INTERIM REPORT Q3/2018

STRONG EARNINGS IN FAVOURABLE MARKET CONDITIONS

The market continues to place a premium on high-quality iron ore products, and demand remains high. Sales increased in the third quarter and operating income improved by 37 percent compared with the same period last year. However, operations were affected by both a stoppage at the processing plant in and disruption on the Ore Railway.

OPERATIONS – THIRD QUARTER

Q3 Q3 Q1– Q3 Q1– Q3 Full year MSEK Note 2018 2017 2018 2017 2017 Net sales 6,594 5,958 18,981 17,159 23,367 LKAB Underlying operating profit 7 2,764 2,083 6,787 5,457 7,148 benefitted from Costs for urban transformation provisions 10 -287 -263 -1,817 -794 -1,147 the prevailing Impairment of property, plant and equipment -12 -12 -26 Operating profit/loss 2,477 1,808 4,969 4,651 5,975 market conditions Net financial income/expense 35 41 605 244 290 and from an ever Profit/loss before tax 2,512 1,849 5,574 4,895 6,266 increasing focus on Profit/loss for the period 1,954 1,434 4,395 3,825 4,803 resource efficiency Operating cash flow 1,552 1,916 4,655 6,549 7,136 and sustainability Investments in property, plant and equipment 475 489 1,831 1,408 2,008 Depreciation -673 -741 -2,127 -2,090 -2,887 among steel customers. Deliveries of iron ore products, Mt 6.9 7.1 20.1 20.3 27.6 Proportion of pellets, % 82 81 83 83 83 Production of iron ore products, Mt 6.8 6.5 20.2 20.0 27.2

Return on equity, % 7 14.6 6.6 14.6 6.6 14.4 Net debt/equity ratio, % 7 5.0 -4.4 5.0 -4.4 -6.6

• The production volumes in the third quarter were higher than in the same quarter last year. Delivery volumes were lower than in the same period last year, partly due to disruption on the Ore Railway during the quarter. • Operating profit for the third quarter was 37 percent higher than in the same period last year, 6.8 Mt mainly as a result of a stronger dollar exchange rate and higher prices for highly upgraded iron Produced during the quarter ore products in the period. • The average global spot price1 for iron ore products in the third quarter was USD 67 (71)/tonne compared with USD 65/tonne in the second quarter 2018. The global spot price at the end of September was USD 69/tonne. The premium for pellet sales stayed at a high level. 6.9 Mt • Operating cash flow for the third quarter was MSEK 1,552 (1,916). Delivered during the quarter • The return on equity increased to 13.9 (4.0) percent. • The net debt/equity ratio was 5.0 (-4.4) percent. 82% Percentage of pellets for the quarter

1Platts IODEX 62% Fe CFR North China LKAB INTERIM REPORT Q3/2018 THE GROUP IN SUMMARY | 1 THE LKAB GROUP

NET SALES AND OPERATING PROFIT/LOSS NET SALES AND OPERATING PROFIT ANALYSIS OF CHANGE IN OPERATING PROFIT MSEK Q3 Q1– Q3 Net sales 2018 Net sales Operating profit Operating profit 2017 1,808 4,651 MSEK Prices, iron ore 144 910 7,200 Currency effect, iron ore incl. hedging of accounts receivable 565 64 6,000 Hedging of currency and iron ore price 20 1,220 4,800 Volume and mix, iron ore 291 473 3,600 Volume, price and currency, industrial minerals 6 -22 2,400 Costs for urban transformation provisions -24 -1,024 1,200 Impairment of property, plant and equipment 12 12 0 -1,200 Depreciation 68 -37 -2,400 Other income and expenses -413 -1,278 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2017 2018 Operating profit 2018 2,477 4,969

Net sales for the third quarter were 11 percent higher when compared year-on-year. The improvement is mainly due to a stronger dollar exchange rate and higher pric- OPERATING CASH FLOW es for highly upgraded iron ore products. The average spot price for iron ore for the Operating cash flow 2018 Operating cash flow

quarter was USD 67 (71)/tonne and the pellet premium remained at a high level. MSEK The cost level for the quarter was higher than in the same period last year, with 3,500 the sale of part of the machinery fleet in the third quarter of 2017 affecting 3,000 2,500 comparability by MSEK 202. Other revenues and cost were mainly affected by higher 2,000 energy prices, higher employee benefit expenses and increased costs for the supply 1,500 of crushed ore in the Southern Division. 1,000 500 Sales for January – September increased by 11 percent compared with the same 0 period last year, mainly as a result of higher market prices for iron ore and a better -500 -1,000 result from price and currency hedging. -1,500 Operating profit accumulated to September increased by 7 percent compared to -2,000 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 the previous year. The increase in sales was countered by higher costs for urban 2015 2016 2017 2018 transformation provisions of MSEK 1,024. Higher energy prices, higher employee benefit expenses, production disruption, higher costs for the supply of crushed ore and increased exploration also had a negative impact on profit for the period. RETURN ON EQUITY Rolling 12 months Target return on equity

CASH FLOW % 30 Q3 Q3 Q1– Q3 Q1– Q3 Full year 25 MSEK 2018 2017 2018 2017 2017 20 Cash flow from operating activities 15 before changes in working capital 2,339 2,315 6,805 5,722 6,970 10 Change in working capital -316 -182 -325 1,956 1,890 5 0 Capital expenditures (net) -471 -217 -1,825 -1,129 -1,724 -5 Operating cash flow 1,552 1,916 4,655 6,549 7,136 -10 -15 -20 Operating cash flow for the third quarter was MSEK 364 lower than in the same Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 period last year, mainly as a result of increased capital tied up in inventories and 2015 2016 2017 2018 higher investment expenditure. Sales of property, plant and equipment in the third quarter of 2017 affect comparability between the years by MSEK 267. Operating cash flow for the first three quarters was MSEK 1,894 lower in a year- on-year comparison. Improved profit and lower expenditure on urban transformation had a positive effect. Increased capital tied up in inventories and accounts receivable, as well as last year’s result from assets pledged for outstanding hedging positions, had a negative effect. Higher expenditure on investments also contributed to the lower cash flow.

LKAB INTERIM REPORT Q3/2018 SALES AND PROFIT | 2 THE LKAB GROUP

NET FINANCIAL INCOME/EXPENSE AND NET FINANCIAL INDEBTEDNESS NET FINANCIAL INDEBTEDNESS Net financial indebtedness Net financial income/expense was MSEK 35 (41) for the third quarter and MSEK 605 MSEK (244) accumulated to the end of September; a higher return on financial investments 10,000 was the main positive influence when compared year-on-year. 8,000 The net debt/equity ratio was 5.0 (-4.4) percent, an increase compared with the 6,000 same period last year, mainly as a result of increased provisions for urban trans­ formation. 4,000 2,000 CREDIT FACILITIES 0 -2,000

Utilized -4,000 MSEK Nominal (nominal) Available Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Commercial paper programme, maturing within one year 5,000 200 4,800 2015 2016 2017 2018 Bond programme 7,000 4,009 Maturing December 2019 1,991 NET DEBT/EQUITY RATIO Maturing June 2021 1,000 Net debt/equity ratio Other bond financing, maturing 2022 250 250 % Credit facility 5,000 5,000 25 Total 17,250 3,441 13,809 20 There were no changes to nominal credit facilities during the quarter. All credit 15 facilities are subject to 100 percent retention of title. 10

5

0

SIGNIFICANT EVENTS IN THE THIRD QUARTER -5

On 28 July there was a fatal accident involving a fall at the pelletizing plant in -10 Svappavaara. Production was stopped immediately, to deal with the situation that Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2015 2016 2017 2018 had arisen and to ensure safety. Operations in Svappavaara were resumed just over two weeks later. In August a fire in a snow protection tunnel along the Ore Railway to resulted in rail traffic being suspended for five days. During a planned maintenance stoppage in September it was found that support structures under the cooler at the pelletizing plant in Svappavaara need to be replaced earlier than planned. The pelletizing plant is therefore being taken out of operation until January 2019, which will impact delivery volumes in the fourth quarter. The results of ongoing exploration in with a view to expanding the mineral resources were compiled during the quarter, and indicate a more complex geology and geometry than had previously been assumed. As a result, further exploration work will be carried out.

EVENTS AFTER THE END OF THE REPORTING PERIOD Following approval by the authorities, LKAB Minerals is to acquire all the shares in Francis Flower Limited and Gurney Slade Lime & Stone Co. Ltd.; this is expected to take place in the fourth quarter of 2018. The acquisition will create growth in the area of industrial minerals which, in line with LKAB’s strategic plan, will create a better balance between LKAB’s business areas and make the company less sensitive to fluctuations in the iron ore market.

LKAB INTERIM REPORT Q3/2018 NET FINANCIAL INCOME/EXPENSE AND FINANCIAL POSITION | 3 MARKET DEVELOPMENT

THE STEEL AND THE DEVELOPMENT OF THE SPOT PRICE FOR IRON ORE AND QUOTED PELLET PREMIUMS IRON ORE MARKET 1 June 2011 – 30 September 2018

USD/tonne THE GLOBAL STEEL AND 200 IRON ORE INDUSTRY Global production of crude steel increased in the third quarter by 4,1 percent com- 150 pared with the same period last year. During the quarter steel prices remained stable, except in the USA where there 100 has been a downward trend since prices peaked at the beginning of July. China’s steel exports decreased compared with 50 the previous quarter. The introduction of US import duties on steel is continuing to unsettle the market. 0 The profitability of steel producers is still 2012 2013 2014 2015 2016 2017 2018 considered good. Price 62% Fe DR pellet premium Atlantic basin bf pellet premium Demand for LKAB’s iron ore products remains good, with demand for DR pellets Source: PLATTS IODEX 62% Fe CFR North China exceeding contracted volumes because of the scarcity of supply on the market.

Europe Production of crude steel within the EU28 for hot-rolled steel/thin plate are expected the quarter. At the end of the quarter it was increased by 0.7 percent during the third to continue to fall for the rest of the year, USD 69/tonne. The average price for the quarter compared with the same period while prices for long products are expected quarter was USD 67/tonne, which was USD last year. The automotive industry remained to be stable or moving upward due to 2/tonne higher than in the preceding strong, despite an increasingly saturated greater demand and the fact that a large quarter. Quoted pellet premiums for blast domestic market. The rate of growth in the proportion of long products will consist furnace pellets and DR pellets were automotive industry is expected to slow to of imported steel that is affected by the unchanged at USD 58/tonne and USD 63/ less than 1 percent from 2020 onwards. import duties. tonne respectively. The pellet premium in China rose substantially and a new record Middle East and North Africa (MENA) China of USD 90/tonne was set at the beginning Production of crude steel increased by China’s production of crude steel increased of September. It then fell somewhat, ending 9.2 percent during the third quarter by 5.9 percent during the third quarter the quarter at USD 88/tonne. The premium compared with the same period last year. compared with the same period last year. for lump ore at first decreased and then The oil price continued to rise compared Iron ore imports into China decreased by recovered, with a quoted premium of USD with the previous quarter, which is positive 1.8 percent during the quarter, to 273 Mt. 21/tonne at the end of the quarter. The price for the region. Demand for DR pellets is Port inventories of iron ore decreased to difference between Platts IODEX 65% Fe and high due to continued weak supply on the nearly 150 Mt at the end of the quarter, 62% Fe continued to increase. The average market. but this is an increase of 14 Mt compared price for the quarter was USD 27/tonne, an with the same period in 2017. increase of USD 7/tonne compared with USA the preceding quarter. There is a continuing In the USA production of crude steel Iron ore spot price developments trend for the market to put a premium increased by 6.8 percent during the third The third quarter began with a spot price of on high-quality iron ore products. Pellet quarter compared with the same period USD 64/tonne. The spot price then remained premiums remain strong and stable, while last year. The rising price trend for steel relatively stable at around USD 65/tonne, lower grade products are being forced into ended at the beginning of the third quarter with only small movements during the larger discounts. when steel prices fell in the USA. Prices quarter but an upward trend at the end of

1Platts IODEX 62% Fe CFR North China

LKAB INTERIM REPORT Q3/2018 MARKET DEVELOPMENT | 4 NORTHERN DIVISION

The Northern Division comprises mines and processing FACTS plants in Kiruna.

OPERATIONS SUMMARY

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK Note 2018 2017 2018 2017 2017 Net sales* 8 3,686 3,451 10,474 10,380 13,473

Underlying operating profit* 7 1,826 1,377 4,535 4,257 5,241 Costs for urban transformation provisions -292 -250 -1,615 -718 -1,060 Operating profit* 8 1,534 1,127 2,920 3,539 4,181

Investments in property, plant and equipment 122 104 483 436 748 Depreciation -268 -317 -924 -934 -1,344

Deliveries of iron ore products, Mt* 4.0 4.2 11.1 11.6 15.2 • The Northern Division mines and Proportion of pellets, %* 87 82 86 86 86 processes iron ore products in Kiruna. • The takes place in the Kiruna Production of iron underground mine, which has an ore products, Mt* 3.7 3.8 11.0 11.2 14.8 inclined slab of magnetite that is around * As from 2018 a new model is being used internally for allocating results to the Northern Division and the Southern Division. Earlier periods have been restated in accordance with the change. 80 metres wide, four kilometres long and extends around two kilometres The production volume for the third quarter decreased by 0.1 Mt in a year-on-year underground. comparison. Deliveries decreased by 0.2 Mt and amounted to 4.0 (4.2) Mt, with • The ore is processed above ground in the proportion of pellets at 87 (82) percent. The lower volumes are due mainly to three concentrating plants and three production disruptions at the pelletizing plant. pelletizing plants. Sales for the third quarter were higher than in the same period last year, mainly • The Northern Division produces both as a result of a higher dollar exchange rate and higher iron ore prices for highly blast furnace pellets and pellets for upgraded iron ore products. This was countered by lower delivery volumes. steelmaking via direct reduction, Costs, excluding provisions for urban transformation, were lower than in the known as DR pellets. same period last year, partly due to decreased costs for production disruptions and • The processed iron ore products are a later maintenance stoppage than last year. Operating profit for the third quarter transported along the Malmbanan increased by 36 percent to MSEK 1,534 (1,127). and Ofotbanen ore railway to the port In the first three quarters of the year 11.0 (11.2) Mt of finished products were in Narvik, for shipment to steel mill produced. The decrease is due mainly to production disruptions at the pelletizing customers around the world. plant. Delivery volumes decreased to 11.1 (11.6) Mt, mainly due to lower production and a less favourable inventory position than in the third quarter last year. • The iron ore operations have a sales Net sales for the first three quarters were on a par with the same period last year. organization for the markets in Europe, A higher dollar exchange rate and higher iron ore price were offset by lower delivery Asia and the Middle East. volumes. Operating profit for the period was lower than in the same period last year, mainly due to the impact of higher costs for urban transformation provisions. Underlying operating profit increased by 7 percent to MSEK 4,535 (4,257). Production of iron ore products (k tonnes) Northern Division 2018 2017

4,500 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Q1 Q2 Q3 Q4

LKAB INTERIM REPORT Q3/2018 NORTHERN DIVISION | 5 SOUTHERN DIVISION

The Southern Division covers mines and processing plants FACTS in and Svappavaara.

OPERATIONS SUMMARY

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK Note 2018 2017 2018 2017 2017 Net sales* 8 2,621 2,181 7,914 7,219 9,999 Underlying operating profit* 7 880 663 2,315 2,130 2,746 Costs for urban transformation provisions 5 -13 -203 -76 -87

Operating profit* 8 885 650 2,113 2,054 2,659

Investments in property, plant and equipment 235 341 868 731 956 • The Southern Division mines and Depreciation -224 -258 -664 -661 -868 processes iron ore products in Malm- berget and Svappavaara. Deliveries of iron • The mining takes place in Malmberget’s ore products, Mt* 2.9 2.9 8.9 8.6 12.4 underground mine and the Svappavaara Proportion of pellets,%* 76 79 80 79 80 open-pit mines.

Production of iron • Magnetite is mainly mined in the ore products, Mt* 3.1 2.7 9.2 8.9 12.4 Malmberget mine, but also hematite.

* As from 2018 a new model is being used internally for allocating results to the Northern Division The mine has around 20 orebodies, of and the Southern Division. Earlier periods have been restated in accordance with the change. which around 10 are currently mined. • In Svappavaara ore is mined in the Production volumes in the third quarter were 0.4 Mt higher than in the same period Leveäniemi and Gruvberget open-pit last year. Deliveries for the quarter amounted to 2.9 (2.9) Mt, with pellets accounting mines. for 76 (79) percent of this. • The ore is processed above ground in Sales for the quarter increased year-on-year, which was mainly an effect of two concentrating and pelletizing plants a higher dollar exchange rate and higher prices for highly upgraded iron ore in Malmberget and in one concentrating products. Costs for the quarter increased compared with the same period last and pelletizing plant in Svappavaara. year, which was mainly due to price increases for energy, higher employee benefit expenses and higher costs for supplying the processing plants with crushed ore • The Southern Division produces both from the mines in Svappavaara. Operating profit increased by 36 percent to blast furnace pellets and fines. MSEK 885 (650). • The processed iron ore products are The production volume for the first three quarters increased to 9.2 (8.9) Mt. transported along the Malmbanan ore Delivery volumes also increased and amounted to 8.9 (8.6) Mt, with pellets railway, mainly to the port in Luleå and accounting for 80 (79) percent. on to European steel mill customers. Sales for the first three quarters increased by 10 percent, mainly as a result • The iron ore operations have a sales of higher iron ore prices and higher delivery volumes. The higher costs for the organization for the markets in Europe, period are due to increased costs for urban transformation provisions, price Asia and the Middle East. increases for energy, increased employee benefit expenses and higher costs for the supply of crushed ore. Underlying operating profit increased by 9 percent to MSEK 2,315 (2,130). Production of iron ore products (k tonnes) Southern Division 2018 2017

4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 Q1 Q2 Q3 Q4

LKAB INTERIM REPORT Q3/2018 SOUTHERN DIVISION | 6 SPECIAL PRODUCTS DIVISION

The Special Products Division is a leading global supplier FACTS of industrial minerals, with a major focus on LKAB’s own minerals of magnetite, mica and huntite. The division also provides products and services to LKAB such as drilling systems, mechanical services, concrete production, contract work and rockwork. These products and services are also marketed to external customers.

OPERATIONS SUMMARY

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK Note 2018 2017 2018 2017 2017 Net sales 8 924 1,027 2,714 2,853 3,936 Underlying operating profit 7 98 105 254 293 417 Impairment of property, plant and equipment -12 -12 -26 Operating profit/loss 8 98 93 254 281 391 • The Special Products Division covers LKAB Minerals, LKAB Wassara, LKAB Investments in property, plant and Berg & Betong, LKAB Kimit and LKAB equipment 34 7 53 26 35 Mekaniska. Depreciation -14 -13 -42 -45 -57 • LKAB Minerals mines and sells minerals and also processes and Net sales for the third quarter were 10 percent lower than in the same period last sells iron ore for applications outside year and amounted to MSEK 924 (1,027). Lower sales of magnetite for offshore gas the steel industry. The business has pipeline projects are the main reason for the decrease. sales offices and production units in The quarter’s underlying operating profit was somewhat lower than in the same Europe, the US and Asia. period last year at MSEK 98 (105), mainly due to lower sales volumes for magnetite. Underlying operating profit accumulated to the end of September was MSEK • LKAB Wassara develops and man- 254 (293), being mainly affected by lower sales volumes for magnetite. The Nord ufactures water-powered precision Stream 2 project is in progress and deliveries will continue to be made into 2019. drilling systems for mining, construc- Increased sales volumes for concrete and crushed material had a positive effect tion and exploration drilling as well as compared with the previous year. dam building and geothermal energy. Customers are located throughout the world. • LKAB Berg & Betong is a leading provider of full service solutions for the mining and construction industries. LKAB Berg & Betong is also the world’s largest producer of sprayed concrete. • LKAB Kimit supplies explosives to the mining and construction industries. • LKAB Mekaniska is a quality-conscious engineering company offering services throughout the supply chain, from planning and design to final inspection.

LKAB INTERIM REPORT Q3/2018 SPECIAL PRODUCTS DIVISION | 7 OTHER SEGMENTS

Other Segments covers supporting operations such as Group-wide functions1 and certain operations that are run as subsidiaries. Other Segments also covers financial operations, including transactions and gains/losses relating to financial hedging of iron ore prices, foreign currency effects and purchases of electricity.

OPERATIONS SUMMARY

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK Note 2018 2017 2018 2017 2017 Net sales excl. hedging 43 18 124 117 157 Net sales hedging 3 1 -69 -1,170 -1,119

Total net sales 8 46 19 55 -1,053 -962

Operating profit/loss 8 -45 -56 -333 -1,234 -1,315

Investments in property, plant and equipment 85 36 427 214 270 Depreciation -166 -151 -498 -449 -620

The improvement in earnings for the period January to September is mainly due to a better result for hedging activities compared with previous periods. Under LKAB’s hedging strategy, price and currency risk in the Group’s forecast sales are not normally hedged. Outstanding accounts receivable are hedged, however. Costs for the period increased somewhat, partly as a result of increased exploration as well as the intensification during the year of work on the strategic development programmes aimed at securing long-term competitiveness.

1. Group-wide functions within Other Segments mainly refers to the Group functions for HR, communication and finance, as well as strategic R&D and exploration.

PARENT COMPANY

The Parent Company LKAB consists of the Northern Division and the Southern Division and the group-wide functions reported under Other Segments. The Parent Company includes the majority of LKAB’s operating activities as well as the company’s financial activities.

OPERATIONS SUMMARY

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK 2018 2017 2018 2017 2017 Net sales 6,171 5,520 17,772 15,783 21,489 Underlying operating profit 2,578 1,903 6,293 4,910 6,373 Costs for urban transformation provisions -287 -263 -1,817 -794 -1,147 Operating profit/loss 2,291 1,640 4,475 4,116 5,225

Investments in property, plant and equipment 416 454 1,714 1,288 1,860 Depreciation -531 -611 -1,703 -1,704 -2,365

Deliveries of iron ore products, Mt 6.9 7.1 20.1 20.3 27.6 Production of iron ore products, Mt 6.8 6.5 20.2 20.0 27.2

LKAB INTERIM REPORT Q3/2018 OTHER SEGMENTS AND PARENT COMPANY | 8 SIGNATURES

Luleå, 26 October 2018 Luossavaara- AB (publ)

Jan Moström President and CEO

FINANCIAL INFORMATION

Year-end Report 2018 Reports are available at www.lkab.com 15 February 2019 Any questions concerning the Interim Report Annual and Sustainability Report 2018 may be directed to Jan Moström, President and 30 March 2019 CEO, or to Peter Hansson, Senior Vice President, Interim Report Q1 2019 Finance, +46 920 381 00. 25 April 2019 Annual General Meeting 25 April 2019

LKAB INTERIM REPORT Q3/2018 SIGNATURES | 9 AUDITOR’S REVIEW REPORT

Introduction We have reviewed the interim report for Luossavaara-Kiirunavaara AB (publ) for the period 1 January 2018 to 30 September 2018. It is the responsibility of the and the Chief Executive Officer to prepare and present this interim report in accordance with IAS 34 and the Annual Accounts Act. Our responsibility is to express an opinion on this interim report based on our review.

Focus and scope of review We conducted our review in accordance with the International Standard on Review Engagements (ISRE 2410), Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review has a different focus and is substantially limited in scope compared to the focus and scope of an audit conducted in accordance with ISA and generally accepted auditing practices. The procedures performed consequently do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in a reasonable assurance engagement. Accordingly, we do not express a reasonable assurance conclusion.

Conclusion Based on our review, nothing has come to our attention that causes us to believe that the interim financial report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act in the case of the Group and in accordance with the Annual Accounts Act in the case of the Parent Company.

Stockholm, 26 October 2018 Deloitte AB

Peter Ekberg Authorized Public Accountant

LKAB INTERIM REPORT Q3/2018 AUDITOR’S REVIEW REPORT | 10 LKAB – GROUP

CONDENSED INCOME STATEMENT

Q3 Q3 Q1–Q3 Q1–Q3 Full year MSEK 2018 2017 2018 2017 2017 Net sales 6,594 5,958 18,981 17,159 23,367 Cost of goods sold -3,909 -4,164 -13,194 -12,049 -16,563 Gross profit/loss 2,685 1,793 5,786 5,110 6,804 Selling expenses -26 -22 -116 -84 -124 Administrative expenses -99 -77 -372 -297 -440 Research and development expenses -80 -84 -266 -242 -398 Other operating income 82 285 225 407 486 Other operating expenses -85 -88 -288 -244 -352 Operating profit/loss 2,477 1,808 4,969 4,651 5,975 Financial income 91 114 779 426 515 Financial expense -56 -73 -174 -182 -225 Net financial income/expense 35 41 605 244 290 Profit/loss before tax 2,512 1,849 5,574 4,895 6,266 Tax -558 -415 -1,179* -1,070 -1,462 Profit/loss for the period 1,954 1,434 4,395 3,825 4,803

Attributable to Parent Company shareholders 1,954 1,434 4,395 3,825 4,803 Earnings per share before and after dilution (SEK) 2,791 2,049 6,279 5,464 6,862 Number of shares 700,000 700,000 700,000 700,000 700,000

*Includes positive remeasurement effects of MSEK 92 resulting from the decision to change the corporate tax rate in with effect from 2019.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

Q3 Q3 Q1–Q3 Q1–Q3 Full year MSEK 2018 2017 2018 2017 2017 Profit/loss for the period 1,954 1,434 4,395 3,825 4,803 Other comprehensive income for the period Items that will not be reclassified to profit for the year Remeasurement of defined benefit pension plans -27 -41 61 -64 123 Tax attributable to actuarial gains and losses 5 7 -13 13 -27 Total items that will not be reclassified to profit for the year -22 -34 48 -51 96 Items that will be reclassified to profit for the year Translation differences on translation of foreign operations for the period -53 37 245 -77 -139 Changes in fair value of available-for-sale financial assets for the period 54 22 -9 96 212 Changes in fair value of cash flow hedges for the period 7 13 108 39 40 Changes in fair value of cash flow hedges transferred to profit for the year -30 41 -2 1,015 1,017 Tax attributable to components of cash flow hedges 5 -11 -23 -232 -232 Total items reclassified to profit or loss -17 102 319 841 898 Other comprehensive income for the period -39 68 367 790 994 Total comprehensive income for the period attributable to the Parent Company shareholders 1,914 1,502 4,762 4,615 5,797

LKAB INTERIM REPORT Q3/2018 LKAB – GROUP | 11 LKAB – GROUP

CONDENSED STATEMENT OF FINANCIAL POSITION

MSEK 30 Sep 2018 30 Sep 2017 31 Dec 2017 ASSETS Non-current assets Intangible assets 207 179 167 Property, plant and equipment for operations 30,819 31,176 30,882 Property, plant and equipment for urban transformation 7,338 1,863 1,890 Participations in associated companies 39 39 39 Financial investments 1,331 1,193 1,303 Deferred tax asset 29 31 28 Non-current receivables 2 Total non-current assets 39,766 34,480 34,309

Current assets Inventories 3,387 2,695 2,602 Accounts receivable 2,004 1,652 1,948 Prepaid expenses and accrued income 184 193 145 Other current receivables 1,201 1,034 1,203 Current investments 21,531 15,061 18,041 Cash and cash equivalents 5,866 5,367 2,051 Total current assets 34,173 26,001 25,990 TOTAL ASSETS 73,939 60,481 60,298

EQUITY AND LIABILITIES Equity Share capital 700 700 700 Reserves 844 469 525 Retained earnings incl. profit for the year 36,685 33,998 35,124 Equity attributable to Parent Company shareholders 38,228 35,166 36,348 Total equity 38,228 35,166 36,348

Non-current liabilities Non-current interest-bearing liabilities 3,236 3,235 3,235 Other non-current liabilities 1 4 3 Provisions for pensions and similar commitments 1,561 1,802 1,642 Provisions for urban transformation 14,178 8,751 9,198 Other provisions 1,249 1,243 1,211 Deferred tax liabilities 1,900 1,826 1,851 Total non-current liabilities 22,125 16,861 17,139

Current liabilities Current interest-bearing liabilities 6,465 1,857 935 Trade payables 1,439 1,314 1,320 Tax liabilities 22 945 542 Other current liabilities 566 193 230 Accrued expenses and deferred income 1,065 903 926 Provisions for urban transformation 3,900 3,136 2,713 Other provisions 129 107 147 Total current liabilities 13,586 8,454 6,811 Total liabilities 35,711 25,315 23,950 TOTAL EQUITY AND LIABILITIES 73,939 60,481 60,298

LKAB INTERIM REPORT Q3/2018 LKAB – GROUP | 12 LKAB – GROUP

CONDENSED STATEMENT OF CHANGES IN EQUITY

Equity attributable to Parent Company shareholders Reserves Retained earnings 2017 Translation Fair value Hedging including profit/ Total MSEK Share capital reserve reserve reserve loss for the year equity Opening equity 1 Jan 2017 700 -83 542 -832 30,224 30,551 Profit/loss for the year 4,803 4,803 Other comprehensive income for the year -139 212 825 96 994 Comprehensive income for the year -139 212 825 4,900 5,797 Dividend Closing equity 31 Dec 2017 700 -222 754 -7 35,124 36,348

Equity attributable to Parent Company shareholders Reserves Retained earnings 2018 Translation Fair value Hedging including profit/ Total MSEK Share capital reserve reserve reserve loss for the year equity Opening equity 1 Jan 2018 700 -222 754 -7 35,124 36,348 Profit/loss for the year 4,395 4,395 Other comprehensive income for the year 245 -9 83 48 367 Comprehensive income for the year 245 -9 83 4,443 4,762 Dividend -2,882 -2,882 Closing equity 30 Sep 2018 700 23 745 76 36,685 38,228

LKAB INTERIM REPORT Q3/2018 LKAB – GROUP | 13 LKAB – GROUP

CONDENSED STATEMENT OF CASH FLOWS

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK 2018 2017 2018 2017 2017

Operating activities Profit/loss before tax 2,512 1,849 5,574 4,895 6,266 Adjustment for items not included in cash flow 956 967 4,011 2,714 3,783 Income tax paid -684 -14 -1,688 -66 -879 Expenditures, urban transformation -445 -487 -1,091 -1,821 -2,178 Expenditures, other provisions -1 -22 Cash flow from operating activities before changes in working capital 2,339 2,315 6,805 5,722 6,970

Cash flow from changes in working capital Increase (-)/Decrease (+) in inventories -412 152 -785 141 234 Increase (-)/Decrease (+) in operating receivables 165 -222 100 2,041 1,648 Increase (+)/Decrease (-) in operating liabilities -69 -113 360 -226 8 Change in working capital -316 -182 -325 1,956 1,890 Cash flow from operating activities 2,023 2,133 6,480 7,678 8,860

Investing activities Acquisition of property, plant and equipment -475 -489 -1,831 -1,408 -2,008 Disposal of property, plant and equipment 5 272 6 279 284 Disposals/acquisitions (net) in current investments 802 -1,304 -3,490 -3,789 -6,770 Cash flow from investing activities 331 -1,521 -5,315 -4,918 -8,494

Financing activities Borrowing 100 5,529 Amortization -633 -217 -14 -937 Dividends paid to Parent Company shareholders -2,882 Cash flow from financing activities -633 -117 2,647 -14 -937

Cash flow for the period 1,721 494 3,812 2,746 -571

Cash and cash equivalents at start of period 4,146 4,873 2,051 2,624 2,624 Exchange difference in cash and cash equivalents -1 -1 3 -3 -2 Cash and cash equivalents at end of period 5,866 5,367 5,866 5,367 2,051 Change in cash and cash equivalents 1,721 494 3,812 2,746 -571

Sub-components of cash and cash equivalents Cash and bank balances 5,816 5,167 5,816 5,167 2,051 Current investments (maturity <90 days) 50 200 50 200 Cash and cash equivalents 5,866 5,367 5,866 5,367 2,051

Consolidated operating cash flow Cash flow from operating activities 2,023 2,133 6,480 7,678 8,860 Acquisition of property, plant and equipment -475 -489 -1,831 -1,408 -2,008 Disposal of property, plant and equipment 5 272 6 279 284 Operating cash flow (excluding current investments) 1,552 1,916 4,655 6,549 7,136 Acquisition/disposal of financial assets (net) 802 -1,304 -3,490 -3,789 -6,770 Cash flow after investing activities 2,354 612 1,165 2,760 366 Cash flow from financing activities -633 -117 2,647 -14 -937 Cash flow for the period 1,721 494 3,812 2,746 -571

LKAB INTERIM REPORT Q3/2018 LKAB – GROUP | 14 LKAB – PARENT COMPANY

CONDENSED INCOME STATEMENT

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK 2018 2017 2018 2017 2017

Net sales 6,171 5,520 17,772 15,783 21,489 Cost of goods sold -3,741 -3,942 -12,759 -11,430 -15,794 Gross profit/loss 2,430 1,578 5,014 4,353 5,695

Selling expenses -8 -6 -54 -22 -33 Administrative expenses -69 -60 -237 -191 -269 Research and development expenses -71 -73 -249 -230 -381 Other operating income 12 217 22 222 231 Other operating expenses -4 -15 -22 -15 -18 Operating profit/loss 2,291 1,640 4,475 4,116 5,225

Profit/loss from financial items -78 146 1,433 273 235 Profit/loss after financial items 2,213 1,786 5,909 4,389 5,460

Appropriations 2,842

Profit/loss before tax 2,213 1,786 5,909 4,389 8,302 Tax -494 -394 -1,221* -938 -1,895 Profit/loss for the period 1,719 1,392 4,688 3,451 6,406

* Includes negative remeasurement effects of MSEK 70 resulting from the decision to change the corporate tax rate in Sweden with effect from 2019.

CONDENSED STATEMENT OF COMPREHENSIVE INCOME

Q3 Q3 Q1– Q3 Q1–Q3 Full year MSEK 2018 2017 2018 2017 2017

Profit/loss for the period 1,719 1,392 4,688 3,451 6,406 Other comprehensive income for the period Comprehensive income for the period 1,719 1,392 4,688 3,451 6,406

LKAB INTERIM REPORT Q3/2018 LKAB – PARENT COMPANY | 15 LKAB – PARENT COMPANY

CONDENSED BALANCE SHEET

MSEK 30 Sep 2018 30 Sep 2017 31 Dec 2017

ASSETS Non-current assets Intangible assets 72 33 34 Property, plant and equipment for operations 25,693 25,916 25,688 Property, plant and equipment for urban transformation 7,338 1,863 1,890 Financial assets Participations in subsidiaries 2,390 2,120 2,390 Participations in associated companies 41 40 41 Receivables from subsidiaries 2,601 2,482 2,419 Other non-current securities 248 247 246 Other non-current receivables 114 110 112 Deferred tax asset 1,747 2,380 1,817 Total financial assets 7,141 7,380 7,026

Total non-current assets 40,244 35,191 34,637

Current assets Inventories 2,765 2,168 2,119 Current receivables Accounts receivable 1,630 1,212 1,596 Receivables from subsidiaries 145 378 161 Other current receivables 1,029 731 1,080 Prepaid expenses and accrued income 115 99 106 Total current receivables 2,918 2,419 2,942

Current investments 20,943 14,799 17,572 Cash and bank balances 5,408 4,819 1,719 Total current assets 32,034 24,205 24,352 TOTAL ASSETS 72,278 59,396 58,989

LKAB INTERIM REPORT Q3/2018 LKAB – PARENT COMPANY | 16 LKAB – PARENT COMPANY

CONDENSED BALANCE SHEET

MSEK 30 Sep 2018 30 Sep 2017 31 Dec 2017

TOTAL EQUITY AND LIABILITIES

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

Non-restricted equity Profit brought forward 17,684 14,160 14,160 Profit/loss for the period 4,688 3,451 6,406 Total equity 23,769 19,008 21,964

Untaxed reserves 15,263 17,663 15,263

Provisions Provisions for urban transformation 14,178 8,751 9,198 Other provisions 1,510 1,533 1,464 Total provisions 15,687 10,285 10,661

Non-current liabilities Bond loans 3,236 3,235 3,235 Other non-current liabilities 1 4 3 Total non-current liabilities 3,236 3,239 3,238

Current liabilities Liabilities to credit institutions 6,465 1,857 935 Trade payables 1,092 972 949 Liabilities to subsidiaries 1,581 1,523 1,765 Current tax liabilities 35 938 510 Other current liabilities 400 34 140 Accrued expenses and deferred income 720 636 706 Provisions for urban transformation 3,900 3,136 2,713 Other provisions 129 107 147 Total current liabilities 14,322 9,202 7,864 TOTAL EQUITY AND LIABILITIES 72,278 59,396 58,989

LKAB INTERIM REPORT Q3/2018 LKAB – PARENT COMPANY | 17 NOTES

The transition to IFRS 15 has meant that demurrage – i.e. the cost for delayed NOTE 1 loading of vessels – is reported differently. Under IFRS 15 the cost affects the transaction price and is recognized as a part of the net sales that relate to sales Accounting principles of iron ore, rather than as cost of goods sold. The restatement of previous periods amounts to MSEK 46 for the first to third quarters of 2017 and MSEK 76 for This interim report was prepared in accordance with IAS 34, Interim Financial full-year 2017. The transition has not resulted in any adjustment items that are Reporting, and applicable regulations in the Annual Accounts Act. Disclosures in recognized in equity. accordance with IAS 34 are provided both in notes and elsewhere in the interim report. The interim report for the Parent Company was prepared in accordance New IFRS standards that have not yet begun to be applied with Chapter 9 of the Annual Accounts Act, Interim Reporting. LKAB is analyzing the effects of the new standard IFRS 16 Leases, which will All amounts are presented in SEK millions (MSEK) unless otherwise indicated. come into effect at the beginning of 2019. Management’s assessment is that IFRS Rounding differences may occur. 16 may affect the amounts recognized in the financial statements, but that the effects will not be significant. The application of IFRS 16 has not yet been analyzed Accounting principles changed due to new or amended IFRS in detail, so the effects cannot yet be quantified. Described below are changed accounting principles applied by the Group with effect from 1 January 2018. In other respects the accounting principles applied in this interim report conform to the accounting principles applied in the prepara- tion of the 2017 Annual Report. For further information concerning the Group’s NOTE 2 accounting principles refer to LKAB’s Annual and Sustainability Report for 2017. Risks and uncertainties Other amendments to IFRS effective from 1 January 2018 have had no impact on consolidated earnings, financial position or the formulation of the interim report. LKAB is exposed to various risks. Risk management plays a vital part in minimizing the impact of factors that lie beyond the Group’s control. IFRS 9 Financial Instruments The Group employs methods for evaluating and limiting these risks by ensuring Classification and measurement that they are managed according to approved guidelines and methods. Financial assets are classified into three categories: measurement either at LKAB works actively to identify, analyze and control how various types of risks amortized cost, at fair value through other comprehensive income or at fair value affect the business and how LKAB can best avoid or confront them. Effective risk through profit or loss. The measurement category in which a financial asset is management is a business-critical success factor. to be placed depends partly on the company’s business model (the purpose for Major risks are LKAB’s access to land for the mining operations, volume which the company holds the asset) and partly on the financial asset’s contractual dependency, the price of iron ore products and transaction exposure in USD. cash flows. For further information concerning risks, refer to LKAB’s 2017 Annual Report. There are no material effects on the classification of financial assets as of 1 January 2018. NOTE 3 Impairment The model used for impairment of financial assets is based on expected credit Significant assumptions and estimates losses, rather than incurred losses as previously. Under the new impairment model, a year’s expected losses are reserved already upon initial recognition. The preparation of financial statements requires management and the Board of In the event of a significant increase in credit risk, the impairment amount Directors to make assessments and assumptions that affect recognized assets, must correspond to the credit losses that are expected to arise during the remaining liabilities, income and expenses and other information provided, such as contin- term. gent liabilities. For further information concerning these, please refer to LKAB’s Based on historical bad debts, no impairment is reported as of 1 January 2018. 2017 Annual Report. For more information about the effects of assessments made in respect of provi- Hedge accounting sions for urban transformation, see Note 10. In accordance with IFRS 9, LKAB has decided that the forward points in forward exchange contracts when hedging cash flows for iron ore sales are to be reported separately as a cost of hedging. This means that the changes in forward points NOTE 4 will be recognized in other comprehensive income and accumulated in a reserve for hedging costs within equity. Hedging costs are recognized in net sales. Events after the end of the reporting period The new reporting is being applied prospectively. As at 31 December 2017, hedg- ing costs amounted to MSEK 5. The change also means that with effect from 2018, Following approval by the authorities, LKAB Minerals is to acquire all the shares hedging costs are reported in net sales instead of as a financial expense. in Francis Flower Limited and Gurney Slade Lime & Stone Co. Ltd.; this is expected The restatement of previous periods amounts to MSEK 39 for the first to third to take place in the fourth quarter of 2018. The acquisition will create growth in the quarters of 2017 and MSEK 49 for full-year 2017. The transition to IFRS 9 has not area of industrial minerals which, in line with LKAB’s strategic plan, will create a resulted in any adjustment items that are recognized in equity. better balance between LKAB’s business areas and make the company less sensi- tive to fluctuations in the iron ore market. IFRS 15 Revenue from Contracts with Customers Revenue from contracts with customers is recognized in profit/loss for the year when control over the goods or services is transferred to the customer. The basic NOTE 5 principle is that an entity recognizes revenue relating to the transfer of promised Transactions with related parties goods or services to customers at an amount that reflects the remuneration that the company expects to be entitled to receive in exchange for the goods or No transactions that have significantly affected the company’s financial position services. and earnings took place between LKAB and related parties. The recognition of revenue is determined according to a five-step model: Step 1 Identify the contract(s) with a customer Step 2 Identify the performance obligations (promises) in the contract Step 3 Determine the transaction price Step 4 Allocate the transaction price to the performance obligations (promises) in the contract Step 5 Recognize revenue when (or as) the entity satisfies a performance obligation

LKAB INTERIM REPORT Q3/2018 NOTES | 18 NOTES

NOTE 6 Disclosures regarding financial instruments

The table below shows the financial instruments measured at fair value in the Level 1 statement of financial position. Quoted prices (unadjusted) on active markets for identical assets or liabilities.

Group, 30 Sep 2018 Level 2 Inputs other than quoted market prices included within Level 1 that are observable (MSEK) Level 1 Level 2 Level 3 Total for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from Shares, financial assets 941 941 prices). Shares, current holdings 5,712 5,712 Interest-bearing instruments 15,868 15,868 Level 3 Inputs for the asset or liability that are not based on observable market data Derivatives 1 114 115 (unobservable inputs). Total 942 21,694 22,636 Interest-bearing instruments Group, 31 Dec 2017 The value of interest-bearing instruments is calculated using data from the (MSEK) Level 1 Level 2 Level 3 Total interest-bearing securities market, obtained from Bloomberg. Shares, financial assets 950 950 Shares and alternative investments Shares, current holdings 4,964 4,964 The value of these investments is calculated using data from the stock market Interest-bearing instruments 13,077 13,077 or received directly from brokers. Derivatives 65 65 Derivatives Total 950 18,106 19,056 The fair values ​​of derivative contracts are calculated using official quotations obtained from Bloomberg. Fair value calculation No transfers have been made between Levels 1 and 2. The following summarizes the methods and assumptions mainly used in determining the fair value of financial instruments reported in the table above. Fair value of other receivables and liabilities The carrying amount of other receivables and liabilities is estimated to be a reasonable approximation of fair value.

NOTE 7 Key ratios – disclosures

Alternative key ratios The company also presents certain non-IFRS financial benchmarks and key ratios Operating cash flow in the interim report. The management considers this supplementary information A reconciliation of operating cash flow can be found in the section The LKAB to be important if readers of this report are to obtain an understanding of the Group in summary. company’s financial position and performance. Net financial indebtedness Definitions 30 Sep 30 Sep 31 Dec Return on equity Profit/loss after tax as a percentage of average MSEK 2018 2017 2017 equity (rolling 12-month figures). Loans payable 9,701 5,092 4,170 Underlying Operating profit excluding costs for urban operating profit transformation provisions and impairment of Provisions for pensions 1,561 1,802 1,642 intangible assets and of property, plant and Provisions, urban transformation 18,078 11,887 11,911 equipment. Provisions, remediation 1,318 1,303 1,290 Operating cash flow Cash flow from operating activities and investing Less: activities relating to property, plant and equipment. Cash and cash equivalents -5,866 -5,367 -2,051 Net financial Interest-bearing liabilities less interest-bearing Current investments -21,531 -15,061 -18,041 indebtedness assets. Financial investments -1,331 -1,193 -1,303 Net debt/equity ratio Net financial indebtedness divided by equity Net financial indebtedness 1,930 -1,537 -2,382

Reconciliation Net debt/equity ratio Underlying operating profit 30 Sep 30 Sep 31 Dec Full MSEK 2018 2017 2017 Q3 Q3 year Net financial indebtedness, MSEK 1,930 -1,537 -2,382 MSEK 2018 2017 2017 Equity, MSEK 38,228 35,166 36,348 Operating profit/loss 2,477 1,808 5,975 Net debt/equity ratio, % 5.0 -4.4 -6.6 Less: Costs for urban transformation provisions 287 263 1,147 Impairment of property, plant and equipment 12 26 Underlying operating profit 2,764 2,083 7,148

LKAB INTERIM REPORT Q3/2018 NOTES | 19 NOTES

NOTE 8 Segment reporting

Segment information is provided on pages 5–8 of the interim report.

The divisions in summary Eliminations/ Northern Southern Special Products Other group adjustments Group MSEK Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 Q1–Q3 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 External income 9,539 9,363 7,745 6,959 1,685 1,951 12 -1,114 18,981 17,159 Internal income 935 1,017 169 261 1,030 902 43 61 -2,176 -2,241 Total net sales 10,474 10,380 7,914 7,220 2,714 2,853 55 -1,053 -2,176 -2,241 18,981 17,159 Operating profit/loss 2,920 3,539 2,113 2,054 254 281 -333 -1,234 15 11 4,969 4,651 Net financial income/ex- 605 244 pense Profit/loss before tax 5,574 4,895

NOTE 9 Revenue breakdown

External income for the segments is reported below broken down by product/service area and region.

Product/service area Northern/Southern Special Products Other Group MSEK Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Q3 2018 Q3 2017 Blast furnace pellets 11,431 9,904 11,431 9,904 DR pellets 4,090 4,777 4,090 4,777 Fines 1,523 1,419 1,523 1,419 Magnetite 736 784 736 784 Mineral sands 398 551 398 551 Other industrial minerals 418 447 418 447 Drilling technology 17 45 17 45 Mining and construction services 113 124 113 124 Financial activities -69 -1,170 -69 -1,170 Other 240 222 3 81 56 324 278 Total external income 17,284 16,322 1,685 1,951 12 -1,114 18,981 17,159

Region Europe 13,143 11,796 1,211 1,240 12 -1,114 14,254 11,922 MENA 3,835 4,353 3,835 4,353 USA 125 95 102 90 227 185 China including Hong Kong 181 78 366 614 547 692 Other 6 7 118 7 Total external income 17,284 16,322 1,685 1,951 12 -1,114 18,981 17,159

LKAB INTERIM REPORT Q3/2018 NOTES | 20 NOTES

NOTE 10 Urban transformation

Provisions are reported in compliance with IAS 37. These accounting principles are current main haulage level of the mine in Kiruna, an additional provision of MSEK applied by LKAB such that a provision for urban transformation is reported where 6,507 was recognized in the second quarter of 2018. The parts of the provision that there is an agreement or a clear, constructive obligation that defines a commitment relate to commitments for areas outside the impact boundary (the boundary of the relating to future impact areas. impact of mining to date for which compensation is payable) were reported as In view of the agreements with the Municipality of Kiruna concerning mine assets relating to future mining. In the second quarter of 2018 an additional commitments within the area of Mine City Park 3 and following assessment of mine asset of MSEK 6,045 was reported. constructive obligations relating to the remaining part of the impact area of the

NOTE 11 Pledged assets and contingent liabilities, Parent Company

Pledged assets Contingent liabilities 30 Sep 30 Sep 31 Dec 30 Sep 30 Sep 31 Dec MSEK 2018 2017 2017 MSEK 2018 2017 2017 As pledged assets for Guarantees, FPG/PRI 15 14 15 own liabilities and provisions Guarantees, GP plan 4 5 4 Company-owned endowment insurance 112 110 112 Guarantees, Swedish Tax Agency 63 63 63 Deposit of cash and cash equivalents 121 121 121 Surety given for Collateral provided, derivatives 217 228 208 subsidiaries 29 33 33 Pledged assets, bonds 6,264 1,025 733 Collateral, remediation 65 66 68 Total pledged assets 6,714 1,484 1,174 Total contingent liabilities 176 181 183

NOTE 12 Quarterly data for the Group

Q3 Q2 Q1 Q4 Q3 Q2 Q1 Q4 MSEK Note 2018 2018 2018 2017 2017 2017 2017 2016 Net sales 6,594 6,160 6,227 6,208 5,958 5,689 5,512 4,517 Underlying operating profit 7 2,764 1,666 2,357 1,691 2,083 1,454 1,920 527 Costs for urban transformation provisions 10 -287 -735 -795 -353 -263 -300 -231 -1,179 Impairment of property, plant and equipment -14 -12 -1,192 Operating profit/loss 2,477 931 1,561 1,324 1,808 1,154 1,689 -1,844 Net financial income/expense 35 370 201 47 40 71 132 -34 Profit/loss before tax 2,512 1,300 1,762 1,371 1,849 1,224 1,822 -1,878

Operating cash flow 1,552 1,333 1,770 587 1,916 3,063 1,571 -356 Investments in property, plant and equipment 475 762 594 600 489 547 372 756

Deliveries of iron ore products, Mt 6.9 6.4 6.8 7.3 7.1 6.6 6.6 6.8 Proportion of pellets, % 82 84 84 81 81 84 86 84 Production of iron ore products, Mt 6.8 6.1 7.3 7.2 6.5 6.3 7.2 7.1

Return on equity, % 7 14.6 13.9 13.4 14.4 6.6 4.0 0.4 neg Net debt/equity ratio, % 7 5.0 11.6 -9.4 -6.6 -4.4 2.1 12.6 20.7

LKAB INTERIM REPORT Q3/2018 NOTES | 21 LKAB 2017 IN BRIEF

EUROPE 1890 LKAB is the EU’s largest iron ore LKAB is one of Sweden’s oldest industrial producer and mines around 80 percent companies and has customer relationships of all iron ore within the EU dating back more than a century

83% LKAB is the world’s SEK 23 .4 bn second-largest2 producer in Iron ore pellets account for 83 percent LKAB’s total sales in 2017 of LKAB’s iron ore deliveries the seaborne pellet market

4118, 100% LKAB is wholly owned by the Swedish state total number of employees

LKAB’s mines and processing plants are located in the Swedish orefields – in Kiruna, Malmberget and Svappavaara. The iron ore products are transported along the Ore Railway to the ports of Narvik and Luleå for shipment to customers around the world. Narvik Svappavaara Kiruna

Malmberget

ARCTIC CIRCLE Ore Railway

Luleå

LKAB IS ORGANIZED INTO THREE DIVISIONS

NORTHERN DIVISION SOUTHERN DIVISION SPECIAL PRODUCTS DIVISION Mine, processing and Mine, processing and Develops and markets industrial support functions in Kiruna support functions in minerals, drilling technology and Malmberget and Svappavaara full service solutions for the mining and construction industries

LKAB INTERIM REPORT Q3/2018 LKAB IN BRIEF | 22