Sotkamo Silver Half-Year Financial Report Q2/2023: Improved profitability by enhanced operational efficiency and higher silver grade

Sotkamo Silver AB, Half-Year Financial Report, 28 July 2023 at 9.45 (EEST) / 08.45 (CET)

Sotkamo Silver Half-Year Financial Report Q2/2023: Improved profitability by enhanced operational efficiency and higher silver grade

HIGHLIGHTS

April - June (Q2)

• Net sales increased by 33 % to 120 MSEK (90 MSEK), driven mainly by a higher average silver grade and positive development of silver price
• EBITDA increased by 721 % to 53 MSEK (6), EBITDA margin increased to 44 % (7)
• EBIT increased to 34 MSEK (-16)
• 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 previous year had a positive impact on the Company's operational costs
• Cash and cash equivalents decreased by 16 % to 36 MSEK (43)
• Investments decreased by 67 % to 8 MSEK (24)
• The production amounted to approximately 383,000 ounces of silver (281,000), 836 ounces of gold (796), 317 tonnes of lead (365), and 662 tonnes of zinc (824)  in concentrates

January - June (H1)

• Net sales decreased by 8 % to 188 MSEK (205 MSEK), driven by a lower mining volume while the average silver grade developed positively  
• EBITDA increased by 34 % to 59 MSEK (44) , EBITDA margin increased to 32 % (22)
• EBIT increased to 24 MSEK (-1)
• The good profitability in the second quarter raised the profitability of the entire first half of the year to a good level. As a result of the good second-quarter EBITDA level, the net debt-to-EBITDA ratio fell below four
• Cash and cash equivalents increased by 4,168 % to 36 MSEK (1)
• Investments decreased by 53 % to 16 MSEK (34)
• The production was approximately 590,000 ounces of silver (617,000), 1,352 ounces of gold (1,666), 549 tonnes of lead (830), and 1,177 tonnes of zinc (1,814) in concentrates
• Company received gross proceeds of approximately 3.4 MEUR or 38.4 MSEK from the rights issue before the deduction of transaction costs in Q1 2023
• Company and the senior lenders agreed in Q1 2023, 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 operative 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 above mentioned external factors to remain at the level forecasted by the market in mid-February 2023..

CEO REVIEW

Improved profitability and operational performance

In the second quarter, Sotkamo Silver focused on improving operational efficiency, and production volumes reached the planned level. The Company's net sales increased by 33 percent compared to the previous year. This was mainly due to the higher silver content of the feed and the positive development of the silver price. As a result of the increased production volumes, the Company's profitability improved in the second quarter and EBITDA margin was 44 percent of net sales.

The improvement in silver grade has been made possible by the extension of the decline last year, which has enabled mining new levels. Previous infill drilling indicated higher silver grades at these levels, and this is being realized in production. We continue to see monthly variation in silver grades, as is typical in mining, but on average we are close to the silver grade levels of the mine's early years.

Profitability was supported by lower energy prices, improved efficiency of mining activities, and the successful cost control measures that were initiated last year. These factors together with the strong silver price are expected to support us in the coming quarters as well. Demand for silver is historically high, and according to the latest forecast published by the Silver Institute in April, demand will remain higher than supply in 2023.

During the first half of the year, we strengthened our working capital through financing arrangements, and I want to thank our shareholders for the trust given in the share issues. We aim to further strengthen this trust through our performance in future. In the second quarter, we stabilized mining operations and made stable progress toward the strategic targets for 2023.

I am pleased to see that the extension of the decline and the infill drilling over the past year are now enabling us to increase production volumes and silver grades. These investments will continue to support Sotkamo Silver's operations in the coming quarters. Our goal is to continue research drilling aimed at extending the life of the mine, but for the time being, we are focusing resources primarily on stabilizing and improving the operations. 

I want to thank all employees for their excellent work for improving our performance. The work done last year and in the past months has proven that we are on right track and the latest results confirm the confidence for the future.

KEY FIGURES

Q2/23 Q2/22 Change, % H1/23 H1/22 Change, % 2022
Net sales, MSEK 120 90 33 188 205 -8 371
EBITDA, MSEK 53 6 721 59 44 34 53
EBITDA margin % 44 7 32 22 14
EBIT, MSEK 34 -16 24 -1 -34
EBIT margin % 28 -18 13 -1 -9
Equity ratio % 43 40 43 40 38
Cash liquidity % 90 86 90 86 46
Net debt-to 3.8 2.7 41 3.8 2.7 41 5.3
-EBITDA ratio
Personnel at the 48 58 -17 48 58 -17 44
end of the period
Silver 383 281 36 590 617 -4 1,169
production, koz
Mill feed, kt 137 169 -19 233 343 -32 635
Average silver 101 62 63 93 67 39 69
grade, g/tonnes

EVENTS AFTER THE REPORTING PERIOD

No significant events have materialized after the reporting period.

FINANCIAL CALENDAR

• Q3 October 25, 2023
• Q4 February 15, 2024

WEBINAR

The result webinar will be held today on July 28 at 10:00 (EEST). You can participate in the event through the link provided below:

https://msteams.link/7WGB

The webinar will be conducted in Finnish, with the material presented in English. During the event, you can ask questions using the chat function. The presentation from the webinar will be made available on the company's website at: https://www.silver.fi/en/investors/presentations

Stockholm, July 28, 2023

Sotkamo Silver AB's Board of Directors and CEO

CONTACT INFORMATION

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

Tommi Talasterä,
CFO of Sotkamo Silver AB
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 2023 Half-Year Financial Report. The complete report is attached to this release and available at the Company webpage: www.silver.fi/en/investors (http://www.silver.fi/en/investorsT)

Tietoa Sotkamo Silver AB:stä

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/