The Board's proposal for redemption

The Board of Directors' of Sandvik AB proposal for an automatic redemption procedure, including (A.) change of the Articles of Association, (B.) share split, (C.) reduction of the share capital for repayment to the shareholders, and (D.) increase of the share capital by way of a bonus issue, etc.

Background

In view of the Company's strong development in recent years, and assessments regarding the Company's strength and positioning for the future, the Board of Directors of Sandvik AB (the "Company") proposes, that the Annual General Meeting 26 April 2007 resolves on an automatic redemption of shares. According to this procedure each share is to be divided into two shares (share split 2:1), with a quotient value of SEK 0.60, of which one share will be redeemed at SEK 3 and, as a result, a total amount of approximately SEK 3,6 billion will be distributed to the shareholders. To make it possible to distribute funds in an easy and time-efficient way, the Board of Directors further proposes that a bonus issue be implemented by a transfer of SEK 711,772,305 from the Company's non-restricted equity to the share capital. For this reason, the Board of Directors proposes that the General Meeting decides in accordance with the following proposal.

A. Change of the Articles of Association

The Board of Directors proposes that the wording of the Articles of Association be changed, so that the permitted range of the share capital is reduced from a minimum of 1,200 million Swedish kronor (SEK 1,200,000,000) and a maximum 4,800 million Swedish kronor (SEK 4,800,000,000) to a minimum of SEK 700 million Swedish kronor (SEK 700,000,000) and a maximum of 2,800 million Swedish kronor (SEK 2,800,000,000) (Section 4).

B. Share split

The Board of Directors proposes that the quotient value of the share (the share capital divided by the number of shares) is changed by way of a so called share split, so that each share be divided into two shares, of which one is to be named redemption share in the VPC system and be redeemed in the manner described under Section C. below. The record day at VPC AB (the Swedish Central Security Depository) for implementation of the share split is to be 22 May 2007. After implementation of the share split, the number of shares in the Company will increase from 1,186,287,175 to 2,372,574,350, each share with a quotient value of SEK 0.60.

C. Reduction of the share capital for repayment to the shareholders

The Board of Directors proposes that the Annual General Meeting resolves that the share capital of the Company be reduced for repayment to the shareholders by SEK 711,772,305 (the reduction amount) by way of redemption of 1,186,287,175 shares, each share with a quotient value of SEK 0.60. The shares that are to be redeemed are the shares which, after implementation of the share split in accordance with Section B. above, are named redemption shares in the VPC system, whereby the record day for the right to receive redemption shares according to Section B. above is to be 22 May 2007.

For each redeemed share a redemption price of SEK 3 is to be paid in cash, of which SEK 2.40 exceeds the quotient value of the share. In addition to the reduction amount of SEK 711,772,305, a total amount of SEK 2,847,089,220 will be distributed, by use of the Company's non-restricted equity. Payment for the redeemed shares is to be made as early as possible, however not later than ten banking days after the Swedish Companies Registration Office's registration of all resolutions pursuant to Sections A. – D.

After implementation of the reduction of the share capital, the Company´s share capital will amount to SEK 711,772,305, divided on, in total, 1,186,287,175 shares, each share with a quotient value of SEK 0.60. Apart from the reduction of the share capital, the Company's restricted equity will not be affected.

In its statement under Chapter 20, Section 13, fourth paragraph of the Swedish Companies Act, the Board of Directors states the following. The resolution on reduction of the share capital for repayment to the shareholders by redemption of shares according to this Section C. may be implemented without obtaining the Swedish Companies Registration Office's or a general court's permission, since the Company at the same time implements a bonus issue according to Section D. below, as a measure with the object that neither the Company's restricted shareholders' equity, nor its share capital be reduced. The effect of the reduction of the share capital and the bonus issue on the Company's restricted equity and share capital appears, as concerns the reduction, from what is stated in the preceding paragraph and, as concerns the bonus issue, from what is stated in Section D. below.

The Board of Directors' statement pursuant to Chapter 20, Section 8 of the Swedish Companies Act is enclosed as Appendix 1.

D. Increase of the share capital by way of a bonus issue

The Board of Directors further proposes that the Annual General Meeting resolves that the Company's share capital be increased by way of a bonus issue, by SEK 711,772,305 to SEK 1,423,544,610 by a transfer of SEK 711,772,305 from the non-restricted equity. No new shares are to be issued in connection with the increase of the share capital.

The number of shares in the Company will, after implementation of the increase of the share capital, be 1,186,287,175, each share with a quotient value of SEK 1.20.

Resolutions adopted by the Annual General Meeting pursuant to Sections A. – D. above is to be adopted as one single resolution. To be valid, the General Meeting's resolution must be supported by shareholders holding at least two thirds of both the votes cast and the shares represented at the meeting.

Finally, the Board of Directors proposes that the Annual General Meeting resolves to authorise the Company's President to make the small adjustments of the resolutions pursuant to Sections A. – D. above that may be required in connection with the registration of the resolutions by the Swedish Companies Registration Office or VPC AB.

Sandviken, 31 January 2007

Sandvik Aktiebolag (publ)
The Board of Directors