Integrated Report ANNUAL and SUSTAINABILITY REPORT Overview of the Past Year
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2012// INTEGRATED REPORT ANNUAL AND SUSTAINABILITY REPORT overview of the past year president’s report 4 continued good profitability 4 business concept, strategy and vision 8 strategic focus areas 9 sustainability strategy and governance 56 performance in ironmaking 10 ambitions for future development 57 a clear-cut customer promise 11 gri index 62 auditor’s report 64 flexibility 16 quick adaptation to change 17 corporate governance report 65 corporate governance structure 66 safe and resource-efficient corporate governance at lkab 67 production 22 board of directors 72 a sustainable value chain 23 group management 74 auditor’s opinion 76 growth 32 group overview 77 we grow with our customers 33 financial accounting 78 urban transformation 40 administration report 80 in close collaboration with all financial statements and notes 90 stakeholders 41 proposed appropriation of profits 128 auditor’s report 129 attractive lkab 48 a long-term strong brand 49 appendix glossary 130 addresses 131 annual general meeting and financial information 132 TAL B E OF 2012 CONTENTS ABOUT LKAB’S 2012 INTEGRATED REPORTING According to owner directives, LKAB shall each year present an annual report and a sustainability report in accordance with the Glob- al Reporting Initiative (GRI) framework. For 2012, LKAB chose to integrate its annual and sustainability reports, since it reflects how LKAB’s operations are run. The basis of the integrated report is LKAB’s business strategy, in which each strategic focus area has sus- tainability dimensions. These strategic focus areas also constitute the very structure of and navigation through the report. This means that information previously reported in a separate sustainability section is now integrated into the description of LKAB’s products and services, market, growth and other strategic areas of focus. The integrated report is followed by information on sustainability manage- ment, the corporate governance report, administration report and financial statements. SEK MILLIONS IN PROFIT BEFORE 26,971 SALES 2012 11,023 taX IN SEK MILLIONS NUMBER OF PERMANENT EMPLOYEES LKAB’S POSITION AMONG 4 ,19 9 31 DECEMBER 2012 SWEDISH EXPORT COMPANIES in 2011: NO 9 NUMBER OF IRON ORE PELLETS 755 LKAB PRODUCES PER SECOND +500 30% OF Sweden’S TOTAL B Y 2015 LKAB FASTIGHETER WILL EXPLOSIVES PRODUCTION HAVE BUILT 500 NEW HOMES IN THE IS DONE BY LKAB KIMIT MUNICIPALITIES OF KIRUNA AND GÄLLIVARE CHool S +2.3% -13 % LKAB’S DELIVERIES IN 2012 LKab’S SALES IN 2012 ent M LKAB REALLOCATED 2 MILLION iron 26.3MT V TONNES AMONG ITS CUSTOMERS RECORD DELIVERIES: EN DURING THE YEAR, BOTH WITHIN 26.3 MILLION TONNES OF al EUROPE AND BETWEEN CONTINENTS IRON ORE PRODUCTS C lo 37MT THREE NEW MINES IN SVAPPAVAARA 360 WILL ENSURE A DELIVERY VOLUME MINELCO, WHICH IS CHANGING ITS OF 37 MILLION TONNES OF FINISHED NAME TO LKAB MINERALS 1 JULY IRON ORE PRODUCTS IN 2015 2013, HAS 360 EMPLOYEES 250,000M3 COST IN SEK MILLION TO EXPAND FluE GAS TREATMENT TO ALL SIX PELLETIZING PLANTS 1,500 PRODUCTION OF OVER 250,000 M3 OF CONCRETE PER YEAR MAKES LKAB Berg & Betong THE WORLD'S LKAB WASSARA 2012 LARGEST PRODUCER OF SHOTCRETE. LKAB 1987 7 M COMMITTED. INNOVATIVE. RESPONSIBLE. LKAB’S VAluES NUMBER OF IRON ORE PELLETS 755 LKAB PRODUCES PER SECOND C O energ MM A TRA C T T L Y C unities I New M and - A E OU LKAB will gener- TE ient C H SING ation of C C build 500 new FI TI climate-smart ION dwellings with produ V varying iron ore pellets by EF E 2017. Max 130 kWh of rental rates in Malm- fälten by 2015. energy use per tonne of resour finished products by 2020. longER O RE -T ool suppl C M SH - 2020 through active 2020 through Y “LKAB to least 20 years reserve for at reserve generates prospecting. new ore new ore prosperity by Ensure - LKAB Acad shall emy foster Sweden’s best school in LKAB Malmfälten. secondary school gen in interest increased erates education. technical being one of the less than 0.8%. absences continue to be Long-term sickness 2020. by worked million hours accidents per mum 2.5 Maxi - - most innovative and An - nual average average resource-efficient for falling T mining companies particulates will EN be reduced by 10% by be reduced from 2011 to 2015. from safet M ALT and sulphur dioxide and sulphur dioxide H in the world.” E RON ing plants will be halved emissions from pelletiz emissions from I V Y H and EN A C lo L services. businesses and community community and businesses responsible local other suppliers, for by 2020. by jobs and opportunities opportunities and jobs E will be at least 25% 25% least at be will operation secure creates tion V women at LKAB LKAB at women - mining opera mining TI E SIT di C proportion of of proportion ESS competitive competitive Q V UA The The ER EN term term V LIT long- T Y lkab Y A A A TRA and P M Do it yourself in December 2012. the Board by approved sustainable development, for about LKAB's strategy and learn more cootie catcher own your Fold O C ETITI COST IN SEK MILLION TO EXPAND FluE GAS TREATMENT TO ALL SIX PELLETIZING PLANTS 1,500 55 M LKAB INVested SEK 5,808 MILLION IN ITS faCILITIES IN 2012. OPTIMISM IS STRONG. DRILL RIGS LIKE THE LKAB WASSARA CAN DRILL fanS UP TO 55 METRES DEEP. THIS MEANS THat EACH fan GIVES MORE THAN EIGHT TIMES AS MUCH IRON ORE AS IT DID 25 YEARS agO. 5,808 2012 ORE WITH ADDED VAluE world leader in pellets LKAB is one of the world’s larg- est producers of iron ore pellets for the global steel industry. Iron ore pellets are a premium prod- uct that constitute 10-20 per- focus on growth cent of the global iron ore market. Long-term forecasts point to a LKAB’s main market is the EU, strong increase in demand for steel where we account for about 40 around the world. LKAB’s customers percent of all pellet deliveries. Today, we are a are growing and need more iron ore. quality leader, technical pioneer and innovative It is against this backdrop that the driving force in our industry. LKAB’s world- LKAB 37 programme is being imple- leading R&D projects are conducted in close col- mented. This initiative represents an laboration with customers. Our vision is to offer increase in LKAB’s annual produc- them tangible added value. tion capacity to at least 37 million tonnes of fin- ished iron ore products. A parallel programme lkab processes will also be implemented whose purpose is to P ellets, LKAB’s main product, are ensure that LKAB’s costs remain competitive. a highly upgraded iron ore product This focus on growth requires that LKAB employ which constitute 84 percent of de- upwards of 700 new qualified employees from liveries. We also produce fines, a 2013 to 2015. fine-grained iron ore sand that is the dominant product in the global iron secure access to raw ore trade. In addition, LKAB develops materials and produces processed industrial LKAB’s ore mining is concentrated minerals that are sold to customers outside the to the orefields of northern Sweden. steel industry and give the Group a complemen- The area has a unique geology with tary leg to stand on. orebodies of magnetite that have an unusually high iron content. The a clear-cut customer promise world’s two largest underground P erformance in Ironmaking is our iron ore mines are located in Kiru- customer promise and is about de- na and Malmberget. The new main levels that livering products that are tailored to are being established in both locations ensure the ironmaking processes of the cus- LKAB’s access to raw materials to 2030–2035 tomer. With LKAB’s iron ore pellets, in Kiruna and to 2023 in Malmberget. Mining in our steelworks customers increase Gruvberget, Leveäniemi and Mertainen will in- their efficiency and productivity, and crease LKAB’s delivery capacity by about 12 mil- reduce their carbon dioxide footprint. lion tonnes per year over the next decade. LKAB The higher the proportion of LKAB’s iron ore is also prospecting in existing mines and start- pellets that customers use in their ironmaking, ing new projects to gradually secure additional the more efficient the process. LKAB pellets raw material for the future. have a unique advantage, since they are made of magnetite, an iron ore mineral that gives off new communities emerge heat during the pellet manufacture. This makes Over the next 20 years, large areas LKAB’s production process less energy intensive of Kiruna and Malmberget will be and reduces carbon dioxide emissions through- affected by continuing mining. Peo- out the chain, as compared to the manufacture ple and buildings must be moved. Do it yourself in December 2012. the Board by approved sustainable development, for about LKAB's strategy and learn more cootie catcher own your Fold and use of iron ore pellets made of hematite ore. Changes in infrastructure will be re- That is why LKAB Green Pellets are the world’s quired. At the same time, it enables most climate-smart iron ore product. new and attractive communities to take shape. LKAB takes responsi- a swedish heavyweight bility for both the practical and financial impli- Iron ore and other minerals make up cations of this. Everything is done in close con- 40 percent of Sweden's net exports. sultation with all stakeholders, particularly the In 2011 LKAB was Sweden's ninth municipalities that are responsible for planning largest export company.