Welcome to this presentation about Rana Gruber's performance in the first quarter of 2023. My name is Gunnar Moe, and I am the CEO of Rana Gruber. This time we will do things a bit different from previous quarters. We have made a film so you can see Rana Gruber from the inside while we report highlights from the quarter. After the film, we will move on to Q&A, and you may ask your questions by using the Q&A function in the webcast solution. The Q1 of the year was a solid quarter for Rana Gruber. The strong production trend continued, and we produced 434,000 metric tons of iron ore. The solid production continued to lower cash cost per metric ton than in 2022. The financial results in the quarter were also good, and the board of directors decided to pay out dividends of NOK 2.86 per share. We have paid out 70% of the adjusted net profit as dividends in all the nine quarters since we became public. Once again, this confirms our ability to create value to our shareholders. We have also made progress on our strategic projects. For the zero- carbon emissions project, we signed a frame agreement with the supplier Sandvik for the delivery of 19 battery-electric vehicles. This agreement is crucial for Rana Gruber to become the world's first carbon-free iron ore producer before the end of 2025. For the Fe65 Project, the positive trend has continued, and we expect to produce hematite with an iron ore content of at least 65% before the end of 2024. In fact, we even believe that we can increase the minimum iron content in the hematite product to around 67% in an economically viable way. More work needs to be done to determine time, timeframe and CapEx.
Finally, we have extended a strategic partnership with Cargill with another five years until 2035. The extended important for the development of the plan for increased iron content in the hematite product and to work with customers to ensure access to the desired end user markets that will value premium-grade ore. Now some words about HSE. We always target zero injuries related to production, and we have tailored safety measures providing a healthy work environment at Rana Gruber. Sadly, there were two production-related injuries which led to short-term absence from work in the Q1 . The incidents were handled according to procedures, and we have implemented measures to prevent similar incidents from happening in the future. Safety is our utmost priority, and we will continue to focus on the safety of our employees. A few more words about the production at Rana Gruber. We have achieved a strong production trend over the last few years. The iron ore concentrate production in Q1 was 434,000 metric tons, up from 406,000 metric tons in the Q1 of 2022. The production increase was partly due to the continuous work to improve the capacity of the processing plant, and it was also due to operational adjustments ensuring a more stable quality of the ore transported to the processing plant, as this enables better utilization of the plant.
One part of our work to improve the production process is to increase the iron content of the hematite product. In this journey, an important milestone is to reach an iron content of 65% Fe. This is going according to plan, and we expect to produce Fe65 concentrate before the end of 2024. Our ambitions are now even greater, and I will now tell you why. In collaboration with our partner Cargill, we have been analyzing the future of the European steel industry. In the coming years, we expect a period of significant change as many European steel producers start to transition away from traditional coal-driven blast furnace hot metal steel making towards the use of Direct Reduced Iron, or DRI, as a feedstock for electric arc furnaces. The driver behind this is the push to decarbonize the steel value chain and transition it to a more sustainable way to produce steel. The DRI process requires ultra-high grade iron concentrate with an iron content above 66.5% Fe. Recently, we have carried out studies that give us a strong belief in our ability to produce a hematite concentrate with an iron content of around 67% Fe.
We also believe we can do this in an economically viable way. This concentrate is suitable for future sustainable DRI-based steel production, and we see these results as a great opportunity. The reason is that the demand for suitable iron ore feedstock for the direct production process will exceed the supply. If we manage to produce the hematite we believe we can produce, this will enable premium pricing for our hematite product. We have now made a decision to continue the studies around the development of a hematite product with at least 67% iron. Such work will require further test work to enable the optimization of processing methodology and product specification, which will be critical to underpin the necessary investments. We do not anticipate that this will be a rather rapid transition, but one which could happen gradually over the next few years to keep in pace with the changing needs of the steel industry.
We aim to transform Rana Gruber to be the world's first carbon-free iron ore producer. For the underground mine, we have started the gradual process of replacing equipment. We have a close collaboration with the electric mining equipment supplier Sandvik. In the Q1 of 2023, we signed a frame agreement for 19 battery-electric mining vehicles, including trucks, loaders, and drills. We have already received two machines. The remaining machinery will be delivered consecutively until the end of 2025. Sandvik will also provide on-site service support and batteries. The zero carbon emissions project is on track, and we expect to be the world's first carbon-free iron ore producer before the end of 2025.
The revenues in the quarter came in at NOK 493 million compared to NOK 516 million in the Q1 in 2022. The reduction is mainly driven by changes in the market prices of iron ore, partially offset by larger volume sold, foreign exchange, and reduced freight costs. Cash cost, adjusted for realized electric power hedges ended at a total of NOK 216.4 million. This corresponds to NOK 496 per metric tons produced, down from NOK 558 per metric tons produced in the Q1 of 2022. The reduction in cash costs, compared to last year, was mainly driven by increased production this year as well as the company's contribution to the new local airport last year and listing process. EBITDA ended at NOK 226.3 million, down from NOK 273.6 million in the Q1 last year. The reduction in EBITDA is explained by the market effect on revenue as well as higher total cash costs. The volume sold in the quarter was in line with production, but the company still has an inventory of reduced iron ore concentrate that is expected to be normalized during the upcoming quarter. In the Q1 , the adjusted net profit ended at NOK 151.4 million, up from NOK 110.8 million last year. This gives us an adjusted EPS of NOK 4.08, by continuing the 70% payout ratio, the board decided to pay out a dividend of NOK 2.86 per share for the Q1 . This represents the fourth largest DPS since the company went public. Let's finally talk a little about our cash flow and our financial position. CapEx for the period was NOK 94.1 million in total. NOK 85.1 million of this was related to development CapEx, mainly related to the development of the new mining level 91. The rest of the development CapEx was related to the Fe65 Project, as well as the new heating facility in the underground mine that will contribute to our zero- carbon emissions project. The remaining NOK 9 million was related to maintenance CapEx. After dividend distribution for the Q4 of 2022, our equity ratio was 55.5%, and the total cash holdings at the end of the quarter was NOK 231.6 million .
The iron ore market was good in the Q1 of the year. After quarter end, the market has been more volatile. Although the volatility may continue in the short term, the long-term market outlook remains positive. Our continued focus on efficiency operations enables a low financial leverage, which enables a strong cash generation. This again enables us to fully fund CapEx through operations and to create value to our shareholders. We expect to pay out solid dividends to our shareholders also in future quarters. With the film. Now we will move over to Q&A, and I wonder if we have received some questions from our listeners.
Thank you, Gunnar. We have received some questions. I will start, with one questions for Erlend. How will you finance the CapEx related to the Sandvik agreement?
The Sandvik agreement is machinery in the underground mine related to the CO2 zero emission project. We expect that the machines themselves, we will finance through leasing. Parts of the infrastructure that is needed to power the machines and the loading charging of the machines, we expect to do over the cashflow. In the beginning, we will also lease the batteries for the machines. As time goes on, we will also look into a rental option that's on the cast that is from operational standpoint, very attractive looking. A mix of leasing and operational cashflow use.
Thank you. The next one goes to you as well. The strategic project requires a lot of investments. Will you be able to pay out dividends?
That is the goal, yes. We are an old mining company with a lot of the heavy infrastructure has been done in the 1960s, 1980 to 1990s. A rationale behind our dividend policy is that we are fully invested, so we expect to be able to maintain the dividend policy at the same time, do our strategic project.
Thank you. The next one goes to you, Gunnar. Do you have any updates about the Fe65 Project?
As mentioned before, we will give a detailed update on the H2 of this year. I can say that we are on track with the plan that we have mentioned before, so the improvement to the quality is a stable phase. We are optimistic and we are sure that this will be positive. The market will take this very positive. That is the signal from the market for the time being.
Can you also say something about the Fe67 Project?
We need to do a lot more research on that topic because we have mentioned that we, that is our goal to produce a product close up to 67%, but that will gradually happen during many years. We'll also have to give an update on that on, in the beginning of next year, I will guess.
Thank you. The next one goes to you, Erlend. Why is the total cash cost higher than the previous quarter?
Inflation is still a topic, although it is a declining topic. We have also increased the activity on our strategic projects. I guess a third factor I could mention is that we are also in a short-term period, higher on OpEx related to the insourcing of our tunneling activity that will contribute to a lower CapEx in a later on. Now in the start phase where we have to train personnel and build up the organization, there will be a short-term lift on the OpEx side.
Yes. One question for you, Gunnar. What factors do you think will affect the market price for iron ore going forward?
China is always the big question here. There are signs that the opening of China after the COVID period has gone slower than the market anticipated. There are very low stocks on steel and raw materials in China, which will normally improve the prices for raw materials when they open up fully. There are geopolitical questions to address as well. It's difficult to say, but we are optimistic for the future.
Yes. I'm not sure which, who are you gonna take this, but, well, maybe you, Aron. If you are completely CO2 free, will you sell CO2 certificate? Are you looking for rare earth metals like in Kiruna?
I guess I can take the first one, and Gunnar can take the second one, of those two. If we have something that is sellable, I think the short answer is yes, we will capitalize on that.
Regarding rare earth materials, we know that this is not something that we are looking for, because we know that in our area, that is nothing, we will not find that in our grounds.
Thank you. That was all the questions for today.
Good.
Thank you to all the listeners.
Have a nice day.
Have a nice day.