Sotkamo Silver (SOSI) Q2 2024 earnings summary

Executive summary

• Q2 2024 net sales fell 13% year-over-year to 105 MSEK due to lower silver grades, but rose 25% sequentially from Q1, supported by higher silver prices.

• EBITDA dropped 64% year-over-year to 19 MSEK, with margin down to 18% from 44%; EBIT was 0 MSEK versus 34 MSEK last year.

• Silver production declined to 274,000 oz (383,000 oz Q2 2023) due to lower grades and mining challenges; gold, lead, and zinc output also decreased.

• Profitability was impacted by increased contractor costs and a 15 MSEK tax expense from a Supreme Administrative Court ruling.

• After the period, mine waste and closure plan approval lifted temporary mining limits, and a change in environmental guarantor will release EUR 3.5 million in cash collateral in Q3.

Financial highlights

• H1 2024 net sales up 1% year-over-year to 190 MSEK; EBITDA down 39% to 36 MSEK, margin at 19% (32%).

• EBIT for H1 was -1 MSEK (24 MSEK H1 2023); cash and cash equivalents at 30 MSEK (79 MSEK H1 2023).

• Investments increased 79% to 29 MSEK in H1; main capex in infill drilling, decline, crusher rebuild, and nitrogen management.

• Q2 result negatively affected by new mining tax (-1 MSEK) and reversal of estimated unrealized sales price adjustment (-9 MSEK other income).

• Operating cash flow was 10 MSEK in Q2; equity ratio at 40% (43% Q2 2023).

Outlook and guidance

• 2024 production guidance: 1.45–1.55 million oz silver, annual EBITDA margin at least 28%, net debt/EBITDA below 2.0 at year-end.

• Profitability expected to remain good, supported by operational efficiency but burdened by inflation and cost escalation.

• H2 2024 assumes silver grade increases to 90–110 g/tonne and improved mining volumes.

• Medium-term targets (to 2025): annual silver production >1.5 million oz, EBITDA margin >30%, net debt/EBITDA <2.0, extend mine life to 2035.