INTEGRATED REPORT ANNUAL AND SUSTAINABILITY REPORT 2013 TABLE OF CONTENTS the past year 2 the year in numbers 4 president’s report 6 ABOUT US 1 OUR FINANCIAL ACCOUNTS 4 our role in society 12 administration report 92 customer focus since 1890 14 financial statements 106 customers and markets 16 notes 115 customer offering 18 affirmation by the board 146 risks and opportunities 20 auditor’s report 147 stakeholder dialogue 22 mineral reserves and mineral resources 148 strategy and value chain 24 group overview 151 gri index 152 OUR STRATEGY IN ACTION 2 performance in ironmaking 28 APPENDIX flexibility 34 glossary 154 safe and resource-efficient production 40 addresses 155 growth 50 annual general meeting and urban transformation 56 financial information 156 attractive lkab 64 OUR GOVERNANCE AND CONTROL 3 corporate governance report 76 corporate governance structure 76 shareholders and annual general meeting 78 management of sustainability work 80 board of directors 84 group management 86 auditor’s statement on the corporate governance report 88 auditor’s limited assurance report on lkab’s sustainability report 89 LKAB’s INTEGRATED REPORTING FOR 2013 According to the state ownership policy and guidelines for state-owned companies, LKAB must prepare an Annual Report and a sustainability report annually, in accordance with the Global Reporting Initiative (GRI) framework. Our sustainability report for 2013 fulfills the requirements in GRI G3 level B+, which can be seen in the GRI index on pages 152-153. This integrated report is the second report in which we have integrated non-financial information (social and environmental) with financial information. This reflects how we run our business. As last year, our business strategy is the basis for the content and structure of the report, and each strategic focus area has sustainability dimensions. The information is presented with a focus on the past 12 months. This year we have added a chapter describing the Group and the way we work. The audited Annual Report includes the administration report and financial statements on pages 92-146 as well as the Corporate Governance Report on pages 76-87. The cover image shows the locomotive workshop at the new main level KUJ 1365 in the Kiruna mine. KUJ at the new main level workshop the locomotive image shows The cover The sustainability information, which has been reviewed by the auditors, can be found on pages 10-73 and 152-153. BY COMMITTED, WE MEAN THAT WE FOCUS ON OUR CUSTOMERS’ RESULTS IN ALL WE DO 3 peregrine falcons hatched in 2013 in LKAB’s mining areas. 5 WIND TURBINES produce 40 GWh per year, equivalent to half the energy required for the transportation of iron ore. DECREASED EMISSIONS TO AIR with flue gas scrubbing at the conveyor belt kiln in Malmberget. 90% 76 TONNES OF IRON ORE 37 mined and hoisted from the Kiruna mine every day. 000 TONNES OF IRON ORE PRODUCTS 000 expected annual production capacity when the open-pit mine in Svappavaara is fully operational. 000 7X STOCKHOLM GLOBE ARENA volume of waste rock extracted at KUJ 1365: 4.2 million m3 equivalent to seven Globe arenas. 13 KUJ 1365 NEW MAIN LEVEL SEK 12.4 billion for capital expenditures to increase 65 annual capacity. OF LKAB’S SALES, 83% WERE IRON ORE PELLETS BY INNOVATIVE, WE MEAN THAT EVERYTHING CAN BE IMPROVED IF WE DARE TO THINK IN NEW WAYS 400 APARTMENTS IN MALMFÄLTEN IN 2015 4 In 2013 a further 43 apartments were built in Kiruna and in Gällivare 28 apartments will be ready for occupancy in summer 2014. 500 KRONOR INVESTED 000 over the last 10-15 years to increase iron NEW EMPLOYEES DURING THE YEAR ore transport capacity. From 2012 to 2015 we plan to 000 289 recruit around 700 people. MORE WOMEN AT LKAB during the year, the percentage of women increased to 18.1% and the percentage of female managers to 19.8%. 25 500 TONNES DELIVERED to LKAB’s customers, primarily in 54 Europe, the Middle East and Asia. 000 PEOPLE EMPLOYED directly or indirectly in LKAB´s 000 operations in northern Scandinavia. RE TONNES DELIVERED CO 24 November was a historic month: we delivered 2.5 million 703 tonnes to the shipping harbours. RD 000 THE MONETARY VALUE IN SEK that LKAB created and distributed 000 for the benefit of society in 2013. WE HAVE 4,427 PERMANENT EMPLOYEES BY RESPONSIBLE, WE MEAN THAT WE THINK LONG TERM, SHOW RESPECT AND PUT SAFETY FIRST IRON ORE PRODUCTS OF LKAB’S PURCHASING VOLUME exported to Asia and the Middle estimated to come via the purchasing 27% East in 2013. 10% office in Shanghai. 40 SUPPLIERS AND SUBCONTRACTORS 00 who form an important part of our value chain. 21 000 TONNES OF PELLETS delivered by LKAB in 2013. 000 INCREASED CRUDE STEEL PRODUCTION is an advantage for LKAB, as it increases demand for LKAB´s iron ore products. 3.5% LKAB PELLETS used for the past two years by Finnish steel company Rukki. 100% LKAB’s POSITION ON THE LIST of the largest taxpayers in Sweden. 5 LKAB WAS SWEDEN’S 8th LARGEST EXPORTER IN 2013 JAN FEB MAR APR MAY JUN RESUMPTION AT GRUVBERGET In Decem- ber 2012, the court finally ruled that produc- tion could continue. On 2 January 2013 the first ore blast detonated after the shutdown of almost 7 months. The open-pit mines in Svappavaara form the backbone of LKAB’s ef- forts to achieve annual production of 37 million tonnes of finished products. NEW INFORMATION OFFICE OPENED IN SVAPPAVAARA LKAB opened an information INTERNATIONAL SUMMIT IN KIRUNA office in Svappavaara in February. The office In May, a total of seven foreign ministers, in- is open for one evening every two weeks. This cluding US Secretary of State John F Kerry complements the information offices that we and Swedish Foreign Minister Carl Bildt, vis- already have in Malmberget and Kiruna. ited LKAB and Kiruna. The visit was made in connection with the Ministerial Meeting of the LKAB’S STRATEGY INCREASES ITS FOCUS ON Arctic Council. SUSTAINABILITY LKAB’s Board of Directors approved in February a revised strategy that LKAB MINERALS SIGNS DEALER AGREE- focuses, among others, on continued growth MENT The agreement was signed in May with as well as on efficient energy use, production NEW CUSTOMER IN THE MIDDLE EAST one of the world’s largest mineral producers, and logistics. This resulted also in changes In March 2013, LKAB signs a long-term con- Tronox Limited, and relates to zircon for the within the organization. tract with Emirates Steel in the United Arab Chinese market. Emirates to deliver one million tonnes of pel- MINING, TOURISM AND REINDEER HERDING lets specially adapted for steelmaking via KUJ 1365 – ONE OF SWEDEN’S LARGEST AIM FOR COOPERATION “Although the tour- direct reduction , DR pellets, per year. INDUSTRIAL INVESTMENTS Minister for ism, reindeer herding and mining sectors have Enterprise, Annie Lööf, opened the new main different interests, a strategy of dialogue and PRODUCTION DISRUPTIONS IN FIRST level at the Kiruna mine, KUJ 1365, on 21 May. compromise is chosen. Showing considera- QUARTER Production disruptions at the pro- The new main level extends the lifetime of the tion and respect, understanding one anoth- cessing plants in Kiruna and Svappavaara dur- mine by at least 20 years and the investment er’s needs and rights, is the way to succeed." ing the spring impacted on deliveries, which amounted to over SEK 12 billion. In October, So writes LKAB CEO Lars-Eric Aaro together fell by around two percent in second quarter. the new main level in the Malmberget mine, with others including the heads of the Gabna A programme of measures was initiated to MUJ 1250, which was officially opened in June and Laevas Sami villages and CEO of reduce the risk of future disruptions. The year 2012, celebrated its first anniversary. ICEHOTEL, Monica Wollmén. ended strongly with records for production and pellet production. 2013 THE PAST YEAR 2 JUL AUG SEP OCT NOV DEC HISTORIC DELIVERY RECORD Never have such large volumes of iron ore products been de- livered, transported on the Ore Railway to the harbours of Luleå and Narvik, as during No- vember. In total, deliveries reached almost 2.5 million tonnes. GROWTH PLANS DELAYED The mining pro- ject in Mertainen is delayed by an appeal to the Land and Environmental Court of Appeal. Preparatory work had to be suspended pend- ing the court’s ruling. Following the appeal in December, there was a partial judgment that permitted LKAB to mine 15 million tonnes of iron ore per year. NEW APARTMENTS IN KIRUNA Subsidiary LKAB Fastigheter starts the construction of 62 new apartments in the residential area Terras- sen in Kiruna, scheduled to be ready for oc- EMPLOYEE SURVEY AND CODE OF CONDUCT NEW SALES OFFICE IN DUBAI The growing cupancy in November 2014. A number of new During the spring, a new employee survey was Middle East market is home to some of the projects have been launched, and more are on carried out, highlighting the strengths and ar- company’s largest customers for pellets spe- the way, in order to reach the target of building eas for improvement for LKAB as a workplace. cially adapted for steelmaking via direct re- 500 new apartments by 2015. In August, the Board of Directors adopted a duction, DR pellets, prompting LKAB to estab- new code of conduct, to replace the previous lish a new sales office during the autumn to “PROJECT PEREGRINE FALCON” AND ENVI- ethics policy. An anonymous reporting channel provide a local presence and service. RONMENTAL COMPENSATION TO PROTECT was also developed during the year.