SOTKAMO SILVER : OSAVUOSIKATSAUKSEN TIIVISTELMÄ TAMMI - MAALISKUU 2023

SOTKAMO SILVER AB INTERIM REPORT FIRST QUARTER 2023

HIGHLIGHTS OF

THE FIRST QUARTER 2023

 Net sales was 67 MSEK compared to

the previous year 114 MSEK. The main

reason was a lower mining volume. The

average silver grade developed

positively

 EBITDA was 6 MSEK (38)

 EBIT was -10 MSEK (15)

 Cash and cash equivalents were 34

MSEK (44)

 Investments were 8 MSEK (13)

 The production was about 207 000

(336 000) ounces of silver, 516 (870)

ounces of gold, 232 (465) tonnes of

lead, and 515 (990) tonnes of zinc in

concentrates

 Company received gross proceeds of

approx. 3.4 MEUR or 38.4 MSEK from

the rights Issue before the deduction of

transaction costs

 The Company and the senior lenders

date of the senior loan agreement (March 31, 2026)

• Company has provided a guarantee in accordance with the environmental permit as security for the obligations following the closure of the mine. According to the concluded contract, the guarantor released one million euros from the escrow account at the end of March 2023
  Comparative figures refer to the corresponding period of the previous year.

Net Sales MSEK

150

100

50

0

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

EBITDA MSEK

50

40

30

20

10

0

-10 Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

-20

EBIT MSEK

20

10

0

agreed on February 13, 2023, upon an

amendment to the terms of the senior

loan agreement, postponing the first

installment (1.5 MEUR due on March

31, 2023) to be paid on the termination

-10-20-30-40

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

CEO WORD

The year 2023 started with a challenging working capital situation for us. Actions for improving the financing situation were initiated already at the end of 2022 and during the first quarter of 2023 these steps were finalized. The share issue, postponing the senior loan amortization and releasing part of the escrow account funds were finalized. These actions ensure an adequate working capital situation for the short term.

Our mining and production plans and the current forecasts for the metal and electricity prices support the positive cash flow for the rest of 2023 and furthermore enable us to finance necessary investments like infill drilling.

Production volumes remained below the plans due to a delay in ramp-up with the new mining contractor. At the end of the quarter, the progress with the ramp-up has been developing in the required direction and we expect to stabilize the production during April.

The impact of the ramp-up delay is seen as temporary, and we estimate that there is no significant effect on the whole year's

production volumes. The new mining contractor is fully committed to improving their performance to a level that enables stable mining volumes and meeting the mining plans.

In the first quarter cash flow management was essential due to the tight working capital situation. This included tight control of all operative costs and investments. While postponing some of the planned costs, the company ensured that the mandatory investments are carried out to continue the operations normally after the winter period. For example, an infill drilling campaign was started, which will provide us with the needed data to plan and execute the mining in an accurate and cost-efficient manner.

The positive development in silver grade is encouraging and gives us confidence in returning to the estimated 90-110 g/tonne level.

I want to thank all the employees for their excellent work in the challenging past months. The uncertainty has undoubtedly affected everyone. The whole Silver team has together ensured that the operational capability is maintained and now when the

winter turns to spring, we are ready to accelerate production to the levels where we need to be. Our expectation for the increasing silver grade and positive development in electricity and metal prices is setting the base for clear positive development in the rest of the year.

BUSINESS

The Company operates the silver mine in Sotkamo, Finland. The production was started in March 2019 and the mine produces silver, gold, zinc, and lead in concentrates which are sold to two smelters. In addition, the Pyrite is sold to smelters to minimize the environmental footprint at the tailings pond. The Company holds also mining and exploration rights to mineral deposits nearby current operations in the Sotkamo region in Finland.

Net sales was 67 MSEK compared to the previous year 114 MSEK. The main reason was a lower mining volume. The average silver grade developed positively. Milled ore tons were 97 000 tonnes and was on lower level due to the ramp-up period with new mining contractor. The silver head grade was improved from the previous quarter 72 to 82 g/t.

Other income of -2,6 MSEK (6) included mainly estimated unrealized final sales price adjustment due to the price difference between provisional and final invoices for the period. Net sales included -2 MSEK estimated final metal content adjustment

due to metal content difference between provisional and final invoices for the period. The final sales price for silver and gold is based on the monthly average market price two months after the delivery, deducted by the customer's smelter charges.

Investments in the underground mine and environmental investments amounted to 8 MSEK (13) in Q1. P700 project's infill- drilling continued in Q1 which costs were included in the investments of the period.

In the first quarter, silver price traded in a range between $20.1 and $24.4 per ounce. At the end of the quarter, the price of silver was $23.9 per ounce.

The euro strengthened against the US dollar in the first quarter of the year from 1.0683 at the beginning of the year to 1.0875.

Market data	Q1	Q1	FY
	2023	2022	2022
Average	22.5	24.0	21.7
silver price
USD
Average	1.073	1.1217	1.0530
EUR/USD

Key figures, group	Q1	Q1	FY
	2023	2022	2022
Net sales MSEK	67	114	371
EBITDA MSEK	6	38	53
EBIT MSEK	-10	15	-34
Equity ratio (%)	40	30	38
Cash liquidity (%)	67	107	46
Personnel at the	44	49	44
end of the period
Mill feed (kt)	97	174	635
Average silver	82	71	69
grade g/tonnes

PRODUCTION AND GUIDANCE

In the first quarter, we milled 97 000 (173 000) tonnes of ore, and produced about 207 000 (336 000) ounces silver, 516

1. ounces gold, 232 (465) tonnes lead, and 515 (990) tonnes zinc in concentrates.

Silver (g/tonne) Head grade

100

75

50

25

0

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

ore feed which might have an impact on the produced silver ounces.

Further Company expects annual EBITDA to be at least 28 % and net debt-to-EBITDA to be below 2.5 at year-end.

The production volume was lower due to the new mining contractor ramp-up period, where delays in some of the mining equipment was extending the original ramp- up plan. In total, the volume remained

The silver head grades improved further in the first quarter and was 82 (71) g/tonne. The development with silver head grade has

400

300

200

100

0

Silver koz

roughly one-third under the planned silver production in Q1. The effect of the delayed ramp-up period is temporary and mining contractor capability is expected to be stabilized during April.

Milled ore (tonne)

1. 000

1. 000

1. 000

1. 000
   0

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

been according to the expectation and a further increase is expected during Q2 2023 as the mining will primarily focus on the new levels between 360- and 420- meters. The silver grade is expected to return to the longer-term average of 90- 110 g/tonne.

Guidance for 2023

The Company repeats its guidance for 2023 given in February 2023: The Company expects to produce 1.4 -1.5 million ounces of silver in 2023. However, Company's primary target is to maximize the revenue and operative cash flow. To achieve this, Company adjusts the mix of metals in the

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

Gold oz

• 000
  750
  500
  250
  0

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23

Zinc tonnes

• 200
  900
  600

300

0

Q1/22 Q2/22 Q3/22 Q4/22 Q1/23