Northland Operational Update-May 2012
LUXEMBOURG, LUXEMBOURG -- (Marketwire) -- 05/22/12 -- Northland Resources S.A. (TSX: NAU)(OSLO: NAUR)(OSLO: NAUR.R)(FRANKFURT: NPK) ("Northland" or the "Company") announces its second bi-monthly operational and construction update on its Kaunisvaara project. During this period, March 19 - May 22, one of the main focuses has been on completing the mine and processing infrastructure at Kaunisvaara as well as signing logistics contracts.
-- The schedule for Kaunisvaara remains unchanged, with production at the
Tapuli Mine scheduled to commence during the fourth quarter of 2012 and
with shipments of concentrate starting in first quarter of 2013.
-- Northland has signed logistics agreements with Peab, Savage Service,
Green Cargo, Grieg Logistics and Kiruna Wagons, thus completing the
logistics chain from Kaunisvaara to the Port of Narvik.
-- Northland has hedged its electricity price considerably lower than used
in the Definitive Feasibility Study (DFS). The agreement is for "Base
blocks", equivalent to approximately 70 percent of the estimated
required amount for 2013 production.
THE MINE
-- Approximately 2,860,000 m3 of the Tapuli overburden has been removed so
far, and the current average rate is 80,000 m3 per week.
-- At the end of April, the first Kaunisvaara process line was 70%
complete. The second Kaunisvaara process line was 39% complete at the
end of April.
-- At the end of April, the Sahavaara mine and related investments were 25%
complete.
-- 4 pieces of 23 mobile mining equipment will be delivered before the end
of June.
THE LOGISTICS CHAIN
-- The build-out of the logistics chain is on schedule for Northland to
commence making deliveries to customers in the first quarter of 2013.
-- Building Permit for storage building at Pitkajarvi transloading terminal
has been received.
THE PORT
-- Construction of the Fagernes Terminal in the Port of Narvik began in
mid-January 2012 and remains on schedule. The initial piling work has
been successful.
Value of Work
At the end of April, Northland had committed USD 933 million of Capex for its Kaunisvaara project for the period up to 2016. At the end of April, the Value of Work done was USD 361 million.
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Kaunisvaara
Construction of the foundation for the primary crusher for the Tapuli ore is ongoing and is on schedule to be ready when the crusher is delivered in the second quarter of 2012. Construction of the ore sheds is also progressing well. Sections of the overland conveyor have now been mounted.
The ore sheds and the truck workshop are being constructed according to plan. The second construction phase, involving the administration premises, including locker rooms, laboratories and the simulator center, is also well underway.
The exterior of the process plant was finalized in mid-March. At the process plant, work is now focused on the interior structures, the delivery of these and other key equipment from Metso started in the second quarter of 2012 and are on time. The main items include crushers and mills from Metso.
Vattenfall Eldistribution AB has continued the erection of the 150 kV power line and the ground preparation for the substation has been initiated. Work is progressing on schedule. The steel structure for the electrical substation and the associated control room at the process plant are under construction.
The total length of the process water pipeline is approximately 40 km. The pipeline will run from the Muonio River to the process water pond and then to various locations around the site as well as to the construction of a number of pumping stations. Most of the water pipeline has now been laid and is progressing according to schedule.
The process water dam was brought into operation in the second quarter of 2012. It was inspected by the Swedish Dam Safety Inspectorate and received approval before it was brought into operation.
Starting in the second quarter of 2012, Northland will receive Caterpillar mining equipment. An agreement for the ongoing maintenance and repair of the mobile mining equipment for the Kaunisvaara project was signed on April 12, 2012.
On March 26, 2012, Northland signed a service contract with Metso to ensure a smooth start-up and running of the process plant. The service contract included staffing for commissioning and completion, performance-guarantee testing, scheduling and quality control, spare parts inventory-keeping and maintenance of the equipment related to the Kaunisvaara process plant.
Logistics
The trucking operation from Kaunisvaara to Pitkajarvi will be operated by Peab/Cliffton.
Construction of transloading terminal in Pitkajarvi:
-- The road and rail interchange work is on schedule
-- Land procurement and land rental has been finalized
-- Work is ongoing with Peab and the Swedish Transport Authority for the
construction works
-- Preparation and construction work on the roads at the Pitkajarvi site
have started
-- Received building permit from the Municipality of Kiruna
Rail operation between Pitkajarvi and Narvik - to be operated by Savage
-- Contract signed with Green Cargo for the operation of the locomotive,
hauling of the iron ore concentrate and for shunting in Pitkajarvi and
Narvik/Fagernes
Terminal at Fagernes (Narvik) - Grieg Logistics the Operator:
-- A permanent storage facility is planned for the fall of 2012
-- Norconsult has been engaged for the terminal design and project support
-- Peab has been engaged for the construction of the terminal
-- The design of the jetty has been finalized and construction is ongoing
-- The ship-loader contract has been signed
-- The de-icing facility contract has been signed
-- The construction work is progressing according to schedule, and the
facility will be operational to handle the first shipment in 2013.
Health & Safety
The Lost Time Injury Frequency Rate (LTIFR) from the start of the project and until end of April 2012 was 1.79 per 200,000 worked hours.
In total 30 Near Hits were reported, 15 of which were reported by contractors and subcontractors.
At the end of the first quarter of 2012, 200 people were trained for the obligatory site safety program.
Northland took over the site safety coordination starting April 1, 2012. The operations staff are preparing for takeover from the project organization during third quarter 2012. Recruitment of permanent site EHS staff is underway, with a safety coordinator in place at the start of May.
Contracts
The total value of commitments made during April 2012 amounted to USD 76.4 million.
The following contracts have been finalized as of the end of April 2012.
Agreements Description
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Construction and supply agreements
1 Process plant supply Agreement for the supply of mineral processing
agreement with Metso equipment and services for the two processing
Minerals (Sweden) AB lines of the Kaunisvaara Project, and basic
engineering for the process plant system of the
Kaunisvaara Project.
2 Long lead items supply Agreement for the supply of long lead items in
agreement with Metso respect of the mineral processing plant for the
Minerals (Sweden) AB Kaunisvaara Project.
3 Mobile mining equipment Agreement for the supply of Caterpillar mobile
supply agreement with mining equipment for use at the Kaunisvaara
PON Equipment AB Project site.
4 Power connection Agreement for the construction of new overhead
agreement with power lines to the Kaunisvaara Project site.
Vattenfall
Eldistribution AB
5 Agreement for supply of Agreement for the supply of explosives,
explosives, accessories accessories and services in connection with the
and services with Forcit Kaunisvaara Project.
Sweden AB
6 Water system agreement Agreement for the engineering and design of all
with FineWeld Sverige AB pump stations and related civil works for the
water and piping systems for the Kaunisvaara
Project.
7 Industrial area civil Agreement for the civil works for the
and building Kaunisvaara Project, including detailed
agreement with engineering, earthworks, foundations, buildings
Peab Sverige AB and related works.
8 Main power supply line Agreement for the main power supply with a
agreement with capacity of 130 kV for the process plant.
Vattenfall
Eldistribution AB
9 Agreement with Peab Agreement to remove an overburden consisting of
Sverige AB for removal peat, moraine and waste rock at the Tapuli
of overburden mine.
10 Port of Narvik lease Agreement with the Port of Narvik which grants
agreement the permit to lease the Narvik Terminal for a
period of 10 years, plus extension options.
11 Agreement for the Agreement for the purchase of a shiploader at
purchase of a ship Narvik with a 3,600 tph loading capacity.
loader with Sandvik
Mining and Construction
Norge AS
12 Mobile mining equipment Agreement for the ongoing maintenance and
maintenance agreement repair of the mobile mining equipment for the
with PON Equipment AB Kaunisvaara Project.
13 Wagon manufacturing Manufacturing contract in relation to the
contract with Kiruna design and manufacture of rail wagons for the
Wagon AB Kaunisvaara Project.
14 Rail operation agreement Agreement for the operation and management of
with Green Cargo the rail operations.
15 Port construction Agreement for the construction of the port
agreement with Peab facilities terminal in Narvik.
Sverige AB NUF
16 Port operation and Agreement for the operation and management of
management agreement the port operations.
with Grieg Logistics AS
17 Logistics operating Agreement between Northland Logistics AB and
agreement Northland Resources AB for the provision of
transportation and logistics services.
18 Logistics management Agreement between Northland Logistics AB and
agreement Savage Logistics AB for the overall management
and coordination of the Kaunisvaara Project
logistics solutions.
19 Life cycle services Agreement regarding equipment services,
agreement with Metso maintenance and supply and repair of parts.
Minerals (Sweden) AB
20 Materials handling and Agreement for the provision of various
transportation services materials handling and transportation services
agreement with for the Kaunisvaara Project.
Swerock AB
Off-take Contracts
21 Iron ore supply Agreement for the supply of a certain
agreement with percentage of the annual iron ore concentrate
Stemcor UK Ltd production of the Kaunisvaara Project.
22 Iron ore supply Agreement for the supply of a certain
agreement with percentage of the annual iron ore concentrate
Standard Bank Plc production of the Kaunisvaara Project.
23 Iron ore supply Agreement for the supply of a fixed amount of
agreement with Tata the annual iron ore concentrate production of
Steel UK Ltd the Kaunisvaara Project.
Finances
May 2, 2012, Northland entered a senior secured cost overrun facility with Standard Bank to finance potential cost overruns up to a maximum of USD 40 million. The facility will be senior secured but subordinated to the USD 350 million Senior Secured Bonds and will mature after the Bonds mature.
On May 7, 2012, Northland Resources AB, an indirect wholly owned subsidiary of Northland Resources S.A. published a prospectus in connection with the listing on Oslo Bors of its USD 270,000,000 (ISIN NO 001 063619.4) and NOK 460,00,000 (ISIN NO 001 063613.7) Senior Secured Bond Issue 2012/2017.
Pellivuoma
Pellivuoma is located approximately 15 km west of Sahavaara. The Company controls 100% of the exploration permit, which totals 11,346 hectares. The deposit constitutes a significant addition to the potential tonnage in the Kaunisvaara area.
Following a review of the ongoing DFS work at Pellivuoma, the Kaunisvaara management has resolved to change the scope of the DFS with the objective to ensure that Pellivuoma is linked in an optimal way to other parts of the Kaunisvaara mining site including the possible increase of the output of high grade concentrate or extending the life of the Kaunisvaara operation in combination with an increase of the production. The DFS is expected towards the end of 2012.
Other matters
Northland's ongoing effort to recruit operational managers as well as operational staff has thus far been successful. The Kaunisvaara senior operational management is in place and the recruitment process is focusing on the 100 positions that are still to be filled.
Next Operational Update
The Operational Update for July 2012 will be published on July 19, 2012.
Shareholders' Meetings in Oslo and Stockholm
Shareholders' Meetings will be held in Oslo (May 23, 5 p.m. CET) and in Stockholm (May 24, 6 p.m. CET). At the respective meeting the Executive Chairman, Mr. Anders Hvide, and the President and CEO, Mr. Karl-Axel Waplan, will comment on the latest Company developments. The presentation will be in the Norwegian and Swedish. Please contact the Northland IR department for further venue information for these meetings.
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Additional photos and video clips are available on Northland's website, www.northland.eu.
Karl-Axel Waplan, President & CEO, Northland Resources S.A.
Northland a development-stage mining company with a portfolio of iron ore projects in northern Sweden and Finland. The Company's Kaunisvaara Project will initially exploit two magnetite iron ore deposits in Sweden. The process will yield a high-grade, high-quality magnetite iron concentrate. The construction of the Kaunisvaara project in Sweden is well underway and mining is planned to start in the fourth quarter of 2012. Northland has entered into off-take contracts for the entire production from Kaunisvaara. The Company is also preparing a Definitive Feasibility Study ("DFS") for its Hannukainen Iron Oxide Copper Gold ("IOCG") Project in Kolari, northern Finland and for its Pellivuoma deposit 15 km from the Kaunisvaara process plant.
Important Notice
Forward-Looking Statements
This announcement may include "forward-looking" statements within the meaning of applicable securities laws. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms "believes", "estimates", "anticipates", "expects", "intends", "may", "will" or "should" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are expectations concerning, among other things, Northland's results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Readers are cautioned that forward-looking statements are not guarantees of future performance and that Northland's actual results of operations, financial condition and liquidity, and the development of the industry in which it operates may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if Northland's results of operations, financial condition and liquidity, and the development of the industry in which Northland operates are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.
Contacts:
Northland Resources S.A.
Karl-Axel Waplan
President and CEO
+46 705 104 239
Northland Resources S.A.
Peder Zetterberg
Acting CFO
+46 708 652 120
Northland Resources S.A.
Anders Antonsson
Vice President - Investor Relations
+46 709 994 970
Northland Resources S.A.
Marguerite Manshreck-Head
Investors Relations, Canada
+1 647 224 7882
www.northland.eu