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Regulatory press release

Sotkamo Silver, Q3/2023 Interim Report: Production and profitability at a targeted good level

Sotkamo Silver
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Sotkamo Silver AB, Interim report, 25 October 2023 at 9.00 EET (08.00 CET)

Sotkamo Silver, Q3/2023 Interim Report: Production and profitability at a targeted good level

HIGHLIGHTS

July- September
  • Net sales increased by 66 % to 110 MSEK (66 MSEK), driven mainly by a higher silver production volume, higher average silver grade and positive development of silver price
  • EBITDA increased to 37 MSEK (-10), EBITDA margin increased to 34 % (-16)
  • EBIT increased to 17 MSEK (-32)
  • Profitability increased significantly driven by a higher average silver grade, higher silver price, improved efficiency of mining activities, and decreased energy prices. The cost control measures initiated during the previous year had a positive impact on the Company's operational costs
  • Cash and cash equivalents increased to 65 MSEK (7)
  • Investments decreased by 29 % to 12 MSEK (17)
  • The production amounted to approximately 412,000 ounces of silver (258,000), 794 ounces of gold (790), 183 tonnes of lead (304), and 393 tonnes of zinc (647) in concentrates
January - September 
  • Net sales increased by 10 % to 298 MSEK (271 MSEK), driven mainly by a higher average silver grade and positive development of silver price
  • EBITDA increased by 183 % to 96 MSEK (34), EBITDA margin increased to 32 % (13)
  • EBIT increased to 42 MSEK (-33)
  • The good profitability in the second and third quarters raised the cumulative profitability to a good level. As a result of the good EBITDA level in the second and third quarters, the net debt-to-EBITDA ratio declined to 2.0
  • Cash and cash equivalents increased to 65 MSEK (1)
  • Investments decreased by 46 % to 28 MSEK (52)
  • The production was approximately 1,002,000 ounces of silver (875,000), 2,146 ounces of gold (2,456), 732 tonnes of lead (1,134), and 1,570 tonnes of zinc (2,461) in concentrates
  • During the first quarter of 2023, the Company received gross proceeds of approximately 3.4 MEUR or 38.4 MSEK from the rights issue before the deduction of transaction costs.
  • During the first quarter of 2023, the Company and the senior lenders agreed, upon an amendment to the terms of the senior loan agreement, to postpone the first installment (1.5 MEUR due on March 31, 2023) to be paid on the termination date of the senior loan agreement (March 31, 2026) 

Comparative figures refer to the corresponding period of the previous year. In case of discrepancies, the official Swedish version of this report prevails.

OUTLOOK

Guidance for 2023 (unchanged)

The Company has issued the following guidance for 2023 on 14 February 2023:
  • The Company expects to produce 1.4 -1.5 million ounces of silver in 2023. However, Company's primary target is to maximize the revenue and operational cash flow. To achieve this, Company adjusts the mix of metals in the ore feed which might have an impact on the produced silver ounces.
  • Annual EBITDA to be at least 28 %
  • Net debt-to-EBITDA to be below 2.5 at year-end

The Company's profitability is significantly affected by external factors, such as metal prices, exchange rates, as well as energy prices. The achievement of guidance requires the above-mentioned external factors to remain at the level forecasted by the market in mid-February 2023.

CEO REVIEW

In the third quarter, Sotkamo Silver's operations proceeded according to plan, and silver production increased to its highest level in three years (412,000 ounces). Thanks to improved operational efficiency and the increased production volumes achieved this year, the Company's operations and profitability have now reached a good level and we are making steady progress towards our targets.

The Company's net sales increased by 66 percent from the previous year, supported by increased production as well as the price of silver which remained on a favorable level. The increase in production was positively impacted by the forecasted good level of the average silver grade (110 g/tonne). Compared to the previous quarter, net sales decreased slightly, mainly due to lower production volumes of zinc and lead.

Profitability remained clearly higher than in the comparison period and EBITDA margin was 34%. As anticipated, costs increased slightly from the previous quarter as production ramped up to full speed.

I am pleased with how we have managed to stabilise Sotkamo Silver's operations, which is visible in the positive development of mining operations, the average silver grade as well as other operations. I would like to thank all of our employees, who have worked hard for this. Their work has also enabled us to shift our focus to the future and the Company's long-term development.

In addition to operational development in July-September we have also made preparations for the future. During the year, infill drilling has been continuously carried out and a total of 7,500 meters has been completed below the current operational levels. During the last quarter, based on the results of the infill drilling, we will provide investors with an update on the Company's economically viable ore reserves in the short-term. The results, based on more frequent and detailed drilling, will primarily support the planning and production for the next few years.

At the same time, we have started planning exploration drillings aimed at increasing the mineral resources and extending the Life-of-Mine (LOM) of the current mine as part of an action plan for the coming years. We will communicate the plans for these drillings in more detail during the first half of 2024.

In addition, more detailed planning for the broader regional exploration work outside the current mining district has been initiated. In practice, this has meant modelling existing research data with new more advanced tools to identify and verify the most potential areas. Based on the modelling, we will prioritise the areas where concrete exploration investments will be targeted in the coming years.

Additionally, to the financial development of the Company and investment planning, we remain focused on our goal of taking the sustainability of our operations to another level, which involves achieving level A in all areas of the mining sustainability system and, for example, reducing nitrogen emissions from our mine - to zero in the long term. This allows us to best meet the needs of our shareholders, employees, and other stakeholders.

KEY FIGURES

Q3/23 Q3/22 Change, % 1-9/23 1-9/22 Change, % 2022
Net sales, MSEK 110 66 66 298 271 10 371
EBITDA, MSEK 37 -10 96 34 183 53
EBITDA margin % 34 16 32 13 14
EBIT, MSEK 17 -32 42 -33 -34
EBIT margin % 28 -48 14 -12 -9
Equity ratio % 43 38 43 38 38
Cash liquidity % 93 41 93 41 46
Net debt-to 2.0 4.4 -55 2.0 4.4 -55 5.3
-EBITDA ratio
Personnel at the 47 52 -10 47 52 -10 44
end of the period
Silver 412 258 60 1,002 875 15 1,169
production, koz
Mill feed, kt 133 138 -4 367 481 -24 635
Average silver 110 69 59 99 67 48 69
grade, g/tonnes

EVENTS AFTER THE REPORTING PERIOD

No significant events have materialized after the reporting period.

FINANCIAL CALENDAR
  • Q4/2023 and Full year 2023: February 15, 2024
  • Annual General Meeting: April 23, 2024
  • Q1/2024: April 25, 2024
  • Q2/2024: July 26, 2024
  • Q3/2024: October 25, 2024

WEBCAST

Sotkamo Silver hold a webcast today (25 October 2023) at 1:00 p.m. Finnish time (12:00 p.m. CET). The presentation will be held in Finnish, and the material is in English. The webcast can be accessed through the following link:
https://msteams.link/KGLN

The presentation will be available at the Company website at:
https://www.silver.fi/en/investors/presentations

CONTACT INFORMATION

Mikko Jalasto,
CEO, Sotkamo Silver
mikko.jalasto@silver.fi
+358 50 482 1689

Tommi Talasterä,
CFO, Sotkamo Silver
tommi.talastera@silver.fi
+358 40 712 6970

This is information that Sotkamo Silver AB is obliged to make public pursuant to the EU Market Abuse Regulation.

This is a summary of Sotkamo Silver's Interim Report. The complete report is attached to this release and available at the Company webpage: www.silver.fi/en/investors

Sotkamo Silver in brief

Sotkamo Silver is a mining and ore prospecting company that develops and utilises mineral deposits in the Kainuu region in Finland. Sotkamo Silver supports the global development towards green transition technologies and produces the metals needed responsibly and by taking local stakeholders into account. Sotkamo Silver's main project is a silver mine located in Sotkamo, Finland. In addition to silver, the mine produces gold, zinc and lead. The company also has mining and ore prospecting rights for mineral deposits in the vicinity of the silver mine in Kainuu. Sotkamo Silver Group consists of the parent company Sotkamo Silver AB and its wholly owned Finnish subsidiary (Sotkamo Silver Oy). Sotkamo Silver is listed at NGM Main Regulated in Stockholm (SOSI), Nasdaq Helsinki (SOSI1), and Börse Berlin.

Read more about Sotkamo Silver on www.silver.fi/en/