Sotkamo Silver AB: Sotkamo Silver's Q1/2025 Interim Report: Continued mining challenges

Sotkamo Silver AB | Stock Exchange Release | April 29, 2025 at 09:00:00 EEST

Continued mining challenges

HIGHLIGHTS

January - March

• Net sales decreased by 19% to 69 MSEK (85 MSEK*), driven mainly by lower metal production.
• EBITDA fell to -8 MSEK (17) and EBITDA margin fell to negative (20%).
• EBIT weakened to -24 MSEK (-1).
• Profitability decreased mainly due to continued mining challenges and lower silver production due to lower grade and lower volume of milled ore.
• Cash and cash equivalents amounted to 1 MSEK (38). The Company amortized the senior loan by 43 MSEK and paid 14 MSEK interest on the loan. The Company had unused credit facility of 22 MSEK.
• CAPEX was 16 MSEK (17) and consisted mainly of exploration and infill drilling, deepening the decline and CAPEX drifts.
• The production amounted to approximately 169,000 ounces of silver (309,000), 365 ounces of gold (717), 137 tonnes of lead (197), and 309 tonnes of zinc (338) in concentrates.
• We continued efforts to move on to better quality stoping areas during Q1, and at publication of this report (29 April 2025), we have been able to move our operation partially to more reliable and stabile areas to ramp up volumes.
• As announced on 18 February 2025, production was temporarily halted as a vehicle caught fire in Sotkamo Silver's mine. The fire was successfully extinguished, employees evacuated safely, and production gradually started within one week after the incident.

*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 2025 (unchanged)

The Company has given (14 February 2025) the following guidance for 2025:

• The Company expects to produce 1.2 - 1.4 million ounces of silver
• Annual EBITDA margin to be at least 30%
• Net debt-to-EBITDA to be below 1.5 at year-end

The Company's profitability is significantly affected by external factors, such as metal prices and exchange rates and internal factors like uncertainties related to ore volumes and metal grades. The achievement of the guidance assumes that metal prices and EUR/USD rate stay approximately at the current level of the time when the guidance was published (14 February 2025).


CEO REVIEW

Continued Mining Challenges Reduced Production Volumes

Production challenges have continued at the beginning of the year. Issues in the bedrock were identified already in the latter part of last year, and we anticipated challenging conditions for the first quarter. Unfortunately, silver production turned out to be even weaker than expected, and the corrective measures to accelerate production did not have the desired impact. Ongoing issues related to the quality of the bedrock have continued to hamper mining, and, for example, we have not been able to open new stopes as planned, and silver grades have remained low. The goal is to urgently continue mining in accordance with the production plans.

In February, a vehicle fire in the main tunnel of the mine also caused a temporary reduction in production. This emergency highlighted the importance of preparedness and safety training. The personnel at the mine site acted in an exemplary manner according to safety procedures, and the cooperation with rescue authorities was seamless.

Demand for silver has remained strong, and during the quarter, the silver price increased from just under USD 29 to over USD 34.

The low production volumes caused a significant year-on-year decline in net sales, and both operating profit and cash flow from operations were weak. The weak cash flow also affected our financial position, along with EUR 5.2 million senior loan repayment, including interest, and EUR 0.4 million mining tax paid at the beginning of the year. After the repayment of EUR 4 million, the principal of the senior loan is EUR 8.1 million. As a result, the company's cash position is tight. We are continuing negotiations to secure financing and will communicate more of them when the negotiations are completed.

Our current focus is on increasing production volumes. We have updated our mining plan and allocated our resources to the most essential actions to resolve the situation quickly. At the time of publishing this report, we are already partially operating in more stable and production-secure mining areas, which improves both the availability and quality of ore.

The Company's key strategic focus in 2025 remains to ensure and strengthen operational reliability. We plan to open alternative mining areas and accelerate the preparation of new stopes earlier than before. We also aim to secure long-term growth. This goal is supported by the permit for expanding the mining concession granted by the authorities in March, which enables us to expand the underground mine to the eastern side of the previously permitted area.

KEY FIGURES

	Q1/25	Q1/24	Change, %	1-12/24
Net sales, MSEK	69	85	-19%	412
EBITDA, MSEK*	-8	17		109
EBITDA margin %	-10.9	20.2		26.4
EBIT, MSEK	-24	-1		32
EBIT margin %	-34.8	-1.4		7.9
Equity ratio %*	41	44	-7%	41
Cash liquidity %*	35	94	-63%	75
Net debt-to-EBITDA ratio*	2.5	1,5	63%	1.6
Personnel at the end of the period	49	49	0%	51
Silver production, koz*	169	309	-45%	1,166
Mill feed, kt*	92	124	-25%	497
Average silver grade, g/tonne*	69	91	-25%	89

Alternative key performance measures are marked with asterisk. For more detailed definitions, please see the full report.

EVENTS AFTER THE REPORTING PERIOD

The Company started at the beginning of April to hedge the price of delivered silver with derivative instruments.

The following main decisions were made at the AGM:

• The income statement and the balance sheet for both the parent company and the group regarding the financial year 2024 were adopted by the AGM. The AGM decided that no dividend would be paid out for the financial year 2024. The members of the Board and the CEO were granted discharge from liability for the financial year 2024.
• The AGM decided that the Board would comprise of six ordinary members. Kimmo Luukkonen, Eeva-Liisa Virkkunen, Sixten Sunabacka, Jukka Jokela, Mauri Visuri and Joni Lukkaroinen were re-elected as directors. Eeva-Liisa Virkkunen was re-elected chairman of the Board.
• The AGM resolved to re-elect the auditing company KPMG until the end of the AGM 2026.
• The guidelines for remuneration for the management and the procedure for appointing the members of the nomination committee were approved in accordance with the proposals from the Board.
• The AGM approved the Board's renumeration report for 2024. The AGM approved the nomination committee's proposal for annual fees to the Board.
• The Board's proposal to authorize the board to resolve on new issues of shares and other financial instruments was not supported by the necessary majority of the cast votes and the shares represented at the AGM. The AGM resolved not to authorize the board to issue new shares or other financial instruments.

FINANCIAL CALENDAR

• Q2/2025: 31 July 2025
• Q3/2025: 23 October 2025
• Q4/2025: To be determined

WEBINAR

The result webinar will be held today on 29 April at 1:00 p.m. Finnish time (EET). You can participate in the event through the link: https://sotkamosilver.videosync.fi/2025-q1-tulos

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, 29 April 2025

Sotkamo Silver AB's Board of Directors and CEO

CONTACT INFORMATION

Mikko Jalasto,
CEO of Sotkamo Silver AB
[e-mail]
[phone]

Tommi Talasterä,
CFO of Sotkamo Silver AB
[e-mail]
[phone]

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 AB is listed at NGM Main Regulated in Stockholm (SOSI), Nasdaq Helsinki (SOSI1), and Börse Berlin.

Read more about Sotkamo Silver at www.silver.fi/en/