavaara with the objective of being able to resume mining in the currently flooded open-pit. In parallel with this intensive efforts were also made to prepare an application regarding LKAB’s processing op-erations in Svappavaara; the application was submitted in December, 2010. Intensive efforts were made during the year on a number of issues concern-ing permits and terms for managing the consequences of mining on new main levels in Malmberget and Kiruna. During 2009 LKAB applied for a permit to release water from Norra Luossajärvi, a new dam and drainage of part of Norra Luossajärvi. Court proceedings were held on December 7, 2010. In connection with the granting of permission for existing and extended operations in Kiruna in 2005 and Malmberget in 2007, the Environmental Court postponed its decision regarding the terms of the safety measures and limitations that should apply. LKAB was ordered to carry out a number of investigations concerning e.g. energy and oxides of nitrogen (NOx) during a test period. During 2010 the results of several test period investigations were submitted to the court. LKAB holds a number of exploration and process concessions for Kiruna, Svappavaara and Malmberget. The overall consequences of mining in the form of spreading deformation have been evident for some time in Malmber-get and are now becoming apparent to the surrounding community in Kiruna.


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Internal controls and inspection Internal control is mandatory and an aid to meeting the requirements of the Environmental Code and the various permits granted by supervisory authori-ties for the company’s operations. The internal control requirement applies to all operations involving risk of nuisance or damage to human health or the environment. Operations that require permits or which have a duty to report are also subject to the legal requirement for internal control. The direction and extent of LKAB’s inter-nal control systems are regulated by established control programmes for the various entities within the Group. Internal control programmes describe the operations and the laws and requirements to which they are subject, as well as how measurement and follow-up are performed. LKAB regularly performs a large number of measurements and surveys to ensure adequate control of each separate operation. The results of internal controls are summarised an-nually in the operations’ environmental reports submitted to the supervisory authorities. The reports are also published at www.lkab.com. Last year problems with treatment systems were noted, chiefly at LKAB’s new KK4 pelletising plant in Kiruna. Intensive efforts were made during 2010 to rectify these problems, which gave results during the latter part of the year. The supervisory authority was kept informed at regular meetings about meas-ures implemented and planned. During 2010 a large glycol leak occurred during the vacation period at the LKAB industrial area, about which the County Administrative Board was informed. Furthermore, in November water was pumped into Luossajärvi to avoid damage to a section of the dam wall being built at one of LKAB’s reservoirs. This activity was reported to the County Administrative Board in accordance with the internal controls and inspection programme. A crushing and dressing installation was put into operation for processing crude ore from the new mine in connection with the start of LKAB operations in Gruvberget in Svappavaara. The installation should have been equipped with dust prevention devices, but this was not possible due to extended de-livery times. Crude ore from Gruvberget was therefore handled by mobile crushers during 2010, which entailed increased dust levels in the area sur-rounding the installation, and in Svappavaara. LKAB has studied the possi-bilities of reducing dust but there are great problems during the winter as the risk of freezing means that measures such as watering are impossible. A new crushing and dressing installation will begin operations in the first quarter of 2011; this installation will be equipped with dust prevention devices.

Remediation/decontamination Site remediation, which may be done in stages and/or after operations are concluded, is a statutory obligation where consideration must be given to safety, environmental, economic and esthetic aspects. LKAB cooperates with the environmental authorities regarding how long-term remediation plans for the mining sites shall be prepared. A few general examples of remedial measures are the planned disposition of waste rock, grass sowing and tree planting. During 2010 LKAB carried out remedial actions for approximately SEK 8 million which included the second stage of the old tailings pond in Malmber-get and the backfilling of waste rock into the old pit at Tingvallskulle. Bank guarantees amounting to SEK 36.1 million for Gruvberget were pledged by the County Administrative Board in May, 2010. Bank guarantees of SEK 5 million were also pledged by the county for the new chalk landfill in Kiruna. LKAB carries out case handling, surveying, decontamination and reme-diation of areas in all of its operating locations on an ongoing basis. A so-called MIFO survey (MIFO is a Swedish Environmental Protection Agency method for inventory of contaminated areas) provides the basis for planning decontamination measures, environmental impact assessments and prioritisa-tion of areas, as well as for communicating LKAB’s future decontamination programme.

Emission allowance tradingAmong other measures, the EU has introduced a trading system for carbon dioxide emission allowances with the objective of reducing greenhouse gas emissions. This system, which is limited to EU member states, encompasses LKAB as the only supplier of iron ore pellets on the global iron ore market. The system entails increased direct and indirect expenses for the company. A global system at this level would increase competitiveness among companies such as LKAB that use energy efficient technology with low CO2 emissions and thus enable a global reduction in emissions. However, LKAB’s princi-pal competitors in Brazil and Australia are not affected by this during the 2008–2012 trading period for such systems, which distorts competition to LKAB’s disadvantage. The increased production at LKAB’s facilities will lead to increased carbon dioxide emissions and to a deficit in emission allowances. This year the defi-cit can be partially balanced by the surplus of emission allowances that arose from the lower 2009 production level. Allocation principles for the 2013–2020 trading period were worked out by the EU commission during the year. LKAB’s iron ore pellets sector was, like many others, defined as being “exposed to risk of carbon leakage due to CO2”. This means that LKAB does not need to participate in emission al-lowance auctions but will receive an allocation free of charge. Owing to the maladroitness of the allocation principles LKAB will be exposed to the risk of significantly reduced allocations compared to the current period despite the fact that in a global perspective LKAB’s installations are documented as be-ing the most CO2 efficient in the world. The company worked extremely hard during the year to demonstrate the unreasonableness of this implementation and to find a way of receiving an allocation in line with the intention and spirit of the trading system. No conclusion to this issue has yet been reached.

Secure electricity deliveriesIncreasing production at LKAB facilities leads to an increasing consumption of electricity especially in mining operations and ore processing. Within a few years annual consumption is anticipated to increase further from around 2.2 TWh to just over 2.8 TWh. Market prices on the Nordic electricity exchange have risen dramatically since deregulation. Securing deliveries of competitively priced electricity is therefore of great strategic importance. LKAB has secured a major part of its electricity deliveries at indexed prices through signing long-term energy agreements with Vattenfall in 1998 and 2005. One third of the Vattenfall agreement portfolio matured at the beginning of 2010 and this volume of electricity is exposed to the Nordic spot market.

current status of permits and concessionsDuring 2009 noise level terms were exceeded in Kiruna by the noisiest op-eration, rail traffic. During 2009/2010 LKAB invested in new locomotives and carried out major reconstruction work which resulted in a significantly improved noise situation in 2010 where LKAB fulfilled its terms. During 2008 a number of property owners in Malmberget and Koskull-skulle filed claims against LKAB in the Environmental Court asking that the court assess damages against LKAB for environmental disruptions in the form of dust, vibrations and seismic activity in the localities. The Environmental Court ruled against the property owners in 2010. The ruling was appealed in the Supreme Court but a review permit was not granted. In March 2009 waste rock backfilling in the Kapten pit in Malmberget was halted as increased seismic activity led to safety risks for the waste rock con-tractors. The County Administrative Board filed a case against LKAB claiming that terms for the remediation of the Kapten pit had been set aside. The case was dropped in 2010. During 2010 LKAB began work on an updated noise survey of all opera-tions at the site in connection with the start up of the Gruvberget operation in Svappavaara. The objective is to obtain a complete picture of noise distribu-tion in order to deploy measures where they have the most effect.


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10 During 2009 the County Administrative Board filed a case against LKAB in regard to prohibited water operations and exceeding vibration terms in Kiruna. In 2010 LKAB paid corporate fines in respect of these two cases. LKAB is participating in the energy efficiency programme. In 2010 energy efficiencies implemented during the programme’s first five years for the min-ing operation were reported and approved. Compensation for damages was paid due to affects on infrastructure in Kiruna and Malmberget. For further information on the financial consequenc-es of urban transformation, refer to Note 26 Provisions.

PERSONNEL work environment/healthIn May 2010 two contractors were killed during construction work on the new main level in the Malmberget mine when their work basket fell. The number of accidents in the Group resulting in absence was 77 com-pared to 58 during 2009. The frequency of accidents per million work hours increased from 9.1 to 11.3; thus the goal of a 20 per cent reduction on the previous year was not achieved. Thanks to a long-term and systematic programme of preventive healthcare and rehabilitation, long-term absence due to illness amounted to an all-time low of 0.4 per cent while short term absence due to illness remains stable at 2.2 per cent.

Recruiting During the year 222 people were hired, 54 of whom are women; 229 people left the company, most of whom retired. Recruiting during the year took place in a number of different areas; re-cruits were accepted to 31 different job categories overall. In May 2010, LKAB opened the Gruvberget open-pit mine in Svappavaara. Active recruiting efforts took place during the summer and autumn and 23 people were hired in the KGS subsidiary for work in drilling, explosives and crushing. New production managers were also hired. Following the recruit-ing, active competence development work took place to ensure competence levels in new employees. During the year LKAB employed large numbers of summer stand-ins and interns. In total there were 927 employees on indefinite contracts on July 31, 2010, of whom 33 worked under the PTK (white collar workers’ trade union) agreement, and 894 under the Metal (metalworkers’ trade union) agreement; 283 of these, or 30.5 per cent, were women. The LKAB-related vocational training programmes continue to be an at-tractive alternative for students in the orefields and constitute an important, long-term recruitment base. On the condition that they successfully complete their studies and have an approved attendance record, all LKAB vocational training students are offered summer jobs at LKAB. Many students from ear-lier years have gained indefinite employment with the company. Education also improves conditions for future equal opportunities employment within LKAB. In the autumn of 2010 half of all students accepted to the LKAB college were girls, which is a record high for both operational localities and for the country as a whole. During the year LKAB was represented at a number of exhibitions with the objective of increasing/safeguarding the recruitment base. For example, LKAB too part in Scandinavia’s career exhibition at the Globe in Stockholm. The exhibition was aimed at both the gainfully employed and recently quali-fied academics. Great interest was shown in LKAB. Planning and selection was carried out during the year for LKAB’s fourth round of trainee programmes which starts in January 2011. The programme has eight places and the ambition is to fill half of them with women.

Equality/diversityLKAB’s goal is that 30 per cent of new recruits are women. During 2010 the proportion of women in the Group rose to 14.3 per cent (13.4 per cent)by the end of the year. The proportion of women managers is 17.8 per cent

(15.3). The goal of achieving a more uniform gender distribution is implicit in all recruiting activities, as is an increased focus on equal treatment. A three-year action plan was drawn up during the year. A survey will take place in 2011 that will be used as support documentation for action plans within the business. Executive training will also take up the equal treatment issue.

competence developmentOwing to the large number of retirements in the orefields in the coming years, LKAB started its own mining engineering programmes in both Malmberget and Kiruna, and these have met with extremely good results during the year. In Kiruna, new employees from the subsidiary KGS were trained to carry out rock reinforcement and rock works in open-pit mines in connection with the opening of the new LKAB mine at Gruvberget in Svappavaara. LKAB has trained students for the Parent Company in both Malmberget and Kiruna and passed them along into production. Major training efforts were made during the early summer for almost 900 temporary summer stand-ins. The objective was to contribute to a safe working environment for the large group of summer workers, many of whom were new to LKAB, through an increased emphasis on training especially in the areas work safety and the working environment. The second round of LIM – LKAB:s International Management programme – began during the year. Participants come from the entire Group. The pro-gramme’s objective is to create a common leadership identity, to add impor-tant knowledge in the area of leadership, to increase knowledge of the group as a whole and to network and swap experiences.

INcENTIVE SYSTEMThe Parent Company’s incentive scheme was introduced in mid-2000. The subsidiaries MTAB, MTAS, Minelco AB and LKAB Norge AS are included in this system. The President and other senior executives are not included. The system, which follows the owner’s guidelines for incentive schemes, is based on three factors: quality, work environment and production targets. The incentive was maximised, as of January 1, 2010, at SEK 60,000 per full-time employee per year for the years 2010 and 2011. Incentives are con-ditional upon positive results in the operations that are included the scheme. In 2010 all parameters led to incentive payments, with an outcome of SEK 28,919 (24,919) per full-time employee with full attendance.

cORPORATE GOVERNANcEA description of corporate governance is presented in a special corporate governance report in accordance with Chapter 6 Section 8 of the Annual Accounts Act. The report is included on pages 52 to 55 of this document. We refer to the Control Environment section on page 54 for a description of the more important features in the Group’s system for internal inspections and risk management in connection with the preparation of the consolidated accounts.

BOARD OF DIREcTORS DuRING 2010 During 2010, the Board of Directors consisted of nine members elected by the Annual General Meeting, plus three members and three deputies ap-pointed by the employees. All board members were re-elected by the Annual General Meeting, and one new member was elected. The President is not a member of the Board of Directors.

ThE BOARD OF DIREcTORS’ RuLES OF PROcEDuREThe Board of Directors establishes its rules of procedure annually. The Board held eleven meetings during 2010 financial year. The meetings follow a set annual calendar aimed at satisfying the Board’s need for information and are otherwise governed by the special rules of procedure followed by the Board. Normally, six meetings are held each year. A board meeting held immediately after each quarter considers the latest financial statements and the outlook for the calendar year. This allows the

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10Board to make an ongoing assessment of strategies and delegations to the President and to take up-to-date positions on specific investment projects. The first meeting of the year usually concerns the closing of accounts, and LKAB’s auditors also participate. At the second meeting, the annual report is reviewed and the third and fourth meetings address issues pertaining to op-erations, strategy and personnel. The emphasis of the fifth meeting is on the market situation, and at the year’s final meeting, decisions are taken regard-ing the budget and operational plans for the coming year. Strategic plans covering the next three years which were previously updated in December, are handled by the Board during the second quarter for adoption in June. The work of the Board is evaluated once per year. A written survey is prepared annually and includes questions concerning how the Board collec-tively, and each member individually, has fulfilled its assignment. The evalua-tion report is used internally by the Board as a support tool. The Chairman is responsible for following up the results, which form the basis for discussions and improvements. The work of the Chairman is normally assessed by the owner, but this may also be part of the work of the Board.

PRESIDENT AND cEOLars-Eric Aaro took up the positions of President and Group CEO on January 1, 2010.

GuIDELINES FOR REMuNERATION TO SENIOR EXEcuTIVESThe Annual General Meeting of 2010 approved the company’s application of the Government’s current guidelines for remuneration to senior executives in state-owned companies. The new government guidelines were adopted on 20 April 2009. The guidelines direct that variable salary is not permissible and that the board is responsible for renegotiating agreements concerning variable salary: pen-sion benefits are to be based on defined contributions unless they comply with an applicable, collectively bargained benefit scheme; the defined con-tribution should not exceed 30 per cent of the fixed salary. The pensionable age shall not be less than 62 years and should be at least 65. The Board proposes that the Annual General Meeting of April 27, 2011 resolve to apply the above-mentioned guidelines and terms when new senior executives are employed and when currently employed senior executives’ salaries are renegotiated. The Board’s proposal is designed to ensure that the LKAB Group is able to offer remunerations at competitive market rates suf-ficient to attract and retain qualified senior executives to LKAB’s management group. The senior executives’ remuneration includes a fixed salary, allowanc-es for car, board, life insurance and pension benefits. The components are intended to create a well-balanced remuneration and benefits package that reflects the individual’s performance, responsibility and the LKAB Group’s growth. The fixed salary, which is determined individually and differentiated on the basis of the individual’s responsibility and performance, is set accord-ing to market principles and is reviewed annually. Agreements entered into before the Annual General Meeting of April 27, 2011 have complied with current government guidelines. For further informa-tion concerning remuneration to senior executives, see Note 6.

EVENTS AFTER cLOSING DAYThe Swedish Environmental Protection Agency has appealed the environmen-tal permit for the open-pit mine in Gruvberget that opened in May, 2010. Following the Environmental court ruling of March 10, 2011 the environ-mental process must be restarted. LKAB will appeal to the Supreme Court and simultaneously include operations at Gruvberget in its ongoing work with the application for environmental permission for pellets production in Svappavaara. A decision by the Supreme Court not to accept the appeal will result in a cessation of operations at Gruvberget until a new environmental permit is obtained.

EXPEcTATIONS REGARDING FuTuRE DEVELOPMENTLKAB grows with its customers. The strategy for the years ahead includes a volume increase of just over 35 per cent to an annual capacity of 37 Mt iron ore products by 2015. The company has invested approximately SEK 22 billion in operations over the past five years. The current production capacity (at surface level) is about 28 Mt of iron ore products per year. The bottleneck is access to crude ore, the raw material for manufacturing upgraded iron ore products such as pellets, fines and special products. Most of the additional iron ore will come from new mines. In May 2010, LKAB inaugurated the Gruvberget open-pit mine in Svappavaara. When it reaches full production the mine will supply the Svappavaara pelletising plant with two mil-lion tonnes of crude ore per year. The two other planned open-pit iron ore mines in the so-called Svap-pavaara field are Leveäniemi and Mertainen. These will also undergo open-pit tests and applications for environmental and test mining permits are pend-ing. Prospecting of more iron ore deposits in the vicinity of current mine operations is also under way. In total, about SEK 75 million will be invested between 2010–2012. The growth strategy calls for a rail haulage capacity on the ore railway of at least 40 Mt by 2015 which will require additional and longer sidings on the line between Luleå and Narvik, as well as more of the new, energy-efficient and climate-adapted IORE locomotives and 100-tonne-payload ore wagons that LKAB has purchased in recent years. The growth strategy will also entail continuous new research and develop-ment initiatives, and a safe, developmental, attractive workplace for those currently employed by LKAB, as well as the ever increasing number of new coworkers recruited. The major ongoing strategic investments in future mining and production capacity entail annual expenditures of around SEK 5–6 billion over the com-ing years. LKAB’s continued underground mining and its investments and urban trans-formation expenditures in Kiruna and Malmberget places high demands on the Group’s ability to generate robust operating profits and healthy cash flows in the years ahead. Exposure on the electricity market is increasing. Despite major efforts to improve energy efficiency, LKAB’s demand for electricity will increase as a result of the planned increase in production capacity. The world’s three predominant iron ore suppliers have signed quarterly price agreements with their steel mill customers. LKAB has elected, during 2010, to continue to sign yearly agreements with customers. Increased de-mand and limited supply, particularly from India, but also of seaborne iron ore in general, has contributed to price increases in recent months. The spot price of iron ore in Asia shows an upward trend. The development of a pricing system for iron ore continues, but is far from complete. During the first quarter, LKAB will continue discussions with customers concerning price models and will decide on contracts for 2011.

DIVIDEND POLIcY AND PROPOSED ALLOcATION OF PROFITSLKAB’s dividend policy means that the dividend to the owner will, over the long term, amount to 30 to 50 per cent of profit after tax and be adapted to the average earnings level over one business cycle. The Board of Directors proposes to the Annual General Meeting that a dividend of SEK 7,143 (714) per share, totaling SEK 5,000 million (500), be paid. The Board of Directors and President propose that unappropriated earn-ings of SEK 19,783 million be distributed as follows:Dividend, 700,000 shares x SEK 7,143 per share SEK 5,000 millionFunds to be carried forward SEK 14,783 millionTotal SEK 19,783 million

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C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S

1072

consolidated statement of income

January 1 – December 31SEK millions Note 2010 2009 1, 31 Net sales 2, 3 28,533 11,558Cost of goods sold –15,307 –10,029Gross profit 13,226 1,529 Selling expenses –213 –202Administrative expenses –451 –377Research and development expenses –213 –237Other operating profit 4 322 263Other operating expenses 5 –390 –317Operating profit 3, 6, 7,8 12,281 659 Financial income 418 705Financial expenses –349 –172Net financial income/expense 9 69 533 Profit before tax 12,350 1,192 Tax 11 –3,267 –473Net profit for the year 9,083 719 Attributable to: Parent Company shareholders 9,083 719 Earnings per share after dilution (SEK) 12 12,976 1,027 Statement of comprehensive income Net profit for the year 9,083 719 Other comprehensive income Exchange rate differences on translation for foreign entities for the year –123 46Change in fair value of available-for-sale financial assets –112 668Change in fair value of cash flow hedges –218 630Changes in fair value of cash-flow hedges transferred to profit for the year –194 1,438Tax attributable to components of cash flow hedges 108 –544

Other comprehensive income for the year –539 2,238Total comprehensive income attributable to: Parent Company shareholders 8,544 2,957


1073

consolidated statement of financial position

As of December 31, 2010 SEK millions Note 2010 2009 1, 31 Assets 15, 29 Intangible assets 13 321 310Property, plant and equipment 14 23,087 21,551Participations in associated companies 1 1Financial investments 18, 28 1,658 1,761Non-current receivables 20 16 65Total non-current assets 25,083 23,688 Inventories 21 2,074 2,301Accounts receivable 22 3,395 2,276Prepaid expenses and accrued income 23 103 230Other receivables 20 1,412 865Current investments 18, 28, 34 6,516 3,564Cash and cash equivalents 34 8,046 2,631Total current assets 21,546 11,867Total assets 46,629 35,555 Equity 2, 24Share capital 700 700Reserves 1,364 1,903Retained earnings including profit for the year 31,355 22,772Equity attributable to Parent Company shareholders 33,419 25,375Total shareholders’ equity 33,419 25,375 Liabilities Provisions for pensions and similar commitments 25 1,893 1,979Other provisions 26 3,756 2,113Deferred tax liability 11 3,438 3,420Total non-current liabilities 9,087 7,512 Trade payables 1,471 1,185Income tax liability 530 242Other liabilities 228 149Accrued expenses and prepaid income 27 1,164 1,050Provisions 26 730 42Total current liabilities 4,123 2,668 Total liabilities 13,210 10,180Total shareholders’ equity and liabilities 46,629 35,555

For information concerning the Group’s pledged assets and contingent liabilities, see Note 30

consolidated statement of changes in shareholders’ equity

Equity attributable to Parent Company shareholders Reserves Profit brought forward incl. Share Translation Fair value Hedge profit for the TotalSEK millions Note equity reserve reserve reserve year equity 1 Shareholders’ equity January 1, 2009 700 –32 757 –1,060 24,853 25,218Net profit for the year 719 719Other comprehensive income for the year 46 668 1,524 2,238Comprehensive income for the year 24 14 1,425 464 719 2,957Dividends –2,800 –2,800Shareholders’ equity December 31, 2009 700 14 1,425 464 22,772 25,375

Equity attributable to Parent Company shareholders Reserves Profit brought forward incl. Share Translation Fair value Hedge profit for the TotalSEK millions Note equity reserve reserve reserve year equity 1Shareholders’ equity January 1, 2010 700 14 1,425 464 22,772 25,375Net profit for the year 9,083 9,083Other comprehensive income for the year 24 –123 –112 –304 –539Comprehensive income for the year –123 –112 –304 9,083 8,544Dividends –500 –500Shareholders’ equity December 31, 2010 700 –109 1,313 160 31,355 33,419


1074

consolidated statement of cash flow (indirect method)

January 1 – December 31 SEK millions Note 2010 2009 1, 34 Operating activities Profit before tax 12,350 1,192Adjustments for non-cash items 4,450 1,952Income tax paid –2,849 –213Cash flow from operating activities before changes in working capital 13,951 2,931 Cash flow from changes in working capital Increase (–) / Decrease (+) in inventories 227 414Increase (–) / Decrease (+) in operating receivables –1,887 –212Increase (+) / Decrease (–) in operating liabilities 476 –245Cash flow from operating activities 12,767 2,888 Investing activities Acquisition of property, plant and equipment –3,973 –3,543Disposal of property, plant and equipment 97 73Acquisition of intangible assets –6Acquisition of subsidiaries –7 Acquisition of financial assets –33 –66Disposal of financial assets 22Divestments/acquisitions (net) in current investments –2,952 308Cash flow from investing activities –6,852 –3,228 Financing activities Dividends paid to Parent Company shareholders –500 –2,800Cash flow from financing activities –500 –2,800 Cash flow for the year 5,415 –3,140 Cash and cash equivalents at beginning of year 2,631 5,771Cash and cash equivalents at year end 8,046 2,631Of which exchange rate effect –8 –8


1075

F I N A N C I A L S T A T E M E N T S – P A R E N T C O M P A N Y

1076

Statement of income – Parent company

January 1 – December 31SEK millions Note 2010 2009 1, 31 Net sales 2, 3 25,825 9,570Cost of goods sold –13,815 –8,497Gross profit 12,010 1,073 Selling expenses –112 –105Administrative expenses –296 –240Research and development expenses –202 –221Other operating income 4 224 159Other operating expenses 5 –181 –145Operating profit 6, 7, 8 11,443 521 Income from financial items: Income from participations in Group companies 49 107Income from participations in associated companies 1 0Income from other securities and receivables held as non-current assets 20 59Other interest income and similar profit/loss items 250 679Interest expense and similar profit/loss items –257 –60Profit after financial items 9 11,506 1,306 Appropriations 10 –59 –311 Profit before tax 11,447 995 Tax 11 –3,021 –229Net profit for the year 8,426 766

Statement of comprehensive income Net profit for the year 8,426 766 Other comprehensive income for the year 0 0Comprehensive income for the year 8,426 766


1077

Balance Sheet – Parent company

As of December 31, 2010SEK millions Note Dec 31, 2010 Dec 31, 2009 1, 31 Assets 29 Non-current assets Intangible assets 13 116 65Property, plant and equipment 14 18,773 17,056Financial assets Participations in Group companies 32 1,400 1,400 Participations in associated companies 16 1 1 Receivables from Group companies 17 992 248 Receivables from associated companies 17 39 Other non-current securities 19, 28 123 91 Other non-current receivables 20, 28 111 142 Deferred tax asset 11 319 337Total financial assets 2,946 2,258 Total non-current assets 21,835 19,379 Current assets Inventories, etc. 21 1,472 1,652Current receivables Accounts receivable 22 2,991 1,948 Receivables from Group companies 17 1,299 2,553 Other receivables 20 1,110 118 Prepaid expenses and accrued income 23 75 123Total current receivables 5,475 4,742 Current investments 18, 34 13,491 5,561Cash and bank balances 34 631 325Total current assets 21,069 12,280Total assets 42,904 31,659


1078

Balance Sheet – Parent company

SEK millions Note Dec 31, 2010 Dec 31, 2009Shareholders’ equity and liabilities 1, 31 Equity 24 Restricted equity Share capital (700,000 shares) 700 700 Statutory reserve 697 697 Non-restricted equity Accumulated profit or loss 11,357 11,144 Net profit for the year 8,426 766Total shareholders’ equity 21,180 13,307 Untaxed reserves 33 12,135 12,076 Provisions Provisions for pensions and similar commitments 25 1,351 1,371 Other provisions 26 4,470 2,141Total provisions 5,821 3,512 Current liabilities Trade payables 992 571 Liabilities to Group companies 1,233 1,171 Income tax liabilities 447 207 Other liabilities 95 65 Accrued expenses and prepaid income 27 1,001 750Total current liabilities 3,768 2,764Total shareholders’ equity and liabilities 42,904 31,659

Pledged assets and contingent liabilities – Parent Company

As of December 31, 2010SEK millions Note Dec 31, 2010 Dec 31, 2009Assets pledged 30 248 223Contingent liabilities 30 130 174

Statement of changes in shareholders’ equity – Parent company see Note 24 Restricted equity Non-restricted equity Profit brought forward incl. Share Statutory profit for Profit for TotalSEK millions capital reserve the year year equity Shareholders’ equity January 1, 2009 700 697 13,977 15,374Group contributions rendered –82 –82Group contributions received 37 37Tax on Group contributions rendered/received 12 12Comprehensive income for the year 766 766Dividend –2,800 –2,800Shareholders’ equity December 31, 2009 700 697 11,144 766 13,307

Restricted equity Non-restricted equity Profit brought forward incl. Share Statutory profit for Profit for TotalSEK millions capital reserve the year year equity Shareholders’ equity January 1, 2010 700 697 11,910 13,307Group contributions rendered –132 –132Group contributions received 61 61Tax on Group contributions rendered/received 18 18Comprehensive income for the year 8,426 8,426Dividend –500 –500Shareholders’ equity December 31, 2010 700 697 11,357 8,426 21,180


1079


1080

Statement of cash flow – Parent company (indirect method)

January 1 – December 31 SEK millions Note 2010 2009 1, 34 Operating activities Profit after financial items 11,506 1,306Adjustment for items not included in cash flow 4 044 1,365Income tax paid –2,745 –151Cash flow from operating activities before changes in working capital 12,805 2,520 Cash flow from changes in working capital Increase (–) / Decrease (+) in inventories 180 244Increase (–) / Decrease (+) in operating receivables –694 27Increase (+) / Decrease (–) in operating liabilities 761 –237Cash flow from operating activities 13,052 2,554 Investing activities Acquisition of property, plant and equipment –3,779 –2,973Disposal of property, plant and equipment 362Acquisition of intangible assets –5 Acquisition of subsidiaries –7 Shareholder contributions to subsidiaries –625Changes to financial assets –745 Divestments/acquisitions (net) in current investments –2,814 305Cash flow from investing activities –7,059 –2,931 Financing activities Dividends paid –500 –2,800Group contributions –71 –46Amortisation of non-current liabilities –15Cash flow from financing activities –571 –2,861 Cash flow for the year 5,422 –3,238 Cash and cash equivalents at beginning of year 2,416 5,654Cash and cash equivalents at year end 7,838 2,416Of which exchange rate effect –8 –8

Note 1 Significant accounting principles

1 Conformity with norms and legislation The consolidated accounts were prepared in accordance with International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB), and the interpretations by the International Financial Reporting Inter-pretations Committee (IFRIC) as approved by the EU. In addition the Swedish Finan-cial Reporting Board’s recommendation RFR 1 Supplementary Rules for Consolidated Financial Statements was applied. The Parent Company applies the same accounting principles as the Group, except in those cases stated below in the Parent Company accounting and valuation prin-ciples section. The deviations that exist between the Parent Company’s and consoli-dated principles are caused by limitations in the ability to apply IFRS in the Parent Company as a result of the Swedish Annual Accounts Act (ÅRL), the Swedish Pension Obligations Vesting Act and for tax reasons in certain cases. The annual accounts and consolidated accounts were approved for issue by the Board of Directors and President on March 23, 2011. The consolidate income state-ment, statement of financial position and the Parent Company’s income statement and balance sheet will be the subject of approval at the Annual General Meeting on April 27, 2011.

2 Measurement bases applied when preparing Parent Company and consolidated financial statementsAssets and liabilities are reported at historical cost. Financial assets and liabilities are reported at historical costs, with the exception of certain financial assets and liabilities that are reported at fair value. Financial assets and liabilities are reported at fair value comprise derivative instruments, financial assets classified as financial assets reported at fair value via the income statement or as financial assets available for sale.

3 Functional currency and presentation currencyThe Parent Company’s functional currency is Swedish crowns (SEK), which is also the Parent Company’s and Group’s presentation currency. This means that financial statements are presented in SEK. All amounts are rounded to the nearest million, unless otherwise specified.

4 Assessments and estimates in the financial reports Preparing the financial statements in accordance with IFRS requires company man-agement to make assessments, estimates, and assumptions that influence the applica-tion of accounting principles and the reported amounts of assets, liabilities, income and expenses. Actual outcomes may deviate from these estimates and judgments. The estimates and assumptions are reviewed regularly. Amendments to estimates are reported in the period in which the change is made if the change only affects this period, or in the period in which the change is made and future periods if the change affects both the period concerned and future periods Judgments made by management when applying IFRSs that have a substantial impact on the financial statements and estimates made that may lead to significant adjustments in the financial statements of subsequent years are described in more detail in section 28, Important estimates and judgments.

5 Important applied accounting principlesThe below-mentioned accounting principles for the Group were applied consistently for all periods presented in the consolidated financial statements, unless otherwise specified. The accounting principles for the Group were applied consistently in the preparation and consolidation of the Parent Company, subsidiary and joint venture company reports.

6 New and changed IFRSs and interpretations for 20106.1 Changed accounting principles resulting from new or changed IFRSsThe amended accounting principles applied by the Group since January 1, 2010 are described below. Other amendments to IFRS for application from 2010 have not had any significant affect on the consolidated accounts.

6.1.1 IFRS 3 Business combinations The revised standard continues to prescribe the application of the purchase method for business combinations, but with some significant changes. For example, all pay-ments for the purchase of an operation are reported at fair value on the day of acquisition, including contingent considerations classified as liabilities which are

Notes to the financial statements

subsequently remeasured at fair value via the income statement. Non-controlling interests in an acquired business are measured either at fair value or as their pro-portionate participation in the net identifiable assets of said acquired business. All acquisition-related costs are expensed. The application of IFRS 3 has not entailed any significant effect on the consolidated accounts.

6.1.2 IAS 27 Consolidated and separate financial statementsIAS 27 requires the effects of all transactions with non-controlling interests to be re-ported in equity as long as there is no change in control and that these transactions no longer give rise to goodwill or gains and losses. The standard also specifies that if the Parent Company loses its controlling influence any remaining participation must be remeasured at fair value and a profit or loss reported in the income statement. The ap-plication of IAS 27 has not entailed any significant effect on the consolidated accounts.

6.1.3. IAS 24 Related party disclosuresThis replaces IAS 24 Related party disclosures, issued 2003. IAS 24 (revised) will be implemented for the financial year beginning January 1, 2011 or later. Earlier appli-cation is permitted, either of the whole or part of the standard. The revised standard clarifies and simplifies the definition of a related party and removes the requirement for government-related entities. The Group began implementing the revised standard on January 1, 2010.

7 New IFRSs and interpretations not yet adopted A number of new or changed IFRSs will not come into force until the coming financial year (2011) or later, and which had not been applied by the time these financial statements were prepared. The amendments that are anticipated to be applicable to the LKAB Group are described below. LKAB is of the opinion that the amendments will not entail any significant effects on its financial statements.

IFRS 9 Financial InstrumentsThis standard is the first step in the process of replacing IAS 39, Financial instru-ments; classification and measurement. IFRS will introduce two new requirements for classification and measurement of financial assets which will probably affect consoli-dated reporting of financial assets. The standard is not applicable until the financial year beginning January 1, 2013. However, the standard has not been adopted by the EU and may not be applied earlier. As yet the Group has not fully evaluated the impact of IFRS 9 on financial statements. The following changes to accounting principles for future application are consid-ered not to have any effect on the Group’s accounts:IFRIC 18 Transfers of assets from customersIFRIC 9 and changes in IAS 39 Embedded derivativesIFRIC 16 Hedges of a net investment in a foreign operation (amendment)IAS 38 Intangible assetsIAS 1 Presentation of financial statements (amendment)IAS 36 Impairment of assets (amendment)IFRS 2 Group cash-settled and share-based payment transactions (amendment)IFRS 5 Non-current assets held for sale and discontinued operations ( amendment)IAS 32 Classification of rights issuesIFRIC 19 Extinguishing financial liabilities with equity instrumentsIFRIC 14 Prepayments of a minimum funding requirement (amendment)

8 Classifications etc.Non-current assets and non-current liabilities consist chiefly of amounts that are ex-pected to be recovered or paid more than twelve months from the closing day. Cur-rent assets and current liabilities consist chiefly of amounts that are expected to be recovered or paid more within twelve months from the closing day.

9 Operating segment reportingAn operating segment is a part of the Group that engages in business operations from which it may generate income and incur expenses and for which discrete finan-cial information is available. An operating segment’s result is reviewed regularly by the company’s most senior executive decision maker, which is the company manage-ment, to assess its performance in order to allocate resources to the operating seg-ment. There are three identified operating segments within the LKAB Group: the Min-ing Division, Minerals Division and Special Businesses Division. Refer to Note 3 for a presentation of operating segments and a more detailed description of their division.

N O T E S T O T H E F I N A N C I A L S T A T E M E N T S

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10 Consolidation principles10.1 SubsidiariesSubsidiaries are companies which operate under the controlling influence of the Parent Company. Controlling influence means a direct or indirect right to decide a company’s financial and operational strategies with the objective of gaining eco-nomic benefits. When assessing whether a controlling influence exists, the existence of shares with potential voting rights that are currently exercisable or convertible should be considered. Subsidiaries are reported according to the purchase method, which means that the acquisition of a subsidiary is regarded as a transaction in which the Group indirectly acquires the subsidiary’s assets and assumes its liabilities and contingent liabilities. The Group-related cost is determined in an acquisition analysis in connection with the acquisition. The analysis establishes the cost of the participation or business operation, the fair value on the day of acquisition of acquired identifiable assets and assumed liabilities and contingent liabilities. The cost of subsidiaries’ shares or business consists of the sum of the fair values on the date of acquisition of the assets, accrued or assumed liabilities and emitted equity instruments given in payment for the acquired net assets. When the cost of a business combination exceeds the net value of identifiable acquired assets, assumed liabilities and contingent liabilities, the difference is reported as goodwill. A subsidiary’s financial statements are included in the consolidated accounts from the acquisition date until the date when controlling influence no longer exists.

10.2 Joint ventures For accounting purposes, joint ventures are companies in which the Group shares a controlling influence over operational and financial management through collabora-tion agreements with one or more parties. Holdings in joint ventures are reported in the consolidated accounts according to the proportional consolidation principle. This principle requires the Group’s share of a joint venture’s income, expenses, assets and liabilities to be reported in the consolidated statement of financial position and income statement. This is done by combining the joint owner’s share of assets, liabili-ties, income and expenses in a joint venture item-by-item with corresponding items in the joint owner’s consolidated accounts. Only equity accrued after the acquisition is reported in the Group’s equity. The proportional consolidation principle is applied from the point in time at which the joint controlling influence is obtained until said influence ceases to exist.

10.3 Transactions eliminated on consolidationIntra-Group receivables and liabilities, income and expenses, as well as unrealised gains or losses arising from transactions between subsidiaries, are eliminated in their entirety when preparing the consolidated accounts. Unrealised profits arising from transactions with jointly controlled companies are eliminated to an extent that corresponds to the Group’s shareholding in the company. Unrealised losses are eliminated in the same way as unrealised profits, but only where there is no indication that an impairment loss is necessary.

11 Foreign currency11.1 Transactions in foreign currencyForeign currency transactions are translated into the functional currency at the ex-change rate prevailing on the transaction date. Functional currency is the currency of the primary economic environment where companies conduct their operations. Monetary assets and liabilities in foreign currency are translated to the functional cur-rency at the exchange rate prevailing on the closing day. Exchange rate differences that arise from translations are reported in the income statement. Non-monetary assets and liabilities reported at historic cost are translated at the exchange rate on the transaction date. Non-monetary assets and liabilities reported fair value are translated to the functional currency at the exchange rate prevailing at the time the fair value was measured and reported in the income statement.

11.2 Financial statements of foreign operations Assets and liabilities in foreign operations, including goodwill and other Group-related surpluses and deficits, are translated from the foreign operations’ functional currencies to SEK, the Group’s presentation currency, at the exchange rate prevailing on the closing day. Revenues and expenses in a foreign operation are translated to SEK at the average exchange rate that constitutes an approximation of the rates applying when the transactions occurred. Translation differences that arise from currency translation of foreign operations are reported under other comprehensive income and accumulated in a separate designated translation reserve. When divest-ing a foreign operation, the accumulated translation differences attributable to the divested foreign operation are reclassified from equity to net profit/loss for the year as a reclassification adjustment at the time profit or loss from the sale is reported.

12 Revenues – sale of goods12.1 Sale of goods Revenue from the sale of goods is recognised in the income statement when signifi-cant risks or benefits associated with ownership of the goods have been transferred to the buyer. Revenue is not recognised if it is probable that future economic benefit will not accrue to the Group.

12.1.1 Sale of iron ore, Mining DivisionIron ore trading is conducted in US dollars and there are three different ways of setting iron ore prices, i.e. annual price, spot price and quarterly indexed price. Normally, an agreement between one of the major mining companies and the Asian or European steel industry sets a global benchmark, after which LKAB concludes agreements with its customers. The timing of agreements regarding the global price varies; some years agreement is reached early and other years later, for which rea-son prices for the new year must almost always be an estimate until they are agreed. The sale of iron ore is reported upon delivery to the customer in accordance with the sales terms. Sales are reported with deductions for value added tax and currency translations take place at the current exchange rate. If sales are hedged by forward exchange rate contracts currency translations take place at the hedged rate. Preliminary invoicing often takes place at the time of delivery in respect of the iron and moisture content of the delivery. When final confirmed amounts have been obtained, revenues are adjusted as necessary and confirmed. Revenues are reported in net sales.

12.1.2 Sale of industrial minerals, Minerals DivisionThe LKAB Group’s Minerals Division carries out trade in a number of different miner-als comprising both minerals in owned by the division such as magnetite, huntite and mica, and also minerals that are either processed within the Group or sold on untreated to final customers. Trade in industrial minerals either takes place in local currency or one of the major currencies such as USD and EUR. The mineral magnetite is purchased from the Mining Division; prices are agreed once per year and are based on the Parent Company’s global price agreements for iron ore products. Other in-house minerals are priced internally, while external miner-als are priced according to agreements with the suppliers concerned and may take place annually or at shorter intervals. Sales of minerals are reported to customers in accordance with agreed sales terms. Sales are reported with deductions for value added tax and currency translations take place at the current exchange rate. If the sale is hedged currency translations take place at the forward exchange rate contract rate. Invoicing takes place on delivery to the customer according to agreed prices and payment terms. Revenues are reported in net sales.

12.2 Rental incomeRental incomes from investment properties are reported on a straight-line basis in the income statement, based on the terms of the rental (lease) agreement. The income is reported in other operating profit.

13 LeasingLeases are classified in the consolidated accounts as either finance leases or operating leases. A finance lease exists when the economic risks and benefits associated with ownership are, in essence, transferred to the lessee; where this is not the case, it is classi-fied as an operating lease. The Group’s leasing agreements are essentially operational. In operational leasing leasing fees are reported on a straight-line basis over the period of the lease. However, some fees are usually expensed on a continuous basis.

14 Financial income and expensesFinancial income and expenses include interest income from bank assets, receivables and interest-bearing securities, interest expenses related to loans, interest expenses on defined-benefit pension plans, dividend income, unrealised and realised gains on financial investments, and derivative instruments used in financial operations. Interest income from receivables and interest expenses related to liabilities are estimated using the effective interest method. Effective interest is the rate of interest which renders the current value of all estimated future payments and disbursements during the expected fixed-interest term to be equal to the carrying amount of the as-set or liability. Interest income and interest expense include periodised amounts of transaction expenses and any discounts, premiums and other differences between the original carrying amount of the receivable or liability, and the amount received or settled on maturity. Dividend income is reported once the right to receive payment is approved. Income from the sale of financial investments is reported when the significant risks and rewards associated with ownership of the instruments have been transferred to the buyer and the Group no longer controls the instruments. Exchange rate gains and losses are reported on a net basis.


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15 TaxesIncome taxes consist of current tax and deferred tax. Taxes are reported in the in-come statement except when the underlying transaction is reported directly under other comprehensive income or in equity, in which case the related tax effect is also reported in other comprehensive income or in equity. Current tax is tax to be paid or received in respect of the year concerned by apply-ing the tax rates that have been decided or which have been decided in practice as of the closing day; this also includes adjustment of current tax attributable to earlier periods. Deferred tax is calculated according to the balance sheet method, on the basis of temporary differences between carrying amounts of assets and liabilities and their values for tax purposes. The following temporary differences are not taken into account; for temporary differences that arise with the initial reporting of goodwill, initial reporting of assets and liabilities which are not business combinations and at the time of the transaction do not affect either reported or taxable profit. Nor are temporary differences attributable to participations in Group companies and associ-ated companies that are not expected to reverse in the foreseeable future taken into account. The calculation of deferred tax is based on how the carrying amount of assets or liabilities is expected to be realised or settled. Deferred tax is calculated in accordance with the tax rates and tax rules that have been established or have been established in practice by the closing date. Deferred tax assets in respect of deductible temporary differences and loss carry-forwards are only reported to the extent that it will be possible for these to be used. The value of deferred tax assets is reduced when it is no longer considered likely that they can be used. Any additional income tax arising from dividends is reported at the same time as when dividend is reported as a liability.

16 Financial instrumentsFinancial instruments reported as assets in the statement of financial position, on the assets side, liquid assets, loans, accounts receivable, financial investments, and derivatives Liabilities include accounts payable, borrowing and derivatives.

16.1 Recognition and derecognition in the Statement of financial positionA financial asset or financial liability is recognised in the statement of financial posi-tion when the Group becomes a party to the contractual terms of the instrument. A receivable is recognised when the Group has performed and a contractual obliga-tion for the counterparty to pay exists, even if an invoice has not yet been sent. A trade receivable is recognised in the statement of financial position when an invoice has been sent. A liability is recognised when the counterparty has performed and there is a contractual obligation to pay, even if the invoice has not yet been received. Trade accounts payable are recognised when an invoice is received. A financial asset is removed from the statement of financial position when the rights in an agreement are realised, expire or the company loses control over them. The same applies for a portion of a financial asset. A financial liability is removed from the statement of financial position when the undertakings in the agreement have been fulfilled or otherwise extinguished. The same applies for a portion of a financial liability. A financial asset and a financial liability are offset and reported in the statement of financial position as a net amount only when there is a legal right to offset the amount and an intention to adjust the items with a net amount or, at the same time, realize the asset and settle the liability. Acquisition and divestment of a financial asset are reported on the trade day, i.e. the day upon which the company undertakes to acquire or dispose of an asset, ex-cept in cases when the company acquires or divests listed securities when settlement date reporting is applied. A spot purchase or sale in the category Fair value option is reported on the day of settlement. LKAB has no liabilities valued according to fair value option. Liquid assets are cash and balances immediately available in banks and similar institutions and current investments with a maturity of less than three months from acquisition date that are exposed only to very marginal risks of fluctuations in value.

16.2 Classification and measurementFinancial instruments are initially reported at a cost corresponding to the fair value of the instrument with an addition for transaction expenses for all financial instru-ments, except those categorised as financial assets and liabilities reported at their fair value in the income statement, which are reported at their fair value excluding transaction expenses. A financial instrument is classified on initial reporting based on the purpose for which the instrument was acquired. Classification determines how the financial instrument is measured after the initial report, as described below. Derivatives instruments are initially reported at fair value, meaning that the transac-tion costs are reported in the income for the period. After the initial entry, the deriva-

tive is reported in the manner described below. If derivative instruments are used for hedge accounting, changes in value of the derivative instruments are reported in the income statement, to the extent the derivative is effective, at the same time and on the same line as the hedged item. Even if hedge accounting is not applied, increases or decreases in the value of the derivative are reported as income or expenses in the income statement or as net financial income/expense, based on the intended use of the derivative instrument and whether that use relates to an operating item or to a financial item. In hedge accounting, the ineffective part is reported in the same way as changes in the value of derivatives not used in hedge accounting. In accordance with IAS 39, LKAB has chosen not to include the interest component in forward exchange contracts in hedging conditions when applying hedge account-ing within the Group. Changes in value in forward exchange rate contracts attribut-able to the interest component are reported instead as financial income or expenses on the line “Interest rate component in forward exchange contract” as the interest rate component is considered financial in nature.

16.3 Financial assets reported at fair value in the income statementThis category consists of two sub-groups; financial assets held for trading and other financial assets in which the company initially decided to invest in this category (according to the so-called Fair Value Option). Financial instruments in this category are appraised at fair value on a continuous basis and changes in fair value are re-ported in the income statement. The first sub-group includes derivatives with positive fair values, with the exception of derivatives that are identified, effective hedging instruments. The fair value option category includes financial instruments that are appraised and reported at fair value. For further information on which financial instruments are included, see Note 28.

16.4 Loans and receivablesLoans and receivable are non-derivative financial assets with fixed payments or deter-minable payments, and which are not quoted on an active market. These assets are measured at amortised cost. Amortised cost is determined based on the effective rate of interest calculated on acquisition. Accounts receivable are reported in the amount at which they are expected to be received, less a deduction for doubtful receivables.

16.5 Financial assets available for saleThe available-for-sale category includes financial assets that are not classified in any other category or financial assets that the company initially classified in this cat-egory. Shares and participations not reported as subsidiaries, associated companies or joint ventures are reported here. Assets in this category are appraised at fair value on a continuous basis, with changes in value reported in other comprehensive in-come, but not changes resulting from impairment losses, interest on debt instruments, dividend income or exchange rate differences on monetary items; these are reported in the income statement. On disposal of the asset the accumulated gain or loss previ-ously reported in other comprehensive income, is reported in the income statement.

16.6 Financial liabilities appraised at fair value in the income statementThis category consist of two sub-groups: financial liabilities held for trade and other financial liabilities that the company has chosen to place in this category (the so-called Fair Value Option); see description under Financial assets measured at fair val-ue in the income statement, above. The first category includes the Group’s derivatives with negative fair values, with the exception of derivatives that are identified, effec-tive hedging instruments. Changes in fair value are reported in the income statement

16.7 Other financial liabilitiesLoans and other financial liabilities, e.g. accounts payable, are included in this category. Liabilities are measured at amortised cost.

17 Derivatives and hedge accounting The Group’s derivative instruments were acquired as a hedge against interest rate and exchange rate risks to which the Group is exposed. An embedded derivative is reported separately unless it is closely related to the host contract. Derivatives are initially reported at fair value, meaning that the transaction costs impact income for the period. After the initial entry, derivative instruments are reported at fair value and changes in value are reported as described below. To comply with IAS 39 requirements concerning hedge accounting, there must be a clear link to the hedged item. Furthermore, the hedging instrument must effectively protect the hedged item; hedging must be documented and its effectiveness measur-able. Hedging gains and losses are reported in the income statement at the same point in time as gains and losses for the hedged items.

17.1 Cash flow hedgesDerivative instruments used to hedge future cash flows are reported in the statement of financial position at fair value. Changes in value are reported directly against


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other comprehensive income and accumulated changes in value are reported as a separate component in shareholders’ equity until the hedged flow is reported on the balance sheet, whereupon the hedging instrument’s accumulated changes in value are transferred to the income statement to meet and match the profit/loss effects of the hedged transaction. The hedged flows can be both contracted and forecast transactions.

18 Property, plant and equipment 18.1 Owned assets Property, plant and equipment are reported in the consolidated accounts at cost after deductions for accumulated depreciations and any impairments. Cost includes the purchase price and expenses directly attributable to the asset, such as the those associated with delivery and installation of the asset for use as intended by the acquisition. Examples of directly attributable expenses that may be included in cost are those for delivery and handling, installation, title deeds, consulting services and legal services. The cost of self-constructed property, plant and equipment includes expenditures for materials, payroll expenditures, other fabrication costs directly attributable to the asset where applicable, and estimated costs of disassembly and estimated expenses for the removal of the assets and the remediation of the site or area in which it has been used. Component parts of property, plant or equipment that have different useful lives are treated as separate components of said property, plant or equipment. The carrying amount of property, plant and equipment is struck from the statement of financial position when the asset is retired or disposed of. Gain or loss arising from the disposal or retirement of an asset is the difference between the selling price and the asset’s carrying amount with deductions for direct selling expenses. Gain or loss is reported as other operating profit/expense.

18.2 Underground installationsInstallations underground, whence iron ore is extracted, can be divided into waste rock mining and iron ore mining. Waste rock mining consists of work done to expose the orebody in connection with the construction of a main haulage level, construction pertaining to transport and maintenance functions such as railways, roads, tunnels, shafts, inclined drifts (a system of access for vehicle traffic from surface level to the work site underground), and facilities for service and electrical and air supply. These expenses referring to installations intended for use for a period longer than one year, are activated on the statement of financial position. Iron ore mining consists mainly of activities including development, cave drilling, and loading, haulage and hoisting of the ore. Expenses for these activities have a useful life of at most one year, which is why they are expensed as they are incurred.

18.3 Prospecting and evaluation workGreater knowledge of the extent of the iron deposits is necessary to secure access to more ore and ensure the future development of operations in the Mining Division. The orebody is surveyed and defined by means of exploration drilling, mainly via drifts adjacent to it. Ore deposit explorations in both existing and future areas of the mines, is expensed. This principle is also applied with respect to areas outside the existing mines. Evaluation of existing mineral assets is carried out to a lesser extent, mainly to pro-vide a basis for a so-called mine plan for mineral assets, and this work is expensed.

18.4 Additional expendituresAdditional expenditures are added to cost if it is probable that future economic benefit associated with the asset will accrue to the company, and if cost can be calculated in a reliable manner. All other additional expenditures are reported as expenses in the period in which they arise. Additional expenditures are added to cost if the expenditures are related to the replacement of identifiable components or parts thereof. In cases where a new com-ponent is created, the expenditure is also added to cost. Any undepreciated carrying amounts on replaced components, or parts thereof, are retired and expensed in con-nection with the replacement. Repairs are expensed on a continuous basis.

18.5 Depreciation principlesAssets are depreciated on a straight-line basis over their useful life; land is not de-preciated. The Group applies component depreciation, whereby the estimated useful life of the component constitutes the basis for depreciation.

Estimated useful life:– Operating properties, investment properties 15–100 years– Machinery and other technical plant 5–20 years– Inventories, tools and installations 5–20 years– Underground installations (average) 12 years

Operating properties are classified mainly as buildings, land improvements and land. Buildings and land improvements consist of several components that are clas-sified on the basis of function; e.g. roads, surfacing, service facilities, processing plants, etc. Investment properties consist of several components with different useful lives. The main classifications are buildings and land. However, the buildings comprise several components with varying useful lives. The estimated useful lives of these components range from 15 to 100 years. The following main groups of components have been identified and form the basis for depreciation of investment properties.

– Frames, foundations and interior walls 100 years– Water, sewage, electrical and heating systems 50 years– Facades 40 years– Windows 50 years– Interior finishing and white goods 15 years

An asset’s residual value and useful life are evaluated at the close of each reporting period and adjusted as necessary.

19 Intangible assets19.1 GoodwillGoodwill is measured at cost less any accumulated impairment losses. Goodwill is allocated among cash-generating units and is tested annually for impairment; see ac-counting principles in section 21.1. Goodwill represents the difference between the cost of a business acquisition and the fair value of the identifiable acquired assets, assumed liabilities and contingent liabilities.

19.2 Mineral rightsMineral rights are reported at cost less accumulated amortisation and any impair-ments.

19.3 Research and development Expenditures for research aimed at acquiring new scientific or technical knowledge are expensed in the period in which they arise. Development expenditures, i.e. expenses for research of which the results or other knowledge is applied to realize new or improved products or processes, are re-ported as an asset in the statement of financial position if the product or process is technically and commercially viable and the company has sufficient resources to com-plete the development and subsequently use or sell the intangible asset. The value includes directly attributable expenses such as goods and services and remuneration to employees. If the above criteria are not fulfilled, the costs must be expensed. No such expenditures have met these criteria thus far, therefore LKAB expenses all expen-ditures for development as they arise.

19.4 Other intangible assets Other intangible assets such as software acquired by the Group are reported at cost less accumulated amortisation (see below) and impairments.

19.4.1 Emissions allowancesLKAB participates in the EU’s system for trade in emissions allowances. LKAB received carbon-dioxide emissions allowances for 2010 in February. An emission allowance grants the right to emit carbon dioxide and is therefore an intangible asset. Alloca-tions are entered against deferred income as the company has not yet qualified for any allowances at the time of issue; qualification takes place at the same pace as actual emissions. When emissions are made a liability arises for the delivery of emis-sion allowances to cover said emissions. This liability is classified as an emission. The liabilities are measured at the cost of the allocated emission allowances. The income is distributed against the cost it is intended to cover. When emission allowances are reported an equivalent number of emission allowances must be delivered. Thus the intangible asset is used and the provision for emissions made is settled. Where a liability to deliver emission allowances exceeds the remaining allocation of emission allowances the excess amount is carried as a liability measured at the current market value of the number of emission allowances necessary to settle the obligation. For information regarding amounts, see Note 26.

19.5 Additional expendituresAdditional expenditures for capitalised intangible assets are reported as assets in the statement of financial position only when they increase the future economic benefits for the specific asset to which they pertain. All other expenditures are expensed as they arise.


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19.6 Depreciation principlesDepreciations are reported in the income statement in a straight-line across the esti-mated useful life of the intangible assets. Depreciable intangible assets are written off from the date upon which they are available for use. The estimated periods of useful life are:

– Mineral rights 30–50 years– Tenancy rights 10 years– Customer-related intangible assets 3–5 years– Software 5 years

An asset’s residual value and useful life are tested at the close of each reporting period and adjusted as necessary.

20 Inventories Inventories are reported at the lower of cost or net realisable value. The cost of in-ventories is calculated on the basis of the first-in, first-out (FIFO) method and includes expenditures arising from the acquisition of the inventory assets and their transport to their current location. In the case of manufactured goods and work in progress, cost includes a reasonable proportion of indirect costs based on normal capacity. Net selling price is the estimated selling price in current operations, after deduc-tions for estimated costs of completion and for realising a sale.

21 Impairments The Group’s reported assets are tested on every closing date to ascertain whether any impairment requirement is indicated. Every closing day a test is carried out on previously impaired assets other than financial assets and goodwill as to whether a reversal should take place.

21.1 Impairment of property, plant, equipment, intangible assets and participations in subsidiaries, associated companies and joint ventures If an impairment requirement is indicated, the recoverable value of the asset is calcu-lated. The recoverable amount for goodwill is calculated annually. If it is not possible to ascertain essentially independent cash flows attributable to a single asset when an impairment requirement is assessed, assets are grouped at the lowest level at which it is possible to identify essentially independent cash flows (a so-called cash-generating unit). An impairment is reported when the carrying amount of an asset or cash-gener-ating unit (group of units) exceeds its recoverable amount. Impairment losses are charged to the income statement. Impairments of assets attributable to cash generat-ing units (group of units) is allocated to goodwill in the first instance, after which a proportional impairment of other assets in the unit (group of units) is carried out. The recoverable amount is fair value less selling expenses or value in use, which-ever is the greater. When calculating value in use, future cash flows are discounted using a pre-tax discount rate that reflects risk-free interest and the risks associated with the specific asset.

21.2 Impairment of financial assetsOn each reporting occasion, the company assesses whether there is objective evi-dence that a financial asset or group of financial assets requires impairment. Objec-tive evidence constitutes observable circumstances that have had an adverse impact on the potential to recover the amortised cost such as breach of contract, late or defaulted payment from a counterparty or bankruptcy, or a significant or long-term decrease in the fair value of a component of a financial investment classified as a financial asset available for sale. The recoverable amount of assets belonging to the categories held-to-maturity se-curities and accounts receivable reported at amortised cost, is calculated as the current value of future cash flows, discounted at the original the effective interest rate calculated when the assets was first reported. Short-duration receivables are not discounted. Impairment losses are charged to operating profit/loss in the income statement. If an impairment in fair value of a financial asset classified as available for sale has previously been reported directly against comprehensive income and there is objective evidence that there is need for an impairment, the accumulated loss re-ported in comprehensive income must be removed from comprehensive income and entered in the income statement, even if the financial asset has not been eliminated from the statement of financial position. The eliminated loss relates to the difference between cost and current fair value, after deduction for any previous impairment of the financial asset.

21.3 Reversal of impairmentsImpairments of assets included in the IAS 36 application area are reversed when there is both an indication that impairment is no longer necessary and there has

been a change in the assumptions which formed the basis of the recoverable amount calculation. However, impairment of goodwill is never reversed. A reversal is only made to the extent that the asset’s carrying amount after reversal does not exceed the carrying amount that the asset would have had, with a deduction for amortisation, if no impairment had been carried out. Impairments of securities, loans receivables and accounts receivable, which are re-ported at accrued cost, are reversed if a subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment was made. Impairments of equity instruments classified as available-for-sale financial assets that were previously reported in the income statement, may not subsequently be reversed through the income statement but rather in other comprehensive income. The impaired value is the amount on which subsequent revaluations are based and which are reported in other comprehensive income. Impairments of interest-bearing instru-ments classified as available-for-sale financial assets are reversed through the income statement if the fair value increases and the increase can objectively be attributed to an event that occurred after the impairment was carried out.

22 Equity22.1 Dividends Dividends are reported as a liability once they have been approved by the Annual General Meeting.

23 Earnings per shareCalculation of earnings per share is based on the Group’s profit for the year attribut-able to Parent Company shareholders and the weighted average number of shares outstanding during the year.

24 Employee benefits24.1 Defined-contribution pension plansDefined contribution pension plans are classified as those plans under which the company’s obligation is limited to the contributions the company has undertaken to pay. Under such plans the size of an employee pension is based on the contribu-tions the company pays to the plan or to an insurance company and the capital yield generated by the contributions. Consequently, it is the employee who bears the actuarial risk (that the payment will be lower than expected) and the investment risk (that the investment assets will be inadequate to provide the expected benefits). The company’s obligations in respect of contributions to defined-contribution plans are reported as a cost in the income statement as they are earned by the employees performing work for the company during the period.

24.2 Defined-benefit pension plansThe Group’s net obligation for defined-benefit plans is calculated separately for each plan by estimating the future compensation that employees have earned through employment in present and previous periods; this compensation is discounted to present value and the fair value of any plan assets is deducted. The discount rate is the interest rate on the closing day for a first-class corporate bond with a maturity corresponding to the Group’s pension obligations. When there is no active market for such corporate bonds, the market interest rate on government bonds with an equivalent maturity is used instead. The calculation is made by a qualified actuary using the Projected Unit Credit Method. In addition, the fair value of plan assets as per closing day is calculated. Actuarial gains and losses may arise when the present value and the fair value of plan assets are determined. These arise either as a result of outcomes deviating from assumptions previously made or revisions to the said assumptions. The corridor approach is applied. This approach means that the portion of the cumulative actuarial gains and losses exceeding 10 per cent of the commitments’ present value or the fair value of plan assets, whichever is the higher, is reported against earnings over the expected average remaining period of employment of the employees covered by the plan. Actuarial gains and losses are not otherwise taken into account. The carrying amount for pensions and similar obligations in the consolidated state-ment of financial position represents the present value of the obligation at the end of the financial year, less the fair value of plan assets, unreported actuarial gains or losses and unreported costs relating to service in earlier periods. When the calculation leads to an asset for the Group, the carrying amount of the asset is limited to the net of the unreported actuarial losses and unreported costs for employment in previous periods as well as the current value of future repayments from the plan or reduced future payments to it. When the compensation in a plan improves, the portion of the increased compensation attributable to the employees’ services in previous periods is reported as an expense in the income statement on a straight-line basis over the average period until the compensation is fully vested. If the compensation is fully vested, an expense is reported directly through the income statement.


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When there is a difference in how the pension cost is determined for a legal entity and the Group, a provision or receivable for the special employer’s contribution is reported based on this difference. No calculation is made for the present-value of the provision or receivable. Net interest of pension provisions and expected yield from associated plan assets are reported in net financial income/expense. Other components are reported in the income statement.

24.3 Short-term employee benefitsShort-term employee benefits are calculated on an undiscounted basis and reported as an expense when the related services are received. A provision is made for the expected cost of profit-sharing or bonus payments when the Group has a legal or informal obligation to make such payments as a result of services being rendered by employees and a reliable estimate of the amount can be made.

25 Provisions A provision differs from other liabilities because of prevailing uncertainty about pay-ment date or the amount required to settle the provision. A provision is reported on the statement of financial position when there is an existing legal or informal obliga-tion due to a past event, it is probable that an outflow of economic resources will be required to settle the obligation, and that the amount can be reliably estimated. A provision is made in an amount that is the best estimate of what is required to settle the existing obligation on the closing date. When the effect of payment timing is important, provisions are calculated by discounting the forecast future cash flow at a pre-tax interest rate that reflects current market estimates of the time value of money and, where appropriate, the risks associated with the liability.

25.1 RestructuringA provision for restructuring is reported when a detailed, formal restructuring plan has been established and the restructuring has either begun or been publicly an-nounced. No provision is made for future operating losses.

25.2 Remediation expenses Provision for remediation expenses is made when the Group has a legal or informal obligation where, for example, the environmental court requires a financial guaran-tee for expanded operations.

25.3 Provisions as a result of mining operationsSee item 28 in Note 1.

26 Contingent liabilitiesA contingent liability is reported if there is a possible commitment stemming from events evidence of whose occurrence is dependent on one or more uncertain future events as well as when there is a commitment that is not reported as a liability or provision because it is unlikely that an outflow of resources will be required.

27 PARENT COMPANY ACCOUNTING PRINCIPLESThe Parent Company has prepared its annual report in compliance with the Swedish Annual Accounts Act (1995:1554) and Swedish Financial Reporting Board recommen-dation RFR 2 Reporting for Legal Entities. Statements issued by the Swedish Financial Reporting Board for publicly listed companies are also applied. RFR 2 means that in preparing the annual accounts for the legal entity the Parent Company must apply all IFRS and statements approved by the EU as far as is possible within the framework of the Swedish Annual Accounts Act and Swedish Pension Obligations Vesting Act taking into account the relationship between reporting and taxation. The recommendation specifies the exceptions from, and supplements to, IFRS that must be made. RFR 2 Accounting for legal entities, and amended IAS 1 Presentation of financial statements, mean that from 2010 the Parent Company must present a new report – Statement of comprehensive income – after the income statement. The effect is that the report over changes in equity will have a content similar to that of Group’s, i.e. excluding income and expense that were previously reported directly in equity but are now reported in other comprehensive income, in the statement of compre-hensive income.

27.1 Differences between Group and Parent Company accounting principlesDifferences between Group and Parent Company accounting principles are detailed below. The Parent Company accounting principles specified below have been consist-ently applied to all the periods presented in the Parent Company’s financial reports.

27.2 Subsidiaries, associated companies and joint venturesParticipations in subsidiaries, associated companies and joint ventures are reported by the Parent Company according to the cost method. This means that transaction expenses are included in the carrying amount for holdings in subsidiaries, associated companies and joint ventures. 27.3 Financial instruments and hedge accountingOwing to the relationship between reporting and taxation, the rules referring to finan-cial instruments and hedge accounting in IAS 39 are not applied in the Parent Compa-ny as a legal entity. Non-current financial assets are measured in the Parent Company at cost less any impairments, or as current financial assets, whichever is the lower. Valuation of shares and money market investments is done at the portfolio level. This means that for instruments included in the same portfolio, unrealised gains are offset against unrealised losses. Surplus losses are reported as reduction in interest income on the line Other interest income and similar items. Surplus gains are not reported. Liabilities are measured at amortised cost.

27.3.1 Derivatives and hedge accountingCurrency exposure with respect to future forecast flows is hedged either via forward exchange contracts or currency options. Forward exchange contracts or currency op-tions that protect the forecast flow are not reported on the balance sheet. Changes in value in forward contracts are reported in the same period as the forecast flow occurs. The hedged volume in US dollars is matched against the estimated net inflow of US dollars. If the hedged volume exceeds the value of the expected net inflow and there is an unrealised exchange loss, it is reported as a financial expense. If there is an unrealised exchange gain, it is not reported. Accrual of forward exchange discounts and premiums is done in accordance with Swedish Accounting Standards Board recommendation No. 7. The interest compo-nent is considered financial in nature and it is reported in the Parent Company’s Net financial items. The difference between the average exchange rate and the year-end rate on binding forward exchange contracts is reported as a contingent liability if the year-end rate is higher than the average rate.

27.4 Financial guaranteesThe Parent Company’s financial guarantee agreements mainly consist of guarantees that benefit subsidiaries. Financial guarantee agreements mean that a company has a commitment to remunerate the bearer of a debt instrument for losses incurred as a result of the failure of a given debtor to make full payment on due date in accordance with the terms of the agreement. The Parent Company applies one of the relief rules permitted by the Swedish Financial Reporting Board, compared with the rules in IAS 39, in its reporting of financial guarantee agreements made out for the benefit of subsidiaries. The Parent Company reports financial guarantee agreements as a provi-sion in the balance sheet when the company has an obligation for which settlement will probably require payment.

27.5 Anticipated dividendsAnticipated dividends from subsidiaries are reported in cases where the Parent Com-pany has sole right to decide the size of the dividend and has decided on the size of the dividend before the publication of its financial statements.

27.6 Intangible assets27.6.1 Research and development All research and development expenditures are reported as expenses in the Parent Company income statement.

27.7 Employee benefits 27.7.1 Defined-benefit plansThe Parent Company applies principles other than those described in IAS 19 when calculating defined-benefit plans. The Parent Company complies with the provisions of the Swedish Pension Obligations Vesting Act and Swedish Financial Supervisory Authority regulations since this is a condition for tax deductibility The essential dif-ferences, compared to IAS 19, are the way in which the discount rate is determined, that calculation of defined-benefit commitments is based on current salary levels with-out assuming any future salary increases, and that all actuarial gains and losses are reported in the income statement as they arise.

27.8 Taxes In the Parent Company, deferred tax liabilities are reported as part of untaxed re-serves. In the consolidated accounts, untaxed reserves are divided between deferred tax liabilities and equity.


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27.9 Group contributions and shareholders’ contributions for legal entitiesThe Parent Company reports shareholder contributions in accordance with the Swedish Financial Reporting Board statement (UFR 2). Shareholder contributions are transferred directly against the recipient’s equity and activated in shares and participations with the donor, to the extent that impairments are not required. Group contributions are reported based on their economic significance. This means that Group contributions rendered for the purpose of minimising the Group’s total tax are reported directly against retained earnings after deducting their current tax ef-fect. At LKAB, Group contributions are reported with the purpose of minimising the Group’s total tax.

28 Significant estimates and assessments In presenting the financial reports, the Company Management and the Board of Di-rectors must make certain estimates and assumptions that affect the reported amounts pertaining to assets, liabilities, income and expenses, and other disclosures such as contingent liabilities. Estimates and assessments that are considered to be of greatest importance for an understanding of the financial statements in regard to degrees of significance and uncertainty, are presented below. Conditions for LKAB’s operations change continu-ously, which means that these assessments also change.

28.1 Provisions as a result of mining operationsLKAB has extracted iron ore from mines in Norrbotten for 120 years. The technology used for ore extraction unavoidably leads to deformations in the form of fractures in the land where mining is pursued. To date, most of the impact has occurred within LKAB’s own sites. Today, however, local communities and infrastructure beyond these areas are also affected. The deformation zones are, or will be, so extensive that it will be necessary to successively relocate sections of Kiruna and Malmberget per-manently. LKAB has already made, and will continue to make, significant expenditures in respect of these urban transformations. For instance, LKAB will incur expenses for the acquisition of real estate comprising buildings and land and municipal infrastructure such as electricity, water and sewage in the affected areas. A major part of these expenditures originate from LKAB’s mandatory obligation to compensate damage resulting from mining activities. Provisions for the damages that the deformations cause cover damage already confirmed and damage not yet confirmed but which will occur after a year or more’s delay as a result of existing mining. The fundamental issue LKAB must decide upon for accounting purposes is how ex-penses are to be distributed across the accounting periods they spring from. Directly applicable accounting regulations for expenses of this nature are lacking. LKAB has chosen to apply rules of provision in IAS 37 Provisions, Contingent Liabili-ties and Contingent Assets.

The basic governing principles were as follows:1. There must be an existing legal or informal obligation toward an external party,2. as a result of events3. that the company anticipates an outflow of economic resources to settle the ob-ligation,4. and that the amount can be reliably estimated. A boundary to impact-related compensation has been defined by LKAB and desig-nated as the impact boundary. The impact boundary, which moves continuously forward, is based on the existing environmental terms boundary according to rulings from the environmental court. Additions are made for a safety zone for operations that are expected to come about even if mining were to cease (100 m) and for an area designated as a Mine City Park (350 m), equivalent to around seven-years conversion time from built-up area to mine city park to industrial area. The basic rule is that an undertaking will not lead to an expenditure until the impact boundary encroaches upon the real estate boundary or infrastructure concerned. The 2010 impact boundary will be located close to the boundary of the detailed plan that Kiruna municipality is expected to establish in the beginning of 2011. Because corresponding environmental terms do not pertain in Malmberget the impact boundary has been set according to best estimates as though LKAB’s publicly presented ring fence plan for 2012 were to correspond to an environmental terms boundary. Otherwise the principles for Kiruna and Malmberget are applied consist-ently. It is in the nature of the issue that impact will occur for a long succession of years; uncertainty will be the rule especially regarding geological consequences, discount-ing parameters and market values. For these reasons it is to be presumed that for a number of years ahead provisions must be calculated with a degree of uncertainty both in respect of their size and times of payment.

The size of provisions has been calculated based on objective valuation methods for each sort of asset (railway, land, municipal infrastructure, etc.) and priced at a discounted amount as the basis for the calculation. A deciding factor in how damages caused by LKAB mining activities must be handled for accounting purposes is where the impact boundary is located at any given time. All damages/compensation claims that lie within the impact boundary will be calculated, provided for and expensed. This must be seen in the light of LKAB’s already having consumed the economic benefits generated by mining, or in other words, because the revenues have already been reported, the cost of damages subsequently arising from earlier mining must also be reported. Real estate is divided into a mine component and a building component for ac-counting purposes. The division is based on the assumption that buildings on the property can be used for temporary letting during a period from the acquisition until its evacuation and that it should therefore be amortised during the estimated utilisa-tion period. The building component is calculated at the current value of net cash flow from letting. The mine component is defined as the property’s total cost less the building component and is in principle depreciated over the use of the asset. Because LKAB has already consumed the economic benefits of the property, that part of the acquisition/provision attributable to the mining component is immediately expensed. The building component is reported as an asset upon occupancy, and is depreciated over the remaining useful life until the estimated time for evacuation of the building. On the other hand, if an area is acquired beforehand for future mining the mining component is expensed when the impact boundary passes the property concerned because the underlying production/consumption of economic benefits will match. For accounting purposes this is considered to be a so-called changed designation based on events (agreements, informal obligations). It means that the entire effect is reported during the period concerned without any retro-active re-calculation of comparisons for previous years. Opinion is that this is not considered amended ac-counting principals.

28.2 Pension benefitsSeveral assumptions are important components in the actuarial methods used to calculate pension obligations, and these may have a significant impact on reported net liability and annual pension expense. The discount rate and the estimated return on plan assets are two critical assumptions used in calculating the year’s pension expense and the current value of pension obligations. These assumptions are revised each year, for each pension plan, in each country. Many factors do not change as often, such as personnel turnover and retirement age. For financial and other reasons, actual outcomes often differ from actuarial assumptions. The discount rate enables the measurement of future cash flows to current value on the measurement date. This rate must correspond to yields on either high-quality corporate bonds or, if there is no active market for such bonds, government bonds. A lower discount rate increases the current value of the pension obligation and the annual pension cost. In order to determine the expected rate of return on plan assets, LKAB considers the current and anticipated categories of plan assets as well as historic and expected returns on the various categories. Compared to the previous year, the average discount rate remains unchanged at 4.0 per cent. The expected average weighted return on plan assets was unchanged at 5.0 per cent in 2010 compared to 2009.

28.3 TaxesSignificant estimates are made to determine current tax liabilities and current tax as-sets, and for deferred tax liabilities and deferred tax assets. LKAB has to determine the probability of deferred tax assets being utilised to offset future taxable profits. Actual outcomes may differ from these estimates, for instance due to changed tax legislation, or the outcome of final reviews of tax returns as yet unconcluded by tax authorities and tax courts.

28.4 DisputesLKAB is party to a number of disputes and legal proceedings in the course of day-to-day business. Management consults with legal experts on issues related to legal disputes and with other experts internal or external on issues related to the ordinary course of business. Management’s considered opinion is that neither the Parent Com-pany, nor any subsidiary, is currently involved in legal proceedings or arbitration that may be deemed to have a material negative effect on the business, its financial position or profit/loss in operations.


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Note 2 Distribution of revenues Group Parent CompanySEK millions 2010 2009 2010 2009Net sales: Sale of goods – iron ore 25,413 9,376 25,825 9,570 Sale of goods – industrial minerals 2,777 1,948 Other 343 234 Total 28,533 11,558 25,825 9,570

Note 3 Segment reporting

Segment information Group Management has set up business segments based on the information used to make strategic decisions in LKAB’s business operations. The Group’s internal reporting system is based on this, as are its product and division perspectives. Group Management assesses and follows up business activities in the respective divisions, and follow-up is focused on operating profit and operating assets in business activities. Intra-Group prices between segments are set based on the arm’s length princi-ple, i.e. between parties that are independent of each other, well-informed and have a stake in the implementation of the transaction. Income, assets and liabilities for the segments include directly attributable items. Non-distributed items consist of net financial income and expense and tax expenses. Assets and liabilities not allocated to segments include income tax re-ceivables and payables, investments and financial liabilities. The segments’ invest-ments in property, plant, equipment and intangible assets include all investments with the exception of those in current inventory and inventory of minor value.

The Group consists of the following business segments:Mining Division. The Mining Division mines and processes iron ore for products for steel making. The main products are pellets and fines, and the number of customers is limited to about twenty.

Minerals Division. The minerals division develops, produces and markets industrial mineral products for several application areas and customers in many different industries throughout the world. The most important industries are con-struction and civil engineering, oil and gas, rubber, plastics and paint, chemicals, automotive and foundries. There are several thousand customers. Special Businesses. Special Businesses is home to several LKAB subsidiaries. These companies are mainly suppliers to the Mining Division and the Minerals Division. Examples of goods and services sold include drilling equipment, explo-sives, concrete, tunnel driving, rock reinforcement, and crushing of iron ore.

The following segment information is reported:

Operating segments Group Special Mining Division Minerals Division Businesses Total Eliminations GroupSEK millions 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009 2010 2009External revenue 25,413 9,376 2,777 1,948 343 234 28,533 11,558 28,533 11,558Intra-Group revenue 495 237 37 193 1,518 864 2,050 1,294 –2,050 –1,294 Total revenue 25,908 9,613 2,814 2,141 1,861 1,098 30,583 12,852 –2,050 –1,294 28,533 11,558 Operating profit/loss per segment 11,524 537 433 –95 244 168 12,201 610 12,201 610Consolidation adjustments *) 80 49Operating profit 12,281 659Net financial income/expense 69 533Profit before tax 12,350 1,192Tax –3,267 –473Net profit for the year 9,083 719 Assets 29,331 27,862 1,264 1,352 1,121 1,063 31,716 30,277 –1,324 –2,769 30,392 27,508Unallocated assets 16,237 8,047Total assets 46,629 35,555 Liabilities 10,031 6,885 721 1,029 449 375 11,201 8,289 –1,429 –1,554 9,772 6,735Unallocated liabilities 3,438 3,445Total liabilities 13,210 10,180 Capital expenditures **) 3,914 3,461 10 13 55 69 3,979 3,543 3,979 3,543Depreciations 1,750 1,741 30 47 56 39 1,836 1,827 1,836 1,827Impairments 300 8 249 308 249 308 317 *) refers to an adjustment in Group pension liabilities as per IAS 19**) refers to property, plant, equipment and intangible assets


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Note 3 Segment reporting (cont.)Operating segments (cont.) Geographic areasGroup sales are mainly made from Sweden and thus by the Swedish companies. Manufacturing of the Group’s product took place almost exclusively in Sweden. Investments were made principally in Sweden. Revenues are reported in the countries/regions in which the respective customers operate. The carrying amount of assets per country/region are according to where the assets are located, and revenues are reported on the basis of where sales, production, delivery and invoicing take place, regardless of where the customers are located.

Group Sweden Rest of Europe Asia Rest of the world**)SEK millions 2010 2009 2010 2009 2010 2009 2010 2009External revenue 26,458 9,847 978 845 956 747 141 119Assets*) 20,908 19,048 2,483 2,849 14 41 3 1Capital expenditures *) 3,817 3,042 160 500 0 1 2 0 *) refers to property, plant, equipment and intangible assets**) countries not part of Europe or Asia

Information about major customersAccording to IFRS 8, companies must provide information about major customers. The LKAB Group has three major customers, each of which accounts for more than ten per cent of the Group’s sales. Sales to these customers amounted to 19 per cent, 10 per cent and 10 per cent of total sales and are reported in the operating segment Mining Division.

Parent Company Mining Division Minerals Division Special Businesses Parent CompanySEK millions 2010 2009 2010 2009 2010 2009 2010 2009Net sales 25,825 9,570 25,825 9,570

Parent Company Europe Asia Rest of the world**) Parent CompanySEK millions 2010 2009 2010 2009 2010 2009 2010 2009Net sales 17,312 6,195 6,846 2,874 1,667 501 25,825 9,570

Note 4 Other operating income Group Parent CompanySEK millions 2010 2009 2010 2009Rental incomes, buildings 149 145 1 2Gain on sale of non-current assets 13 Exchange rate gains on receivables/liabilities related to operations 52 10 14 10Insurance compensation 8 8 Rental and leasing income 10 14 15 14Other 90 94 186 133 322 263 224 159

Note 5 Other operating expenses Group Parent CompanySEK millions 2010 2009 2010 2009Exchange rate losses on receivables/liabilities related to operations 41 Property expenses 90 102 Insurance compensation 9 19Loss on sale of non-current assets 3 2 Other 256 204 181 126 390 317 181 145

Note 6 Employees, personnel costs and remuneration to senior executivesAverage number of employees of whom of whom of whom of whomParent Company 2010 of women of men 2009 of women of men Sweden 2,998 15% 85% 2,800 13% 87%Total, Parent Company 2,998 15% 85% 2,800 13% 87% Subsidiaries Sweden 450 12% 88% 405 12% 88%China 41 20% 80% 62 15% 85%The Netherlands 25 32% 68% 23 35% 65%Norway 211 9% 91% 205 8% 92%UK 210 21% 79% 205 21% 79%Germany 20 50% 50% 22 45% 55%Other countries 75 21% 79% 56 27% 73%Total in subsidiaries 1,032 15% 85% 978 15% 85% Group total 4,030 15% 85% 3,778 13% 87%


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Gender distribution in corporate management 2010 2010 2009 2009 Percentage Percentage Percentage PercentageParent Company of women of men of women of menBoard of Directors 33% 67% 27% 73%Other senior executives 33% 67% 20% 80%Group total Board of Directors 13% 87% 14% 86%Other senior executives 15% 85% 13% 87%

Salaries and other remuneration by country, senior executives and other employees, and social security contributions in the Parent Company 2010 2009 Senior SeniorParent Company executives Other executives OtherSEK millions (21 people) employees Total (21 people) employees Total Salaries and other remunerations Sweden 17 1,356 1,373 17 1,216 1,233Parent Company, total 17 1,356 1,373 17 1,216 1,233 Social costs1 786 6271of which pension expenses 317 238

Salaries and other remuneration, pension expenses and pension commitments for senior executives in the Group

Group 2010 2009 Senior Senior executives executives SEK millions (38 people) (41 people) Salaries and other remunerations 41 44(of which bonus & similar) Pension expenses 11 13Pension commitments 22 25 Remuneration to senior executivesSenior executivesSenior executives refers to Board members, the President and other senior execu-tives. Other senior executives refers to salaried employees who are members of Group Management together with the President

Guidelines for remunerations to senior executivesRemuneration to the Chairman and Board members is decided by the Annual General Meeting. In addition, remunerations are paid for committee work. The AGM has decided that government guidelines current at any given time for employment terms for employees in senior management positions and for incen-tive schemes for employees of state-owned companies shall apply to remuneration to Group Management. Government guidelines were updated in April 2009.

Preparation and decision processes for setting remunerations to senior executivesCompensation for the President and salary-setting principles for Group Manage-ment members are prepared by a compensation committee appointed by the Board of Directors. The committee consists of the Chairman and three other board members. The Board of Directors takes decisions based on committee proposals. The Chairman of the Board approves the annual salary reviews of other Group Management members.

Principles for remuneration to senior executivesThe President and the other members of Group Management are paid fixed salaries. The salaries are pensionable. On January 1, 2010, Lars-Eric Aaro assumed the position of President and CEO of LKAB. Lars-Erik Aaro’s monthly salary was SEK 312,000 per month. Retirement age for the President is 65 years. The President’s pension plan is a defined-contribution plan whereby LKAB makes a yearly provision of 30 per cent of the President’s current fixed annual salary for a pension plan chosen by the President, which may include the ITP plan. That part of the alternative ITP premium that is not used to cover premiums for the ITP plan can be used by the President for a complementary pension plan. Accrued pension benefits from earlier employment agreements are vested benefits. The President is entitled to decline salary in favour of additional pension provisions up to a maximum level decided by LKAB. The retirement age of other senior executives who joined the Group prior to 2005 (2 people) is 60 years. Pension is payable at 65 per cent of the pension-carrying salary (defined according to ITP plan, and free car benefit) at the time of retirement for the period up to the age of 65. The pension commitment is secured via an endowment policy taken out by LKAB with an insurance company. The pension commitment is benefit-defined and vested. From the age of 65, pension is payable in accordance with the ITP plan with a supplement for salary seg-ments between 30 and 50 base amounts. The supplement is 32.5 per cent of the pensionable salary (defined according to the ITP plan). Obligations additional to the general pension plan are secured via an endowment policy taken out by LKAB with an insurance company. In addition to the ITP plan’s family pension (survivor annuity), a special family pension is payable (extended survivor annuity). Any bonus paid on endowment or pension insurance policies accrues in its entirety to the senior executives as increased pension. The retirement age of other senior executives who joined the Group between 2005–2008 (3 people) is 62 years. In addition to pension benefits regulated by collective agreements (defined according to ITP plan), 14–18 per cent of basic annual salary is allocated as a pension premium. The retirement age of other senior executives who joined the Group later than 2009 (3 people) is 65 years. The pension is contribution defined and follows the ITP 1 plan, meaning 4.5 per cent of salary portions up to 7.5 income base amounts and 30 per cent of salary portions thereafter. Mutual notice of termination is six months for senior executives. Severance pay equivalent to 18 monthly salaries shall be paid when notice of termination of employment is given by the company. For further information, refer to the table Remuneration and other benefits to senior executives in Group Management, 2010.


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Remuneration and benefits to Board members 2010 2009SEK thousands Director’s fee *) Director’s fee *)Chairman of the Board Björn Sprängare 350 350Board member Christer Berggren 220 220Board member Stina Blombäck 160 160Board member Per-Ola Eriksson 160 160Board member Lars-Åke Helgesson 220 220Board member Hanna Lagercrantz**) 0 Board member Anna-Greta Sjöberg 220 220Board member Maija Liisa Friman 160 160Board member Egil M. Ullebö 160 160Employee representatives (3 people) 190 150Employee representative deputies (3 people) 99 99Total 1,939 1,899

*) Remuneration includes fees for work on the Board’s audit committee, currency committee and finance committee.**) Joined the Board at the 2010 AGM.

Remuneration and other benefits to other senior executives during 2010 Variable Other Pension PensionSEK thousands Salary remuneration benefits 1 expense 2) Total obligations President, Lars-Eric Aaro 3,642 113 1,156 4,911 4,442Vice President Leif Boström 1,958 84 847 2,889 165Vice President Anders Furbeck 1,910 72 1,161 3,143 3,486Vice President Grete Solvang Stoltz 1,512 80 354 1,946 9Vice President Per-Erik Lindvall 2,112 91 1,645 3,848 5,261Vice President Anders Kitok 1,582 94 842 2,518 552Vice President Charlotta Fogde 1,411 87 511 2,009 25Vice President Katarina Holmgren 3) 771 57 272 1,100 119Vice President Markus Petäjäniemi 4) 255 6 50 311 27Total 15,153 684 6,838 22,675 14,086

1) Other benefits include car, board and life insurance benefits. 3) From May 10, 2010. 2) Pension costs excluding special contribution tax. 4) From November 15, 2010.

Remuneration and other benefits to other senior executives during 2009 Variable Other Pension PensionSEK thousands Salary remuneration benefits 1) expense 2) Total obligations President Ola Johnsson 3) 1,984 306 608 2,898 4,553Acting President Lars-Eric Aaro 4) 2,771 106 2,116 4,993 4,778Vice President Leif Boström 1,898 78 767 2,743 149Vice President Anders Furbeck 1,908 69 949 2,926 2,857Vice President Johan Heyden 3) 366 19 225 610 101Vice President Mats Pettersson 3) 349 11 207 567 133Vice President Grete Solvang Stoltz 3) 408 25 92 525 2Vice President Per-Erik Lindvall 5) 2,039 84 1,550 3,673 4,307Vice President Anders Kitok 1,550 88 717 2,355 520Vice President Charlotta Fogde 1,369 72 532 1,973 13Total 14,642 858 7,763 23,263 17,413

1) Other benefits include car, board and life insurance benefits. 4) Remuneration in respect of 8 months as acting President and 4 months as VP.2) Pension costs excluding special contribution tax. 5) In respect of remuneration from subsidiary for part of 2009.3) Only part of 2009.


1091

ABSENCE DUE TO ILLNESS (in Parent Company, employees in Sweden only) 2010 2009Total absence due to illness as percentage of normal working hours 2.6% 2.8%Percentage of total absence due to illness regarding extended absences of 60 days or more 21.8% 35.7%Absence due to illness per gender: Men 2.7% 2.8% Women 3.1% 2.8%Absence due to illness by age group: 29 or younger 2.2% 2.4% 30–49 years 2.5% 2.6% 50 or older 3.6% 3.2%

For information on post-employment benefits, etc; see Note 25 Employee benefits.

Note 7 Auditors’ fees and compensation Group Parent CompanySEK millions 2010 2009 2010 2009KPMG Audit assignments 6 5 3 3Audits additional to audit assignment 2 2 1 2Tax advice 1 1 1 1Other services 2 2 2 1 Other auditors Audit assignments 1 1 1 1 Tax advice 0 0 0 0 Other services 0 0 0 0

Audit assignments involve examination of the annual report and financial accounting as well as the administration by the Board of Directors and the President, other tasks related to the duties of the company’s auditors together with consultation or other services that may result from observations noted during such examinations or the implementation of such other tasks.

Note 8 Nature of operating expenses Group Parent CompanySEK millions 2010 2009 2010 2009Personnel costs 2,845 2,486 2,212 1,902Materials, etc. 3,834 2,336 2,288 1,625Energy 1,543 881 1,390 752Transport 1,627 993 2,445 1,612Depreciations 1,836 1,827 1,442 1,542Impairment of non-current assets 308 249 300 Other operating expenses 4,581 2,390 4,529 1,775 16,574 11,162 14,606 9,208

Earnings for the year impacted by SEK 2,997 million for costs associated with the urban transformation in Kiruna and Malmberget due to the effects of mining. SEK 300 million of that amount relates to impairments to real estate encroached upon by the impact boundary. The Group also reports an impairment of goodwill in Minelco GmbH of SEK 8 million as a result of a lowering of expectations regarding the company’s future development. A decision to close the Minerals Division olivine mine on Greenland was taken in 2009. Closing-down costs of SEK 317 million including SEK 249 million in impairment losses impacted 2009 earnings. Closure was largely concluded during 2010. Some small work will remain during 2011. Refer to Notes 13 and 14 Intangible assets and Property, plant and equipment regarding impairment losses. Tax expenses in respect of the closure are described in Note 11 Income taxes

Note 9 Net financial income/expenseGroupSEK millions 2010 2009Financial income Interest income 123 108Dividend Financial assets available for sale 13 49 Financial assets appraised at fair value (fair value option) 17 16Return on assets managed 56 62Net profit/loss Financial assets appraised at fair value (fair value option) – return on share portfolios (excl. dividends) 208 326 – revaluation of financial assets 1 0 Total net profit/loss 209 326Exchange rate differences (net) 144Total income from financial items 418 705 Financial expenses Interest rate component in forward exchange contracts –17 –27Interest expense on defined-benefit pension plans –131 –134Interest expense on loan facility –48 –9Net profit/loss Financial assets appraised at fair value (fair value option) – return on share portfolios (excl. dividends) Other financial expenses –15 –2Exchange rate differences (net) –138 Total financial expenses –349 –172Net financial income/expense 69 533

Net profit/loss reported in net financial income/expense under exchange rate differences refers mainly to revaluation of cash and cash equivalents and receivables from Intra-Group lending. Return on assets managed refers to net return on plan assets. The return on assets managed is not an actual return, but an anticipated rate of return on funded obligations. Closing-day price data is used for share portfolio valuations. No interest incomes or interest expenses refer to items that are not reported at fair value. Interest income includes returns on money-market instruments and bonds amounting to SEK 75 million (97). Since the contracts were signed, higher interest rates in SEK compared to USD have had a negative effect of SEK –17 million (–27), which is coupled to the item interest rate component in forward exchange contracts. Limit fees amounting to SEK 48 million (9) in respect of loan facilities impact net financial income/expense. Revaluation of financial assets is done with discounted cash flows based on available market rates. During 2010 revaluation affected net financial income/expense by SEK 0.6 million (0.1). The strengthening of the Swedish crown has meant significant exchange-rate losses during the year on assets and bank balances. Other financial expenses relate mainly to bank and administration costs.


1092

Parent Company Income from Income from participations participations subsidiaries associated companies companiesSEK millions 2010 2009 2010 2009Dividend 49 107 1 0

Parent Company Income from other Interest income securities and and similar receivables held as income non-current assets statement itemsSEK millions 2010 2009 2010 2009Interest income, subsidiaries 7 10 49 58Interest income, forward exchange premiums 44Interest income, other 120 121Return on share portfolio 64 261Dividends, shares 12 49 17 15Revaluation of financial receivables 1 0 Exchange rate differences, foreign currency 180 20 59 250 679

Dividends on shares that are financial assets refer to holdings in SSAB. Interest income and similar income statement items include returns on money-market instruments and bonds amounting to SEK 75 million (97).

Interest expense and similar profit/loss itemsParent Company SEK millions 2010 2009Interest expense, limit fee on loan facility –48 –9Interest expense, forward exchange deduction –9 Interest expenses, subsidiaries –5 –9Interest expenses, pension liabilities –36 –28Impairment, financial assets –7 Exchange rate differences, foreign currency –141 Interest expenses, other –8 –6Other –3 –8 –257 –60

Interest expenses on pension liabilities were calculated at an interest rate of 5 (3.9) per cent. The impairment of financial assets relates to participations in Kiruna Stationsfastigheter AB.

Other financial expenses relate mainly to bank and administration costs.

Income from financial instruments reported in operating profit is stated in the fol-lowing table: Group Parent CompanySEK millions 2010 2009 2010 2009Exchange rate gains/losses on receivables and accounts payable 11 10 14 10Net profit/loss on derivatives reported in operating profit 1,152 –1,645 1,154 –1,662 The derivatives reported in operating profit refer mainly to hedging of accounts receivable.

Note 10 AppropriationsParent CompanySEK millions 2010 2009Difference between book depreciation and appreciation according to plan: Underground installations 1 1Buildings and land 1 2Machinery and inventories –561 –608Tax allocation reserve, provisions for the year Tax allocation reserve, reversal for the year 500 294Total –59 –311

Deferred tax on appropriations amounted to SEK –16 million (–82) . Deferred tax is only reported in the consolidated income statement.

Note 11 TaxesReported in income statementGroupSEK millions 2010 2009Current tax expense (–) Tax expense for the period –3,123 –299Adjustment for taxes attributable to previous years –14 26 –3,137 –273Deferred tax expense (–) Deferred tax in regard to temporary differences –130 –200 –130 –200Total reported tax expense in Group –3,267 –473 Parent Company SEK millions 2010 2009Current tax expense (–) Tax expense for the period –2,989 –220Adjustment for taxes attributable to previous years –14 27 –3,003 –193Deferred tax expense (–) Deferred tax in regard to temporary differences –18 –36 –18 –36Total reported tax expense in the Parent Company –3,021 –229 Reconciliation of effective tax Group 2010 2009 SEK millions (%) 2010 (%) 2009 Profit before tax 12,350 1,192Tax according to current tax rate for Parent Company 26.3% –3,248 26.3% –313Non-deductible expenses 0.1% –12 8.6% –102Tax-exempt income –0.1% 11 –1.4% 17Tax attributable to previous years 0.0% –3 –2.3% 27Standard interest on tax allocation reserve 0.4% –42 3.4% –40Other –0.2% 27 5.1% –62Reported effective tax rate 26.5% –3,267 39.7% –473 Parent Company 2010 2009 SEK millions (%) 2010 (%) 2009Profit before tax 11,447 995Tax according to current tax rate for Parent Company 26.3% –3,021 26.3% –262Non-deductible expenses 0.1% –7 1.4% –14Tax-exempt income –0.2% 20 –4.5% 45Tax attributable to previous years 0.0% –3 –2.7% 27Effect of changed tax rates Standard interest on tax allocation reserve 0.4% –41 3.9% –39Other –0.2% 21 –1.4% 14Reported effective tax rate 26.4% –3,021 23.0% –229 Tax attributable to other comprehensive income Group SEK millions 2010 2009Deferred tax attributable to forward exchange contracts 108 –544 108 –544 Tax reported directly against equity Parent Company SEK millions 2010 2009Current tax in Group contributions rendered 18 12 18 12


1093


1094

Reported in the statement of financial position and balance sheet Reported deferred tax assets and liabilities Deferred tax assets and liabilities relate to the following

Deferred Deferred Group tax asset tax liability Net SEK millions 2010 2009 2010 2009 2010 2009Buildings and land 34 11 –37 –7 –3 4Machinery and inventories 94 133 –1,987 –1,804 –1,893 –1,671Pension provisions 289 294 –10 289 284Tax allocation reserves 7 7 –1,697 –1,829 –1,690 –1,822Security reserve –118 –118 –118 –118Cash flow hedges –58 –166 –58 –166Loss carryforward 67 69 67 69Impairments 17 18 17 18Current investments –55 –17 –55 –17Other 8 12 –2 –1 6 –1Tax assets/tax liabilities 516 532 –3,954 –3,952 –3,438 –3,420Offset –516 –532 516 532 Tax assets/tax liabilities, net –3,438 –3,420 –3,438 –3,420 Reported deferred tax assets and liabilities Deferred tax assets and liabilities relate to the following:

Deferred DeferredParent Company tax asset tax liability NetSEK millions 2010 2009 2010 2009 2010 2009Buildings and land 33 28 33 28Machinery and inventories 94 134 94 134Pension provisions 185 166 185 166Other 7 9 7 9Tax assets 319 337 319 337

Change in deferred tax in temporary differences and loss carryforwards Reported in Carrying Other Group Balance income comprehensive Other Balance SEK millions Jan 1, 2009 statement income changes Dec 31, 2009Buildings and land 0 4 4Machinery and inventories –1,285 –386 –1,671Pension provisions 193 91 284Tax allocation reserves –1,906 84 –1,822Security reserve –114 –4 –118Cash flow hedges 369 9 –544 –166Loss carryforward 21 48 69Impairments 45 –27 18Current investments 0 –17 –17Other 1 –2 –1 –2,676 –200 –544 –3,420

Deferred tax expense in regard to loss carryforwards and impairments totaling SEK 48 million relate to the closure of the operation in Greenland Reported in Carrying Other Balance income comprehensive Other Balance SEK millions Jan 1, 2010 statement income changes Dec 31, 2010Buildings and land 4 –7 –3Machinery and inventories –1,671 –222 –1,893Pension provisions 284 4 289Tax allocation reserves –1,822 132 –1,690Security reserve –118 –118Cash flow hedges –166 108 –58Loss carryforward 69 –2 67Impairments 18 –1 17Current investments –17 –38 –55Other –1 3 4 6 –3,420 –130 108 4 –3,438

Note 12 Earnings per shareThe number of shares was 700,000 for both 2010 and 2009. Net income attributable to Parent Company shareholders amounts to SEK 9,083 million (719). Earnings were thus SEK 2,976 (1,027) per share. No options or potential common shares exist, for which reason there is no dilution.

Note 13 Intangible assetsAll of the Group’s intangible assets were acquired. Group MineralSEK millions Goodwill rights Other Total Accumulated costs Opening balance January 1, 2009 218 291 129 638Capital expenditures Change in emissions allowances –34 –34Disposals and retirements –2 –2Exchange rate differences for the year –4 –2 –6Closing balance December 31, 2009 214 289 93 596 Opening balance January 1, 2010 214 289 93 596Capital expenditures 6 6Change in emissions allowances 49 49 Exchange rate differences for the year –18 –18Closing balance December 31, 2010 196 289 148 633 Accumulated amortisations Opening balance January 1, 2009 –1 –161 –21 –183Depreciation for the year –11 –4 –15Disposals and retirements 3 2 5Exchange rate differences for the year 2 –2 0Closing balance December 31, 2009 1 –171 –23 –193 Opening balance January 1, 2010 1 –171 –23 –193Depreciation for the year –11 –4 –15Disposals and retirements –2 –2Exchange rate differences for the year –1 –1Closing balance December 31, 2010 –182 –29 –211 Accumulated impairment losses Opening balance January 1, 2009 –27 –27Impairment losses for the year –66 –66Closing balance December 31, 2009 –93 –93 Opening balance January 1, 2010 –93 –93Impairment losses for the year –8 –8Closing balance December 31, 2010 –8 –93 –101

(cont.)Carrying amounts As of January 1, 2009 217 103 108 428As of December 31, 2009 215 25 70 310 As of January 1, 2010 215 25 70 310As of December 31, 2010 188 14 119 321 Amortisation and impairments are reported in the following lines in the income statement GroupSEK millions 2010 2009Cost of goods sold –23 –81 –23 –81Of which impairments –8 –66

Impairment per asset classGoodwill impairments for the year of SEK 8 million relate to operations in Ger-many. The previous year’s impairment of SEK 66 million relates to the closure of the Minerals Divisions olivine mine on Greenland.

Parent Company MineralSEK millions rights Other TotalAccumulated costs Opening balance January 1, 2009 161 104 265Capital expenditure Change in emissions allowances –34 –34Closing balance December 31, 2009 161 70 231 Opening balance January 1, 2010 161 70 231Capital expenditure 5 5Change in emissions allowances 49 49Closing balance December 31, 2010 161 124 285 Accumulated amortisations Opening balance January 1, 2009 –161 –3 –164Depreciation for the year –2 –2Closing balance December 31, 2009 –161 –5 –166 Opening balance January 1, 2010 –161 –5 –166Depreciation for the year –3 –3Closing balance December 31, 2010 –161 –8 –169 Carrying amounts As of January 1, 2009 0 101 101As of December 31, 2009 0 65 65 As of January 1, 2010 0 65 65As of December 31, 2010 116 116

Impairment requirements for cash-generating units containing goodwillThe following cash-generating units, which form parts of the primary segment Min-erals Division, have significant amounts of goodwill in relation to the Group’s total carrying amount of goodwill: SEK millions 2010 2009Minelco Ltd 112 115Minelco OY 35 41 147 175Units without significant amounts of goodwill, compiled 41 39 188 214

Assessment of the recoverable amounts of cash-generating units is based on the same important assumptions. The impairment test is based on value in use. This value is based on cash-flow forecasts where the first three years are based on the three-year business plan established by the Minerals Division’s corporate management. The total forecast period corresponds to the useful life of the unit’s most important assets. The cash flow forecast after the first three years was based on an annual growth rate of 2 (2) per cent, which corresponds to the long-term growth rate of the unit’s markets. The forecast cash flows were measured at present value with a discount rate of 10 per cent (8) after tax. Important assumptions with respect to the three-year business plan are described below.


1095

Reported in Parent Company Balance income Balance SEK millions Jan 1, 2009 statement Dec 31, 2009Buildings and land 21 7 28Machinery and inventories 181 –47 134Pension provisions 161 5 166Other 10 –1 9 373 –36 337 Reported in Balance income Balance SEK millions Jan 1, 2010 statement Dec 31, 2010Buildings and land 28 5 33Machinery and inventories 134 –40 94Pension provisions 166 19 185Other 9 –2 7 337 –18 319

Important variables Method of estimating valueMarket growth Historically, demand for these products has followed economic cycles. Expected market growth is based on a transition from the prevailing economic situation to the expected long-term growth. Personnel costs Personnel cost forecasts are based on the expected rate of inflation and certain real wage/salary increases. The forecast is in agreement with previous experience.During 2010 a goodwill impairment of SEK 8 million impacted Group earnings. The impairment relates to Minelco GmbH as a result of a lowering of expectations regarding the company’s future development. It is the corporate management’s assessment that no reasonable changes in these assumptions will result in recoverable amounts that are lower than the carrying amounts of the units.

Note 14 Property, plant and equipmentGroup Machinery and other Inventories, Buildings Installations technical tools and ConstructionSEK millions and land underground installations installations in progress TotalCost Opening balance January 1, 2009 5,861 4,111 17,566 2,958 5,669 36,165Acquisitions 55 7 410 91 2,980 3,543Reclassifications 1,498 63 1,163 120 –2,844 Disposals and retirements –16 –1 –221 –52 –68 –358Exchange rate differences 14 –3 6 184 201Closing balance December 31, 2009 7,412 4,180 18,915 3,123 5,921 39,551 Opening balance January 1, 2010 7,412 4,180 18,915 3,123 5,921 39,551Acquisitions 110 4 211 47 3,601 3,973Reclassifications 12 66 489 60 –627 0Disposals and retirements –32 –1 –306 –40 –106 –485Exchange rate differences –137 –109 –13 3 –256Closing balance December 31, 2010 7,365 4,249 19,200 3,177 8,792 42,783 Depreciations Opening balance January 1, 2009 –1,669 –2,864 –8,770 –1,599 –14,902Depreciations for the year –213 –214 –1,141 –244 –1,812Disposals and retirements 9 1 206 49 265Exchange rate differences 3 –9 –4 –10Closing balance December 31, 2009 –1,870 –3,077 –9,714 –1,798 –16,459 Opening balance January 1, 2010 –1,870 –3,077 –9,714 –1,798 –16,459Depreciations for the year –273 –171 –1,112 –265 –1,821Disposals and retirements 9 1 91 29 130Exchange rate differences 5 32 7 44Closing balance December 31, 2010 –2,129 –3,247 –10,703 –2,027 –18,106 Impairments Opening balance January 1, 2009 –389 –399 –572 –10 –1,370Impairment losses for the year –6 –177 –183Exchange rate differences 1 10 11Closing balance December 31, 2009 –394 –399 –739 –10 –1,542 Opening balance January 1, 2010 –394 –399 –739 –10 –1,542Impairment losses for the year –39 –261 –300Disposals and retirements 8 224 232Exchange rate differences 1 19 20Closing balance December 31, 2010 –424 –399 –496 –10 –261 –1,590 Carrying amounts January 1, 2009 3,803 848 8,224 1,349 5,669 19,893December 31, 2009 5,148 704 8,462 1,315 5,921 21,551 January 1, 2010 5,148 704 8,462 1,315 5,921 21,551December 31, 2010 4,812 603 8,001 1,140 8,531 23,087 Tax assessment value Group Dec 31, 2010 Dec 31, 2009Tax assessment value, buildings (Sweden) 2,062 1,225Tax assessment value, land (Sweden) 55 67


1096

Depreciation and impairments are included in the following lines in the income statement Group SEK millions 2010 2009Cost of goods sold 2,092 1,976 Of which impairments 300 183Selling expenses 3 3Administrative expenses 21 10Research and development 5 6 2,121 1,995

Impairments for the year of SEK 300 million relate to acquired buildings and land encroached upon by the impact boundary. The previous year’s impairment of SEK 6 million for buildings and land and SEK 177 million for machines and other technical installations relate to the closure of the Mineral Division’s olivine mine in Greenland.

For information regarding amounts, see Note 29.

Parent Company Machinery and other Inventories, Buildings Installations technical tools and ConstructionSEK millions and land underground installations installations in progress Total Cost Opening balance January 1, 2009 4,946 4,111 16,374 591 3,626 29,648Acquisitions 38 7 363 63 2,502 2,973Reclassifications 12 63 643 57 –775 Disposals and retirements –20 –1 –220 –12 –362 –615Closing balance December 31, 2009 4,976 4,180 17,160 699 4,991 32,006 Opening balance January 1, 2010 4,976 4,180 17,160 699 4,991 32,006Acquisitions 33 4 116 14 3,612 3,779Reclassifications 35 66 465 57 –623 0Disposals and retirements –16 –1 –59 –5 –312 –393Closing balance December 31, 2010 5,028 4,249 17,682 765 7,668 35,392 Depreciations Opening balance January 1, 2009 –1,230 –2,864 –7,820 –434 –12,348Depreciations for the year –184 –214 –1,073 –68 –1,539Disposals and retirements 9 1 206 11 227Closing balance December 31, 2009 –1,405 –3,077 –8,687 –491 –13,660 Opening balance January 1, 2010 –1,405 –3,077 –8,687 –491 –13,660Depreciations for the year –186 –171 –1,028 –54 –1,439Disposals and retirements 6 1 59 4 70Closing balance December 31, 2010 –1,585 –3,247 –9,656 –541 –15,029 Impairments Opening balance January 1, 2009 –387 –399 –495 –9 –1,290Closing balance December 31, 2009 –387 –399 –495 –9 –1,290 Opening balance January 1, 2010 –387 –399 –495 –9 –1,290Impairment losses for the year –39 –261 –300Closing balance December 31, 2010 –426 –399 –495 –9 –261 –1,590 Carrying amounts January 1, 2009 3,329 848 8,059 148 3,626 16,010December 31, 2009 3,184 704 7,978 199 4,991 17,056 January 1, 2010 3,184 704 7,978 199 4,991 17,056December 31, 2010 3,017 603 7,531 215 7,407 18,773 Tax assessment value Parent Company (SEK millions) Dec 31, 2010 Dec 31, 2009Tax assessment value, buildings (Sweden) 2,013 1,181Tax assessment value, land (Sweden) 35 47 Depreciation and impairments are included in the following lines in the income statement Parent Company (SEK millions) 2010 2009Cost of goods sold 1,730 1,529Of which impairments 300 Administrative expenses 4 5Research and development 5 5 1,739 1,539 Impairments for the year of SEK 300 million relate to acquired buildings and land encroached upon by the impact boundary.For information regarding amounts, see Note 29.


1097

Note 16 (cont.)Specification of the Parent Company’s direct ownership of participations in associated companies

Associate company Corp. ID No. and registered office 2010 2009 Voting and Carrying Voting and Carrying Total equity amount equity amount shares share in % (SEK millions) share in % (SEK millions)Swedish associated companiesProgressum AB/556540-0768/Kiruna 120 42.8 0 42.8 0Norrskenet AB/556537-7065/Kiruna 2,500 33.3 0.35 33.3 0.35Expandum AB/556252-3281/Gällivare 1,665 33.3 0.17 33.3 0.17MCC AB/556644-8295/Kiruna 1,000 33.3 0.20 33.3 0.20 Foreign associated companiesFuturum AS/-/Narvik, Norway 500 23.8 0 23.8 0 1 1

Note 17 Receivables from subsidiaries and associated companiesParent Company Receivables from Receivables from subsidiaries associated companiesSEK millions Dec 31, 2010 Dec 31, 2009 Dec 31, 2010 Dec 31, 2009Accumulated costs Opening balance January 1 248 262 40 40Lending 807 28 Amortisation –63 –42 –40 Closing balance December 31 992 248 40 Accumulated impairment losses Opening balance January 1 –1Discounting 0Closing balance December 31 –1 Carrying amount at year end 992 248 0 39 Current receivables from subsidiaries have fallen during the year and amounted at year end to SEK 1,299 million (2,553).Receivables with associated companies have been re-entered as current.


1098

Note 15 Participations in joint ventures GroupThe Group has a 50-per cent interest in the joint venture company Likya Minelco, whose main products are minerals with flame retardant properties (UltraCarb). In the consolidated financial statements, the following items comprise the Group’s share of the joint venture company’s assets, liabilities, income and expenses.

SEK millions 2010 2009Net sales 18 11Expenses –13 –8Profit/loss 5 3 Non-current assets 5 6Current assets 9 7Total assets 14 13 Current liabilities –2 –2Non–current liabilities –1 –3Total liabilities –3 –5Net assets 11 8

Note 16 Parent Company participations in associated companiesParent Company SEK millions Dec 31, 2010 Dec 31, 2009Accumulated costs At beginning of year 2 2Closing balance December 31 2 2 Accumulated impairment losses At beginning of year –1 –1Closing balance December 31 –1 –1 Carrying amount at year end 1 1


1099

Note 18 Financial investmentsGroupSEK millions Dec 31, 2010 Dec 31, 2009Financial investments that are assets Financial assets available for sale Shares and participations 1,435 1,516Financial assets relating to reserves for pension commitments 223 245 1,658 1,761Short-term investments that are current assets Financial assets appraised at fair value in the income statement Shares and participations 1,259 977 Interest-bearing securities 5,257 2,586 6,516 3,563

Financial investments that are fixed assets refer to shares in SSAB appraised at fair value as of Dec 31, 2010 in accordance with IAS 39. The carrying amount of SSAB shares significantly exceeds their cost. Changes in value for the year are reported in other comprehensive income.

Parent Company Dec 31, 2010 Dec 31, 2009Specification of securities Market value Carrying Market value CarryingSEK millions or similar amount or similar amountMoney-market instruments 12,441 12,441 4,649 4,644Listed shares/mutual funds 1,259 1,050 977 917 13,700 13,491 5,626 5,561 The table below describes the maturity profile of discount instruments and government bonds. Group TotalDecember 31, 2009 Carrying Nominal SEK millions < 3 months 3–6 months 7–12 months 13–24 months 25 > months amount amountInterest-bearing securities 2,285 528 147 595 560 4,115 4,007Total 2,285 528 147 595 560 4,115 4,007 Group TotalDecember 31, 2010 Carrying Nominal SEK millions < 3 months 3–6 months 7–12 months 13–24 months 25 > months amount amountInterest-bearing securities 10,064 806 172 493 173 11,708 11,653Total 10,064 806 172 493 173 11,708 11,653

Surplus liquidity is managed according to the financial policy established by the Board. The Group’s maturity profile is considered to be broadly similar to the Parent Company’s. The information in the maturity profile is from the Parent Company.

Note 19 Other non-current securitiesParent Company SEK millions Dec 31, 2010 Dec 31, 2009Accumulated costs At beginning of year 91 89Acquisitions 32 2Closing balance December 31 123 91 The change for the year of SEK 32 million refers to shareholder contributions to Vindin AB Specification of other non-current securities Parent Company December 31, 2010 December 31, 2010 Market value Carrying Market value CarryingSEK millions or similar amount or similar amountSSAB 1,395 83 1,508 83Other 40 40 8 8 1,435 123 1,516 91

Note 20 Non-current receivables and other receivablesGroupSEK millions Dec 31, 2010 Dec 31, 2009Non-current receivables that are assets Receivables from associated companies 0 39Other 16 26 16 65 Other receivables that are current assets PRI balance 16 15VAT asset 110 97Clearing account for taxes 1,006 41Forward exchange contracts (USD) 215 602Other 65 110 1,412 865

Parent CompanySEK millions Dec 31, 2010 Dec 31, 2009Non-current receivables Company-owned endowment insurance 95 107Interest-free loan, Jernbaneverket 16 18Interest-free loan, Banverket 0 17 111 142Other receivables (current) PRI balance 16 15VAT asset 104 93Clearing account for taxes 949 0Other 41 9 1,110 118

Parent Company SEK millions Dec 31, 2010 Dec 31, 2009Non-current receivables Accumulated costs At beginning of year 142 130Lending 18Amortisation –17 Discounting –1 0Change in value, endowment insurance –13 –6Closing balance December 31 111 142

Note 21 InventoriesGroupSEK millions Dec 31, 2010 Dec 31, 2009Raw materials and consumables 1,353 1,433Work in progress 15 21Finished products and goods for sale 706 847 2,074 2,301 Parent CompanySEK millions Dec 31, 2010 Dec 31, 2009 Raw materials and consumables 1,084 1,180 Work in progress 16Finished products 388 456 1,472 1,652

Note 22 Accounts receivableAccounts receivable are reported taking into account bad debts that have arisen in the Group amounting to SEK 1 million (1).

Note 23 Prepaid expenses and accrued income Group Parent Company Dec 31 Dec 31 Dec 31 Dec 31-SEK millions 2010 2009 2010 2009Insurance premiums 5 7 Other 98 223 75 123 103 230 75 123

Note 24 Equity The Group’s specification of the shareholders’ equity item reserves

Translation reserve 2010 2009Opening translation reserve 14 –32Translation differences for the year –123 46Closing translation reserve –109 14

Fair value reserve 2010 2009Opening fair value reserve 1,425 757Financial assets available for sale: Revaluations reported directly in other comprehensive income –112 668Closing fair value reserve 1,313 1,425

Hedge reserve 2010 2009Opening hedge reserve 464 –1,060Cash flow hedges Revaluations reported directly in other comprehensive income –218 630 Dissolved through income statement –194 1,438 Tax attributable to revaluations for the year 108 –544Closing hedge reserve 160 464

Total reserves 2010 2009Opening reserves 1,903 –335Change in reserves for the year: Translation reserve –123 46 Fair value reserve –112 668 Hedge reserve –304 1,524Closing reserves 1,364 1,903

Share capitalAs of December 31, 2010, the registered share capital comprised 700,000 (700,000) common shares. The holder of common shares is entitled to a dividend that is decided by the Annual General Meeting, and each share entitles the holder to one vote. The quota value is SEK 1,000 per share.

Translation reserveThe translation reserve covers all exchange rate differences that arise in the translation of financial reports of foreign operations whose accounts are reported in currencies other than the Group’s reporting currency. The Parent Company and consolidated accounts are reported in SEK.

Fair value reserveFinancial assets available for saleThe fair value reserve includes the accumulated net change in fair value of avail-able-for-sale financial assets up until the assets are removed from the statement of financial position. Any impairment is reported in the income statement.

Hedge reserveThe hedge reserve includes the effective share of the accumulated net change in fair value of cash-flow hedging instruments attributable to hedging transactions that have not yet occurred.

DividendAfter the closing date, the Board has proposed the following dividend, which is subject to approval by the Annual General Meeting on 27 April 2011.

SEK millions 2010 2009SEK 7,143 (714) per common share 5,000 500 5,000 500

The dividend proposed by the Board has been approved by the Annual General Meeting for the past two years.

Parent CompanyRestricted reservesRestricted reserves may not be reduced through dividends.

Statutory reserveThe purpose of the statutory reserve is to save a part of the net profit that is not used to cover loss brought forward.

Non-restricted equityProfit brought forwardComprises the previous year’s non-restricted equity after any dividend has been paid. Together with net profit for the year, it makes up non-restricted equity i.e. the sum that is available for payment as a dividend to shareholders.

Capital managementLKAB’s management of financial risks is regulated by a financial policy approved by the Board. The Currency and Finance Committee prepares and follows the company’s hedging programme and financial guidelines. LKAB defines capital un-der management as shareholders’ equity in the Group, less unrealised exchange loss/profit on outstanding USD futures/options. In 2010 LKAB’s capital under management amounted to SEK 33.3 (24.9) billion. According to Board policy, the Group’s financial goal is to maintain a good capital structure and financial stability, and thereby secure a foundation for con-tinued growth of business operations and future changes in the community. The Board’s ambition is to maintain a balance between high yield and the benefits and security afforded by a sound capital structure. The Group’s objective is to achieve a return on equity of 10 per cent. In 2010, return on equity was 30.9 (2.8) per cent. In comparison, the average interest income on interest-bearing investments was 0.87 (1.9) per cent. LKAB’s dividend policy means that the dividend to the owner will, over the long term, amount to 30 to 50 per cent of profit after tax and be adapted to the aver-age earnings level over one business cycle. The proposed dividend of SEK 5 000 million (500) is equivalent to 55 per cent (70) of the previous year’s earnings after tax. No changes to Group capital management were made during the year. LKAB Försäkring AB is the only subsidiary with a statutory capital requirement which on closing day amounted to EUR 3,200,000, equivalent to SEK 29 million (33).


10100

Note 25 PensionsDefined-benefit pension plansGroupSEK millions 2010 2009Present value of unfunded obligations 2,165 2,282Present value of wholly or partially funded obligations 1,082 1,089Total present value of obligations 3,247 3,371Fair value of plan assets –1,088 –1,022Present value of net obligation 2,239 2,382 Unreported actuarial gains (+) and losses (–) –569 –615Net reported obligation, defined-benefit plans 1,670 1,734

The net amount is reported in the following statement of financial position items:Financial investments –223 –245Provisions for pensions, non–current liability 1,893 1,979Net amount in statement of financial position 1,670 1,734

Defined-benefit pension plansMost of LKAB’s pension plans for employees in Sweden are defined-benefit plans, which means that LKAB guarantees pensions based on a certain percentage of salary. Pension commitments in Sweden are secured by the company mainly via provisions reported in the statement of financial position, whereof most are secured through credit insurance in FPG (Försäkringsbolaget PRI Pensionsgaranti). Promises of future retirement before the age of 65 are to a certain degree contin-gent upon underground work and are secured by the company via provisions, in the statement of financial position, without credit insurance. Commitments for retirement pensions and survivor benefits for salaried em-ployees in Sweden are insured by Alecta. According to a pronouncement from the Swedish Financial Reporting Board, UFR 3, this is a defined-benefit plan that involves several employers. The company has not had access to such information as is necessary for reporting this obligation as a defined-benefit plan. The ITP pension plan insured via Alecta is therefore reported as a defined-contribution plan. Alecta’s surplus can be distributed to the policyholders and/or the insured parties. At the end of 2010, Alecta reported a plan surplus of 136 per cent (141), which was below the normal spread of 125–155 per cent stated in Alecta’s consolidation policy for these plans. For employees in Belgium, Norway, the UK and Germany, LKAB has defined-benefit plans as a complement to social insurance. In Belgium, pensions are secured via pension insurance; in the UK, via a company-managed pension fund and in Germany via provisions reported in the balance sheet and through credit insurance. In Norway, pensions are secured via a company-managed superan-nuation fund, via provisions reported in the balance sheet and through credit insurance.

Changes in present value of obligations for defined-benefit plansGroupSEK millions 2010 2009Net obligation for defined-benefit plans as of January 1. 3,371 3,156Compensation paid –196 –184Costs for employment during current period 70 95Interest expense 131 134Actuarial gains and losses 27 126Effect of premium-based mine policy and adjustments in Norway –42 Exchange rate differences –114 44Net obligation for defined-benefit plans as of December 31. 3,247 3,371

Changes in fair values of plan assets GroupSEK thousands 2010 2009Fair value of plan assets as of January 1 1,022 975Charges from the employer 30 59Compensation paid –56 –54Assumed return 56 62Difference between assumed and actual return (actuarial gain or loss) 20 –41Exchange rate differences –64 21Fair value of plan assets as of December 31 1,008 1,022

Of plan assets funded through funds in England and Norway in 2010 30 per cent was invested in shares and 70 per cent in interest-bearing securities. The actual return in 2010 amounted to SEK 76 million (21).

Cost reported in income statementGroupSEK millions 2010 2009Costs relating to employment during current period 70 95Interest expense for obligation 131 134Assumed return on plan assets –56 –62Effect of premium-based mine policy and settlements in Norway –42 Unreported actuarial gains (–) and losses (+) 31 66Total net cost in income statement 134 233

The costs are reported on the following lines in the income statement:GroupSEK millions 2010 2009Cost of goods sold 59 161Income from financial items (reported in net financial income/expense) –56 –62Financial expenses (reported in net financial income/expense) 131 134 134 233

Assumptions for defined-benefit obligationsSignificant actuarial assumptions as of closing day (expressed as weighted averages)GroupPer cent 2010 2009Discount rate, December 31 4.0 4.0Assumed return on plan assets, December 31 5.0 5.0Future salary increase 3.0 3.0Employee turnover 3.5 3.5Future increase in pensions 2.0 2.0 Assumptions refer to the Swedish liabilityAssumed future mortality rate is based on published statistics and mortality fig-ures. The average life expectancy (years of life remaining) for an individual who retires at 65 years of age is 18 years for men and 20 years for women. The total assumed long-term return on plan assets is 5.0 per cent (with certain deviations in Belgium and the UK). The assumed long-term return is based on the plan assets portfolio as a whole and not on the sum of the returns on the individual assets. The actual return for 2010 was 7 per cent.

Sensitivity analysis discount rate GroupSEK millions –1% 1%Change in pension obligations 2010 160 –141

Only Swedish pension obligations are included in calculations of changes in pension obligations.

Historical information GroupSEK millions 2010 2009 2008 2007 2006Present value of defined- benefit obligations 3,247 3,371 3,156 3,054 2,862Fair value of plan assets –1,008 –1,022 –975 –1,031 –917Net obligations 2,239 2,349 2,181 2,023 1,945 Experience-based adjustment of plan assets 20 –41 –141 26 1Experience-based adjustment of defined-benefit obligations 16 17 88 –57 7

The Group estimates that SEK 30 million will be paid to funded and unfunded defined-benefit plans in 2011, and an estimated SEK 25 million will be paid to the defined-benefit plans that are reported as defined-contribution plans.


10101

Parent Company pension obligationSEK millions 2010 2009PRI 521 509Other provisions subject to Pension Obligations Vesting Act 201 229Provisions not subject to Pension Obligations Vesting Act 629 633 1,351 1,371Of which credit guarantees via FPG/PRI 722 738

Capital value of pension obligations under the company’s own managementParent CompanySEK millions 2010 2009Capital value of pension obligations at beginning of year 1,371 1,335Cost excluding interest expense charged to income statement 57 111Interest expense 37 28Pension obligation transferred 5Pension disbursements –114 –108Capital value of pension obligations at year end 1,351 1,371

Costs associated with pensionsParent CompanySEK millions 2010 2009Company-managed pension schemes Cost excluding interest expense 57 111Interest expense 37 28Costs for company-managed pension schemes 94 139Insured pension schemes Insurance premiums 189 79Sub-total 283 218Capital gains tax on pension funds 3 4Special contribution tax on pension expenses 64 43Expenses for credit insurance, administration expenses, other 4 2Reported net expense attributable to pensions 354 267

The net pension expenses are reported on the following lines in the income state-ment:Parent CompanySEK millions 2010 2009Financial expenses (reported in net financial income/expense) 37 28Operating expense 317 239 354 267

The financial costs are calculated at an interest rate of 5 per cent.

Assumptions for defined-benefit obligationsSignificant actuarial assumptions as of closing day (expressed as weighted averages)

Parent CompanyPer cent 2010 2009Discount rate, December 31 3.8 3.8

The Parent Company estimates that SEK 2 million will be paid to defined-benefit plans in 2010. Assumptions are based on current salary levels per closing day

Defined-contribution pension plansIn Sweden, the Group has defined-contribution pension plans for which the company assumes full cost. In foreign subsidiaries, defined-contribution plans are financed partly by the companies and partly by contributions paid by the employees. Premiums for these plans are paid on a current basis in accordance with regu-lations for each plan.

Group Parent CompanySEK millions 2010 2009 2010 2009Costs for defined-contribution pension plans 199 84 184 68

During 2010 retirement solutions amounting to SEK 53 million (5) were paid out. On January 1, 2010 a defined-contribution mine pension was introduced that impacted Parent Company earnings by SEK 34 million and SEK 37 million in the Group.


10102

Note 26 ProvisionsGroupSEK millions Dec 31, 2010 Dec 31, 2009Provisions Urban transformations 4,251 1,991Carbon dioxide emissions allowances 75 122Remediation expenses 144 42Other 16 Total 4,486 2,155

Parent CompanySEK millions Dec 31, 2010 Dec 31, 2009Provisions Urban transformations 4,251 1,991Carbon dioxide emission allowances 75 108Remediation expenses 144 42Total 4,470 2,141

Provisions for urban transformations relate to compensation expenses in Kiruna and Malmberget caused by ground deformations attributable to mining thus far. Group Community Emission Other SEK millions transformation allowances provisions TotalIB 2009 2,224 93 142 2,459Emissions for the year 42 42Settlement of previous year’s emissions –93 –93Reversal of provisions –89 –89Utilised provisions –144 –20 –164UB 2009 1,991 42 122 2,155Of which paid out during 2010 42 42Of which for pay out after 2010 1,991 122 2,113

IB 2010 1,991 42 122 2,155Provisions for the year 2,698 38 2,736Emissions for the year 75 75Settlement of previous year’s emissions –42 –42Reversal of provisions –100 –100Utilised provisions –338 –338UB 2010 4,251 75 160 4,486Of which paid out during 2011 655 75 730Of which for pay out between 2012–2018 3,596 3,596Of which for pay out after 2018 160 160

Refer to Note 1 item 28 for information regarding urban transformation expenses.SEK 730 million (42) are reported as current liabilities and SEK 3,756 million (2,113) as non-current liabilities in the statement of financial position. Parent Company Community Emission Other SEK millions transformation allowances Provisions TotalIB 2009 2,224 93 112 2,429Provisions for the year 42 42Emissions for the year –93 –93Settlement of previous year’s emissions Reversal of provisions –89 –89Utilised provisions –144 –4 –148UB 2009 1,991 42 108 2,141Of which paid out during 2010 42 42Of which for pay out after 2010 1,991 108 2,099

IB 2010 1,991 42 108 2,141Provisions for the year 2,698 36 2,734Emissions for the year 75 75Settlement of previous year’s emissions –42 –42Reversal of provisions –100 –100Utilised provisions –338 –338UB 2010 4,251 75 144 4,470Of which paid out during 2011 655 75 730Of which for pay out between 2012–2018 3,596 3,596Of which for pay out after 2018 144 144

Note 27 Accrued expenses and prepaid income Group Parent CompanySEK millions Dec 31, 2010 Dec 31, 2009 Dec 31, 2010 Dec 31, 2009Electricity 101 63 89 54Payroll and employee costs 499 360 427 302Accrued accounts payable 395 384 363 312Other 169 243 122 82 1,164 1,050 1,001 750

Note 28 Significant risks and uncertaintiesIn addition to the information below, see the Financial Risks section in the Report of the Board of Directors for further information. The Group’s transaction exposure is distributed over the following contract currencies:

2010 2009 Effect on Effect on Effect on Effect onCurrency Amount Change Profit/loss Equity Amount Change Profit/loss EquityUSD 3,200 SEK 0.1 320 49 1,422 SEK 0.1 142 45NOK 531 SEK 0.1 53 327 SEK 0.1 33 EUR 52 SEK 0.1 5 25 SEK 0.1 3 GBP 0 SEK 0.1 0 0 SEK 0.1 0

Transaction exposure in US dollars during 2010 was hedged to 1,940 (1,485) or 61 (104) per cent via currency derivatives. No ineffectiveness in hedging affected the financial result (SEK 67 million) negatively. The effect on equity due to changes in the underlying currency exchange rates is calculated based on a model using prices from Reuters.

Outstanding on closing day, including forward exchange contracts (selling con-tract) reported in revenue Maturity USD millions Hedging rate2011 –880 7.23

The Group applies hedge accounting for USD and classifies its forward contracts and option contracts used to hedge forecast transactions as cash flow hedges. The fair value of forward exchange contracts and option contracts used to hedge forecast flows amounted to SEK 215 million (602) as of December 31, 2010.

Translation exposureLKAB does not normally hedge its translation exposure as this is not considered to add any value for the Group over time, even though the level of exposure has increased in recent years due to the expansion of the Minerals Division. Transla-tion exposure in the Group refers to foreign net assets within the Group.

Translation exposure (millions, local currency)GroupSEK millions 2010 2009EUR 8 6GBP 34 37USD 0 0SGD 1 1DKK 1 1NOK 717 699CNY 21 18HKD 92 81

Fair valueCarrying amounts and fair value of financial instruments in the Group are stated below:

Group 2010 Items reported at fair value in the income statement Financial Derivatives Financial assets Held used in Trade assets Total Total fair value in for hedge loan held Other carrying fairSEK millions the option sale accounting receivables for sale liabilities amount valueShares, financial assets 1,435 1,435 1,435Shares, current holdings 1,259 1,259 1,259Interest-bearing instruments, current holdings 5,256 5,256 5,256Non-current receivables 17 17 17Trade and other receivables 4,592 4,592 4,592Cash and cash equivalents* 7,199 848 8,047 8,047Forward exchange contracts (USD) 215 215 215Other accrued income 103 103 103Total 13,731 215 5,543 1,435 20,924 20,924 Trade payables 1,471 1,471 1,471Other liabilities 228 228 228Accrued expenses 1,164 1,164 1,164Total 2,863 2,863 2,863

* Cash and cash equivalents incl. cash-equivalent current investments.The maximum credit risk exposure on closing day, December 31, 2010 amounted to SEK 18,230 million.LKAB has no financial assets that have reached maturity or impairments that have resulted in credit losses.LKAB’s SEK 5 billion credit facility remained unutilized as of December 31, 2010.


10103

Group 2009 Items reported at fair value in the income statement Financial Derivatives Financial assets Held used in Trade assets Total Total fair value in for hedge loan held Other carrying fairSEK millions the option sale accounting receivables for sale liabilities value valueShares, financial assets 1,516 1,516 1,516Shares, current holdings 977 977 977Interest-bearing instruments, current holdings 2,586 2,586 2,586Non-current receivables 65 65 65Trade and other receivables 2,513 2,513 2,513Cash and cash equivalents* 2,083 548 2,631 2,631Forward exchange contracts (USD) 602 602 602Other accrued income 230 230 230Total 5,711 602 3,291 1,516 11,120 11,120 Trade payables 1,185 1,185 1,185Other liabilities 149 149 149Accrued expenses 1,050 1,050 1,050Total 2,384 2,384 2,384

* Cash and cash equivalents incl. cash-equivalent current investments.The maximum credit risk exposure on closing day, December 31, 2009 amounted to SEK 8,627 million.LKAB has no financial assets that have reached maturity or impairments that have resulted in credit losses.During the year LKAB arranged a SEK 5 billion credit facility that was unutilized as of December 31, 2009.


10104

Maturity analysis, liabilities

Group 2010 < 1 1–3 3–12SEK millions month months months Total Trade payables 1,037 34 0 1,071Other liabilities 106 1,427 1,533Accrued expenses 582 60 273 915Total 1,725 94 1,700 3,519

Group 2009 < 1 1–3 3–12SEK millions month months months Total Trade payables 589 19 10 618Other liabilities 58 1,009 1,067Accrued expenses 398 93 295 786Total 1,045 112 1,314 2,471

The Group’s maturity profile is considered to be broadly similar to the Parent Company’s. The information above is from the Parent Company. Derivative liabili-ties are lacking in the Parent Company and Group. The US dollar hedges have a surplus value of SEK 215 million (602). Maturity is 12 months.

Other information on financial instruments

The following tables show how the fair value was determined in financial instru-ments reported at fair value in the statement of financial position. A breakdown of how fair value is determined is carried out on three levels.

Level 1: according to prices quoted on an active market for such instrumentsLevel 2: according to direct or indirect observable market data not included in level 1.Level 3: according to input data that is not observable on the market.

Group 2010 SEK millions Level 1 Level 2 Level 3 TotalShares, financial assets 1,435 1,435Shares, current holdings 1,259 1,259Interest-bearing instruments 4,874 382 5,256Non-current receivables 17 17Cash and cash equivalents 7,199 7,199Forward exchange contracts (USD) 215 215Total 14,767 614 15,381

Group 2009 SEK millions Level 1 Level 2 Level 3 TotalShares, financial assets 1,516 1,516Shares, current holdings 977 977Interest-bearing instruments 2,277 309 2,586Non-current receivables 65 65Cash and cash equivalents 2,083 2,083Forward exchange contracts (USD) 602 602Total 6,853 976 7,829

The category ‘interest-bearing instruments’ (Level 2) refers to bond obligations that are reported at prices quoted on the bond and derivatives market. Non-current receivables (Level 2) are valuated at present value of capital cash flows. Forward exchange contracts (Level 2) are calculated based on a model using prices from Reuters.

Fair value calculationThe following is a summary of the principal methods and assumptions used in deter-mining the fair value of financial instruments reported in the table above.

SecuritiesFor listed financial assets, fair values correspond to the asset’s buying rate on the closing date.

Derivative instrumentsForward exchange contracts are calculated at current market prices by using quoted market prices. The discount rate used is the market interest rate on similar instruments quoted on closing day.

Other receivables and liabilitiesThe carrying amount of other receivables and liabilities is equivalent to fair value.

Note 29 Contractual obligationsAt year-end, the Group’s remaining contractual obligations to acquire property, plant and equipment amounted to SEK 3,871 million (2,722). Of these obliga-tions, SEK 2,504 million (2,043) is expected to be settled during the following financial year.

The Parent Company’s obligations amounted to SEK 3,558 million (2,245), of which SEK 2,206 million (1,572) is expected to be paid during 2011.

Group Parent Company Dec 31 Dec 31 Dec 31 Dec 31SEK millions 2010 2009 2010 2009Assets pledged In the form of assets pledged for liabilities and provisions Property mortgages 1 1 Corporate mortgages 2 2 Listed shares for which options have been exercised Company-owned endowment insurance 95 107 95 107 Deposit of cash and cash equivalents 153 116 153 116Total assets pledged 251 226 248 223 Contingent liabilities Guarantees, FPG/PRI 15 15 10 10 Guarantees, GP plan 5 6 3 3 Sureties for the benefit of subsidiaries 110 133 Deficit in pension fund, England 26 26 Other 47 60 7 2 Forward exchange contracts Total contingent liabilities 67 107 130 174

Company-owned endowment insurance covers pension obligations for the Presi-dent, former President and senior executives (Group Management) according to the earlier defined-benefit pension agreement. The value of endowment insurance decreases as pension payments are disbursed. The deposit of cash and cash equivalents is intended to cover remediation costs and other costs associated with the eventual closure of mine operations. Guarantee undertakings for PRI Pensionstjänst and the Mine Pension cor-respond to 2 per cent of the obligations on the closing date. The obligation in PRI relates to ITP2 premiums for salaried employees and the vested obligation to employees participating in the mine pension being carried as liabilities.

Note 30 Pledged assets and contingent liabilities

Note 31 Related partiesThe Group is subject to the controlling influence of the Swedish state. Aside from the close relationships that the Parent Company has with its subsidiaries (see Note 32), the Group has related-party transactions with Vattenfall AB and the Swedish Transport Administration.

Summary of related-party transactions Group Sales of Interest and Purchase of Liabilities Receivables goods to dividend goods from related parties related partiesRelated-party relationship Year related party (net) related party December 31 December 31Associated companies 2010 16 2 39Associated companies 2009 15 2 39 Parent Company Sales of Interest and Purchase of Liabilities Receivables goods to dividend goods from related parties related partiesRelated-party relationship Year related party (net) related party December 31 December 31Subsidiaries 2010 496 100 3,020 1,233 2,291Subsidiaries 2009 299 165 2,248 1,171 2,801 Associated companies 2010 16 2 39Associated companies 2009 15 2 39

LKAB has secured a major part of its electricity deliveries at indexed prices through signing long-term energy agreements with Vattenfall in 1998 and 2005. One third of the Vattenfall agreement portfolio matured at the beginning of 2010 and this volume of electricity is exposed to the Nordic spot market. Electricity purchases amounted to 2,235 (1,547) GW.

LKAB’s mining activities have affected the existing railway installations and has made it impossible for the installations to remain in their current location. LKAB compen-sates the Swedish Transport Administration for expenditures arising from the construction of new railway installations. Purchases from the Swedish Transport Administra-tion amounted to SEK 305 million (89).

In 1997 LKAB made a participating loan with a nominal amount of SEK 40 million to the associated company Norrskenet AB.Interest is paid annually and amounted to SEK 520 thousand (212) in 2010.The loan will be completely amortised in 2011 at which time profit sharing takes place.

Transactions with key individuals in leading positions are reported in Notes 6 and 25.

Transactions with related parties are priced and conducted in accordance with commercial principles.


10105

Note 32 Group companiesParent CompanySEK millions Dec 31, 2010 Dec 31, 2009Accumulated costs At beginning of year 1,400 775Capital contribution 625Closing balance December 31 1,400 1,400

Specification of the Parent Company’s and Group’s ownership of participations in subsidiaries Dec 31, 2010 Dec 31, 2009 Total Shares in % Shares in % Carrying Carrying Subsidiary / Corp. ID No. / Registered office shares 2010 2009 amount amountSwedish subsidiariesFastighets AB Malmfälten /556009-8849/ Kiruna 5,000 100.0 100.0 0 0Wassara AB /556331-8566/ Stockholm 20,000 100.0 100.0 10 10AB Kiruna Grus & Stenförädling /556074-8237/ Kiruna 24,000 100.0 100.0 47 47LKAB Nät AB /556059-9796/ Kiruna 10 100.0 100.0 0 0Minelco AB /556223-1786 /Luleå 2,000,000 100.0 100.0 225 225LKAB Försäkring AB /516406-0187/ Luleå 10,000 100.0 100.0 100 100Malmtrafik i Kiruna AB /556031-4808/ Kiruna 208,000 100.0 100.0 252 252Kiruna Stationsfastigheter AB /556736-3840 1,000 100.0 0

Foreign subsidiariesLKAB Norge AS /918 400 184/Narvik, Norway 300,000 100.0 100.0 763 763LKAB Far East Pte Ltd /198401144W/ Singapore, Singapore 200,000 100.0 100.0 1 1 LKAB S.A. /403 455 761/ Brussels 100 100.0 100.0 0 0LKAB Schwedenerz GmbH /HRB 718/ Essen 100 100.0 100.0 2 2Total, Parent Company 100.0 100.0 1,400 1,400

Indirect ownership via the subsidiary Minelco AB Minelco B.V. /24236591/ Breda, The Netherlands 100.0 100.0Minelco Inc /02-0551509/ Cincinnati, USA 100.0 100.0Minelco GmbH /HRB 16692/ Essen, Germany 100.0 100.0Minelco Asia Pacific Ltd /876455/ Hong Kong 100.0 100.0Microfine Minerals Ltd /0245817/ Welton, UK 100.0 100.0Minelco OY /1934671-4/ Helsinki, Finland 100.0 100.0Minelco AS/A/S277716/ Nuuk, Greenland 100.0 100.0Minelco Limited / 04621769/ Derby, UK 100.0 100.0 Minelco Tianjin Minerals Co /70051551-5/ Dongli District Tianjin, China 100.0 100.0 Minelco Minerals Ltd /00103751/ Derby, UK 100.0 100.0 Quay Minerals Ltd /02732626/ Flixborough, UK 100.0 100.0 Tianjin Jindalai Mineral /60089030-X/ Dongli District Tianjin, China 100.0 100.0 Fergusson Wild & Co Ltd /2529921/ West Sussex, UK 100.0 100.0 Fordamin Company Ltd /00925517/ UK 100.0 100.0 Minelco Specialities Ltd /1151578/ Derby, UK 100.0 100.0 Microfine Hellas A.E. /–/ Thessalonica, Greece 100.0 100.0

Indirect ownership via the subsidiary AB Kiruna Grus & StenförädlingAB KGS Mekaniska /556013-3059/ Kiruna 100.0 100.0Kimit AB /556190-6115/ Kiruna 100.0 100.0

Indirect ownership via the subsidiary Malmtrafik i Kiruna ABMalmtrafikk AS /974 644 991/ Narvik, Norway 100.0 100.0

Indirect ownership via the subsidiary Fastighets AB MalmfältenJägarskolan Fastigheter AB /556594-9095/ Kiruna 100.0 100.0

Indirect ownership via the subsidiary Wassara AB Wassara Limitada/ Santiago/ Chile 100.0 100.0


10106


10107

Note 33 Untaxed reservesParent CompanySEK millions Dec 31, 2010 Dec 31, 2009Accumulated depreciations in excess of plan: Buildings and land Opening balance January 1 8 10Depreciations in excess of plan for the year Accelerated depreciation dissolved –1 –2Closing balance December 31 7 8 Machinery and inventories Opening balance January 1 5,282 4,674Depreciations in excess of plan for the year 561 608Closing balance December 31 5,843 5,282 underground installations Opening balance January 1 1 2Disposals, retirements and dissolution –1 –1Closing balance December 31 0 1 Tax allocation reserves Allocated at 2003 assessment Allocated at 2004 assessment 500Allocated at 2005 assessment 1,410 1,410Allocated at 2006 assessment 1,400 1,400Allocated at 2007 assessment 1,275 1,275Allocated at 2008 assessment 2,200 2,200Closing balance December 31 6,285 6,785 Total untaxed reserves 12,135 12,076

Note 34 Statement of cash flowCash and cash equivalents – GroupSEK millions Dec 31, 2010 Dec 31, 2009The following sub-components are included in cash and cash equivalents: Cash and bank balances 847 548Current investments, equivalent to cash1) 7,207 2,091Exchange rate differences in cash and cash equivalents –8 –8Total according to statement of financial position and statements of cash flow 8,046 2,631

Cash and cash equivalents – Parent CompanySEK millions Dec 31, 2010 Dec 31, 2009The following sub-components are included in cash and cash equivalents: Cash and bank balances 639 333Current investments, equivalent to cash1) 7,207 2,091Exchange rate differences in cash and cash equivalents –8 –8Total according to balance sheet and statements of cash flow 7,837 2,416

1) Cash and cash equivalents include current investments (money-market instru-ments) that have been classified as cash equivalents according to the following:• They entail insignificant risk of value fluctuations.• They can be easily converted to cash.• They have a maturity of at most three months from date of acquisition.

Shares and participationsSEK millions Dec 31, 2010 Dec 31, 2009Opening balance 977 573Purchase of shares and participations 2,575 1,942Sale of shares and participations –2,502 –1,598Unrealised capital gains, shares and participations 209 60Shares and participations according to balance sheet 1,259 977

Interest paid and dividends received Group Parent CompanySEK millions 2010 2009 2010 2009Dividends received 31 65 80 172Interest received 48 11 101 136Interest paid –56 –14 –110 –59 –7 62 71 249

Adjustments for items not included in cash flow Group Parent CompanySEK millions 2010 2009 2010 2009Depreciations 1,838 1,827 1,441 1,542Impairments 308 249 307 Exchange rate differences 88 –156 Unrealised interest differences on forward exchange contracts –26 159 Income from sale and retirement of property, plant and equipment 26 20 26 26Provisions for pensions and similar commitments –64 106 –20 36Other provisions 2,304 –253 2,289 –237Other items that do not affect liquidity 7 –2 4,450 1,952 4,044 1,365

Change in operating capital

Group operating capital was affected by SEK 386 million relating to a change in a hedge reserve reported in Group equity. The amount did not affect the Group’s cash flow and is therefore not included in change in operating capital in the cash flow statement. The corresponding amount for 2009 was SEK 1,909 million.

Tax paid Group Parent CompanySEK millions 2010 2009 2010 2009Tax expense according to income statement –3,267 –473 –3,021 –229Change in tax assets/liabilities 288 59 240 30Adjustment for deferred tax 130 201 18 36Adjustment for tax effect of Group contributions 18 12 –2,849 –213 –2,745 –151

Acquisition of subsidiariesGroupSEK millions 2010 2009Investment properties Intangible assets Buildings and land 9 Machinery and inventories Current receivables Total assets 9 Deferred tax 2 Current liabilities Total provisions and liabilities 2 Purchase sum: Deducted: Cash and cash equivalents in the acquired business 7 Effect on cash and cash equivalents 7

The Board of Directors and President propose that unappropriated earnings of SEK 19,783 million be distributed as follows: Dividend, 700,000 shares x SEK 7,143 per share SEK 5,000 millionFunds to be carried forward SEK 14,783 millionTotal SEK 19,783 million

Proposed disposition of unappropriated earnings

Authorization by the Board of DirectorsThe Board of Directors and President hereby certify that the consolidated accounts and annual report were prepared in accordance with International Account-ing Standards, referred to in the regulation of the European Parliament and the Council of Ministers (EG) No. 1606/2002 of July 19, 2002, concerning the application of international accounting standards and generally accepted ac-counting principles, and give a true and fair view of the Group and the Parent Company’s position and results. The Report of the Board of Directors for the Group and the Parent Company gives a true overview of the activities, results and financial position of the company and Group and also describes the significant risks and uncertainties to which the Parent Company and the other companies in the Group are exposed.

D I S T R I B U T I O N O F E A R N I N G S

10108


Björn Sprängare Chairman

Christer Berggren Stina Blombäck Per-Ola Eriksson Lars-Åke Helgesson Board member Board member Board member Board member

Anna-Greta Sjöberg Egil M. Ullebö Maija-Liisa Friman Hanna Lagercrantz Board member Board member Board member Board member

Tomas Nilsson Jan Thelin Tomas Kohkoinen Employee representative Employee representative Employee representative

Lars-Eric Aaro President

The annual report, consolidated accounts and sustainability report were approved for issuance by the Board of Directors on and CEO on March 23, 2011. The consolidated income statement, statement of financial position and the Parent Company’s income statement and balance sheet will be subject to adoption

by the Annual General Meeting on April 27, 2011.

Our Audit Report was submitted on March 23, 2011.

Caj Nackstad Filip Cassel Authorised public accountant Authorised public accountant Chief accountant Appointed by the Swedish National Audit Office KPMG AB

Auditors’ Report

A U D I T O R S ’ R E P O R T

10109

To the Annual General Meeting of Luossavaara-Kiirunavaara ABCorp. ID. No. 556001-5835

We have audited the annual accounts, the consolidated accounts, the accounting records and the administration of the Board of Directors and the President of Luossavaara-Kiirunavaara AB for the year 2010. The company’s annual report and consolidated accounts are presented on pages 61-108 of the print version of this document. The Board of Directors and the President are responsible for these accounts and the administration of the company as well as for the application of the Annual Accounts Act when preparing the annual accounts and the application of International Financial Reporting Standards (IFRS) as adopted by the EU when preparing the consolidated accounts. Our responsibility is to express an opinion on the annual accounts, the consolidated accounts and the administration based on our audit.

We conducted our audit in accordance with generally accepted auditing standards in Sweden. Those standards require that we plan and perform the audit to obtain high but not absolute assurance that the annual accounts and the consolidated accounts are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the accounts. An audit also includes assessing the accounting principles used and their application by the Board of directors and the President and significant estimates made by the Board of directors and the President when preparing the annual accounts and the consolidated accounts as well as evaluating the overall presentation of information in the annual accounts and the consolidated accounts. As a basis for our opinion concerning discharge from liability, we examined significant decisions, actions taken and circumstances of the company in order to be able to determine the liability, if any, to the company of any board member or the President. We also examined whether any board member or the President has, in any other way, acted in contravention of the Companies Act, the Annual Accounts Act or the Articles of Association. We believe that our audit provides a reasonable basis for our opinion set out below.

The annual accounts have been prepared in accordance with the Annual Accounts Act and give a true and fair view of the company’s financial position and results of opera-tions in accordance with generally accepted accounting principles in Sweden. The consolidated accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and the Annual Accounts Act and give a true and fair view of the Group’s financial position and results of operations. The administration report is consistent with the other parts of the annual accounts and the consolidated accounts.

We recommend to the Annual General Meeting of shareholders that the income statements and balance sheets of the Parent Company and the Group be adopted, that the profit of the Parent Company be dealt with in accordance with the proposal in the administration report and that the members of the Board of Directors and the President be discharged from liability for the financial year.


KPMG AB

Caj Nackstad Filip CasselAuthorised public accountant Authorised public accountant Appointed by the Swedish National Audit Office

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Sustainability Management within LKAB

Work within the group is based on LKAB’s vision and business concept. It is neces-sary for LKAB to act in a manner sustaina-ble over the long term if customers and the surrounding world are to continue to have confidence in the company’s business op-erations. Systematic sustainability efforts have a part in the development of the com-pany’s business. The Board of Directors is ultimately re-sponsible for LKAB’s sustainability efforts and has delegated the task of internally following up these efforts and of produc-ing this sustainability report to the Audit Committee. LKAB has a number of Group policies that provide a framework for each employ-ee’s actions and which support the com-pany’s strategy and sustainability efforts. All of the policies were resolved by LKAB’s Board of Directors

•Qualitypolicy• Environmentandenergypolicy• Ethicspolicy• Personnelpolicy• Informationpolicy• Financialpolicies

The operational responsibility for sustain-abilitylieswiththePresidentandCEOwho have appointed a steering committee tasked with managing the overarching sus-tainability issues in day-to-day operations. The steering committee comprising the di-rectorsfortheGroupunitsFinance,Com-munications,HR,UrbanTransitionandTechnology & Business Development. A reorganisation within the Group was carried out at the end of 2010 and respon-sibility for sustainability issues was trans-ferred from Communications to the Tech-

nology & Business Development unit. The 2010 sustainability report was pre-pared in collaboration with expertise with-inFinance,Communications,Environ-ment,HRandUrbanTransformation.Thework is also followed by LKAB’s internal quality auditors. Forcorporategovernanceissues,pleaserefertotheCorporateGovernanceReporton page 52.

Financial ManageMentLKAB is a publicly listed company whol-ly owned by the Swedish State. The own-er’s overarching objective is to create val-ue,andLKAB’sassignmentistodevelopa successful operation through the extrac-tion,processingandsaleofminerals.LK-AB’s financial policies aim to safeguard soundfinanceswithinthecompany,andanumber of financial targets measure how well LKAB is generating and delivering fi-nancial results over time. In addition to the financial value gen-erated and distributed to interested par-tiesintheformofdividendstoowners,re-munerationstoemployees,purchasesfromsuppliersandtaxestosociety,LKABcon-tributes indirectly to local businesses in ar-easwhereitoperates,e.g.intheformofcommunityinvestments.Moreover,LKABsponsorslocalinterestswithineducation,culture and sport.

ManageMent oF enviRonMental WoRkThe president of LKAB has overall respon-sibilityforenvironmentalissues.Opera-tional environmental work and responsibil-ity for said work is delegated to divisional and unit heads and on to operational man-agers. The quality department together with the head of environment handle day-

to-day issues regarding the external envi-ronment. Because mining operations are considered to have a wide-ranging affect on the envi-ronmentandsurroundings,theyarestrict-ly governed by legislation and regulations LKAB always pays attention to environ-mentalaspectsinitsdecisionsandactions,and it strives to achieve environmentally sustainable,profitabledevelopment. LKAB’s environment and energy pol-icy forms the basis for the management ofenvironmentalefforts,andanenviron-mental management system certified to ISO14001ensuresthattheworkisper-formedinastructured,systematicmannerthroughout the Group. TheParentCompanyisalsocertifiedinaccordancewithSS627750,the Swedish energy management standard. An audit was carried out during the autumn accordingtotheupgradedEuropeanener-gystandardEN16001.Riskanalysesthatobserve the precautionary principle are a componentofenvironmentalcertification,and their objective is to prevent negative environmental consequences from occur-ring in operations. LKAB has a number of stated environ-mental objectives concerning.

• Energy• Particulates•Waste

An internal inspection programme was set up in consultation with the supervisory au-thorities. All licensable operations submit annual environment reports to the author-ities concerned. There is an internal inci-dent reporting system within LKAB Sver-ige to which all environmental incidents

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must be reported and documented. In 2010 these reports included among oth-ers 38 incidents (13) of fluid spills includ-ing,oil,fuelandglycoltotaling16m3 (10). During the year a number of events con-cerning the external environment were handledbyvariousauthorities,andthesearereportedonpage34andintheAdmin-istrationReport.

ManageMent oF Social iSSUeSTheVicePresidentofHumanResources,whoisamemberofGroupmanagement,is responsible for strategic personnel as-signments. LKAB’s management of operation-al work with social issues that affect em-ployees is decentralised. Work environ-ment issues are usually handled as close toanissue’soriginaspossible,wherethebest insights into how a case should be handled are found. In the Swedish oper-ations,specialHRissuesarehandledindifferent forums such as the rehabilita-tion and remuneration committees and the risk assessment and diversity groups. These forums also include work environ-ment groups that invite contractor repre-sentatives to discuss mutual issues as well as the overarching work environment com-mittee that provides guidelines for environ-mental work within LKAB. Personnelpolicyformsthebasisfortheinternalmanagementofsocialissues,andthere are a number of targets linked to im-portant policy issues:

• Accidents• Absenceduetoillness•Wellnessandhealth• Equality• Competencedevelopment

AllLKABemployeesinSwedenandNor-way are subject to collective bargaining agreements,withtheexceptionofGroupmanagement. All employees within the Group have employment contracts; within Minelco these contracts are based on cur-rent legislation in the countries concerned. Dialogues with employees are also held throughperiodicworkplacesurveys,jobdescriptions,leadershipprofilesandpsy-chosocial health and safety checks. Minel-co conducts employee surveys regularly. There are also a number of collaborative bodies involving LKAB and trades unions were operational issues are discussed pe-riodically.

Managing SUpplieR RelationS LKAB has guidelines governing employee conduct in their contact with external par-ties.Employeeswhoareincontactwithsuppliers are LKAB representatives and are required to act on behalf of LKAB’s best interests at all times. Suspicions of bribery and corruption may result in prosecution andlitigation.Asaconsequence,LKABmay suspend or terminate the employee. LKAB expects its suppliers to work to a sustainability programme that covers en-vironmental and social issues such as re-spectforhumanrights,workenvironment,healthandsafety,andworktominimiseclimate impact and discharges to the at-mosphere and water. Work on setting supplier standards and monitoring compliance regarding sustaina-bility issues is an area under development; efforts will be intensified.

Strategy and profile

1. Strategy and analysis

1.1 President’s statement on sustainable development 6–8 F

2. Organisational profile

2.1 Organisation’s name 62 F

2.2 Brands, trademarks, products and/or services 4–5, 11 F

2.3 Operational structure, including divisions, operating companies, subsidiaries, and joint ventures

4–5, 38, 64–66, 106

F

2.4 Location of the organisation’s head office 116 F

2.5 Countries in which the organisation operates 106, 116 F

2.6 Nature of ownership and legal form 52, 62 F

2.7 Markets 4–5 F

2.8 Scale of the reporting organisation 4–5, 15–16 F

2.9 Significant changes during the reporting period regarding size, structure, or ownership

4–5, 22, 33, 62 F

2.10 Awards received in the reporting period None F

3. Report parameters

3.1 Reporting period 112 F

3.2 Date of publication of the most recent report 112 F

3.3 Reporting cycle 112 F

3.4 Contact point for questions regarding the report or its contents

113 F

3.5 Process for defining report content 24–25, 110 F

3.6 Boundary of the report 112–113 F

3.7 Specific limitations on the scope or boundary of the report

24–25, 112–113 F

3.8 Basis for reporting on joint ventures, subsidiaries, and other entities that can significantly affect comparability

82, 85, 112–113 F

3.9 Data measurement techniques and the bases of calculations

113 F

3.10 Explanation of the effect of any re-statements of infor-mation provided in earlier reports, and the reasons for such re-statement

112–113 F

3.11 Significant changes in the scope, boundary, or measurement methods applied in the report

112–113 F

3.12 GRI Index 112–113 F

3.13 Policy and practice with regard to external assurance 112 F

4. Governance, commitments and engagement

4.1 Governance structure of the organisation 52–55 F

4.2 Indicate whether the Chair of the highest governance body is also an executive officer

53 F

4.3 The number of members of the highest governance body that are independent and/or non-executive members.

53, 56–57 F

4.4 Mechanisms for shareholders and employees to provide recommendations or direction to the highest governance body or executive management

52–53 F

4.5 Linkage between compensation for members of the highest governance body and executive management, and the organisation’s performance (including social and environmental performance)

54, 90 F

4.6 Procedures and processes for the highest governance body with respect to conflicts of interest

53–55 F

4.7 Process for determining the qualifications and exper-tise of the members of the highest governance body for guiding the organisation’s strategy on environmental topics

53 P

4.8 Statements of mission or values, codes of conduct, and principles relevant to economic, environmental, and social performance

10–11, 110 F

4.9 Procedures and processes of the highest governance body for overseeing the organisation’s identification and management of economic, environmental, and social performance, including relevant risks and opportunities

110 F

4.10 Processes for evaluating the highest governance body’s own performance, particularly with respect to economic, environmental, and social performance

54, 110 F

4.11 Explanation of whether and how the precautionary ap-proach or principle is addressed by the organisation

110 F

4.12 Externally developed economic, environmental, and social charters, principles, or other initiatives to which the organisation subscribes or endorses

26, 31, 35–36, 38, 112

F

4.13 Membership in associations 31, 35–36 F

4.14 List of stakeholder groups engaged by the organisation 24–26, 30–31, 51 F

4.15 Basis for identification and selection of stakeholders with whom to engage

24 F

4.16 Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder group

24–26, 30–31, 51 F

4.17 Key topics and concerns that have been raised through stakeholder engagement

24–26, 30–31, 51 F

G3 inform-ation Description

Page in Annual report and Sustain-ability Report F =

Full

P = Pa

rtial

ly

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Accounting Principles and Application of GRI

LKAB reports annually in accordance with GRI G3 guidelines (Global Reporting Initia-tive) and the Sustainability Report forms part of LKAB’s 2010 Annual Report. The previ-ous year’s report was published in March, 2010. LKAB has applied GRI guidelines to lay down the content of the report. The index below includes the core performance indicators from the GRI guidelines and additional indicators from G3 deemed relevant on the basis of an analysis of the company’s stakeholders and its most important issues. It also includes selected indicators from the Mining and Metals Sector Supplement, version 6. The letter “P” indicates partial reporting and “F” indicates full reporting according to GRI guidelines.

In accordance with guidelines from the owner, the Sustainability Report has been reviewed by external auditors; the auditors’ statement of assurance is given on page 114. LKAB is of the understanding that this report complies with GRI’s C+ application level, which is also confirmed by the external auditors.

Scope and boundariesIn keeping with reports from the previous two years the reports has a certain emphasis on the Nordic operation and the iron ore operation in Sweden and Norway. It makes up around 90 per cent of the Group’s total sales. During 2010 LKAB worked on inte-grating Minelco operations into the report to a greater extent.

G R I I N D E X G 3

Economic performance indicators

Information on sustainability management 110 F

EC1 Economic value generated and distributed 25 F

EC2 Financial implications and other risks and opportuni-ties for the organisation’s activities due to climate change

24–25, 31, 35–38, 69

P

EC3 Coverage of the organisation’s defined benefit plan obligations

101–102 F

EC4 Significant financial assistance received from govern-ment

37, 39 F

Environmental performance indicators

Information on sustainability management 33, 110 F

EN1 Materials used by weight or volume 34 F

EN3 Direct energy consumption by primary energy source 38 F

EN4 Indirect energy consumption by primary energy source 38 F

EN5 Energy saved due to conservation and efficiency improvements

37–38 F

EN6 Initiatives to provide energy-efficient or renewable energy based products and services, and reductions in energy requirements as a result of these initiatives

31, 35–36 F

EN8 Total water withdrawal by source 44 P

EN9 Water sources significantly affected by withdrawal of water

44 P

EN10 Percentage and total volume of water recycled and reused

44 P

EN11 Location and size of land owned, leased, managed, in or adjacent to protected areas and areas of high biodiversity value outside protected areas

46 F

EN12 Description of significant impacts of activities, prod-ucts, and services on biodiversity in protected areas and areas of high biodiversity value outside protected areas

44, 46 F

EN13 Habitats protected or restored 44–46, 69 F

EN16 Total direct and indirect greenhouse gas emissions by weight

39, 41 P

EN18 Initiatives to reduce greenhouse gas emissions and reductions achieved

31, 35–36 P

EN20 NOx, SO2 and other significant air emissions by type and weight

39, 41 F

EN21 Total water discharge by quality and recipient 44 P

EN22 Total weight of waste by type and disposal method 41–42 F

EN23 Total number and volume of significant spills 110 F

EN25 Identity, size, protected status, and biodiversity value of water bodies and related habitats significantly affected by the reporting organisation’s discharges of water and runoff

44 P

EN28 Monetary value of significant fines and total number of non-monetary sanctions for non-compliance with environmental laws and regulations

34 F

MM 2 Description of sites requiring special systems for managing biodiversity

44–46 F

MM 3 Total amounts of overburden, rock, tailings, and sludges and their associated risks

42 F

Social performance indicators

Information on sustainability management 110–11 P

LA1 Total workforce by employment type, employment contract, and region

49–50 F

LA2 Total number and rate of employee turnover by age group, gender, and region

49–50 F

LA4 Percentage of employees covered by collective bar-gaining agreements

111 F

LA7 Rates of injury, occupational diseases, lost days, absenteeism, and number of work-related fatalities by region

47–48 F

LA8 Education, training, counselling, prevention, and risk control programmes regarding serious illnesses

47–48 F

LA10 Average number of hours of training per year per employee by employee category

49–50 F

LA13 Composition of governance bodies according to indicators of diversity

48–49, 56–58 F

HR4 Total number of incidents of discrimination and actions taken

49 F

MM5 Operations taking place adjacent to indigenous peoples’ territories, and formal agreements with indigenous peoples’ communities

31, 38, 46 P

SO1 Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of operations on communities, including entering, operat-ing, and exiting

25, 27–30, 38, 46, 51

F

MM9 Number of sites where resettlements took place, the number of households resettled, and the impacts of resettlement

28–30 F

MM11 Systems and development related to the use of mate-rial in processes and products

31 F

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The report makes clear which units are included when data are reported. Changes in respect of boundaries, scope or measurement methods compared with previous years are explained in the report adjacent to the data.

Data collectionThe reporting of consolidated financial information takes place in the consolidated ac-counting system. Personnel data is gathered from personnel systems, personnel reports, databases and manual procedures and covers all permanent employees in the Group unless otherwise stated.

The environmental information pertains to LKAB’s Mining Division and Minerals Divi-sion unless otherwise stated. The information is taken chiefly from the management systems for quality, environment and energy, environmental reports, environmental im-pact assessments and self inspection programmes. External reporting of carbon dioxide emissions according to the LKAB monitoring system is to an accredited verifier, to the Swedish Environmental Protection Agency and to the Administrative Board of Norrbot-ten County.

ContactThe contact for LKAB’s Sustainability Report is Lotta Fogde, Senior Vice President, Com-munications: [email protected]

Our limited review has been based on an assessment of materiality and risk, and has been conducted according to the following review procedures:• Assessment of suitability and application of criteria with respect to internal and

external stakeholders’ need of information.• Interviews with responsible management, at group level and at subsidiary level,

with the aim of assessing whether the qualitative and quantitative information stated in the Sustainability Report is complete, correct and sufficient.

• Interviews with external stakeholders to ascertain whether LKAB responds to important stakeholders’ concerns in the Sustainability Report.

• We have studied internal documents in order to assess whether the reported information is complete, correct and sufficient.

• Evaluation of the structure of procedures and processes for reporting sustain-ability information and data.

• Review of underlying documentation, on a random-sample basis, to assess sus-tainability information and data in the Sustainability Report.

• Visits to LKAB in Luleå and Kiruna, where compilation of sustainability informa-tion and data has been conducted.

• Review of qualitative information and statements, as well as the report on com-pliance with legislation, permits and conditions related to sustainability.

• Assessment of the LKAB’s stated application level according to GRI’s guidelines.• Reconciliation of financial information against the company’s Annual Report for

2010.• Overall impression of the Sustainability Report, and its format, considering the

correctness of the information in relation to the criteria applied.

ConclusionBased on our review procedures, nothing has come to our attention that causes us to believe that the Sustainability Report has not, in all material aspects, been prepared in accordance with the above stated criteria.

Stockholm, March 29, 2011KPMG AB

Caj Nackstad Åse BäckströmAuthorised public accountant Specialist member FAR SRS

Auditors’ report on limited review of the Sustainability Report

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To the readers of LKAB’s Sustainability Report 2010:

IntroductionThe Board of Directors of LKAB has assigned us the task of performing a limited re-view of LKAB’s Sustainability Report, 2010. The Sustainability Report is presented on pages 22–51, 67–70 and 110–114 in LKAB’s Annual Report and Sustainability Report, 2010. The Board and Group Management of LKAB are responsible for the continuous activities with sustainable development regarding financial issues, environment and social responsibility, and for the preparation and presentation of the Sustainability Report in accordance with applicable criteria. Our responsibility is to express an opinion on this Sustainability Report, based on our review.

Scope and extent of the limited reviewOur review has been performed in accordance with FAR SRS (the institute for the accountancy profession in Sweden) draft recommendation “RevR 6 Assurance of Sustainability Reports” published by FAR. A review consists of making enquiries, primarily to persons responsible for preparing a Sustainability Report, performing an analytical review and undertaking other review measures. A review has another direction and is substantially less in scope than an audit conducted in accord-ance with the Auditing Standard in Sweden (RS) and generally accepted auditing practice and quality control otherwise has. The procedures performed in a limited review do not enable us to obtain an assurance that would make us aware of all significant matters that might be identified in an audit. The expressed conclusion based on a review does not therefore have the degree of certainty that a conclusion expressed as a result of an audit has.

The criteria upon which our review is based are the applicable sections of “Sustain-ability Reporting Guidelines, G3”, issued by the Global Reporting Initiative (GRI). We believe these criteria to be appropriate for our assurance activities.

Glossary

G L O S S A R Y

10115

Barren rock: Rock that is not ore.

Basic, ph: pH value above seven.

Burden: Materials (ore, slag formers, etc.) that are added (charged) to a furnace, possibly together with fuel, in ironmaking.

calcites and silicates: Two of the most abundant and widely distributed mineral groups.

coating: Surface coating.

concentration: Beneficiation of finely ground ore by separation into a concentrate of iron ore powder with very high purity, so-called slick.

crude iron: Also called hot metal, pig iron or blast-furnace iron, this intermediate product results from processing of iron ore and coke in the blast furnace and is sub-sequently refined to crude steel.

crude ore: The untreated ore broken loose from the deposit.

crushed ore: Designation for input to ore processing plants.

Deformation zone: Ground area affected by subsidence due, for example, to mining. Deformation zone boundaries are defined at the point where seismic instruments first indicate disturbance.

Discharge: Release of water from a pond.

Dressing: Rough sorting of crushed ore. Consists at LKAB of screening of the crushed ore into various fractions, after which the waste rock is separated from the iron ore by magnetic separators.

Flotation: Chemical process/method for particle separation, used in beneficiation of iron ore.

hematite: Mineral (bloodstone). Non-magnetic iron ore (Fe2O3).

huntite: Mineral, (Mg,Fe)2SiO4.

Indicators: Quantifiable key values as defined by the GRI sustainability areas Econo-my, Environment, and Society.

Inert waste: Material waste that is not reactive and does not decompose after final placement.

Intact ore: When ore is in its original state before being mined said to be intact.

Integrated steelmill: Steelmill that covers the entire production chain from ore to steel and has both sintering plant and blast furnace.

Landfill: Area in which materials such as tailings or waste rock are stored indefinitely.

Landfill plan: Long-term plan for final placement of waste material.

Leachate: Water containing elements that are present in the material through which it has passed. For example, when precipitation falls on a heap of rock or stone. Leachate is caused principally by precipitation percolating through waste deposited in a landfill.

Leaching test: Test to determine the probability of liberation of elements.

Lignosulphate: A dust-binding agent.

Magnetite: Mineral, Magnetic iron ore (Fe3O4).

Main level: Transport level in the mine to which the ore is tipped through a chute or shaft from overlying mining levels.

Mica: Mineral, (Mg,Fe)2SiO4.

Olivine: Mineral, (Mg,Fe)2SiO4.

Particulate emissions: Release of particulate matter into the air.

Pelletising: Process where slick is mixed with binder and rolled together into “green” balls. The balls are sintered in a pelletising plant. The finished product is pellets.

Seismic events: Movements of the ground, including earthquakes.

Sintering: Heating of fine-grained ore (fines) until it starts to melt. The ore is then fused (sintered) into lumps (sinter) that can be used in a blast furnace.

Spillway: Device for controlled discharge of water from e.g., a tailings pond.

Sponge iron: (= DRI, Direct Reduced Iron). End product of the DR process. Solid, porous iron with some remaining mineral residues and oxygen. HBI (Hot Briquetted Iron) is a compressed form of DRI that reduces the risk of autoignition.

Stripping: Preparation of ground by removal of vegetation and or soil, etc., to enable access to underlying materials.

Sulphides: Several types of chemical compounds containing sulphide ions.

Survey plinth: Fixed reference point at which GPS readings are taken for registering ground deformations. A hole is drilled down to a depth of about 5 m (or in bedrock), and then a steel pipe is installed and subsequently filled with concrete. The pipe pro-jects about 1.5 m above ground surface. On top is a mount for the GPS instrument used for taking readings.

TJ: Terajoule

Twh: Terawatt hour

Value-in-use: Lowest possible cost for iron and steel production with the least possible disruptions. LKAB pellets increase blast furnace efficiency, reduce e.g. emissions, the formation of slag and energy consumption.

Yield: Ore yield = The ratio between the recovered crude ore and the theoretical quantity of intact ore in the ground. The difference is made up of ore losses and is dependent on the workability of the ore, i.e. how economical it is to mine. Weight yield = The ratio between the iron content of the finished product (output) and the iron content of the raw material (input) entering a plant.

A D D R E S S E S

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Addresses

LKAB GROuP hEAD OFFIcE

Box 952, SE 971 28, Luleå, Sweden.Tel +46 920-380 00. Fax +46 920-195 [email protected] Aaro, President and CEO

IRON ORE

MARKETING AND SALESLKAB Nordic RegionBox 952, SE 971 28, Luleå, Sweden.Tel +46 920-380 00. Fax +46 920-148 [email protected] Heyden, Sales Manager

LKAB S.A.Chaussée de la Hulpe 150, BE-1170 Brussels, Belgium.Tel +32-2 663 36 70. Fax +32-2 675 05 [email protected]öran Ottosson, President

LKAB SchwEDENERZ GmbhBredeneyer Strasse 182, D-45133 Essen, GermanyTel +49 201 879 440. Fax +49 201 879 [email protected]öran Ottosson, President

LKAB FAR EAST Pte. Ltd300 Beach Road #29-02, The Concourse, Singapore 199555.Tel +65 6392 49 22. Fax +65 6392 49 [email protected] Nordlund, President

PRODucTIONLKABSE 981 86 Kiruna, Sweden. Tel +46 980-710 00. Fax +46 980-109 02.

LKABSE 983 81 Malmberget, Sweden. Tel +46 970-760 00. Fax +46 970-236 00.

Malmtrafik i Kiruna AB (MTAB)SE 981 86 Kiruna, Sweden.Tel +46 980-710 00. Fax +46 980-109 02.Göran Heikkilä, President

LKAB Norge ASPostboks 314, NO-8504 Narvik, Norway.Tel +47 769 238 00. Fax +47 769 449 25.Magne Leinan, President

LKAB, Luleå harbourBox 821, SE 971 25, Luleå, Sweden.Tel +46 920-381 60. Fax +46 920-380 88.Lars Andersson, General Manager

MINERALS

Minelco Ltd.Flixborough Industrial Estate, Flixborough, North Lincolnshire, DN15 8SF, England.Tel +44 1724 277411. Fax +44 1724 [email protected] Boulton, President and Group CEO Minelco Group

Minelco ABBox 952, SE 971 28, Luleå, Sweden.Tel +46 920-381 60. Fax +46 920-190 [email protected] Johansson, President Minelco OyKaivoksentie 300, FI-71800 Siilinjärvi, FinlandTel +358 17 266 0160. Fax +358 17 266 [email protected] Laukkanen, President

Minelco, Inc.2020 Scripps Center, 312 Walnut Street,Cincinnati, OH 45202, USA.Tel +1 513 322 5530. Fax +1 513 322 [email protected] Drugge, President

Minelco GmbhP.O. Box 10 25 54, DE-450 25 Essen, Germany.Tel +49 201 45060. Fax +49,201 4506 [email protected] Tepper, President

Minelco B.V.Vlasweg 19, Harbour M164, P.O. Box 16,NL-4780 AA Moerdijk, The Netherlands.Tel +31 168 388 500. Fax +31 168 388 [email protected] Yvonne Dirken, President

Minelco Asia Pacific Ltd.4502 China Resources Building, 26 Harbour Road, Wanchai, Hong Kong.Tel +852 2827 4138. Fax +852 2827 [email protected] Engel, President

Minelco (Tianjin) Minerals co., Ltd.Junyi Industrial Park, Jungliangcheng, Dongli District, Tianjin, P.R. China 300301.Tel +86 22 2435 1706. Fax +86 22 2435 [email protected] Qi, President

Likya MinelcoITOB Organize Sanay Bölgesi Tekeli Beldesi Menderes, Izmir, Turkey.Tel +90 232 799 01 60Fax +90 232 799 01 74

Minelco Slovak RepublicPanenska 13, SK-81103 Bratislava, Slovak Republic.Tel +421 2 5930 5753. Fax +421 2 5930 [email protected] Zilinsky, Sales manager

Minelco SpainRepresentative Office, C./Nord no. 2 Ent.5, 08500 Vic,Spain.Tel/Fax +34 93 886 [email protected]

Minelco GreeceRepresentative Office, 13, N.Kountouriotou str., 546 25 Thessalonica, Greece.Tel +30 2310 539073. Fax +30 2310 [email protected]

Minelco SingaporeRepresentative Office300 Beach Road #29-02, The Concourse, Singapore 199555.Tel +65 6392 49 22. Fax +65 6392 49 [email protected]

SuBSIDIARIES

wassara ABHornsgatan 103, SE 117 28 Stockholm, Sweden.Tel +46 8-84 95 50. Fax +46 8 -84 02 [email protected] Johansson, President

AB Kiruna Grus & Stenförädling (KGS AB)Box 817, SE 981 28 Kiruna, Sweden.Tel +46 0980-685 00. Fax +46 0980-832 [email protected] Söderman, President

Fastighets AB MalmfältenSE 981 86 Kiruna, Sweden.Tel +46 0980-710 00. Fax +46 0980-728 [email protected] Aidanpää Edlert, President

LKAB Nät ABSE 981 86 Kiruna, Sweden.Tel +46 0980-710 00. Fax +46 09980-109 [email protected]

LKAB Försäkring ABBox 952, SE 971 28, Luleå, Sweden.Tel +46 920-380 00. Fax +46 920-195 [email protected]

LKAB’s Annual General Meeting will be held at 3 p.m. on Wednesday 27 April 2011, in Luleå.

ParticipationThe meeting is open to the public.

NoticeNotice of the Annual General Meeting, financial information and other information is available at www.lkab.com.Printed financial information can be ordered by email: [email protected], or from LKAB, Box 952, SE 971 28 Luleå, Sweden.

Reporting datesInterim reports

27 AprilInterim Report Q1, January-March 2011

15 AugustInterim Report Q2, January-June 2011

26 OctoberInterim Report Q3, January-September 2011

February 2012Interim Report Q4, January-December 2011

EnquiriesQuestions concerning the content of LKAB’s financial information may be directed to Leif Boström, Senior Vice President, Treasury, and/or Lars-Eric Aaro, President and CEO.

Annual General Meeting

A N N U A L G E N E R A L M E E T I N G A N D F I N A N C I A L I N F O R M A T I O N

10117

EnvironmEntal gains with “lKaB grEEn PEllEts”Total carbon dioxide emissions from the production of crude steel, about 2,000 kg CO2/tonne, are reduced when LKAB pellets are used as the iron raw material. The manufacture of LKAB pellets generates one seventh of the carbon dioxide emissions as compared to sintering at the steelmill, and one-third as compared to hematite-based pellet manufacture. The reduction is about 215 kg and 95 kg CO2/tonne crude steel, respectively.

Fe3o4 4,100EmPloYEEs

thE high-gradE magnEtitE orE From lKaB’s minEs is somE oF

thE world’s BEstmorE than 200 tradEs and ProFEssions

distriBution oF womEn and mEn in lKaBLKAB’s ambition is to be an attractive employer for all individuals, regardless of gender, disability, cultural background or sexual orientation.

lKaB PEllEt Production 2010 Most of LKAB’s products are iron ore pellets with an iron content of 66%. Carefully tested and measured additives in pellet manufacture increase productivity, reduce energy input, result in lower wear and lead to lower slag volumes in steelmaking.

14% are women

86% are men

66%Iron content

For thE saKE oF thE EnvironmEnt In the ULCOS project (Ultra-Low Carbon dioxide Steelmaking), Europe’s steel and mining industries have joined forces in research collaboration to find solutions for tomorrow’s environmentally friendly, ultra-low carbon dioxide steelmaking.

38kg CO2/tonne

110kg CO2/tonne

250kg CO2/tonne

LKAB PELLETS

HEMATITE-BASED PELLETS SINTER

Other products

13%

PELLETS 87%

SHARE OF PELLETS/ OTHER PRODUCTS IN

LKAB’S PRODUCT RANGE

a rEcord! lKaB Posts an oPErating ProFit For 2010 oF

twElvE thousand two hundrEd and EightY onE million Kronor.

lKaB’s logistics in FigurEsLKAB delivered a total of 26 million tonnes of finished iron ore products during 2010.

Ore harbor in Luleå:

5.8 mt(437 vessels)

Ore harbor in Narvik:

17.2 mt(215 vessels)

Other deliveries to customers and stocks, 3.0 Mt. Payload/train:

6,800 tonnes

68 cars/train, so-called long train.

Payload/car:

100 tonnes

towards thE toPOne aim of LKAB’s sponsorship strategy

is to offer broad sponsorship that contributes to active recreation, and to attract and assist talented young

athletes to reach the elite level. By giving

110%the trio of young wrestlers Johanna

Mattsson, Hanna Johansson and Sofia Mattsson from Gällivare have won

several gold, silver and bronze medals in national, European and world

championships, and their sights are set on winning medals in the 2012 Olympics.17% of LKAB’s managers are women. In 2000 the corresponding figure was 4.6%.

rEducEd atmosPhEric EmissionsAlthough pellet production has more than tripled in the past 30 years, LKAB has managed to halve discharges of particulates and emissions of sulfur dioxide and fluorides.

This dramatic reduction has been achieved thanks to improved efficiency in production, new technologies and improved knowledge of processes. The goal is further reductions.

More information on emissions, including carbon dioxide, is given on pages 39-41.

In the past 30 years LKAB’s production has

increased by more than

300%while emissions of sulfur

dioxide and fluorides and discharges of particulates

have decreased by

50%

EMIS

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189 g/tonne pellets

103 g/tonne pellets

70 g/tonne pellets

31 g/tonne pellets

10 g/tonne pellets

NITROGENOXIDE

SULFUR DIOXIDE PARTICULATES HYDROGEN

CHLORIDEHYDROGENFLUORIDE

50% lowEr co2-Emissions

LKAB Annual Report 2010.Produced by LKAB in collaboration with Vinter.The Sustainability Report has been produced in collaboration with Hallvarsson & Halvarsson.Photo: Fredric Alm, Andreas Lundberg and LKAB.Printed by: Luleå Grafiska.


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LKAB 2010



Group strategies 10









Value creation 25


Environment 31



Energy 37


waste 41

water 44

Deformations 45


Site remediation 46

Co-workers 47


GRI index 112






F I N A N C E 6 0

Group overview 60





Glossary 115

Addresses 116


Documents

ANNUAL REPORT AND SUSTAINABILITY REPORT 2 …...#1 Europe’s largest iron ore producer #2 The world’s second-largest pellet manufacturer 1,250 M e T res 1,365 e T res underground,