Year-end Report January – December 2021

Significant events during the fourth quarter 2021

• The decided set-off issue increases the number of shares by 3,552,062.
• The short-term loan facility is extended until the end of the first half of 2022.
• The Board begins to seek successors to the CEO
• The project director leaves his assignment

Fourth quarter, 1 October – 31 December 2021

• Net income amounted to SEK 0 million (0)
• Earnings after tax amounted to SEK -1.9 million (-2.1)
• Investments during the period October – December totalled SEK 1.8 million (4.9)
• Basic earnings per share were SEK -0.05 (-0.07)

The whole year, 1 January – 31 December 2021

• Net income amounted to SEK 0 million (0)
• Earnings after tax amounted to SEK -8.8 million (-9.0)
• Investments during the period January – December totalled SEK 3.5 million (7.3)
• Basic earnings per share were SEK -0.26 (-0.29)
• Cash and cash equivalents on 31 December 2021 amounted to SEK 2.8 million (5.2)

Significant events after the end of the period

• The company signs a letter of intent regarding further development of the project with Cargill International Trading.
• The company's outgoing CEO was contracted to continue on a consulting basis as interim CEO.

A turning point

In Q3 I said goodbye, but so, I had the honor of succeeding myself, albeit as an interim CEO. This hopefully means that I get to be involved when the project takes off.

The most important event was that at the end of the year we resumed discussions from earlier in the year. We have relatively recently been able to publish the results. We have signed an important memorandum of understanding with Cargill, one of the global players in the commodity trading industry, who will help us develop the project, both as an investor and as principal for the sale of our products. However, there are a couple of conditions that must be met before the deal is completed; Cargill must review our project and, we must ensure that we can match their investment with at least the corresponding amount. If we succeed in this, we will receive a capital injection in the order of at least SEK 100 million. It is a proof of quality of our project that such a player as Cargill is interested in joining as a partner already at this stage before the construction work has begun.

The market

As reported during the third quarter of 2021, iron ore prices were hit by something of a collapse from the previous surprising highs. This was partly due to a “bursting bubble” and policy changes in China to limit steel production. But, as predicted, this was an overreaction, largely driven by a negative market sentiment that caused base prices of iron ore to temporarily fall below $ 100 / t.

As can be seen from the Fastmarkets chart above, the uncertainty in the market, partly driven by the spread of the new covid variant, helped the downward spiral of the iron ore price. But as can also be seen, the markets in the last weeks of Q4 became more resilient and as the supply chain / logistics issues continued, ore prices began to recover. In mid-February, the price was again around 145 USD per tonne.

Most importantly for NIO, the premiums for higher-quality iron ore began to recover during the end of the fourth quarter of 2022 and the beginning of 2022. See graph below which shows the price difference for 65% and 58% iron respectively compared to the price for 62%.

This is largely due to China's continued efforts to improve air quality ahead of the Winter Olympics, and rather than just continue to reduce steel production, is looking to achieve this by improving the raw material for the steelmaking process. In addition, there is the continued development towards a fossil-free future in the steel industry, and the realization that for most steel companies (and countries) an easily accessible way to make a noticeable reduction in carbon dioxide emissions is to use iron ore / scrap of higher quality. In Europe, the cost of emission allowance is increasing, which drives the desire to reduce emissions. These trends will help to push iron ore premiums ever higher, and the differences between the qualities will continue to ensure that NIO has one of the most desirable high-quality products to offer the market and at premium prices.

Overall, I can state that Nordic Iron Ore is developing in the right direction. The collaboration with Cargill is very important and will probably open new doors and lead to the project taking a real step forward in the relatively near future.