Rana Gruber ASA (RANA) Earnings Call Transcript & Summary

Welcome to this presentation of about Rana Gruber's performance in the third quarter of 2022. My name is Gunnar Moe and I am the CEO of Rana Gruber. With me today is our CFO, Erlend Hoyen, who will give you additional insights into the financial results of the quarter. After this presentation, we will move to our capital markets update where we will give you more -- go more into depth about the range of topics, included some of those briefly covered in this third quarter presentation. I will start today's presentation by giving you a quick overview of the highlights of the quarter. Then I will cover the production of the quarter and our safety KPIs. After this, Erlend will take you deeper into the financial results. Towards the end of the presentation, I will sum up and make a few comments about the outlook before we move on to the Q&A. [Operator Instructions] The third quarter was a good quarter for Rana Gruber. We had a record high production of 469,000 metric tons of iron ore concentrate. And I'm happy to say that once again, it was without related injuries while total costs remain stable projects. Now a few more words about the production of the quarter. As mentioned, the iron ore concentrate production totaled 469,000 metric tons and this is the largest amount produced in 1 quarter in the history of Rana Gruber. The production increase was partly due to continuous work to improve the capacity of the processing plant, but it was also due to operational adjustments ensuring a more stable quality of the ore transported to the processing plant, which enables better utilization of the plant. Hematite concentrate amounted to 442,000 metric tons of the produced volume. And in addition to this, 27,000 metric tons of magnetite concentrate and 1,100 metric tons of the Colorana were produced. Due to the timing of shipments, the volumes sold in the quarter were moderate compared to the volumes produced. We have stored masses of produced volumes, and these volumes will be shipped in later quarters. The amount of store volumes are expected to normalize during the first half of 2023. In the quarter, we continued the development of the next mining level, Level 91. Production drilling is planned to begin towards the end of 2023. Blasting and full production of the mining level is expected to begin in [indiscernible] 2024. Now some words about our safety KPIs. The quarter saw a continuation of the positive trend from the previous quarters. There have been no injuries leading to absence from work for the past 2.5 years. Once again, this confirms that our tailored safety measures are successful and provide a healthy work environment in Rana Gruber. Now I leave to our CFO, Erlend Hoyen, to take us through the financial results of the quarter.

The revenues for the quarter came in at NOK 230.5 million [indiscernible] higher than the third quarter of 2021. The increase is mainly explained by the fall of -- in the price of iron ore from the second to the third quarter of '21. We also saw a decline in the price this year, but it was not as substantial as it was last year. I will say more about the booking of revenues in our Capital Markets update later in this session. The operating profit ended at NOK 64 million, up from negative NOK 8 million in the third quarter of '21. And the difference is also mainly explained by the price fall of iron ore in the second to third quarter of 2021. Total cash costs ended at NOK 240.6 million (sic) [ NOK 204.6 million ], this corresponds to NOK 435 per metric tons produced. Despite the ongoing inflation that we saw all around us, this is the lowest cash cost per metric tons produced the company has since we went public almost 2 years ago. This is a result of continuous focus on high production levels as well as cost efficiency. Over to the adjustment of the EPS for the quarter. In accordance with our dividend policy, the adjusted net profit is based on the IFRS net profit before tax. This is then again adjusted for the unrealized gains resulted from our hedging portfolio in iron ore and foreign exchange. The adjustments will therefore relate to positions with maturity 3-plus months after the reporting date. The Board of Directors can also adjust for extraordinary events, which is not part of core business. The adjustment of the net profit is necessary to enable a more accurate evaluation of our performance for a given quarter, excluding accounting effects from quarters, which does not relate to the production or the sales for the quarter. For more information about -- regarding our adjustments, please see the appendix in the quarterly reports. In this quarter, the pretax profit was adjusted by NOK 6.2 million related to the unrealized change in the hedging portfolio of iron ore and U.S. dollar with 3 months -- 3-plus month maturity after reporting date. The adjusted net profit amounted to NOK 55.4 million, which gives an EPS -- adjusted EPS of NOK 1.49. And based on this, the Board of Directors decided to pay out a dividend of NOK 1.5 per share for the third quarter of '21. Then let's have a look at the cash flow and our financial position. The total cash flow from operations amounted to NOK 69.9 million (sic) [ NOK 69.6 million ]. CapEx for the period was NOK 46.4 million, NOK 31.7 million of this was related to maintenance CapEx then mainly the new development of the Level 91 that Gunnar talked about as well as installing the new spirals that we have for the Fe65 project. NOK 14.7 million in CapEx was related to maintenance CapEx. And of the financial activities, NOK 56 million was payout of dividends for the second quarter and NOK 6.7 million was payment of principal portion of the lease liabilities that we have. In sum, total cash flow for the quarter was negative by NOK 35.9 million (sic) [ NOK 39.5 million ]. Let's have a look at the financial position. Our interest-bearing debt towards financial institutions only consists of lease and rent obligations. Apart from this, we have -- we still have no long-term bank debt, and we hold an unused credit facility of NOK 100 million. After the dividend distribution for the second quarter of this year, our equity ratio was 45.5% at the end of the third quarter, and we had a cash holding of NOK 339 million in the company. That concludes the review of the financial performance for the quarter, and I will leave the word back to Gunnar for his final remarks.

Thank you, Erlend. We have now given you an overview of the third quarter. To sum up, the quarter has been characterized by record high production, reduced cost per ton and progress with our strategic projects. Allow me now to make some comments about the future. Iron ore is essential to build infrastructure, buildings and a range of other products. The long-term market outlook remains positive. In the short term, the market demand may be more volatile, especially due to the handling of COVID-19 in China. China is the main global demand driver. We have seen that COVID related restrictions have reduced the global demand. We are planning several investments related to our ongoing strategic projects. The CapEx related to these projects will increase in the coming years. For the 0 carbon emissions project, we are currently in the process of identifying the most suitable solutions and suppliers. We will not finance these projects with either new interest-bearing debt or share issues. The plan is to finance the projects with earnings from operations and lease obligations for vehicles and mobile machinery. We also expect the 0 carbon emission projects to be partly financed through a public financial support scheme, and we are in close dialogue with Enova about the project. We will go more into depth about these topics in the Capital Markets update after this session. The completion of the development project is expected to be within the previously communicated time frame. With stable production, vast resources, strategic offtake agreements with Cargill, a solid financial position and investments in strategic projects. The outlook for Rana Gruber remains positive.

Thank you, Erlend and Gunnar. We will now answer questions from the audience. Please note that you may just ask questions during this session online. And I will come with the microphone for those who have a question now. And we will take 3 or 4 questions now on take the other 1 after the Capital Markets Day.

As we saw an Increase in production, and you also saw a significant reduction in costs. How much of that is attributable to higher grades and how much is more long-lasting cost reductions?

You can answer the production one. The cost is more a result of the decrease in the cash cost per ton is more result of the increased production rather than decreasing cost because if you look at the cost for the third quarter last year, and this -- they're roughly in line with each other. So in absolute money, we spend the same amount, but the increase in production came without an increasing cost showing the benefit of maintaining and keeping high production. And yes, the increase in the production, we believe to be stable.

Any other questions from the audience? Then I could take 1 from the web. We see some other miners turning down, expectation on dividends or trimming dividend payments out right. So my question is given this worsening macro outlook that we're seeing with recession knocking at our door, can we assume that you will continue to focus on cash returns and keep your dividend in line with market?

Yes, there's no -- there's nothing in our strategy now but to change but dividend policy, that stays firm.

Yes. Here are some questions about Fe65 but I think we will come back to that in the Capital Markets Day. And same goes for CapEx. Can you say something about our demand from China?

Well, as I said, the demand from China is regulating the price of the iron ore. That's the main -- so it hasn't got anything to do with the demand for our projects -- products. It's related to the price of the product. So I don't -- I think that will probably be -- I think I can't say about that topic at the moment.

Any other questions? Then I think we could sum up and take a short break.

Yes. Thank you all for participating at the third quarter presentation, and we will now have a short break before moving on to the -- our Capital Markets update, and we will be back in approximately 5 minutes. Please stay tuned for you on the web. [Break]

[Presentation]

Okay, everyone. We will now start the capital markets update. Welcome to new listeners. My name is Vegard Nerdal, and I'm Controller and Investor Relations in Rana Gruber. I will now take you through the program for today. First, our CEO, Gunnar Moe, will give you a brief overview of our business. Then we move to the strategy update. Gunnar will tell us more about work to in-source work streams. Then we move to Nancy Schreiner, sorry, our Environment and Sustainability Manager. After these updates, Jan Ove Stene from our electric machinery supplier, Sandvik will tell us about the demand for electric mining equipment and Sandvik's ability to supply this demand. After this, our CEO, Stein-Tore Liljenstrom, will tell us about our resource and reserves, and then we will have a short break. After the break, Leon Davies from Cargill Metals will tell us about the iron ore market. And after this, our CFO, Erlend Hoyen will tell us more about financial topics. After this, we will conclude this with a Q&A session. We ask that you save your questions for these sessions. And at the end, Gunnar will sum up some main takeaways before you're all invited for lunch in the floor above us. Now I leave the over to you, Gunnar.

Thank you, Vegard. My name is Gunnar Moe and I am as mentioned, the CEO of Rana Gruber. And welcome, everyone, to this Capital Markets update. Welcome also to those following us on the web. I am pleased to see you all here today. I'm also very happy that Leon Davies from Cargill Metals and Jan Ove Stene from Sandvik were able to join us. Your contribution is very much appreciated. As Vegard said, I will first give you a brief overview of our business. Rana Gruber the only iron ore producer in Norway. We have 1 of the industry's lowest carbon emissions today. And our aim is to be the first world -- first carbon-free iron ore producer. The favorable location of our deposits enables an energy-efficient logistics. As you can see on the map here, the deposits are located only 20 -- 32 kilometers from the processing plant. The deposits are also higher above the sea level. This enables short downhill transport of the ore to the processing plant and port. And this requires minimal amounts of energy. We have vast resources and reserves. And this enables mining operations for decades to come. We have also proved a stable production level year after year. Our operations consist of 3 separate activities. The first is mining of iron ore from local open pit and underground mines. The second is railway transport of iron ore from our mines to our processing plants. And the third is extraction of hematite and magnetite in the processing plant and also production of Colorana products. As you can see, we operate at the beginning of the value chain. After we have produced iron ore concentrate and Colorana products, they are shipped to a range of different industries. These industries are largely independent of each other and use our products to make a range of different end products. Let me elaborate a little bit on this. We have, as mentioned, 3 products: hematite, magnetite, and Colorana. We have an offtake agreement with Cargill for our entire hematite production. Under this agreement, Cargill is committed to buy and market all our hematite. This amounts to more than 90% of our total production. Cargill is 1 of the world's largest commodity traders. And since Cargill has a leading market position, it is able to identify the right buyers and the best prices. Currently, our hematite is distributed to 3 European steel producers, which utilize the products to make steel. Steel again is used for a variety of end products, such as cars, buildings and infrastructure. Our magnetite is sold to 8 chemical producers. They use our magnetite to make water treatment chemicals. And these chemicals are used in public water purification systems. Colorana is used for both colorants and highly advanced products such as brake linings, magnetic stripes and colorants. Customers for Colorana are within a diverse group of industries or market segments, such as concrete, paint, plastics, steel, automotive industry, heat management and toner production. Now let's turn to strategy updates. A mining company will always look for ways to optimize operations and reduce cost per ton. This involves finding out which activities one should in-source and which activities one should outsource to external providers. We have already in-sourced the exploration drilling. And we are now in the process of in-sourcing the development of new mine tunnel infrastructure. We expect to have both machinery and personnel ready to start this in-house activity next year. The decision to in-source these activities was based on the long-term mining plan. Since we are getting closer to exhaust the resource in the open pit mine, we will enter into a new phase. Now we will focus more on underground mining in the outfield deposits. This has consequences for both exploration drilling and development of new mine tunnel infrastructure. Since we know less about the rock masses underground, exploration drilling will become part of our day-to-day operations. And since we will work more underground, the development of new mine tunnel infrastructure will also become part of our day-to-day operations. These activities used to be done from time to time when we needed it. know that these activities are needed continuously, it is more cost effective to conduct these activities in-house. There are 3 benefits of in-sourcing these work streams. The first and main benefit is reduced costs. The second benefit is more predictability related to costs. There are 2 reasons why in-sourcing will improve cost predictability. Firstly, we will avoid business cycles in the construction industry. Secondly, we will recruit local workers. Our subcontractors use nonlocal workers who often face logistical challenges when traveling to our site, especially in the winter time when challenging weather conditions prevent crossing the [indiscernible] passes by car and sometimes even prevent flight from landing at the local airport. These challenges have led to unpredictable costs, which will cease with local workers. And the third advantage is of in-sourcing is more influenced on the terms and conditions of the workers needed. This again gives operational stability. We have previously defined 3 strategic development projects. The aim of the first is to increase the minimum iron content in our hematite product to 65%. The aim of the second is to increase our magnetite production and the aim of the third project is to eliminate carbon emissions from our production. I will now say some words about the project to increase the current minimum iron content in our hematite from 65% to a minimum of 65%. The market prices for hematite concentrate depend on the iron content. From January 2021, until the end of September 2022, products with a minimum iron content of 65% as an average -- has average been priced USD 23.5 higher per metric ton than products with a minimum iron content of 62%. The market prices for hematite within these character -- categories are tracked by the indices called plus Fe65 and plus Fe62. The price difference reported in these 2 indices is due to higher demand for hematite with higher iron content. The higher demand is due to environmental advantages with higher iron content and the environmental responsibilities facing the steel industry. The industry needs to reduce its carbon emissions. And most European steel mills aim to reduce emissions by around 30% before 2030. And to be carbon neutral before 2050. To achieve these goals, the steel mills need changes in both the production methods and the raw materials used. Hematite with higher iron content will enable steel mills to use less hematite concentrate in their production, which again lead to less carbon emissions and waste. To put it simply, environmental advantages impact the demand, and this gives premium pricing for hematite products with higher iron content. This is why Cargill has encouraged us to increase the minimum iron content in our hematite product from around 63% to 65%. We are doing several things to be able to produce hematite with a minimum iron content of 65%. Firstly, we do considerable R&D work to find the optimal production method, so that we do not sacrifice much production volume for higher iron content. Everyone can produce hematite with a high iron content by sacrificing production volumes. But if we are to take advantage of the premium pricing, we need to keep up our high production volumes. Secondly, we are making investments in the processing plant based on the iron -- the R&D work. The delivery of some of the equipment has been delayed due to global supply chain challenges. In addition, some of the relevant upgrades have to be implemented during the annual care and maintenance, which takes place in July. So this takes time. The final measure in this project is preparing the market to receive our improved product. For even if we reach our goal, this will not contribute to our top line overnight. The pricing based on the positive Fe65 index depends on approval of the product quality by the steel mills that receives this. Cargill, therefore, reaches out to steel mills so that some willing to pay for our improved product will be ready to receive it. Once the steel mills have approved of the product quality, we can negotiate the contractual returns and base the pricing of our hematite concentrate to Platts Fe65. We expect this to happen during 2025. To give you an idea of the process, we can have a look at these 2 graphs. The graph on the left-hand side shows the development of iron content in our hematite production in 2022. We see that before the summer, there was no significant development of high -- and a high variability in the iron content. Here at the vertical line, we had the annual care and maintenance of the mine and processing plant. During this period, we had small adjustments in the plant. On the right-hand side of the graph, we see that this has already given results. There is both less variability and an upward trend. The graph on the right-hand side shows the development after the annual care and maintenance. We expect that the adjustments we made during the annual care and maintenance will continue to pay off. And when we have finalized the upgrade of the processing plant and installed all the new equipment, we expect to take the last few steps to produce hematite with an iron content of at least 65%. And we expect this to happen before the end of 2024. Now some words about our second strategic development projects, namely to increase our magnetite production. As I mentioned earlier, our magnetite concentrate is sold to European chemical producers, which use the magnetite to make water treatment chemicals. These chemicals are used to purify water in public water purification systems. There are 2 reasons why we want to increase our magnetite production. The first reason is that there is a high demand for our magnetite. Magnetite is usually utilized in steel production. But since we do not use any chemicals in our production, our magnetite is clean and, therefore, suitable for product used in water purification. The demand for water treatment products based on magnetite is very high. And we often get requests from players wanting to buy our products. But with our current production level, we cannot supply this demand. The second reason we want to increase our magnetite production is that our revenues from magnetite provides security in times with fluctuating prices for hematite. To increase the magnetite production, we have completed the design of processing plant and plan the organizing of the upgrade. And the next step is to order the equipment needed. Today, we produce, as mentioned earlier, 100,000 tons -- metric tons per year, and the plan is to increase this production volume by 50% by the end of 2024. Before we move to the third development project, let me sum up on the first 2. We are on track with the -- the both Fe65 project and the M40 project. We are in the process to upgrade the processing plant, and we expect to complete both projects before the end of 2024. Nancy will now tell you more about the project to become carbon free.

Thank you, Gunnar. My name is Nancy Schreiner and I'm the Environment and Sustainability Manager at Rana Gruber. Today, Rana Gruber has among the industry's lowest carbon emissions with 9.29 kilo CO2 equivalents per ton produced iron ore. But we want to go even further and eliminate all the carbon emissions by the end of 2025. There are 4 reasons why we want to become carbon free. The first is social responsibility. The mining industry is responsible for the 4% to 7% of global carbon emissions. At Rana Gruber, we take our responsibility seriously. We want to pave the way for the industry and become the world's first carbon-free iron ore producer. The second reason is that by replacing an annual consumption of 5 million liters diesel with renewable power. We expect to reduce operating costs. The third reason is that we expect the future price premium for iron ore concentrate, which is produced in a more sustainable way. Since this will also help the steel mills to reach their emissions goals. The fourth reason we want to become carbon free is that we expect this to make a more global, a more attractive investment. One of our benefits for achieving an industry-leading carbon footprints is the location of our deficits. As Gunnar explained, the deposits are located close to their processing plant and port, which are located next to each other. Their deposits are also higher above the sea level. This enabled a short downhill rail transport of the ore, which requires minimal amounts of energy. In addition to this, Rana Gruber is located in an area with good access to renewable powers. Eliminating emissions means that our mining equipment vehicles, railway and underground mine heating facility must be electrified or else be replaced with our non-fossil fuel alternative. This is a difficult challenge as the machinery needs to handle large and heavy masses of iron ore. We may divide our execution plan into 3 parts, which -- that which concerns the underground mine, that which concerns the open pit mine, and that which concerns the railway transport. For the underground mine, we have started the gradual process of replacing equipment. We have also started the planning of the on-site infrastructure needed for electrified operations. The new infrastructure involves both an efficient charging structure and safety measures. Even though accidents are rare, the batteries in electric vehicles are combustible items, the utmost priority for Rana Gruber is to secure the safety of our employees. So we will make the investment needed to maximize safety. We work closely with external advisers and suppliers to identify and plan the best solution for the on-site infrastructure. For the open pit mine, the production in Ortfjell will continue with today's operational facilities until we have exhausted their reserves of the deposits in 2024. Future open pit production in the Finnkateng deposit will be carbon free, but we have not yet decided whether we will operate it -- the mine ourselves or if we will leave it to external providers. For the railway transport, there is an ongoing project with SINTEF and other players to investigate the pros and cons of electricity-based solutions and hydrogen-based solutions. We expect their recommended to be ready in the first half of 2023. We want to be at the forefront of the sustainability mining. We will therefore commit to the highest ESG standards and continue to prioritize the health and safety of our employees. We hope to continue to score high on rewards. Before I leave the word to Jan Ove Stene, let me sum up. In 2021, we were responsible for 9.29 kilos CO2 equivalents per ton produced iron ore. The main driver behind this was transportation, followed by fuel and energy-related activities. The goal is to be carbon free at the end of 2025. And our favorable location makes this possible. We have a robust plan to reach our goal, and we are working hard to have everything in place for the deadline we have set us to ourselves.

Thank you, Nancy. I'm happy to introduce Jan Ove Stene, Managing Director and Territory Manager of Sandvik Group. He will now give us more insight into electric mining equipment.

So thank you for the invitation to participate in Rana Gruber's Capital Market Day. I'm pleased to be here. As mentioned, my name is Jan Ove Stene. I'm located here in Norway and representing Sandvik here in the Capital Market Day. I belong to business area within the Sandvik Group, Sandvik Mining and Rock Solutions. Yes. Next, Okay. First of all, I will give you a glance of Sandvik of '21 figures. We are currently 39,000 employees. 2021 numbers had SEK 86 billion in revenue. We have globally 68 research and develop centers globally and we have sales in about 150 countries around the globe. Each year, we are actually using around SEK 3.5 billion in research and development to keep us in a marketing-leading position when it comes to global technology. I will come into that later on. And we have currently 5,520 active patents, which we are monitoring and taking care of. Currently, we are 3 business areas: Mechanical Cutting and Machining Solutions, Mining and Rock Solutions, where I come from. And then we have Rock Processing Solutions. And for this 3 business area, we hold a world-leading position with a technology leadership. And within Mining and Rock Solutions and also Rock Processing Solutions, it's a really strong focus around electrification and battery technology. As I mentioned, we are among the leading manufacturing company when it comes to battery electric vehicles and this is globally. What we see currently is that there is a very, very high global demand within the mining industry for battery electric vehicles and also electrification. Due to this, Sandvik is now heavily ramping up our production to cope with the high global demand scene. It's not only Rana Gruber looking into electrification of underground mine. It's a global trend. What is good to see is that Rana Gruber is actually what I would say, a front runner in this electrification with a goal to be fossil free in 2025. And we, within Sandvik, we have committed ourselves to assist Rana Gruber with that process. Yes, our battery electric vehicles and electrical equipment are produced at our production units in U.S., Canada and Finland. And we also have overall battery technology, focusing on a very low risk for burst out gases, fire and such things. And this battery technology, we acquired through an acquisition of Artisan, which is a leading battery electric vehicle factory in U.S. located in California. And that acquisition took place in 2019. And with that battery technology, we also are able to focus a lot on the underground mining safety. Is this something underground mine would like to avoid or have to avoid is the far risk. And if you can use battery technology with a very low risk factor, you are also able to control it in a much better way. It's currently different solution for the battery technology as such. And if you look into it, the risk level differs, and our technology is actually the 1 which has the highest safety as such. What we see currently as a shift in the underground mining industry is a clear direction through a sustainable underground mine. And this is actually coming from electrification. And also, it's also a trend for more and more automation, much more using data and to look at the data analytics way. and also end-to-end optimation of the production. So this is actually what we are currently doing together with Rana Gruber. We are carrying out in depth on the [indiscernible] of the mine, together with Rana Gruber to see how we can do the electrification at the mine with a focus on productivity, profitability and sustainability. So what is actually the benefits with the electrification in the mine? Yes, the benefit is that you can actually have a reduction of the ventilation up to 30%. And in underground mine, ventilation is a very high cost factor. You actually also increased the ramp-up speed up to 2x using a battery technology, replacing it from the fossil engines you are normally using today. And you also reduced the CO2 emission and the safety for the workers with the 0 diesel particles in there. And we also have an increased productivity with faster load time and much faster acceleration from the loading zone. Automation allows you to operate the equipment, more or less operator free. You can do it outside the mine. You can do it in the mine. You can actually be here in this location and operate equipment at the mine site. And the data and to analyze the data gives you a much better maintenance view production optimation and all this and also then end-to-end automation. It's currently 3 main drivers for electrification in the mining industry, focus on the workers' health, as Nancy mentioned, where you remove these particulates, you reduce the heat due to the fact that the engines is not giving so much heat as the normal engines used today. And you will reduce also the noise level a lot. It's improved mine economics because ventilation, as I mentioned, is a very high cost contributor in underground mine today, cooling and productivity. Another reason for electrification on the mines today is the mines are going deeper and deeper and the heat is increasing. And of course, productivity and global sustainability, you are removing the greenhouse gases, fossil fuel use is not there any longer. And you also have the energy efficiency. So in November 2022, we signed a cooperation agreement and electro intent with Rana Gruber, where we are going to build a long-term development plan with clear targets for a successful relationship, develop the work process for the next phases, mentioned by Gunnar earlier today and also to establish a clear fleet strategy to enable Rana Gruber to be fossil-free in 2025. As I mentioned, it's currently extremely low and high demand for battery electric vehicles. So doing this together with Rana Gruber, we are also there to secure that and can do the electrification with and within the time frame 2025. Commit jointly to determine the need for training and education of Rana Gruber personnel because this is a new technology and personnel need training and also education to utilize the equipment in the best possible way and also to handle the battery in a safe way and bring up product and application development needs together for the way further. And this has been done now during 2021, '22, where we conduct a Trans4Mine study. As you can see, the purpose of the Trans4Mine is to assist strategic customers, realize best practice as sustainable safety, cost and productivity benefits and performance within their operations. And this study is now almost coming to an end. We are currently going through the results together. And from there, we take it to the next steps. So to summarize, Sandvik is there to support Rana Gruber with the journey forward. Thank you.

Thank you, Jan Ove Stene . We will now continue with Stein-Tore Liljenstrom who will tell us more about our resource and reserves, our exploration drilling and our 5 iron ore deposits.

Thank you, Vegard. My name is Stein-Tore Liljenstrom, and I am the CEO of Rana Gruber. In December last year, we presented a report with an updated estimate of our resources and reserves. The report was prepared by Micon International in accordance with the Pan-European Reserve and Resource reporting Committee standard for the public reporting of exploration results, mineral resources and mineral reserves, PERC in short. Before I proceed with the results of the report, let me quickly remind you of the resource and reserve distinction. The resources are the total estimated amount of iron ore in our deposits. The reserves are the amount of resources that we are reasonably confident are both technically feasible and economically profitable to extract. We updated ore estimates shows that we posses a vast resource base, exceeding 444 million metric tons. Of these 444 million tons resources, 94 million tons have been classified as reserves. These estimates indicates that we can operate our mines for several decades to come. As Gunnar mentioned, we have an ongoing exploration drilling program. The purpose of the exploration drilling is to expand the resource and reserve basis. More detailed knowledge of the geological and physical properties of the rock masses, also provides more precision in the long-term mine planning, which we aim to expand beyond 2040, in accordance with our long-term perspective. Gunnar also mentioned the exploration drilling was previously handled by external providers, but is now carried out by in-house personnel. Ortfjell deposit you see in the picture here is our main deposit. This deposit is on Rana Gruber's own property. It is where we have the existing infrastructure, including the silo, crusher, railway and our network of roads. The deposit contains 72% of our total resources and 69% of our reserves, and it will be mined for decades, as I mentioned. In addition to the main deposit in Ortfjell within our property, there are 3 smaller deposits in areas called Finnkateng, Ortvann and Stensundtjernc in this area. We also have our exploration license in our -- on our 1/3 of deposits in an area called Dunderland, appear in the picture. But this is outside of our property, but we have the exploration license. Finnkateng, Ortvann and Dunderland together contains 20% of our resources but none of these has yet been classified as reserves. And all of these are then part of the current mine plan. Stensundtjernc contains only 8% of the resource, but 31% of the reserve, and we are currently in the process of obtaining operating license for this deposit. And we plan to take advantage of the resource without making heavy investments in new infrastructure. As the Ortfjell deposit is close to our silo, crusher and railway with which we -- the ore is transported down to the processing plant, we will probably end up transporting the ore from Stensundtjernc to Ortfjell with trucks and mining equipment. In this way, we will maximize the value of the existing infrastructure rather than investing in new one. We expect to start mining in Stensundtjernc deposit in 2024. So to sum up, we already have a vast resource and reserve base, and we are working to increase the reserve base even further and we are able to utilize our existing infrastructure to conduct mining operations for decades.

Thank you, Stein-Tore. Now there will be a 10-minute coffee break. So please help yourself, and we'll start up in 10 minutes. [Break]

Then I think everyone is back, and I would like to introduce Mr. Leon Davies, Sustainability Lead and Atlantic Customer lead at Cargill Metals. And Leon will now tell us more about the iron ore market.

Thank you. Good morning. I'm Leon Davies. As Vegard said, I look at the sustainability for Cargill Metals globally. I'm also the customer lead for all of our business across the Atlantic. I've worked in the steel industry for the last 18 years spending the majority of that time either buying or selling iron ore. Apologies for the really boring slide. We'll skip through this one. So Cargill Metals have got many decades of experience in the metals industry. We've got about 150 employees in our business globally spread across multiple locations. Each year, we sell more than 50 million tons per year of iron ore and [ 16 million tons ] per U.S. steel. As a group, Cargill overall has around 155,000 employees. We're working in about 70 different countries. So I'm going to spend a few minutes now talking about the iron ore market, both in terms of what we're seeing today in the short term, but also then going on to some of the longer-term trends that we see impacting the years ahead. Iron ore has been through a few pretty volatile years and 2022 has been no different. We've seen over recent months to market really grinding down to levels where today we see Platts on a 62 basis in the high 80s, which is not dissimilar to the low points we saw in Q4 last year. At the same time, we've seen quite a lot of volatility in the freight market. We haven't this year witnessed the highs that we saw in freight in Q4 last year where we saw this quite unusual situation where containerized freight spiked to extremely high levels of demand driven by the COVID spending binge, which was -- which creates an unusual scenario of some materials, which were normally moving container freight being pushed into the dry bulk segment, and therefore, pulling more demand into that segment and pushing up the entire freight market to pretty high levels. Today, container freight is returned back to its pre-COVID levels and reverse some of that trend. However, what we do see today still is the C3 number, which is the freight cost and Capesize vessels from Brazil to China, seeing in the sort of high teens level. And the reason behind that level staying relatively high is that about 2/3 of the current C3 price is driven by high fuel prices, high bunker prices. For reference to that in recent years, when we've seen very weak freight markets we've seen the C3 price less than half of that of where it is today. This is a very relevant factor when you're thinking about the cost structure of iron ore miners. There's a lot of production here in the Atlantic. We have to think that iron ore prices there in China. Therefore, high freight environment shifts the cost structure up for a lot of those producers. If we think about China today, it's in something you have a balancing act at present. There's been -- it's been a difficult few months on the market. The 0 COVID policy stance of the central government has definitely disrupted a lot of the economic activity in the country. And that has really driven sentiment to turn increasingly negative. Well, you have to balance this with the desire to maintain a stable economy, which has resulted in a lot of stimulus measures being targeted at the market. Trying to second guess Chinese government policy is pretty difficult, but the market is watching very closely right now for signs of government softening, it's 0 COVID policy. So you see a huge amount of speculation around as and when the shackles will come off. Sentiment in the Chinese property market has been particularly weak. And the recent economic data in October was disappointing, which would really suggest that there's depressed spending at present in the infrastructure presence -- infrastructure projects. You got to balance this with the desire to provide support for the real economy, which could well result in further stimulus being targeted at the market. The Chinese property sector is huge and is of critical importance to the steel industry and the overall economy in general. So if we look into steel, 2021 and the start of this year was really a very good period for steelmakers globally. And the vast majority of people are enjoying very healthy margins in what's a classically cyclical industry. But through the course of this year, the headwinds have been growing. And that's due to a combination of the 0 COVID policies in China, but also the inflationary pressures that the world is facing. And that's been accelerated by the energy crisis resulting from the situation in Ukraine. The result of this has been a deterioration in steel markets through the course of 2022 and really steel mills are suffering from the combination of weakening demand, eroding demand at the same time as very high energy prices, both for gas for power but also for coal. We've seen also quite an unusual situation recently where metallurgical coal has actually been trading at a discount to thermal coal, which is completely decoupled from the normal market behavior, and that's been pulling some of the supply of met coal into thermal coal tightening an already tight segment. Recently, we started to see some reductions in energy prices, and that's certainly giving a little bit of improvement and help support the steel margins right now. Iron ore on the other hand, is in quite an interesting time. There's a few factors that we really need to think about. So firstly, if we look at the Chinese port inventory levels right now, they're actually sitting at relatively low levels over here compared to the levels where they were a year ago. But on top of that, and perhaps equally important is thinking about the inventory levels which you're seeing in steel mills. So as the steel mills have been going through this more bearish period, they've been running down their own inventories at site and we're operating on a hand-to-mouth basis. And what the Chinese industry has the benefit of is this huge port market, which they can tap into on any given day and restock or buy material on a hand-to-mouth basis. This is quite interesting in terms of where you can foresee a scenario where sentiment start to turn more positive and a lot of the on mills need turn pour into a port market at potentially to restock at the same time, when your inventory levels there are actually they were relatively low compared to where it might have been at previous points. We also need to think about the supply side of iron ore, and this faced a number of challenges. So the shipment pace from Brazil continues to fall behind expectations and has done so ever since the Vale Brumadinho dam tragedy in early 2019. But coupled with this, we also see a lot of other issues. So there's the increase in tariffs on Indian iron ore exports has virtually stopped the entire flow of Indian iron ore fines from -- into the China market this year, driven also further by the strong demand in that -- to feed their own growing steel industry. We've also recently seen a bit of effect in the bottom right chart there where Chinese domestic concentrate production has also been curtailed due to some safety concerns related to -- in the mines there. And coupled with this, we're now heading into the season where the market is much more prone to disruption. So we have the prospect of heavy rainfall that starts soon in Brazil that impacts both mine production and logistics there. And at the same time, the season where the Pilbara region of Australia is relatively exposed to cyclones disrupting the supply there as well. So whilst the steel industry is in a very difficult moment, I think it's also fair to summarize that the iron ore market is relatively tight right now. And so what does this mean for Rana Gruber? Well, as I said, we sell 50-odd million tons a year of iron ores. We're selling somewhere in the region of 50 million tons a year of iron ore to the Chinese steel industry. And that means we've got a very large global customer base. And we always have the option to sell Rana Gruber as material into China as a backstop if we require. And that was a pretty useful lever right at the start of COVID, where we saw some curtailment of production from some of our customers in Europe, and we needed to divert a few vessels into the Chinese market. And that was quite easy to do. But for the past couple of years now, we've sold every single ton that Rana has produced and sent to us into the European market. And we've really focused our efforts on growing further the European customer base, as Gunnar mentioned before. And that's been pretty successful. So we've seen growing demand for Rana Gruber's products into the key target market to the extent that we're foreseeing greater demand than supply at present. As we start to think about some of the longer-term market trends, I think you have to look to the path to think about the future. So we've seen 3 very distinctive eras in the steel industry. There were the pre-2000 industrial era. And again, you have to think about China there has been a relatively small player in the market. In fact, in 2000, China was about 10% of global steel production and a relatively small importer, largely consuming domestic iron ore. I know prices were pretty stable, but also pretty low. And there was little differentiation between different grades of iron ore because there was an abundance of supply of high grade iron ore. Many miners got to survive through this period. We then moved into the 2000 to 2010 era or the super cycle. So we got this dramatic demand expansion in China has expanded their production and consumption of steel. Supply chains across the mining industry, we're really stretched to their breaking point as companies were scrambling to meet this growing demand. And as China increased its consumption of iron ore so quickly, the iron ore grades that were available in the market started to deteriorate. So this oversupply of high-grade iron ore quickly disappeared. We started to feel a little bit more of differentiation between the different grades. And then sort of the following decade was what we thought -- think about as the era of commodities. So the benchmark price ended in 2010 and was replaced by index-linked pricing. And at the same time, as that the first derivatives market study to rapidly grow first in Singapore and then onshore in China. So China launched the Dalian Commodity Exchange iron ore contract in 2013, and it traded 33 million tons of iron ore on its first day. It peaked around 1 billion tons in a single day. And today, it settled at around 100 million to 150 million tons per day, which to give you some context is comparable to the entire annual consumption of the European steel industry. So this has been enormously disruptive to how the iron ore market operates, how it structures, how it's priced. And so we really do talk about iron ore, we talk about China and the influences on the price and the market there becoming increasingly complex. Today, as I mentioned, the start of this century, China was less than 10% -- around 10% of the steel industry. Today, it's a little over 50% of global steel production. It consumes the vast majority of the seaborne trade of iron ore. So its influence can never be underestimated. But we're now moving into the new era, which we're thinking about, which is decarbonization. And in our view, this is the ingredients to be as every bit as disruptive to the market as what we've seen over the last 2 phases. We also go into a period of a lot of different uncertainties. So we've talked about the Chinese policy, COVID policy this year and the impact that's having about the impact of the war in Ukraine and the geopolitical uncertainty. We're also facing on the growing pressures and the daily news we see around climate change and the impact of that. And we also see an increasing trend of resource scarcity. So you see in countries now increasingly scrambling to secure access to the critical resources for the economies of the future. And this is leading to quite a different period. So we see 3 main themes that are starting to emerge. The first thing is that we're seeing value chain starting to really now converge around carbon. And this is to a degree, going to drive a period of deglobalization. So the last 30 years have been characterized by globalization, the growth of efficiency gains. So it was entirely logical to ship raw materials to the other side of the world, produce steel in other and produce automobiles, fridges or whatever, ship them back to the other side of the world. But in a world with high carbon prices and decarbonization, this is just not going to be the way forward. So the economics will stack up and we're seeing trade policies like the sea ban coming in, which will target eroding of what we think about as carbon leakage. So very soon in the future, the way we think about it is that exporting steel, exporting scrap, exporting high grade iron ore from your local region, will feel like you're importing carbon to replace it, and therefore, it doesn't feel very logical. People are going to want to do less of that. So you're already seeing protectionism around, for instance, scrap resources in certain regions. The second thing is that we foresee a shortage of green steel, where we've got a significant potential in balance coming. So in Europe alone, there's about 26 announced projects over the next decade for the transition to low CO2 steel making by 2032. But the challenges of delivering these projects are going to be best. They're going to require huge amounts of capital. They're going to require a lot of technology risk and a lot of complexity to deliver scarcity of engineering resources, et cetera. But at the same time, as this is happening, we've seen a huge amount of commitments made by countries, by companies about reducing their Scope 1 and 2 or 3 emissions by the end of this decade. And we start to see a scenario where, by 2030, the demand for green steel will start to vastly outstrip the supply of green steel in the European steel industry. And then the third theme we see is the growing need for green and transparent supply chains. We see when we look at downstream customers and consumers, there's a growing pressure to have greater visibility, if not just how the products that they're buying are made, but also how the raw materials and feeds into those products are being produced. Consumers are increasingly applying pressure on steel mills to ensure that the products they need meet the standards that they demand. And it's fair to say that opacity that has, for a long time, existed in the ferrous steel industry will not be accepted in the future. So a huge pressure to operate clean green transparent supply chain right up to the very top of the value chain. We think this era of disruption will certainly lead to there being winners and losers in the market. I think the economics of the green transition are concerned to many today but the security of green steel, green raw materials, green supply chains means that we see big downside risk for those companies that move through slowly. And the window is closing to be a first mover. So it's really a question of if you want to go green, you better move now because if you think it's expensive today, wait 5 years and see how expensive it will be. So at Cargill, we're really delighted to continue our work with an Rana Gruber. It's a really exciting time for the company. We're really excited to see the implementation of the plans to become the first carbon-free iron ore miner in the world. Which I think will be a huge achievement and generate a lot of excitement across the ferrous industry. It's not just also though about what Rana Gruber can do for their own emissions, but it's about the impact that Rana can have on our downstream customers by delivering high-quality products, which, as Gunnar mentioned before, will allow our customers in turn to reduce their own carbon emissions. So yes, an exciting few years ahead. Thank you.

Thank you, Leon, and thank you for your insights. We now continue with Erlend, who will tell us more about the financial topics.

Hi, again, everyone. Thank you, Vegard. My name is Erlend Hoyen, and I am the CFO of Rana Gruber. Our financial targets for value creation remains firm. Our continuous focus on cost-efficient operations enables a low financial leverage. This enables a strong cash generation. This again enables us to fully fund our CapEx needs through operations and to deliver on our dividend policies. Today, I will go through more into depth into these topics and a couple of other ones. We have a strong focus on cost efficiency. And even though the global inflation has impacted our costs in the last few quarters, we see that the third quarter of 2022 had the lowest cash cost per metric tons produced since we went public. This is a result of the continuous work that we do to keep up pipe production as well as keeping focus on our cost levels. On the right-hand side of the graph, you can see a breakdown of our cash cost for 2022 full year figures. And we see that mining is, by far, the largest cost driver followed by administration and processing. We have a solid financial platform, and we have a policy to not have any long-term bank debt. As you can see on the graph on the left-hand side, we've had a positive leverage development the last couple of years, and we are now free of all long-term bank debt. Being free of long-term bank debt enable us to have a sufficient capital buffer for the investments needed to deliver on our strategic projects, the development of new mining levels and as well as the replacement of equipment and machineries even when the market is volatile. We also have an unused credit facility of NOK 100 million and by the end of the third quarter, we had an equity ratio of 45.5% and a cash holding in the company of NOK 339 million. Now some words about CapEx going forward. We planned investments related to our ongoing project, the Fe65 project, the M40 project and the zero-carbon emission project and the CapEx related to these projects will increase in the coming years. The Fe65 project and the M40 projects depend on an integrated process to upgrade the processing plant. The total CapEx estimated for these projects is between NOK 80 million to NOK 90 million. Of these, we have already invested NOK 10 million now in 2022. As Nancy said earlier, we are currently in the process of identifying the most suitable solutions and suppliers for the 0 carbon emission project. Sandvik, you have already met today, but we need to decide on several solutions from other suppliers as well in order to have everything we need. This makes it difficult to communicate an exact number for the CapEx needed in this particular project at the current time. What we do know is that we will not finance either of these projects with either new interest-bearing debt or share issues. The plan is to finance these projects through earnings from operation and lease obligations. We also expect that the 0 carbon emission project will be subject to governmental support, and we are in close dialogue with Enova regarding this project. And as Gunnar once mentioned earlier, all of these 3 projects are expected to be within the previously communicated time line. Since the listing on Euronext Growth in 2021, more than NOK 600 million has been paid out in dividends. This has provided a solid direct return on the Rana Gruber share with a distribution of NOK 16.47 per share, including the third quarter of '22. We aim to pay out 50% to 70% of the adjusted net profit over time to quarterly dividends determined by the Board of Directors and the Board of the Directors also have the option to allocate up to 30% of the estimated dividends to repurchase of all shares. The rationale behind the dividend policy is that an Rana Gruber is a mature mining company. Most of the heavy infrastructure investments were done in -- from the [ 1916 up till the 1920s ], and this is part of what enables us to have a strong cash flow generation in the current days. Of course, we need to develop new mining levels, and we do continuously need to work on improving the operations. But unlike the situation of a mining company in the start-up phase, most of the major investments have already been done. We often get a question about the price mechanism and booking of revenue, so I'll try to explain this here. The final price for any shipment of hematite concentrate is settled 3 months after the shipment has left our port in Mo i Rana. So, for a shipment taking place in January, the final price will be settled in April and for a shipment taking place in February. The price will be settled in May and so on. This 3-month lag between the initiation of shipment and the settlement of the price of the shipment is a well-established standard in the industry. The final price for any shipment is based on the average spot price for the settlement, not reported by the Platts Fe65 Index, which had been mentioned earlier today. But since the Fe62 Index is an index for Cargill delivered a port in China, and we only deliver SOB. The settlement involves an adjustment for freight as well as other minor elements related to the actual characteristics of the particular cargo and the end customers. And the freight index that is used in the settlement is the C3 index, which Leon mentioned on the Baltic Dry Index. For illustration, let's have a look at this table. Today, we reported that revenues for shipments taking place in the third quarter as well as the final settlements for shipments that left our port in the second quarter. So if you have a look at the first shipment, which took place in July, we see that the final settlement for this shipment is settled 3 months after in October. But even though we know the final price of these shipments, the revenue reported today is not based on the final price. They are based on what the forward price for October was at the end of -- the last day in September. And the same applies for the second shipment. The third and fourth shipment took place in August and the final price for these shipments will be settled when we know the November average. The revenues from these shipments reported today are based on what the forward price was for November at the end of the third quarter by 30th of September. The same mechanism applies for the last 2 shipments. The difference between the revenues booked for shipments taking place in a quarter and the settlement price of these shipments is based upon the changes on the Platts index compared to the forward prices used in the reporting. And this -- the difference impacts results in the following quarter. So that means in every quarter that we present, their revenues will be based partly on the estimated value for our shipments that is based on for prices as well as partially adjustments for the settlement prices for the previous quarter. Finally, some words about our hedging. We have hedging positions, both in -- related to iron ore and U.S. dollar, which is the currency that we sell most of our products in. And the purpose of our hedging positions is to secure a sustainable and stable cash flow that enables our needed investments and compliance with our dividend policy. As stated in our hedging policy, we may secure up to 50% of the annual production volume for a period of up to 24 months. This translates to a hedging portfolio covering up to around 750,000 metric tons. Our assessment of whether we should hedge or not are based on several factors. One of them being expectations about large changes in the iron ore market. Our expectations about changes is based on continuous conversations with strategic partners and analysts as well as sudden movements that we see in the world. And we typically try to stay away from hedging when we see an upward trend in the market. Other factors taken into consideration is whether the market is in a position we're securing is a small portion of the sales volume would support a large portion of the operating costs. And finally, the timing of large investments and cash draws will also be taken into consideration when we evaluate whether or not to hedge. And according to IFRS, changes in the portfolio value is included in the P&L under net financial income and expenses. Let's sum up to financial topics. We have a solid financial position. This enabled us to be compliant with our dividend policy, invest in our strategic projects, develop new mining levels and do all the necessary CapEx rotators and [indiscernible] machinery and equipment. That's all for me now.

Thank you, and we now have some time for questions. So are there any questions from the audience? Or shall I start with the received ones from the web?

[ Hansarn from Clarksons. ] I have a question for Leon Davies from Cargill. Seeing the low port inventories, seeing the low of steel mill inventories, and in general, seeing that Vale is struggling to ramp up from Brazil to China. Technically, it looks to me that the market will be showed iron ore concentrate or so on for the next 12 to 18 months. So can you elaborate if I'm right in reading your figures? And to me, it looks like iron ore is going to move upwards even with a slow China.

I mean if I knew the answer to that question, I know I'd be retired. I think that it's very difficult to call some of the policy decisions. And that's key because that's what said sentiment. But I think what you can see is the ingredients there where I set circumstances came together and certainly in moving upwards given the factors that you laid out there. And certainly, demand for high grade, high-grade concentrates is all somewhat influenced by steel margin, and secondly, by the energy costs. So in a situation where you have expansion of steel margins going forward, which isn't necessarily going to be the case that you see an enhancement in demand for the high-grade corrective types of ores. But we don't really make price forecast, Hansarn that's not our job. That's for the investment banks out there. So...

[ Kanad Sishen in ] Pareto Securities. Two questions for me. First, on the green premium. How should we think about the green premium company with 0 pollution could attract. That's the first 1. And the second 1 is on China actually in. Given the weak housing data you see now in China, what is the time like from housing project start-up and steel demand. If you have any thoughts there, it will be appreciated. And then the third and final is more on the Rana, how to think about CapEx for the next level on the mining project there?

So I think on the green premium, it's difficult to be too precise at this stage. I would say a little bit anecdotally what we see in the market. So I think there's pretty well publicized reports around green premiums to be achieved by new hydrogen-based steel making projects coming in Scandinavia. There's also -- we see rumors in the market that some of the products which are available in the market to -- and package as low carbon steel today are selling in with premiums in excess of EUR 100 per ton over the, what you might call the gray steel index for hot-rolled coils. So that already sets a little bit of a line in the sand that those triple-digit premiums for steel exist today. And where they go in future, I guess, well, it's difficult to be too precise. But as I said, we see that there's going to be an imbalance in terms of the demand for these solutions and the supply and availability of them as we move towards the sort of second half of this decade. And what does that mean then for green producers in the mining industry, et cetera, it's difficult to be too precise, but you are starting to move into a new or where there is a willingness to pay and there is a need for solutions to be delivered. Your second question has really stunned me. I can't be too precise because we have a whole team in China who are looking at trading and analytics. I'm sorry, I'm going to pass a little bit on that question. What I would say is that I think sentiment is very important. So everybody is looking for those forward indicator points I was looking at the -- for instance, the new loan data that comes out stimulus packages are coming more forward sentiment is like, which means that the actual lack of spending to underlying demand might be much shorter than the cycle time from spending through to apparent demand.

Regarding the CapEx level on the next mining level, there is a reason why we in-source that activity. And that is the predictability of the costs on the CapEx on every level. So then we do not influence by changing times in an entrepreneur business. So the next mining level will be at the same level with CapEx as the previous one.

Any other questions?

Then I have 1 question. I will like to test it on Leon. Why did Rana Gruber pay the same shipping cost as they would -- let's try again. Why do you pay the shipping cost the same range as you will ship to Asia when you ship to Europe?

Good question. So I used to be an iron ore buyer for a European steel mill. So I sat on the other side of the table in the past. At the iron ore contract, the Platts index is [ CF Qingdao ] contract. So that's where the market price is set. And the gain from there is how much of the freight benefit you can claw back. So when we talk about C3, C3 is -- as I said, it's a Capesize assessment from Brazil to China in 170,000, 180,000 ton vessels. So achieving C3 netback versus as a comparison to shipping in a smaller vessel from the North Atlantic actually is not about outcome. And it's all really -- the game with our customers is all really about how you get the right balance between what your netback price can be. But you can never move away from the fact that there isn't any kind of liquid CFR European reference point. The only market reference point is CFR China. So that's the starting point for every negotiation.

Do you want to say something?

No. He explained the mechanism, and that's the way it is for every producer in the European segment. So that's the way it is in order to be compatible with every other supplier in Europe, we have to link this into our contracts.

There's 1 question about -- there's a lot of talk about artificial intelligence these days, can drones powered by artificial intelligence, machine learning, be used to explore new fields? I think Stein-Tore should take that one.

Short answer is no. And I can elaborate a little bit in order to -- as I understand, explore new fields means exploring new iron ore in terms of drones, you need to drill you need to drill long holes into the ore itself, extract material from the ore body and inspect it. So no, it's a good question, but it's not feasible to use drones to find information deep in underground.

Thank you. I think either Gunnar or Erlend should take the next one. What are the following options do you prefer with total profits and increased automation and equity distribution dividends, buyback of your own shares and strengthen your equity?

Keep an equity, pay back dividends or buy back shares. You prefer?

I guess we would say that would prefer a balance. We both have to take into consideration the capacity we need to do these strategic projects and to deliver on our strategy to be debt-free for once. And on the other side, we have both Norwegian and international -- investment that we have to take care of. So -- there's a balance there as well between the buyback and the -- continue to pay out dividends. But I would say we, as a company, don't have any clear preference. We try to stick to what we feel that our biggest owners and the market wants the most as I think we have shown by implementing both. But if we look at the track record, the track record so far has been dividends through signals that we have gone through -- gotten to our biggest shareholders, but obviously, that is something that could change going forward, if that's something that's requested by the market.

You touched upon hedging strategy. Are you sure you have the optimal hedging strategy? And what are the main risks of the company?

I would try to refresh the same question as Leon said, if we knew that, we would be retired by now. I think that what we try to communicate with our hedging strategy is that we are not trying to speculate on the market. We're not trying to see whether or not we could beat the market or not, we have a strong cash flow focus on our hedging. And we are a long-term mining company. So being -- having a hedging strategy that support our cash needs going forward and being able for us to draw the big and the long lines that we need in being able to do the necessary investments when we need them at the right time is the important background for a lot of the rationale behind the hedging.

Yes. That was all the questions from the web. Are there any new questions from the audience? Mr. Mark? Can the cost from being the forerunner of green solution be higher than the benefits?

Well, we don't now, but we don't think so. As Leon mentioned, if you're too late, you could be too late. So you have to be an early mover to show that you will be in the front of the development. And that has been our singularized strategy all the time, and we still believe that that's our right way to go. And there are no -- from the investigation so far, I can't say that there are any reason why we should be struggling with financing the products. And we also believe and suspect that the revenue from the premium from producing a product that the steel industry is craving for will be substantial.

And then you touched upon CapEx for the strategic project. Could you say something about the level of maintenance CapEx?

Typically run around NOK 40 million to NOK 50 million in typical maintenance CapEx per year. And a part of that is traditionally transition of classical diesel-driven equipment that will be more towards the 0 carbon emission project. But in the last years, we have been using roughly, NOK 40 million to NOK 50 million in typical maintenance CapEx.

Given the cost pressure we are seeing across the industry and raw material prices that are still sky high, how do you see development in cash cost towards the end of 2022 and into 2023?

I think that for our cost base, obviously, there were will be fluctuations that everyone in this room knows related to the mass removal. As you saw, the mining operation is the operation that draws the most cash cost. But I think that what we do see is that a lot of the parts that has been increasing a lot for us, diesel explosives and input factors like that. They are starting to ease out and not continuously increasing at the moment. So I would expect them to be stable going forward.

I have 1 question to Stein-Tore regarding Fe65 project. Will you be able to increase the quality to 65% and still produce the same total volumes as you do today.

Yes, again, short answer, we believe so. It's not easy, but it's -- we have done a lot of R&D around that topic, how much capacity do you lose when you increase the quality. Every figure points towards that we are able to keep up the productivity of iron ore concentrate.

One question, I think again Leon could take this. Are you sure the demand for green steel products will increase in a world that potentially is heading towards a recession?

Yes. I think so. I'm quite sure the things that happen geopolitical now will not influence on the way going forward on green steel demand. So I'm quite sure.

And a question to Sandvik. Can you guarantee that you will be able to deliver the machinery that Rana Gruber needs to become carbon-free before entering into 2026?

I mean we have committed ourselves to Rana Gruber over a strategic partner. And we are now completing the Trans4Mine study. And I cannot predict the outcome of that, but I will say, yes, we can.

That was all for now. Then I will leave the word to Gunnar who will...

Yes. Thank you, Vegard. I would like to sum up this in 3 points. Firstly, we are on track with our strategic development projects before the end of 2024, that stays firm. And we expect to increase the minimum iron content in our hematite production to 65% and also to increase our magnetite production by 50%. Before the end of 2025, we expect to be the first carbon-free iron ore producer. Secondly, we already have vast resources and reserves and we are working to increase the reserve base and resource base further. We are able to utilize our existing infrastructure to conduct mining operations for decades to come. Finally, we have a solid financial position, and this enables attractivity and predictability, dividend distributions, investments in strategic projects development of new mining levels and necessary replacements of machinery and equipment. Thank you very much for your attention, and you are all invited for lunch in the floor above us. So please enjoy. Thank you again.