Mining Company LKAB Supports Kiruna Municipality to Secure Relocation Process of the Arctic Town 

The large-scale relocation of Sweden's northernmost city Kiruna is in full swing.

The remarkable relocation of the town, with its accompanying city transformation, is taking place to secure continued mining operations in the northern Swedish town.

LKAB, a wholly state-owned mining company, has extracted iron ore in Kiruna for more than one hundred years, but due to ground subsidence caused by the local iron ore mining activities, the decision was made to move the town. 

The relocation of the town has been under way for several years – and will continue in the years ahead. 

This week, however, the Swedish mining giant and Kiruna Municipality reached a historic agreement on the city's transformation going forward. At the same time, the company is contributing as much as SEK 1.8 billion to deal with the municipality's financial situation. 

Financial crisis

In May this year, Kiruna Municipality announced that its finances were in crisis, with a shortfall of SEK 1.8 billion in future investments related to the city transformation.

More specifically, among others, radio broadcater Sveriges Radio reported in June that the municipality was struggling with a growing budget deficit, and that the money the municipality receives from LKAB for the first part of the town's relocation appeared to be running out. This meant that the municipality risked having to take out further major loans to complete the construction of Kiruna's new town centre. 

"The municipality’s financial problems must be addressed to allow continued community development. That is why LKAB is taking a number of measures to help the municipality out of the crisis, says CEO of LKAB Johan Menckel in a statement on Monday this week. 

"We can see that the municipality cannot sort this out on its own, and then both we and the residents of Kiruna are affected. The most important thing is that together we can secure the way forward for both the mine and the community," he adds.

Takes over projects

The current package of measures, which LKAB is now putting forward, amounts to approximately SEK 1.8 billion and consists of two parts, according to a joint press release. 

First and foremost, it means that LKAB will take over infrastructure projects and construction projects for which the municipality has received compensation, and which were supposed to have been carried out within the framework of the first part of the city transformation.

This is work that the municipality no longer sees itself as able to handle as a result of the financial situation.

The municipality has estimated the remaining costs at around SEK 1.1 billion, corresponding to SEK 50,000 per resident in the municipality.

In addition, LKAB will pay compensation for plots of land and several properties that may amount to approximately SEK 700 million, and which mainly concern the next part of the urban transformation.

"This means that LKAB is taking over what we need to secure access to land for city transformation and continued mining operations. We are also taking responsibility for developing the infrastructure that the municipality sees it cannot manage, and which must be put in place for the sake of Kiruna’s residents," says Senior Vice President of Community Development, Stefan Hämäläinen, at LKAB.

"For us to be able to continue extracting iron ore in Kiruna, a functioning community is required where people want to live and work. This is a way for us to take shared responsibility for the way forward," he adds.

Important cooperation agreement

At the same time as Kiruna municipality and LKAB have agreed on the financial package of measures, they are also entering into a cooperation agreement that will regulate the division of responsibilities between the parties for the period up to 2035.

The aim of the agreement is to clarify who is responsible for land, detailed development plans, infrastructure and property development in order to enable the city transformation.

The agreement also makes it clear that the basis for the urban transformation going forward will be to replace functions where LKAB takes responsibility from start to finish in order to enable progress and reduce risk for the municipality and residents.

"I see this as the beginning of something new. It feels very good that we have landed here after reviewing how the urban transformation and the cooperation have worked so far," says Mayor and Chairman of the Municipal Council in Kiruna, Mats Taaveniku.

"This also means that LKAB takes full financial and practical responsibility for what is to be built, but the implementation will take place in cooperation," he adds. 

The two parts; the cooperation agreement and the financial package of measures, are being dealt with as separate matters, but are closely linked, the statement says.

The agreements are subject to a final decision by Kiruna Municipality, as well as by LKAB’s board. 

Affects more of the town

As HNN has reported in a number of articles, an entire town is on the move to secure LKAB’s continued iron ore mining operations.

The relocation of the town has been under way for several years, but in 2022 Kiruna’s new town centre was officially opened.

In August 2025, LKAB announced that the mining operations are affecting the ground more than expected, and that a significantly larger area will fall within the affected zone. A further 650 houses and 20 businesses must be relocated. Nearly 7,000 people are affected by the changes.

In the wake of this, LKAB and the municipality requested significant financial support from the state, as well as the release of a larger area to allow mining operations to continue.