Annual Report 2011

Contents

Annual General Meeting

Nordic Mines in brief

4

Administration Report

Comments by the CEO

6

Income statement and Balance sheet 36

AB (publ), 556679-1215, is being held on

Production 8

Statements of cash flow

40

Wednesday 23 May 2012, at 15.00, in

Deposits 12

Accounting principles

41

Restaurang Flustret, Svandammen 1,

Environment 15

Notes 46

Uppsala.

Employees 18

Auditors’ report

Read more on page 59

Exploration and other projects

20

Board of Directors and Management 57

The market

24

Addresses 59

Ore reserves and mineral resources 29

Glossary 60

Share information

30

The dorébar, which was cast in February, contains about 70 percent gold, 16 percent silver and 13 percent copper.

31

56

The Annual General Meeting of Nordic Mines

First doré bar from the Laiva mine It was a significant moment, that December day in 2011 when the first doré bar was cast at the Laiva mine in Finland – six years after Nordic Mines began exploration in the area. It meant that the entire gold production chain at the Laiva mine was up and running – from mining in the open-pit mine to the casting of doré bars. It also meant that Nordic Mines had taken the final step, from being an exploration company to a fully-fledged mining company.   The gold deposit at the Laiva mine is one of the largest to have been identified in the Nordic Region to date, with a proven and probable ore reserves of 12.9 million tonnes and an average gold content of 1.85 grams per tonne. This is equivalent to a total of 23,850 kg of gold. There are also demonstrable mineral resources that can be extracted in the future, based on current conditions.   The exploration drilling rigs continues at the same time to work in the forests of Österbotten, near Raahe in central Finland. In 2011, Nordic Mines carried out twice as much core drilling as the year before at the Laiva deposit that is open in several directions. The objective is to obtain sufficient data in order to reclassify parts of the mineral resources from inferred to indicated and from mineral resources to ore reserves when the new mineral resources calculation is conducted during the first half of 2012.   The exploration work continues in parallel with this, both in the immediate vicinity of the mine and at the company’s other exploration targets in Finland and Sweden. The plan is to expand and safeguard mining operations for a long time to come.   Nordic Mines’ goal is to become a long-term, leading gold producer in Europe, and at the same time to be a role model when it comes to environmentally friendly mining. The result is one of the Nordic region’s most modern and most environmentally compliant facilities for gold production.

NORDIC MINES ANNUAL REPORT 2011 3

Nordic Mines in brief

Nordic Mines AB is a Nordic mining and exploration company. Its goal is to be one of the leading gold producers in Europe as well as a role model in respecting the environment. During the late summer of 2011, the mining of ore commenced in the company’s first mine, the Laiva mine near Raahe in Finland. Exploration is being conducted in parallel close to the Laiva mine, as well as in other areas in Finland and Sweden. The primary objective is to expand and extend manufacturing in the Laiva mine and as a next phase to construct the next mine. Nordic Mines was founded in June 2005 and on 31 December 2011 had an equity of SEK 377 million. The group has 86 employees, of which most were recruited in 2011 to the Laiva mine. The company’s head office is located in Uppsala. The Nordic Mines share is traded on the Nasdaq OMX Mid Cap exchange in Stockholm.

Business concept Nordic Mines’ business concept is to create significant growth in value by exploring and exploiting the company’s existing and future gold and mineral deposits and, on the basis of these, conducting its own mining operations.

Vision Nordic Mines’ vision is to become one of the leading gold producers in the Nordic region and Europe – and at the same time to be a role model in looking after the environment.

4 NORDIC MINES ANNUAL REPORT 2011

Strategic objectives

Financial objectives

To carry on mining operations and production at the Laiva mine in Finland

Each year, the Company will give a dividend, which, over time, will correspond to 30–50 per cent of the company’s profit after tax. However, consideration must be given to the company’s liquidity, future income, financial situation, capital requirement and other factors.

To establish an organisation of the right size with a well-documented experience of exploration and mining operations To cooperate with leading consultancy companies in the sector in order to identify and develop mineral deposits in an efficient and environmentally friendly way To establish its own mining operations and produce metals at its own processing plant, situated adjacent to the mines To produce a high-quality end product that is in demand on the global market

K i r u na

Important events in 2011 • The first gold ore was mined in summer 2011 at the Laiva mine

To r m ua Gold

Lu leå

• The gold production facility at the Laiva mine was gradually brought into operation and fine tuned during the autumn

ou lu r aa h e

La i va Gold

S ke lle fteå

• The first doré bar at the facility was produced in December

fj ä l lt u na Gold

O ltava Gold umeå

• The exploration activities were extended both in Finland and Sweden • Loan agreements regarding a new credit framework of EUR 7.5 million were entered into with Standard Bank Plc and UniCredit Bank AG • The gold price was hedged at an average of EUR 1,049 (1,458 dollar) per ounce for 36 per cent of the planned production in the Laiva mine from the first quarter of 2012 up to and including the first quarter of 2015

Va s s b o S i l v e r, l e a d

H e ls i n ki

uppsala s to c k h o lm

Important events at the start of 2012 • As from 2 January 2012, Nordic Mines’ shares are being traded on the Stockholm Stock Exchange’s Mid Cap list • At the start of 2012, production of gold gradually increased and deliveries of doré gold to refineries commenced • Plans were published regarding a directed share issue within the framework of the authorisation previously granted by the AGM. The purpose was to consolidate the company’s equity Mineral resources and ore reserves, development

Cash cost for the Laiva mine USD/Oz 1,600

Tonnes 18,000,000 18 000 000

1,400

16,000,000 16 000 000

1,200

Price of gold 2010 1,227 USD/oz

14,000,000 14 000 000

1,000

12,000,000 12 000 000 800

10,000,000 10 000 000

88,000,000 000 000

600

66,000,000 000 000

Proven ore reserves

44,000,000 000 000

Probable ore reserves

22,000,000 000 000 0

400

Measured mineral resources 200 Indicated mineral resources

2005 2005 2006 2006 2006 2006 2007 2007 2007 2008 2009 Jun

Oct

Jan

May

Aug

Oct

Jan

Sep

Dec

Jul

2010

Feb

Mar

2011 Aug

Inferred mineral resources Production

25 %

50 %

75 %

100 %

Cash cost for the largest gold mines in the world. The lower axis shows the total mine production globally as percentages, relative to cost. In the feasibility study OF March 2010 the cash cost of the Laiva mine was estimated to be EUR 310/Oz, corresponding to about USD 440/Oz.

See also the table on pages 13 and 32

Analysts following the company • ABG Sundal Collier • Carnegie • Pareto Öhman • Penser Fondkommission • Redeye

Key ratios

2011

2010

2009

2008

2007

Investments over the year, SEK thousand 518,880 337,673 48,448 67,310 Drilled metres, in total 71,930 metres since 2005 11,080 5,900 2,000 23,000 Result after financial items, SEK thousand −33,335 −25,741 −11,686 −139,000 Equity/assets ratio, % 30.4% 92.3% 85.2% 92.8% Balance sheet total, SEK thousand 1,241,515 606,164 293,612 281,989 Short-term investments and liquid assets, SEK thousand 11,379 48,803 10,560 83,315 Average number of employees 52 16 12 15

35,474 11,000 −5,659 94.5% 179,800 103,688 10

NORDIC MINES ANNUAL REPORT 2011 5

Comments by the Managing Director

Production up and running at the Laiva mine The first doré bar was cast at the end of December at the Laiva mine. As a result, we achieved our goal of starting gold production during 2011. The start of production was overdue by just over four months. At the same time, the start of production demonstrates that both the quality of the doré bars and the environmental outcome are already fulfilling our long-term goals. We are now working to gradually increase the production rate over the course of the year to achieve our goal of full capacity, i.e. more than 10 kg of gold per day. The next goal is to expand production and safeguard operations at the Laiva mine for many years to come through successful exploration work.

A further impact of this has been that initial production was based solely on leaching in the low-grade circuit, i.e. the extraction of gold from ore with a low gold content. Happily, soon after operation started we achieved our gold recovery target in this part of the process. At the end of February 2012, we were also able to start up the high-grade circuit, starting the extraction of gold from the ore with a high gold content. This meant that the facility as a whole was in operation.

It was with great satisfaction that we were able to cast our first doré bar at the end of December after working hard throughout the year. Over the course of the year, work focused on construction and preparations. As early as last summer the contracting company Tallqvist Oy started mining ore on schedule. We gradually took over drilling and loading during the autumn, in line with our decision to take care of mining ourselves so as to safeguard the quality of the ore extraction. Since then, the facility has been gradually brought into service, although the start-up process has taken longer than we had hoped. The external conditions for starting production have been there, with all the infrastructure and process equipment in place. The stumbling blocks have included delays in deliveries, of above all pipe components and valves for the processing plant. This resulted in several stoppages during the autumn and in early January.

6 NORDIC MINES ANNUAL REPORT 2011

The delay in starting up the facility was both unwanted and unexpected. The gold production facility at the Laiva mine is based on tried and tested technology. At the same time, however, every ore is unique and the process has to be adjusted to the ore’s particular characteristics. This also means that the process has to be fine tuned in order, as in our case, to achieve maximum recovery with a minimum impact on the environment. Against the background of a few months of production we can say that the recovery is in line with what we had expected. The quality of the doré bars is also higher than expected, with a gold content of around 70–80 per cent. Despite the unusually severe winter weather during January, with temperatures down to -35°C, the facility has continued working without any major disruptions. In March 2012, Nordic Mines applied for a licence from Finland’s Environmental Administration to release water from precipitation via the temporary outlets that have been used during the construction period. Analyses that have been performed on the water show no harmful lev-

els of any substances. The background to the application is that there has been more precipitation in the past year than normal, and the water level in the reservoir has therefore risen more than expected. As it took longer than anticipated to start up gold production at the Laiva mine, Nordic Mines decided to strengthen the company’s working capital through a directed issue within the framework of the authorisation previously granted by the AGM. In total, this provided the company with approximately SEK 89 million before issue costs. About 40 per cent of the issue was taken by institutional investors in London, a further 40 per cent by institutional investors in Stockholm, with the remainder going to investors in Finland and other countries. The level of interest from large, international institutions is pleasing, and a quality stamp for our operation. Since the start of January 2012, Nordic Mines’ shares have been traded on the Stockholm Stock Exchange’s Mid Cap list. The interest in Nordic Mines has increased since the start-up of the gold mine in Laiva in the second half of the year. Hopefully the change of list will contribute to a further increase in turnover of Nordic Mines shares and attract even more investors. During 2011, we carried out a programme of core drilling adjacent to the Laiva mine that was twice the size of the previous year’s programme. The goal was to get adequate data to reclassify parts of the mineral resources to ore reserves in conjunction with the new ore reserves calculation. During 2012, we are also planning to start core drilling in our ­Tormua project area, close to the Finnish border with Russia. Previous studies have shown an inferred mineral resources of 590,000 tonnes with an average gold content of 3.5 grams per tonne. Our studies indicate that the mineralisation may be significantly larger

than this, however, and we hope to be able to establish this through the upcoming drilling programme. In addition to gold, the mineralisation also contains tellurium, which is used in the manufacture of solar cells. The long-term objective of exploration is to expand and in the long-term secure manufacturing at the Laiva mine while at the same time developing new gold projects for mine production, possibly in Tormua. The increased ore reserves, combined with gold prices that are still rising, has meant that the Laiva mine project has been further strengthened over the past year. By selling a small proportion – 36 per cent – of production in the form of hedges in accordance with an agreement from March 2011, we have secured the operating and financing costs at the Laiva mine for several years. At the same time, we can benefit from the increase in the gold price, as the majority of production is still exposed to the current gold price. We were able to fill the positions at the Laiva mine quickly, thanks to a high level of interest in working with us. We are now continuing the work of further training our new employees. During the year, we have made significant progress towards our goal of becoming one of Europe’s leading gold producers. We have achieved this thanks to all our old and new shareholders, old and new employees, the Board of Directors, suppliers and consultants who are following us on this exciting journey.

Michael Nilsson, Managing Director of Nordic Mines

NORDIC MINES ANNUAL REPORT 2011 7

Production

From ore to bar In late summer 2011, Nordic Mines began to mine gold ore at the Laiva mine in Finland. In the autumn, the entire complicated gold production process was phased into service in the newly built processing plant – with crushing, grinding, leaching and electrolysis. The first doré bar was cast in December. The target is to produce approximately 10 kilos of gold a day. No ores are the same. This means that the processes at the Laiva mine are unique even if they are based on well-tried techniques. This also means that a period of fine tuning is needed before full production can be achieved.

The extraction of gold ore at the Laiva mine takes place at an open-pit mine. Careful planning of the mining operation is required in order to position the blasting rounds precisely enough to ensure that the optimum amount of gold ore is extracted.

GC drilling

8 NORDIC MINES ANNUAL REPORT 2011

Planning is conducted in accordance with a block model, week by week, and is based on Grade Control drilling (GC drilling), in which the contents and ratio of ore to waste rock is monitored. The drill holes are located close together, with 12.5 metres be-

tween the profiles and 5–10 metres between the holes. Drilling results in drill cuttings that are carefully analysed in the laboratory to show where – and how – the ore should be mined.

Mining

Orange plastic structures indicate where blasting is to take place. A grid is drilled and each hole is loaded with explosive. After blasting, the rock is sorted into three categories: A-grade ore with a high gold content which is processed immediately; lower quality B-grade ore which is saved for possible future extraction, and waste rock much of which can be used for the construction of roads and other infrastructure. The A-grade ore is transported directly to the crushing facility and then into the processing plant. The B-grade ore and waste rock is transported to their relevant heaps.

NORDIC MINES ANNUAL REPORT 2011 9

Guldgruvan Productioni Laiva

uppstart

Crushing and grinding The ore is tipped and crushed in a jaw crusher from Metso. After the crusher, the ore is transported on a conveyor belt into the 40 metre tall processing plant, where it is crushed and ground until all the particles are smaller than 0.1 mm. This takes place in several stages, in which the ore grinds itself – autogenous grinding. The mills have been designed and supplied by Outotec, one of the leading manufacturers of ore grinding mills in the Nordic region. The mills are designed for a grinding capacity of 250 tonnes an hour, 24 hours a day.

Grundstensmurning i Laiva

Guldförande vulkanit från Laiva

Leaching, electrolysis and control

After grinding, the gold content is physically exposed and is ready for the next stage, i.e. leaching. Leaching is performed in large steel tanks outside the processing plant, where cyanide, together with oxygen, dissolves the gold. The gold is absorbed using activated carbon, which in turn is separated for further processing. Gold is extracted from the loaded carbon at high temperature. The solution, which is now rich in gold, is processed using electrolysis and the gold is precipitated.

The control room

The leaching tanks

Casting doré bars

The agitators in the leaching tanks

The final stage in the production chain is the casting of bars, known as doré bars, which are the most common end product of gold production. These contain 70 per cent gold, 16 per cent silver and 13 per cent copper. The last percentage is made up of other metals, such as iron. The liquid doré gold is poured into a mould and then cooled down rapidly in a water bath. After this, the bar is ready for delivery to an external refinery, where it is further purified to 99.9 per cent gold.

The casting

NORDIC MINES ANNUAL REPORT 2011 11

The gold mine in Laiva

Expanding deposit

The Laiva mine from the air during construction

One of the largest gold deposits ever to have been found in the Nordic region is continuing to expand. This can be seen from the new reserve calculation for the deposit at the Laiva mine, which was published in August 2011. According to the calculation, the proven and probable ore reserves increased by 1.2 million tonnes compared to the previous report, to 12.9 million tonnes with an average gold content of 1.85 grams per tonne. The geological conditions for gold in the area are unusually favourable. The current resource and reserve calculation report covers the drilling results up to the end of 2010. Core drilling has continued since then at an increased capacity in the vicinity of the Laiva mine, where large areas are still to be explored. A new resource and reserve update is planned for the first half of 2012.

day. They are present in vertical shear zones and quartz veins running in an east-west direction. More than 90 per cent of the gold can be extracted using existing techniques. The difficulties lie in correctly balancing the various stages in the production process.

Favourable conditions

Nordic Mines took out a mining concession for the Laiva deposit in 2005. Between 1981 and 1987, Outokumpu conducted exploration work in the area and produced certain information about the deposit, which was taken over by Nordic Mines in conjunction with the mining claim. Since then, Nordic Mines has systematically conducted drilling of the deposit. Focus has been on obtaining greater knowledge about those parts of the Laiva mine that are to be mined up until 2017. In conjunction with the start-up of mining in autumn 2011, the focus of the exploration drilling work was expanded to explore

The Laiva mine is located in the Finnish mining belt, which extends from Raahe by the Baltic Sea, right across Finland to Lake Ladoga in Russia. The bedrock at the Laiva mine is dominated by intermediary to mafic volcanic rocks and quartz diorites. The mineralisation was formed when pressure and movements in the Earth’s crust opened cracks and sliding surfaces in the rock, where hot circulating solutions could penetrate. Favourable chemical conditions, in combination with the cooling of the solutions, caused the gold to be precipitated and formed the mineralisations we see to12 NORDIC MINES ANNUAL REPORT 2011

Systematic exploration

more of the additional gold indications that have been identified within the 30 km² exploration area. These indications show that the gold mineralisations continue outside of the area surveyed up to now. With the support of the results from Nordic Mines’ extensive exploration work at the Laiva mine, a Qualified Person, Malcolm Titley, at the mining consultancy company CSA Global has calculated the reserves and mineral resources in accordance with the international NI43-101 and JORC Code reporting standards. The first indication of gold in the area was discovered at the start of the 1980s, when the Finnish amateur geologist Pentti Järnbäck’s dog picked up the scent of a badger during a skiing excursion in the forest near Raahe. While chasing after his dog, he caught sight of something glimmering in a stone that stuck up out of the snow. This was the start of Nordic Mines’ future.

“Borrugglan” at work at the Laiva mine

According to the ore calculation from August 2011, the ore that is planned to be mined amounts to 12.9 million tonnes at 1.85 g gold per tonne – compared to the previously reported figures of 11.7 million tonnes at 1.86 g gold per tonne. The updated ore calculation is based on core drilling work carried out during 2010. 35 new holes were drilled during the year, while five older drill holes were extended. The calculation includes 66,696 metres of drilling. The reported ore reserves is based on a gold price of EUR 535 per ounce, which is more than 50 per cent below the level of the gold price at the time of reporting in August 2011. If a price of EUR 750 per ounce were to be used instead, the ore reserves would increase to 15.3 million tonnes with an average gold content of 1.74 grams per tonne. Production costs and other technical parameters are calculated in accordance with the feasibility study that has been published for the Laiva mine. 10 kg gold per day

The mineralisation has been calculated at an average depth of 150 metres below the ground, although the holes that have already been drilled to double this depth show that the deposit continues down. During the first years of production – from 2011 to 2017 – Nordic Mines anticipates mining 22 tonnes of gold from an open-pit mine. An annual production of approximately 2 million tonnes of ore is estimated, which in the initial years is expected to produce around 118,000 ounces or 3,700 kg of gold.

ore reserves for the Laiva project according to the results of Whittle open-pit mine optimisation Ore reserves cut-off 0.5 g/tonne

Tonnes of ore Gold g/tonne Kg gold Oz gold

Proven ore reserves 5,764,000 1.83 10,550 340,000 Probable ore reserves 7,147,000 1.86 13,300 428,000 Total ore reserves 12,910,000 1.85 23,850 768,000 The above ore reserves has been adjusted for 10% dilution and 10% ore loss. Ore: Waste rock ratio 1:4.8. Low-grade ore between 0.5 g/tonne and 0.8 g/tonne, which can be mined profitably, has been included in the ore reserves and therefore affects the average head grade.

Mineral resources in addition to the ore reserves

Mineral resources Tonnes Gold g/tonne Kg gold Oz gold

Measured mineral resources 174,000 1.45 253 8,100 (cut-off 0.8 g/tonne) Indicated mineral resources 4,200,000 1.73 7,270 234,000 (cut-off 0.8 g/tonne) Total Measured & Indicated 4,370,000 1.72 7,520 242,000 (cut-off 0.8 g/tonne) Mineral resources, category B 2,910,000 0.62 1,810 58,100 Measured & Indicated Content 0.5-0.8 g/tonne Inferred mineral resources 3,600,000 1.8 6,500 210,000 (cut-off 0,8 g/ton)

NORDIC MINES ANNUAL REPORT 2011 13

The gold mine in Laiva

ore reserveS The figure shows the mineral resources adjoining the Laiva mine. External waste rock is granite. The ore reserves is shown as black/gold.

Current open-cast mine.

La i va 1 2 km

kaukainen musunneva

oltava

Environment

Towards a green mine

Paste facility at the Laiva mine

Environmentally friendly exploration. Minimised energy consumption. Comprehensive cleaning of water. Ever since the first plans for the Laiva mine began to take shape, there has been a high level of ambition to make the operation as environmentally friendly as possible. The objective has been to create a green gold mine – and to become a role model in the sector.

There are as many environmental aspects to mining as there are ways of helping to make it as environmentally friendly as possible. Nordic Mines began by contacting the local population in the region around the planned Laiva mine. The discussions focused primarily on how the company could best prevent harmful substances from the mining process reaching lakes and watercourses – as well as how to prevent disruption in the form of dust, noise and vibrations. Based on these discussions, plans were drawn up for the operation in an ongoing dialogue with representatives of the local community. Stringent formal, environment-related requirements are also stipulated for mining operations in Finland. The specific requirements that apply to Nordic Mines are defined in the environmental permit for the Laiva mine.

Environmentally friendly exploration

The aim of the environmental work is to ensure that the environment outside of the immediate industrial area is not damaged. The initial survey of the deposit at the Laiva mine was conducted with the aid of Nordic Mines’ unique “Borrugglan” exploration drilling rig, which has been developed in co-operation with Atlas Copco and Snorre Maskin with the aim of minimising damage to land during the exploration work. Borr­ugglan also provides an improved working environment compared to conventional drilling machines. Borrugglan is also being used in the ongoing exploration work close to the mine. Forest curtains and noise protection

The Laiva mine is located a couple of kilo-

metres from the nearest village. Mining is associated with noise, vibration and dust. In order to protect those living in the area from this, curtains of forest are being retained and noise barriers are being built. The road to and from the mining area has also been routed through an unpopulated area in order to cause as little disruption as possible. Reduced energy and water

This environmental work includes making all employees aware of how they can work in as environmentally friendly a way as possible. This includes using as little energy as possible. It also involves recovering as much process water and energy as possible. Mining processes require large volumes of water: in the Laiva mine, around 200300 cubic metres of water will be used per hour. In order to satisfy this water requireNORDIC MINES ANNUAL REPORT 2011 15

Our environmental work includes making all employees aware of how they can work in as environmentally friendly a way as possible. ment, Nordic Mines has constructed a storage reservoir. The sand is dewatered, processed and stored in the area. Most of the water is recycled into the process. The water leaving the operational area is cleaned in several stages. The water quality is checked through continuous and accurate readings. In March 2012, Nordic Mines applied for a licence from Finland’s Environmental Administration to release water from excess precipitation via the temporary outlets that have been used during the construction period. Analyses indicate fewer exceptions compared to unaffected water in the surrounding environment. No concentrations according to the environmental licence were exceeded. There is a plan to construct a pipeline to the sea this year in order to carry away the excess water from sources such as precipitation in the area. Environmentally friendly grinding, leaching…

Steel balls are traditionally used to grind the ore. The mills in the Laiva mine grind the ore using autogenous grinding which has a number of benefits. Among these are lower

16 NORDIC MINES ANNUAL REPORT 2011

costs and no disturbances in the chemical process. In addition, this process technology means that Nordic Mines has been able to minimise the average leaching time. In addition to a series of other positive effects, the result is more environmentally friendly residual products. …and depositing of sand

Following leaching, sand remains as a waste product. Most of the sand (98-99 per cent) is free of harmful substances and does not affect the surrounding environment. The sand is dewatered to produce a thick sand paste, which is pumped through pipes to a nearby area of marshland where it is deposited. After being deposited, it can be covered, with moraine for example. It is the first time this method has been used in the Nordic region. The area can then be planted with forest. Remediation is an important and carefully planned part of our environmental work. The remainder of the sand (1-2 per cent) contains substances such as sulphide-bound metals. This sand is deposited in a safe way within the mining area for possible future extraction.

Environment

The brain behind the process technology is proud of low emissions “Extracting gold is difficult, and there is no recipe that works everywhere – that’s why I have a job.” These are the words of Dale Fanning, Australian metallurgy specialist, industry veteran and the brain behind the process technology at the Laiva mine. The objective has been to achieve a high recovery and purity in combination with low emissions.

Dale Fanning

“We have used the best available technology to prevent emissions, and we now have evidence that it is working.” Dale Fanning

Dale Fanning tenderly holds the first doré bar to have been produced at the Laiva mine – his tenth gold project in a career spanning more than three decades and all the world’s continents. “I make gold – that is my job. All gold projects are unique. A great many factors determine how the optimum process is to be formulated, including the composition of minerals in the ore body. It is a case of outwitting the aggressive minerals that steal the oxygen, because without oxygen there is no gold.” “It is a relief to get confirmation that it is working,” he says. It can be difficult to understand how the complicated mixture of chemistry and mechanics comes together – and that the gold that glimmers on your finger has required the processing of almost two tonnes of ore. This is a dizzying thought, but Dale Fanning is used to it. “Ever since the start of my career, I have been contemplating how the production of gold in various projects should be refined to increase the recovery – and at the same time keep down emissions. In other words, to earn more money and have less impact on the environment.” He is particularly proud of the low emissions in the Laiva mine project. In its environmental permit for the Laiva mine, Nordic Mines is entitled to emit up to 10 ppm of cyanide. “Investigations to date indicate emissions of less than 0.5 ppm – a level of cya-

nide that is not even measurable, in other words,” explains Dale Fanning. “We have used the best available technology to prevent emissions, and we now have evidence that it is working.” As an additional measure, the foundations of the leaching tanks have been cast with extra layers of concrete and without joins. The eight large leaching tanks outside the processing plant have been designed by Metso, a world leader in the development of mineral processes and metallurgy technologies. A challenge in every project

Each mine project has its challenges, according to Dale Fanning. “One challenge in the Laiva mine is that the gold deposit also contains silver and small amounts of copper, up to two tonnes per year at the calculated production volumes. It is important to have a process where the silver and copper that are present can be extracted without impairing the gold recovery.” “However, possibly the greatest challenge in this project has been all the paperwork. More documentation is necessary in the Nordic region than elsewhere in the world,” says the mining veteran, but adds that is also provides security for the mine in the future. Footnote: Nordic Mines has signed up to the International Cyanide Management Code, a voluntary, global organisation for gold producers whose aim is to promote the responsible handling of cyanide. NORDIC MINES ANNUAL REPORT 2011 17

Employees

From geologists to chemists at the Laiva mine

Operations at the Laiva mine go on round the clock in three shifts

Successfully running a mine is a complicated project that requires a wide range of specialist skills – from geologists and engineers to metallurgists and chemists. Nordic Mines has engaged some of the foremost brains in the sector in order to build up an operation that can both extract the gold as effectively as possible, and do so in the most environmentally friendly way. Most of the positions at the Laiva mine have now been filled – with people from many different countries. The Laiva mine is one of the most centrally located, new mining projects in the Nordic region. It is also one of the largest gold deposits in the Nordic region. So there has been a great deal of interest in working on the project. During 2011, a large number of suppliers and subcontractors from all over the world came to the forest near Raahe in central Finland to help build up operations at the Laiva mine. The recruitment and training of the mine’s own workforce took place in parallel with this. By the start of 2012, a total of 78 employees had taken up positions at the Laiva mine, which basically meant that all the posts had been filled. Around five times this number had applied, many of whom were highly 18 NORDIC MINES ANNUAL REPORT 2011

qualified and had a suitable background, for example as engineers, technicians and chemists. Nordic Mines has carried out an extensive training programme. Training has continued during the fine tuning phase, focusing on issues such as those related to safety and chemicals. Focus on safety

The Laiva mine contains all the elements required for producing gold in a modern, environmentally friendly way, from mining the ore to casting the doré bars. These include everything from the mine itself and the processing plant to the storage reservoir and the paste facility for the environmentally friendly disposal of sand. As the process involves

large machinery, many people and a high work rate, there is a sharp focus on safety. With the completion of recruitment and training, main contractors such as Outotec, Metso and Ruukki have handed over to Nordic Mines’ own personnel. Some duties, such as blasting, transport and road maintenance, will continue to be contracted out in future, in order to create greater flexibility and more efficient production planning. Including these contractors, there are around 130 people in total working at the Laiva mine. Many nationalities

In the course of the construction work during 2011, there have not only been representatives from the principal suppliers at the Laiva mine, but also from their subcontractors – all specialists within their particular area. Although many of the suppliers were local, a large number of different nationalities came together at the mine. At most, some 20 different countries were represented on the site. The mining industry is extremely international, which means that many different nationalities are also represented among the workforce that has now been employed. A significant part of the training programme is about establishing a common terminology in this Finnish speaking area. “One of our greatest challenges is not only to get the machines to work together – but also the people,” says Krister Söderholm, Site Manager at the Laiva mine.

“This is not routine work. It is dynamic, exciting, requires courage and decisiveness. And I get to be outside.” Olow Svonni, a geologist working with GC drilling at the Laiva mine, who abandoned his career as a journalist in Stockholm to take up a profession in the mining industry.

“I really wanted to work as a mining engineer. So when I was given this opportunity – and on such an exciting project – I felt as though I’d won first prize.” Ilari Kinnunen, trained mining engineer

“It is interesting to be here at the start of a mining project where so much leading technology in different areas is used – from process technology to environmental technology.” Mike Gunn, an Australian consultant with more than 35 years experience of mining all over the world whose focus is operations and process design.

“I enjoy the excitement of exploring what is below the ground. Finding gold gives you an incredible adrenaline rush.” Minna Jakobsen, a geologist and one of the key individuals involved in surveying the gold deposit at the Laiva mine.

“I have been on a fantastic journey here in the Laiva area, from the initial sampling of the moraine to seeing a mine in full operation with all the infrastructure that has grown up around it.” Sebastian Åbacka, co-ordinator and manager of the exploration work in the area around the Laiva mine – and a young veteran within Nordic Mines.

NORDIC MINES ANNUAL REPORT 2011 19

Exploration

Exploration drilling helping the Laiva mine to grow

Borrugglan carrying out exploration in the Laiva area

The drilling rigs continue to explore Nordic Mines’ 1,700 hectare claim area around the Laiva mine. The short-term goal of this core drilling in the vicinity of the mine is to raise some of the mineral resources from the inferred mineral resources to the indicated mineral resources category in conjunction with the next mineral resources calculation. The long-term goal is to increase the ore reserves, in order to expand and extend mine production in the area. The work is being led by exploration manager Peter Finnäs.

Peter Finnäs

20 NORDIC MINES ANNUAL REPORT 2011

Hole after hole. Metre after metre of drilling. Core after core. In parallel with the start-up of gold production in the Laiva mine, intensive exploration work is being conducted adjacent to the mine. “During 2011, we carried out a programme of core drilling twice the size of last year’s programme. In total, 12,000 drilling metres up to December. Of these we drilled 2,000 metres in Oltava,” explains Peter Finnäs, Exploration Manager at Nordic Mines. “The objective is to obtain sufficient data to reclassify parts of the mineral resources from inferred to indicated when the new mineral resources calculation is undertaken in the first half of 2012,” he continues. Peter Finnäs has been involved since Nordic Mines was founded in 2005 – initially as a consultant and then as an employee. His first job in the sector was at Terra min-

ing, which he joined as a newly qualified geologist in 1993. His choice of career was clear from an early age – a picture of Peter Finnäs as a 5-year-old shows him with a hammer standing on a rock inspired by a piece of galena he had been given by his grandfather. “It definitely lit a fire inside me. I have always been curious and interested in nature. But I had actually imagined a career in research. My degree dissertation focused on the environment, relating specifically to acidification. However, I quickly realised how difficult it was to procure financing for research, and I therefore decided to get a ‘proper’ job,” explains Peter Finnäs. “The great thing about exploration is that it is reminiscent of research – it is like an exciting treasure hunt,” he continues. Constant gold contents

Core drilling, which is also known as diamond drilling, entails a cylindrical core being cut out of the rock with the aid of a drill bit encrusted with small diamonds. The drill cores are placed in boxes and transported to an archive for charting and sampling. The drill archive at Nordic Mines’ exploration office, where Peter Finnäs and his colleagues are based, is now becoming so overcrowded that they will have to start using new premises soon. The mineralised parts of the drill cores are sent for analysis at laboratories in Sweden and Finland.

“The results of this year’s drilling operations show that the content remains at the same level as the material that was previously investigated, in other words around 2 grams of gold per tonne,” says Peter Finnäs. Systematic drilling of the Laiva deposit has been going on since 2005. The gold in the deposit, which is one of the largest in the Nordic Region, is in vertical shear zones – i.e. areas of bedrock that are characterised by significant deformation – as well as quartz veins running in an east-west direction. The deposit is still open in many different directions, providing opportunities for a future expansion of the ore base. Ever since the start of drilling, Peter Finnäs has spent his weeks living out in the Nordic Mines house in the forest outside Raahe along with a few other geologists and drillers, with bears, lynxes and wolves to keep them company. His home and his wife are in Turku, which is where he spends his weekends. “My wife and I are getting used to living this way. I think it’s good for our relationship, we don’t wear each other out,” he says. Calculation according to Kriging

The reported mineral resources satisfies the demands according to the internationally adopted JORC code standard. The calculations have been carried out by Malcolm Titley, Qualified Person at CSA Global, with the aid of the Kriging method. This is a geostatistical calculation method that calculates the ore’s tonnage and content. A three-dimensional network of blocks is laid across the entire defined mineralised volume. Each block is calculated and the sum of all the included blocks gives the total mineral resources. The calculations are performed in three dimensions – along the zone, vertically in the zone and across the zone. These parameters constitute important elements in the Kriging calculations. “The part of the block model that is categorised as indicated, and the higher category of measured mineral resources, are used in the next stage to determine what proportion of the mineralisation is mineable and can therefore be categorised as a ore reserve,” says Peter Finnäs. “To determine this, consideration is given to all costs that affect mining operations, the technical parameters that govern mining, as well as safety factors,” he continues. The open-pit mine at Laiva is planned to be approximately 150 metres deep.

Core samples

Drill cuttings from RC drilling

The “Borrugglan” behind our successful exploration Effective studies of the surface moraine, drilling and sampling of both the lower layers of the moraine and the bedrock, as well as continual analysis and evaluation. These are the various stages of the exploration method that Nordic Mines employs. Nordic Mines’ exploration method, which it has developed in-house, is based on studies of the surface moraine using the “Borrugglan” rig and has been a key factor behind the successes in the Laiva mine. At present, the exploration work is primarily focused on expanding the ore base in and around the Laiva mine – and thereby extending and hopefully also expanding gold production in the area. In parallel with this, new deposits are being surveyed in the company’s other exploration areas in Finland and Sweden.

ods, this type of exploration is fast and cost-effective. The main reason for this is that large areas can be surveyed in a short space of time so as to identify mineralisations before starting more costly investigations, such as core drilling. One single sample of moraine can mirror up to one square kilometre of the bedrock. Since the matrix exploration method was launched, a large number of deposits have been identified through it. In spring 2007, the unique “Borrugglan” exploration rig was taken into use, which made the exploration process even more efficient. Its high capacity and its ability to collect continuous samples from both moraine and rock have made it a key resource in Nordic Mines’ exploration work. The machine’s low ground pressure also means that it is kind to the terrain.

Matrix exploration

Core drilling and RC drilling

Around three-quarters of Sweden’s and half of Finland’s surface is covered by moraine. One of the basic ideas behind the unique exploration method – matrix exploration – that has been developed by Nordic Mines and on which the company’s exploration work is based, is that the composition of the moraine mirrors that of the underlying bedrock. The matrix exploration method, in its first stage of analysing soil samples, shows the type of bedrock found in the area. If the results from these analyses indicate high grades of interesting metals, Nordic Mines starts a more systematic evaluation through drilling and testing the lower layers of the moraine and the underlying bedrock. Following chemical analyses an evaluation is performed based on statistical models. Compared to more traditional meth-

When a mineral deposit has been identified, a programme of core drilling is launched to ascertain how much of the mineral is present and what form the deposit takes. In this final stage of the exploration work, Nordic Mines uses diamond and RC drilling. Diamond drilling entails a cylindrical drill core being cut out of the rock using a drill bit encrusted with small diamonds. The drill cores are placed in boxes and transported to an archive for charting and sampling. RC stands for Reverse Circulation, and entails rock fragments – drill cuttings – being blown upwards using compressed air in such a way that no contamination or mixing up of the samples can take place. The drill cuttings are collected continuously, charted and sampled for chemical analysis. NORDIC MINES ANNUAL REPORT 2011 21

Exploration

Systematic exploration for new deposits Nordic Mines is conducting continuous, systematic exploration for new deposits. At present, the company has exploration licences for five areas – in addition to the Laiva mine and Oltava, Tormua in Finland and Fjälltuna and Vassbo in Sweden.

Exploration around the Laiva mine and Oltava, Finland

The Laiva mineralisation is open at depth and eastwards, which opens the door to a future expansion of the ore base. Because the deposit is open at depth there is a possibility of continued extraction underground, in the open pit and in underground works. There are also three further gold indications in the vicinity of Laiva – Kaukainen and Musunneva some 2 km from Laiva,

and Oltava which is located 12 km away. The initial exploration in Musunneva and Kaukainen has indicated raised gold content levels in both the soil and the bedrock. During 2010 and 2011, Nordic Mines conducted exploration work in Oltava, 12 km south of the Laiva deposit, with the aid of the “Borrugglan” exploration rig. Samples were taken both from the moraine and from the underlying bedrock, down to a depth of 1.5-2 metres. In total, 250 holes

were drilled in two areas with a total surface area of 0.2 km². In 2011, deeper holes were drilled by Nordic Mines. However, it is too early to say whether this mineralisation will be workable. Oltava is of particular strategic interest, as it is within transportation distance of the processing plant in Laiva. Significant stripping of part of the mineralisation for survey purposes is now planned, along with further drilling.

Tormua, Finland

Fjälltuna, Sweden

Vassbo, Sweden

Tormua is a gold deposit close to the Russian border. It is part of a 140 km long greenstone belt, known for some ten gold mineralisations. Previous drilling has shown an inferred mineral resources of 590,000 tonnes with an average gold content of 3.5 grams per tonne. However, geochemical and geophysical investigations indicate that the section with the increased gold content is significantly larger than the area that previously underwent core drilling.

22 NORDIC MINES ANNUAL REPORT 2011

In Västerbotten, Nordic Mines has four exploration licenses for a total of about 3,700 hectares in which several gold mineralisations have been found. During 2011, 205 exploration holes were drilled in the area. Analyses point to raised levels of gold and copper. However, this relates to individual finds, and it is not yet possible to draw any conclusions regarding average content and economic potential. Stripping and surveying of a large mineralised area has been conducted ahead of a future programme of core drilling.

In Vassbo in northern Dalarna, Nordic Mines conducted surface moraine sampling during 2010-2011. This sampling indicates mineralisations of lead and silver. The exploration licenses are for five different areas and cover a total area of 8,375 hectares.

Exploration boom in the Nordic region A new exploration record was set in the Nordic region during 2011. Mining companies from all over the world invested more than SEK 2 billion in looking for minerals in the region. According to Magnus Ericsson, MD of the analysis company Raw Materials Group, they are being attracted by the good geological conditions combined with a stable political situation and a well developed infrastructure.

Magnus Ericsson

“Rising metal prices are the primary incentive for looking for new mineral deposits. In recent years, the price of metals has risen continuously. As exploration follows the metal price trend with a time lag of approximately a year, exploration in the Nordic region is expected to increase by a further 10 per cent during 2012,” says Magnus Ericsson. Swedish mining companies such as Boliden, LKAB and Nordic Mines are among those participating in this Nordic hunt for minerals, along with mining companies and pure exploration companies based in countries such as Canada, Australia and the UK. Many of the mineral deposits that have been discovered in the Nordic Region – just like the Laiva mine – are located in the mineralised belt that extends from Lake Ladoga in Russia, right across Finland and the Gulf of Bothnia, to the Skellefte field and on into Norway. “Several of the major gold deposits around the world that we already know about, such as in South Africa, are now beginning to run out. In some gold mines in South Africa, mining is taking place at a depth of almost 4,000 metres, which is both costly and challenging in many other ways. Gold production in South Africa fell by 30 per cent between 1984 and 2007. This, combined with record prices, means that more money is being invested in exploration. The areas of the world that are considered to have the greatest potential for new, large deposits are Africa and Siberia. How-

ever, some African states and Russia deter some potential investors, due to the lack of infrastructure and uncertainty regarding the political situation,” says Magnus Ericsson. “In addition to favourable geological conditions in the Nordic region, many are being attracted by the well developed, effective communications network and by the political stability. It doesn’t matter how much is found if it cannot be transported – and it is uncertain that you will be able to keep it,” he adds. The trade magazine Resource Stocks carries out an annual survey among thousands of key individuals within the mining and oil industries, known as the World Risk Survey. In this survey, the subjects are asked to assess which country they consider to have the best conditions for the mining industry in respect of a number of factors, including financial and political risk, access to land, social risk, infrastructure, natural disasters and labour market conditions. Finland came in first place and Sweden fourth in the survey. “The Nordic region has been under-­ explored compared to other parts of the world with similar geological conditions, such as Canada and Australia. In addition, the attitudes of the authorities and the public towards the mining industry are fundamentally positive. There is also a rich mining tradition, with access to a knowledgeable and experienced workforce and skilled subcontractors,” says Magnus Ericsson.

NORDIC MINES ANNUAL REPORT 2011 23

The market

New factors governing the price of gold Debt crisis in the eurozone. The downgrading of the USA’s credit rating. Weak returns in many financial instruments. Many factors conspired to encourage interest in gold in 2011, and resulted in the price of gold increasing for the eleventh year in a row, measured in dollars. However, a more in-depth analysis shows that the explanation for the price trend is more complex than this, and is based on a fundamental change in both supply and demand. That is the opinion of Marcus Grubb, MD of Investment at the World Gold Council, the international market development organisation for the gold industry.

From jewellery to financial instrument. From a sign of love and wealth to a secure investment in times of financial worry. From central banks and institutional investors to private individuals. From South Africa to the whole world. Over the past 40 years, not only has the map of where in the world gold is produced been redrawn, but also our understanding of the factors that govern demand. “Gold fulfils an increasingly important and wider ranging role in society. At the same time, both supply and demand are moving to the east,” says Marcus Grubb. Demand is increasing in India and China

Marcus Grubb

24 NORDIC MINES ANNUAL REPORT 2011

Gold is a rare metal. In total, only 166,000 tonnes have been produced around the world to date – equivalent to a cube with each side measuring 20 metres. Around 60 per cent of the gold produced today is turned into jewellery, with India and China with their expanding economies topping demand. In addition to jewellery, gold is used as an investment asset, for the central banks’ currency reserves and in industry. As prosperity increases in India and China, private individuals are buying gold – in the form of jewellery and as an investment object. The rising price of gold has not arrested the gold boom in these countries – over the past ten years, the price of gold in India has risen by 400 per cent (measured in Rupees),

yet at the same time demand has increased by an incredible 25 per cent. Production spreading all over the world

The supply of gold derives from mining production, recycling – which is responsible for around 40% of the supply – and in the past when central banks sold part of their reserves. In 1970, South Africa was responsible for more than 60 per cent of the world’s production of gold from mines. Today, no country supplies more than 14 per cent. The largest producers in 2010 were China at 13 per cent, followed by Australia at 10 per cent, the USA at 9 per cent, Russia at 8 per cent and South Africa down in fifth position at 8 per cent. During 2011, the mine production of gold increased slightly to a new record level, although the impact on the supply was countered by a decrease in recycling along with an increase in net purchases by the

central banks. The increase in the price of gold during the 2000s has led to increased exploration – but as it takes a long time to move from exploration to a gold-producing mine, only a few new gold mines have started production in recent years. The gold mining sector is relatively fragmented – the ten largest producers are responsible for around 40 per cent of total production. The five largest global gold mining companies are Barrick, Newmont Mining, AngloGold Ashanti, Gold Fields and Goldcorp. In 2009, Barrick produced 7.4 million ounces of gold. In the Nordic region, Nordic Mines will be one of the largest gold G lobal gold con s u m ption Industry and dental care 11%

mining companies, with an estimated annual production of 118,000 ounces. Rising demand – and rising price

Demand for gold rose by a further 0.4 per cent to 4,067 tonnes during 2011, and the price rose for the eleventh consecutive year, calculated in dollars. The price of gold is affected by developments on the global financial markets; gold is viewed as a safe asset with an increased value in times of economic or political uncertainty. As gold is considered to have a stable value, the metal is often viewed as a form of protection against inflation. During 2011, there was Leadi ng gold produce rs arou n d th e wor ld

an increase in demand for both gold bars and coins. “The increased demand is based on anxiety about the global economic situation, particularly in the eurozone, high inflation in certain countries, such as India, China and Vietnam, and the relatively weak growth of alternative investments,” says Marcus Grubb. “In line with the growing uncertainty about the future and the increasing volatility on the world’s financial markets, the perception of gold as a safe and stable investment that offers protection against inflation is being strengthened. G lobal s u pply of gold

Recycled gold 35%

USA 12 % Latin America 20 % Australia 8 %

South Africa 9 %

Financial instruments 35%

Jewellery industry 54%

Source: World Gold Council 2011

China 12 %

Others 39 %*

*Of which Sweden 0.3%

Sales by central banks 6%

Mine production 59%

Source: World Gold Council 2011

Source: G FMS 2010

NORDIC MINES ANNUAL REPORT 2011 25

The World Gold Council predicts that interest in gold will increase even more in the future, as will the importance of the metal in our society.

conducts lobbying activities targeted at governments, public authorities and central banks. The organisation also takes the initiative in the development of new channels and products for making gold more accessible. Exchange Traded Funds (ETFs), which were introduced in 2002, are an example of one such instrument. Investments in gold were previously complicated, as they often required the purchase of physical gold. With the introduction of ETFs, which are listed funds the only holding of which is physical gold, this was made much simpler. ETFs are becoming an increasingly popular investment instrument in many parts of the world. Demand for gold futures and OTC products in gold is also increasing. “We are constantly investigating the potential to develop new products that make it easier to invest in gold – as well as new ways to trade in gold, such as over the Internet. Both ETFs and the internet trading site Bullion Vault, where it is possible to trade in gold on the internet, have contributed to many private individuals starting to invest in gold,” says Marcus Grubb. Gold is becoming an increasingly important part of the financial system. One sign of this is the fact that a number of stock exchanges and clearing counterparties around the world have announced during 2011 that they are accepting gold as security in financial transactions,” he continues. Easier to trade in gold

The World Gold Council is a global market development organisation with its headquarters in London; its task is to develop the gold market. The organisation is backed by the world’s major gold mining companies – its members are responsible for around 70 per cent of total mine production of gold. The World Gold Council supplies research and statistics about gold, as well as

26 NORDIC MINES ANNUAL REPORT 2011

Gold price trend in Euros and Dollars since 2005 EUR/ounce

USD/ounce

2,000

2,000

1,600

1,500

1,200 1,000 800 500

400

Gold, USD 0

0 2005

2006

2007

2008

Central banks have become net purchasers

The central banks’ gold reserves have increased by more than 500 tonnes over the past two years, in line with a number of central banks, primarily in developing countries, having made major purchases and sales having fallen to a minimum. The European central banks traditionally hold a significant proportion of their currency reserves in gold, whereas the central banks in the major economies outside of Europe and the USA have had a low proportion of their currency reserves in gold. The current trend is for these countries – such as China, India and Russia – to increase their gold reserves, at the same time as the European central banks have stopped selling theirs. “It is worth noting that after 18 years as net sellers, the central banks have now become net purchasers of gold,” says Marcus Grubb. “The reasons for this include the fact that these countries do not want to become too dependent on one or two foreign currencies, and that they want to restore the previous balance between gold and foreign currency in the country’s reserves. They also want to make use of gold’s ability to preserve the value of the country’s assets and contribute to stability on the financial markets.”

2009

2010

2011

Gold, EUR

2012

tant component in the manufacturing of semi-conductors. Sales of semi-conductors reached a new record level in 2011, which maintained demand within the electronics industry during the year despite the financial uncertainty. Interest predicted to increase

The World Gold Council predicts that interest in gold will continue to increase in the future, as will the importance of the metal in our society. “Low interest rates as a result of the continued unease regarding state finances in many countries, particularly in the euro zone, are expected to encourage demand for

secure assets such as gold. Gold’s role as an inflation hedge is attractive. The central banks are continuing to buy – as are Chinese households,” says Marcus Grubb. “Both supply and demand have spread geographically, respect for gold is higher than it has been for decades, and there is greater insight into the importance of gold as a stabilising force in today’s uncertain financial situation. All of this indicates that demand for gold will remain strong in the future,” he continues. Footnote: Nordic Mines reports its costs in Euros, which means that the price of gold in relation to the Euro is of most relevance for the company.

Constant demand from the electronics sector

Industrial demand comes primarily from the electronics industry. Gold is an impor-

NORDIC MINES ANNUAL REPORT 2011 27

Nordic mines in figures

Ore reserves and mineral resources Statement by the Qualified Person at Nordic Mines The technical report has been written by Peter Kuiper, appointed as a Qualified Person by SveMin and employed as the Head of Development at Nordic Mines. For further information about Peter Kuiper’s professional background, see the section on the Board of Directors and senior executives. Peter Kuiper has agreed to publish this information in the Annual Report and he can be contacted at the company’s address. The original report is available at the company’s head office in Uppsala, Sweden. See the last page of this report for the address.

Mineral resources in addition to the ore reserves

TEST DRILLING The estimated mineral resources at the Laiva deposit are based on 66,696 metres of drilling, from core drilling and RC (Reverse Circulation) holes, along with diamond sawn channel samples. Approximately 80% of the drilled metres come from core drilling.   The sample data base comprises 52,985 metres of diamond drilling from 337 drill holes, 13,470 metres of RC drilling from 93 drill holes and 242 metres of sawn channel samples from 26 profiles.   The density of the drilling grid varies across the deposit, from the more densely drilled sections with a distance between the holes of 25 x 25 metres or even closer, with 25 metres between the profiles and 25 metres between the holes in the profiles, to the less densely drilled parts, where the distance between the profiles and holes ranges from 50 to 100 metres. The measured mineral resource is calculated over a volume where the density is 25 x 25 (30) metres between the profiles and drill holes, respectively. The indicated mineral resource, for which there is a somewhat lower information density, is calculated with a density of between 50 x 30 metres and 50 x 50 metres between the holes. The inferred mineral resources are calculated across volumes where the density between the drill holes varies from 50 x 30 metres to 100 x 60 metres. CALCULATION MODEL The mineral resources and the ore reserves are calculated in accordance with the JORC Code. The calculations have been performed by Malcolm Titley at CSA Global Pty Ltd. Malcolm Titley is a Qualified Person (QP), a member of the Australasian Institute of Geoscientists (AIG) and the Australasian Institute of Mining and Metallurgy (AusIMM). ore reserves for the Laiva project according to the results of Whittle open-pit mine optimisation Ore reserves cut-off 0.5 g/tonne

Tonnes of Gold g/ ore tonne

Proven ore reserves

5,764,000

1.83

10,550 340,000

7,147,000

1.86

13,300 428,000

12,910,000

1.85

23,850 768,000

Probable ore reserves Total ore reserves (rounded)

Kg gold

Oz gold

The above ore reserves have been adjusted for 10% dilution and 10% ore loss. Ore: The waste ratio is 1:4.8. Economic low-grade ore between 0.5 g/tonne and 0.8 g/tonne, which can be mined profitably, has been included in the ore reserves and therefore affects the average head grade.

Mineral resources

Tonnes

Gold g/ tonne

Kg gold

Oz gold

Measured mineral resources (cut-off 0.8 g/tonne)

174,000

1.45

253

8,100

Indicated mineral resources 4,200,000 (cut-off 0.8 g/tonne)

1.73

7,270 234,000

Total Measured & Indicated (cut-off 0.8 g/tonne)

4,370,000

1.72

7,520 242,000

Mineral resources, category B Measured & Indicated Content 0.5-0.8 g/tonne

2,910,000

0.62

1,810

Inferred mineral resources 3,600,000 (cut-off 0.8 g/tonne)

1.8

58,100

6,500 210,000

The mineral resources model has been developed by defining gold mineral zones in all drill holes according to three cut-off contents: 0.5, 0.8 and 1.0 grams gold/tonne.   Only zones covering at least 3 metres along the drill holes have been included in the calculations.   The gold mineralisation in Laiva is defined by seven domains which, in turn, are defined by changes in the average orientation of the gold-carrying structures.   A block model has been developed, in which each block measures 12.5 x 2.5 x 5 metres (length x width x height). Blocks within the gold mineralisation were defined in 3D modelling by calculating the probability that the block has a gold content that equals, or exceeds, the cut-off content. This calculation model was applied to all three cut-off contents.   A variogram was used to define the correct parameters for calculating the contents. The gold content has been calculated using Ordinary Kriging for each cut-off content. High gold contents, above 30 grams/tonne, have been adjusted down to 30 grams/tonne.   After calculating the contents, the models were combined to create a model with 0.5 grams/tonne as the cut-off. The density of the rock is determined by measuring the core samples.   The calculations have been classified as measured, indicated and inferred mineral resources according to the guidelines specified in the JORC Code. The Kriging variance, in combination with the distance between the drill holes, has been used to define the classification borders between measured, indicated and inferred mineral resources. OPEN-PIT MINE OPTIMISATION – ORE RESERVES Within the framework of measured and indicated mineral resource categories, open-pit mine optimisation has been carried out through Whittle optimisation, the leading international standard for the optimisation of open-pit mines. The proportion of the mineral resources falling within Whittle optimisation constitutes the ore reserves. The calculation has been based on a gold price of EUR 535/oz, which is more than 50% below the present price. Two further optimisations have also been carried out, based on a gold price of EUR 750/oz and EUR 1,000/oz.   Whittle optimisation includes all influencing factors, such as costs affecting mining production, the price of gold, technical parameters governing extraction, expected ore loss and dilution for the selected mining method – the table with the Whittle parameters is published on our home page , www.nordicmines.se under / Bolagsinfo / Rapporter / tekniska rapporter / 9 augusti 2011 Teknisk Rapport

NORDIC MINES ANNUAL REPORT 2011 29

Mineraltillgång och Malmreserv. Production costs and other technical parameters are in accordance with the published feasibility study for the Laiva mine.   In conjunction with the 2010 feasibility study, CSA drew up a mining plan based on the Whittle optimisation for EUR 535/oz. This mining plan forms the basis for current mining planning in Laiva. ANALYSES OF CORE SAMPLES The core samples are sawn lengthwise, after which half the core is sent for analysis and the remainder is kept as a reference sample. The analyses are based on one-metre sections. If some part of the core sample has not been analysed, the gold content has been defined as zero.   Until 1986, analyses of core samples were carried out by Outokumpu at Outokumpu’s own laboratory. Since 1986, core sample analyses have been performed at the Finnish State Laboratories (GTK), now called Labtium, and ALS Chemex, both of which are accredited laboratories. GTK’s sample preparation and analyses are carried out according to the following procedure: Drying the sample at 70°C, crushing in a jaw crusher, pulverising in a steel tray, then a 50 gram Pb-fire assay, followed by a gold analysis using the ICPAES method. ALS Chemex’s sample preparation and analyses are carried out according to the following procedure: Drying of the sample at 100-110°C, crushing down to 70 percent < 2 mm, splitting to 250 grams, pulverising, then a 50 gram sample is analysed according to Au-ICP 22. The reporting of the various classes meets the requirements of the internationally adopted JORC Code standard.

Share information The share capital of Nordic Mines amounted to SEK 34,921,647 on 31 December 2011, divided between 34,921,647 shares with a quota value of SEK 1 each. The Group’s equity amounted to SEK 377 million. Equity per share was SEK 10.74 at year end 2011. See Note 19 for more information. Nordic Mines share 30.12.2008–30.12.2011 SEK 80

Ownership structure (Holdings at 30.03.2012) Name Shares  Capital/ votes % Cederlund, Tord 2,988,904 8.15% Cbldn-Cip-Ignis 2,876,072 7.84% Försäkringsaktiebolaget, Avanza Pension 2,646,303 7.22% Schönning Lennart genom bolag 1,360,000 3.71% JP Morgan Bank 1,241,334 3.38% Länsförsäkringar Småbolagsfond 981,945 2.68% Swiss Life (Liechtenstein) AG 971,656 2.65% Moreborg, Kjell 800,000 2.18% UBS (Luxembourg) SA 774,669 2.11% Nilsson, Michael inklusive bolag 762,921 2.08% DZ Privatebank S.A., W8IMY 706,500 1.93% CF Ruffer Baker Steel Gold Fund 690,000 1.88% Six Sis AG, W8IMY 603,625 1.65% DLG Aktiefond 559,483 1.53% 785, Skandia 499,670 1.36% Nordnet Pensionsförsäkring AB 487,282 1.33% Cbldn-Pohjola Bank Plc Client A/C 481,767 1.31% Skandia Global Dynamic Equity Fund 464,071 1.27% Deutsche Bank AG LDN-Prime Broker 453,179 1.24% BNY GCM Client Accounts (E) BD 424,849 1.16% Skandinaviska Enskilda Banken S.A., W8IMY 398,356 1.09% JP Morgan Bank 368,200 1.00% Handelsbanken Svenska Småbolagsfond 363,804 0.99% Banque Carnegie Luxembourg SA 342,582 0.93% Robur Försäkring 317,886 0.87% Nordea Bank Finland ABP 304,775 0.83% Genus Dynamic Gold Fund 295,500 0.81% Sparretun, Per Gunnar Magnus 294,000 0.80% M2 Capital Management AB 261,561 0.71% Other shareholders 12,950,753 35.32% Total 36,671,647 100,00% Total number of shareholders: 6,755 registered shareholders. Share price development On 30 December 2011, the final call price for Nordic Mines shares (prefix NOMI) was SEK 64.75. Nordic Mines’ overall market capitalisation amounted to SEK 2,261 million (SEK 1,565 million). Over the course of the year, the share’s highest price was SEK 75.00 on 8 March and its lowest price was SEK 42.10 on 5 August. Analyses Analysts following the company include ABG Sundal Collier, Carnegie, Pareto Öhman, Penser Fondkommission and Redeye.   For more information about Nordic Mines and Nordic Mines shares, visit our website www.nordicmines.se.

60

40

20

0

Nordic Mines OMX Stockholm

30 NORDIC MINES ANNUAL REPORT 2011

Administration Report The Board of Directors and Managing Director of Nordic Mines AB (publ), corporate identity number 556679-1215, hereby present their annual report and consolidated financial statements for the financial year 01.01.2011–31.12.2011.   Nordic Mines AB is a Nordic mining and exploration company. Its goal is to be one of the leading gold producers in Europe as well as a role model when it comes to respecting the environment. Ore mining started at the Laiva mine near Raahe in central Finland in the summer of 2011. The facility started operation in the autumn, and the first doré bar was produced at the end of the year. The gold deposits are among the largest in the Nordic region, with an ore reserve of 12.9 million tonnes and a gold content of 1.85 grams per tonne. Once fully operational, the Laiva mine is expected to yield 118,000 ounces, or approximately 3,700 kg of gold, per year. Exploration is being conducted in Finland and Sweden. Nordic Mines was founded in 2005, and as of 31 December 2011, the Group has an equity of SEK 377 million. The Group now has 86 employees and its head office is situated in Uppsala. The Nordic Mines share is traded on the Nasdaq OMX Mid Cap exchange in Stockholm.   The Nordic Mines Group consists of the parent company, Nordic Mines AB (publ), with a Finnish branch, Nordic Mines AB (publ), filial Finland, and the subsidiaries Nordic Mines Optioner AB and Nordic Mines Marknad AB, which in turn has a subsidiary in Finland, Nordic Mines OY. Nordic Mines AB (publ)

Nordic Mines Marknad AB

Sweden Finland

Nordic Mines AB, filial

Nordic Mines Optioner AB

Nordic Mines Oy

2011 at a glance • The facility at the Laiva mine was gradually put into operation, fine tuning started in the autumn. • The first doré bar was produced on 27 December. • The exploration activities in Finland and Sweden were expanded. Core drilling work adjacent to the Laiva mine was intensified during 2011. • A credit agreement for project finance of EUR 53 million was signed in March with Standard Bank Plc, UniCredit Bank AG and Finnvera Plc. The term of the loan is 5 years. An interest rate swap agreement has been made with Standard Bank Plc and UniCredit Bank AG for half the loan. • The gold price was hedged in March at an average of EUR 1,049 (USD 1,458) per ounce for 36 percent of the planned production in the Laiva mine from the first quarter of 2012 up to and including the first quarter of 2015. • A new credit framework agreement for EUR 7.5 million was entered into with Standard Bank Plc and UniCredit Bank AG during the third quarter. • A new mineral appraisal was published on 9 August, showing an increase in the ore reserves in the Laiva mine by 1.2 million tonnes. OPERATIONAL ACTIVITIES Nordic Mines is a company that, with a high degree of expertise, conducts mining and exploration operations with a primary focus on gold deposits. Nordic Mines has a gold project in an advanced stage in Laiva, central Finland, where ore mining started in the summer of

2011. The facility started operation in the autumn, and the first doré bar was produced at the end of the year.   In parallel with the mining and prospecting operations in the Laiva area, exploration continued in Nordic Mines’ other project areas in Finland and Sweden. These other project areas include Tormua (gold) and Oltava (gold) in Finland, and Fjälltuna (gold) and Idre (zinc-lead) in Sweden.   Nordic Mines collaborates with leading companies in the mining industry, such as the technology company Outotec AB and the consultancy company CSA Global (UK) Ltd for process development and feasibility studies. Group sales and earnings Net sales amounted to SEK 0 in 2011 (SEK 0). The company recorded a loss of SEK -17.6 million (SEK -26.0 million). Administrative expenses amounted to SEK -15.1 million (SEK -11.3 million) and consisted mostly of costs for the future administration, offices and operation of the Laiva mine, as well as expenses for financial and legal consultation in relation to the financing of the Laiva project. Other operating expenses decreased to SEK -2.5 million (SEK -14.7 million). The result after financial items amounted to a loss of SEK -33.3 million (SEK -25.7 million). The result after financial items amounted to a loss of SEK -182.9 million (SEK -4.9 million). The valuation of outstanding forward contracts at the market price on 31 December 2011 gives a negative result of SEK 157.3 million (SEK 0 million). Earnings per share after dilution amounted to SEK -0.71 (SEK -0.15). Exploration Nordic Mines is conducting continuous, systematic exploration for new deposits. The company has exploration licences in seven areas – at present, exploration work is focused on the Laiva mine, Oltava and Tormua in Finland and Fjälltuna and Vassbo in Sweden.   The primary focus of exploration has been to extend proven ore reserves. Since the end of the second quarter of 2011, activities have gradually been expanded.   This applies in particular in the area of the Laiva mine, above all to the south and immediately adjacent to the open-pit mine. The results of expanded core drilling operations in the area are now being evaluated.   Core drilling has also continued at Oltava, 12 km south of the Laiva mine. The results of previous test drilling operations, presented at the start of 2011, demonstrate interesting gold deposits in Oltava.   During the period, Nordic Mines was granted an exploration licence in Vassbo in Sweden. In Tormua in Finland, work has focused primarily on geochemical investigations.   Exploration activities are necessary if Nordic Mines is to realise its vision of becoming one of Europe’s leading gold producers. FINANCING A credit agreement for project finance of EUR 53 million was signed in March with Standard Bank Plc, UniCredit Bank AG and Finnvera Plc. The term of the loan is 5 years.   Nordic Mines has entered into an interest rate swap transaction with Standard Bank Plc and UniCredit Bank AG. This means that 50 percent of the amount of the loan (EUR 53 million) has an annual fixed interest of 2.39 percent and a floating component of 3 months Euribor. Taking into account the lenders’ margins, this means a current annual interest rate of 6 percent.   In March, Nordic Mines entered into a forward contract for the period from and including the first quarter of 2012 up to and including the first quarter of 2015 covering 130,860 ounces of gold at an average price of EUR 1,049 per ounce including transaction costs. This corresponds to 36 percent of the planned gold production at the Laiva mine. This price hedging was carried out in partnership with Standard Bank Plc and UniCredit Bank AG.   In the third quarter, a credit agreement regarding a future credit NORDIC MINES ANNUAL REPORT 2011 31

framework of EUR 7.5 million was entered into with two of the existing lenders, Standard Bank Plc and UniCredit Bank AG. The credit framework can be utilised as necessary and runs for 3.5 years. The project finance of EUR 53 million is not affected by this credit agreement.   Following the end of the year, the Board of Directors decided to strengthen the company’s equity through a directed issue within the framework of that authorised by the AGM. In March 2012, a new issue of 1,750,000 shares was made, providing the company with approximately SEK 89 million before issue costs. The funds from the directed new issue are intended to strengthen Nordic Mines’ working capital and to finance continued exploration work. INVESTMENTS Over the course of the year, Nordic Mines has carried out exploration adjacent to the Laiva deposit to further increase mineral resources. Exploration has also been conducted in Nordic Mines’ other project areas in Sweden and Finland. Investment in exploration amounted to SEK 23 million over the year, compared to SEK 21 million in 2010.   Capital expenditure in property at the Laiva mine amounted to SEK 518.9 million, compared to SEK 308.5 million in 2010. ENVIRONMENT The environmental licence granted to Nordic Mines means that it meets the environmental regulations governing mining operations.   Investment in environmental measures will be substantial, but are within the framework of the company’s estimates. This investment in environmental protection measures will also be an advantage for future Company operations. For a long time Nordic Mines has been sampling watercourses near the planned mine, and will follow up this work on a continuous basis throughout the construction and production phases.   Nordic Mines operates an established environmental policy in which care for people and the environment is a top priority for the Company. One of Nordic Mines’ core values is therefore to plan and carry on operations on the basis of environmental considerations. The company calls this approach our “Green Mines” concept. EMPLOYEES The average number of employees in 2011 stood at 52 (16). By the end of the year, Nordic Mines had 86 employees, compared to 17 at the end of 2010. Nine of the employees work in Sweden and 77 in Finland. CORPORATE GOVERNANCE 2011 Legislation and Articles of Association Nordic Mines AB (publ) is a Swedish limited liability company listed on the Nasdaq OMX Nordic Exchange. Nordic Mines complies with the Swedish Companies Act along with the regulations and recommendations resulting from the Company’s listing. In addition, Nordic Mines complies with the regulations stipulated in the Company’s Articles of Association. The company’s Articles of Association are contained in full on the Company’s website www.nordicmines.se. Swedish Code of Corporate Governance In accordance with the current listing requirements of the Nasdaq OMX Nordic Exchange, the Swedish Code of Corporate Governance (“the Code”) must be applied by all companies, the shares of which are either registered or listed on a stock exchange. Nordic Mines applies the Code.   The Annual General Meeting (AGM), the Board of Directors and the Managing Director form the basis of the Company’s corporate governance. The Company’s auditors, who are appointed by the AGM, audit the Company’s annual accounts, accounting records and administration by the Board of Directors and the Managing Director. The Nominations Committee prepares proposals for the AGM regarding matters such as the election and remuneration of the Board and the auditors. Annual General Meeting The AGM is the highest decision-making authority of Nordic Mines 32 NORDIC MINES ANNUAL REPORT 2011

AB (publ). Based on the owners’ proposals, the AGM decides on the election of Board members and the company’s auditors. The date of the AGM is announced no later than the publication of the third quarter report. Bulletins and minutes from AGMs are available on www.nordicmines.se. 2011 AGM At the AGM on 19 May 2011, it was decided to set up a Nominations Committee to adopt principles for the remuneration and other terms of employment for the management of the Company in accordance with the proposals of the Board, and to give a mandate to the Board to decide – on one or more occasions in the period up to the 2012 AGM, and with or without exceptions to the preferential rights of the shareholders – on a new share issue of a maximum of 1,750,000 shares (see below for more information). The AGM also decided to establish an incentive programme in the form of an employee stock option programme for certain key individuals in and consultants engaged by the company, Nordic Mines AB (publ) filial Finland and Nordic Mines Oy. Nominations Committee The AGM in May 2011 decided on the setting up of a Nominations Committee. Prior to the 2012 AGM, the Nominations Committee shall draw up proposals to enable the AGM to decide on: the election of a Chairman for the AGM, the number of Board members to be appointed by the AGM, the election of a Chairman of the Board, other Board members and the auditors, and the remuneration for the Board and auditors, any other remuneration for committee work, as well as principles for the composition of the Nominations Committee.   The AGM decided that the Nominations Committee should have four members and comprise one representative for each of the company’s two largest shareholders, as specified in the Company’s share register on 30 September 2011. When these representatives have been appointed, they must jointly appoint two more members to the Nominations Committee, of which at least one member is to represent the company’s small shareholders. At least one member must be independent of the company’s major shareholders and one must represent the company’s small shareholders. For the details of how the Nominations Committee is appointed, see www.nordicmines.se.   The composition of the Nominations Committee is to be made public as soon as the committee has been appointed, and at the latest six months before the AGM. The members of the Nominations Committee will not receive fees for their work, although any expenses incurred during the nomination process are to be paid by the company.   The composition of the Nominations Committee for the 2012 AGM was announced on 1 November 2011, and its members are Tord Cederlund and Kjell Moreborg, representing the two largest shareholders. The following individuals, who are not Board members in the company, were appointed to the Nominations Committee: Jan Erik Johnson, who is independent of the company’s major shareholders, and Solveig Staffas, who is representative for the company’s small shareholders. Jan Erik Johnson was appointed Chairman of the Nominations Committee. Board of Directors The Board of Directors is responsible for the Company’s organisation and the administration of the Company’s business. The work of the Board is led by the Chairman and the Secretary of the Board is Torbjörn Koivisto, Master of Law from IARU (Institutet för Affärsjuridisk Rådgivning i Uppsala AB), a consultancy in corporate law. Board members are appointed by the AGM to serve for a mandate period through the end of the next AGM.   The present Board was elected at the AGM on 19 May 2011 and consists of Lennart Schönning (Chairman), Thomas Cederborg, Tord Cederlund, Catharina Lagerstam (newly elected), Bengt Löfkvist and Kjell Moreborg. Everyone on the Company’s Board of Directors is independent of the Company and the Company’s major shareholders. Over the course of the year, Bengt Löfkvist carried out minor consulting assignments for the Company. The Board’s

Elected Independent Company/Owner

Committee

Attendance Fee, SEK

2010 Lennart Schönning (Chairman) 2009 Yes/Yes Remuneration 13/13 Thomas Cederborg 2009 Yes/Yes Remuneration 13/13 Tord Cederlund 2007 Yes/Yes Audit/Remuneration 13/13 Bengt Löfkvist 2006 Yes/Yes Audit 12/13 Kjell Moreborg 2005 Yes/Yes Audit 13/13 Krister Söderholm 2010 Yes/Yes 13/13

250,000 150,000 150,000 150,000 150,000 150,000

2011 Lennart Schönning (Chairman) 2009 Yes/Yes Remuneration 17/17 300,000 Thomas Cederborg 2009 Yes/Yes Remuneration 17/17 200,000 Tord Cederlund 2007 Yes/Yes Audit/Remuneration 16/17 200,000 Catharina Lagerstam* 2011 Yes/Yes Audit 10/17 200,000 Bengt Löfkvist 2006 Yes/Yes Audit 17/17 200,000 Kjell Moreborg 2005 Yes/Yes 17/17 200,000 Krister Söderholm** 2010 Yes/Yes 6/17 200,000 * Appointed to the Board May 2011. ** Left the Board May 2011. members are introduced in more detail in the Board and Management section on page 60.   The division of responsibility between the Board of Directors, the Chairman and the Managing Director, and reporting guidelines, are regulated in the standing orders of the Board of Directors, the instructions for the Managing Director and the instructions for reporting. These documents are reviewed and revised as needed and at least once a year in conjunction with the statutory Board meeting. The work and remuneration of the Board of Directors The Board held 17 meetings during 2011. The meetings were scheduled on the basis of an agenda established by the Board to meet its requirements for information on the company’s earnings and financial position, exploration results, financing and other matters in addition to information on current issues.   The AGM in May 2011 approved payment of SEK 300,000 in remuneration to the Chairman of the Board, as well as SEK 200,000 in remuneration to each of the other members of the Board for their work up to the 2012 AGM. No separate remuneration is paid for committee work. Remuneration paid to each member of the Board during 2011 is shown in the table above. Evaluation of the work of the Board of Directors The work of the Board of Directors, like that of the Managing Director, is to be evaluated annually in a systematic and structured process. The purpose of this is to form a good basis for the development of the Board of Directors itself, and to provide the Nominations Committee with a basis for nominations. The Chairman of the Board of Directors is responsible for undertaking the evaluation. Audit and remuneration committees The Board has established an Audit Committee and a Remuneration Committee in accordance with the Swedish Companies Act, the Swedish Annual Accounts Act and the Swedish Code of Corporate Governance. Catharina Lagerstam, Tord Cederlund and Bengt Löfkvist serve on the Audit Committee. The Remuneration Committee’s members are Lennart Schönning, Tord Cederlund and Thomas Cederborg.   The Audit Committee is responsible for preparing the work of the Board by assuring the quality of the Company’s financial reporting. The Audit Committee will meet with the Company’s auditor on a continual basis to provide information about the direction and scope of audits, to discuss how external and internal audits are to be coordinated, and to provide an opinion on the Company’s risk exposure. It is the job of the Audit Committee to draw up guidelines for which services, other than auditing, the Company can buy from the

Company auditor, and to evaluate auditing. The committee shall also inform the Company’s Nominations Committee about the results of evaluation, and assist the Nominations Committee in the development of proposals for auditors and the remuneration of audit work. Three meetings were held over the year. All members attended the meetings.   The task of the Remuneration Committee is to deal with issues of remuneration and other employment terms for the Company management. Over the course of the year, two meetings were held, which were attended by all members. Audit Auditors are appointed by the AGM for a period of one year to four years.   At the AGM in May 2011, the auditing firm ÖhrlingsPricewaterhouseCoopers was appointed auditor for Nordic Mines, with Helene Ragnarsson as auditor in charge, for the period through the end of the 2012 AGM. Helene Ragnarsson, chartered accountant, does not own any shares in Nordic Mines.   Since 2006, the company has been applying the International Financial Reporting Standards (IFRS/IAS) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC/SIC), as approved by the European Commission, when preparing the consolidated financial statements.   In accordance with a decision by the AGM, remuneration paid for auditing assignments is to be fair and based on invoices. Remuneration paid to auditors in 2011 amounted to SEK 961,000 (784,000) for the Group, of which SEK 396,000 (452,000) related to services over and above the audit assignment.   All interim reports for 2011 were examined by the Company auditor. Remuneration to senior executives The AGM in May 2011 approved the Board’s entire proposal regarding guidelines for determining remuneration and other employment terms for senior executives. The guidelines state that the company must strive to offer its senior executives remuneration and other employment terms in line with market conditions; that the criteria for this are to be based on the importance of their work duties, competency requirements, experience and performance; and that salary and remuneration are to consist of the following components: a) b) c) d)

fixed basic salary variable salary pension benefits, and other benefits

Participation in long-term incentive programmes, such as warrants, NORDIC MINES ANNUAL REPORT 2011 33

can be offered to supplement the above and is based, when applicable, on decisions and guidelines approved by the AGM.   The above principles are in agreement with remuneration principles from previous years and are based on agreements that have already been entered into between the company and senior executives. Senior executives refers to the Managing Director and other senior executives in the company and its subsidiaries. Senior executives are entitled to pension benefits on market terms, where basic salary provides the basis for pensionable income. All previously decided remuneration, which has not yet been paid, is within the framework stated above.   The Board is authorised to deviate from these guidelines if there is a special reason for this in individual cases.   The Managing Director, Michael Nilsson, has a fixed monthly salary of SEK 100,000. If the company terminates the Managing Director’s employment, he is entitled to three months’ notice period pay and severance pay of SEK 1.2 million. Other senior executives have a six month period of notice with no right to severance pay. See Note 2 for more information about remuneration to senior executives. Internal control with regard to financial reporting The Board of Directors is responsible for the existence of an efficient system for internal control and risk management. At a statutory meeting following the AGM, the Board establishes the agenda for the Board of Directors and its Audit Committee and Remuneration Committee. In addition, the instructions and authorisation instructions of the Managing Director are adopted.   Nordic Mines’ Managing Director has operational responsibility for internal scrutiny. On the basis of the Board’s guidelines, laws and regulations regarding financial reporting, the management has an established division of roles and responsibilities for those individuals who work with the Company’s financial reporting. Responsibilities and authorities are further defined in policies, such as the finance policy, the IT policy and the insider policy, and in authorisation instructions.   Important accounting issues and issues relating to financial reporting are prepared by the Audit Committee and dealt with by the Board of Directors. At least once a year, the Audit Committee and the Board of Directors as a whole has a meeting with the auditor.   The company has no separate auditing function (internal audit). The Board of Directors does not consider that the particular circumstances of the business or other conditions justify the establishment of such a function. Information policy Nordic Mines endeavours to provide open, quick and accurate information to the stock market, the general public and government authorities in accordance with the information policy established for the company. For the 2012 financial year, Nordic Mines intends to publish financial reports on 9 May, 16 August, 15 November 2012 and 14 February 2013.   Nordic Mines is a member of SveMin, an employers and industry association for mines and mineral and metal producers in Sweden. Nordic Mines therefore complies with joint recommendations regarding the publication standards of companies involved in exploration, development and mineral mining. When calculating mineral resources and ore reserves in Laiva, Nordic Mines has collaborated with Malcolm Titley, CSA Global. He has classified the mineral resources in accordance with the international standards NI 43-101 and the JORC Code (Australasian Joint Ore Reserves Committee). The publication standard NI 43-101, developed by CIM (Canadian Institute for Mining, Metallurgy and Petroleum), is an internationally accepted standard that is approved by both SveMin and FinnMin (Association of the Finnish Extractive Resources Industry).   In 2009 (February–March), an ore calculation was done in accordance with NI 43-101. After that, ore calculations were carried out in accordance with the JORC Code.

SHARE INFORMATION The share capital of Nordic Mines amounted to SEK 34,921,647 on 31 December 2011, divided between 34,921,647 shares with a quota value of SEK 1 each. The number of shareholders on 31 December 2011 stood at approximately 6,395. The largest shareholder was Ignis Investment Services, with 3,541,142 shares and 10.1 percent of the votes.   The closing price for Nordic Mines shares was SEK 64.75 (SEK 44.80) on 30 December 2011. This was equivalent to an overall market capitalization of approximately SEK 2,261 million (SEK 1,565 million). Over the course of the year, the share’s lowest price was SEK 42.10 on 5 August and its highest price was SEK 75.00 on 8 March. Since 2 January 2012, Nordic Mines shares have been traded on the Nasdaq OMX Nordic Exchange’s Mid Cap list under the prefix NOMI. In 2010, Carnegie Bank and Erik Penser Bank began monitoring Nordic Mines. Nordic Mines was already being tracked by Evli Bank and Redeye, among others.   The AGM in May 2011 decided to implement an employee stock option programme aimed at certain key individuals and consultants covering 510,000 warrants, with the associated right to subscribe for a maximum of 510,000 shares in the company. At full subscription with utilisation of the warrants, the share capital will increase by SEK 510,000, entailing a dilution of the total number of shares and votes in the company by approximately 1.5 percent. For full terms, see the notice to attend the AGM. See Note 19 for other options.   Following the end of the year, the Board of Directors decided to strengthen the company’s equity through a directed issue within the framework of that authorised by the AGM. In March 2012, a new issue of 1,750,000 shares was made, providing the company with approximately SEK 89 million before issue costs. The funds from the directed new issue are intended to strengthen Nordic Mines’ working capital and to finance continued exploration work. RELATED PARTY TRANSACTIONS No board member, senior executive or the Group’s auditors – individually or indirectly, through companies or related parties – has participated directly or indirectly in business transactions that were, or are, unusual in nature. The Group has not granted loans or given guarantees or sureties to the benefit of Board members, senior executives or the Group’s auditor. SIGNIFICANT RISKS AND UNCERTAINTIES All enterprise is associated with a certain degree of risk. Nordic Mines’ operations must be assessed against a background of the risk, cost and difficulty that companies in the mining and exploration business often face. In most cases, this risk is not such that companies can insure for. In addition to this, it should be noted that Nordic Mines is in an early phase of its operational activities. Nordic Mines is a small company and is dependent on a number of key individuals.   The risk faced by mining and exploration companies is mainly associated with the outcome of the exploration itself, and the market price on the metal markets, but there is also risk associated with licensing issues related to exploration, processing and the environment. Gold prices are in U.S. dollars, the costs of the primary project in Laiva are incurred in Euros and revenues in the income statement are in Swedish kronor. The company is therefore directly dependent on the exchange rates between these currencies. Financial risk management policy The Group is exposed to a variety of financial risks. These risks consist primarily of currency risk, gold price risk, credit risk, liquidity risk and interest rate risk. The Board of Directors and the company management try to manage these risks by identifying, evaluating and, where appropriate, mitigating risk.   In future, the Board intends to continue to attempt to maintain a strong financial position. Currency risk Gold prices are in U.S. dollars, the costs of the primary project in the Laiva mine are incurred in Euros and revenues in the income state-

34 NORDIC MINES ANNUAL REPORT 2011

ment are in Swedish kronor. The company is therefore directly dependent on exchange rates between these currencies. Some currency risks are protected by the hedging programme that the company has entered into. Gold price risk The Group had no sales during 2011. Sales started January 2012 and consist essentially of a single product, doré bars, containing gold, copper and silver. A decline in the price of gold will therefore have an immediate impact on the Group’s earnings. Gold price hedging risk Nordic Mines Oy has entered into an agreement with Standard Bank Plc and UniCredit Bank AG which means that 130,860 ounces of the Company’s gold production has been sold at an average price of EUR 1,049 (USD 1,458). If the Company cannot produce the amount of gold sold, and the price of gold exceeds the agreed price, the Company must reimburse the banks for the difference. If the price of gold is less than the agreed price of gold the banks must reimburse the Company for the difference. Credit risk Excess liquidity (i.e. liquid assets that will not be invested in operations in the short-term) is, as a rule, invested in deposit accounts in reputable banks or in short-term debt instruments without any significant credit risk. Liquidity risk The Group is currently in the start-up phase and, as such, it must continue making major investments. At the moment, internally generated income alone does not provide sufficient funding for such investment. The company’s growth therefore still requires external financing. Interest risks The interest on the loan facility of EUR 53 million affects the Group’s profit/loss and cash flow. The term of the loan is five years, with a variable interest rate. To limit interest rate risk, an interest rate swap has been entered into with Standard Bank Plc and UniCredit Bank AG for half of the loan with a fixed annual interest rate of 2.39 percent and a flexible component of 3 months Euribor. Major lease agreements will be dealt with in the same way. Other risk In addition to these risks, the more general risks faced by just about all companies involved in business must be taken into account, such as economic trends, competitors, technology and market development, suppliers, customers, acquisitions, qualified personnel, legislation and regulation, intellectual property rights and stock market risk. Other risks and uncertainties of which Nordic Mines is not currently aware, or that are not deemed significant, may also develop into factors that may affect the future of Nordic Mines.

SIGNIFICANT EVENTS AFTER THE END OF THE REPORTING PERIOD As from 2 January 2012, Nordic Mines’ shares are being traded on the Stockholm Stock Exchange’s Mid Cap list.   At the start of 2012, production of gold gradually increased and deliveries of doré to refineries started.   In the first quarter of 2012, EUR 9.3 million of the project buffer of EUR 10 million has been utilised.   The Board of Directors decided to strengthen the Company’s equity through a directed issue within the framework of that authorized previously by the AGM. This authorization covers a maximum of 1,750,000 shares, corresponding to a maximum 5 percent dilution. FUTURE PROSPECTS The start of doré production has taken longer than the Company had hoped which was reported in previous interim reports. The facility is in complete operation and the production of doré gold is underway. The focus now is to continue fine tuning to achieve full capacity in 2012.   Nordic Mines will then have achieved its first major goal. The next step will be to continue to develop the Company’s operations with a view to future expansion. This will be achieved by continued exploration – in Laiva and its immediate area, and in the Company’s other exploration areas.   The goal is not just to become one of the leading gold producers in Europe. It is also to be the leader in environmentally friendly extraction. Because of this, environmental considerations have characterised every stage of the process, from the initial plans for the mine in Laiva to their implementation. PROPOSED APPROPRIATION OF PROFITS IN THE PARENT COMPANY The following funds are at the disposal of the Annual General Meeting (SEK): Share premium reserve Loss brought forward Net profit/loss for the year Total 

523,982,304 -24,642,093 1,720,607 501,060,818

The Board of Directors proposes that the balance of SEK 501,060,818 be carried forward.   The earnings and general financial position of the Group and Parent Company are shown in the following income statements, balance sheets and cash flow statements with supplementary disclosures. ANNUAL GENERAL MEETING The Annual General Meeting will be held on Wednesday 23 May 2012 at 3 pm at Restaurang Flustret, Uppsala.

NORDIC MINES ANNUAL REPORT 2011 35

The Group’s statement of comprehensive income/ The Parent Company’s income statement

Group

Parent Company

Amounts in SEK thousand

Note

2011

2010

2011

2010

Administrative expenses Other operating expenses Operating profit/loss

1, 2, 3 4

-15,063 -2,538 -17,601

-11,254 -14,722 -25,976

-10,707 -2,404 -13,111

-11,293 -14,685 -25,978

5 6

412 -16,146 -33,335 8,326 -25,009

817 -582 -25,741 21,525 -4,216

17,931 -2,423 2,397 -676 1,721

781 -506 -25,703 21,507 -4,196

-157,331 -581 -157,912 -182,921

– -686 -686 -4,902

-25,009 -25,009

-4,216 -4,216

-182,921 -182,921

-4,902 -4,902

34,922 35,108 -0.72 -0.71 -5.24 -5.21

32,064 32,088 -0.15 -0.15 -0.15 -0.15

34,922 35,108 0.05 0.05

32,064 32,088 -0.13 -0.13

Financial income Financial expenses Profit/loss after financial items Income tax Net profit/loss for the year Other comprehensive income Cash flow hedges Exchange rate differences Total other comprehensive income for the year Total comprehensive income for the year Net profit (loss) for the period related to: the Parent Company’s shareholders

Total comprehensive income for the period related to: the Parent Company’s shareholders

Average number of shares before dilution, in thousands Average number of shares after dilution, in thousands Earnings per share before dilution Earnings per share after dilution Total earnings per share before dilution Total earnings per share after dilution

36 NORDIC MINES ANNUAL REPORT 2011

7

19 19

Balance sheets

Group Amounts in SEK thousand ASSETS Non-current assets Intangible assets Capitalised expenditure for exploration and evaluation assets Property, plant and equipment Buildings and land Deposit Machinery and equipment Construction in progress (CIP)

Financial assets Other receivables Receivables from Group companies Deferred tax assets Participations in Group companies

Note 31.12.2011 31.12.2010 31.12.2011 31.12.2010

8

60,596

177,431

60,416

177,431

9 10 11 12

25,624 140,000 26,885 797,398 989,907

25,681

25,624

25,681

2,156 308,520 336,357

1,584

1,910

27,208

27,591

13

15,208

8,090

7 14

80,838

21,525

96,046 1,146,549

29,615 543,403

466,345 24,105 200 490,650 578,274

21,507 200 21,707 226,729

Total non-current assets Current assets Inventories and construction in progress Current receivables Receivables from Group companies Other receivables Prepaid expenses and accrued income

Cash and cash equivalents Total current assets TOTAL ASSETS

Parent Company

15

54,093

16 17

20,517 8,977 29,494

6,635 7,323 13,958

1,642 224 1,866

317,435 641 503 318,579

18

11,379 94,966 1,241,515

48,803 62,761 606,164

3,676 5,542 583,816

35,416 353,995 580,724

NORDIC MINES ANNUAL REPORT 2011 37

Balance sheets

Group Amounts in SEK thousand

Note 31.12.2011 31.12.2010 31.12.2011 31.12.2010

EQUITY AND LIABILITIES Equity Share capital Other contributed capital Accumulated profit or loss Equity attributable to parent company’s shareholders Restricted equity Share capital Statutory reserve

Parent Company

34,922 549,983 -207,649

34,922 549,983 -25,506

377,256

559,399

19

Non-restricted equity Share premium reserve Accumulated profit or loss Net profit/loss for the year Equity

Non-current liabilities Borrowings Derivative instruments

Current liabilities Accounts payable Borrowings Derivative instruments Other liabilities Accrued expenses and prepaid income

18, 20 18, 20

18, 20 18, 20 21

TOTAL EQUITY AND LIABILITIES

362,342 133,996 496,338

75,202 207,147 74,390 1,304 9,878 367,921 1,241,515

34,922 26,000 60,922

34,922 26,000 60,922

523,982 -24,642 1,721 501,061 561,983

523,982 -20,448 -4,196 499,338 560,260

10,074 10,074

16,754 15,363

7,809

1,761 15,000

633 14,015 46,765 606,164

354 3,596 11,759 583,816

550 3,153 20,464 580,724

Pledged assets

22

21,268

Contingent liabilities

23

76

38 NORDIC MINES ANNUAL REPORT 2011

76

The Group’s statement of changes in equity Share capital

Other contributed capital

Accumulated profit or loss

Total equity

23,271

247,447

-20,618

250,100

-4,902 14 -4,888

-4,902 14 -4,888

11,561

321,254 -18,718 302,536



332,905 -18,718 314,187

Total equity as of 31 December 2010

34,922

549,983

-25,506

559,399

Opening balance, 1 January 2011

34,922

549,983

-25,506

559,399

549,983

-182,921 778 -182,143 -207,649

-182,921 778 -182,143 377,256

Amounts in SEK thousand Opening balance, 1 January 2010 Comprehensive income Net profit/loss for the year Exchange differences Total comprehensive income for the year Transactions with shareholders New issue Issue costs Total transactions with shareholders

11,651

Comprehensive income Net profit/loss for the year Exchange differences Total comprehensive income for the year Total equity as of 31 December 2011

34,922

Change in equity, Parent Company Share capital

Statutory reserve

Share premium reserve

Accumulated profit or loss

Net income

Opening balance, 1 January 2010

23,271

26,000

221,446

-8,803

-11,659

New issue Issue costs Appropriation in accordance with AGM decision Translation difference Net profit/loss for the year Closing balance, 31 December 2010

11,651

-11,659 14

11,659

34,922

26,000

523,982

-20,448

-4,196 -4,196

Opening balance, 1 January 2011

34,922

26,000

523,982

-20,448

-4,196

-4,196 2

4,196

Amounts in SEK thousand

Appropriation in accordance with AGM decision Translation difference Net profit/loss for the year Closing balance, 31 December 2011

34,922

321,254 -18,718

26,000

523,982

-24,642

1,721 1,721

NORDIC MINES ANNUAL REPORT 2011 39

Cash flow statement Group Amounts in SEK thousand Operating activities Profit/loss before financial items Adjustments for items not included in cash flow: Interest received Interest paid Cash flow from operating activities before changes in working capital

Note

24

Cash flow from changes in working capital Changes in inventories and construction in progress Change in current receivables Change in accounts payable Change in current liabilities Cash flow from operating activities Investing activities Acquisition of intangible assets Acquisition of property, plant and equipment Acquisition of financial assets Cash flow from investing activities Financing activities New issue New loans Loan amortisation Cash flow from financing activities Year’s change in cash equivalents and current investments Cash equivalents and current investments at the beginning of the period Cash equivalents and current investments at the end of the period

40 NORDIC MINES ANNUAL REPORT 2011

8 9,10,11,12 13

Parent Company

2011

2010

2011

2010

-17,601 6,251 412 -16,146

-25,976 1,170 817 -582

-13,111 -2,563 17,931 -2,423

-25,978 1,365 781 -506

-27,084

-24,571

-166

-24,338

-54,093 -22,069 58,448 -8,830 -53,628

– 83,033 4,183 13,798 76,443

– -214 6,049 -14,754 -9,085

– -221,576 -10,810 3,013 -253,711

-23,254 -493,717 -7,120 -524,091

-20,214 -309,369 -8,090 -337,673

-23,074 -238 582 -22,730

-20,214 -853 – -21,067

– 540,295 – 540,295

314,200 – -14,727 299,473

– 75 – 75

314,200 – -14,363 299,837

-37,424

38,243

-31,740

25,059

48,803

10,560

35,416

10,357

11,379

48,803

3,676

35,416

Accounting principles GENERAL INFORMATION Nordic Mines AB (publ) (the Parent Company) and its subsidiary companies (jointly the Group) is a Nordic mining and exploration company. The Parent Company is a registered limited liability company with its registered office in Uppsala. The address of the head office is Trädgårdsgatan 11, 753 09 Uppsala, Sweden. Since 2 January 2012, its shares have been listed on the Nasdaq OMX Nordic Exchange Stockholm, Mid Cap list.   Unless otherwise stated, all amounts are in SEK thousands. Figures in brackets refer to the previous year.   A summary of the significant accounting principles is presented below. BASIS FOR PREPARATION OF THE REPORTS The consolidated financial statements for the Nordic Mines AB Group have been prepared in accordance with the Annual Accounts Act, RFR 1 Supplementary Accounting Rules for Group Accounts and the International Financial Reporting Standards (IFRS) as adopted by the EU. They have been prepared in accordance with the cost method, with the exception of revaluations of financial assets and liabilities (including derivative instruments) measured at fair value via the income statement.   The preparation of financial statements in accordance with IFRS requires the use of several key account-related estimates. Furthermore, the management is required to make certain assessments in the application of the company’s accounting principles. Areas that require a more in-depth assessment, that are complex or other areas where the assumptions and estimates are of significant importance for financial reporting purposes, are reported in the section Important estimates and assessments for accounting purposes below. CHANGES IN ACCOUNTING PRINCIPLES AND DISCLOSURES New and revised standards applied by the Group None of the IFRS or IFRIC interpretations that are mandatory for the first time for the financial year commencing 1 January 2011 have had any significant impact on the Group. New standards, changes and interpretations of existing standards that have not yet entered into force and have not been applied early by the Group IAS 19

Employee benefits (Amendment)

1 January 2013

IFRS 9

Financial instruments

1 January 2015

IFRS 10

Consolidated financial instruments

1 January 2013

IFRS 12

Disclosure of interest in other entities

1 January 2013

Fair value measurement

1 January 2013

IFRS 13

The Group intends to apply the above new standards from the relevant date of entry into force, but has not yet evaluated the full effect on the financial reports.   None of the other IFRS or IFRIC interpretations that have not yet entered into effect are expected to have any significant impact on the Group. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements are prepared in accordance with the purchase method, which means that the subsidiary companies’ equity at the time of acquisition, established as the difference between the actual values of the assets and liabilities, is eliminated in its entirety. In this way, the consolidated financial statements only include that part of the subsidiary companies’ equity that has been added since the acquisition.   Subsidiary companies are all those companies where the Group is

entitled to formulate financial and operational strategies in a way that normally requires a shareholding amounting to more than half of the voting rights. The existence and effect of potential voting rights, which may currently be utilised or converted, are considered when assessing the extent of the Group’s controlling interest in another company. Subsidiaries are included in the consolidated financial statements as of the date when the Group obtains a controlling interest. They are excluded from the consolidated financial statements as of the date when the Group no longer has a controlling interest.   Intra-Group transactions and balance sheet items, and unrealised profits from transactions between Group companies, are eliminated. Unrealised losses are also eliminated unless the transaction constitutes evidence of a write-down requirement (impairment) for the transferred asset. In certain instances, the accounting principles for subsidiaries have been revised in order to guarantee consistent application of the Group’s accounting principles. FOREIGN CURRENCY TRANSLATION Functional currency and reporting currency Items that are included in the financial statements for the various units belonging to the Group are measured in the currency that is used in the economic environment where the company primarily has its operations (functional currency). The consolidated financial statements are reported in SEK, which is the Parent Company’s functional currency and reporting currency. Transactions and balance sheet items Transactions in foreign currency are translated to the functional currency using the exchange rate that is in effect on the transaction date. Exchange gains and losses that arise when such transactions are paid and when translating monetary assets and liabilities in a foreign currency at the rate on the balance sheet date, are reported in the income statement. Exceptions to this are when the transactions constitute hedges that satisfy the conditions for hedge reporting of the cash flows or of net investments, when profits/ losses are reported in other comprehensive income. Exchange differences that arise when translating financial assets and liabilities are reported in the income statement under financial items. However, other exchange differences are reported as other operating income and other operating expenses, respectively. Group Companies Profit (loss) and financial position for all Group companies that have a different functional currency than the reporting currency, are translated to the Group’s reporting currency as follows: a)

assets and liabilities for each balance sheet are translated at the rate on the balance sheet date;

b)

income and expenses for each of the income statements are translated at the average exchange rate (provided this average rate constitutes a reasonable approximation of the accumulated effect of the exchange rates that apply on the transaction date, otherwise income and expenses are translated to the rate on the transaction date), and all exchange rate differences that arise are reported in other comprehensive income.

c)

CASH FLOW STATEMENT The cash flow statement has been prepared in accordance with the indirect method. The reported cash flow only comprises transactions that result in cash payments. SEGMENT REPORTING A business segment is a group of assets and operations that provide products or services, and which is subjected to risks and opportunities that differ from the other business segments. Geographic regions provide products or services within an economic environNORDIC MINES ANNUAL REPORT 2011 41

ment that is exposed to risks and opportunities that differ from those that other economic environments are exposed to. At present, gold sales have not yet commenced within any of the geographic areas. For this reason, segment information is not yet provided. REVENUE RECOGNITION Sales of gold and other minerals are recognised as revenue as soon as there is a binding purchase agreement and delivery to the customer has taken place. Sales are reported gross of the salesrelated taxes. Any income for activities that are not part of ordinary operations is reported as other operating income.   At present, the company does not conduct any production and as such does not have any sales. INTANGIBLE ASSETS Capitalised expenditure for exploration and evaluation assets Mining claims and capitalised exploration expenditure are reported in accordance with IFRS 6 Exploration for and Evaluation of Mineral Resources. Mining claims and capitalised exploration expenditure are valued at cost and pertain to all expenditure directly related to the exploration and evaluation of mineral resources. Capitalised exploration and evaluation assets include expenditure for exploration, test drilling, underground mining, laboratory analyses, enrichment experiments, geological studies and restoration costs. When it can be proven that it is technically possible and commercially feasible to extract a mineral resource, the capitalised development expenditure will no longer be classified as exploration and evaluation assets. The assets will be reclassified and reported in accordance with IAS 16 Property, Plant and Equipment or IAS 38 Intangible Assets, depending on how the assets have been reclassified.   Exploration and evaluation assets are tested for impairment and any such write-downs are reported before such reclassification takes place.   In accordance with IFRS 6, impairment testing of exploration and evaluation assets takes place when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount. When facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount, evaluation and classification are performed and disclosures are provided in accordance with IAS 36 Impairment of Assets. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are reported at their acquisition cost less accumulated depreciation and impairment losses. The acquisition cost includes expenditure that is directly related to the acquisition of the asset. Borrowing costs attributable to financing the development or completion of significant items of property, plant and equipment are included in the cost of acquisition. Preparation costs are comprised in part of rock quarrying in order to access the ore and in part of work pertaining to roads, drift mining, shafts, crosscut mining, etc. Preparation costs that have a useful life in excess of 3 years are capitalized. Additional expenditure is added to the asset’s carrying amount or reported as a separate asset, depending on which is most appropriate, only to the extent that it is likely that the future economic rewards associated with the asset will flow to the Group and when it is possible reliably to measure the asset’s cost of acquisition. All other types of repairs and maintenance are reported as costs in the income statement in the period that they arise. Depreciation and impairment principles for property, plant and equipment Land is not depreciated. Depreciation of other assets, in order to adjust the cost of acquisition or the revalued amount down to the estimated residual value during the estimated useful life, is made as follows: • Capitalised preparations, facilities and equipment in mines are depreciated at the rate that the extracted ore from the underlying mines is utilized, i.e. production-based depreciation. • Permanent buildings in the business are depreciated on a straight-line basis over 20 years. However, the depreciation period may not exceed the mine’s useful life. • Structural engineering devices (e.g. air and heating installations, elevators, etc.) that are worn out more quickly are depre42 NORDIC MINES ANNUAL REPORT 2011

• • •

ciated on a straight-line basis over a 10-year period. Production machinery and similar equipment are depreciated on a straight-line basis over a 10-year period. Pumps and other such items exposed to a great deal of wear and tear are depreciated on a straight-line basis over a 3-year period (at most). Cars and other means of transport are depreciated on a straight-line basis over a 5-year period (at most).

The Group applies the component depreciation method, which means that large process facilities are divided into components that have different useful lives and thus different depreciation periods.   The useful life of a mine is calculated by summing up the ore assets at a site that contains ore reserves and then dividing that figure by the average estimated annual production plan. 100% of the portion that contains ore reserves is included in the calculations, whereas the rest of the mineral resources are included at a probable value that is based on a qualified assessment and prior experience. The production plans for the useful life of mines are prepared annually.   Residual values and estimated useful lives of assets are assessed on every balance sheet date and adjusted as necessary. An asset’s carrying amount is immediately written down to its recoverable amount if the asset’s carrying amount exceeds its assessed recoverable amount.   Profit or loss arising in conjunction with disposal of an asset is established on the basis of a comparison between the proceeds of the sale and the asset’s carrying amount. This is reported in the income statement as Other profits/losses. Leasing Non-current assets that are utilised via leasing are classified in accordance with the financial significance of the leasing agreement. Leasing objects that are utilised via financial leasing are presented as non-current assets and future leasing fees are presented as interest-bearing liabilities in the consolidated financial statements. For leasing objects that are classified as operational leasing, the leasing cost is presented as an operating cost in the income statement. Leasing of non-current assets, where the Group retains substantially all of the financial risks and rewards associated with ownership, are classified as financial leasing agreements. Financial leasing is reported at the start of the leasing period at the actual value of the leasing object or the current value of the leasing fees, whichever is the lower. Other leasing agreements are classified as operational leasing agreements. Payments that are made during the leasing period are charged to costs in the income statement on a straight-line basis over the leasing period. In the parent company, all leasing agreements are reported as operational. FINANCIAL ASSETS AND LIABILITIES The company’s financial assets and liabilities are divided into the following categories and balance sheet items: • Financial assets at fair value via the income statement; Other long-term securities • Loan receivables and accounts receivable; Accounts receivable • Other financial liabilities; Other non-current liabilities, accounts payable. Financial assets are referred to the various categories in the initial accounts, depending on the properties and purpose of the instrument. Financial assets are initially presented at their acquisition cost, which corresponds to the fair value of the instrument with the addition of transaction costs, for all financial instrument assets apart from financial assets that are reported at fair value via the income statement. These are reported at fair value excluding transaction costs. Subsequent reporting takes place depending on how they have been classified according to IAS 39.   A financial asset is included in the balance sheet when the company becomes a party to the instrument’s contractual terms. Accounts receivable are included in the balance sheet when the invoice has been sent out. A financial asset is removed from the balance sheet when the rights in the agreement are realised, fall due

or when the company loses control of them.   Acquisitions and divestments of financial assets are reported on the day of the transaction. In those cases where the company acquires or sells listed securities, settlement date reporting is applied. The fair value of listed financial assets, i.e. share and interest funds, corresponds to the stock market price on the balance sheet date. On each reporting occasion, an evaluation is performed as to whether there are any objective indications that a financial asset or group of financial assets needs to be written down.   A financial liability is included in the balance sheet when the company becomes a party to the instrument’s contractual terms. Liabilities are included when the other party has performed its duties and there is a contractual obligation to pay, even if no invoice has been received. Accounts receivable are included in the balance sheet when the invoice has been received. A financial liability is removed from the balance sheet when the obligation in the agreement is fulfilled or otherwise ceases.   Financial liabilities are classified as other financial liabilities, which mean that they are initially reported at the received amount after deductions for transaction costs. After the time of acquisition, liabilities to credit institutions are valued at the amortised cost in accordance with the effective interest method. Non-current liabilities have an anticipated remaining term of longer than one year, whereas current liabilities have a remaining term of less than one year. Derivative instruments and hedging measures Derivative instruments are reported in the balance sheet on the contract date and are measured at fair value, both initially and at subsequent revaluations. The method for reporting the profit or loss that arises during the revaluation is dependent on whether the derivative has been identified as a hedging instrument and, if so, the nature of the item that has been hedged. The Group identifies certain derivatives as either: a)

hedging of fair value in respect of a reported asset or liability or a binding undertaking (fair value hedging),

b)

hedging a particular risk that is linked to a reported asset or liability or a very probable forecast transaction (cash flow hedging), or

c)

hedging a net investment in a foreign operation (hedging net investment).

When the transaction is entered into, the Group documents the relationship between the hedging instrument and the hedged item, as well as the Group’s objective for the risk management and the risk management strategy in respect of the hedge. The Group also documents its assessment, both when the hedge is entered into and continually, of whether the derivative instruments that are used in hedging transactions are effective when it comes to mitigating changes in fair value or the cash flows attributable to the hedged items.   Disclosures about the fair value of various derivative instruments that are used for hedging purposes can be found in Note 19. Changes in the hedge reserve in equity are contained in Note 19. The entire fair value of a derivative that constitutes a hedging instrument is classified as a non-current asset or long-term liability when the remaining term of the hedged item is longer than 12 months, and as a current asset or current liability when the remaining term of the hedged item is less than 12 months. Derivative instruments that are held for trade are always classified as current assets or current liabilities. (a) Hedging of fair value Changes in the fair value of a derivative that has been formally identified for hedging of fair value, and that satisfies the conditions for hedge reporting, are reported in the income statement together with changes in fair value, attributable to the hedged risk, of the hedged asset or liability. The Group only applies hedging of fair value in respect of borrowing with a fixed interest rate. The profit or loss that pertains to the effective part of an interest rate swap, which hedges borrowing with a fixed interest rate, is reported in the entry Financial expenses in the income statement. The profit or loss that pertains to the ineffective

part is reported in the income statement entry Other profits/losses – net. Changes in fair value in respect of hedged borrowing with a fixed interest rate that are attributable to the hedged interest risk, are reported in the income statement as Financial expenses.   If a hedge no longer satisfies the criteria for hedge reporting, the adjustment of the reported value for a hedged item, for which the effective interest method is used, will be accrued in the income statement over the remaining term. (b) Cash flow hedging The effective part of changes in fair value of a derivative instrument that is identified as cash flow hedging and that satisfies the conditions for hedge reporting, is reported in other comprehensive income. The profit or loss that pertains to the ineffective part is reported immediately in the income statement in the entry Other profits/losses – net.   Accumulated amounts in equity are reversed to the income statement in those periods when the hedged item affects the results (e.g. when the forecast sales that are hedged take place). The profit or loss that pertains to the effective part of an interest rate swap that hedges borrowing with a variable interest rate, is reported in the entry Financial expenses in the income statement. The profit or loss that pertains to the ineffective part is reported in the income statement entry Other profits/losses – net. If a hedge of a forecast transaction subsequently leads to the reporting of a non-financial asset (e.g. inventories or fixed assets), the profits and losses that have previously been reported in equity are transferred from equity and included in the initial acquisition cost for the asset. These amounts charged to assets will subsequently be reported in Costs for goods sold when it comes to inventories or in Depreciation when it comes to fixed assets.   When a hedging instrument falls due or is sold, or when the hedge no longer satisfies the criteria for hedge reporting and accumulated profits or losses in respect of hedging are present in equity, these profits/losses remain in equity and are charged to profit at the same time as the forecast transaction is finally reported in the income statement. When a forecast transaction is no longer expected to take place, the accumulated profit or loss that has been reported in equity is immediately transferred to the income statement entry Other profits/losses – net. (c) Hedging net investment Hedges of net investments in foreign operations are reported in a similar way to cash flow hedges.   The share of profit or loss in a hedging instrument that is assessed as an effective hedge is reported in other comprehensive income. The profit or loss that is attributable to the ineffective part is reported in the income statement. Accumulated profits or losses in equity are reported in the income statement when the foreign operation is sold, wholly or in part. Inventories Inventories are reported at the acquisition cost or the net sales value, whichever is the lower. The acquisition cost is established using the first in, first out method (FIFO). The acquisition cost for finished goods and construction in progress comprises design costs, raw materials, direct salaries, other direct costs and attributable indirect manufacturing costs (based on normal manufacturing capacity). Loan costs are not included. The net sales value is the estimated sales price in operating activities, less applicable variable sales costs. Costs for inventories include transfers from equity of any profits/losses from cash flow hedges that satisfy the conditions for hedge reporting, attributable to the purchase of raw materials. Accounts payable Accounts payable are obligations to pay for goods or services that have been acquired from suppliers as part of operating activities. Accounts payable are classified as current liabilities if they fall due within one year or less (or during the normal business cycle, if it is longer). Otherwise, they are classified as non-current liabilities.   Accounts payable are initially reported at fair value. After that, they are carried at amortised cost and the effective interest method is applied. NORDIC MINES ANNUAL REPORT 2011 43

Borrowings Borrowings are initially carried at fair value, less transaction costs. Afterwards, they are reported at amortised cost and any difference between the amount obtained (less transaction costs) and the amount to be repaid is reported in the income statement, distributed over the loan period, and having applied the effective interest method.   Fees that are paid for loan commitments are reported as transaction costs for borrowings to the extent that it is likely that a portion of, or the entire credit margin, will be utilised. In such instances, the fees are recognised when the credit margin is utilised. When there is no evidence that it is likely that a portion (or all) of the credit margin will be utilised, the fee is recognised as a prepayment for financial services and it is distributed over the term of that loan commitment.   Overdraft facilities are recognised as borrowing among Current liabilities in the balance sheet. Borrowing costs General and special borrowing costs that are directly attributable to purchasing, construction or production of qualifying assets, which are assets that necessarily take a significant amount of time to complete for their intended use or sale, are recognised as a part of these assets’ acquisition cost. Capitalisation ceases when all activities that are required to complete the asset for its intended use or sale have primarily been completed.   Financial income that has arisen when special borrowed capital has been temporarily invested pending being used to finance the asset, reduces the borrowing costs that can be capitalised. All other borrowing costs are charged to costs when they arise. INCOME TAX Reported income taxes include tax to be paid or received for the current year, adjustments regarding the relevant tax in previous years as well as changes in deferred tax.   All tax liabilities are valued at nominal amounts and in accordance with the tax regulations and tax rates that have been adopted, or that have been announced and in all likelihood will be adopted.   In accordance with the balance sheet method, deferred tax is reported in its entirety for all temporary differences that arise between the tax base and the carrying amount of assets and liabilities in the consolidated financial statements. If deferred tax arises from a transaction associated with the initial recognition of an asset or liability that is not a business combination and which, at the time of the transaction, has no effect on either reported profit or taxable profit, it is not recognised. Deferred tax is calculated using the tax rates (and legislation) that have been decided or announced as of the balance sheet date and that are expected to apply when the deferred tax asset concerned is realised or when the deferred tax liability is settled.   Deferred tax assets are recognised to the extent it is probable that the temporary differences can be used against future taxable surpluses.   Deferred tax is calculated on temporary differences that arise on participations in subsidiaries and associated companies, except when the Group is able to control the timing for reversal of the temporary differences and when it is likely that the temporary differences will not be reversed in the foreseeable future. EMPLOYEE BENEFITS Pensions Nordic Mines does not have any defined benefit pension plans. All of its pension solutions are defined contribution plans. A defined contribution pension plan requires the Group to pay fixed fees to a separate legal entity. The Group does not have any legal or informal obligations to pay additional fees if that legal entity does not have sufficient assets to pay all remuneration to employees that is associated with service performed by employees during the current year or previous periods. For defined contribution pension plans, the Group pays fees to public or privately administered pension plans on an obligatory, contractual or voluntary basis. The Group does not have any further payment obligations once the fees have been paid. The fees are reported as personnel expenses when payment is due. Prepaid fees are reported as an asset to the extent that the Group can expect cash repayment or a decrease in future payments. 44 NORDIC MINES ANNUAL REPORT 2011

Termination benefits Termination benefits are paid if an employee’s employment is terminated before the ordinary retirement date or when an employee agrees to voluntary termination in exchange for such benefits. The Group reports severance pay when it is demonstrably committed to either 1) terminating the employment in accordance with a detailed formal plan and the decision may not be revoked, or 2) providing termination benefits in conjunction with an offer that has been made to encourage voluntary resignation. Benefits that fall due more than 12 months after the balance sheet date are discounted to present value. Share-based remuneration The Group has a number of share-based remuneration plans, where regulation is performed with shares and where the company receives services from employees as payment for the Group’s equity instruments (options). The fair value of the service that entitles employees to an allocation of options is charged to costs. The total amount charged to costs is based on the fair value of the allocated options: • including all market-related terms (e.g. share target price), • excluding any effect from employment terms and non marketrelated terms for earnings (e.g. profitability, targets for sales increases and the fact that the employee remains in the employment of the company for a specified period of time), and • including the effect of terms that do not constitute terms in relation to earnings (e.g. demands that employees must save). It may occasionally be the case that employees perform services before the allocation date, and in such cases an estimate is made of the fair value, in order that a cost can be reported distributed over the period from the time when the employee starts performing services until the allocation date. At the end of each reporting period, the Group reassesses its assessments of how many shares are expected to be earned based on the non market-related earnings terms. Any deviation in relation to the original assessments to which the reassessment gives rise, is reported in the income statement and corresponding adjustments are made in equity.   When the options are utilised, the company issues new shares. Received payments, after deductions for any directly attributable transaction costs, are credited to the share capital (quota value) and other contributed capital.   The social security contributions that arise at the allocation of share options are viewed as an integral part of the allocation, and the cost is treated as a cash-regulated share-based payment. PROVISIONS Provisions for environmental restoration, restructuring costs and legal requirements are reported when the Group has a legal or informal obligation as a result of past events and when settlement is expected to result in an outflow of resources and when the amount has been estimated reliably. No provisions are made for future operating losses.   The provisions are measured at the present value of the amount that is expected to be required in order to settle the obligation. A pre-tax discount rate is used that reflects a current market assessment of the time-dependent value of money and the risks associated with the provision. Any increase in the provision that is based on the passage of time is reported as an interest expense.   If a number of similar obligations exist, the likelihood that settlement will result in a future outflow of resources is assessed for the entire group of obligations as a whole. A provision is reported even if the likelihood of an outflow related to one specific item in that group of obligations is low.   Nordic Mines still does not report any provision related to restoration since compensation is provided to the land owners on an ongoing basis. CASH AND CASH EQUIVALENTS Cash and cash equivalents includes cash, bank deposits and other short-term investments that fall due within three months of the acquisition date.

SHARE CAPITAL Common stock is classified as equity. Transaction costs that are directly attributable to the issue of new shares or options are reported (net after tax) to equity as a deduction from the issue proceeds. CALCULATION OF FAIR VALUE The nominal value, less any assessed credits, of accounts receivable and accounts payable is assumed to be equivalent to their fair value, since these items are short-term in nature. The fair value of financial liabilities is calculated, for disclosure in a note, by discounting the future contracted cash flow at the current market interest rate that is available to the Group for similar financial instruments. SIGNIFICANT RISKS AND UNCERTAINTIES All enterprise is associated with a certain degree of risk. Nordic Mines’ operations must be assessed against a background of the risk, cost and difficulty that companies in the mining and exploration business often face. In most cases, this risk is not such that companies can insure for. In addition to this, it should be noted that Nordic Mines is in an early phase of its operational activities. Nordic Mines is a small company and is dependent on a number of key individuals.   The risk faced by mining and exploration companies is mainly associated with the outcome of the exploration itself, and the market price on the metal markets, but there is also risk associated with licensing issues related to exploration, processing and the environment. Gold prices are in U.S. dollars, the costs of the primary project in Laiva are incurred in Euros and revenues in the income statement are in Swedish kronor. The company is therefore directly dependent on the exchange rates between these currencies. Financial risk management policy The Group is exposed to a variety of financial risks. These risks consist primarily of currency risk, gold price risk, credit risk, liquidity risk and interest rate risk. The Board of Directors and the company management try to manage these risks by identifying, evaluating and, where appropriate, mitigating risk.   In future, the Board intends to continue to attempt to maintain a strong financial position. Currency risk Gold prices are in U.S. dollars, the costs of the primary project in the Laiva mine are incurred in Euros and revenues in the income statement are in Swedish kronor. The company is therefore directly dependent on exchange rates between these currencies. Some currency risks are protected by the hedging programme that the company has entered into. Gold price risk The Group had no sales during 2011. Sales started in January 2012 and consist essentially of a single product, doré bars, containing gold, copper and silver. A decline in the price of gold will therefore have an immediate impact on the Group’s earnings. Gold price hedging risk Nordic Mines Oy has entered into an agreement with Standard Bank Plc and UniCredit Bank AG which means that 134,280 ounces of the Company’s gold production has been sold at an average price of EUR 1,049 (USD 1,458). If the Company cannot produce the amount of gold sold, and the price of gold exceeds the agreed price, the Company must reimburse the banks for the difference. If the price of gold is less than the agreed price of gold the banks must reimburse the Company for the difference. Credit risk Excess liquidity (i.e. liquid assets that will not be invested in operations in the short-term) is, as a rule, invested in deposit accounts in reputable banks or in short-term debt instruments without any significant credit risk. Liquidity risk The Group is currently in the start-up phase and, as such, it must continue making investments. At the moment, internally generated

income alone does not provide sufficient funding for such investments. The company’s growth therefore still requires external financing. Interest risks The interest on the loan facility of EUR 53 million affects the Group’s profit/loss and cash flow. The term of the loan is five years, with a variable interest rate. To limit interest rate risk, an interest rate swap has been entered into with Standard Bank Plc and UniCredit Bank AG for half of the loan with a fixed annual interest rate of 2.39 percent and a flexible component of 3 months Euribor. Major lease agreements will be dealt with in the same way. Other risk In addition to these risks, the more general risks faced by just about all companies involved in business must be taken into account, such as economic trends, competitors, technology and market development, suppliers, customers, acquisitions, qualified personnel, legislation and regulation, intellectual property rights and stock market risk. Other risks and uncertainties of which Nordic Mines is not currently aware, or that are not deemed significant, may also develop into factors that may affect the future of Nordic Mines. IMPORTANT ESTIMATIONS AND ASSESSMENTS FOR ACCOUNTING PURPOSES Preparing the financial reports in accordance with IFRS requires the company management to make assessments and estimates, as well as to make assumptions that influence the application of the accounting principles and the recognised amounts for assets, liabilities, income and expenses.   The actual result may differ from these estimates and assessments. The estimates and assumptions are reviewed regularly. Changes to estimates are reported in the period during which the changes are made if the changes have only influenced that period, or in the period during which the change is made and in future periods if the change affects both the current period and future periods.   The estimates and assumptions that entail a considerable risk of significant adjustments to carrying amounts for assets and liabilities during subsequent reporting periods are outlined below. Testing for impairment of intangible assets In accordance with IFRS 6, impairment testing of exploration and evaluation assets takes place when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount. The value may need to be written down if: 1) the conditions should change for the underlying assessments that were used to assess the value of the intangible assets; or 2) facts and circumstances should emerge that indicate a need for impairment testing in accordance with IAS 36. No such circumstances or facts have arisen that would suggest that an impairment loss would be justified. The value of the assets is dependent in part on: • Obtaining a permit to extract ore • The start of extraction activities • The sum of incurred expenses, along with the discounted value of future expenditure to extract minerals, is less than the present value of the income that is expected to be generated from the extraction of minerals. The value of the assets in the form of capitalised development expenses for mining operations is dependent on the Group obtaining a mining permit for the locations where exploration is taking place. Exploration has primarily been focused on the Laiva region in Finland and Fjälltuna in Sweden. Geochemical exploration has also taken place at several locations in Sweden and Finland. The management considers that the likelihood of obtaining mining permits is good. Restoration of land At present, no provisions have been made. The management has determined that there are no existing land restoration obligations. Provisions will be made if any land restoration obligations arise. A corresponding amount is recorded as a non-current asset by the Group and it starts being depreciated as soon as mining activities begin. NORDIC MINES ANNUAL REPORT 2011 45

Assessment of loss carry-forward Every year, the Group’s management and Board of Directors assess the potential to capitalise deferred tax receivables with regard to taxable loss carry-forwards. Deferred tax receivables are only entered in the event it has been deemed assured that these can be used against taxable surpluses. As investment decisions have been taken by the Group, it has been decided to report deferred tax receivables as a consequence of taxable deficits.

ACCOUNTING PRINCIPLES FOR THE PARENT COMPANY The Parent Company has prepared its annual report in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board’s recommendation RFR 2 Accounting for Legal Entities. RFR 2 requires the parent company, as the legal entity, to apply all of the EU approved IFRS and statements, to the extent that this is possible within the framework of the Annual Accounts Act, and taking into account the correlation between accounting and taxation. This recommendation specifies the exceptions from and additions to IFRS that may be applied. Participations in subsidiary companies are reported in accordance with the cost method.

Legal issues The Board of Directors continually assesses the risk of financial consequences of disputes. These assessments include a certain measure of estimation as regards outcome and required provisions.

Notes Unless otherwise indicated, all amounts are in SEK thousands. Note 1 Fees and remuneration to auditors The audit assignment includes the audit of the annual report, accounting records and the administration of the Board of Directors and the Managing Director, as well as other duties that the company’s auditor

is obliged to conduct and advice or other assistance resulting from observations made during the audit or performance of these other duties. Any other services provided are included in “other fees.” Group

Parent Company

2011

2010

2011

2010

565

332

366

312

PwC - Audit assignment - Auditing tasks in addition to the audit assignment

184

153

184

153

- Tax advice

212

299

184

287

961

784

734

752

Note 2 Personnel Group

Parent Company

Total 2011

of which men

Total 2010

of which men

Total 2011

of which menn

Total 2010

of which men

Sweden

9

89%

8

87%

9

89%

8

87%

Finland

43

86%

8

75%

6

52

87%

16

81%

15

87%

5

85%

88%

13

86%

Average number of employees

Group Gender distribution for senior management (incl. the MD) and Board

Parent Company

2011

2010

2011

2010

6

6

6

6

Number at the end of the reporting period Parent Company Board members of which women

1



1



Senior executives (incl. MD)

6

6

5

5

of which women









Group 2011 Salaries and other remuneration

Parent Company 2011 2010

2010 Social Salaries and security other expenses remuneration

Social Salaries and security other expenses remuneration

Social Salaries and security other expenses remuneration

Social security expenses

Salaries, other remuneration and social security expenses Sweden

4,674

(of which pension expenses) Finland (of which pension expenses) Total 46 NORDIC MINES ANNUAL REPORT 2011

2,383

4,150

(563) 15,190

3,283

19,864

(2,651) 5,666

2,365

4,674

(589) 3,355

687

7,505

(576) 3,052

2,383

4,150

(563) 2,376

585

7,050

(449) 2,968

2,365 (589)

2,767

565

6,917

(343) 2,930

Note 2 Personnel, cont. Group 2011 MD, Board and senior executives

2,562

Parent Company 2010

Other employees

MD, Board and senior executives

2,112

1,626

13,030

922

15,142

2,548

2011

Other employees

MD, Board and senior executives

1,924

2,562

2,433

697

4,357

3,259

2010

Other employees

MD, Board and senior executives

Other employees

2,112

1,626

1,924

1,679

705

3,791

2,331

Salaries and other remuneration by country and between board members, etc., and other employees Sweden (of which bonus, etc.)

(–)

Finland

2,160

(of which bonus, etc.)

(–)

(–)

Total

4,722

(–)

REMUNERATION TO SENIOR EXECUTIVES Principles A fee is paid to the Chairman of the Board and the Board of Directors in accordance with a resolution adopted at the Annual General Meeting. The company must endeavour to offer its senior executives a competitive salary and employment terms. The criteria must therefore be based on the importance of the assigned task, required skills, experience and performance. Remuneration to the Managing Director and other senior executives consists of a fixed basic salary, pension benefits and other benefits. Besides the Managing Director, senior executives are individuals who are part of the Group management team and who report directly to the Managing Director. Pension premiums are paid at an amount based on the ITP plan (supplementary pensions for salaried employees in Sweden). Pension-based salary consists of basic salary. Remuneration and other benefits during the year Annual remuneration to the Chairman of the Board and Board members who are not employees of the company is as follows: SEK 200,000 for each Board member and SEK 300,000 for the Chairman of the Board. For 2011, the Board of Directors will receive fees totalling SEK 1,300,000 (SEK 1,000,000). 2010 Lennart Schönning (Chairman) Thomas Cederborg Tord Cederlund Bengt Löfkvist Kjell Moreborg Krister Söderholm 2011 Lennart Schönning (Chairman) Thomas Cederborg Tord Cederlund Catharina Lagerstam Bengt Löfkvist Kjell Moreborg

Elected Remuneration 2009 SEK 250,000 2009 SEK 150,000 2007 SEK 150,000 2006 SEK 150,000 2005 SEK 150,000 2009 SEK 150,000 2009 2009 2007 2011 2006 2005

(–)

SEK 300,000 SEK 200,000 SEK 200,000 SEK 200,000 SEK 200,000 SEK 200,000

Six individuals are included for the item Salary and other remuneration to the Managing Director and senior executives. In 2011, the Managing Director received salary and other taxable remuneration of SEK 1,325,208 (SEK 1,011,401) in total. Benefits to the Managing Director and senior executives, with a value of SEK 118,760 (SEK 90,367) of which the Managing Director SEK 0 (0).

(–)

(–)

2,062

(–) 3,986

Pensions Of the pension expenses in Sweden, SEK 477,759 (SEK 478,454) pertains to the Group Managing Director and senior executives, of which SEK 258,881 (SEK 261,837) pertains to the Managing Director. Of the pension expenses in Finland, SEK 390,645 (SEK 163,127) pertains to the Group Managing Director and senior executives.   Pension provisions in Sweden are made in accordance with the general agreement SIF-SAF. Pension provisions in Finland are made in accordance with Finnish labour code legislation. Notice period The company must provide a 3-month period of notice when issuing notice of termination to the Managing Director, along with the option for the Managing Director to be released from all duties during the notice period. During the notice period, the Managing Director is entitled to basic salary, along with severance pay of SEK 1.2 million due to the termination of employment.   Severance pay is paid out in 2 instalments: one within 30 days of issuing the notice of termination and one within 30 days of the next closing date.   The notice of termination for other senior executives is 6 months in Sweden and Finland. Employee stock option programme The Annual General Meeting on 19 May 2011 decided to issue 510,000 warrants. Nordic Mines Optioner AB, 556751-0671, a wholly owned subsidiary of Nordic Mines AB (publ), will be entitled to subscribe, with deviation from the preferential rights of the shareholders. The subsidiary company will issue purchase options in relation to the right to acquire the warrants for certain key individuals in, and consultants engaged by, the company Nordic Mines AB (publ), filial Finland, and Nordic Mines Oy. Subscription took place on 25 May 2011. The warrants are issued with no payment. Each warrant grants the entitlement, during the period from 16 June 2014 until 14 June 2024, to subscribe for one (1) new share in the company, at a price per share amounting to the volume-weighted average call price for the company’s shares on NASDAQ OMX for a period of ten (10) trading days immediately after the 2011 AGM, although always at least at the share quota value. It must be possible to increase the share capital by a maximum of SEK 510,000 when all the warrants are used.   The exercise price is SEK 65.65.

NORDIC MINES ANNUAL REPORT 2011 47

Note 3 Administrative expenses Group

Parent Company

2011

2010

2011

2010

9,007

9,019

8,010

9,551

Employee costs

3,975

1,668

2,665

1,668

Depreciation of machinery and equipment

2,081

567

32

74

15,063

11,254

10,707

11,293

Other external costs

Note 4 Other operating expenses Group Exchange losses

Parent Company

2011

2010

2011

2010

2,538

14,722

2,404

14,685

2,538

14,722

2,404

14,685

Note 5 Financial income Group

Parent Company

2011

2010

2011

2010

412

817

205

781

412

817

17,931

2011

2010

2011

2010

13,189

227



227

220

33





Interest expenses, other loans

1,283

279

1,264

279

Other interest expenses

1,454

43

1,159



16,146

582

2,423

506

Interest income, cash equivalents Interest income, Group companies

17,726 781

Note 6 Financial expenses Group Interest expenses, bank loans Interest expenses, financial leasing

48 NORDIC MINES ANNUAL REPORT 2011

Parent Company

Note 7 Income taxes and Deferred tax Group

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

Income tax









Total tax









Origination and reversal of temporary differences

8,326

21,525

-676

21,507

Total income tax

8,326

21,525

-676

21,507

Reported profit/loss before taxes

-33,335

-25,741

2,397

-25,703

Tax according to the applicable tax rate

8,356

6,780

-630

6,760

-30

-23

-46

-16



4,792



4,792

Current tax

Deferred tax

Tax effects of: Non-deductible expenses Issue costs Utilisation of loss carry-forwards not previously reported Total income tax



9,976



9,971

8,326

21,525

-676

-21,507

The applicable tax rate for the Parent company and its Swedish subsidiaries is 26.3%. For the Finnish subsidiaries it is 24.5%. Tax receivables are part of Financial assets

80,838

21,525

24,105

21,507

Deferred tax on loss carry-forward

29,783

21,525

24,105

21,507

Deferred tax on unrealised losses on cash flow hedges

51,055







Total deferred tax

80,838

21,525

24,105

21,507

Opening balance for the year

21,525



21,507



of which:

Exchange rate differences Reporting in the profit and loss statement Group contributions

-68







8,326

21,525

-676

21,507





3,274



Income tax attributable to components in other comprehensive income

51,055







Closing balance for the year

80,838

21,525

24,105

21,507

Note 8 Capitalised expenditure for exploration and evaluation assets Group Opening acquisition value Capitalised exploration costs Reclassification

Closing carrying amount

Other areas, Finland Sweden

31.12.2010

31.12.2011

31.12.2010

177,431

157,724

177,431

157,724

23,254

20,628

23,074

20,628

60,685

Exchange rate differences

Area around the Laiva mine

31.12.2011

-140,000

Closing accumulated acquisition values

Capitalised exploration costs

Parent Company

2011

2010

12,252

9,029

8,695

8,789

2,307 23,254

2,810 20,628

-140,000 178,352

60,505

178,352

-89

-921

-89

-921

60,596

177,431

60,416

177,431

TESTING FOR IMPAIRMENT Impairment testing of exploration and evaluation assets takes place when facts and circumstances suggest that the carrying amount of the assets may exceed their recoverable amount. The company management has determined that no such facts or circumstances exist. Accordingly, no impairment loss has been recorded.

NORDIC MINES ANNUAL REPORT 2011 49

Note 9 Buildings and land Group Opening acquisition value

31.12.2011

31.12.2010

31.12.2011

31.12.2010

25,895

25,072

25,895

25,072

Purchasing Closing accumulated acquisition values Opening accumulated depreciation Depreciation for year Closing accumulated depreciation Closing carrying amount

Parent Company

823

823

25,895

25,895

25,895

25,895

-214

-157

-214

-157

-57

-57

-57

-57

-271

-214

-271

-214

25,624

25,681

25,624

25,681

31.12.2011

31.12.2010

31.12.2011

31.12.2010

wNote 10 Mineral Deposit Group Opening acquisition value

Parent Company









Reclassification asset

140,000







Closing accumulated acquisition values

140,000

0

0

0

Closing carrying amount

140,000

0

0

0

Note 11 Machinery and equipment Group Opening acquisition value or revalued amount

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

6,803

6,773

4,462

4,432

Purchasing

27,613

30

238

30

Closing acquisition value or revalued amount

34,416

6,803

4,700

4,462

Opening accumulated depreciation

-4,647

-3,352

-2,552

-1,751

Depreciation for year

-2,901

-1,295

-564

-801

Closing accumulated depreciation

-7,548

-4,647

-3,116

-2,552

Exchange rate differences Closing carrying amount The item Machinery and equipment for the Group includes financial lease agreements pertaining to exploration drilling rigs.   On the balance sheet date, the carrying amount of assets held under a financial lease agreement was SEK 25,163 (246) thou-

17







26,885

2,156

1,584

1,910

sand, which comprises an acquisition cost of SEK 29,552 (2,341) thousand and accumulated depreciation of SEK 4,389 (2,095) thousand.

Note 12 Construction in progress (CIP) Group 31.12.2011

31.12.2010

31.12.2011

31.12.2010

491,267

308,520





799,787

308,520





-2,389 797,398

– 308,520

– –

– –

Opening acquisition value

308,520

Purchasing Closing accumulated acquisition values Exchange rate differences Closing carrying amount

50 NORDIC MINES ANNUAL REPORT 2011

Parent Company

Note 13 Deposit Finnish Environment Institute Group

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

Deposit to Finnish Environment Institute EUR 900 thousand

8,031

Deposit to Sampo Bank EUR 804 thousand

7,177

8,090









15,208

8,090





Note 14 Participation in Group companies Parent Company 31.12.2011

31.12.2010

Opening acquisition value

200

200

Closing accumulated acquisition values

200

200

Closing carrying amount

200

200

Share, %

Book value 100

Subsidiaries Nordic Mines Marknad AB – Nordic Mines Oy Nordic Mines Optioner AB

CIN

Registered office

556767-4980

Uppsala

100%

2296579-4

Piehinki

100%

556751-0671

Uppsala

100%

100 200

Note 15 Inventories Group Material Work in progress

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

22,120 31,973

– –

– –

– –

54,093

0

0

0

Note 16 Other receivables

Receivable: VAT Finland Receivable: VAT Sweden Tax asset Other current receivables

Group 31.12.2011 31.12.2010 18,615 6,113 383 468 785 – 734 54 20,517 6,635

Parent Company 31.12.2011 31.12.2010 852 119 383 468 359 – 48 54 1,642 641

Group 31.12.2011 31.12.2010 59 60 309 86 55 – 343 461 62 250 8,121 6,466 28 – 8,977 7,323

Parent Company 31.12.2011 31.12.2010 59 54 68 86 55 – 15 113 250 – 27 – 224 503

Note 17 Prepaid expenses and accrued income

Prepaid rent Prepaid lease Prepaid interest expenses Prepaid insurance Accrued interest Accrued contributions Other prepaid expenses

NORDIC MINES ANNUAL REPORT 2011 51

Note 18 Financial instruments by category Loan receivables and trade receivables

Derivatives used for hedging purposes

Cash and cash equivalents

11,379



11,379

Total financial assets

11,379



11,379

Other financial liabilities

Derivatives used for hedging purposes

Total

569,489



569,489

Total

Assets in the balance sheet 31 December 2011

Liabilities in the balance sheet 31 December 2011 Borrowings



208,386

208,386

75,202



75,202

644,691

208,386

853,077

Loan receivables and trade receivables

Derivatives used for hedging purposes

Total

Cash and cash equivalents

48,803



48,803

Total financial assets

48,803



48,803

Other financial liabilities

Derivatives used for hedging purposes

Total

Derivative instruments Accounts payable Total financial liabilities

Assets in the balance sheet 31 December 2010

Liabilities in the balance sheet 31 December 2010 Borrowings

15,363



15,363

Accounts payable

16,754



16,754

Total financial liabilities

32,117



32,117

The entire fair value of a derivative instrument that constitutes a hedging instrument is classified as a fixed asset or long-term liability if the remaining term of the hedged item is longer than 12 months, and as a current asset or current liability if the remaining term of the hedged item is less than 12 months. The changes in this hedging reserve are reported in other comprehensive income as long as it is in effect. There is no ineffectiveness to report with regard to cash flow hedges. Gold price hedging
 An agreement to hedge the gold price was drawn up March 10, 2011. This agreement gives Nordic Mines a fixed price per ounce of gold for a period from the first quarter of 2012 up to and including the first quarter of 2015. This financial instrument is made up of a metal swap that corrects the average delivery quarter price accord-

ing to the London Bullion Market (LBMA) to a fixed price of EUR 1,049 oz. If the price according to the LBMA is lower* than EUR 1,049 oz Nordic Mines is compensated with the difference by the bank. If the average price according to the LBMA is higher than EUR 1,049 oz Nordic Mines pays the difference to the bank. 

 Allocation of hedged volumes per year (oz)

 2012, Q1 11,296 2012, Q2 10,772 2012 Q3 11,194 2012 Q4 11,534 2013 40,240 2014 35,872 2015 9,952 Total 130,860

Note 19 Equity The total number of shares is 34,921,647 with a quota value of SEK 1 per share. All issued shares have been fully paid. Each share carries full entitlement to an equal voting right at the AGM and a share of the Company’s assets and profits. Each share also provides

the shareholder with preferential rights to new issues of shares, warrants and convertibles in proportion to the number of shares owned, along with the right to partake in dividends and any surplus upon liquidation.

Number of shares (thousand) 23,271 1 6 923 2 2 328 3 2 400 34,922 34,922 34,922

1. New issue in January 2010 of 6,923,077 shares at SEK 26 per share. The issue provided the company with SEK 180,000 thousand. 2. Issue with preferential rights in February 2010 of 2,327,142 shares at SEK 26 per share. The issue provided the company with SEK 60,505 thousand. 3. New issue in December 2010 of 2,400,000 shares at SEK 38.50 per share. The issue provided the company with SEK 92,400 thousand.

Share capital Opening balance, 1 January 2010 Directed issue Issue with preferential rights Directed issue Closing balance, 31 December 2010 Opening balance, 1 January 2011 Closing balance, 31 December 2011 52 NORDIC MINES ANNUAL REPORT 2011

Note 19 Equity, cont. Dividend policy Each year, the Company will give a dividend, which, over time, will correspond to 30-50 per cent of the company’s profit after tax. However, consideration must be given to the company’s liquidity, future income, financial situation, capital requirement and other factors.

STOCK OPTIONS Employee stock option programme See Note 2, Page 49. Warrants The Company has issued 400,000 option rights to Standard Bank Plc and UniCredit Bank AG. The option rights give each the right, up to and including 28 January 2013, to subscribe at a price per share of SEK 31.42.

Reserves in the Group Translation reserve

Hedging reserve

Total

Exchange differences

-686



-686

As of 31 December 2011

-686



-686

Translation reserve

Hedging reserve

Total

As of 1 January 2011

-686



-686

Exchange differences

-581



-581

-208,386

-208,386

51,055

51,055

-157,331

-158,598

As of 1 January 2010

Cash flow hedges: Fair value, loss over the year Tax on fair value, loss over the year -1,267

As of 31 December 2011

Note 20 Borrowing Group Within 1 year 1–5 years

Loan currency Long-term Group Companies Bank loans Other loans Debts regarding financial leasing Total long-term borrowings Short-term Bank loans Other loans Debts regarding financial leasing Total short-term borrowings Total borrowings

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

207,147 362,342 569,489

15,363 – 15,363

– 10,074 10,074

15,000 – 15,000

Group 31.12.2011 31.12.2010

Parent Company 31.12.2011 31.12.2010

SEK EUR SEK EUR/SEK

– 338,628 10,000 13,714 362,342

– – – – –

74 – 10,000 – 10,074

– – – – –

EUR SEK EUR/SEK

201,669 – 5,478 207,147 569,489

– 15,000 363 15,363 15,363

– – – – 10,074

– 15,000 – 15,000 15,000

a) Loans to group companies No period of maturity has been agreed. Instead, instalments will be made in line with the cash flow needs of the group company. b) Bank loans The Company has two bank loans. One loan of EUR 53 million that runs for five years. In 2012, EUR 22.6 million will be repaid. The second loan is of EUR 7.5 million and runs for 3.5 years.

c) Debts regarding financial leasing Leasing fees consist in part of minimum lease payments and in part variable fees. The leasing fees are based on a variable rate of interest and they are included in the minimum lease payments based on the prevailing interest rate at the start of the agreement. Future changes in the interest rate are included in the variable fees. The total amount of leasing fees paid during the period was SEK 1,704 (481) thousand.

NORDIC MINES ANNUAL REPORT 2011 53

Note 21 Accrued expenses and prepaid income Group

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

3,783

1,824

2,030

1,731

853

505

581

503

4,651

190

487

190

434

587

418

587

Legal consultant costs

80

3,534

80

77

Construction in progress (CIP)

77

7,293





Accrued salaries/holiday pay Accrued social security contributions Interest Financial consultant costs

Other accrued expenses



82



65

9,878

14,015

3,596

3,153

Note 22 Pledged assets Parent Company 31.12.2011

31.12.2010

For own liabilities and provisions: Restricted bank funds Property mortgages

803



20,465



21,268



31.12.2011

31.12.2010

Note 23 Contingent liabilities Guarantee, VPC

50

50

Bergsstaten

26

26

76

76

Note 24 Adjustments for items not included in cash flow Group

Parent Company

31.12.2011

31.12.2010

31.12.2011

31.12.2010

Depreciation and impairment losses

2,958

1,350

620

857

Exchange rate conversion, tangible assets

3,200

506

91

508

Deferred tax, Group contribution





-3,274



Exchange rate conversion, equity

93

-686





6,251

1,170

-2,563

1,365

Note 25 Transactions with related parties No board member, senior executive or the Group’s auditors – individually or indirectly, through companies or related parties – has participated directly or indirectly in business transactions that were,

or are, unusual in nature. The Group has not granted loans or given guarantees or sureties to the benefit of Board members, senior executives or the Group’s auditor.

Note 26 Significant events after the balance sheet date As from 2 January 2012, Nordic Mines’ shares are being traded on the Stockholm Stock Exchange’s Mid Cap list.   At the start of 2012, production of gold gradually increased and deliveries of doré to refineries started.   In the first quarter of 2012, EUR 9.3 million of the project buffer of EUR 10 million has been utilised.

54 NORDIC MINES ANNUAL REPORT 2011

  The Board of Directors decided to strengthen the Company’s equity through a directed issue within the framework of that authorized previously by the AGM. This authorisation covers a maximum of 1,750,000 shares, corresponding to a maximum 5 per cent dilution.

The Board of Directors and Managing Director hereby declare that this annual report provides a true and fair view of the company’s and the Group’s business activities, financial position and performance. The significant risks and uncertainty factors facing the company and its subsidiaries have also been described. Uppsala, 30 March 2012

Thomas Cederborg Board member

Lennart Schönning Chairman

Tord Cederlund Board member

Catharina Lagerstam Board member

Bengt Löfkvist Board member

Kjell Moreborg Board member

Michael Nilsson Managing Director

Our audit report was submitted on 11 April 2012. Öhrlings Pricewaterhouse Coopers AB

Heléne Ragnarsson Authorised Public Accountant

NORDIC MINES ANNUAL REPORT 2011 55

Auditors’ report REPORT ON THE ANNUAL ACCOUNTS AND THE CONSOLIDATED FINANCIAL STATEMENTS We have audited the annual accounts and consolidated financial statements of Nordic Mines AB (publ) for 2011, with the exception of the Corporate governance report on pages 35–37. The company’s annual accounts and consolidated financial statements are included in the printed version of this document on pages 39–57. The Board of Directors’ and the Managing Director’s responsibility for the annual accounts and consolidated financial statements The Board of Directors and the Managing Director are responsible for preparing annual accounts that provide a true and fair view in accordance with the Annual Accounts Act, and consolidated financial statements that provide a true and fair view in accordance with international accounting standards, such as those adopted by the EU, and the Annual Accounts Act, as well as for the internal checks that the Board of Directors and the Managing Director deem necessary to prepare annual accounts and consolidated financial statements that are free from material misstatement, irrespective of whether this is due to irregularities or errors. The auditors’ responsibility Our responsibility is to express an opinion on the annual accounts and the consolidated financial statements based on our audit. We have conducted the audit in accordance with the International Standards on Auditing and generally accepted auditing standards in Sweden. These standards require that we comply with demands for professional conduct and carry out the audit in order to achieve reasonable assurance that the annual accounts and consolidated financial statements are free from material misstatement.   An audit entails obtaining audit evidence through various measures regarding amounts and other information in the annual accounts and consolidated financial statements. The auditor selects which measures are to be carried out, for example by assessing the risks of material misstatement in the annual accounts and the consolidated financial statements, irrespective of whether this is due to irregularities or errors. During this risk assessment, the auditor gives consideration to those aspects of the internal checks that are of relevance to the way the company prepares the annual accounts and consolidated financial statements, in order to give a true and fair view with the aim of formulating auditing measures that are appropriate bearing in mind the circumstances, although not with the aim of making a pronouncement on the effectiveness of the company’s internal checks. An audit also includes an evaluation of the appropriateness of the accounting principles that have been used, and of the reasonableness of the Board of Directors’ and the Managing Director’s estimates in the accounts, as well as an evaluation of the overall presentation of the annual accounts and the consolidated financial statements.   We consider that the audit evidence we have gathered is sufficient and appropriate to provide grounds for our opinion. Opinion In our opinion, the annual accounts have been prepared in accordance with the Annual Accounts Act and in all essential respects they provide a true and fair view of the Parent Company’s financial position as at 31 December 2011 and of its financial results and cash flows for the year according to the Annual Accounts Act, and the consolidated financial statements have been prepared in accordance with the Annual Accounts Act and in all essential respects they provide a true and fair view of the Group’s financial position as at 31 December 2011 and of its financial results and cash flows in accordance with international accounting standards, such as those adopted by the EU, and the Annual Accounts Act. Our opinion does not cover the Corporate governance report on pages 35-37. The Administration report is in agreement with the other sections in the annual accounts and consolidated financial statements. 56 NORDIC MINES ANNUAL REPORT 2011

To the AGM of Nordic Mines AB (publ) CIN 556679-1215   We therefore recommend to the Annual General Meeting that the income statement and the balance sheet for both the Parent Company and the Group be adopted. REPORT ON OTHER REQUIREMENTS ACCORDING TO LAWS AND OTHER STATUTES In addition to our audit of the annual accounts and the consolidated financial statements, we have also audited the proposed allocation of the company’s profit or loss, as well as the Board of Directors’ and the Managing Director’s administration of Nordic Mines AB (publ) for 2011. We have also carried out a statutory review of the Corporate governance report. The Board of Directors’ and the Managing Director’s responsibility The Board of Directors is responsible for the proposed allocation of the company’s profit or loss, and the Board of Directors and the Managing Director are responsible for the administration of the company in accordance with the Swedish Companies Act, and for the Corporate governance report on pages 35–37 being prepared in accordance with the Annual Accounts Act. The auditors’ responsibility Our responsibility is, with reasonable assurance, to express our opinion on the proposed allocation of the company’s profit or loss, as well as on the administration of the company, based on our audit. We conducted our audit in accordance with auditing standards generally accepted in Sweden. As a basis for our opinion concerning the Board of Directors’ proposed allocation of the company’s profit or loss, we have examined whether the proposal is in agreement with the Swedish Companies Act.   As a basis for our opinion concerning discharge from liability, we have, in addition to our audit of the annual accounts and the consolidated financial statements, examined significant decisions, actions taken and circumstances in the company in order to be able to determine the liability, if any, to the company of any Board Member or the Managing Director. We also examined whether any Board Member or the Managing Director has, in any other way, acted in contravention of the Swedish Companies Act, the Swedish Annual Accounts Act or the Articles of Association.   We consider that the audit evidence we have gathered as described above is sufficient and appropriate to provide grounds for our opinion.   We have also read the Corporate governance report and, based on this and our knowledge of the company and the Group, we consider that we have sufficient grounds for our opinion. This means that our statutory review of the Corporate governance report has a different focus and a significantly reduced scope compared to the focus and scope of an audit carried out in accordance with the International Standards on Auditing and generally accepted auditing standards in Sweden. Opinion We recommend to the Annual General Meeting that the profit be dealt with in accordance with the proposal in the administration report and that the Members of the Board of Directors and the Managing Director be discharged from liability for the financial year.   A Corporate governance report has been prepared, and it statutory information is in agreement with the other sections in the annual accounts and the consolidated financial statements. Uppsala, 11.04.2012 Öhrlings PricewaterhouseCoopers AB Heléne Ragnarsson Authorised Public Accountant Chief Auditor

BOARD OF DIRECTORS

Lennart Schönning (born 1948)

Thomas Cederborg (born 1948)

Tord Cederlund (born 1941)

Catharina Lagerstam (born 1962)

Board member and Chairman of the Board of Nordic Mines. Lennart Schönning has an MSc in Engineering. He is an entrepreneur with prior experience from the construction and property sector as CEO for Åke Larsson Byggare in the USA and the property company, Näckebro, Stockholm, which was previously listed on the Stockholm Stock Exchange. Lennart now manages his own property portfolio and works on a number of wind power projects. Lennart’s board memberships include Catena AB (publ) and Property Dynamics AB. Number of shares: 1,360,000 (via companies)

Board member of Nordic Mines since 12 May 2009. Thomas Cederborg has a Master of Laws degree and a great deal of experience in the business management of mining companies. He has been a board member of more than 20 companies (in Sweden and internationally) during his career. Thomas was previously the Group Managing Director of Boliden AB. He has also been the Managing Director of International Gold Exploration AB and Boart Longyear Ltd. Since 2001, Thomas has been running his own management consultancy, working on projects in Sweden and abroad. He is also a board member of ACI Konsult AB. Number of shares: 2,000

Board member of Nordic Mines since 10 May 2007. Tord Cederlund has an MSc in Business Administration and Economics. He is also a Certified Public Accountant. Tord Cederlund, founder of one of the first private finance companies, Cederlund & Grandin AB, has been involved in the formation of a large number of companies in Sweden and abroad. Tord Cederlund has been resident in Brussels for several years, where he is the Vice Chairman of the mining industry lobby organisation, Euromines Gold Group. He has a great deal of experience on the boards of companies in Europe and USA, and he has been an investor in the mining industry since 1996. (Tord Cederlund is one of the Company’s largest shareholders.) Number of shares: 2,988,904

Board member of Nordic Mines since 19 May 2011. Catharina Lagerstam has a Doctorate in financial risk, an MSc in Engineering and an MSc in Business Administration and Economics. Catharina Lagerstam has worked on financial issues in both the private and public sectors for more than 20 years, in Sweden and internationally. Catharina Lagerstam was previously CFO at Hufvudstaden, Head of Financial Analysis and Investor Relations at the then Föreningsbanken, and responsible for the valuation process at the Bankstödsnämnden (the Swedish Banking Support Committee) during the banking crisis of the 1990s. Catharina now works primarily as a director, although she also operates as an independent consultant. Number of shares: 2,000

Bengt Löfkvist (born 1936)

Kjell Moreborg (born 1946)

Board member of Nordic Mines since 7 April 2006. Bengt Löfkvist has many years of experience of the company management and board membership of companies in the mining industry. He is a mining engineer and has had various management roles and directorships in the LKAB, LAMCO, Trelleborg and Boliden groups. His posts include Managing Director of Boliden Mineral AB and Deputy Managing Director of Boliden Limited. He has also been a board member of Boliden AB. Number of shares: 1,542

Kjell Moreborg has a BA in Geology with a focus on the quaternary period. He has many years of experience of the company management and board membership of companies in the mining industry. With others, he developed TerraMining AB and founded Scanmining, where he was Managing Director between 1992 and 2002. Kjell Moreborg is also one of the founders of Nordic Mines and he has been on the board since 2005. Number of shares: 800,000

NORDIC MINES ANNUAL REPORT 2011 57

management

Michael Nilsson (born 1957)

Peter Kuiper (born 1961)

Hannu Vehmanen (born 1953)

Peter Finnäs (born 1962)

Managing Director since January 2006. Prior to that, a consultant to the company since June 2005. Michael Nilsson has many years of experience of the company management and board membership of companies in the mining industry. He has an MSc in Chemical Engineering and a BA in Geology and Geophysics. He has been appointed as the Qualified Person by SveMin. He has previously been a board member of TerraMining Oy, an associated company of TerraMining AB and Scanor Mining AS. He has also been Managing Director of Scanmining AB and Scanmining Oy. Number of shares: 762,921 (including companies)

Head of Development since January 2006. Peter Kuiper has many years of experience of the company management and board membership of companies in the mining industry. He has a BA in Geology and has been appointed a Qualified Person by SveMin. He has previously been a member of the boards of TerraMining and Scanor Mining AS, and he has been the Exploration Manager at TerraMining and the Head of Technology and Development at ScanMining. Number of shares: 99,038

CFO since January 2007. Hannu Vehmanen, who was born and raised in Finland, has a BA and MSc in Business Administration and Economics. He has several years of experience as the general manager and controller at several listed, international groups of companies. Hannu has most recently been employed as Senior Consultant – Business Intelligence at ACC Group. Before that, he was employed as the Deputy Managing Director of Sollentunamässan and Finance & Administration Manager, Nordic Region at AP/Dow Jones Telerate and Motorola AB. Number of shares: 2,121

Exploration Manager since January 2006. Peter Finnäs has many years of experience in the mining industry and he has a MSc in Geology and Mineralogy. He has prior experience as an exploration geologist at Endomines Oy and Kalvinit Oy. He has also been a mining and exploration geologist at TerraMining AB. Peter Finnäs lives in Finland. Number of shares: 21,500

Göran Gustafsson

Krister Söderholm

(born 1945)

(born 1950)

Group CFO since June 2009. Göran Gustafsson has a BA from Stockholm University and many years of experience as the Managing Director and CFO of several listed groups. Most recently, he was the Managing Director and CFO of Lundin Mining Exploration AB and North Atlantic Natural Resources AB, which are part of the Lundin Mining Corp. Group. Göran Gustafsson does not own any shares in the Company.

Site Manager Laiva mine. Krister Söderholm has a geology degree from Åbo Akademi University in Finland. He has worked for several years at Outokumpu as a project manager and mining geologist. During the period 1999-2001, he was project manager for a gold project in Sudan. Krister has also worked as head geologist and mine manager at A/S Bidjovagge Gruber in Norway and as head geologist/head of exploration at Viscaria AB in Sweden. He has worked on behalf of the Finnish Ministry of Trade and Industry as the mines inspector responsible for granting mineral rights, maintaining the register of mines, mineral policies and an expert on mining issues. His most recent post was Managing Director and later Country Manager of Kevitsa Mining Oy/First Quantum Minerals Ltd. Number of shares: 1000

58 NORDIC MINES ANNUAL REPORT 2011

ANNUAL GENERAL MEETING AND REPORTING DATES Annual General Meeting The Annual General Meeting of Nordic Mines AB (publ), corporate identity number 556679-1215, (the Company) will be held on Wednesday 23 May 2012, at 3 pm, in Restaurang Flustret, Svandammen 1, Uppsala, Sweden. Registration Shareholders who wish to participate in the AGM must 1. be listed in the registry maintained by Euroclear Sweden AB on Wednesday 16 May 2012, and 2. must also submit their intention to attend the AGM no later than 3 pm on Friday 18 May 2012. Such notification may be sent by post to Nordic Mines AB (publ), Trädgårdsgatan 11, 753 09 Uppsala. It is also possible to make notification by telephone: +46 18 84 35 500 or by email: [email protected]. Registration must contain the shareholder’s full name, personal or company identification number, shareholding, address, daytime telephone number and, when applicable, information regarding the shareholder’s representative or proxy. The registration shall, where appropriate, be accompanied by power of attorney, registration documentation and other authorisation documentation.

Nominee shares In order to participate in the AGM, shareholders with nominee shares must also temporarily allow their shares to be registered in their own name in the registry maintained by Euroclear Sweden AB. To ensure that this information is registered by Wednesday 16 May 2012, the shareholder must allow ample time to request re-registration through the administrator. Representative Shareholders who appoint a representative must provide their representative with a signed and dated power of attorney. If the power of attorney document is prepared by a legal entity, a witnessed copy of the certificate of registration (or equivalent document for the legal entity) must be attached. The validity of the power of attorney may extend a maximum of five years from its issue. The original power of attorney, along with the certificate of registration should be sent to the Company at the above address well in advance of the AGM. Upcoming reports Interim report January – March Annual General Meeting Interim report April – June Interim report July – September Year end report 2012

9 May 2012 23 May 2012 16 August 2012 15 November 2012 14 February 2013

Addresses Nordic Mines AB (publ) Trädgårdsgatan 11 SE-753 09 Uppsala www.nordicmines.se +46 (0)18-84 34 500

auditors Öhrlings PricewaterhouseCoopers AB Box 179 SE-751 04 Uppsala

Nordic Mines Oy Laiva Office Laivakankaantie 503 FI-92 230 Mattilanperä Finland +358 (0)8-22 94 04 Nordic Mines AB, filial Finland Exploration Office Ylipääntie 637 FI-922 20 Piehinki +358 (0)8-22 94 00

NORDIC MINES ANNUAL REPORT 2011 59

GLOSSARY: GOLD Atomic weight

196.967

Purity

Atomic number

79

24 carat

Thousands Uses 1,000

Typically for gold coins

Chemical symbol

Au

22 carat

916

Typically for jewellery in the Middle East and Asia

Melting point C

1,064

18 carat

750

Typically for jewellery in Europe

Hardness (Mohs)

2.5-3.0

14 carat

583

Typically for jewellery in USA

Boiling point

2,808 C

10 carat

417

Minimum carat weight for jewellery USA

Density gm/cm3

19.32

9 carat

375

Typically for jewellery in England

Elasticity km/mm2

11.9

8 carat

333

Minimum carat weight for jewellery in parts of Europe

1 troy ounce/g

31.103

1 carat

41.7

Anomalies

 eviations from normal value – in this D context, pertains to moraine with elevated metal concentrations.

Arsenopyrite

Mineral consisting of iron, arsenic and sulfur.

Au

 ymbol for gold in the periodic table of S elements.

Block model

 statistical model where a deposit is A divided into blocks of a defined size and with a calculated metal grade and tonnage. The model can be used for planning purposes and it can also be viewed three dimensionally in a computer.

Leaching

Chemical extraction of metals.

Mineral

A solid inorganic substance occurring in nature that is defined by its chemical composition and crystal structure. One or several minerals together form a type of rock.

Mineral resource

A concentration or occurrence of minerals in or on the earth’s crust in such quantity, condition or quality that financially profitable extraction is deemed possible.

Mineralisation

Natural accumulation of minerals in the bedrock. Pertains to common substances of commercial interest.

Claim

Legal right to explore a defined area (Finland).

Mining concession Right to extract metal (Finland). Mining rights

A permit to extract minerals.

Concentrates

Concentrates of minerals obtained when ore is pulverised and enriched.

Open-pit ­(open-cast) mine

A mine that is mined from the surface.

Concentrating

The process of concentrating a ­substance.

Ore

Doré bars

 on-refined gold bullion containing N mostly gold and silver.

Financial concept, mineral deposit that can be mined with profit.

Ore reserve

Drill cuttings

Crushed rock material that is collected during drilling with a rotating and cutting drill bit.

Part of a mineral resource that can be mined and processed while taking into account the company’s profitability requirements.

Precious metal

Such as gold, silver or platinum.

Drill profiles

A line along which drill holes are made. A drill model often consists of drill profiles with a certain distance between each other, i.e. 25 or 50 meters between the profiles. Along the profile, the drill holes are also made with a defined distance between each other.

Pyrrhotite

Mineral consisting of a compound of iron and sulfur.

Recovery

The percentage of a particular metal in a raw material that is extracted during the enrichment process.

Reserve calculation

Analysis of technical and economic variables to examine the deposit’s size/ nature and also determine if it would be profitable to mine.

SGU

The Geological Survey of Sweden.

Sulphide ore

Ore containing metals joined with elemental sulfur, from which copper zinc, lead, silver, gold and other metals can be extracted.

SveMin

Association for mines, mineral and metal producers in Sweden.

Tr. oz.

1 troy ounce = 31.103 gram. Weight unit for gold.

Waste rock

Rock that does not contain recoverable amounts of metal.

Exploitation

Extraction of ore, for example.

Exploration

The search for economically mineable metals and minerals.

Exploration permit Legal right to explore a defined area (Sweden). Fault

 ormation where the earth’s crust has F raised, lowered or or moved laterally.

Feasibility study

 easibility and profitability study that F provides the basis for a decision to invest in a mine.

Geochemistry

The science of metals and other chemical substances’ natural behavior in nature.

Geophysics

The science of physical properties and phenomena in soil and rock.

GTK

Geological Survey of Finland.

Hectare

10,000 m2.

JORC Code

Reporting standard developed by the Australasian Joint Ore Reserves ­Committee (JORC) for reporting ­exploration results, ore estimates and mineral resources.

60 NORDIC MINES ANNUAL REPORT 2011

Nordic Mines AB (publ) Trädgårdsgatan 11 SE-753 09 Uppsala www.nordicmines.se