A Strong finish to a turnaround year

HIGHLIGHTS

October - December

• Net sales increased by 9 % to 109 MSEK (100 MSEK), driven mainly by a higher silver production volume, higher average silver grade and positive development of silver price. Sales of zinc and lead decreased driven mainly by lower zinc price and lower head grades 
• EBITDA increased by 125 % to 44 MSEK (19), EBITDA margin increased by 106 % to 40 % (19)  
• EBIT increased to 25 MSEK (-1)
• Profitability increased significantly driven by a higher average silver grade, higher silver price, improved efficiency of mining activities, decreased energy prices, and lower mining volumes. 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 79 MSEK (1) 
• Investments increased by 65 % to 18 MSEK (11)  
• The production amounted to approximately 409,000 ounces of silver (294,000), 902 ounces of gold (829), 177 tonnes of lead (401), and 287 tonnes of zinc (874) in concentrates 

January – December

• During 2023, Sotkamo Silver successfully implemented operational and financial turnaround, resulting in improved profitability and the fulfillment of all of the Company’s targets in line with its guidance  
• Net sales increased by 10 % to 407 MSEK (371 MSEK), driven mainly by a higher average silver grade and positive development of silver price  
• EBITDA increased by 163 % to 140 MSEK (53), EBITDA margin increased by 139 % to 34 % (14) 
• EBIT increased to 67 MSEK (-34) 
• After the first quarter, profitability increased to a good level and the net debt-to-EBITDA ratio declined to 1.5 
• Cash and cash equivalents increased to 79 MSEK (1) 
• Investments decreased by 24 % to 46 MSEK (61)  
• The production was approximately 1,411,000 ounces of silver (1,169,000), 3,048 ounces of gold (3,285), 909 tonnes of lead (1,535), and 1,857 tonnes of zinc (3,335) in concentrates 
• During the first quarter, the Company secured gross proceeds from a rights issue (3.4 MEUR) and renegotiated the terms of its senior loan agreement to postpone the first installment (1.5 MEUR) to March 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 2024

The Company gives the following guidance for 2024: 

• The Company expects to produce 1.45 -1.55 million ounces of silver in 2024 
• Annual EBITDA to be at least 28 % 
• Net debt-to-EBITDA to be below 2.0 at year-end 

The Company expects profitability to remain at a good level in 2024. Profitability is supported by improved operational efficiency but burdened by inflation and cost escalation. The Company's profitability is significantly affected by external factors, such as metal prices, exchange rates and inflation. The achievement of the guidance assumes a slight increase in metal prices and EUR/USD rate to remain approximately at the level of the time when the guidance is published (14 February 2024).  

CEO REVIEW, MIKKO JALASTO

Sotkamo Silver ended the year with a strong fourth quarter. Silver production remained at a high level (409,000 ounces) and net sales increased by 9% from the previous year. EBITDA improved both year-on-year and quarter-on-quarter to SEK 44 million. Improvements in profitability were supported by the increased operational efficiency after the comparison period, the firm silver price, and lower mining costs during the final quarter. Additionally, the EBITDA margin was influenced by a lower electricity price compared to the previous year. 

During the fourth quarter, we also made significant progress towards our key strategic sustainability goals. Our objective is to achieve an A-level rating across all aspects of the Responsible Mining System as verified by an independent auditor. According to the latest assessment by management, by the end of the year 2023, we were largely ready in four main areas: tailings management, water treatment, occupational health and safety, and stakeholder engagement. We will also continue our efforts to reduce nitrogen emissions. 

In December, we reported the results of infill drilling, which were in line with our expectations and support the mining activities for the coming years. We believe the current known ore reserves and mineral resources are sufficient for approximately 7-8 years of mining. These will be further supplemented during years 2024-2025. 

Overall, the year 2023 progressed as planned, following the change of the mining contractor during the first quarter. The strategic targets we set in our rights issue in the beginning of the year 2023 have largely been achieved, and the company has successfully executed a clear operational and financial turnaround. At the end of 2022, we communicated that silver head grades would improve as we begin mining at lower levels, and this has now occurred thanks to effective execution and planning. 

The turnaround was perhaps most clearly visible in our cashflow from operations, which improved by almost SEK 100 million compared to the previous year. During 2024, we will continue to focus on operational efficiency to maintain high profitability and to curb the impact of general inflation. 

During the first half of this year, we will focus primarily on finalising the plans to extend the life of the mine to 2035. The necessary investments will be completed during 2024-2025. The first campaign will start already this year, in which we plan to invest approximately one million euros. Thanks to our successful turnaround, we are now able to develop our operations with cash flow from operations. I’m very pleased with this. During 2025 we plan to finalize the required drilling, complete the analysis of results and publish updated estimates on the life of the mine.    

KEY FIGURES

EVENTS AFTER THE REPORTING PERIOD

No significant events have materialized after the reporting period.

BOARD OF DIRECTOR’S PROPOSAL FOR DIVIDEND DISTRIBUTION

The Company’s Board of Directors will propose to the Annual General Meeting that no dividend will be paid for the financial year 2023.

FINANCIAL CALENDAR

• Annual report: latest April 2, 2024 
• Annual General Meeting: April 23, 2024  
• Q1/2024: April 30, 2024 
• Q2/2024: July 26, 2024 
• Q3/2024: October 25, 2024 

WEBCAST

Sotkamo Silver hold a webcast today (14 February 2024) at 1:00 p.m. Finnish time (12:00 CET). The presentation will be held in Finnish, and the material is in English. The webcast can be accessed through the following link:
https://link.silver.fi/2023Q4

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 Financial Statement Release. 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/