Northland Resources AB (publ)

Transcription

Listing Prospectus
13 per cent. Northland Resources AB (publ) Senior Secured Bond Issue 2012/2017
ISIN NO 001 063613.7
ISIN NO 001 063619.4
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO BUY,
SUBSCRIBE OR SELL THE SECURITIES DESCRIBED HEREIN. IT HAS
BEEN PREPARED SOLELY FOR THE PURPOSE OF LISTING THE
SECURITIES ON THE OSLO BØRS AND NO SECURITIES ARE BEING
OFFERED OR SOLD PURSUANT TO THIS PROSPECTUS.
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO
THE UNITED STATES, AUSTRALIA, CANADA OR JAPAN.
Stockholm, 4 May 2012
Listing Prospectus
IMPORTANT INFORMATION
This prospectus (the “Prospectus”) has been prepared by Northland Resources AB (publ), registration
number 556656-1675, (the “Issuer” or “Northland Resources”) in connection with the listing of the
USD 270,000,000 and NOK 460,000,000 Senior Secured Bond Issue, 2012/2017, (the “Bonds”) on
the Oslo Børs.
This Prospectus has been prepared in accordance with the rules and regulations of the Swedish
Financial Instruments Trading Act (Sw. lag (1991:980) om handel med finansiella instrument) and
Commission Regulation (EC) no 80/2004 of 29 April 2004 implementing Directive 2003/71/EC of the
European Parliament and of the Council. This Prospectus has been approved and registered with the
Swedish Financial Supervisory Authority (Sw. Finansinspektionen) in accordance with the provisions
in Chapter 2, Sections 25 and 26 of the Swedish Financial Instruments Trading Act. Such approval and
registration does not constitute any guarantee from the Swedish Financial Supervisory Authority that
the information in this Prospectus is accurate or complete.
This Prospectus is governed by Swedish law. The courts of Sweden have exclusive jurisdiction to settle
any dispute arising out of or in connection with this Prospectus.
This Prospectus together with its summary (the “Summary”) of even date hereof constitutes the
“Prospectus”.
This Prospectus will be available at the Swedish Financial Supervisory Authority’s web site (www.fi.se)
and Northland Resources’ web site (www.northland.eu). Paper copies of this Prospectus may be
obtained from Northland Resources.
Investing in the Bonds involves risks. Prior to making an investment decision, all prospective
purchasers of the Bonds should carefully consider the factors set out under Section 2 (Risk Factors), in
addition to the other information contained in this Prospectus. The content of this Prospectus does not
constitute legal, financial or tax advice and bondholders and prospective purchasers of the Bonds are
encouraged to seek legal, financial and/or tax advice in respect of the Bonds from their own legal,
financial and/or tax advisors.
Unless otherwise explicitly stated, no information contained in this Prospectus has been audited or
reviewed by auditors. Certain financial information and other information contained in this
Prospectus has been rounded and, as a result, the numerical figures shown as totals in this Prospectus
may vary slightly from the exact arithmetic aggregation of the figures that proceeds them.
The Bonds may not be sold in the United States absent registration with the United States Securities
and Exchange Commission or an exemption from registration requirements under the U.S. Securities
Act of 1933, as amended (the “Securities Act”) and applicable state securities laws. In particular, the
Bonds have not been and will not be registered under the Securities Act, and may not be transferred or
resold except to (A) a “Qualified Institutional Buyer” pursuant to rule 144A of the Securities Act, (B) a
person who is not a U.S. person in an “Offshore Transaction” pursuant to regulations under the
Securities Act or (C) pursuant to any other exemption from registration as permitted under the
Securities Act and applicable state securities laws.
The Bonds will not be registered under the applicable securities laws of any state, province, territory,
county or jurisdiction of the United States, Australia, Canada or Japan. Accordingly, unless an
exemption under the relevant securities law is applicable, any such securities may not be offered, sold,
resold, delivered or distributed, directly or indirectly, in or to the United States, Australia, Canada or
Japan or any other jurisdiction if to do so would constitute a violation of the relevant laws of, or
registration thereof in, such jurisdiction.
The Bonds will not be listed on the Toronto Stock Exchange and may not be sold, transferred,
hypothecated or otherwise traded in Canada or to or for the benefit of a Canadian resident for a period
of four months and one day from the date that the Issuer becomes a reporting Issuer in any province
or territory of Canada.
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Listing Prospectus
TABLE OF CONTENTS
1.
SUMMARY ......................................................................................................................................4
2.
RISK FACTORS ............................................................................................................................. 14
3.
STATEMENTS ...............................................................................................................................33
4.
INFORMATION REGARDING THE SECURITIES TO BE ADMITTED TO TRADING ..........35
5.
SWEDISH TAXATION..................................................................................................................44
6.
NORWEGIAN TAXATION ...........................................................................................................45
7.
INDEPENDENT AUDITORS .......................................................................................................46
8.
SELECTED FINANCIAL INFORMATION REGARDING THE ISSUER...................................47
9.
SELECTED FINANCIAL INFORMATION REGARDING THE PARENT GUARANTOR ........ 51
10.
INFORMATION REGARDING THE ISSUER .............................................................................54
11.
INFORMATION REGARDING THE PARENT GUARANTOR .................................................. 57
12.
OVERVIEW OF BUSINESS OPERATIONS ................................................................................58
13.
ORGINISATIONAL STRUCTURE .............................................................................................106
14.
INFORMATION REGARDING TRENDS .................................................................................. 107
15.
BOARD OF DIRECTORS, MANAGEMENT AND SUPERVISORY BODIES ..........................108
16.
MAJOR SHAREHOLDERS OF THE ISSUER ........................................................................... 114
17.
MAJOR SHAREHOLDERS OF THE PARENT GUARANTOR ................................................ 114
18.
FINANCIAL INFORMATION REGARDING THE ISSUER’S ASSETS AND LIABILITIES,
FINANCIAL POSITION AND RESULTS ................................................................................... 116
19.
FINANCIAL INFORMATION REGARDING THE PARENT GUARANTOR’S ASSETS AND
LIABILITIES, FINANCIAL POSITION AND RESULTS............................................................117
20.
ADDITIONAL INFORMATION ................................................................................................. 118
21.
MATERIAL AGREEMENTS ....................................................................................................... 123
22.
STATEMENT REGARDING SOURCES AND EXPERT OPINIONS........................................ 126
23.
DOCUMENTS ON DISPLY AND INCORPORATED BY REFERENCE ................................... 127
24.
DEFINITIONS AND GLOSSARY OF TERMS ........................................................................... 129
ANNEXES
ANNEX 1 – BOND AGREEMENT
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Listing Prospectus
1.
SUMMARY
The following summary should be read as an introduction to this Prospectus and is qualified in its
entirety by the more detailed information appearing elsewhere in this Prospectus, and any decision
to invest in the Bonds should be based on consideration of this Prospectus as a whole by the investor.
No civil liability will attach to the Issuer only on the basis of this Summary, unless it is misleading,
inaccurate or inconsistent when read together with the other parts of this Prospectus. Where a claim
relating to the information contained in this Prospectus is brought before a court, the claimant
might, under the national legislation of a Member State of the European Economic Area (the “EEA”),
have to bear the costs of translating this Prospectus before legal proceedings are initiated.
The attention of investors is particularly drawn to the risk factors described in Section 2 (Risk
Factors). Investors should conduct their own evaluation of the risk factors before making an
investment decision.
1.1
Presentation of the Issuer and the Parent Guarantor
1.1.1
Information regarding the Issuer
The trade name of the Issuer is Northland Resources AB (publ). The Issuer was incorporated in
Sweden, according to the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)), on January 15,
2004, and registered by the Swedish Companies Registration Office (Sw. Bolagsverket) on February
17, 2004 as a private limited liability company under the laws of Sweden. On June 17, 2011, the Issuer
was converted to a public limited liability company under the laws of Sweden. The Issuer’s registration
number is 556656-1675. The seat of the Board of Directors of the Issuer is the municipality of Luleå.
The Issuer’s head office is at Datavägen 14, SE-977 54 Luleå, Sweden, and its telephone number is +46
920 77900.
As of the date of this Prospectus, the Issuer’s issued share capital is SEK 500,000, comprised of 5,000
shares with a par value of SEK 100 each, all of which are fully paid. All of the shares are, as at the date
of this Prospectus, legally and beneficially owned by Project Guarantor, a wholly owned direct
subsidiary of the Parent Guarantor.
The Issuer has, as at the date of this Prospectus, two wholly owned subsidiaries, Northland Logistics
AB and Northland Logistics AS. These two subsidiaries will be the operating companies for the
logistics chain from Kaunisvaara to Narvik.
1.1.2
Information regarding the Parent Guarantor
The trade name of the Parent Guarantor is Northland Resources S.A. The Parent Guarantor was
incorporated as a limited liability company under the laws of British Columbia, Canada on March 13,
1987. Following the migration to Luxembourg which was completed on January 18, 2010, the Parent
Guarantor was incorporated as a Luxembourg public limited company (société anonyme) and is
subject to the Luxembourg Companies Act. The Parent Guarantor’s registration number with the
Luxembourg Trade and Companies’ Register is B 151.150. The Parent Guarantor’s legal domicile is
Luxembourg.
The Parent Guarantor’s registered office is at Scorpio Building, 7A, rue Robert Stümper, L-2557
Luxembourg, Luxembourg and its telephone number is +352 26 495 84492.
As at the date of this Prospectus, the authorized share capital of the Parent Guarantor is CAD
937,680,525. The Parent Guarantor has 514,128,899 shares issued and outstanding, all of which are
fully paid, for a total issued share capital of CAD 51,412,889.9. Each share carries one vote and gives
equal rights in the Parent Guarantor. The Parent Guarantor has only one class of shares outstanding.
The shares have no nominal value.
The Parent Guarantor is listed on the Toronto Stock Exchange, the Oslo Børs and the Frankfurt Open
Market, the unofficial market organized by the Deutsche Börse in Germany.
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Listing Prospectus
1.1.3
Vision and business strategy
The Group is engaged in the business of acquiring, exploring and evaluating mineral resource
properties and either developing, joint venturing or disposing of the properties when the Group’s
evaluation is completed. Currently, the Issuer has interests in mineral properties located in Sweden.
The Issuer’s vision is to become a leading producer of high quality iron concentrate. The Group
pursues a strategy of developing its projects towards production.
The Group believes that these strategies, coupled with its other exploration stage projects located in
Sweden, will allow it to develop into a substantial European iron product. The Group is in the process
of executing its exploration and development plans in support of this vision.
1.1.4
Primary business operations and business overview
The Parent Guarantor is the holding company of a development-stage mining group, with two
principal projects: the Kaunisvaara Project in Sweden, and the Hannukainen IOCG project in Finland.
The projects are primarily located within the Pajala Shear Zone, which is about 250 km long and 10 km
wide, and trends north, north-east-south, south-west between northern Sweden and Finland.
The Hannukainen IOCG project in Finland is operated by the Parent Guarantor’s wholly owned
subsidiaries Northland Mines OY and Northland Exploration Finland OY. The said companies are
neither involved in the Kaunisvaara Project nor parties to the Bond Agreement or any related
agreements. The Issuer is the Group’s primary operating company with respect to the Kaunisvaara
Project.
As the Parent Guarantor is merely the holding company of the Group it is fully dependent on the
operating companies of the Group. In consideration hereof, the following description relates solely to
the operating companies within the Group and the Kaunisvaara Project.
The Issuer’s business activities and operations are governed by its Articles of Association, which
include the following: exploration and exploitation of mineral deposits, trading in metals, management
of tangible property and other tasks compatible with the aforementioned. The Issuer’s and the Group’s
activities will be restricted by the positive and negative covenants applicable to the Issuer and the
other members of the Group contained in, inter alia, the Bond Agreement, the Intercreditor
Agreement and the Security Documents.
After the completion in September 2009 of a positive PEA on the Kaunisvaara iron concentrate
project, the Issuer moved forward with a DFS, which was published on September 27, 2010. The DFS
incorporated detailed reports on particular aspects such as geology, resources and reserves, mineral
processing, infrastructure, economic feasibility and analysis, iron ore concentrate pricing and
environmental considerations. A supplement to the DFS was produced in May 2011 to take into
account the results of the further work done by the Issuer in relation to the planned logistics solution
for the Kaunisvaara Project.
The Kaunisvaara Project will comprise the Tapuli and Sahavaara mines, a processing plant with two
production lines and other related infrastructure, and a fully integrated logistics solution for the
delivery of iron ore concentrate from Kaunisvaara to the ice-free port of Narvik in Norway. The Tapuli
mine is planned to begin its first shipments in the first quarter of 2013 and the Sahavaara mine in
2016. The Kaunisvaara Project is expected to produce approximately 4.4 million dmtpa of high-grade,
high-quality iron magnetite concentrate, to be sold as a premium product to pellet producers as well as
to sinter plants. The Issuer has entered into long term agreements for 100% off-take with established
market counterparties Standard Bank Plc, Tata Steel UK Limited and Stemcor UK Limited.
The Issuer has a project financing plan in place with projected sources of funds for, and the application
of such funds to, the capital expenditures and related contingencies for the development, construction
and completion of the Tapuli mine, the processing plant and the logistics solution through to
December 31, 2014. By that time, the Issuer expects its generation of cash flow to be able to service the
debt and finance the development of the Sahavaara mine.
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Listing Prospectus
1.1.5
Board of Directors and Management
The following table sets forth certain information regarding the members of the Issuer’s and the
Parent Guarantor’s Board of Directors:
Company
Name
Position
Northland Resources S.A.
Anders Hvide
Chairman
Matti Kinnunen
Director
Tuomo Mäkelä
Director
Stuart Pettifor
Director
Birger Solberg
Director
Karl-Axel Waplan
Chairman
Peter Pernlöf
Director and Managing Director
Peder Zetterberg
Director
The management of the Issuer and the Parent Guarantor is responsible for the day-to-day
management of the Issuer’s respective the Parent Guarantor’s affairs and for the implementation of
key strategic decisions taken by the Board of Directors in the respective company.
The management consists of Mr. Jonas Lundström (Vice President – Human Resources and Corporate
Communication), Mr. Hans Nilsson (Vice President – Marketing), Mr. Peter Pernlöf (Director and
Managing Director), Mr. Willy Sundling (Project Manager – Logistics for the Kaunisvaara Project),
Mr. Karl-Axel Waplan (Chairman), Mr. Peder Zetterberg (Director and Acting CFO), Mrs. Eva Kaiser
(CFO, on parental leave 2012), Mr. Jukka Jokela (Vice President – Finnish Operations & Managing
Director for Northland Mines OY, Dr. Petri Peltonen (Vice President – Exploration), Mr. Manfred
Lindvall (Vice President - Environment, Health & Safety and acting Vice President – Swedish
Operations) and Mr. Anders Antonsson (Vice President – Investor Relations).
1.2
Summary of risk factors
Readers of this Prospectus should carefully consider all of the information contained herein and in
particular the following risk factors, which may affect some or all of the Issuer’s activities and which
may make an investment in the Bonds one of high risk. This list is not exhaustive. The actual results of
the Issuer could differ materially from those anticipated as a consequence of many factors, including
the summary of risk factors described below as well as risks described elsewhere in this Prospectus, in
particular under Section 2 (Risk Factors).
The companies included in the Group are parties to the Bond Agreement, and thereto related security
arrangements, and consequently the operations of any of these companies may have an impact on the
future financial and/or operating performances of the Issuer as well as the other companies included
in the Group. Thus, certain of the following risk factors relate to and are relevant not only for the
Issuer but for the Group as a whole.
Risk factors relating to the Issuer
•
•
•
•
Fulfillment of conditions precedent for financing
Liquidity risk
Commodity prices risk
Risk related to future sale of minerals
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Listing Prospectus
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Competition risk
Exploration, development and operating risk
Iron ore processing risk
Nature of operations
Construction costs and delays of the Kaunisvaara Project
Risks in the transportation and logistics solution
Material capital and operating leases to be entered into in order to complete the Kaunisvaara
Project
Future agreements, arrangements and permits
Insurance and uninsured risk
Legal and regulatory risk
Government regulations
Permits
Health and safety hazards
Environmental risk hazards
Uncertainty in the estimation of ore/mineral reserves, mineral resources and metallurgical
sampling and studies
Uncertainty relating to measured, indicated and inferred mineral resources
Additional ore/mineral reserves
Title to assets and titles
Risks in the results from current DFS
Third party reports
Currency risk
Credit risk
Changes in critical accounting estimates could adversely affect financial results
Current global financial conditions
Additional financing
Capital expenditures risks related to the future cash flows from the Kaunisvaara Project
Risk factors relating to the Bonds
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Inability of Guarantors to fulfill guarantee undertakings under the Bond Agreement
The Issuer’s indebtedness under the Bonds
The terms and conditions of the Bond Agreement will impose significant operating and
financial restrictions
Defaults and insolvency of subsidiaries
Value of secured assets
The market price of the Bonds may be volatile
Interest rate risks may have an adverse effect on the value of the Bonds
The Bonds may be subject to optional redemption by the Issuer, which may have a material
adverse effect on the value of the Bonds
Mandatory prepayment events may lead to a prepayment of the Bonds in circumstances where
an investor may not be able to reinvest the prepayment proceeds at an equivalent rate of
interest.
Legal investment considerations may restrict certain investments
Restrictions on the transferability of the Bonds
The security will not be granted directly to the holders of the Bonds
Security over the assets of a company through a Swedish law corporate mortgage is only a
“passive” security
7
Listing Prospectus
•
•
•
•
1.3
A mortgage over real property in Sweden is limited in value and can only be enforced through
public proceedings
The security for the Bonds does not include any security interest granted over the mining
concessions for the Kaunisvaara Project, or any other mining concessions owned by the Issuer
or any member of the Group
Perfection of certain security interests will only be perfected at a later stage, which will
increase the risk for nullification in an insolvency situation
Limitation on the value of security provided by a Norwegian company in favor of a debtor
domiciled in Sweden or any other foreign jurisdiction and restrictions on financial assistance –
general exceptions
Auditors and advisors
The auditor of the Issuer is Ernst & Young Aktiebolag, P.O. Box 7850, SE-103 99 Stockholm, Sweden.
Lars Fredrik Lundgren, authorized public accountant (member of FAR SRS) is the auditor in charge.
The auditor of the Parent Guarantor is Ernst & Young S.A., of 7, rue Gabriel Lippmann, Parc d’Activité
Syrdall, L-5356 Munsbach, Luxembourg.
Certain legal matters in connection with the preparation of this Prospectus and the admission to
trading of the Bonds have been passed upon for the Company by Bird & Bird Advokat KB, Stockholm
Sweden, with respect to the laws of Sweden, and Advokatfirmaet Thommessen AS, Oslo, Norway, with
respect to the laws of Norway.
1.4
Major shareholders
The Issuer is wholly owned by the Project Guarantor which in turn is wholly owned by the Parent
Guarantor.
The Parent Guarantor is listed on the Toronto Stock Exchange, the Oslo Børs and the Frankfurt Open
Market, the unofficial market organized by the Deutsche Börse in Germany.
As of February 14, 2012, the Parent Guarantor had a total of 2,950 shareholders registered with the
VPS. The table below sets forth the 20 largest shareholders trading on the Oslo Børs, and registered in
the VPS. As of February 14, 2012, there were 179,751,837 shares registered via the VPS, of a total of
226,628,899 shares outstanding in the Parent Guarantor, representing approximately 79.3% of the
total number of shares in the Parent Guarantor. The following table shows the largest shareholders
registered in the VPS and their shareholdings as a percentage of the shares held in the VPS.
Shareholders
Number of Shares
Percentage (%)
1
AVANZA BANK (Custodian Bank)
23,623,777
13.14
2
NORDNET BANK (Custodian Bank)
10,653,526
5.93
3
SKANDINAVISKA ENSKILDA BANKEN (Custodian Bank)
7,474,243
4.16
4
SWEDBANK (Custodian Bank)
7,234,833
4.02
5
HANDELSBANKEN (Custodian Bank)
7,230,186
4.02
6
STATE STREET BANK (Custodian Bank)
6,023,266
3.35
7
FINNISH INDUSTRY INVESTMENT
4,522,000
2.52
8
EUROCLEAR BANK S.A.
3,766,565
2.10
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Listing Prospectus
9
HOLBERG NORDEN VERDIPAPERFONDET
3,468,569
1.93
3,127,531
1.74
10
BANK OF NEW YORK (Custodian Bank)
11
HANDELSBANKEN HELSINKI (Custodian Bank)
3,103,400
1.73
JP MORGAN CHASE HAYWOOD SECURITIES
(Custodian Bank)
3,009,247
1.67
12
13
THE BANK OF NOVA SCOTIA
3,000,000
1.67
14
BANK JULIUS BAER
2,759,824
1.54
15
HOLBERG NORGE VERDIPAPERFONDET
2,474.416
1.38
16
JP MORGAN CHASE BANK NORDEA TREATY ACC
2,002,418
1.11
17
CITIBANK
1,991,416
1.11
18
KLP AKSJE NORGE
1,713,578
0.96
19
GLEFF AS
1,700,000
0.95
20
SVITHUN FINANS AS
1,700,000
0.95
100,596,795
55.98
Total 20 largest shareholders
Neither in North America nor in Luxembourg is common for shareholders to register their holdings in
publicly listed companies directly in their own name. Rather, their shares will commonly be held via a
nominee, and the Parent Guarantor has limited access to information regarding the identity of the
beneficial owner.
1.5
Brief summary of the securities to be admitted to trading
The Bonds are debt instruments, which confirm that bondholders have a claim against the Issuer.
The Bonds are a secured bond issue with a fixed rate and have been issued through a so called private
placement. No Bonds have been issued, or will be issued, after the Issue Date and the Bonds were
subscribed in full on the Issue Date.
The Bonds have been issued in two different tranches (a NOK Tranche in the amount of NOK
460,000,000 and a USD Tranche in the amount of USD 270,000,000). The Bonds are electronically
registered in book-entry form with the VPS. Each bond in the NOK Tranche has a denomination of
NOK 1.00 and each bond in the USD Tranche has a denomination of USD 1.00.
To simplify the trade in the Bonds, the Issuer intends to apply for a listing of the Bonds on the Oslo
Børs. The first day of trading of the Bonds is expected to be 10 May, 2012. Even though an application
regarding listing of the Bonds on the Oslo Børs has been handed in to Oslo Børs it does not mean that
the application will be approved.
The Bonds are secured by inter alia pledges over certain assets of the members of the Group. The
members of the Group have also provided guarantees for the benefit of the bondholders.
1.6
Summary of operating and financial information regarding the Issuer
The Issuer’s financial statements have been prepared in accordance with accounting principles
generally accepted in Sweden. The Issuer’s financial year has been changed and is currently January 1
to December 31 of each year. Previously, the Issuer’s financial year ended on January 31. To
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Listing Prospectus
accommodate the transition to the new financial year, the financial year 2010 was shortened to
December 31.
1.6.1
Selected financial information
The tables below present selected historical financial information for the Issuer as of, and for the
financial years ended, December 31, 2011, December 31, 2010 and January 31, 2010. The selected
historical financial information has been derived from the Issuer’s audited annual financial statement
for the year ended December 31, 2011, the audited annual financial statement for the period ended
December 31, 2010 and the audited annual consolidated financial statement for the year ended
January 31, 2010, which have been incorporated in this Prospectus by reference.
The tables and information in this Section should be read together with, and is qualified in its entirety
by reference to, the annual financial statements for the financial years ended December 31, 2011
December 31, 2010, and January 31, 2010, and the accompanying notes.
1.6.2
Summary of statement of comprehensive income
SEK
Own work capitalized
January 1 –
December 31,
2011
February 1 – February 1, 2009
December 31,
– January 31,
2010
2010
1,070,808,382
178,008,550
160,880,827
5,333,990
1,903,886
3,072,111
1,076,142,372
179,912,436
163,952,938
(1,066,963,800)
(160,651,383)
(166,797,021)
Personnel costs
(40,223,524)
(43,131,491)
(28,771,766)
Depreciation and write-downs of tangible fixed assets
and amortization and write-downs of intangible fixed
assets
(27,514,242)
(244,763)
(101,706)
-
(3,834,875)
Other operating income
Operating expenses
Other external expenses
Other operating expenses
Total operating expenses
(1,134,701,566) (207,862,512)
(1,014,163)
(196,684,656)
(58,559,194)
(27,950,076)
(32,731,718)
(8,151)
-
-
19,218,565
1,806
8,497
Interest expenses from Group companies
(31,742,819)
(13,955,070)
-
Interest expenses and similar profit/loss items
(76,315,193)
(4,46)
(14,998)
Total profit/loss from financial items
(88,847,598)
(13,957,724)
(6,501)
Income after financial items
(147,406,792)
(41,907,800)
(32,738,219)
Net loss for the year
(147,406,792)
(41,907,800)
(32,738,219)
Operating income
Income from financial items
Result from participations in Group companies
Other interest income and similar profit/loss items
10
Listing Prospectus
1.6.3
Summary of statement of financial position
December 31,
December 31,
January 31,
2011
2010
2010
1,838,785,365
613,193,088
421,243,639
484,442,696
46,620,370
87,668,106
Total assets
2,323,228,061
659,813,458
508,911,745
Total equity
1,696,528,571
(39,592,317)
(77,684,517)
Total long-term liabilities
150,000,000
619,704,113
560,733,911
Total current liabilities
474,435,490
79,115,867
23,880,017
2,323,228,061
659,813,458
508,911,745
SEK
Total fixed assets
Total current assets
Total equity and liabilities
1.6.4
Summary of statement of cash flow
January 1 December 31,
2011
– January 31,
December 31,
2010
2010
SEK
Net cash flow used in operating activities
(351,984,908)
(11,045,555)
(53,965,199)
Net cash used in investing activities
(925,205,304)
(182,868,058)
(161,849,382)
Net cash flow from financing activities
1,413,823,567
138,970,202
281,471,764
Cash and cash equivalents at beginning of
period
11,254,309
66,197,719
540,535
Increase/Decrease in cash and cash equivalents
136,633,355
(54,943,411)
65,657,183
147,887,664
11,254,309
66,197,719
Cash and cash equivalents at end of period
1.7
Summary of operating and financial information regarding the Parent Guarantor
The Parent Guarantor’s financial statements have been prepared in accordance with Canadian GAAP
until January 31, 2010. On February 1, 2010, the Parent Guarantor adopted IFRS, as adopted by the
EU. The transition date was set at February 1, 2007. The Parent Guarantor’s financial year has been
changed and is currently January 1 to December 31 of each year. Previously, the Parent Guarantor’s
financial year ended on January 31. To accommodate the transition to the new financial year, the
financial year 2010 was shortened to December 31.
1.7.1
Selected financial information
The tables below present selected historical financial information for the Parent Guarantor as of, and
for the financial years ended December 31, 2011, December 31, 2010, and January 31, 2010. The
selected historical financial information has been derived from the Parent Guarantor’s audited annual
consolidated financial statements for the year ended December 31, 2011, the audited annual
consolidated financial statements for the period ended December 31, 2010, and the audited annual
consolidated financial statements for the year ended January 31, 2010, which have been incorporated
in this Prospectus by reference.
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by reference to, the annual consolidated financial statements for the financial years ended December
31, 2011 December 31, 2010, and January 31, 2010, and the accompanying notes.
1.7.2
Summary of consolidated statement of comprehensive income
January 1 –
December 31,
2011
February 1 –
December 31,
2010
February 1, 2009
– January 31,
2010
(28,092)
(18,972)
(11,955)
Loss before tax
(37,667)
(22,325)
(15,033)
Loss for the year/period
(38,069)
(21,246)
(15,033)
Total comprehensive profit/(loss) for
the year/period, net of tax
(46,554)
(7,789)
6,572
Loss per share: Basic and diluted loss
for the year/period attributable to the
equity holders of the parent, USD
(0.17)
(0.18)
(0.14)
USD ‘000
Operating loss
1.7.3
Summary of consolidated statement of financial position
December 31,
2011
December 31,
2010
January 31,
2010
339,177
127,457
98,494
USD ‘000
Total non-current assets
79,594
257,018
53,713
Total assets
418,771
392,186
152,207
Total equity
339,713
380,119
145,455
Total non-current liabilities
4,629
81
1,035
74,429
11,954
5,717
418,771
392,186
152,207
1.7.4
Summary of statement of cash flow
2011
December 31,
– January 31,
2010
2010
USD ‘000
(43,560)
(9,187)
(7,135)
(179,250)
(32,241)
(25,725)
4,312
238,181
733
Changes in cash and cash equivalents
(218,498)
196,753
(32,126)
5,386
2,704
10,350
Cash and cash equivalents at beginning of the
year / period
251,435
52,011
73,787
Cash and cash equivalents at end of the year /
period
38,323
251,467*
52,011
Effect of changes in exchange rates
* Cash and cash equivalents at December 31, 2010 include an amount of USD 33,000 as “Assets held for sale”.
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Listing Prospectus
1.8
Significant changes to the Issuer’s and the Parent Guarantor’s financial or
trading position since December 31, 2011
On December 21, 2011, the Issuer signed a bridge facility with Standard Bank Plc for USD 50 million
with a final maturity on March 31, 2012. The first drawdown was exercised on January 26, 2012 and
the second drawdown was exercised on February 16, 2012. The bridge facility has as of the date of this
Prospectus been repaid in full.
In addition, the Issuer has launched and closed a senior secured bond issue in the amount of USD 350
million, which upon fulfillment of all applicable conditions precedent, will be available for financing
the Kaunisvaara Project. Furthermore, the Parent Guarantor has issued 287,500,000 new shares,
resulting in estimated net proceeds of USD 325,000,000, part of which has been granted as a loan to
Northland Sweden AB and further to the Issuer for financing of the Kaunisvaara Project.
Other than described above, there have been no significant changes in the financial and trading
position of the Issuer and the Parent Guarantor subsequent to December 31, 2011.
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Listing Prospectus
2.
RISK FACTORS
2.1
General
Investing in the Bonds involves inherent risks. The risks described below are not the only ones facing
the Issuer. Additional risks not presently known to the Issuer, or that the Issuer currently deems
immaterial, may also impair the Issuer’s business operations and adversely affect the price of the
Bonds and the Issuer’s ability to service its debt obligations. If any of the events or circumstances
discussed below actually occur, the Issuer’s business, financial position and operating results could be
materially and adversely affected, and this might have a material adverse effect on the Issuer’s ability
to meet its obligations (including the payment of principal and interest) under the Bonds.
Prospective investors should carefully consider all of the information set out in this Prospectus and
particularly the risk factors set forth below before making an investment decision, and should consult
his or her own expert advisors as to the suitability of an investment in the Bonds. An investment in the
Bonds is suitable only for investors who understand the risk factors associated with this type of
investment and who can afford a loss of all or part of the investment. The information provided below
is presented as of the date hereof and is subject to change, completion or amendment without notice.
2.2
Information notice
The companies included in the Group are parties to the Bond Agreement, and thereto related security
arrangements, and consequently the operations of any of these companies may have an impact on the
future financial and/or operating performances of the Issuer as well as the other companies included
in the Group. Thus, certain of the risk factors described below relate to and are relevant not only for
the Issuer but for the Group as a whole.
2.3
Risk factors relating to the Issuer
2.3.1
Fulfilment of conditions precedent for financing
Although the Issuer currently believes it has obtained sufficient financing to enable the Kaunisvaara
Project to come into production, the financing includes terms and conditions to be satisfied in order
for the Issuer to draw down any amounts thereunder, and no assurance can be made that such terms
and conditions will be satisfied. In particular, the Bond Agreement contains extensive conditions
precedent for the Issuer to make use of any funds thereunder which could be challenging for the Issuer
to comply with. There is a risk that no amounts may be available under such bond financing. If the
Issuer is unable to draw funds under the Bond Agreement it will have a material adverse effect on the
Issuer’s ability to complete the Kaunisvaara Project and the Issuer will have to seek other debt and
equity financing options.
2.3.2
Liquidity risk
Liquidity risk encompasses the risk that the Issuer may not be able to meet its financial obligations as
they fall due. The Issuer is actively seeking financing to be able to finalize the first phase of the
Kaunisvaara Project, but there is no guarantee that the Issuer will be able to obtain the financing
necessary for the Issuer’s operations.
2.3.3
Commodity prices risk
Financial results, exploration and development activities have previously been, and may in the future
be, significantly adversely affected by declines in commodity prices, which are subject to significant
fluctuation. The factors giving rise to these fluctuations are generally out of the Issuer’s control, being
largely driven by external global economic factors. The market price for iron ore (magnetite), and
other metals is volatile and cannot be controlled. There is no assurance that, if commercial quantities
of iron ore (magnetite), and other metals are discovered, a profitable market may continue to exist for
a production decision to be made or for the ultimate sale of the metals. As the Issuer is currently not in
production, no sensitivity analysis for price changes has been provided or carried out. Unfavorable
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Listing Prospectus
levels of commodity prices may have a material and adverse effect on the Issuer’s business, results of
operations and financial condition or prospect.
The Issuer will operate in a highly volatile commodity market. Average per unit prices for most iron
ore producers vary significantly from period to period, as unit prices are dependent on global prices
(over which the majority of producers, as price takers, have little or no control). The Issuer’s business,
when the Kaunisvaara Project commences commercial operations, will be highly dependent on the
market price of iron ore and, in particular, the reference prices for iron ore concentrates used in its offtake contracts. The prevailing level of worldwide demand for and supply of steel products determines,
to a large degree, the sales prices and demand for iron ore, which are highly cyclical. At present, the
global market for iron ore is highly dependent on the Chinese steel sector, which accounts for
approximately one half of global iron ore consumption. Demand for iron ore declined significantly in
most industrialized economies in late 2008, although demand levels have since recovered. If the price
of iron ore returns to the previous low level seen in late 2008 or fall significantly over an extended
period, the Issuer’s anticipated revenues from the sale of iron ore would be adversely affected and the
economic prospects of the Kaunisvaara Project could be significantly reduced. Furthermore, a
reduction in overall demand or an increase in the supply of iron ore could have an impact on the
premiums, if any, that the Issuer receives for its high-grade iron ore concentrate.
Factors that tend to put downward pressure on the price of iron ore include:
•
a reduction in the demand for steel in China;
•
exchange rates, inflation rates, forward sales of iron ore and steel by producers and
speculators as well as other geo-political, social or economic conditions;
•
increased production and the development of new sources of iron ore supply; and
•
consolidation in the steel industry, leading to a weaker position for iron ore suppliers
in price negotiations.
Any significant or sustained reduction in iron ore prices generally, or in the reference prices for iron
ore concentrates used in the Issuer’s off-take contracts, could require the Issuer to restate or reduce its
estimated mineral reserves and would, in any event, materially and adversely affect the Issuer’s
business, results of operations, financial condition or prospects.
2.3.4
Risk related to future sale of minerals
The Issuer is dependent on future sales of minerals. Although the Issuer will strive to enter into sales
agreements, including off-take agreements for future sales, no assurance can be given that the Issuer
will be able to sell produced minerals at such terms and conditions as is favorable for, or necessary to
sustain the operations of, the Issuer. Furthermore, the Issuer is a development-stage mining company,
and several risk factors including those set out herein and other risk factors currently not known to the
Issuer may result in delays of start of production of minerals for sale or in a worst case scenario result
in the Issuer not being able to commence production as currently contemplated or at all. The
occurrence of any such risk factors may have an adverse effect on the Issuer’s operations and financial
position. The Issuer has entered into certain off-take agreements regarding the sale of expected
production under the Kaunisvaara Project. The Issuer may in the future enter into further such offtake agreements for the Kaunisvaara Project or other projects. Such agreements have, and may have,
certain representations, terms and conditions in order to result in firm commitments, and no
assurance can be made that such representations, terms and conditions can or will be satisfied.
Further, no assurance can be made that the Issuer is able to maintain such off-take agreements in
place, nor replace or obtain such agreements on satisfactory terms. Failure of this may have an adverse
effect for the Issuer’s operations and financial position. Such off-take agreements may also confer firm
commitments upon the Issuer to deliver products in the future. If the Issuer, for whatever reason, is
not able to produce the products in accordance with the terms of such agreements, such
noncompliance or violation of these agreements may have adverse effect for the Issuer’s operations
and financial position. Even if the Issuer is able to meet the requirements set out in each off-take
contract, there is no assurance that the contract counterparties will be willing or able to purchase the
production at the prices or quantities they have agreed to in the off-take contracts. If one of the off15
Listing Prospectus
take counterparties defaults or if the contract is otherwise terminated in accordance with its terms,
there can be no guarantee that the Issuer will be able to find a new counterparty willing to enter into a
replacement off-take contract with similar pricing, quantity and quality terms or at all. The Issuer’s
off-take contracts have, and any such future contracts may have, certain representations, terms and
conditions in order to result in firm commitments, and no assurance can be made that such
representations, terms and conditions can or will be satisfied. Such termination or violation of these
contracts by the relevant counterparties, depending upon the Issuer’s ability to enter into replacement
contracts of equivalent value, could materially and adversely affect the Issuer’s business, results of
operations and financial condition or prospects. Additionally, the three off-take contracts entered into
and under which the Issuer has contracted to sell the entire anticipated iron ore concentrates
production of the Kaunisvaara Project for the first seven years of its operations, each calculate the
price at which the Issuer is able to sell consignments of iron ore concentrates by reference to a separate
reference price. The reference prices in the off-take contracts provide for the addition of an iron
content premium per Fe-unit, however do not guarantee any value in respect thereof; nor do they
guarantee the addition of a VIU premium, although the off-take contracts do provide for either a VIU
premium to be negotiated in good faith between the parties or for adjustments of the price by
reference to iron content, moisture and impurities. The reference prices used under the off-take
contracts are comparatively new, and have been used in the iron ore market only for a period of
approximately two to three years. Each of these factors, taken together or individually, could
materially and adversely affect the Issuer’s business, results of operations and financial condition or
prospects and the Issuer’s ability to make payments on the Bonds could be impaired.
2.3.5
Competition risk
The mining industry is highly competitive in all of its phases. The Issuer faces strong competition from
other mining and exploration companies in connection with the acquisition and exploration of
properties capable of profitably producing the commodities it seeks. Many of these companies have
greater resources than the Issuer and, as a result, the Issuer may be unable to acquire or maintain
attractive properties on terms it considers acceptable, in which case its exploration activities,
development activities and financial condition could be affected adversely.
2.3.6
Exploration, development and operating risk
The Issuer’s activities are primarily directed towards exploration and the development of its
exploration projects. The Issuer is also actively engaged in searching for additional exploration
projects in Sweden. Mineral exploration and development involves a high degree of risk, which even
careful evaluation, experience and knowledge may not eliminate. While the discovery of an ore body
may result in substantial rewards, few properties that are explored are ultimately developed into
producing mines. Major expenses may be required to locate and establish mineral reserves, to develop
metallurgical processes and to construct mining and processing facilities at a particular site. There is
no assurance that the Issuer’s mineral exploration activities will result in any discoveries of new bodies
of ore that will be economically feasible for commercial production. Discovery of mineral deposits is
dependent upon a number of factors and significantly influenced by the technical skill of the
exploration personnel involved. Discovery may not result in a producing mine. The commercial
viability of a mineral deposit is also dependent upon a number of factors that are beyond the Issuer’s
control. Some of these factors are the attributes of the deposit, such as size, grade and proximity to
infrastructure; commodity prices which, are highly cyclical; government policies and regulation,
including regulations relating to prices, necessary permits taxes, royalties, land tenure, land use,
importing and exporting of minerals; and environmental protection. The exact effect of these factors
cannot be accurately predicted, and the combination of these factors could result in the Issuer not
receiving an adequate return on invested capital. There is no certainty that the expenditures made by
the Issuer in its search for and evaluation of mineral deposits will result in discoveries of commercially
viable quantities of ore. In addition, if a mineral deposit is discovered, it would take several years from
the initial phases of exploration until production is possible, if any. During this time, the economic
feasibility of production may change. As a result of these uncertainties, there can be no assurance that
the Issuer will successfully acquire additional mineral rights.
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Listing Prospectus
2.3.7
Iron ore processing risk
In addition to the Tapuli mine and the Sahavaara mine, the Issuer will operate an iron ore processing
plant on the Kaunisvaara Project site. The Issuer may experience practical or technical problems in the
construction of the plant or in the application of its processing technology to the iron ore. Any
prolonged outage or shutdowns at the plant due to technical problems or otherwise could substantially
increase production costs. The inability to efficiently process iron ore into iron ore concentrate in a
cost effective manner and in the grades that it currently anticipated and as required under its off-take
contracts could materially adversely affect the saleability of the product and the Issuer may not be able
to realize the anticipated premiums or may even be required to apply discounts to its prices, which
could materially and adversely affect its business, results of operations, contractual obligations under
various supply contracts and its financial condition or prospects.
2.3.8
Nature of operations
The Issuer is in the process of exploring and developing its mineral resource properties. To date, the
Issuer has not earned any revenues and is considered to be in a development stage. The realization of
amounts shown for resource properties is dependent upon the discovery of economically recoverable
reserves, the ability to obtain the necessary financing to develop these properties, and future profitable
production or proceeds of disposition from these properties. The mines, the processing plant and their
related infrastructure have not yet been constructed, the planned logistics solution has not yet been
implemented and its commercial operations have not yet commenced. In addition to the Tapuli mine
and the Sahavaara mine, the Issuer will operate an iron ore processing plant on the Kaunisvaara
Project site. In the development and ramp-up phase, practical or technical problems may be
experienced in the construction of the mines and/or the plant or in the application of mining and
processing technology to the iron ore studies.
Any prolonged outage or shutdowns at the plant due to technical problems or otherwise could
substantially increase costs of production. The Issuer is highly dependent on its ability to develop,
construct, commission and operate the Kaunisvaara Project within the planned timeframe and in
accordance with the capital cost estimated by the Issuer. The estimations are based on estimates
relevant to the information and level of design and engineering studies, the accuracy of which cannot
be assured due to the inherent uncertainty of future projections and the fact that some of these studies
may be out of date. Accordingly, the cost estimates on which the Issuer is relying do not represent
fixed costs and may vary as construction progresses. Additionally, the Capex assumed in these studies
are also estimates and may vary from the actual Capex required to implement the mining plan, the
operation of the processing plant and the integration and development of the planned logistics
solution. The Issuer expects, and in its estimates assumes, that the first production of iron ore
concentrate at Tapuli will occur during the first quarter of 2013, with project completion at the end of
the first half of 2016. A significant part of the anticipated Capex represents variable costs. Also, while
certain material contracts for the construction and development of the Kaunisvaara Project have been
signed, the Issuer is still in the process of negotiating other material contracts, which are expected to
cover, among other things, the development of a terminal and certain port facilities. If the Issuer does
not agree the outstanding material contracts that are required, the Issuer may incur increased costs
and/or the Kaunisvaara Project may be significantly delayed as a result. No contractor has been
engaged for the construction of the Kaunisvaara Project on a fixed-price, turnkey basis and the
contracting strategy is to engage component contractors separately. Accordingly, the Issuer will only
have recourse against individual contractors who are engaged but fail to perform their separate tasks
rather than against one single overarching contractor, though several contractors such as Metso and
Peab are responsible for a substantial amount of the work on the Kaunisvaara Project and the impact
of their failure to perform their obligations is significant. While the Issuer intends to have appropriate
insurance in place in respect of the Kaunisvaara Project, the failure of a particular contractor to
perform their obligations may not trigger the terms of that insurance or the insurance may not be
sufficient to fully ameliorate the harm. Further, there can be no assurance that the Issuer will be able
to enter into the full complement of insurance policies that are currently planned or that those policies
will be entered into in a timely fashion. If the counterparties to the contracts relating to the
Kaunisvaara Project fail to fulfill their obligations, the Issuer will bear the full risk of such failure as
opposed to a third party, which may affect the Issuer’s ability to complete the Kaunisvaara Project.
Failure to complete the Kaunisvaara Project would materially and adversely affect the Issuer’s
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Listing Prospectus
business, results of operations, financial condition or prospects and the ability to make payments on
the Bonds could be impaired.
2.3.9
Construction costs and delays of the Kaunisvaara Project
The mines, the processing plant and their related infrastructure have not yet been constructed, the
Issuer’s planned logistics solution has not yet been implemented and its commercial operations have
not yet commenced. The Issuer is highly dependent on its ability to develop, construct, commission
and operate the Kaunisvaara Project within the planned timeframe and in accordance with the capital
cost estimated by the Issuer. The estimations are based on estimates relevant to the information and
level of design and engineering studies, the accuracy of which cannot be assured due to the inherent
uncertainty of future projections, the fact that some of these studies may be out of date and the
limitations imposed by multiple focused studies.
Accordingly, the cost estimates on which the Issuer is relying do not represent fixed costs and may vary
as construction progresses. Additionally, the Capex assumed in these studies are also estimates and
may vary from the actual Capex required to implement the mining plan, the operation of the
processing plant and the integration and development of the planned logistics solution. The Issuer
expects, and in its estimates assumes, that the first production of iron ore concentrate at Tapuli will
occur during the first quarter of 2013, with project completion at the end of the first half of 2016. A
significant part of the anticipated Capex represents variable costs. Also, while certain material
contracts for the construction and development of the Kaunisvaara Project have been signed, the
Issuer is still in the process of negotiating other material contracts, which are expected to cover, among
other things, the development of a terminal and certain port facilities. If the Issuer does not agree the
outstanding material contracts that are required, the Issuer may incur increased costs and/or the
Kaunisvaara Project may be significantly delayed as a result.
Furthermore, even in those cases where the Issuer has signed contracts, it is possible that the
counterparties to such contracts will have to negotiate their own contracts with sub-contractors, and
any delays in such negotiations could delay the Kaunisvaara Project. Completion of construction and
commencement of production of iron ore concentrate may be delayed by, or require the expenditure of
significant additional funds due to, factors outside the Issuer’s control, such as the inability or failure
of contractors to complete construction of the Kaunisvaara Project in a timely manner, the failure of
contractors to enter into agreements with their sub-contractors in a timely manner, changes in the
regulatory environment, industrial disputes, unavailability of parts, machinery or operators, inability
to obtain the necessary permits, dispensations, licenses or approvals from government authorities or
third parties, unforeseen geological, physical or weather conditions, natural disasters, labour shortages
or stoppages, political and other factors, or factors at least partially within the control of the Issuer,
such as requested changes to the technical specifications of the plant design, failure to enter into
additional agreements with contractors or suppliers in a timely manner, shortage of capital and
undisclosed changes to the detailed engineering plans. Any construction delay could delay the
production of iron ore concentrate, which could, even in those cases where the Issuer can seek some
remedies for delays imposed upon it by the failures of the counterparties, have a material adverse
impact on its cash flow and financial performance, its ability to meet some or all of its contractual
supply obligations, and, in certain circumstances, delays could allow the contractors to terminate their
contracts with the Issuer. Any delay or increase in costs could materially and adversely affect the
Issuer’s business, results of operations, financial condition or prospects.
2.3.10 Risks in the transportation and logistics solution
The Issuer’s operations require transportation and logistics solutions which are currently not in
operation. The commercial viability of the Kaunisvaara Project depends on the Issuer’s ability to
successfully finalize the development of planned logistics solution for the transportation and delivery
of the iron ore concentrates from the Kaunisvaara Project’s processing plant in Sweden to the port of
Narvik in Norway. The intention is to transport the iron ore concentrate by truck using public roads
from the processing plant to a railhead in Svappavaara and then by rail from Svappavaara to Narvik,
where the Issuer has dedicated facilities at the port for the storage and loading of concentrate onto
ships. Although the road and rail infrastructure currently exists, such infrastructure will need to be
upgraded and/or expanded in certain respects to accommodate increased use by the Issuer and other
parties. The Issuer has obtained the rights to land, and is currently constructing facilities, at Pitkäjärvi
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that will enable the transfer of iron ore concentrate from trucks onto rail cars which will be especially
designed for the Issuer’s use. While all permits for the construction of the Port in Narvik are in place, a
building permit for a part of the construction and a voluntary permit for conditions to use the
Pitkäjärvi transshipment terminal are not. While the Issuer anticipates the receipt of this permit, there
is a risk that the permit may be delayed or not granted. It will also be necessary to enter into
arrangements with third parties for the supply, lease or sale to use of rail cars and locomotives used to
transport iron ore concentrate from Svappavaara to Narvik, and arrangements for the provision of
train operating services, as well as to complete arrangements for the lease of facilities at the port in
Narvik, and to upgrade such facilities to accommodate the Issuer’s operations and requirements.
2.3.11
Material capital and operating leases to be entered into in order to complete the
Kaunisvaara Project
All material capital lease arrangements for the acquisition of material items of mining equipment, and
which the Issuer will be required to enter into in order to be able to successfully fund and operate the
Kaunisvaara Project, are accounted for as a source of financing in the project financing plan. Although
the Issuer is engaged in discussions with relevant third parties, no assurance can be given that the
Issuer will be able successfully to reach agreement with such third parties or that any such agreements
will be finalized on terms and conditions that are currently contemplated and reflected in the project
financing plan. Further, if the Issuer is unable to successfully reach agreement with such third parties,
there can be no assurance that it will be possible to find replacement providers for such material
mining equipment on similar pricing and other terms, or at all. If the Issuer is unable to successfully
reach agreement with third parties for the capital lease of such material assets, it may be required to
purchase the relevant assets, which would require significant Capex not presently contemplated and
there can be no assurance that the Issuer will be able to obtain or raise the additional funds necessary
to fund completion of the Kaunisvaara Project.
2.3.12 Future agreements, arrangements and permits
There are various agreements to be entered into, arrangements to be put in place and permits to be
obtained in order for the Issuer to complete the Kaunisvaara Project, including for logistics,
environmental and construction purposes. No assurance can be made that it will be possible to have
such agreements, arrangements and permits in place at acceptable terms, in the contemplated time
schedule or at all. The commercial viability of the Kaunisvaara Project depends not only on the
developing of the Tapuli and Sahavaara ore bodies, the dual-line processing plant and the related
facilities in and around Kaunisvaara, but also on the Issuer’s capability of entering into contracts that
will allow the Issuer to utilize the rail and port infrastructure and to complete the necessary upgrades
and alterations to those facilities so as to create an integrated transportation system from Kaunisvaara
to the port of Narvik. The Issuer intends to transport its iron ore concentrates by truck and rail to the
Norwegian port of Narvik where the Issuer leases space in the port for a terminal and berth. Some of
the facilities that the Issuer intends to use will need to be upgraded, built or expanded in order to
handle the increased demands that will be placed on them due to the movement of iron ore
concentrates. In particular, (i) facilities need to be built at Pitkäjärvi/Svappavaara, where the Issuer
expects to load the iron ore concentrates from the trucks into the train cars; and (ii) certain expansions
to the Narvik port facilities will need to occur in cooperation with the relevant road, rail and port
authorities. The Issuer has applied for a dispensation from the STA for heavier trucks than the current
maximum allowable of 60 tonnes gross weight. Although the authority has declared its commitment to
grant the maximum dispensation for the truck the Issuer intends to use, there is no guarantee this will
be obtained at the time such trucks are required. A smaller truck size will entail higher costs than
anticipated in the DFS for the Kaunisvaara Project. As the combination of road, rail and port facilities
on which the Kaunisvaara Project will rely has never been previously used in the manner proposed and
the detailed arrangements for access to such road and rail facilities have not been finalized with the
relevant owners/operators, it is possible that additional work of which the Issuer is not currently
aware may be required and/or that the costs of maintaining such facilities may be greater than it is
currently contemplating. The railway that the Issuer intends to use to transport its iron ore
concentrates is a public railway, and is used by other iron ore producers since the beginning of the
1900’s: access to this railway is regulated by the STA in Sweden and the Norwegian National Rail
Administration (No. Jernbaneverket) in Norway. If demand were to exceed supply on the railway, the
available slots would be allocated considering the socio-economic benefits of the transports or, in the
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event that such demand arises after the annual allocation has been made, with regards to the time
when the conflicting applications were made.
The allocation is made without regard to previous years’ allocations among the parties requesting slots.
In such circumstances, it is possible that the Kaunisvaara Project may not have sufficient access rights
to transport all the iron ore concentrates the Issuer is capable of producing with the result that it may
be forced to temporarily find alternative routes for transportation or reduce production of iron ore
concentrates and/or deliveries of iron ore concentrates to the customers. Furthermore, the Issuer may
not be able to successfully enter into agreements with third parties who are to provide services that will
enable to implement the logistics solution. Any failure to implement in a timely manner or maintain
continuous operations of the intended logistics solution, particularly if such were to occur repeatedly
or for a prolonged period of time, could disrupt the timely delivery of iron ore concentrates to
customers which would adversely affect the Issuer’s revenues and could result in the termination of
one or more of the off-take contracts which currently are in place and/or claims by customers under
those contracts for damages for breach of the supply obligations. While the Issuer might, in such a
case, be able to sell its iron ore concentrates to alternative third parties, there can be no guarantee that
such a price would not be materially worse than under the supply contracts or that the Issuer could sell
the supply at all. In addition, the Issuer could be required to incur unexpected capital or operating
costs to rectify such failures, and such expected costs could materially and adversely affect the Issuer’s
business, results of operations, financial condition or prospects and the ability to make payments on
the Bonds could be impaired.
2.3.13 Insurance and uninsured risk
The Issuer’s business is subject to a number of risks and hazards generally, including adverse
environmental conditions, industrial accidents, labor disputes, unusual or unexpected geological
conditions, ground failures, drill hole cave-ins, changes in the regulatory environment and natural
phenomena such as inclement weather conditions, floods, snow falls and avalanches. Such occurrences
could result in damage to exploration equipment, personal injury or death, environmental damage to
the Issuer’s properties or the properties of others, delays in exploration activities, monetary losses and
possible legal liability.
Although the Issuer maintains insurance policies to protect against certain risks in such amounts as it
considers reasonable, its insurance will not cover all the potential risks associated with an exploration
of the Issuer’s operations and may not be adequate to cover particular liability. Moreover, insurance
against risks such as environmental pollution or other hazards as a result of mining activities is not
generally available to companies in the industry on acceptable terms.
It is not always possible to obtain insurance against all such risks and the Issuer may decide not to
insure against certain risks because of high premiums associated with insuring against those risks or
for other reasons. Furthermore, insurance coverage may not continue to be available at economically
feasible premiums, or at all. Losses arising from events that are not insured or are not adequately
insured may cause the Issuer to incur significant costs that could have a material adverse effect upon
its financial performance and results of operations.
2.3.14 Legal and regulatory risk
Mining and construction operations in Sweden and Norway are subject to a variety of general and
industry-specific regulations concerning the environment, the health and safety of employees, land
access, infrastructure creation and access, royalties, taxation, accounting policies and other matters. In
addition, certain types of operations require the use of certain mining and construction methods and
equipment, submission of impact statements and approval thereof by government authorities.
Compliance with such existing laws and regulations may cause delays or require capital outlays in
excess of those anticipated, which, in turn, could have a material adverse effect on the Issuer’s
operations. Additionally, if these laws and regulations were to change and, as a result, material
additional expenditure were required to comply with such new laws and regulations, restrictions or
delays in the development of the Kaunisvaara Project or significant additional costs could occur that
would cause the Kaunisvaara Project to become uneconomic. Substantially all of the Issuer’s activities
are subject to environmental permitting and regulation. These regulations and subsequent permits
regulate, among other things, emissions to air and water as well as noise, vibrations and land
20
Listing Prospectus
reclamation. They also set forth regulations for management of solid and hazardous waste.
Environmental legislation is evolving in a manner which may result in stricter standards and
enforcement, increased fines and penalties for non-compliance, more stringent environmental
assessments of proposed projects and a heightened degree of responsibility for companies and their
officers, directors and employees. There is no assurance that future changes in environmental
regulation will not adversely affect the Issuer’s activities. Various competent authorities’ approvals and
permits are required in connection with the Issuer’s activities. To the extent approvals and permits are
required and not obtained, the Issuer may be curtailed or prohibited from proceeding with planned
exploration or development of mineral properties. Failure to comply with applicable laws, regulations
and permitting requirements may result in enforcement actions, including orders issued by regulatory
or judicial authorities, pursuant to which the Issuer may be required to cease or curtail its operations
or take corrective measures requiring Capex, installation of additional equipment, or remedial actions.
Parties, such as the Issuer, engaged in mining operations or in the exploration or development of
mineral properties may be required to compensate those suffering loss or damage by reason of their
exploration and development activities and may be subjected to civil or criminal fines or penalties
imposed for violations of applicable laws or regulations. Amendments to current laws, regulations and
permits governing operations and activities of mining and exploration companies, or more stringent
implementation thereof, could have a material adverse impact on the Issuer and cause increases in
exploration expenses or require abandonment of or delays in the exploration and development of new
mining properties. In addition, the Issuer requires certain building permits, dispensations and
authorizations in relation to certain aspects of its planned logistics solution for the Kaunisvaara
Project, for example the transshipment terminal in Pitkäjärvi. If the Issuer is unable to obtain these
permits and authorizations, or if they are revoked or not renewed once issued, the ability to complete
its planned logistics solution may be materially impaired, with the consequence that it would not be
possible to deliver the iron ore concentrate to the customers. Certain laws and regulations, particularly
those related to environmental legislation, are evolving in a manner that may mean stricter standards
and enforcement, increased fines and penalties for non-compliance, more stringent assessments of
proposed projects and a heightened degree of responsibility for companies and their officers, directors
and employees. There can be no assurance that future changes in environmental regulation will not
adversely affect the Issuer’s activities. Any delays or increased costs as a result of existing regulations,
new regulations or fines for a breach of such regulations could materially and adversely affect the
2.3.15
Government regulations
The exploration and development activities of the Issuer is subject to various laws governing
exploration, development, mining, processing, taxes, labour standards and occupational health and
safety, toxic substances, land use, water use, land claims of local people and other matters. Although
the Issuer believes that the exploration and development activities are currently being carried out in
accordance with all applicable laws, no assurance can be given that new rules and regulations will not
be enacted or that existing rules and regulations will not be applied in a manner which could limit or
curtail production or development. Amendments to current laws and regulations governing
exploration and development activities or more stringent implementation thereof could have a
substantial material adverse effect on the Issuer.
The Issuer’s operations may be affected in varying degrees by government regulations with respect to,
for example, restrictions on exploration, development, processing, production, price controls, export
controls, currency remittance, income taxes, expropriation of property, foreign investment,
maintenance of claims, environmental legislation, land use, land claims of local people, water use and
mine safety. Failure to comply strictly with applicable laws, regulations and local practices relating to
mineral right applications and tenure, could result in loss, reduction or expropriation of entitlements,
or the imposition of additional local or foreign parties as joint venture partners with carried or other
interests. Changes in exploration, mining or investment policies or shifts in political attitude could
materially adversely affect the Issuer’s financial results.
In addition, the Issuer requires certain building permits, dispensations and authorizations in relation
to certain aspects of its planned logistics solution for the Kaunisvaara Project. If the Issuer is unable to
obtain these permits and authorizations, or if they are revoked or not renewed once issued, the ability
to complete the planned logistics solution may be materially impaired, with the consequence that it
would not be possible to deliver iron ore concentrate to the customers. Certain laws and regulations,
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Listing Prospectus
particularly those related to environmental legislation, are evolving in a manner that may mean
stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent
assessments of proposed projects and a heightened degree of responsibility for companies and their
officers, directors and employees. There can be no assurance that future changes in environmental
regulation will not adversely affect the Issuer’s activities. Any delays or increased costs as a result of
existing regulations, new regulations or fines for a breach of such regulations could materially and
adversely affect the Issuer’s business, results of operations, financial condition or prospects.
2.3.16 Permits
Although the Issuer has or will receive title opinions in relation to its concessions, exploration permits,
environmental licenses and other property that has been considered as material to the Issuer, there is
no guarantee that title to such assets will not be challenged or impugned. The Issuer has not conducted
surveys of the concessions, permits, licenses and other property in which it holds a direct or indirect
interest, and therefore the exact area or location for such concessions, permits and licenses may be in
doubt. The Issuer’s concessions, permits and licenses may be subject to prior unregistered agreements,
transfers, leases or native land claims and title may be affected by such unidentified or unknown
claims or defects. Furthermore, any concession, permit or license may be withdrawn or the terms and
conditions therefore be changed by the relevant authority in case the Issuer does not comply with its
obligations under applicable laws or such specific concession, permit or license or if there otherwise
are compelling reasons, e.g. effects of the operations that could not have been foreseen at the time of
authorization of such concessions, permits and licenses. Obtaining the necessary governmental
licenses or permits is a complex and time-consuming process involving numerous jurisdictions. There
can be no assurance that the Issuer will be able to maintain or obtain all necessary licenses and
permits that may be required to carry out exploration, development and mining operations at their
projects. The Kaunisvaara Project will, upon completion, include the Tapuli and Sahavaara mines,
each of which requires certain permits prior to the commencement of its development, including an
environmental permit for each mine. Additionally, permits for the processing of the ore from each
mine in a two line processing plant are required. To date, the Issuer has received all the principal
permits that are required in order to operate Tapuli and Sahavaara except for an environmental permit
for the Sahavaara mine. The permit for the Tapuli mine and the Kaunisvaara mill allows mining of up
to 20 Mt per annum of ore and the processing of ore in the Kaunisvaara mill from Tapuli or similar ore
with other origin. The permit also approved the construction of the mill with two processing lines and
a nominal capacity of 12 Mt per annum of ore and 5 Mt of concentrate. This permit is valid and
irrevocable, independent of additional applications and permits related to the Kaunisvaara operations.
The ongoing construction work is following the conditions stipulated in the Tapuli mine and the
Kaunisvaara mill permit issued by the Border River Commission in August 2010. A comprehensive
application for an environmental permit covering the above-mentioned and already permitted
operations and the planned activities in the Sahavaara mine was filed in June 2011. The Sahavaara
environmental permit also, when and if granted, provide for a right to process the ore from the
Sahavaara pit with increased sulphide levels. Unless and until the Issuer obtains such environmental
permit, it will not be possible to commence the development of the Sahavaara mine. An application
was made on December 7, 2010 and amended in June 2011 to the relevant authorities in Sweden to
obtain this environmental permit for the Sahavaara mine. It is the Issuer’s belief that the Sahavaara
environmental permit is expected to be granted by the third quarter of 2012.
While the Issuer does not currently anticipate any difficulty in obtaining the Sahavaara environmental
permit in a timely manner, the relevant authority in Sweden handling the permit application is not the
same as the authority that granted the Tapuli environmental permit, and the Sahavaara mine involves
certain environmental issues related to the presence and disposal of sulphide contained within the
Sahavaara orebody that were not addressed in the application for the Tapuli environmental permit
because those sulphides are not present in the Tapuli orebody. No assurance can be given that the
outstanding environmental permit for the Sahavaara mine will be granted in a timely manner or at all,
or that if granted such permit will not be subject to one or more conditions that the Issuer would be
unable to meet or that could require the Issuer to change the plans for the Sahavaara mine, delay the
completion of the Sahavaara mine, or increase the cost of constructing and/or operating the Sahavaara
mine. To mitigate the risk of the Sahavaara environmental permit not being granted by the end of the
third quarter of 2012, it has been resolved to construct both lines of the processing plant as planned
and to delay the development of the Sahavaara orebody. Tapuli ore will be processed in both lines of
the processing plant. The Issuer is confident that it will be able to operate in this manner for up to
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Listing Prospectus
approximately 24 months, after which it would be necessary to reduce the rate of production at the
Tapuli orebody. Accordingly, it should be possible to achieve and maintain economically viable levels
of production from the Kaunisvaara Project should there be a delay in obtaining the Sahavaara
environmental permit of at least 24 months beyond the date on which the Issuer currently expects to
obtain the permit. However, should there be any significant further delay in obtaining, or should the
Issuer fail to obtain, the Sahavaara environmental permit this would materially and adversely affect its
business, results of operations, financial condition or prospects and the Issuer’s ability to make
payments on the Bonds could be impaired.
2.3.17
Health and safety hazards
The Issuer cannot guarantee that none of its employees will ever be injured or become ill from any
occupational disease related to the workplace, or that such injuries or diseases may not have any
implications on the Issuer. The materialization of any of the foregoing may have a material and
adverse effect on the Issuer’s business, results of operations and financial condition or prospect.
2.3.18 Environmental risk hazards
All phases of the Issuer’s exploration and development activities are subject to regulation by
governmental agencies under various environmental laws in the various jurisdictions in which it
operates. These laws address emissions into the air, discharges into water, management of waste,
management of hazardous substances, protection of natural resources, antiquities and endangered
species, and reclamation of lands disturbed by mining operations. Environmental legislation is
evolving in a manner which will require stricter standards and enforcement, increased fines and
penalties for non-compliance, more stringent environmental assessments of proposed projects, and a
heightened degree of responsibility for companies and their officers, directors and employees.
Compliance with environmental laws and regulations may require significant capital outlays on behalf
of the Issuer and may cause material changes or delays in its intended activities. There is no assurance
that future changes in environmental regulation, if any, will not adversely affect the Issuer’s operations
or result in substantial costs and liabilities to the Issuer in the future. Furthermore, environmental
hazards which are unknown at present and which have been caused by previous or existing owners or
operators may exist on the Issuer’s properties.
2.3.19 Uncertainty in the estimation of ore/mineral reserves, mineral resources and
metallurgical sampling and studies
The figures for ore/mineral reserves and mineral resources contained herein, or otherwise disclosed by
the Issuer, are estimates only and no assurance can be given that the anticipated tonnages and grades
will be achieved, that the indicated level of recovery will be realized or that ore/mineral reserves can be
mined or processed profitably, if at all. There are numerous uncertainties inherent in estimating
ore/mineral reserves and mineral resources, including many factors beyond the Issuer’s control. Such
estimation is a subjective process, and the accuracy of any reserve or mineral resource estimate is a
function of the quantity and quality of available data and of the assumptions made and judgments
used in engineering and geological interpretation. Short-term operating factors relating to the
ore/mineral reserves, such as the need for orderly development of the ore bodies or the processing of
new or different ore grades, may cause any ore body to be unprofitable in any particular accounting
period. In addition, there can be no assurance that recoveries derived from small scale laboratory tests
will be duplicated in larger scale tests under on-site conditions or during production. Fluctuation in
commodity prices, results of drilling, metallurgical testing and production and the evaluation of mine
plans subsequent to the date of any estimate of ore/mineral reserves or mineral resources may require
revision of such estimates. The actual volume and grade of reserves mined and processed and recovery
rates may not be the same as currently anticipated. Any material reductions in estimates of
ore/mineral reserves and mineral resources, or of the Issuer’s ability to extract these ore/mineral
reserves, could have a material adverse effect on the Issuer’s results of operations and financial
condition. The Issuer has not disclosed updated figures for ore/mineral reserves and mineral resources
since 1 June 2011. No assurance can be made that the aforementioned report provides an accurate or
complete description of the Issuer’s ore/mineral reserves and mineral resources.
While there has been metallurgical testing of the Kaunisvaara Project’s iron ore from samples, by its
very nature, mineralization is not homogeneous and the samples may not be representative of the
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Listing Prospectus
broader orebody. The test work conducted to date has been on samples, which the Issuer believes to be
representative of the orebody at the Tapuli and Sahavaara mines. However, there is a risk that this may
not be the case. If the ore mined at the Tapuli and Sahavaara mines does not perform in the iron ore
processing plant as expected based on trials that have been conducted, or if it has a materially different
percentage of iron ore or other chemical composition than currently expected, the Issuer’s ability to
process the iron ore in the processing plant or to attract the price for its iron ore concentrate that the
Issuer anticipates may be adversely impacted. This may, in turn, materially and adversely affect the
2.3.20 Uncertainty relating to measured, indicated and inferred mineral resources
There is risk that measured, indicated and inferred mineral resources cannot be converted into
mineral reserves as the ability to assess geological continuity is not sufficient to demonstrate economic
viability. Due to the uncertainty of measured, indicated and inferred mineral resources, there is no
assurance that inferred mineral resources will be upgraded to proven and probable mineral reserves as
a result of continued exploration.
The disclosure in this Prospectus (including in the documents incorporated by reference) of a scientific
or technical nature of the Issuer’s material properties, including disclosure of mineral reserves and
resources, is based on technical reports prepared for those properties in accordance with NI 43-101
and other information that has been prepared by or under the supervision of “qualified persons” (as
such term is defined in NI 43-101) and included in this Prospectus with the consent of such persons.
The technical reports have been filed on SEDAR and can be reviewed at www.sedar.com. Actual
recoveries of mineral products may differ from reported mineral reserves and resources due to
inherent uncertainties in acceptable estimating techniques. In particular, “indicated” and “inferred”
mineral resources have a great amount of uncertainty as to their existence, economic and legal
feasibility. It cannot be assumed that all or any part of an “indicated” or “inferred” mineral resource
will ever be upgraded to a higher category of resource. Mineral resources that are not mineral reserves
do not have demonstrated economic viability. Investors are cautioned not to assume that all or any
part of the mineral deposits in these categories will ever be converted into proven and probable
reserves, or that any proven or probable reserves will lead to economically viable production or
production at all.
2.3.21 Additional ore/mineral reserves
Because mines have limited lives based on proven and probable ore/mineral reserves, the Issuer must
continually replace and expand its ore/mineral reserves in order for a mine to continue production.
The life-of-mine estimates for the anticipated operations may not be correct, and ultimately, the
Issuer’s ability to maintain or increase its anticipated annual production will be dependent on the
ability to bring new mines into production and/or to expand ore/mineral reserves at its then existing
mines.
2.3.22 Title to assets and titles
The title to properties may be subject to disputes or other claims. Although the Issuer has exercised
reasonable due diligence with respect to determining title to properties in which they have a material
interest, there is no guarantee that title to such properties will not be challenged or impugned. There
may be valid challenges to the title of the properties, which, if successful, could impair the Issuer’s
ability to explore, develop and/or operate its properties or to enforce its rights with respect to its
properties. The title may be subject to prior unregistered or native land claims by the indigenous Sami
people, and its title may be adversely affected by unidentified or unknown defects. If the title to
material real properties required for the development of the Kaunisvaara Project were to be challenged
or impugned, this could increase the costs associated with the two projects and, if the Issuer is unable
to settle or resolve such issues, require the Issuer to cease such developments in whole or in part, or
change the manner in which the Kaunisvaara Projects is developed. Any changes in the planned
development of the Kaunisvaara Project could materially and adversely affect the Issuer’s business,
results of operations, financial condition or prospects. Other parties may dispute the Issuer’s title to
the properties in which it has an interest and such properties may be subject to prior unregistered
agreements or transfers and title may be affected by undetected encumbrances or defects or
government actions. An impairment to or defect in the Issuer’s title to its properties could have a
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Listing Prospectus
material adverse effect on the Issuer’s business, financial condition or results of operations. In
addition, such claims, whether or not valid, will involve additional costs and expenses to defend or
settle which could adversely affect the Issuer’s profitability.
2.3.23 Risks in the results from current DFS
According to normal practice in the industry, the Issuer is performing DFS for its projects. There is no
assurance that the Issuer’s activities and assessments in connection with the DFS will verify the
preliminary results earlier communicated to the market. The commercial viability of a mineral deposit
is dependent upon a number of factors that are beyond the Issuer’s control as described above and
could result in the Issuer not receiving an adequate return on invested capital. There is also a risk that
the DFS cannot be completed in the time frame expected as this is dependent upon receiving complete
and accurate information from a number of consultants involved in the DFS work. A delay in finalizing
the DFS could also mean, due to changes beyond the control of the Issuer, that it is no longer viable to
open new mining operations.
2.3.24 Third party reports
This Prospectus contains references to reports prepared by third parties. The scope of each of these
reports is limited, and the opinions, conclusions, information and observations contained therein are
given as at their respective dates and subject to the limitations and qualifications specified therein,
including with respect to their reliance upon certain information provided to them by the Issuer and
other third parties.
2.3.25 Currency risk
The companies within the Group are exposed to foreign currency risk mainly due to inter-company
loans which are denominated in the functional currencies of the subsidiaries as well as to their
respective cash balances that are denominated in currencies other than the functional currencies in
which they are measured. The Group monitors this exposure, but had no hedge positions at September
31, 2011.
The following table demonstrates the sensitivity to a reasonably possible change in the foreign
exchange rate, with all other variables held constant, of the Group’s result before tax due to changes in
the carrying value of monetary assets and liabilities.
Effect on result
before tax for the
year ended
December 31, 2011
Increase/
(Decrease)
Effect on result
before tax for the
eleven months ended
December 31,
2010
Increase/
(Decrease)
Effect on result
before tax for the
year ended January
31,
2010
Increase/
(Decrease)
Effect on result
before tax for the
year ended
January 31,
2009
Increase/
(Decrease)
USD million
USD million
USD million
USD million
SEK
12.56
4.30
2.16
1.72
EUR
1.86
1.73
1.61
0.93
USD
0.32
0.10
1.10
0.41
NOK
0.49
1.36
2.00
5.27
GBP
1.39
0.25
0.14
0.20
Increase
foreign
exchange rate
+5%*
*A decrease in foreign exchange rates of 5% would have the opposite impact on income.
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Listing Prospectus
2.3.26 Credit risk
The Issuer considers that the following financial assets are exposed to credit risk: cash, accrued
interest receivable, prepaid expenses and deposits. Credit risk is the risk that one party to a financial
instrument will fail to discharge an obligation and cause the other party to incur a financial loss. The
Issuer does not currently generate any revenues from sales to customers nor do they hold derivative
type instruments that would require a counterparty to fulfill a contractual obligation. The Issuer has
never held any asset backed paper instruments. The Issuer seeks to place its cash with reputable
financial institutions. Accordingly, the Issuer believes that it is exposed to minimal credit risks at the
current time, although the current concerns surrounding financial institutions globally have increased
the risk of a credit default by a major financial institution impacting the Issuer. The Issuer only
deposits cash surpluses with major banks of high quality credit standing.
2.3.27 Changes in critical accounting estimates could adversely affect financial results
The Issuer’s most significant accounting estimates relate to the carrying value of the mineral property
assets. The accounting policies in relation to metal and mineral properties are set out in full in the
Issuer’s annual financial statements. Management regularly reviews the net carrying value of each
metal and mineral property. Where estimates of future net cash flows are not available and where
other conditions suggest impairment, management assesses if carrying value can be recovered.
Management’s estimates of mineral prices, mineral resources and operating, capital and reclamation
costs are subject to certain risks and uncertainties which may affect the recoverability of mineral
property costs. Although management has made its best estimate of these factors, it is possible that
changes could occur in the near term, which could adversely affect the future net cash flows to be
generated from the properties.
2.3.28 Current global financial conditions
Current global financial conditions have been subject to increased volatility and numerous financial
institutions have either gone into bankruptcy or have had to be rescued by governmental authorities.
Access to public financing has been negatively impacted by, inter alia, subprime mortgages, state crises
and the liquidity crisis affecting the asset-backed commercial paper market. These factors may impact
the ability of the Issuer to obtain equity or debt financing in the future on terms favorable to the
Issuer. If these increased levels of volatility and market turmoil continue, the Issuer’s operations could
be adversely impacted and the trading price of the Bonds may be adversely affected.
2.3.29 Additional financing
The exploration, development, mining and processing of the Issuer’s projects may require additional
external financing. Failure to obtain sufficient financing on terms and conditions acceptable to the
Issuer could result in the delay or indefinite postponement of exploration, development or production
on any or all of the Issuer’s projects. There can be no assurance that additional capital or other types of
financing will be available if needed or that, if available, the terms of such financing will be favorable.
The failure to secure suitable additional financing may have a material and adverse effect on the
Issuer’s business, results of operations and financial condition or prospect.
2.3.30 Capex risks related to the future cash flows from the Kaunisvaara Project
The Issuer is planning to develop the Tapuli mine, the processing plant and the planned logistics
solution prior to the development of the Sahavaara mine. There is a risk that the funds available to the
Issuer prior to completion of the Tapuli mine, the processing plant and ancillary facilities and the
planned logistics solution will not be sufficient to progress construction of the Kaunisvaara Project to
the stage where the Issuer is able to generate operating cash flows from Tapuli’s production. The
Issuer assumes, accounting for contingencies that it will need to incur more than USD 600 million of
Capex prior to production commencing at Sahavaara. Furthermore, there is a risk that even if the
Issuer is able to generate cash flows from Tapuli’s production, the amount of such cash flows actually
generated (together with other funds available to the Issuer, if any) may not be sufficient to fund
completion of the Kaunisvaara Project. As a result the Issuer may be required to cease, slow or delay
certain or all further construction works until it is able to raise additional funds. Any such cessation or
delay could result in third parties exercising their rights of termination under certain material
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Listing Prospectus
agreements and/or the Issuer being required to pay liquidated damages or other amounts to third
parties under such agreements.
The amount of operating cash flow that the Issuer will be able to derive from the Kaunisvaara Project
prior to its completion depends on a number of factors, many of which are entirely outside the Issuer’s
control. Such factors include, but are not limited to, the prevailing iron ore price, the quality of the
produced iron ore concentrate, and the ability to deliver iron ore concentrate to the customers in a
timely manner and the level of operating expenditures incurred by the Issuer. Accordingly, there can
be no assurance that the operating cash flows derived from the Kaunisvaara Project prior to its
completion will be equal to or greater than the amounts assumed in the Issuer’s funding plan or
sufficient (when taken with other funds available to the Issuer) to fund completion of the Kaunisvaara
Project. In the event of a shortfall in pre-completion operating cash flows, there can be no assurance
that the Issuer will be able to obtain or raise the additional funds necessary to complete the
Kaunisvaara Project or that any associated delays or increased costs of completing the Kaunisvaara
Project will not have a material adverse effect on the Issuer’s business, results of operations and
financial condition. Any requirement to seek additional funding sources or any delay in completion of
the Kaunisvaara Project could materially and adversely affect the Issuer’s business, results of
operations, financial condition or prospects. Changes in critical accounting estimates could adversely
affect financial results.
2.4
Risk factors relating to the Bonds
2.4.1
Inability of Guarantors to fulfill guarantee undertakings under the Bond
Agreement
The Guarantors’ (including the Parent Guarantor) ability to fulfill their respective guarantee
undertakings under the Bond Agreement is dependant upon the operations of the operating companies
within the Group.
2.4.2
The Bonds may not be a suitable investment for all investors
Each prospective investor must determine the suitability of that investment in light of its own
circumstances. In particular, each prospective investor should:
2.4.3
•
have sufficient knowledge and experience to make a meaningful evaluation of the
Bonds, the merits and risks of investing in the Bonds and the information contained
or incorporated by reference in the Prospectus;
•
have access to, and knowledge of, appropriate analytical tools to evaluate, in the
context of its particular financial situation, an investment in the Bonds and the impact
the Bonds will have on its overall investment portfolio;
•
have sufficient financial resources and liquidity to bear all of the risks of an
investment in the Bonds;
•
understand thoroughly the terms of the Bonds; and
•
be able to evaluate (either alone or with the help of a financial adviser) possible
scenarios for economic, interest rate and other factors that may affect its investment
and its ability to bear the applicable risks.
Current global financial conditions have been subject to increased volatility and numerous financial
institutions have either gone into bankruptcy or have had to be rescued by governmental authorities.
Access to public financing has been negatively impacted by, inter alia, subprime mortgages, state crises
and the liquidity crisis affecting the asset-backed commercial paper market. These factors may impact
the ability of the Issuer to obtain equity or debt financing in the future on terms favourable to the
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Listing Prospectus
Issuer. If these increased levels of volatility and market turmoil continue, the Issuer’s and the Group’s
operations could be adversely impacted and the trading price of Bonds may be adversely affected.
2.4.4
The Issuer’s indebtedness under the Bonds
The Issuer will have substantial indebtedness under the Bonds which could have important
consequences for the bondholders because:
2.4.5
•
the Issuer’s ability to obtain additional financing for working capital, capital
expenditure, asset acquisitions or general corporate purposes and its ability to satisfy
its obligations under the Bonds may be impaired in the future;
•
the Issuer may be more vulnerable to general adverse economic and industry
conditions;
•
the Issuer may be at a competitive disadvantage compared to its competitors with less
indebtedness or comparable indebtedness at more favourable interest rates and as a
result, it may be worse positioned to withstand economic downturns;
•
the Issuer’s ability to refinance indebtedness may be limited or the associated costs
may increase; and
•
the Issuer’s flexibility to adjust to changing market conditions and ability to withstand
competitive pressures could be limited, or the Issuer could be prevented from carrying
out capital expenditures that are necessary or important to the Issuer’s growth
strategy and efforts to improve operating margins or the Issuer’s business.
The terms and conditions of the Bond Agreement will impose significant
operating and financial restrictions
The terms and conditions of the Bond Agreement contain numerous restrictions on the Issuer’s
activities, including, but not limited to, covenants which may limit the ability to:
•
transfer or sell certain assets;
•
incur or guarantee additional debt;
•
make certain investments or acquisitions;
•
pay dividends or make other payments; and
•
enter into transactions with affiliates.
The restrictions in the terms and conditions of the Bond Agreement may prevent the Issuer from
taking actions that it believes would be in the best interest of the Issuer’s business, and may make it
difficult for the Issuer to execute its business strategy successfully or compete effectively with
companies that are not similarly restricted.
2.4.6
Defaults and insolvency of subsidiaries
In the event of insolvency, liquidation or a similar event relating to one of the Issuer’s subsidiaries, all
creditors of such subsidiary would be entitled to payment in full out of the assets of such subsidiary
before the Issuer, as a shareholder, would be entitled to any payments. Defaults by, or the insolvency
of, certain subsidiaries of the Issuer could result in the obligation of the Issuer to make payments
under parent company financial or performance guarantees in respect of such subsidiaries’ obligations
or the occurrence of cross defaults on certain borrowings of the Issuer and other members of the
Group. There can be no assurance that the Issuer and its assets would be protected from any actions by
the creditors of any subsidiary of the Issuer, whether under bankruptcy law, by contract or otherwise.
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Listing Prospectus
2.4.7
Value of secured assets
Although the Bonds are secured obligations of the Issuer, there can be no assurance that the value of
the security for the Bonds and the Issuer’s other assets will be sufficient to cover all the outstanding
Bonds together with accrued interests and expenses in case of a default and/or if the Issuer enters into
liquidation.
2.4.8
Limited liquidity of the Bonds: Absence of a secondary market for Bonds
There can be no assurance that a secondary market for the Bonds will provide the bondholders with
liquidity or that any such liquidity will continue for the life of the Bonds. Consequently, any purchaser
of the Bonds must be prepared to hold such Bonds for an indefinite period of time or until final
redemption or maturity of the Bonds.
The liquidity and market value at any time of the Bonds is affected by, among other things, the market
view of the credit risk of such Bonds and will generally fluctuate with general interest rate fluctuations,
general economic conditions, the condition of certain financial markets, international political events,
the performance and financial condition of the Issuer, developments and trends in the mining industry
generally.
2.4.9
The market price of the Bonds may be volatile
The market price of the Bonds could be subject to significant fluctuations in response to actual or
anticipated variations in the Issuer’s operating results and those of its competitors, adverse business
developments, changes to the regulatory environment in which the Issuer operates, changes in
financial estimates by securities analysts and the actual or expected sale of a large number of Bonds, as
well as other factors. In addition, in recent years the global financial markets have experienced
significant price and volume fluctuations, which, if repeated in the future, could adversely affect the
market price of the Bonds without regard to the Issuer’s operating results, financial conditions or
prospects.
2.4.10 Interest rate risks may have an adverse effect on the value of the Bonds
Investment in the Bonds involves the risk that subsequent changes in market interest rates may
adversely affect the value of the Bonds.
2.4.11
The Bonds may be subject to optional redemption by the Issuer, which may have
a material adverse effect on the value of the Bonds
The terms and conditions of the Bond Agreement provides that the Bonds shall be subject to optional
redemption by the Issuer at their outstanding principal amount, plus accrued and unpaid interest to
the date of redemption, plus in some events an amount calculated in accordance with the terms and
conditions of the Bond Agreement. This feature is likely to limit the market value of the Bonds. During
any period when the Issuer may elect to redeem the Bonds, the market value of the Bonds generally
will not rise substantially above the price at which they can be redeemed. This may also be true prior to
any redemption period. The Issuer may be expected to redeem the Bonds when its cost of borrowing is
lower than the interest rate on the Bonds. At those times, an investor generally would not be able to
reinvest the redemption proceeds at an effective interest rate as high as the interest rate on the Bonds
and may only be able to do so at a significantly lower rate. Potential investors should consider
reinvestment risk in light of other investments available at that time.
2.4.12 Mandatory prepayment events may lead to a prepayment of the Bonds in
circumstances where an investor may not be able to reinvest the prepayment
proceeds at an equivalent rate of interest.
The terms and conditions of the Bond Agreement provides that the Bonds shall be subject to
mandatory repayment by the Issuer if (a) the Parent Guarantor’s ownership (directly or indirectly) in
the Project Guarantor is reduced below 100%; (b) the Project Guarantor’s ownership (directly or
indirectly) in the Issuer is reduced below 100%; (c) the Issuer’s ownership (directly or indirectly) in
any of the Issuer Subsidiaries is reduced below 100%. Upon the occurrence of such mandatory
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Listing Prospectus
repayment event, the Issuer shall redeem 100% of the outstanding Bonds. Following any early
redemption after the occurrence of a mandatory repayment event, it may not be possible for
bondholders to reinvest such proceeds at an effective interest rate as high as the interest rate on the
Bonds and may only be able to do so at a significantly lower rate. It is further possible that the Issuer
will not have sufficient funds at the time of the mandatory prepayment to make the required
redemption of Bonds.
2.4.13 Legal investment considerations may restrict certain investments
The investment activities of certain investors are subject to legal investment laws and regulations, or
review or regulation by certain authorities. Each potential investor should consult its legal advisers to
determine whether and to what extent (a) the Bonds are legal investments for it, (b) the Bonds can be
used as collateral for various types of borrowing, and (c) other restrictions apply to its purchase or use
of the Bonds. Financial institutions should consult their legal advisors or the appropriate regulators to
determine the appropriate treatment of the Bonds under any applicable risk-based capital or similar
rules.
2.4.14 Restrictions on the transferability of the Bonds
The Bonds have not been and will not be registered under the Securities Act, or any U.S. state
securities laws. Therefore, a holder of the Bonds may not offer or sell the Bonds in the United States,
except pursuant to an exemption from, or in a transaction not subject to, the registration requirements
of the Securities Act and applicable state securities laws, or pursuant to an effective registration
statement. The Issuer has not undertaken to register the Bonds under the U.S. Securities Act or any
U.S. state securities laws or to effect any exchange offer for the Bonds in the future. Furthermore, the
Issuer has not registered the Bonds under any other country’s securities laws. It is the bondholder’s
obligation to ensure that your offers and sales of Bonds within the United States and other countries
comply with all applicable securities laws.
The Bonds will not be listed on the Toronto Stock Exchange and may not be sold, transferred,
hypothecated or otherwise traded in Canada or to or for the benefit of a Canadian resident for a period
of four months and one day from the date that the Issuer becomes a reporting Issuer in any province
or territory of Canada.
2.4.15 The security will not be granted directly to the holders of the Bonds
The security interests in the Bonds that will secure the Issuer’s obligations under the Bonds, will not be
granted directly to the holders of the Bonds, but will be granted only in favor of the Security Agent for
the benefit of the secured creditors. The Bond Agreement and the Intercreditor Agreement provides
that only the Security Agent will have the right to enforce the security interests in the security. As a
consequence, holders of the Bonds will not have direct security interests and will not be entitled to take
enforcement action in respect of the security securing the Bonds, except through the Security Agent.
2.4.16 Security over the assets of a company through a Swedish law corporate mortgage
is only a “passive” security
A Swedish corporate mortgage will essentially cover inventory, machinery, receivables and intellectual
property rights owned by a Swedish company. It does not cover real property, cash and bank deposits,
shares and other financial instruments intended for public trading, property that can be subject to a
mortgage or property that cannot be seized or that cannot form part of a bankruptcy estate. A
corporate mortgage provides security over the assets covered by the corporate mortgage up to a
maximum amount equal to the lower of (a) the secured claim and (b) 115% of the face amount of the
corporate mortgage certificate plus interest on such amount from the date of the bankruptcy
application at a rate corresponding to the official reference rate plus 4%.
Until a seizure or bankruptcy occurs, a company that has provided a corporate mortgage is free to deal
with the assets covered by the corporate mortgage. Thus, if any of the company’s assets are sold, the
corporate mortgage over such assets will seize to be valid. Furthermore, special priority rights with a
higher ranking than a corporate mortgage (such as a possessory pledge) may be attached to or granted
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Listing Prospectus
by the owner over assets covered by the corporate mortgage. If this is done, such priority rights will
give a better priority to these assets and the proceeds from a sale of such assets in a bankruptcy.
A corporate mortgage cannot be enforced by the mortgagee but will give the mortgagee a priority (as
described above) to the proceeds from a sale of the assets covered by the business mortgage after a
seizure of such assets or by the bankruptcy administrator in a bankruptcy.
2.4.17
A mortgage over real property in Sweden is limited in value and can only be
enforced through public proceedings
A mortgage over real property in Sweden will cover the relevant land unit plus certain fixtures and
fittings. Depending on whether a special filing has been made, the real property may include also
certain industrial fixtures and fittings. Since the Issuer will make such filing, the real property
mortgage granted by the Issuer will not include industrial fixtures and fittings. Such assets will instead
be treated as chattels and be subject to security by way of security sales from time to time. A mortgage
over real property provides security over the land unit (including certain fixtures and fittings) up to a
maximum amount equal to the lower of (i) the secured claim and (ii) 115% of the face amount of the
mortgage certificate plus interest on such amount from the date of enforcement at a rate
corresponding to the official reference rate plus 4%.
2.4.18 The security for the Bonds does not include any security interest granted over the
mining concessions for the Kaunisvaara Project, or any other mining
concessions owned by the Issuer
Under the laws of Sweden, it is not possible to pledge to the Security Agent any interests in the mining
concessions for the Kaunisvaara Project, or any other mining concessions owned by the Issuer. In the
event of liquidation and the Security Agent’s inability to/or failure to enforce its rights under the share
pledges, these rights would revert to the ownership of the Swedish state, and would not form part of
the assets available to the holders of the Bonds or any other of the secured or unsecured creditors.
Moreover, it is not possible to alienate the mining concessions without the permissions of the relevant
authorities.
2.4.19 Perfection of certain security interests will only be perfected at a later stage,
which will increase the risk for nullification in an insolvency situation
Certain bankruptcy limitations could apply under Swedish law. In particular, under the Bankruptcy
Act (Sw. konkurslagen (1987:672)), in a bankruptcy or in a company reconstruction where a
composition among creditors has been approved by the court, any security granted may be nullified if
(a) it was not provided for at the time the debt it secured arose or if it was not perfected without delay
following the coming into existence of such debt, unless in the circumstances it was nevertheless
ordinary, and (b) it was granted later than three months before the “relevant date” (broadly, the date
when the petition for bankruptcy or company reconstruction was lodged). Such security may also be
nullified if provided to a related party earlier than three months but later than two years before the
relevant date, unless it can be shown that the debtor was not insolvent at the time of the action and did
not become insolvent as a result of it.
The security granted pursuant to the business mortgage and the real property mortgage will not have
to be perfected until such time as the Issuer wishes to withdraw the proceeds of the Bonds. The
security over certain of the bank accounts will only be perfected upon an account control event and the
security over future inter-company loans will only be perfected if and when such loans arise. The
Issuer has also undertaken to create security by way of a security sale (Sw. lösöreköp) over certain
machinery and other assets acquired by the Issuer from time to time. All such security will be subject
to the additional risk of recovery in a subsequent bankruptcy, as described in the previous paragraph.
In addition, the taking of security by way of security sale will only be perfected when (a) an
announcement of the security sale containing a specification of the assigned property has been
published in a local newspaper in the area where the Issuer has its venue within one week of the date
of the sale and (b) the security sale has been registered at the relevant enforcement authority (Sw.
kronofogdemyndighet) within eight days from the date of the announcement in the local newspaper.
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Listing Prospectus
Provided that these requirements are complied with, the security interest so created will be perfected
30 days after the registration at the enforcement authority.
2.4.20 Limitation on the value of security provided by a Norwegian company in favor of
a debtor domiciled in Sweden or any other foreign jurisdiction and restrictions
on financial assistance – general exceptions
Under the laws of Norway, there exist certain limitations (with some exceptions) on the right for a
Norwegian company to grant a valid security for its parent company’s financial indebtedness. Such
limitations may apply if the parent company is domiciled in another jurisdiction than Norway and are
generally assumed to restrict a Norwegian subsidiary from, inter alia, granting any security for any
Swedish parent company’s financial indebtedness. Consequently it is assumed that the value of any
security granted by Northland Logistics AS in favor of the Bond Trustee as security for the outstanding
amounts under the Bonds, will be very limited if having any value at all. The provision of the
Norwegian Companies Act furthermore prohibits the company from granting any financial assistance
(e.g. any security) in relation to any purchase of shares in it or the shares of its parent company. The
Bond Agreement will thus contain standard provisions limiting the amount recoverable under any
security granted by Northland Logistics AS if and to the extent any of the provisions of Norwegian law
prohibits the company from granting such security for its Swedish parent company’s financial
indebtedness.
The above restrictions will not apply for a Norwegian subsidiary’s right to grant any form of security
for its own financial indebtedness. The Norwegian subsidiary, Northland Logistics AS will thus be
permitted to grant security over its assets for its payment obligations under inter-company loans. The
creditors under such loans shall according to the provisions of the Bond Agreement and to the extent
permitted by applicable law, assign such inter-company loans and the security provided by the
Norwegian subsidiary (as a sub charge) to the Bond Trustee as security for the Bonds. This may
indirectly create a valid perfected pledge over the Norwegian assets in favor of the Bond Trustee.
However, the right to enforce the security thereby created over the assets of the Norwegian subsidiary
is subject to and limited by the from time to time outstanding amount under the relevant intercompany loans. As a consequence thereof, the Bond Agreement includes a general covenant that any
funds shall be transferred to it as inter-company loans in the maximum amount permitted according
to applicable law and applicable accounting principles. It is, thus, important to note that the Bond
Agreement does not include any specific minimum amount of principal to be granted under such intercompany loans to Northland Logistics AS. Based on the foregoing, any investment in the Bonds should
be made knowing that there is a high risk that the security granted by Northland Logistics AS, directly
or indirectly in favor of the Bond Trustee (on behalf of the bondholders), may be without or of very
limited value.
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Listing Prospectus
3.
STATEMENTS
3.1
Responsibility Statement by the Persons Responsible
The Issuer issued the Bonds on 6 March 2012. This Prospectus has been prepared for the purpose of
listing the Bonds on the Oslo Børs and in accordance with the Commission Regulation (EC) no
80/2004 of 29 April 2004 implementing Directive 2003/71/EC of the European Parliament and of the
Council and the rules and regulations in Chapter 2 of the Swedish Financial Instruments Trading Act.
The Issuer is responsible for the contents of this Prospectus. The Issuer hereby assures that the Issuer
has taken all reasonable care to ensure that the information in this Prospectus, to the best of the
Issuer’s knowledge, is in accordance with the actual conditions and that no information has been
omitted which may serve to distort the picture of the Issuer. The information in this Prospectus and in
the documents incorporated by reference which derive from third parties has, as far as the Issuer
knows and can judge on basis of other information made public by the respective third party, been
correctly represented and no information has been omitted which may serve to render the information
misleading or incorrect.
The Board of Directors of the Issuer also assumes responsibility for the contents of this Prospectus and
the Board of Directors hereby assures that the Board of Directors has taken all reasonable care to
ensure that the information in this Prospectus, to the best of the Board of Directors’ knowledge, is in
accordance with the actual conditions and that no information has been omitted which may serve to
distort the picture of the Issuer.
Stockholm, 4 May 2012
NORTHLAND RESOURCES AB (PUBL)
The Board of Directors
Karl-Axel Waplan
Peder Zetterberg
Peter Pernlöf
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Listing Prospectus
3.2
Forward-looking statements
This Prospectus may include “forward-looking statements”. All statements other than historical facts
included in this Prospectus, including, without limitation, those regarding the Issuer’s future financial
or operating performances of the Issuer and its subsidiaries and their respective projects, illustrative
projections and forecasts, the timing and amount of estimated future production, estimated costs of
future production, capital, operating and exploration expenditures, costs and timing of the
development of its minerals projects, the future price of iron ore and precious and base metals, the
estimation of mineral reserves and resources, the realization of mineral reserve estimates, uncertainty
relating to inferred mineral resources, the costs of the Issuer’s hedging policy, costs and timing of
future exploration, requirements for additional capital, government regulation on exploration,
development and mining operations, environmental risks, reclamation and rehabilitation expenses,
title disputes or claims, liquidity risks, permits, key personnel, limitations of insurance coverage, legal
and regulatory risks, risks relating to currency, credit risk and risks relating to the Bonds.
Such forward-looking statements involve known and unknown risks, uncertainties and other factors
which may cause actual results to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such forward-looking
statements are based on numerous assumptions regarding the Issuer’s present and future business
strategies and the environment in which the Issuer will operate in the future.
Among the important factors that could cause the Issuer’s actual results, performance and
achievements to differ materially from those in the forward-looking statements include, but are not
limited to, those discussed in Section 2 (Risk Factors). These forward-looking statements speak only as
of the date of this Prospectus. The Issuer expressly disclaims any obligation or undertaking to release
publicly any updates or revisions to any forward-looking statements contained herein to reflect the
change in the Issuer’s expectations with regard thereto or any change in events, conditions or
circumstances on which any statement is based.
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Listing Prospectus
4.
INFORMATION REGARDING THE SECURITIES TO BE ADMITTED TO TRADING
The information contained in the below table is a summary of certain terms and conditions for the
Bonds only and should not be considered a complete description of the particular terms and
conditions summarized.
The full terms and conditions for the Bonds are set forth in Annex 1 (Bond Agreement). Terms and
expressions that are defined in the Bond Agreement are used with the same meaning in the below
summary unless otherwise is explicitly understood from the context.
ISIN:
NOK Tranche NO 001 063613.7 and USD Tranche NO 001
063619.4.
The reference name of the
Bonds:
13 per cent. Northland Resources AB (publ) Senior Secured
Bond Issue 2012/2017.
Issuer:
Northland Resources AB (publ).
Parent Guarantor:
Project Guarantor:
Northland Sweden AB.
Guarantors:
Parent Guarantor, Project Guarantor, Northland Logistics AB
and Northland Logistics AS.
Obligors:
The Issuer and the Guarantors.
Security type:
Secured Bond Issue with fixed rate.
Issue:
The Bonds have been issued through a so called private
placement. No Bonds have been issued, or will be issued, after
the Issue Date and the Bonds were subscribed in full on the
Issue Date.
Issue Price:
100% (par value).
Currency:
NOK and USD.
Loan Amount:
NOK Tranche in the amount of NOK 460,000,000 and USD
Tranche in the amount of USD 270,000,000.
Denomination:
Each bond in the NOK Tranche has a denomination of
NOK 1.00 and each bond in the USD Tranche has a
denomination of USD 1.00.
Securities form:
The Bonds are electronically registered in book-entry form
with the VPS.
Issue Date:
March 6, 2012.
Interest bearing from and including:
Issue Date.
Interest bearing to:
Maturity.
Maturity:
March 6, 2017 or an earlier maturity date as provided for in
the Bond Agreement.
Coupon Rate:
A fixed rate of 13 per cent. p.a., semi-annual interest payments.
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Listing Prospectus
Day count fraction:
30/360.
Interest payment date:
March 6 and September 6 each year and the Maturity Date.
Any adjustment will be made according to Business Day
Conversion.
Business Day Convention:
No Adjustment of Business Day - no adjustment will be made,
notwithstanding that the period end date occurs on a day that
is not a Business Day, and if such date is not a Business Day,
payments of interest will be made on the first following day
that is a Business Day.
Listing:
To simplify the trade in the Bonds, the Issuer intends to apply
for a listing of the Bonds on the Oslo Børs. The Issuer has
agreed to list the Bonds, see further clause 3 in the Bond
Agreement. The first day of trading is expected to be May 10,
2012. That an application regarding listing of the Bonds on the
Oslo Børs has been handed in to Oslo Børs does however not
mean that the application will be approved.
Release of funds to the Issuer:
The proceeds of the Bond Issue will be released to the Issuer in
portions from escrow accounts blocked and pledged in favor of
the Bond Trustee. Release of funds will each time be subject to
approval by an independent engineer appointed by the Bond
Trustee, based, inter alia, on a “cost-to-complete” test of the
Issuer’s available funding for completion of the Kaunisvaara
Project.
Amortization:
The Bonds will
Instalments):
be repaid as follows
(as Scheduled
In respect of the NOK Tranche:
(i)
on the interest payment date in March 2015 by NOK
46,000,000;
(ii)
on the interest payment date in September 2015 by
NOK 46,000,000;
(iii)
on the interest payment date in March 2016 by NOK
46,000,000;
(iv)
NOK 46,000,000; and
(v)
on the Maturity Date the outstanding Bonds under the
NOK Tranche.
In respect of the USD Tranche:
(i)
on the interest payment date in March 2015 by USD
27,000,000;
(ii)
USD 27,000,000;
(iii)
on the interest payment date in March 2016 by USD
27,000,000;
(iv)
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Listing Prospectus
USD 27,000,000;
(v)
on the Maturity Date the outstanding Bonds under the
USD Tranche
Scheduled Instalments will be made as follows:
(i)
if falling in 2015, at 110% of par value (plus accrued and
unpaid interest on the repaid amount);
(ii)
if falling in 2016, at 105% of par value (plus accrued
and unpaid interest on the repaid amount);
(iii)
at any time thereafter, at 100% par value (plus accrued
and unpaid interest on the repaid amount);
However, after an Event of Default which is continuing is
declared (even if no acceleration has been made), any
repayment of principal shall be made at the same redemption
prices as those applicable upon a Mandatory Prepayment
Event.
Issuer’s call options:
The Issuer may redeem the Bonds (all or in parts of no less
than the equivalent of NOK 150 million, divided pro rata
between the NOK and the USD tranche) at any time from and
including:
(i)
the interest payment date in March 2015 to, but
excluding, the interest payment date in March 2016 at a
price equal to 110% of par value (plus accrued and
unpaid interest on the redeemed amount); and
(ii)
the interest payment date in March 2016 to, but
excluding, the Maturity Date at a price equal to 105%
par value (plus accrued and unpaid interest on the
redeemed amount).
Ranking of the Bonds:
The Bonds are senior debt obligations of the Issuer, secured on
first priority in certain assets of the Issuer and the Guarantors
as set out herein, and otherwise rank at least pari passu with
the claims of its other unsubordinated creditors, except for
obligations which are mandatorily preferred by law.
Guarantees:
The Issuer’s obligations under the Bonds are fully and
unconditionally guaranteed on a joint and several basis by the
Guarantors (the “Guarantee”). The Guarantee, along with any
future guarantees of the Bonds, will be subject to certain
limitations on enforcement and may be limited by applicable
law or subject to certain defences that may limit its validity
and enforceability. See further clause 13 in the Bond
Agreement.
Cost Overrun Facility:
The Issuer has established a cost overrun facility of up to USD
40 million with the Standard Bank of South Africa, which
facility shall be available for drawdowns to finance any project
costs. The Cost Overrun Facility is subordinated to the Bonds,
and will only be available for drawdowns after the Bond
proceeds have been fully depleted, and any drawdowns will be
subject to satisfaction of a cost-to-complete test for the Cost
Overrun Facility and certain other conditions precedent to be
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Listing Prospectus
agreed.
The terms of the Cost Overrun Facility specifies its own set of
events of default, covenants, cost-to-complete test, project
completion test and such matters as material adverse effect,
separate to those of the Bond Agreement.
The Cost Overrun Facility is secured on second priority only in
the assets and guarantees securing the Bonds (except for
pledge over certain bank accounts), provided that the
creditor(s) under the Cost Overrun Facility are subordinated to
the Bonds, and otherwise be subject to the terms, as set out in
an intercreditor agreement governed by Norwegian law (see
“Intercreditor Agreement” below).
Security:
The Bonds are secured, on first priority, subject to appropriate
limitation language by:
(i)
the Guarantee;
(ii)
a pledge over all shares in (a) the Project Guarantor, (b)
the Issuer, (c) Northland Exploration Sweden AB, (d)
the Issuer Subsidiaries, and (e) any other subsidiary of
the Project Guarantor;
(iii)
direct/step-in agreements with project contractors in
respect of the certain material project agreements
subject to approval from and agreement on reasonable
terms with, the relevant counterpart to such material
project agreements;
(iv)
a corporate mortgage (Sw. företagshypotek) in an
amount of SEK 700,000,000 over the assets of the
Issuer;
(v)
a corporate mortgage (Sw. företagshypotek) in an
amount of SEK 100,000,000 over the assets of
Northland Logistics AB and in an amount of SEK
25,000,000 over the assets of each of the Project
Guarantor and Northland Exploration Sweden AB;
(vi)
real estate mortgage pledges (Sw. Fastighetsinteckning
/ No. pant i fast eiendom) by the Issuer or other
relevant members of the Obligors over (a) Pajala,
Kaunisvaara 13:20 in an amount of SEK 800,000,000,
(b) Pajala, Kengis 8:3 in an amount of SEK 1,500,000,
(c) Kaunisvaara 9:13 in an amount of SEK 250,000, (d),
Kaunisvaara 7:4 in an amount of SEK 250,000, (e)
Kaunisvaara 7:1 in an amount of SEK 250,000 and (f)
any other real property owned or to be owned by a
member of the Obligors in an amount of no less than
the market value of such property (in the case of (d), (e)
and (f), as soon as possible after the relevant company’s
ownership to such properties has been registered in the
cadastral register);
(vii)
pledge over each lease agreement over real estate
entered into by any member of the Obligors (except for
the Parent Guarantor), to the extent permitted under
the relevant agreement or otherwise agreed with the
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Listing Prospectus
relevant counterparty;
Intercreditor Agreement:
(viii)
assignments of the insurance proceeds underinsurances
granted by each member of the Obligors entitled to
receive insurance payment, to the extent permitted
under the relevant agreement or otherwise agreed with
the relevant counterparty;
(ix)
pledge of any purchase option rights in any lease
agreements for any Caterpillar Equipment and Atlas
Copco Equipment to be granted as soon as possible
after the Issuer or any of its Swedish subsidiaries has
entered into such lease agreements including any
option rights, to the extent permitted under the
relevant agreement or otherwise agreed with the
relavant counterparty;
(x)
pledge over any proceeds to be received by the Issuer or
its Swedish subsidiaries from any material Project
Documents with contractors to the Issuer or its Swedish
subsidiaries, to the extent permitted under the relevant
agreement or otherwise agreed with the relevant
counterparty;
(xi)
a pledge over each of the Accounts (governed by
Norwegian law in respect of the Norwegian Bank
Accounts and governed by Swedish law in respect of the
Operating Expense Accounts), including the amounts
from time to time standing to the credit of the Issuer in
the Accounts (it being understood that, in accordance
with Swedish law, the pledge over the Operating
Expense Accounts will be in the form of an unperfected
pledge giving the right to perfect such pledge upon an
Event of Default);
(xii)
a Security Sale (Sw. Lösöreköp) of all machinery and
equipment acquired by the Issuer or any of its Swedish
subsidiaries from time to time in its operations, other
than (i) fixtures and fittings to land (Sw.
fastighetstillbehör), (ii) fixtures and fittings to
buildings (Sw. byggnadstillbehör), (iii) machinery and
equipment with a purchase price of less than USD
100,000 (or its equivalent in any another currency) per
item, and (iv) machinery and equipment with an
expected useful life of less than two (2) years, with
additional security sales semi annually or upon
acquisition of such machinery and equipment as set out
above in an aggregate value of USD 10 million;
(xiii)
pledge/charge over certain of the assets of the Issuer’s
Norwegian subsidiary (subject to limitations under
applicable law prohibiting to some extent intercompany loans, security and financial assistance); and
(xiv)
pledge over inter-company loans and assignment of any
security granted by the Issuer’s Norwegian subsidiary
under any inter-company loan.
To establish the relative rights of creditors under various
financing arrangements, an Intercreditor Agreement has been
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Listing Prospectus
entered into by, among others: (i) the Issuer, the Parent
Guarantor, the Project Guarantor and the Issuer Subsidiaries;
(ii) a security agent which will hold the security on behalf of
the Primary Creditors, being the Bond Trustee (the “Security
Agent”); (iii) the Bond Trustee (on behalf of the bondholders);
(iv) each person that may accede thereto as a provider of
hedging arrangements (each a “Hedge Counterparty”); (v)
each creditor that may accede thereto as a provider of
additional financing to an Obligor (each an “Additional
Creditor”); (vi) the creditors under the Cost Overrun Facility
(the “Cost Overrun Facility Creditors”); and (vii) the agent
under the Cost Overrun Facility (the “Cost Overrun Facility
Agent”). The Intercreditor Agreement is governed by
Norwegian law and sets out, among other things, the relative
ranking of certain of the Issuer’s debt obligations, when
payments can be made in respect of such debt obligations,
when enforcement action can be taken in respect of the debt
obligations, the terms pursuant to which certain of the debt
obligations will be subordinated, turnover provisions, as well
as loss sharing arrangements and other customary
intercreditor provisions governing similar debt instruments.
Change of control:
Upon a change of control event occurring, which for the
purpose of the Bonds shall mean that any person or group of
persons acting in concert becomes the owner, directly or
indirectly, or otherwise gains control of more than 50% of the
outstanding shares of the Parent Guarantor, each Bondholder
has a right of pre-payment (i.e. a Put Option) of the Bonds at a
price of 101% of par value (plus accrued and unpaid interest)
during a period of 60 days following the notice of a change of
control event.
Mandatory Prepayment:
Upon the occurrence of a Mandatory Prepayment Event, the
Issuer shall on the earlier of: (i) the day the Issuer or any of the
Issuer Subsidiaries receives the proceeds following the
relevant Mandatory Prepayment Event (if any); and (ii) 30
days after the occurrence of the relevant Mandatory
Prepayment Event, redeem 100% of the outstanding Bonds as
follows:
(i)
if occurring anytime from the Issue Date to (but not
including) the interest payment date in March 2015, at
a price equivalent to the sum of:
a.
the present value on the relevant record date
of 110% of the par value discounted from the
interest payment date in March 2015; and
b.
the present value on the relevant record date
of the remaining interest payments (less any
accrued but unpaid interest, as such interest
shall be paid in full) through and including the
interest payment date in March 2015,
all calculated by using a discount rate of 50 basis points
over the comparable rate for Norwegian Treasury Bills/
Government Bonds for the NOK tranche and the
comparable U.S. Treasury Rate for the USD tranche
(i.e. comparable to the remaining duration of the Bonds
until the mentioned interest payment date in March
40
Listing Prospectus
2015) (plus accrued interest on redeemed amount) and
where “relevant record date” shall mean a date agreed
upon between the Bond Trustee, the Paying Agent, VPS
and the Issuer in connection with the such repayment;
and
(ii)
Mandatory Prepayment Event:
Certain Covenants:
if occurring anytime from and including the interest
payment date in March 2015 to, but not including, the
Maturity Date, at a price equal to the prevailing Issuer’s
call option prices on such date (plus accrued interest on
redeemed amount).
Means if:
(i)
the Parent Guarantor’s ownership (directly or
indirectly) in the Project Guarantor is reduced below
100%;
(iii)
the Project Guarantor’s ownership (directly or
indirectly) in the Issuer and Northland Exploration
Sweden AB is reduced below 100%; or
(iv)
the Issuer’s ownership (directly or indirectly) in any of
the Issuer Subsidiaries is reduced below 100%.
The Bond Agreement, among other things, restrict the Issuer’s
and/or the Guarantors’ ability to:
(i)
incur or guarantee additional indebtedness, subject to
inter alia certain baskets, working capital facilities, Cost
Overrun Facility, Existing Financial Indebtedness,
Permitted Hedging Obligations and Permitted
Financial Leases;
(ii)
make certain restricted payments, including dividends
or other distributions;
(iii)
make certain investments;
(iv)
provide financial assistance to third parties;
(v)
create or permit to exist certain security over its assets;
(vi)
sell, lease or transfer certain assets;
(vii)
engage in certain transactions with affiliates;
(viii) de-merge, merge or transfer all or substantially all of its
assets or change the nature of its business;
Events of Default:
(ix)
terminate or make certain changes to the project
documents; and
(x)
invest or take part in any activities not solely related to
the Kaunisvaara Project and related matters.
The Bond Agreement includes standard remedy and event of
default provisions, including cross default provisions for the
Obligors only (subject to a general carve-out of USD 10
million). Any termination or withdrawal of any exploitation
41
Listing Prospectus
concession required for the completion and operation of the
Kaunisvaara Project or termination or cancellation of any
Project Document is also included as events of default (subject
to customary remedy periods).
Bond Agreement:
The Bond Agreement has been entered into between the
Issuer, the Guarantors and the Bond Trustee. The Bond
Agreement regulates, inter alia, the Bondholders’ rights and
obligations in relation to the Bonds. The Bond Trustee has
entered into this agreement on behalf of the Bondholders to
the extent provided for in the Bond Agreement. For more
information regarding the authority of the Bond Trustee,
please see clause 19 in the Bond Agreement.
When Bonds are subscribed / purchased, the Bondholders
have accepted the Bond Agreement and are bound by the
terms and conditions of the Bond Agreement.
The Bond Agreement is available from the Issuer.
Bondholders’ Meeting:
At the Bondholders’ Meeting each Bondholder holding bonds
in the NOK Tranche shall have one vote for each Voting Bond
owned, and the Bondholders holding bonds in the USD
Tranche shall have a number of votes for each Voting Bond
owned equal to the value in NOK of such Voting Bond
converted at the Initial Exchange Ratio, for both Tranches
based on the number of Voting Bonds owned at close of
business on the day prior to the date of the Bondholders’
Meeting in accordance with the records register in the VPS.
Whoever opens the Bondholders’ Meeting shall adjudicate any
question concerning which Bonds shall count as the Issuer’s
Bonds. The Issuer’s Bonds shall not have any voting rights.
For further description of the rights attached to the Bonds,
including any limitations of those rights, and procedure for the
exercise of those rights, see clause 18 in the Bond Agreement.
Purpose:
Fees and Expenses:
The proceeds from the Bond Issue (net of fees, legal costs of
the Managers and the Bond Trustee and any other costs and
expenses) shall be used toward: (i) financing various costs,
capital expenditure and working capital incurred in connection
with the development of the Kaunisvaara Project; and (ii)
funding the debt service account.
All payments in respect of the Bonds by or on behalf of the
Issuer shall be made free and clear of, and without withholding
or deduction for, any taxes, levies, imposts, duties, charges,
fees, deductions and withholdings, unless such withholding or
deduction is required by law. In that event, the Issuer will pay
such additional amounts as may be necessary to compensate
Bondholders for such withholding or deduction.
Any public fees or taxes levied on the trade of Bonds in the
secondary market shall be paid by the Bondholders, unless
otherwise provided by law or regulation.
Time limits on payments:
Interest and principal due for payment will be credited each
Bondholder directly from the Securities Depository. Claims for
interest and principal shall be time barred in accordance with
42
Listing Prospectus
the Norwegian Act on Limitations of 18 May 1979 no 18.
Market-making:
There is no market-making arrangement entered into in
connection with the Bonds.
Legislation under which the Bonds
have been created:
Norwegian law.
Transfer restrictions:
Subject to the restrictions set forth in clause 5 of the Bond
Agreement, the Bonds are freely transferable and may be
pledged.
Bondholders may be subject to purchase or transfer
restrictions with regard to the Bonds, as applicable from time
to time under local laws to which a Bondholder may be subject
(due e.g. to its nationality, its residence, its registered address,
its place(s) for doing business). Each Bondholder must ensure
compliance with local laws and regulations applicable at own
cost and expense.
The Bonds have not been registered under the US Securities
Act or the securities laws of any other jurisdiction and may this
be subject to restrictions on transferability and resale. The
Issuer has not agreed to, or otherwise undertaken to, register
the Bonds under the US Securities Act.
Governing Law for the Bonds and
the Guarantee:
Norwegian law.
Governing law for the Security
Documents:
Norwegian, Swedish or Luxembourg law, as applicable.
Bond Trustee:
Norsk Tillitsmann ASA, P.O. Box 470 Vika, N-0116 Oslo,
Norway.
Paying Agent:
Nordea Bank Norge ASA, Verdipapirservice, Middelthunsgate
17, N-0362 Oslo, Norway.
Securities Depository:
The Securities depository in which the Bonds are registered, in
accordance with the Norwegian Act of 2002 no. 64 regarding
Securities depository.
On the Issue Date, the Securities Depository is
Verdipapirregistreret (”VPS”), P.O. Box 4, N-0051 Oslo,
Norway.
Investors with accounts in Euroclear or Clearstream,
Luxembourg may hold the Bonds in their accounts with such
clearing systems and the relevant clearing system will be
shown in the records of the VPS as the holder of the relevant
amount of the Bonds.
43
Listing Prospectus
5.
SWEDISH TAXATION
The following is a summary of certain Swedish tax provision relevant to the holding of the Bonds. This
summary is not exhaustive and is only intended as general information. This summary is based on the
current tax legislation as in force on the date of this Prospectus and covers, unless otherwise stated,
only entities and individuals tax resident in Sweden. The special legislations concerning investment
companies, bonds held by partnerships or bonds held as current assets are not covered. All holders of
the Bonds are recommended to seek further tax advice in relation to the holding of the Bonds.
5.1
Individuals
Interest on the Bonds and capital gains realized on the disposal on the Bonds are regarded and taxed
as capital income. The capital income tax rate is 30%. Interest is subject to tax when the interest is
received/can be disposed of by the holder of the Bonds and capital gains are taxed when the Bonds are
disposed of.
On the disposal, e.g. sale or redemption, of the Bonds, the capital gain or loss is calculated as the
difference between the sale proceeds and the acquisition cost of Bonds. The average costs of asset of
the same kind constitute the acquisition cost. Bonds issued in e.g. different currencies are not of the
same kind. Any costs attributable to disposing on the Bonds are deductible when calculating the
capital gain or loss.
Interest compensation received when the Bond is disposed of is taxed as interest and is not taken into
account in the capital gains calculation.
The preliminary tax on interest, which is 30%, is withheld by Euroclear or, for nominee registered
securities, the nominee. The preliminary tax is settled against the final tax of the holder of the Bonds.
Capital losses are generally tax deductible against all other capital income. Capital losses on listed
receivables are fully deductible. The Bonds should qualify as listed. Capital losses on non-listed bonds
are deductible at 70%.
Currency losses on the Bonds are fully deductible.
If there is a deficit in the taxable income category that includes income from capital, a reduction of the
tax on income from employment and from business, as well as the real property tax and municipal real
property fee, is allowed. The tax reduction allowed amounts to 30% of any deficit not exceeding SEK
100,000 and 21% of any deficit in excess of SEK 100,000. Deficits cannot be carried forward to a
subsequent fiscal year.
5.2
Legal entities
All income in a legal entity is deemed as income attributable to the business operations carried on by
the entity. The corporate income tax rate for Swedish limited liability companies (Sw. aktiebolag) is
currently 26.3%. Capital gains and losses on assets, such as the Bonds, which qualify as capital assets
for tax purposes, i.e. not current assets, are calculated in the same manner as for individuals. Capital
losses are generally fully deductible.
Interest is taxed on an accrued basis.
5.3
Foreign Bondholders
Individuals and legal entities which are not tax resident in Sweden are generally not subject to tax in
Sweden on interest income and capital gains attributable to the Bonds. Business operations carried on
in Sweden by a foreign legal entity through a permanent establishment are subject to tax in Sweden on
the part of the income attributable to the permanent establishment. Such taxation corresponds to the
taxation of Swedish entities. There is no withholding tax on interest and capital gains attributable to
the Bonds.
44
Listing Prospectus
6.
NORWEGIAN TAXATION
Set out below is a summary of certain Norwegian tax matters related to holding the Bonds. The
summary is based on Norwegian laws, rules and regulations applicable as of the date of this
Prospectus, which may be subject to any changes in law occurring after such date. Such changes could
possibly be made on a retroactive basis.
The summary is of a general nature and does not purport to be a comprehensive description of all tax
considerations that may be relevant for a decision to hold or dispose of Bonds. Bondholders who wish
to clarify their own tax situation should consult with and rely upon their own tax advisors. Please note
that for the purpose of the summary below, a reference to a Norwegian or Non-Norwegian Bondholder
refers to the tax residency rather than the nationality of the bondholder.
6.1
Norwegian Bondholders
Interests on bonds received by Norwegian bondholders who are individuals resident in Norway for tax
purposes and bondholders who are limited liability companies (and certain similar entities) resident in
Norway for tax purposes (together referred to as “Norwegian Bondholders”) are taxable as ordinary
income at a flat rate of 28%. The interests are subject to tax in Norway in the year of accrual.
If certain requirements are met, Norwegian Bondholders may be entitled to a tax credit in the
Norwegian tax calculated on interests received for any withholding tax imposed on the interests in the
jurisdiction where the foreign company (i.e. the debtor) is resident for tax purposes.
Sale, repayment, redemption or other disposal of bonds are considered a realization for Norwegian tax
purposes. A capital gain or loss generated by a Norwegian Bondholder through a realization of bonds is
taxable or tax deductible in Norway. Such capital gain or loss is included in or deducted from the
bondholder's ordinary income in the year of disposal. Ordinary income is taxable at a rate of 28%.
The taxable gain/deductible loss is calculated per bond and is equal to the sales price less the
Norwegian Bondholders cost price of the bond, including costs incurred in relation to the acquisition
or realization of the bond.
If the Norwegian Bondholder owns bonds acquired at different points in time, the bonds that were
acquired first will be regarded as the first to be disposed of, on a first-in first-out basis.
Capital gains or loss on foreign currency exchange is also taxable/tax deductible in Norway. The
gain/loss is included in/deducted from the ordinary income of the Norwegian Bondholder in the year
of disposal. Ordinary income is subject to tax at a flat rate of 28%.
6.2
Non-Norwegian Bondholders
As a general rule, interests received by a bondholder not resident in Norway for tax purposes (“NonNorwegian Bondholder”) from bonds in Non-Norwegian companies are not subject to Norwegian
taxation unless the Non-Norwegian Bondholder holds the bonds in connection with the conduct of a
trade or business in Norway.
6.3
Net wealth tax
The value of bonds is included in the basis for the computation of wealth tax imposed on Norwegian
personal bondholders. Currently, the marginal wealth tax rate is 1.1% of the value assessed. The value
for assessment purposes for bonds listed on Oslo Stock Exchange is the listed value as of 1 January in
the year of assessment. Norwegian corporate bondholders are not subject to net wealth tax.
Non-Norwegian Bondholders are generally not subject to Norwegian net wealth tax. Non-Norwegian
personal bondholders can however be taxable if the bonds are effectively connected to the conduct of
trade or business in Norway.
45
Listing Prospectus
7.
INDEPENDENT AUDITORS
7.1
Independent auditor of the Issuer
The auditor of the Issuer is Ernst & Young Aktiebolag, P.O. Box 7850, SE-103 99 Stockholm, Sweden.
Lars Fredrik Lundgren, authorized public accountant (member of FAR SRS) is the auditor in charge.
The audited annual financial statements of the Issuer for the financial years ended January 31, 2010,
December 31, 2010 and December 31, 2011, incorporated in this Prospectus by reference, have been
audited by Ernst & Young Aktiebolag, as stated in Ernst & Young Aktiebolag’s reports therein.
7.2
Independent auditor of the Parent Guarantor
The auditor of the Parent Guarantor is Ernst & Young S.A., of 7, rue Gabriel Lippmann, Parc d’Activité
Syrdall, L-5356 Munsbach, Luxembourg.
The audited financial statements for the financial year ended January 31, 2010, December 31 2010 and
December 31, 2011, incorporated in this Prospectus by reference, have been audited by Ernst & Young
S.A., as stated in Ernst & Young S.A.’s reports therein. These audit reports have been issued with the
following comment: “Without qualifying our opinion, we draw your attention to Note 2 to the
accompanying consolidated financial statements which indicates that the Parent Guarantor encounters
treasury problems. These conditions indicate the existence of material uncertainties which may impact
the Parent Guarantor’s ability to continue as a going concern if management is not able to finalize the
completion of its re-financing as described in Note 2 of the consolidated financial statements.”
Ernst & Young S.A, Cabinet de revision agréé, is a member of the Institut des Réviseurs d’Entreprises
of the Grand Duchy of Luxembourg and is also registered with the CSSF and with the Canadian Public
Accountability Board and the United States Public Parent Guarantor Accounting Oversight Board.
Prior to this, Ernst & Young LLP, Chartered Accountants, of 700 West Georgia Street, PO Box 10101,
Vancouver, BC, have been the Parent Guarantor’s auditor since January 11, 2007, and have performed
the audit reports in respect of the financial statements prepared in accordance with Canadian GAAP as
of January 31, 2010 and 2009. These audit reports were issued without comments, qualifications or
reservations.
Ernst & Young LLP, Chartered Accountants, is a member of the Institute of Chartered Accountants of
British Columbia and is also registered with the Canadian Public Accountability Board and the United
States Public Parent Guarantor Accounting Oversight Board
46
Listing Prospectus
8.
SELECTED FINANCIAL INFORMATION REGARDING THE ISSUER
8.1
General
The Issuer prepares its financial statements in accordance with accounting principles generally
accepted in Sweden, see further Section 18.1 (Historical financial information).
The Issuer’s financial year has been changed and is currently January 1 to December 31 of each year.
Previously, the Issuer’s financial year ended on January 31. To accommodate the transition to the new
financial year, the financial year 2010 was shortened to December 31.
by reference to, the annual financial statements for the year ended December 31, 2011, the annual
financial statements for the period ended and December 31, 2010, and the annual consolidated
financial statements for the year ended January 31, 2010, and the accompanying notes, which have
been incorporated in this Prospectus by reference, see Section 23.3 (Documents Incorporated by
Reference).
8.2
Presentation of selected financial information
The tables below present selected historical financial information for the Issuer as of, and for the year
ended December 31, 2011, the period ended December 31, 2010, and the year ended January 31, 2010.
The selected historical financial information has been derived from the audited annual financial
statements for the year ended December 31, 2011, the audited annual financial statements for the
period ended December 31, 2010, and the audited annual consolidated financial statements for the
year ended January 31, 2010.
8.2.1
Selected financial information in relation to the statements of financial position
Balance Sheet
SEK
December 31,
December 31,
January 31,
2011
2010
2010
86,594,934
89,902,530
419,715,409
Assets
Fixed assets
Intangible fixed assets
Capitalized expenditure for exploration
Capitalized expenditure for software
787,823
87,382,757
-
-
89,902,530
419,715,409
Tangible fixed assets
Buildings, land and land improvements
Equipment, tools, fixtures and fittings
Constructions in progress attributable to tangible
and intangible fixed assets
10,681,167
3,699,987
278,152
7,172,629
274,660
529,287
1,568,907,390
507,167,073
1,586,761,186
511,141,720
807,439
1,605,200
305,200
305,200
2,500
-
-
-
Financial non-current assets
Participations in Group companies
Participations in associated companies
Other long-term receivables
Total fixed assets
163,033,722
11,843,638
415,591
164,641,422
12,148,838
720,791
1,838,785,365
613,193,088
421,243,639
47
Listing Prospectus
Current assets
Current receivables
Accounts receivable - trade
Receivables with Group companies
Other current receivables
Prepaid expenses and accrued income
Cash and bank balances
Total assets
-
37,091
-
112,137,812
7,581,003
15,430,936
183,850,061
10,520,381
5,742,266
40,567,159
17,227,586
297,185
336,555,032
35,366,061
21,470,387
147,887,664
11,254,309
66,197,719
484,442,696
46,620,370
87,668,106
2,323,228,061
659,813,458
508,911,745
500,000
100,000
100,000
Equity
Restricted equity
Share capital
Non-restricted equity
Profit/loss brought forward
1,843,435,363
2,215,483
(45,046,298)
(147,406,792)
(41,907,800)
(32,738,219)
Total equity
1,696,028,571
(39,692,317)
(77,784,517)
1,696,528,571
(39,592,317)
(77,684,517)
2,264,000
585,795
585,795
2,264,000
585,795
585,795
Provisions
Provisions for restoration expenses
Total provisions
Long-term liabilities
Liabilities with Group companies
150,000,000
619,704,113
560,733,911
150,000,000
619,704,113
560,733,911
Accounts payable - trade
344,475,437
22,497,316
3,054,690
Liabilities with Group companies
30,020,669
32,296,470
70,287
Total long-term liabilities
Current liabilities
Other current liabilities
Accrued expenses and deferred income
8.2.2
2,509,215
1,314,803
84,884
97,430,169
23,007,278
20,670,156
474,435,490
79,115,867
23,880,017
2,323,228,061
659,813,458
508,911,745
Selected financial information in relation to the statements of comprehensive
income
Income statement
SEK
Own work capitalized
Other operating income
January 1 –
December 31,
2011
December 31,
– January 31,
2010
2010
1,070,808,382
178,008,550
160,880,827
5,333,990
1,903,886
3,072,111
1,076,142,372
179,912,436
163,952,938
48
Listing Prospectus
Operating expenses
Other external expenses
(1,066,963,800)
(160,651,383)
(166,797,021)
Personnel costs
(40,223,524)
(43,131,491)
(28,771,766)
Depreciation and write-downs of tangible fixed assets
and amortization and write-downs of intangible fixed
assets
(27,514,242)
(244,763)
(101,706)
Other operating expenses
-
(3,834,875)
(1,014,163)
(1,134,701,566)
(207,862,512)
(196,684,656)
(58,559,194)
(27,950,076)
(32,731,718)
(8,151)
-
-
19,218,565
1,806
8,497
Interest expenses from Group companies
(31,742,819)
(13,955,070)
-
Interest expenses and similar profit/loss items
(76,315,193)
(446)
(14,998)
(88,847,598)
(13,957,724)
(6,501)
Income after financial items
(147,406,792)
(41,907,800)
(32,738,219)
(147,406,792)
(41,907,800)
(32,738,219)
Total operating expenses
Operating income
Income from financial items
Result from participations in Group companies
Other interest income and similar profit/loss items
Total profit/loss from financial items
8.2.3
Selected financial information in relation to statements of cash flow
Cash flow statement
SEK
2011
December 31,
– January 31,
2010
2010
Operating activities
Profit/(Loss) for the year / period
Adjustments for non-monetary items
(147,406,792)
(41,907,800)
(32,738,219)
28,856,819
170,291
80,183
(277,849,398)
3,034,727
(15,665,014)
(23,339,573)
(16,930,401)
(35,294)
67,754,036
44,587,628
(5,606,855)
(351,984,908)
(11,045,555)
(53,965,199)
(17,906,782)
(129,785,144)
(160,859,304)
(754,797,786)
(41,654,867)
(603,906)
(1,500,000)
-
(200,000)
Changes in working capital
Accrued interest receivable and value added tax
Prepaid expenses and deposits
Accounts payable and accrued liabilities
Cash flow from investing activities
Investment in exploration and evaluation assets
Acquisition of property, plant and equipment
Investment in Group companies
Proceeds from sale/liquidation of Group companies
Long-term receivable
191,849
-
-
(151,192,585)
(11,428,047)
(186,172)
49
Listing Prospectus
(925,205,304)
(182,868,058)
(161,849,382)
400,000
-
-
Shareholders contribution net
1,263,423,567
80,000,000
-
Increase inter-company loans
150,000,000
58,970,202
281,471,764
1,413,823,567
138,970,202
281,471,764
Cash and cash equivalents at beginning of year /
period
11,254,309
66,197,719
540,535
Increase/Decrease in cash and cash equivalents
136,633,355
(54,943,411)
65,657,183
147,887,664
11,254,309
66,197,719
December 31,
2011
December 31,
2010
January 31,
2010
-6%
-15%
Cash flow from financing activities
Proceeds from issuance of ordinary shares
Cash and cash equivalents at end of year / period
8.2.4
Key ratios
Key ratio
Calculation
Debt ratio
Equity/Total assets
73%
Debt-to-equity ratio
Debt/Equity
0,37
Interest cover ratio
(Operating income +
Financial income) /
Financial expenses
Negative
N/A (equity below N/A (equity below
0)
0)
Negative
Negative
50
Listing Prospectus
9.
SELECTED
FINANCIAL
GUARANTOR
9.1
General
INFORMATION
REGARDING
THE
PARENT
The Parent Guarantor’s financial statements were prepared in accordance with Canadian GAAP until
January 31, 2010. On February 1, 2010, the Parent Guarantor adopted IFRS, as adopted by the EU.
The transition date was set at February 1, 2007.
The two years audited consolidated statement of financial position as at January 31, 2010 and the
consolidated statement of comprehensive income for the years then ended were initially prepared and
published under Canadian GAAP and have now been restated, prepared and audited under IFRS as
adopted by the EU, see further Section 19.1 (Historical financial information).
The Parent Guarantor’s financial year has been changed and is currently January 1 to December 31 of
each year. Previously, the Parent Guarantor’s financial year ended on January 31. To accommodate the
transition to the new financial year, the financial year 2010 was shortened to December 31.
by reference to, the annual consolidated financial statements for the year ended December 31, 2011,
the annual consolidated financial statements for the period ended December 31, 2010, and the annual
consolidated financial statements for the year ended January 31, 2010, and the accompanying notes,
which have been incorporated in this Prospectus by reference, see Section 23.4 (Documents
Incorporated by Reference).
9.2
Currencies
The Parent Guarantor’s financial statements up to December 31, 2010 were presented in CAD, which is
the functional currency of the Parent Guarantor and was the Parent Guarantor’s reporting currency.
Following the Board of Directors’ approval of December 13, 2010, the Parent Guarantor’s reporting
currency has changed to USD with effect from January 1, 2011. The comparative figures have been
restated to reflect the change in the reporting currency. All values are rounded to the nearest thousand
USD unless otherwise stated.
9.3
Presentation of selected financial information
The tables below present selected historical financial information for the Parent Guarantor as of, and
for the year ended December 31, 2011, the period ended December 31, 2010, and the year ended
January 31, 2010. The selected historical financial information has been derived from the Parent
Guarantor’s audited annual consolidated financial statements for the year ended December 31, 2011,
the audited annual consolidated financial statements for the period ended December 31, 2010, and the
audited annual consolidated financial statements for the year ended January 31, 2010.
9.3.1
Selected financial information in relation to the consolidated statements of
financial position
Balance Sheet
USD ‘000
Assets
Non-current assets
Exploration and evaluation assets
Mines under construction
Total non-current assets
December 31,
2011
December 31,
2010
January 31, 2010
64,165
236,794
339,177
45,703
74,950
127,457
94,241
98,494
79,594
257,018
53,713
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Listing Prospectus
Assets of disposal group classified as
held for sale
-
7,711
-
Total assets
418,771
392,186
152,207
Total equity
339,713
380,119
145,455
4,629
81
1,035
-
32
-
74,429
11,954
5,717
418,771
392,186
152,207
Total non-current liabilities
Liabilities directly associated with the
assets classified as held for sale
9.3.2
Selected financial information in relation to the consolidated statements of
comprehensive income
Income statement
USD ‘000
January 1 –
December 31,
2011
February 1 –
December 31,
2010*
February 1, 2009
– January 31,
2010
Operating loss
(28,092)
(18,972)
(11,955)
Loss before tax
(37,667)
(22,325)
(15,033)
Loss for the year/period
(38,069)
(21,246)
(15,033)
Total comprehensive profit/(loss) for the
year/period, net of tax
(46,554)
(7,789)
6,572
(0.17)
(0.18)
(0.14)
Loss per share: Basic and diluted loss for
the year/period attributable to the equity
holders of the parent, USD
* short financial year of 11 months
9.3.3
Selected financial information in relation to statements of cash flow
Cash flow statement
USD ‘000
2011
– January 31,
December 31,
2010
2010
Operating activities
Profit/(Loss) for the year / period before taxation
(39,667)
(22,325)
(15,033)
After adjustments for non-monetary items
(24,819)
(12,063)
(8,889)
(30,194)
(1,655)
1,675
Changes in working capital
Trade and other receivables
Other current assets
(1,067)
236
(230)
Trade and other payables
12,520
4,295
309
(43,560)
(9,187)
(7,135)
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Listing Prospectus
Cash flow from investing activities
Investment in exploration and evaluation assets
Proceeds from sale of properties
Acquisition of PPE including mines under construction
Long-term receivable
(20,496)
(24,255)
(25,118)
-
146
-
(139,468)
(6,381)
(607)
(19,286)
(1,751)
-
(179,250)
(32,241)
(25,725)
2,339
254,156
740
(1,430)
(13,725)
(7)
Cash flow from financing activities
Proceeds from issuance of ordinary shares
Share issuance costs
Net proceeds from borrowings
4,302
-
-
Transaction cots prepaid on fundraising
(899)
(2,250)
-
4,312
238,181
733
(218,498)
196,753
(32,126)
Changes in cash and cash equivalents
Effect of changes in exchange rates
5,386
2,704
10,350
Cash and cash equivalents at beginning of the
year / period
251,435
52,011
73,787
Cash and cash equivalents at end of the year /
period
38,323
251,467*
52,011
* Cash and cash equivalents at December 31, 2010 include an amount of USD 33,000 as “Assets held for sale”.
53
Listing Prospectus
10.
INFORMATION REGARDING THE ISSUER
10.1
General information
The trade name of the Issuer is Northland Resources AB (publ). The Issuer was incorporated in
Sweden, according to the Swedish Companies Act (Sw. aktiebolagslagen (2005:551)), on January 15,
2004, and registered by the Swedish Companies Registration Office (Sw. Bolagsverket) on February
17, 2004 as a private limited liability company under the laws of Sweden. On June 17, 2011, the Issuer
was converted to a public limited liability company under the laws of Sweden. The Issuer’s registration
number is 556656-1675. The seat of the Board of Directors of the Issuer is the municipality of Luleå.
The Issuer’s head office is at Datavägen 14, SE-977 54 Luleå, Sweden and its telephone number is
+46 (0) 920 77900.
The Issuer has, as at the date of this Prospectus, two wholly owned subsidiaries, Northland Logistics
AB (direct subsidiary) and Northland Logistics AS (indirect subsidiary). These two subsidiaries will be
the operating companies for the logistics chain from Kaunisvaara to Narvik.
10.2
Recent events with material impact on the Issuer’s solvency
There are no recent events which have had a material impact on the solvency of the Issuer.
10.3
Investments
The Issuer is a minerals exploration and development company that does not have any active mining
operations. However, the Issuer is developing the Kaunisvaara Project and therefore significant capital
in progress for the mine under construction, as well as capitalized exploration expenses whereof the
main part is related to the Pellivuoma deposit. The table below summarizes the capitalized exploration
expenses incurred over the last three financial years for the Issuer. The financial data in the table
below is extracted from the audited annual financial statements of the Issuer. It represents historical
financial costs incurred over the last three financial years in relation to exploration and evaluation
assets.
Summary of capitalized
exploration expenses
December 31, 2011
December 31, 2010
January 31, 2010
-
-
-
379,355
1,627,384
678,176
-
-
-
9,584,850
77,495,234
52,842,345
17,893
40,594
75,252
-
6,508,540
21,766,295
401,689
1,692,670
2,426,652
Equipment and rental
-
58,402
880,132
Future income taxes
-
-
-
Geochemistry
-
1,897,160
9,717,357
27,605
1,055,481
454,888
Legal and accounting fees
-
2,729,220
468,212
Licenses and taxes
-
-
-
Materials
-
-
-
Medical insurance
-
-
-
-
3,435,833
-
220,147
706,227
286,420
SEK
Administration
Automobile
Camp, food and utilities
Consulting fees
Drafting, maps and printing
Drilling
Environmental
Geophysics
Metallurgy
Office and miscellaneous
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Listing Prospectus
Property payments
Pajala resource property
payments
Rent and utilities
Salaries and wages
132,601
747,916
938,379
-
-
-
1,000,853
1,890,603
2,426,982
3,076,605
20,419,424
26,681,952
-
216,274
180,143
Shipping and courier
Software and lease
637,315
-
368,720
Telephone
68,065
509,141
651,256
Travel and accommodation
453,726
3,010,468
2,675,347
Other
489,602
9,376,415
1,668,850
Stock-based compensation
-
6,777,825
-
Inter-company recharges
-
-
35,693,470
16,490,305
140,194,812
160,880,827
Total
The Issuer has entered into several agreements with third parties regarding investments for the
operation of its business. The below table summarizes agreements for such committed investments
which have not yet been fully paid by the Issuer. The committed investments summarized in the below
table will be financed with the funds available to the Issuer, as shown in Section 12.2.11 (Project
Finance Plan).
Contract
Value of order
Supplier contract in
April-June 2012
Nordic Education
CE-labeling
0.5
Pöyry
Owners Engineering
1.2
Metso
Process Plant System
Liner Handler
3.9
Sweco/WSP
PWP Design Engineering
1.2
Forcit
Explosives
Peab
Construction of Industrial Area, Civil and Buildings
261.1
0
112.7
ÅF-Industry AB
Drafting of material for request of orders
0.2
BDX
PWP Construction contract
4.1
Cramo Instant AB
Rental of modular space
1.2
Golder Associates AB
Detailed planning of Tailings Management Facilities
0.4
Kiruna Wagon
Rail cars
2.8
July-September 2012
FineWeld
Water System
38.0
Provanum
Content Management System
0.1
Picab
Consultancy services
0.8
Atlas Copco CMT Sverige
Drills
9.7
Intelex
Environmental software
0.1
ViewBase
Qlikview Reporting Software
0.1
Peab
Pre Development Norway
13.0
Overburden removal
50.1
October-December 2012
Tyréns
Pitkäjärvi loading terminal
2.7
55
Listing Prospectus
Henrik Björklund Entreprenör
Measuring services
0.5
EPN Partners AB
De-icing of rail cars
7.4
Faveo Projektledning AB
Consultancy services
0.2
Adecco
Staffing services
0.2
Rejlers/Vectura
Rail Engineering
0.7
ABB AB
Electrical Power Supply
7.5
56
Listing Prospectus
11.
INFORMATION REGARDING THE PARENT GUARANTOR
11.1
General information
The trade name of the Parent Guarantor is Northland Resources S.A. The Parent Guarantor was
incorporated as a limited liability company under the laws of British Columbia, Canada on March 13,
1987. Following the migration to Luxembourg which was completed on January 18, 2010, the Parent
Guarantor was incorporated as a Luxembourg public limited company (société anonyme) and is
subject to the Luxembourg Companies Act. The Parent Guarantor’s registration number with the
Luxembourg Trade and Companies’ Register is B 151.150. The Parent Guarantor’s legal domicile is
Luxembourg.
The Parent Guarantor’s registered office is at Scorpio Building, 7A, rue Robert Stümper, L-2557
Luxembourg, Grand Duchy of Luxembourg and its telephone number is +352 26 495 84492.
11.2
Recent events with material impact on the Parent Guarantor’s solvency
There are no recent events which have had a material impact on the solvency of the Parent Guarantor.
11.3
Investments
The Parent Guarantor is the parent company of the Group, and is a holding company with no
operating activities. The Parent Guarantor has not made any material investments since its last
financial statement. As the Parent Guarantor has no operating activities the Parent Guarantor has not
planned for or committed itself in respect of any future investments. However, the Kaunisvaara Project
is operated by the Issuer and the Issuer has entered into several agreements with third parties
regarding investments for the operation of the Issuer’s business and the Kaunisvaara Project, see
Section 10.3 (Investments).
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Listing Prospectus
12.
OVERVIEW OF BUSINESS OPERATIONS
12.1
Business overview
The Parent Guarantor is the holding company of a development-stage mining group, with two
principal projects: the Kaunisvaara Project in Sweden, and the Hannukainen IOCG project in Finland.
The projects are primarily located within the Pajala Shear Zone, which is about 250 km long and 10 km
wide, and trends north, north-east-south, south-west between northern Sweden and Finland.
The Hannukainen IOCG project in Finland is operated by the Parent Guarantor’s wholly owned
subsidiaries Northland Mines OY and Northland Exploration Finland OY. The said companies are
neither involved in the Kaunisvaara Project nor parties to the Bond Agreement or any related
agreements. The Issuer is the Group’s primary operating company with respect to the Kaunisvaara
Project.
As the Parent Guarantor is merely the holding company of the Group it is fully dependent on the
operating companies of the Group. In consideration hereof, the following description relates solely to
the operating companies within the Group and the Kaunisvaara Project.
The Issuer’s business activities and operations are governed by its Articles of Association, which
include the following: exploration and exploitation of mineral deposits, trading in metals, management
of tangible property and other activities compatible with the aforementioned. The Issuer’s and the
Group’s activities will however be restricted by the positive and negative covenants applicable to the
Issuer and the other members of the Group contained in, inter alia, the Bond Agreement, the
Intercreditor Agreement and the Security Documents.
After the completion in September 2009 of a positive PEA on the Kaunisvaara iron concentrate
project, the Issuer moved forward with a DFS, which was published on September 27, 2010. The DFS
incorporated detailed reports on particular aspects such as geology, resources and reserves, mineral
processing, infrastructure, economic feasibility and analysis, iron ore concentrate pricing and
environmental considerations. A supplement to the DFS was produced in May 2011 to take into
account the results of the further work done by the Issuer in relation to the planned logistics solution
for the Kaunisvaara Project. Please refer to Section 12.2.5 (Kaunisvaara DFS 2010 and 2011 update) for
further information on the DFS and the supplement to it.
The Kaunisvaara Project will comprise the Tapuli and Sahavaara mines, a processing plant with two
production lines and other related infrastructure, and a fully integrated logistics solution for the
delivery of iron ore concentrate from Kaunisvaara to the ice-free port of Narvik in Norway. The Tapuli
mine is planned to begin first shipments in the first quarter of 2013 and the Sahavaara mine in 2016.
The Kaunisvaara Project is expected to produce approximately 4.4 million dmtpa of high-grade, highquality iron magnetite concentrate, to be sold as a premium product to pellet producers as well as to
sinter plants. The Issuer has, as at the date of this Prospectus, entered into long term agreements for
100% off-take with established market counterparties; Standard Bank Plc, Tata Steel UK Limited and
Stemcor UK Limited.
The Issuer has a project financing plan in place with projected sources of funds for, and the application
of such funds to, the Capex and related contingencies for the development, construction and
completion of the Tapuli mine, the processing plant and the logistics solution through to December 31,
2014. By that time, the Issuer expects its generation of cash flow to be able to service the debt and
finance the development of the Sahavaara mine.
12.2
The Kaunisvaara Project
12.2.1
The Kaunisvaara Project – Sahavaara and Tapuli
12.2.1.1 Property description and location
As at the date of this Prospectus, Kaunisvaara Project was approximately 30% complete with first
shipment scheduled for the first quarter of 2013. Associated infrastructure includes access, service and
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Listing Prospectus
dumper roads, a process plant building, stockpile buildings, an administration building, workshops
and truck bays, warehouse, metallurgical laboratory, plant services building, two pump station
buildings and an Assay laboratory.
The Kaunisvaara Project comprises two iron ore deposits; Tapuli and Sahavaara, located
approximately 100 km north of the Arctic Circle in the municipality of Pajala and near the village of
Kaunisvaara. The Sahavaara deposit is located close to the Sahavaara village. This village has
historically been referred to as “Stora Sahavaara”, however the Issuer has now generalized the name to
simply Sahavaara. The Tapuli deposit is located approximately 4 km to the north of Sahavaara. The
Tapuli deposit also includes the smaller Palotieva deposit to the north.
The town of Pajala is located approximately 140 km from the regional centre of Gällivare by road,
where major mines are in operation. The regional hospital is located in Gällivare. Kaunisvaara lies
approximately 210 km north of the major city of regional capital of Luleå, which has more than 70,000
inhabitants, further health care facilities and Northern Scandinavia’s leading mining university. Access
from Luleå is possible by road and air services to Pajala airport.
Figure 1: Kaunisvaara Project Overview
Source: Northland Resources S.A.
The landscape in the Kaunisvaara area is dominated by an abundance of bogs, small lakes and some
hills, constituting the highest coastline following the glaciation period. There is a glacial till cover on
most of the area, with little outcropping of bedrock. The elevation of the Deposits ranges from 175 to
220 m above sea level. Northern Sweden is a temperate forest zone with mild summers and cold
winters, and moderate rainfall or snow.
12.2.1.2 Title and ownership
On December 8, 2004, Northland Resources Inc (formerly North American Gold Inc.) announced that
it had entered into a Letter of Agreement with Anglo American Exploration B.V., Holland, Filial
Sverige (Anglo), a wholly owned subsidiary of Anglo American Exploration plc, to acquire a 100%
interest in the “Swedish Pajala Properties” also referred to as the “Pajala Project” which includes the
Tapuli and Sahavaara magnetite deposits. This Agreement was amended and the terms of the original
agreement restated in the “Option, Royalty and Back-In Agreement” (Agreement) dated April 5, 2005.
During December of 2007, the Issuer exercised its option of cash payment for this agreement and
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Listing Prospectus
entered into an Offer to Purchase Agreement which allowed the Issuer to negotiate final terms of the
Asset Purchase Agreement by January 31, 2008. The binding Asset Purchase Agreement has been
executed by both parties. Subsequently, the Issuer controls all its Kaunisvaara Deposits 100%, free of
any back-in-right or royalty.
The Issuer’s permits and concessions for the Tapuli and Sahavaara Deposits are held by the Issuer. The
permits and concessions are not subject to any encumbrances, royalties or other obligations, other
than a 0.2% landowner and state royalty (calculated based on quantity of ore mined, percentage
mineral in the ore and the average commodity price during the years).
Issuer Exploration Permits
Area
Decision
date
Valid from
Valid to
Owners
Tapuli K nr 2
17,8592
2008-11-20
2008-11-20
2033-11-20
Issuer (100%)
Tapuli K nr 1
129,5771
2008-11-20
2008-11-20
2033-11-20
Issuer (100%)
Sahavaara K nr 1
106,8250
2010-10-28
2010-10-28
2035-10-28
Issuer (100%)
Name
Issuer Claims
Name
Licence
ID
Area
Valid from
Valid to
Owners
Sahavaara nr 2
2004:15
5
16456,1100
2004-12-21
2012-12-21
Issuer (100%)
Sahavaara nr 4
2010:39
4453,1700
2010-01-28
2013-01-28
Issuer (100%)
Käymäjärvi nr 10
2007:90
3381,7500
2007-03-20
2013-03-20
Issuer (100%)
Käymäjärvi nr 14
2010:92
1945,5500
2010-05-11
2013-05-11
Issuer (100%)
Sahavaara nr 5
2010:114
297,6100
2010-08-10
2013-08-10
Issuer (100%)
Kokkovuoma nr 2
2010:124
279,3800
2010-09-07
2013-09-07
Issuer (100%)
Käymäjärvi nr 11
2007:278
1455,0000
2007-10-16
2013-10-16
Issuer (100%)
Kokkovuoma nr 3
2010:152
10829,8400
2010-10-18
2013-10-18
Issuer (100%)
Kokkovuoma nr 1
2007:305
8796,1300
2007-11-06
2013-11-06
Issuer (100%)
Käymäjärvi nr 12
2007:341
3839,5000
2007-12-12
2013-12-12
Issuer (100%)
Sahavaara nr 3
2005:181
473,1393
2005-09-14
2014-09-14
Issuer (100%)
Käymäjärvi nr 13
2009:22
90,6265
2009-01-23
2015-01-23
Issuer (100%)
Source: Mining Inspectorate of Sweden.
12.2.1.3 Geology and Mineralization
The Kaunisvaara Deposits are located within the Pajala Shear Zone, which forms part of the BalticBothnian mega-sheer. The Pajala Shear Zone is a 30-50 km wide system of thrust and reverse faults
which were active during the Svecofennian orogenic events (1.91-1.81 Ga). The Deposits occur within
metasedimentary rocks of Paleoproterozoic-age, which form part of the central Lapland Greenstone
Belt of Northern Sweden. The meta-sediments consist of quartzite, dolomites, phyllites and schists
60
Listing Prospectus
overlying a greenstone unit. The Pajala Shear Zone hosts approximately 30 iron ore Deposits, some of
which contain significant copper and gold concentrations.
The Deposits of the Kaunisvaara Project are located adjacent to the westernmost thrust fault of the
Pajala Shear Zone along the margin of the Karelian craton. The supracrustal rocks of the area consist
of Karelian (2.5-2.0 Ga) quartzite, dolomite marbles, black schists, mica schists and mafic
metavolcanic rocks with minor Svecofennian (1.96-1.85 Ga) phyllites and quartzitic phyllites. The
intrusives in the immediate area of the Deposits are dominantly gabbro and diabase (1.89-1.77 Ga)
with relatively late-orogenic granites (1.82-1.79 Ga) to the west. Metasomatic skarns occur in
association with the magnetite Deposits. Magnetite and associated chalcopyrite are the primary
economic ore minerals occurring within magnetite-dominated Ca-Mg-silicate skarn.
Figure 2: Geology of Kaunisvaara Camp
12.2.1.4 Sahavaara geology and mineralization
The Sahavaara Deposit occurs as a continuous “seam” located between a hanging-wall quartzite and
footwall graphitic schist. Minor remnants of skarn-altered dolomite occur within the Deposit and likely
reflect the original protolith. At Sahavaara, the mineralization consists of one main lens and a smaller
adjacent mineralized lens. The main mineralization domain (Stora Sahavaara) has a north-northeast
to south-southwest orientated strike length of 1300 m, dips at 50-70 degrees to the west, plunges to
the north and is concordant with the host sedimentary rocks. The mineralization is generally open
down-dip below the limits of the resource model. The mineralization comprises magnetite, serpentine,
pyrrhotite, pyrite and tremolite. Phlogopite, diopside, chlorite, talc, valleriite, chalcopyrite, graphite,
scapolite, vesuvianite and apatite also occur as minor constituent minerals.
The Sahavaara Deposit geometry, as can be seen in the cross section below, shows a dipping (50-70
degrees west), roughly tabular sheet, which is amenable for both open pit and underground block cave
type mining. It is similar in shape to the Kiruna iron ore mine, which is owned by LKAB.
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Listing Prospectus
Figure 3: Geology of Sahavaara Deposit with Cross Section
12.2.1.5 Tapuli geology and mineralization
The Tapuli Deposit is situated within the north-western limb of a major, north-east-trending anticline
within the supracrustal rocks and on the westernmost margin of the Pajala Shear Zone. Structurally
Tapuli is situated in the same north-east-south-west trending shear zone as Sahavaara. The main
central portion of the Deposit, and thickest part of the Deposit (up to 200 m), was formed along a
significant north-east-trending flexure in the major fold axis.
The bedrock at Tapuli consists of Precambrian supracrustal sedimentary sequences. The Tapuli
mineralized lenses follow a stratigraphic corridor approximately 2 km long. The Deposit occurs as set
of stratabound, semicontinuous, tabular bodies. The mineralization in the central portion of the trend
is by far the most economically important in terms of its size, grade and continuity. The Deposit has
been outlined by drilling to depths ranging from the surface to 300 m below surface, with bands of
contiguous magnetite mineralization with variable iron grades ranging from 10-200 m in thickness.
The mineralization remains open down-dip below the limits of the Mineral Resource and the vertical
extent of the Deposits is not delineated. The generalized surface geology at Tapuli and cross section
across the central Tapuli Deposit is shown in the Figures below.
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Listing Prospectus
Figure 4: Tapuli Deposit Geology
Figure 5: Typical Geological Section of the Central Portion of Tapuli Deposit
The Deposit has been outlined by drilling to depths ranging from the surface to 300 m below surface,
with bands of contiguous magnetite mineralization with variable iron grades ranging from 10-200 m
in thickness. The mineralization remains open down-dip below the limits of the resource and the
vertical extent of the Deposits is not delineated.
The dip of the mineralized lenses is concordant with the surrounding metasedimentary units and
ranges from 45-60 degrees, the main dip direction varying between west, north-west to north-west.
The Tapuli magnetite Deposit occurs as a relatively continuous mineralized trend, with occasional
moderate displacements by crosscutting, sub-vertical faults, core breakage and crushing within the
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Listing Prospectus
mineralized zones and wall rocks provide evidence of faulting. Interpretation of magnetic signatures
and the close-spaced drillhole spacing have provided clear evidence of discontinuity offsets in most
cases. Several north- and northwest-trending faults are apparent from the stratigraphic and
mineralization displacements.
The sole mineralization mineral at Tapuli is magnetite, although small amounts of chalcopyrite have
been detected in relatively sulphur-rich layers near the footwall at depth. Pyrite and pyrrhotite occur
locally, usually in isolated trace amounts in the upper low sulphur portion of the Deposit. In the
sulphur-richer parts of the Deposit, these two minerals provide the primary sources of sulphur.
12.2.1.6 Kaunisvaara resource work completed
The Kaunisvaara ore field, comprising Sahavaara (Stora, Östra and Södra) and Tapuli (including
Palotieva) Deposits were discovered by a geologist named V. Tanner in 1918.
In the 1960’s the SGU, with funding and technical assistance from LKAB, began the Iron Ore
Inventory Program of the province of Norrbotten. Ground magnetic and gravity surveys were
conducted over the northern portion of the Kaunisvaara field focusing on Tapuli and Stora Sahavaara.
Diamond drilling commenced in 1961 on the Sahavaara occurrences and throughout the early 1960’s
exploration of Stora Sahavaara progressed, leading to the delineation of a Mineral Resource of 82 Mt
averaging 41% Fe. During the latter part of the 1960’s exploration focused on the Tapuli Deposit,
leading to the delineation of an additional Mineral Resource of 60 Mt averaging 29% Fe.
The Group has actively been exploring the area since 2005 and to date drilled 385 holes totalling
66,284 m on the two Deposits referred to in this project, including holes for metallurgical testing. All
core produced up to 2008 was cut at the Group’s core facility in Kolari, Finland, while the ones from
2009 were treated at the Group’s facility in Pajala, Sweden. The metallurgical testwork program was
developed by Bo Arvidson Consulting LLC based on existing data from the Deposits and experience of
working with similar programs. Bench scale testwork was performed on Tapuli drill cores by GTK in
Finland to establish crushing and grinding requirements, and to develop conceptual flowsheets. The
bench scale testwork was complemented by a pilot plant testwork indicating that a final product could
be produced meeting the required marketing specifications of 69% Fe and less than 1% SiO2, 2% MgO,
0.05% S. Similar testwork was also performed on the Sahavaara Deposit indicating a similar upfront
flowsheet. However, due to high sulphur levels, a flotation circuit is also required.
12.2.1.7 Sahavaara resource work completed
The Stora Sahavaara project was drilled by the SGU from 1961 to 1965. The program consisted of 63
holes and a report was published in 1967. A small test shaft was also developed to a depth of a few tens
of meters. LKAB, in conjunction with the SGU, conducted mineralogical, metallurgical and scoping
studies during the mid 1970’s on the Sahavaara and Tapuli magnetite ores. Very little work was carried
out between then and 2005 when the Group acquired the project. The SGU established that the
“Kaunisvaara Iron Ore Field” consisting of the Södra, Östra and Stora Sahavaara, Ruutijarvi, Tapuli
and Palotieva contain a significant magnetite resource with additional by-product copper credits.
The Group has systematically drill-tested the magnetite body using large diameter core where possible.
The Group geologists have also re-logged and re-sampled the historic core stored in the SGU core
archive. The large diameter core also provided sufficient material for initial metallurgical test work and
completion of a NI 43-101 compliant Mineral Resource calculation in May 2006. During the spring of
2007, the Group hired a local excavation contractor to clear the overlying glacial till and prepare the
access ramp for the start of the underground phase of a bulk sample. After completion of an access
ramp to the magnetite, the contractor blasted a 50 m long horizontal tunnel within the magnetite from
which a 2,000 tonnes bulk sample of material was collected. A representative sample of this material
was then sent to the metallurgical testing laboratory (SGS Group) in Ontario, Canada. During the third
quarter of 2008, the Group completed bulk sampling at Sahavaara, by drilling 30 holes, totaling 3,726
m. Additional metallurgical drill core was taken during 2008 to provide a representation of all the ore
types in the Mineral Resource and more definitive metallurgical testing took place at GTK in Finland
during 2009. Data from Assaying of metallurgical holes was imported to the Group’s database during
the fall of 2009 to be used in future Mineral Resource calculations. SRK Consulting (UK) Ltd. updated
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Listing Prospectus
the Mineral Resource model in March 2010 and issued a NI 43-101 Technical Report based on the
additional drilling and DTT testing.
12.2.1.8 Sahavaara metallurgical testwork
In early 2007, the Group collected a 2,000 tonnes underground bulk sample, a portion of which was
analyzed by the metallurgical testing laboratory (SGS Group) in Canada. Late in 2007, Corus Group
R&D in the Netherlands completed a pelletizing test on 2.5 tonnes of iron ore concentrate generated by
the bulk sample program. The results demonstrate that the pellets made from the Sahavaara first pilot
plant concentrate needed further development in order to produce satisfactory quality pellets.
During the first quarter of 2009 additional metallurgical testing and process development was
undertaken at GTK in Finland on drill core samples combined to represent the ore types to be expected
across Sahavaara. The testing aimed to see if the levels of Fe could be elevated and the levels of MgO
could be reduced, and to provide improvements to the process conditions by reducing reagent
consumption and the time for flotation.
Additional testwork with a large representative sample composed by numerous drill cores for bench
testing and a pilot plant conducted in late 2009 and early 2010 confirmed that a high-grade
concentrate could be produced with a sulphur level at 0.05% S. The work included additional
comminution testing for the crushing and grinding model; preparation of a representative sample for
the development of a flowsheet for Sahavaara; pilot plant testing to provide sufficient concentrate for
additional metallurgical testing and to generate tailings for settling and disposal tests (environmental);
preparation of sufficient concentrate for further pelletizing test work (DR and BF) to be blended with
concentrate from Tapuli; and shipping samples for vendor testing. Subsequently, pellet testwork by
SGA in Germany with a blend of Sahavaara and Tapuli products, proportioned according to projected
future production schedule, demonstrated that very good DR pellets can be produced with an
attractive blend with hematite fines, enhancing the ultimate pellet Fe grade. Initial results with BF
pellets are promising. In the second quarter of 2010, metallurgical testing for the DFS and associated
studies was completed. Pelletizing test work was continued by SGA (DR and BF pellets) with Tapuli
concentrate blended with concentrate from Sahavaara. The final results of the pellet testing indicated
that the very good quality pellets could be produced from the Kaunisvaara concentrates.
12.2.1.9 Tapuli resource work completed
Tapuli was drilled by the SGU between 1965 and 1969. Twenty-six holes were drilled on the Tapuli
occurrence, totaling 6,280 m; of these, the majority has density determinations. Geophysical work
(magnetic and gravity) was completed by the SGU in 1971 and concluded that the central core of high
grade ore may be continuous to a depth in excess of 2,000 m. Little further work was done until the
Group acquired the project in 2004.
A comprehensive review of historic and recent information for Tapuli and Palotieva was completed;
and historic drill logs, Assays, surveys, and other important information were converted into the
Group’s digital data base management and geographic information system. An
exploration/development drilling program was designed and implemented with the objective of
verifying the results of existing historical drilling completed by the SGU in the late 1960’s, and
potentially extend the limits of the known magnetite zone at Tapuli and Palotieva.
The Group has systematically drilled the magnetite body, and when appropriate the Group has used
large diameter core, which has provided sufficient material for initial metallurgical test work.
In June 2007, the Group announced the results from a 33-hole drill program and the initial results of
the metallurgical testing at the Tapuli magnetite Deposit. The results supported the Group’s
management’s current view that the Tapuli body is a potential source of low sulphur iron ore,
accessible by open pit mining operations with a relatively low stripping ratio.
The Group’s 2007 drilling program added 37 holes for a total of 5,697 m. All the drill holes were
integrated into the current database, which contained a total of 5,603 iron analyses. Two historic drill
holes were twinned to verify lithological and Assay reliability with good correlation. Because the
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Listing Prospectus
Tapuli-area Deposits had been explored previously, the Group was able to move directly to in-fill and
deeper hole drilling.
In January 2010, the Group commenced with condemnation drilling at Tapuli, with the intent to test
the Tapuli waste rock area, sand storage area and other planned industrial sites in the Kaunisvaara
area.
SRK Consulting (UK) Ltd. updated the resource model in March 2010 and issued a NI 43-101
Technical Report based on the additional drilling and DTT testing.
12.2.1.10
Tapuli metallurgical test work
In conjunction with the drilling, the Group initiated a major metallurgical test program at Tapuli
including DTT and x-ray mineralogical analysis. The DTT and Assay results indicate that a high grade,
low sulphur iron concentrate may be achievable through magnetic separation only.
A representative bulk sample of 25 tonnes of drill core from Tapuli was collected in the first quarter of
2009 and was processed in a pilot plant at GTK in Finland, in order to:
•
Prove the bench-scale developed process flow-sheet on a larger scale;
•
Provide a sample of high quality concentrate for evaluation by prospective customers
and further metallurgical test work;
•
Gain process data for commercial plant design; and
•
Produce tailing fractions for an environmental permit application.
Two separate processing runs of the pilot plant were conducted, each consisting of coarse cobbing,
followed by rod mill-ball mill grinding, wet cobbing, fine grinding and six stage low intensity magnetic
separation.
In the fall of 2009, metallurgical test work required for the DFS was completed. The work included
additional comminution testing for the crushing and grinding model; finalization of the flowsheet
development for Tapuli; further extensive testing of a representative sample to generate tailings for
settling and disposal tests (environmental); preparation of sufficient concentrate for additional
pelletizing test work (DR and BF pellets) to be blended with concentrate from Sahavaara; and shipping
samples for vendor testing. In the second quarter of 2010, metallurgical testing for the DFS and
associated studies was completed. Pelletizing test work continued at SGA (DR and BF pellets) with
Tapuli concentrate blended with concentrate from Sahavaara. The final results of the pellet testing
indicated that very good quality pellets could be produced from the Kaunisvaara concentrates.
12.2.1.11
Kaunisvaara permitting
As at the date of this Prospectus, the Issuer is in receipt of all necessary exploitation concessions and
environmental permits required in order to carry out the first phase of the Kaunisvaara Project. The
first phase will comprise the construction of the necessary facilities to enable the Issuer to extract and
process iron ore from the Tapuli mine and to produce the iron ore concentrate from the Tapuli mine,
from which first shipment is expected to commence in the first quarter of 2013. The building permit
required for construction and building works on the Kaunisvaara Project site, including the processing
plant, was approved by Pajala Municipality on March 30, 2011. The Issuer has applied for, but not yet
received, the remaining environmental permit to enable development of the Sahavaara mine. The
permit is expected to be obtained in the third quarter of 2012. Additionally, certain further permits,
authorizations and licenses will be required to be obtained in relation to the construction and
operation of the planned logistics solution for the transport of iron ore concentrate to be shipped from
the port of Narvik.
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Listing Prospectus
While all permits necessary for the construction of the port of Narvik are in place, a building permit for
a part of the construction and a voluntary permit for conditions to use the Pitkäjärvi transshipment
terminal are not.
A land use permit is needed as part of the property where the Pitkäjärvi terminal is proposed to be
built. This property is owned by the Swedish State. The body that grants the land use permit is the
Reindeer Herding Delegation (Sw. rennäringsdelegationen), at the County Administrative Board of
Norrbotten (Sw. länsstyrelsen), where a meeting was scheduled to be held on February 1, 2012
regarding such permit. Due to absences by certain of the members from the meeting, no resolution
regarding the permit was made, but it is expected that the permit will be addressed at a reconvened
meeting.
The construction permit for the Pitkäjärvi transshipment terminal is required from the Kiruna
Municipality. All required filings by the Group have been made in this regard.
The environmental permit is granted by the Environmental Delegation at the County Administrative
Board in Norrbotten. All required filings by the Group have been made in this regard.
The Group anticipates that it will obtain the abovementioned permits.
In the event of a delay in the receipt of the Pitkäjärvi permits, the Group expects to be able to use
alternative temporary solutions to ship iron ore to its customers. The decision to pursue a temporary
alternative route must be made at the latest end March 2012 in order to not affect the planned
shipment schedule in first quarter of 2013. The Group has currently identified, and is evaluating, other
viable alternatives.
One alternative could be a temporary transshipment terminal in Gällivare in Sweden which would be
at a site previously used for transshipment by the mining company Boliden. Here, the existing rail
route from Gällivare to Narvik would be used. This option may be operational by the first quarter of
2013, and would need an agreement with the Gällivare Municipality. This terminal is expected to have
capacity to handle all planned volumes of material in 2013 and 2014. The Capex is expected to be
limited and the Opex is expected to increase marginally as a result of the use of smaller 60 ton trucks
and a longer rail distance.
Another alternative would be to transport the concentrate by truck to the Finnish rail in Kolari and rail
the material to a port in Finland for further shipment. This alternative could be operational beginning
January 2013 and no permits are required.
On October 1, 2010, the Swedish/Finnish Border River Commission lost its authority to issue
environmental permits and such authority reverted to the Environmental Court in Umeå. However,
the Swedish/Finnish Border River Commission will remain a regional reference authority for the
monitoring of practice in permit matters, and its decisions prior to October 1, 2010 remain valid.
The exploitation concession according to the Swedish Minerals Act was issued by the Swedish Mines
Inspector on October 28, 2010. An application for an environmental permit according to the
Environmental Code for whole Kaunisvaara area including the permit previously granted by the
Swedish/Finnish Border River Commission and the additional permit needed for the Sahavaara mine
was submitted to the Environmental Court in Umeå, Sweden on December 7, 2010 and extended in an
updated application submitted June 21, 2011. The sulphur content of the orebody at the Sahavaara
mine (which is higher than that at the Tapuli mine) will require certain additional processes to be
undertaken at the Kaunisvaara Project’s processing plant. These additional processes are industry
standard techniques, namely a floatation circuit to remove the majority of the sulphur content from
the Sahavaara ore and certain special arrangement and practices at the tailings management facility.
12.2.2 Kaunisvaara Mineral Resources estimates
12.2.2.1 Introduction
Information contained in this Prospectus relating to estimated Mineral Resources for the Tapuli and
Sahavaara ore bodies is taken from a report prepared by SRK Consulting (UK) Ltd. dated October 3,
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Listing Prospectus
2010. Information contained in this Prospectus relating to estimates of the Mineral Reserves for the
Tapuli and Sahavaara ore bodies is taken from a report prepared by SRK Consulting (UK) Ltd. dated
June 1, 2011 (the SRK Technical Report). SRK Consulting (UK) Ltd. has not undertaken any further
technical work subsequent to publication of the said Technical Report.
The Mineral Resources and Mineral Reserve estimates for the Tapuli and Sahavaara mines, as set out
in this Prospectus and in the SRK Technical Report, are defined and classified according to Canadian
National Instrument 43-101-Standards of Disclosure for Mineral Projects (NI 43-101) and the
Canadian Institute of Mining, Metallurgy and Petroleum Standards on Mineral Resources and Mineral
Reserves: Definitions and Guidelines (December 2005) (the CIM Code), and have been estimated in
conformity with the Canadian Institute of Mining, Metallurgy and Petroleum’s Estimation and Mineral
Resources and Mineral Reserve Best Practice Guidelines.
Estimates of Mineral Reserves and Mineral Resources are largely dependent on the interpretation of
geological data obtained from drill holes and other sampling techniques and feasibility studies that
derive estimates of mining costs based on anticipated tonnage, expected recovery rates and Capex and
other factors. Mineral Resources and Mineral Reserves are distinguishable from each other in that
Mineral Resources represent mineralization of potential economic interest that has been identified
through exploration and sampling, whereas Mineral Reserves represent the subset of Mineral
Resources that economic, technological and environmental analysis has identified as extractable
according to an officially approved plan. No assurance can be given that the Mineral Resources and
Mineral Reserves presented in this Prospectus will be recovered at the quality or yield presented.
Furthermore, a decline in the prevailing iron ore price or increases in capital or operational costs could
have a negative impact on the amount of, and could result in the Group restating or reducing the
amount of, the estimated Mineral Reserves.
The full NI 43-101 compliant SRK Technical Reports dated October 3, 2010 and June 1, 2011 in respect
of the Kaunisvaara Project is available for download at www.sedar.com and the Issuer’s web site,
www.northland.eu.
The following provides the two individual Mineral Resource statements which make up the
Kaunisvaara Project.
12.2.2.2 Mineral Resources statement for the Tapuli iron ore project
The table below shows the Mineral Resources for the Tapuli iron ore Deposit, using a 10% Fe cut-off:
Mineral Resource
Category
Tonnes
(Mt)
Fe Total %
S
%
SiO2
%
MgO
%
Al2O3 %
CaO
%
P
%
Mn
%
Measured
52.8
27.02
0.23
25.31
17.90
2.10
6.31
0.07
0.08
Indicated
54.6
25.04
0.24
28.63
17.05
2.05
8.72
0.05
0.11
Meas+Ind
107.4
26.01
0.23
26.99
17.47
2.08
7.53
0.06
0.09
Inferred
24.7
24.58
0.23
28.53
17.75
2.00
7.80
0.06
0.10
The Mineral Resource for the Tapuli Deposit was constrained within mineralized solids defined by a 10% Fe grade cut-off and
within a Lerchs-Grossman pit shell defined by the following assumptions; a metal price of USD 1.10/dmtu for magnetite
concentrate; slope angles varying between 38-47 degrees; mining recovery of 95%; mining dilution of 5%; mine Opex of USD
1.10/tonne; incremental mine cost of USD 0.06/tonne/12m; high sulphur process cost of USD 5.30/tonne ore; low sulphur
process cost of USD 3.75/tonne ore; G&A cost of USD 0.30/tonne ore; concentrate transport cost of USD 2.113/tonne ore;
concentrate grade of 68.50% Fe; Low Sulphur (<0.5% S)Fe Recovery=-0.0000002349*Fe6 + 0.0000409000*Fe5 0.0027807227*Fe4 + 0.0939905986*Fe3 - 1.6906632925*Fe2 + 16.8668152871*Fe + 0.7364853172; Medium Sulphur (>0.5%
S and < 1.0% S) Fe Recovery = 0.0015079856*Fe3 - 0.1530754340*Fe2 + 6.1103552318*Fe + 0.5611866936; High Sulphur
(>1.0% S) Fe Recovery = 0.0005075760*Fe3 - 0.0879614412*Fe2 + 4.9092379827*Fe + 1.1566475907.
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Listing Prospectus
Potential Tonnage
SRK Consulting (UK) Ltd. has identified 45-55 Mt of potential tonnage that falls within the resource
pit shell that form potential targets of future exploration. The potential quantity of tonnes is
conceptual in nature as there has been insufficient exploration in these areas. It is uncertain if further
exploration will result in these targets being delineated as a Mineral Resource. These potential
tonnages reflect a range of material within SRK Consulting (UK) Ltd’s solid models outlining the
interpreted down dip extent of Mineralization.
Key Resource Estimation Assumptions, Parameters and Methods
Mineral Resource estimate was based on a database comprised of 17,376 samples from 161 drill holes.
Predominant drill hole spacing was on a nominal 50 m grid. Solid modeling the Mineralization based
on 10% Fe cut-off resulted in two separate ore zone areas Palotieva and Tapuli. Palotieva measures
360 m along strike and 10-30 m across strike and was modelled to a depth of 475 m. Tapuli measures
2.7 km along strike and 10–250 m across strike and was modelled to a depth of 475 m. Drill hole
intercepts within these solids were composited to 4 m lengths which were subsequently used for
statistics and grade interpolation. The density dataset was comprised of 1,605 density samples
collected by the Group. Two separate Fe grade based density regression formulas were generated for
each of the zone solids. Grade interpolation was comprised of ordinary kriging and validated against
original Assay results and mean composite grades.
Mineral Resource Classification
Mineral Resource classification was based on a variety of criteria. Measured Mineral Resource
classification was based on low geological complexity, drill hole spacing much less than the 2/3rd
maximum variogram range along strike, blocks interpolated with optimized search parameters; and
slope of regression dominantly greater than 0.8. Indicated Resources were based on all of the same
criteria as measured except with a slope of regression greater than 0.5. Inferred Mineral Resources
were assigned to blocks by extending the indicated boundary 50 m down dip and ensuring that deeper
drill hole intercepts were included.
12.2.2.3 Mineral Resource statement for the Sahavaara iron ore project
The table below shows the Mineral Resources for the Sahavaara iron ore Deposit, using a 10% Fe cutoff:
Mineral Resource
Category
Tonnes
(Mt)
Fe Total %
S
%
SiO2
%
MgO
%
Al2O3 %
CaO
%
P
%
Mn
%
Measured
30.2
42.96
2.66
14.85
14.43
1.32
1.61
0.07
0.10
Indicated
56.6
38.14
1.55
20.08
14.73
1.32
4.02
0.05
0.12
Meas+Ind
86.8
39.82
1.93
18.26
14.63
1.32
3.18
0.06
0.11
Inferred
34.7
37.28
1.44
20.99
15.21
1.20
4.13
0.04
0.11
The Mineral Resource estimate for the Sahavaara Deposit was constrained within ore solids defined by a 10% Fe grade cut-off
and within a Lerchs-Grossman pit shell defined by the following assumptions; a metal price of USD 1.10/dmtu for magnetite
concentrate; slope angles varying between 49 and 54 degrees; a mining recovery of 95%; mining dilution of 5%; mine Opex of
USD 1.40/tonne; incremental mine Opex of USD 0.06/tonne/12m; process Opex of USD 5.30/tonne ore; G&A costs of USD
0.30/tonne ore; concentrate transport costs of USD 3.488/tonne ore; a concentrate grade of 69.9% Fe. In addition the
optimisation assumed low sulphur ore (S<0.5%) Fe recovery = 0.0000048981*Fe5 - 0.0007163586*Fe4 + 0.0398624195*Fe31.0588373844*Fe2 + 14.2588045522*Fe + 0.0446129086; medium sulphur ore (0.5%<S<1.0%)Fe recovery =
0.0000009037*Fe5 - 0.0002056897*Fe4 + 0.0160166116*Fe3 - 0.5717121551*Fe2 + 10.5203767140*Fe - 1.4317216058; and
high sulphur ore (>1.0% S) Fe recovery = -0.1174169928*Fe2 + 5.6286181054*Fe.
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Listing Prospectus
Potential Tonnage
SRK Consulting (UK) Ltd. has identified 4-5 Mt of potential tonnage that falls within the Mineral
Resource pit shell as well as another 55-65 Mt of potential down dip tonnage below the pit shell that
form potential targets of future exploration. The potential quantity of tonnes is conceptual in nature as
there has been insufficient exploration in these areas. It is uncertain if further exploration will result in
these targets being delineated as a Mineral Resource. These potential tonnages reflect a range of
material within SRK Consulting (UK) Ltd’s solid models outlining the interpreted down dip extent of
Mineralization.
Key Resource Estimation Assumptions, Parameters and Methods
The Sahavaara Mineral Resource estimate was based on a database comprised of 8,906 samples from
182 drill holes amounting to 9,608 m of samples. The predominant drill hole spacing was on a nominal
50 m grid. Solid modelling of the Mineralization based on 10% Fe cut-off resulted in two separate ore
zones; Stora Sahavaara measuring 1.2 km along strike, approximately 800 m depth and 10-80 m
across strike and Södra Sahavaara measuring 1.2 km along strike, 700 m depth and 5-65 m across
strike. A second high grade cut-off of 50% Fe was used to define a continuous high grade zone
contained within the core of the Stora Sahavaara Deposit. Drill hole intercepts within these solids were
composited to 6 m lengths which were subsequently used for a statistical analysis and grade
interpolation. Three separate Fe grade based density regression formulas were generated for each of
the zone solids. The density dataset was comprised of 1,200 density samples collected by the Group.
Grade interpolation was comprised of ordinary kriging and validated against original Assay results and
mean composite grades.
Mineral Resource Classification
Mineral Resource classification was based on a variety of criteria. Measured Mineral Resource
classification was based on areas of low geological complexity, a drill hole spacing much less than the
2/3rd of the maximum variogram range along strike, blocks interpolated with optimized search
parameters and with a slope of regression being dominantly greater than 0.8. Indicated Mineral
Resources were based on all of the same criteria as Measured Mineral Resources except with a slope of
regression greater than 0.5. Inferred Mineral Resources were assigned to blocks by extending the
indicated boundary 50 m down dip and ensuring that deeper drill hole intercepts were included.
12.2.2.4 Cautionary statements
The effective date of the Tapuli and Sahavaara Mineral Resource estimates is October 3, 2010. The
Fe% presented in each of the above tables is not meant to imply recoverable product. Mineral
Resources for the Tapuli and Sahavaara iron projects have been classified according to the “CIM
Standards on Mineral Resources and Reserves: Definitions and Guidelines (December 2005)” by
Howard Baker (MAusIMM) an independent Qualified Person as defined by NI 43-101.
Mineral Resources were estimated in conformity with generally accepted CIM “Estimation and
Mineral Resources and Mineral Reserve Best Practices Guidelines”. SRK Consulting (UK) Ltd. is not
aware of any known environmental, permitting, legal, title, taxation, socio-economic, marketing or
other relevant issues that could potentially affect the estimate of Mineral Resources. The Mineral
Resources may be affected by further exploration drilling which may increase or decrease the estimate.
The Mineral Resources may also be affected by subsequent assessments of mining, environmental,
processing, permitting, taxation, socio-economic and other factors. There is insufficient information at
this stage to assess the extent to which the resources will be affected by these factors that are more
fully assessed in a DFS.
The quantity and grade of reported Inferred Mineral Resources in this Prospectus are uncertain in
nature and there has been insufficient exploration to define these Inferred Resources as an Indicated
or Measured Mineral Resource; and it is uncertain if further exploration will result in upgrading them
to an Indicated or Measured Mineral Resource category.
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Listing Prospectus
Database Validation
The QA/QC program for the Group’s Tapuli and Sahavaara drilling consists of alternating the insertion
of a blank or standard sample on a regular basis within the sample train. Because the Group employs
several standards with varying grades these are also alternated. Also, samples are flagged regularly for
the primary laboratory to prepare a lab duplicate for analysis by a second laboratory. The ALS Chemex
analytical laboratory analyzed the samples in batches of 81 and each batch has multiple samples for
testing for cross contamination and reproducibility of results.
SRK Consulting (UK) Ltd. found that the results of the above described QA/QC program indicate that
the Group’s Tapuli and Sahavaara Assay databases were appropriate for Mineral Resource estimation.
Data Verification
Mr. Howard Baker (MAusIMM), Principal Consultant (Mining Geology) of SRK Consulting (UK) Ltd.,
acted as Qualified Person and completed the verification of data on which the Tapuli and Sahavaara
Mineral Resource estimates were based. This verification included an assessment of QA/QC data,
sample preparation and Assay methodologies, core recoveries, density data, data inputs, survey data
and validation of historic exploration data used in the estimate. Data was validated by using field
checks, statistical methods and evaluating written protocols.
Qualified Person
Mineral Resources of the Tapuli and Sahavaara projects have been estimated and categorized for
reporting purposes by Mr. Howard Baker (MAusIMM), Principal Consultant (Mining Geology) of SRK
Consulting (UK) Ltd. Mr. Baker is a Qualified Person as defined by the NI 43-101 and is an
independent consultant to the Group.
Petri Peltonen, Ph.D. is Vice President of Exploration for the Group and its Qualified Person in
accordance with NI 43-101 responsible for overseeing the execution of the Group’s exploration
programs and for verifying that the information presented in this Prospectus is an accurate summary.
Dr. Peltonen is an accredited Chartered Professional member of the Australasian Institute of Mining
and Metallurgy, MAusIMM (CP) (Member #306710), and Member of the European Federation of
Geologist (EurGeol #961).
12.2.3 Kaunisvaara Mineral Reserve estimates
12.2.3.1 Introduction
The Group issued a press release on September 27, 2010 with the first Mineral Reserve estimates for
the Tapuli and Sahavaara iron ore Deposits. A new Technical Report has since been prepared by SRK
Consulting (UK) Ltd. in accordance with the CIM Code. This report, dated June 1, 2011, constitutes the
basis for the estimates relating to the Mineral Reserves for the Tapuli and Sahavaara ore bodies below
(the SRK Technical Report). SRK Consulting (UK) Ltd. has not undertaken any further technical work
subsequent to publication of the said Technical Reports.
The Kaunisvaara Project’s Mineral Reserves estimate as at June 1, 2011 is approximately 164.8 million
tonnes, of which 81.9 million tonnes are classified as proven reserves and 83.0 million tonnes are
classified as probable reserves. The overall Mineral Reserve estimate has an average iron grade of
31.10%. The total Mineral Reserve estimates for the Kaunisvaara Project as at June 1, 2011, are
summarized in the below tables.
12.2.3.2 Total Mineral Reserves for Kaunisvaara
The table below shows the total Mineral Reserves for the Tapuli and Sahavaara iron ore Deposits:
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Listing Prospectus
Mineral
Reserve
Category
Tonnes
(Mt)
Fe Total %
S
%
SiO2
%
MgO
%
Al2O3 %
CaO
%
P
%
Mn
%
TiO2
%
K2O
%
Proven
81.9
32.98
1.11
21.34
16.66
1.78
4.53
0.07
0.09
0.14
0.50
Probable
83.0
32.51
1.00
23.30
15.91
1.61
5.53
0.05
0.11
0.12
0.39
164.9
32.74
1.06
22.33
16.28
1.70
5.23
0.06
0.10
0.13
0.44
Proven
Probable
+
This table includes technical information, which requires subsequent calculations to derive subtotals,
totals and weighted averages. Such calculations may involve a degree of rounding and consequently
introduce an error. Where such errors occur, SRK Consulting (UK) Ltd. does not consider them to be
material.
12.2.3.3 Estimated Mineral Reserve statements for the Tapuli iron ore Deposit
The table below shows the Mineral Reserves for the Tapuli iron ore Deposit:
Mineral
Reserve
Category
Tonnes
(Mt)
Fe Total %
S
%
SiO2
%
MgO
%
Al2O3 %
CaO
%
P
%
Mn
%
TiO2
%
K2O
%
Proven
51.7
27.14
0.21
25.14
17.96
2.04
6.24
0.06
0.09
0.17
0.63
Probable
42.8
25.32
0.23
28.33
16.89
2.02
8.78
0.05
0.11
0.15
0.46
94.5
26.31
0.22
26.59
17.47
2.03
7.39
0.06
0.10
0.16
0.55
Proven
Probable
+
12.2.3.4 Mineral Reserve Statement for the Sahavaara iron ore Deposit
The table below shows the Mineral Reserves for the Sahavaara iron ore Deposit:
Mineral
Reserve
Category
Tonnes
(Mt)
Fe Total %
S
%
SiO2
%
MgO
%
Al2O3 %
CaO
%
P
%
Mn
%
TiO2
%
K2O
%
Proven
30.2
42.96
2.66
14.85
14.43
1.32
1.61
0.07
0.10
0.09
0.28
Probable
40.2
40.17
1.81
17.94
14.88
1.19
2.90
0.05
0.11
0.09
0.31
70.4
41.37
2.18
16.61
14.68
1.24
2.35
0.06
0.11
0.09
0.29
Proven
Probable
+
12.2.4 Kaunisvaara PEA
In September 2009, the Group published a PEA on the Kaunisvaara Project, a study that was
performed by renowned industry consultants such as Jacobs E&C Limited (formerly Aker Solutions
ASA), and Scott Wilson. The PEA demonstrated that the Kaunisvaara Project stands to be financially
rewarding with robust operating margins and high rates of return, as well as technically feasible. Based
on the positive PEA outcome, the Group decided to continue with a DFS on the Kaunisvaara Project,
and the results of the DFS were published in June 2010.
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Listing Prospectus
12.2.5
Kaunisvaara DFS 2010 and 2011 update
In September 2010, the Group published a DFS on the Kaunisvaara Project, a study that was
performed by renowned industry consultants such as Jacobs E&C Limited (formerly Aker Solutions
ASA) and SRK Consulting (UK) Ltd. The DFS demonstrated that the Kaunisvaara Project stands to be
financially rewarding with robust operating margins and high rates of return, as well as technically
feasible. Based on the positive DFS, the Group decided to continue into the execution phase of the
Kaunisvaara Project.
On May 18, 2011, the Group published an update of the DFS, including the results of the DFS on the
logistics, a revision to the estimated premium for the Group’s high quality, low impurity Fe
concentrate, the impact of recent optimization studies on engineering costs and operating estimates
and revisions to Capex including sustainable capital, using current exchange rates. The updated DFS of
the Kaunisvaara Project shows a doubling of the NPV. This study also confirms the positive economics,
with an increase of return, measured in IRR, and remaining strong margin in spite of an increase of
operational expenses.
The highlights of the DFS update in May 2011 included:
•
After interest and tax, NPV1 of USD 934 million and an IRR of 24.0% using a discount
rate of 8% (compared to the September 2010 DFS: NPV estimate of USD 463 million
and an IRR of 18.8% using a discount rate of 8%)
•
Pre-tax and interest, NPV of USD 1,461 million and an IRR of 32.0%1 using a discount
rate of 8% (compared to the September 2010 DFS: NPV estimate of USD 774 million
and an IRR of 24.7%)
•
Capex to reach 5 Mt of USD 765 million excluding Capex related to the logistics
solution, with adjustments for cost optimization and current exchange rates
(compared to USD 694 million in September 2010 DFS)
•
Cost optimization reduced initial Capex by USD 14 million
•
Currency adjustments increased Capex by USD 85 million
•
LOM Capex was reduced to USD 892 million from USD 908 million (compared to
September 2010 DFS)
•
Cost optimization expected to reduce LOM Capex by USD 111 million
•
Currency adjustments expected to increase Capex by USD 95 million
•
Total Opex per tonne of concentrate delivered FOB at the port of Narvik for the LOM
is estimated to average USD 58.80 per tonne concentrate (compared to the September
2010 DFS estimate of USD 53.76 per tonne)
•
Mining costs are estimated to be USD 3.50 per tonne lower
•
Logistics costs are estimated to be to USD 8 per tonne higher
•
Independent market analyst, RMG, have now included an estimated premium for the
Group’s pellet feed of USD 7 per Fe-unit
As part of the NI 43-101 process, SRK Consulting (UK) Ltd. has reviewed the Mineral Resource and
Mineral Reserve statements and the capital and Opex estimates for the Kaunisvaara Project. SRK
1
This is based on the Issuer’s estimated IRR and NPV before tax and interest which are consistent in all material respects with the equivalent
pre-tax estimates determined by SRK Consulting (UK) Ltd. and presented in the NI 43-101 report.
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Listing Prospectus
Consulting (UK) Ltd.’s estimates for IRR and NPV before tax and interest presented in the NI 43-101
are consistent in all material respects with the pre-tax estimates derived by the Group and presented in
the DFS.
A complete NI 43-101 compliant report dated June 1, 2011 summarizing the results of the DFS on the
Kaunisvaara Project has been filed on SEDAR and is available on www.sedar.com.
DFS results overview
The DFS for the Kaunisvaara Project includes the Tapuli and Sahavaara magnetite iron ore Deposits.
They will provide feed to a single, multi-line processing facility in Sweden.
The DFS was led by Jacobs E&C Limited (formerly Aker Solutions ASA) which was responsible for
overall study management and coordination. Jacobs E&C Limited was supported by a number of
specialist service groups and subconsultants.
DFS results in detail
As part of the NI 43-101 process, SRK Consulting (UK) Ltd. has audited the updated capital and Opex
estimates for the Kaunisvaara Project. SRK Consulting (UK) Ltd.’s estimates for IRR and NPV before
tax and interest presented in the NI 43-101 are consistent in all material respects with the pre-tax
estimates derived by the Group and presented in the DFS.
Optimization work reduces expected mining cost
Since completing the initial DFS study in September 2010, the Group optimized operating and
engineering costs which resulted in a 27% decrease in the expected total mining cost over the LOM and
a 22% reduction in expected cost per tonne of ore.
Optimization studies identified some low-margin/high-stripping ore which could be excluded from the
production schedule and improve economics. Decreasing waste production has several positive effects
including lower Capex (less equipment to purchase) and lower direct costs (for items such as
explosives, fuel, etc.) The optimization has reduced the Capex over the LOM with USD 88 million and
the Opex over the LOM has been reduced by USD 352 million.
DFS on Logistics
In the September 2010 DFS, the logistic costs were only presented at a scoping study level. Since that
time, the Group and the Swedish Transport Administration have signed a letter of intent on cofinancing and an agreement on cooperation covering the comprehensive transport solution, in other
words, how the iron ore concentrate will be transported from the Kaunisvaara process plant to the port
of Narvik, Norway.
The updated 2011 DFS confirmed the viability of the plan presented in the September 2010 DFS. The
logistics included:
•
Trucking from Kaunisvaara to Pitkäjärvi terminal (Svappavaara) (150 km). The
anticipated truck size was 104 tonnes gross (compared to 170 tonnes trucks in
September 2010 DFS). The anticipated size was based on an evaluation of existing
dispensation as well as a thorough consideration of the expected outcome of the joint
studies and what work with the Swedish Transport Association will produce
•
Trans-loading from truck to rail in Svappavaara with a new terminal (Pitkäjärvi)
•
Rail using 100 tonne rail cars on the already existing rail line between Svappavaara
and Narvik (226 km)
•
A new terminal and berth in the port of Narvik with the capacity to load Cape Size
vessels
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Listing Prospectus
Capex
The revised DFS Capex in order to reach 5 Mt capacity (end 2014) was estimated at USD 765 million,
adjusted for revised exchange rates and a 10% contingency. This compares to an initial Capex estimate
in the DFS of USD 694 million. The increase is largely the result of a change in SEK/USD exchange
rate assumptions.
Capex for the 17 years LOM was estimated at USD 892 million, including sustainable capital adjusted
for the revised exchange rate and a 10% contingency. This number compares with the original DFS
estimate of USD 908 million (including a 10% contingency). A comparison to the current and previous
Capex estimate is shown in the table below.
DFS 2011 Capex details
Capex September 2010 DFS
Updated Capex with
optimization benefits
Updated Capex with
exchange rates adjustment
and optimization benefits1
End 2014
End 2014
End 2014
Mines, dikes, mobile mining
equipment
139
136
Mines – crushing stations &
conveyors
58
55
Plant – stream Sahavaara
122
115
125
Plant – stream Tapuli
174
147
163
Tailings & water ponds/lines
34
34
43
Power supply
15
13
16
Filtration plant/common equipment
& infrastructure
91
108
Owners cost
57
57
70
Closure cost
4
-
-
Logistics
-
15
15
694
680
765
USD million, incl 10%
contingency
Areas breakdown
Total
1 Capex adjusted - 2/3 using a
148
58
127
new rate of 6.40 SEK/USD and 1/3 at 6.95 SEK/USD
Exchange rates
The Opex and the Capex in the September 2010 DFS used an exchange rate of 8.125 SEK/USD. Since
then the SEK has strengthened considerably against the USD. To reflect this, 2/3 of the Capex in SEK
has been adjusted using a new rate of 6.40 SEK/USD and 1/3 at 6.95 SEK/USD. The impact of these
exchange rate changes is USD 85 million in Capex.
Opex
The revised total Opex for the LOM operation is estimated to be USD 58.80 (including 5%
contingency) per tonne of concentrate (dry) delivered FOB to the port of Narvik. This compares to
USD 53.76 per tonne in the September 2010 DFS. A comparison of the current and previous DFS
estimates is shown in table below:
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Listing Prospectus
September 2010 DFS
Updated logistics DFS, presented May
18, 2011
Mining
21.12
17.64
Process
12.31
12.60
General & Administration
1.36
1.45
Transportation
18.36
26.37
Royalties
0.26
0.36
Other
0.35
0.38
Total
53.76
58.80
Cost category
As shown above, the increase in the Opex is largely a result of an increase in transportation costs to
Narvik, partially offset by lower mining costs.
Permitting
The Swedish/Finnish Border River Commission has approved the environmental permit for the Tapuli
mine and the Kaunisvaara mill. The Group received a exploitation concession for the Sahavaara
Deposit on October 28, 2010. The remaining environmental permit application for Sahavaara, was
submitted to the Environmental Court on December 7, 2010. The Group expects to receive the permit
in the third quarter of 2012.
The Group’s iron ore Deposits of Tapuli and Sahavaara have been classified by the SGU as being of
“national interest for mineral production”, according to Chapter 3 in the Environmental Code. The
designation of the Deposits as being of “national interest for mineral production” strengthens the
Group’s upcoming applications for environmental permits and exploitation concessions.
Mining
Mining operations at Tapuli and Sahavaara mines will utilize drill and blast techniques and consist of a
conventional shovel, wheel loader and truck open pit operation, moving, respectively, approximately
35 Mt and 44 Mt of ore and waste per year at peak production. Iron ore concentrate will be hauled to
the pit rim, crushed and transported overland by conveyor to the process plant.
To date there has been no progress of actual working nor is there expected to be in the immediate
future of the actual workings of the reserves. The reserves have not been influenced by any exceptional
factors.
Mineral Processing for Tapuli and Sahavaara
Process development has been conducted work in several programs on all the Mineral Resources by
the Group’s staff and consultants and the resulting process flowsheets have been confirmed by pilot
plant programs. The two Kaunisvaara process lines are engineered based on verified scale up
procedures to make the processing simple, reliable, energy and resource efficient with minimum
emissions and flexible to accommodate ore feed variability.
The process is based on primary crushing at the mine and material is transported by conveyors to the
process plant, where primary autogenous or semi-autogenous grinding takes place. The ground
product is separated using low intensity magnet separators (LIMS), which reject a substantial portion
of the silicate gangue material with minimal loss of iron units. The magnetic concentrate is then
ground in a second stage by stirred mills (Vertimills) to a particle size at which the magnetite is fully
liberated from the gangue minerals and hence suitable for the final stage magnetic separation, again
using LIMS. The Tapuli ore will produce a high-grade concentrate, which will be dewatered by air
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Listing Prospectus
pressure filtration and transported by road to the rail head. The tailings slurry will undergo thickening
to recover process water, then pumped to a tailings Deposition facility where also final cleaning of the
effluent water takes place. The Sahavaara ore contains minor quantities of magnetic sulphides. In
order to achieve the concentrate target quality, the magnetite concentrate from Sahavaara requires
further upgrading using flotation techniques, where these minerals will be removed. The combined
product from Tapuli and Sahavaara, which is ready for pelletizing by customers without further
grinding, will be transported by road to the rail head at Svappavaara/Pitkäjärvi. Tailings management
is the same as for Tapuli. The tailings storage facility will ultimately be covered by essentially inert
material.
Infrastructure and Logistics
Transport costs for the iron ore concentrate from the mine to the end customer are crucial to the
feasibility of the project. Therefore the Group, in cooperation with Swedish, Norwegian and Finnish
transport authorities, has spent a lot of effort in finding the best possible transport solution. The DFS
of May 2011, describes the transportation from the mines in Kaunisvaara to the port of Narvik.
Shipping from Narvik is a cost-efficient alternative as Narvik is a deep-water port with ice-free
conditions for Cape-Size vessels (above 150,000 dwt).
The current logistics solution includes:
•
Truck transportation from Kaunisvaara to Pitkäjärvi for reloading to railway wagons
•
Rail transportation from Pitkäjärvi to Narvik on the railway track ‘Malmbanan’ –
currently used for iron ore transport by other operations in the region
•
Use the Fagernes terminal in Narvik as a temporary solution (minimum 10 years) and
the Group is working with the municipality to find a long-term terminal solution
It is intended that the Issuer will appoint contractors to manage the entire logistics solution and
provide the necessary rail services, truck transport services and the port operations. Service contracts
with these logistics providers were finalized in April, 2012.
For the January 2012 update of the logistic solution, see further Section 12.2.10 (Changes to mine
scheduling, logistics, Opex and Capex).
12.2.6 Additional exploration targets near Kaunisvaara
Pellivuoma
A third iron ore Deposit, Pellivuoma, is located adjacent to Kaunisvaara. This Deposit is an asset of the
Issuer and is included in the security package for the Bonds. Long term, the Issuer plans to develop
this Deposit to extend the Kaunisvaara Project’s LOM materially, or increase the production or a
combination thereof.
Property Description, Location, Title and Ownership
The Pellivuoma Deposit is located approximately 18 km west of Kaunisvaara. The Group has reported,
in the NI 43-101 compliant report “Mineral Resource Estimate for the Tapuli Iron project, Pajala
Municipality, Norrbotten County, Sweden, March 26, 2010 by SRK Consulting (UK) Ltd.”, that
Pellivuoma contains 38.5 Mt with 30.1% Fe in the measured category and 18.8 Mt with 29.9% Fe in the
indicated category. Additionally, the Deposit contains 37.8 Mt with 29.3% Fe classified as Inferred
Mineral Resources. The Mineral Resource for the Pellivuoma Deposit was constrained within ore
solids defined by a 10% Fe and 2% S grade cut-off and within a Lerchs-Grossman pit shell defined by
preliminary technical, cost and price assumptions. Reserves have not yet been estimated for the
Pellivuoma Deposit.
The Issuer acquired the Pellivuoma Deposit through staking in 2007. Pellivuoma is located within the
Exploration Licence Käymäjärvi Nr. 10 (registered owner: the Issuer; grant date: September 2, 2010;
expiry date: March 20, 2013; area: 3,382 hectares). The Pellivuoma Deposit has been declared by the
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Listing Prospectus
SGU as being of “national interest for mineral production”, according to Chapter 3 in the
Environmental Code. The designation of the Deposit as being of “national interest for mineral
production” would strengthen an application for environmental permits and exploitation concessions
in respect of the Deposit.
Geology and Mineralization
The bedrock at Pellivuoma consists of Precambrian supracrustal sedimentary sequences, and an
extensive granite batholith.
Pellivuoma Resource Work Completed
The Pellivuoma Deposit was discovered by Nordsvenska Malmfält 1919 and was declared a State
Mining Field in 1924.
The Group acquired the Pellivuoma project in mid-2007 as an exploration prospect hosting a nearsurface magnetite body. During 2008, the Group drilled 12 holes totalling 1,812.65 m (as published in
the press releases dated July 14, 2008, and September 8, 2008) and delineated a continuous
magnetite Mineralization along the strike of 500 m with an overall width of up to 250 m.
Following the decision to prepare a DFS on Pellivuoma, the Group is fast-tracking the database check,
including primary data archiving, and quality QA/QC.
SRK Consulting (UK) Ltd. updated the resource model in March 2010 and issued a NI 43-101
Technical Report based on the additional drilling and DTT testing.
Pellivuoma Metallurgical Test Work
The initial testwork program for the Pellivuoma Deposit was completed at the GTK in Outokumpu,
Finland. The geological work and initial DTT identified two distinct zones at Pellivuoma - the “upper”
zone of the project that contained higher sulphur content, and the “lower” zone containing less
sulphur, which is separated from the upper zone by a thrust fault. Drill core samples were selected to
be representative of the ore types present and metallurgical evaluation was undertaken to establish the
best process flowsheet.
Mineral Resource Statement for Pellivuoma
The table below shows the Mineral Resources for the Pellivuoma iron ore Deposit, using a 10% Fe cutoff:
Mineral Resource
Category
Tonnes
(Mt)
Fe Total %
S
%
SiO2
%
MgO
%
Al2O3 %
CaO
%
P
%
Mn
%
Measured
38.54
30.13
0.36
22.90
21.46
1.12
3.41
0.03
0.17
Indicated
18.80
29.86
0.52
25.07
20.18
1.06
4.04
0.03
0.29
Meas+Ind
57.34
30.04
0.41
23.61
21.04
1.10
3.62
0.03
0.21
Inferred
37.81
29.28
0.77
25.99
18.66
1.21
4.96
0.02
0.37
The Mineral Resource for the Pellivuoma Deposit was constrained within ore solids defined by a 10% Fe and 2% S grade cut-off
and within a Lerchs-Grossman pit shell defined by the following assumptions; a metal price of USD 1.10/dmtu for magnetite
concentrate; slope angles varying between 48-51 degrees; mining recovery of 95%; mining dilution of 5%; mine Opex of USD
1.40/tonne; incremental mine cost of USD 0.06/tonne/12m; high sulphur process cost of USD 5.30/tonne; G&A cost of USD
0.30/tonne; concentrate transport cost of USD 2.455/tonne; concentrate grade of 69.90% Fe; Fe Recovery=
0.0000068357*Fe4+ 0.0015601638*Fe3-0.1305013842*Fe2+ 5.0427383556*Fe + 16.7575888290.
Potential Tonnage: SRK Consulting (UK) Ltd. has identified a further 20-25 Mt of potential down
dip tonnage below the pit shell that form potential targets of future exploration. The potential quantity
78
Listing Prospectus
of tonnes is conceptual in nature as there has been insufficient exploration in these areas. It is
uncertain if further exploration will result in these targets being delineated as a Mineral Resource.
These potential tonnages reflect a range of material within SRK Consulting (UK) Ltd.’s solid models
outlining the interpreted down dip extent of Mineralization.
Key Resource Estimation Assumptions, Parameters and Methods: Mineral resource
estimate was based on a database comprised of 9,576 samples from 71 drill holes. Predominant drill
hole spacing was on a nominal 50 m grid. Solid modeling the Mineralization based on 10% Fe lower
and 2% S upper cut-off resulted in three separate ore zones; a central, eastern and western zone. The
central zone measures 650 m along strike, 20-200 m across strike and was modeled to a depth of 500
m. The eastern zone measures 260 m along strike and 2-30 m across strike and was modeled to a
depth of 500 m. The western zone measures 320 m along strike and 10-50 m across strike to a depth of
500 m. Drill hole intercepts within these solids were composited to 6 m lengths which were
subsequently used for statistics and grade interpolation. The density dataset was comprised of 1,455
density samples collected by the Group. A single Fe grade based density regression formula was
applied to the block model. Grade interpolation was comprised of ordinary kriging and validated
against original Assay results and mean composite grades.
Mineral Resource Classification: Mineral Resource classification was based on a variety of
criteria. Measured Mineral Resource classification was based on low geological complexity, drill hole
spacing much less than the 2/3rd maximum variogram range along strike, blocks interpolated with
optimized search parameters; and slope of regression dominantly greater than 0.8. Indicated Mineral
Resources were based on all of the same criteria as measured except with a slope of regression greater
than 0.5. Inferred Mineral Resources were assigned to blocks estimated in search volume two, using
double the optimum search parameters determined.
Cautionary Statements
The effective date of the Pellivuoma Mineral Resource estimates is March 26, 2010. The Fe% presented
in the above table is not meant to imply recoverable product. Mineral Resources for Pellivuoma have
been classified according to the “CIM Standards on Mineral Resources and Reserves: Definitions and
Guidelines (December 2005)” by Howard Baker (MAusIMM) an independent Qualified Person as
defined by NI 43-101.
Mineral Resources were estimated in conformity with generally accepted CIM “Estimation and
Mineral Resources and Mineral Reserve Best Practices Guidelines”. SRK Consulting (UK) Ltd. is not
aware of any known environmental, permitting, legal, title, taxation, socio-economic, marketing or
other relevant issues that could potentially affect the estimate of Mineral Resources. The Mineral
Resources may be affected by further exploration drilling which may increase or decrease the estimate.
The Mineral Resources may also be affected by subsequent assessments of mining, environmental,
processing, permitting, taxation, socio-economic and other factors.
The quantity and grade of reported Inferred Mineral Resources in this Prospectus are uncertain in
nature and there has been insufficient exploration to define these Inferred Resources as an Indicated
or Measured Mineral Resource; and it is uncertain if further exploration will result in upgrading them
to an Indicated or Measured Mineral Resource category.
Database Validation: The QA/QC program for the Group’s Pellivuoma drilling consists of
alternating the insertion of a blank or standard sample on a regular basis within the sample train.
Because the Group employs several standards with varying grades these are also alternated. Also,
samples are flagged regularly for the primary laboratory to prepare a lab duplicate for analysis by a
second laboratory. The ALS Chemex analytical laboratory analyzed the samples in batches and each
batch has multiple samples for testing for cross contamination and reproducibility of results. SRK
Consulting (UK) Ltd. found that the results of the above described QA/QC program indicate that the
Group’s Pellivuoma Assay databases were appropriate for Mineral Resource estimation.
Data Verification: Howard Baker as qualified person completed the verification of data on which the
Pellivuoma Mineral Resource estimates were based. This verification included an assessment of
QA/QC data, sample preparation and Assay methodologies, core recoveries, density data, data inputs,
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Listing Prospectus
survey data and validation of historic exploration data used in the estimate. Data was validated by
using field checks, statistical methods and evaluating written protocols.
Qualified Person: Mineral Resources of Pellivuoma have been estimated and categorized for
reporting purposes by Mr. Howard Baker, MAusIMM, Principal Mining Geologist of SRK Consulting
(UK) Ltd. Mr. Baker is a Qualified Person as defined by the NI 43-101 and is an independent
consultant to the Group.
Petri Peltonen, Ph.D., is Vice President of Exploration for the Group and its Qualified Person in
accordance with NI 43-101 responsible for overseeing the execution of the Group’s exploration
programs and for verifying that the information presented in this Prospectus is an accurate summary.
Dr. Peltonen is an accredited Chartered Professional member of the Australasian Institute of Mining
and Metallurgy, MAusIMM (CP) (Member #306710), and Member of the European Federation of
Geologist (EurGeol #961).
Mining, Mine Design, Metallurgy and Process Design
The mine at Pellivuoma will be an open pit mine. Waste rock at the mine will be hauled via truck to
waste facilities immediately adjacent to the mine. The feed from Pellivuoma requires upgrading by
removing sulphide minerals using flotation techniques. It is envisaged that ore from Pellivuoma will be
processed at Kaunisvaara.
Pellivuoma DFS
A DFS on the Pellivuoma Deposit has been undertaken, and is expected to be finalized in the second
quarter of 2012. An exploitation concession application for Pellivuoma will be completed as soon as
sufficient information on the Mineral Resource is available.
12.2.7
Kahujärvi
The Group is investigating the possibility to include minor magnetite Deposits in a cluster of Deposits
in the Pajala region into the resource base of the Kaunisvaara mining complex. The Kahujärvi iron
oxide copper Mineralization is one of such targets located 2 km west of the road between Pajala and
Kaunisvaara under swampy terrain at the small lake Kahujärvi. The northernmost part of the
occurrence is close to a logging road. The magnetic anomaly of Kahujärvi consists of a main anomaly
and a thin continuation towards the north. The total length of the anomaly is approximately 1,600 m.
In 1996, Outokumpu Oy drilled three drill holes in the area (Au-target). These historical drill holes
were drilled away from the magnetic anomaly but did intersect short intervals, 1-10 m thick, with 2025% estimated magnetite. GTK carried out regional airborne geophysical survey over the target area in
2006.
In 2008, the Group retained GeoVista AB and Astrock Oy to model the airborne geophysical data over
the property. Both models support the potential for mid size (+50 Mt) iron resource mineable by an
open pit. During the first quarter of 2009, the Issuer drill tested the Kahujärvi airborne magnetic
anomaly with two drill holes totalling 338.1 m. The two drill holes with 30-60 m long intersection with
significant magnetite and copper concentrations support the exploration model and warrant further
exploration of the target.
12.2.8 Käymäjärvi
During 2009, the Group initiated a review of exploration potential for iron, copper and gold at its
Käymäjärvi licence area, which hosts the Pellivuoma iron Deposit at its southern border. The
Käymäjärvi area is located near lake Käymäjärvi between the Lompolovaara, and Käymävaara and
Sammalvaara hills, 20-25 km north-west of Pajala. The area is dominated by swampy ground and hills.
The license area covers the main portion of a volcano-sedimentary belt, which runs obliquely towards
the Pajala Shear Zone from the north-west. The belt forms an antiform, which consists of the
Käymäjärvi-group basic pyroclastic volcanites, tuffites, chemical sediments such as chert, BIF,
limestone and graphite-phyllite.
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Listing Prospectus
The property geology exhibits a complex metallogeny including the presence of both BIF and the skarn
iron Deposit together with numerous geological and geochemical indications of Cu and Au
Mineralization including pyrrhotite-rich zones with Cu mineralization and up to 3.5 g/t Au found in
boulders and outcrops. The Käymäjärvi group is overlain by the Pahakurkio group of quartzites and
quartz-mica-schists, which contains conglomerates with anomalous Au and Cu contents.
The Group believes that despite good exploration indications, the area is underexplored as indicated
by very little drilling data. The initial review included the GIS compilation of all data and
reconnaissance mapping of known copper-gold occurrences. During the summer of 2010, the Group
conducted an intensive geological mapping and sampling program in the Käymäjärvi area.
12.2.9 Project construction
The Group’s strategy for managing the contracting requirements in relation to the Kaunisvaara Project
has been first to seek out and hire appropriately skilled and experienced personnel to assume key roles
within the Group structure with responsibility for managing the needs in relation to the different areas
of project development. Where a shortfall exists the Issuer has brought in suitably qualified
consultants to enhance its team. The overall project execution plan has then been developed taking
into account the collective past experience of the team, the status of design, the current workload of
suitable contractors and the need to have strict controls over costs and schedule. A modified
Engineering, Procurement and Construction approach utilizing large experienced Scandinavian
construction contractors complemented by experienced employees of the Group have been utilized in
the execution of the Kaunisvaara Project. As at the date of this Prospectus all the preparatory work for
the construction phase at the site in Kaunisvaara has been completed and the project has moved into
the major construction phase. More than 400 people are currently working at site on multiple shifts.
The project is currently 30% complete and running on schedule and under budget, however over 90%
of the Capex has been committed this far.
During 2011 the construction work progressed rapidly and focused in a number of different areas. The
initial focus early 2011 was to establish an onsite quarry and utilize material to construct the dyke
around the Tapuli Deposit to allow for effective dewatering which would allow for efficient removal of
the overburden peat layer. This was successfully completed towards the end of the second quarter of
2011. The subsequent dewatering of the water from the peat layer proved to be very successful and was
completed on time and on budget at the end of second quarter of 2011.
In the third quarter of 2011 a subsequent contract for the removal of the peat overburden from Tapuli
was awarded to Peab and by year end the Tapuli ore had been exposed. By year end over 500,000 m3
of peat material has been removed. Currently the construction contractor is removing up to 100,000
m3 per week and well on target to complete the project on budget and schedule. This rapid progress
will allow for earlier than planned start of mining operations ensuring a smooth transition to operation
start up.
Early in the year the Group awarded a contract for the purchase of the Mine Mobile Equipment to PON
Equipment AB for the supply of Caterpillar and Bucyrus mine mobile equipment. The first batch of
equipment is scheduled for delivery in the middle of 2012 in line with ramp up of mining operations.
This contract covers the supply of the first batch of the mining haulage trucks, loading shovels as well
as ancillary equipment. Subsequent to this contract the Group procured adequate tires for the haulage
trucks to try to mitigate the risk of further supply shortages.
For the process plant a basic engineering contract was awarded to Metso in January 2011 and it was
followed by a contract for the long-lead items for the Tapuli line of the process plant. The long lead
items contract mainly consisted of key items for the Tapuli line including the first SAG mill, crusher
and vertimills for the Tapuli line. These early orders were required to maintain the implementation
schedule. During the basic engineering modifications of the process chain components are made,
enhancing the overall projected process efficiency and reliability while reducing maintenance
requirements. By end of the first quarter 2011, basic engineering had progressed sufficiently to enable
the initial earthwork phase of the on-site construction to begin.
In April 2011, a contract which is the largest contract on the Kaunisvaara Project was awarded to
Metso for the turn-key engineering, and supply of equipment as well as process construction of the
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process plant. The Agreement covers the complete equipment package for the processing plant,
including two primary gyratory crushers, two autogenous grinding mills, seven vertimills (VTM 3000),
magnetic separators and seven VPA press filters.
Currently, Metso continues to perform above expectation on the development of the process plant and
detailed engineering is progressing well. All equipment including the SAG mills, primary crusher and
the vertimills all remain on track to be delivered as per the scheduled delivery on June 29, 2012. The
contract is currently forecasted to be slightly under budget and ahead of schedule. Metso are due to
start site work in April 2012 with mechanical completion planned for November 2012.
At the end of May 2011 the Issuer entered into a contract with Peab for the construction of the civil
works associated with the industrial area. The scope covers all the civil works for the Kaunisvaara
Project including detailed engineering, earthworks, foundations, buildings and related works. The
scope includes crusher stations, conveyor tunnels, stockpile buildings, mill foundations and the
construction of the process plant building. Also included is the truck workshop and a number of
smaller buildings. Construction of the civil works is expected to be completed in the third quarter of
2012.
Over the summer 2011 construction work focused on the major earthworks in the industrial area and
the construction of the major foundations; namely those for the process building and the grinding
mills. The long days of the Northern summer enhanced the efficiency of the construction teams as they
worked in a double shift cycle and rapid progress was achieved. As the winter approached the steel
columns for the process plant building were erected as the construction site moved in a 24 hours a day
operation, with the steel erected at night and civil construction continuing by day. Again the weather
was in the Group’s favor, as the mild weather early in winter enhanced productivity such that by end of
2011, the roof of the building and the majority of the side cladding have been installed for both lines.
Work has also progressed in parallel in other areas of the industrial area such that at the date of this
Prospectus, all foundation work as well as the majority of the concrete foundations for the stockpile
buildings, the Tapuli crusher and the conveyor tunnels from the stockpile to the process plant building
had been completed. Figure 6 below provides a good overview as of the end of November 2011 of work
progress which shows construction in full swing. The steel work for the truck workshop had been
erected and ground works complete.
The development of process water system is another key set of contracts that work progressed rapidly
throughout 2011. The water systems consist of two major contracts, the construction of the process
water dam and the construction of the water systems. The water systems contract which was awarded
to a Finnish company FineWeld OY during the summer which comprises of engineering and design, all
pump stations and related civil works for the water systems. The total length of pipeline is
approximately 40 km and consists of the laying of a pipeline from the Muonio River to the process
water pond and then various locations around the site as well as the construction of a number of pump
stations at the Muonio River and throughout the site. Pipe laying progressed extremely fast with up to
180 m being installed per day during the summer and to date the majority of the water pipe has been
completed.
At the end of the fourth quarter of 2011, 11 km out of 11.5 km piping from Muonio River to the process
water pond was complete as well as earth works for two pump stations. Work with pump stations is
ongoing as well as preparations for tailings pipes to the TMF area. The project is currently running
slightly ahead of schedule and on budget
The contract for the process water dam was awarded early in 2011 and mobilization and construction
was rapid over the summer period and the project was completed towards the end of the third quarter
of 2011. This dam is expected to be brought in operation in the second quarter of 2012 and has already
been inspected by the Swedish Dam Safety Inspectorate and approved for operation.
In late 2010 a contract was awarded to Vattenfall for the construction of both a 40 kV line for
construction power and a 130 kV line for the permanent power. The power supply was identified early
in the project as a key risk to the schedule, however, the risk been mitigated as Vattenfall has
performed well in 2011. Early in the first quarter of 2011 the 40 kV line was installed which provided
construction power to the site and this will form the backup emergency power later during operations.
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Toward the end of the year construction of the 130 kV line progressed well with all the power poles
installed and the starting of the laying of the conductor itself on the poles. Early in the project this was
also deemed a schedule risk but the latest contractor schedule updates indicate that this work will be
completed ahead of schedule.
Figure 6: Construction at the Kaunisvaara Project site, November 2011
The building to the left is the processing plant and further to the left corner are the two stock piles. In the right upper corner is
the quarry used for aggregate material.
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Figure 7: Kaunisvaara process plant
The logistics chain which is key to the successful execution of the project has been moving on with progress made in all areas.
Since June 2010 where an updated plan for the logistics has been provided, the Group has engaged
numerous consultants into an integrated team to allow a holistic approach to be developed for the
complete logistics chain. This integrated team consists of consultants from Norconsult, who are
currently finalizing the detailed engineering for the port of Narvik, a team from Tyréns, who have
developed a detailed engineering plan for the development of the rail/road terminal at Pitkäjärvi as
well as Vectura who have been involved with the Group from a very early stage are involved in the
planning of the purchasing of wagon and locos, contracts, evaluating tenders contact, involved in
contacts with Swedish, Norwegian and Finish rail authorities. They are assisting in the process to find
an operator for trains and also to source suitable lessors for wagons.
Towards year end 2011 a number of crucial agreements were achieved towards the advancement of the
logistics solution. In early December 2011, Narvik Municipality Planning Committee granted the
Group a construction permit for the iron ore terminal at Fagernes in Narvik, Norway. Work on the
construction of the jetty has already started and is progressing well. At the end of December 2011 the
Swedish Transport Authority granted the Group permission to proceed with trial testing of the 90
tonnes transportation truck as an initial step toward the awaited dispensation.
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Figure 8: 90 tonnes Demo truck
The Swedish Transport Authority has declared its commitment to grant the maximum dispensation for the truck. The Issuer
intends to use to transport its high-quality magnetite concentrate.
In August 2011, the Group signed a letter of intent with three logistic specialist companies to manage
and develop the logistics solution between the Kaunisvaara mines and the port of Narvik. The letter
covered the initial agreements for the companies to support the Group in the development of the
logistics solution. The intention is that Savage shall assume the overall responsibility for the
coordination, management and cooperation between the three parties and coordinate the work
program. In addition, Savage will ensure an appropriate railway transport solution through the
procurement of subcontractors and rail operators while Peab, will be responsible for the operation of
road transport by truck as well as the construction of the infrastructure necessary at the Pitkäjärvi
terminal and port of Narvik and Grieg Logistics, will be responsible for the operation of the terminal
facility in the port of Narvik. These final agreements were finalized in April, 2012.
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Figure 9: Construction work at the Fagernes Terminal in Narvik, Norway
The Issuer’s partner Peab has started the construction work for the iron ore terminal in Narvik, Norway.
12.2.10 Changes to mine scheduling, logistics, Opex and Capex
During the latter half of 2011 a number of changes and reviews to the project resulted in the
development of a revised base case. In the earlier base case the plan was to develop the logistics as a
separate financed entity. However to assure full control of the logistics solution, it was decided that
logistics should be brought inside the project and as a result the overall Capex of the project increased.
A number of reviews were also conducted to the mine sequence to try to optimize the project ramp up
further and to also mitigate certain risks related to the permitting of Sahavaara.
The environmental permit for the Tapuli mine is already in place having been granted by the
Swedish/Finnish Border River Commission in 2010. However, the Sahavaara environmental permit is
not currently in place. The permit which was submitted in June 2011 is expected to be granted during
the third quarter of 2012. The Group, however, sought to mitigate the risk of any delays.
Following detailed investigation, the Group determined that the Tapuli mine alone was capable of
supplying the required 12 million tonnes of ore for a period of 2 years. This is also the maximum
period of time that the Group felt would be required to finalize the issuance of the Sahavaara permit.
As a further result of this optimization the Group was also able to delay a certain amounts of Capex
related to the Sahavaara mine, thereby reducing eternal financing requirements. This delayed Capex is
up to USD 50 million. A summary of the main changes is provided below.
Tapuli mine will commence production from the end of 2012, with expected production of 1.3 million
dmtpa in 2013, 2.4 million dmtpa in 2014, 3.9 million dmtpa in 2015. In 2016, Tapuli production will
be 3.1 million dmtpa, while Sahavaara will produce 0.7 million dmtpa. From 2018, the combined
production will be approximately 4.4 million dmtpa from the two mines. See Figure 10 below for the
full planned project sequence over the initial years. By applying this sequence to the project the Group
will achieve almost full planned concentrate production through 2015 while benefiting from delayed
Capex spend and mitigated exposure to any delay in the Sahavaara permit.
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Figure 10: Mine Production Sequence, million of dry tonnes
The logistics solution used in the DFS update in May 2011 was to be financed separately. To assure the
best logistics solution, the Group has decided that the logistics should be included as part of the overall
project. This has resulted in an increase in Capex, representing the full cost of the logistics solution
and a reduction in budgeted Opex, as the costs of third party ownership have been eliminated.
The updated project finance plan is outlined below.
12.2.11 Project financing plan
Kaunisvaara Sources & Uses from Project Start to December 31, 2014
Sources
USDm
Uses
USDm
Contributed equity to Kaunisvaara ..........................
262
Acquisition, exploration and development.......
New equity to Kaunisvaara ................................
250
Capex Kaunisvaara ................................................ 629
38
Capex Logistics ..................................................... 179
Unconditional shareholder contribution ....................
Capex additional Contingency ................................
Total equity …..........……………………………..
550
Total Capex …………………….......……………
New bond……………………………………………………………
350
Transaction costs .................................................
Proposed equipment leases………………………………
58
Total debt .........................................................
408
Net operating cash flow ……………………………………
262
Total ................................................................ 1,220
Bond DSRA and interest ................................
82
67
875
26
152
Equipment Leases …………………………………………
29
Cash ................................................................
56
Total ................................................................ 1,220
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The Issuer has entered into a USD 40 million cost overrun facility to provide additional financing in
the event of any cost overruns.
Capex – Update January 2012
The revised Capex in order to reach 4.4 million dmtpa capacity (end 2014) has been estimated at USD
875 million, adjusted for revised exchange rates and additional contingency. This compares to an
initial Capex estimate in the updated DFS May 2011 of USD 765 million. The increase is to be referred
mainly to the inclusion of the logistics solution.
Capex for the 17 years LOM at January 2012 is estimated at USD 1,085 million, including sustainable
capital adjusted for the revised exchange rate and a 10% contingency. This number compares with the
original DFS estimate of USD 892 million (including a 10% contingency). A comparison to the current
and previous Capex estimate is shown in the table below.
DFS update
New Plan,
May 2011
January 2012
Mines – dikes, mobile mining equipment
148
100
Mines – crushing stations & conveyors
58
34
USDm, incl 10% contingency
Areas breakdown
Plant – stream Sahavaara
125
112
Plant – stream Tapuli
163
160
Tailings & water ponds/lines
43
40
Power supply
16
15
Filtration plant/common equipment & infrastructure
127
121
Owners cost
70
47
Closure cost
0
0
Logistics
15
179
765
807
Total
Additional contingency
0
67
Total, incl contingency
765
874
LOM Capex
892
1,085
The additional contingency of USD 67 million is based on a thorough review of all significant contracts
with the objective to cover the risk for increases of the total cost to achieve project completion.
Opex
The revised total Opex following the update in January 2012 for the LOM operation is estimated to be
USD 55.60 (including 5% contingency) per tonne of concentrate (dry) delivered FOB to the Port of
Narvik, Norway. This compares to USD 58.80 per tonne in the May 2011 Update. A comparison of the
current and previous estimates is shown in table below:
DFS update
New Plan,
May 2011
January 2012
Mining
17.6
18.4
Process
12.6
12.5
General & Administration
1.5
1.4
Cost category, USDm
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Transportation
26.4
22.4
Royalties
0.4
0.4
Other
0.4
0.6
Total
58.8
55.6
The reason for the Opex reduction is the lower transportation and handling cost as a consequence of
owning the logistics.
Net Present Value
As a consequence of the increase in Capex, i.e. the inclusion of the logistical chain, the IRR has
decreased in comparison with the DFS update, and is shown in the table below.
NPV at 8% pre tax and funding
IRR pre tax and funding
NPV at 8% post tax and funding
IRR post tax and funding
DFS update
New Plan,
May 2011
January 2012
USD 1,461m
USD 1,366m
32.0%
28.8%
USD 934m
USD 800m
24.0%
20.1%
Pre-tax and interest, NPV of USD 1,366 million using a discount rate of 8% and an IRR of 28.8%
(compared to the DFS update May 2011: NPV estimate of USD 1,461 million and an IRR of 32.0%).
After interest and tax, NPV of USD 800 million using a discount rate of 8% and an IRR of 20.1%
(compared to the DFS update May 2011: NPV estimate of USD 934 million using a discount rate of 8%
and an IRR of 24.0%).
12.3
Primary markets
12.3.1
Mineral exploration in Sweden
According to the SGU, Sweden had recorded significantly greater interest as an exploration destination
for international mining and exploration companies as far back as 2000. In fact, by the end of year
2000, companies with predominantly foreign ownership/management held 79% of the total area
under exploration permits. Updated figures for the percentage of foreign ownership/management are
not available but the continued run up in commodity prices can only have increased the exploration
activity.
The Swedish Minerals Act regulates exploration and exploitation of certain mineral Deposits on land,
regardless of the ownership of the land. Applications for permits and concessions are made to the
Swedish Mines Inspector. An exploration permit gives access to the land and an exclusive right to
explore within the permit area and is granted for a specific area where a successful discovery is likely
to be made. An exploration permit is initially valid for a period of three years, after which it can be
extended up to a total of 15 years if special conditions are met. The application fee for an exploration
permit is SEK 500 for each area of 2,000 hectares or part thereof. However, the exploration fee varies
for different concession minerals and for different periods of validity.
A concession gives the holder the right to exploit a proven, extractable mineral Deposit for a period of
25 years, which may be extended. Permits and concessions under the Swedish Minerals Act may be
transferred with the permission of the Swedish Mines Inspector. A concession may be granted when a
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mineral Deposit is discovered that is believed to be technically and economically recoverable during
the period of the concession provided that the nature and position of the Deposit does not make it
inappropriate to grant a concession. Under the provisions of the Environmental Code, an application
for a concession is to be accompanied by an EIA. Applications are considered in consultation with the
County Administrative Board, taking into account whether the site is acceptable from an
environmental point of view. The application fee for a claim is SEK 6,000 per area.
12.3.2 The iron ore market
The Kaunisvaara Project will produce a 69% Fe iron ore concentrate with very low impurities,
representing the top 5% of global iron ore production from a quality perspective. The quality of iron
ore is forecast to decline over time. Given the cost savings for steel producers using high quality iron
ore concentrate as a feedstock, the Group expects its iron ore to attract a significant pricing premium
in the market over time.
Iron (Fe) is one of the most abundant metals on earth and is used in the production of steel, which is
present in almost every aspect of our everyday life. Finished steel is used in construction, automobile
manufacturing, vessels and buildings. Iron is also used as ballast material for pipelines, oil platforms
and bridge piers. Because of its countless applications iron is the most widely used of all metals.
Iron is rarely found in its elemental state, as it binds chemically with oxygen, water, carbon dioxide or
sulphur to form a variety of minerals. Iron is found in iron ore, meaning iron rich minerals with
sufficiently high content of iron for it to be commercially viable for exploitation. The most common
iron ore minerals are hematite (Fe2O3) and magnetite (Fe3O4), occurring in various geological contexts
with a variety of impurities and grades.
Hematite ore is often recovered as run of mine product, and not processed further. This is possible in
cases where the head grade is high enough. Hematite is hard and abrasive, requiring considerable
amounts of energy to crush and grind if beneficiation is required. Hematite ore is generally sold at
lower iron grades due to the more complex process required for final upgrading.
Magnetite ore can be recovered at lower grade as its magnetic properties offer excellent technical
options for processing to high-grade products. Sintering and pelletizing of magnetite generates an
exothermal chemical reaction making it more suitable for pellet production because of the fuel savings
accomplished. Often, this attracts premium prices as magnetite products offer lower energy costs and
CO2 emissions for the end user.
Iron ore occurs naturally in a variety of forms, ranging from solid rock to sand-like iron fines. After the
iron ore is mined, it will usually undergo a process of crushing, separation, screening, dressing and
concentration to produce a saleable product. After this processing the concentrate can be used either
as a pellet feed for production of pellets or as sinter feed production of sinter. In addition to iron ore
concentrates there is also lump ore, which is only crushed and screened. Concentrates for sinter
production and lump ore are almost exclusively delivered directly to steel plants while pellet feed is
either used by the mining company itself for pellet production, and then shipped as a finished product,
or shipped to a stand-alone pellet producer (merchant pellet producer) or to a steel plant with its own
pellet production.
Metallic iron is produced by removing the oxygen which is bonded with the iron in a reduction and
smelting process, where a reducing agent, generally coke in a blast furnace, is added at very high
temperatures (2000°C), or without smelting in a direct reduction process. Blast furnaces are fed by
either pellets, lump ore or sinter, while the most commonly used direct reduction technology is based
on pellets or lump ore. Blast furnaces produce hot metal that either goes directly to a steel making
process or to pig iron casting. The most commonly used direct reduction processes are MIDREX and
HYL where reduction of oxygen is done without smelting and where the metallic iron comes out either
as DRI or HBI. Pig iron, DRI and HBI are all trading commodities.
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Figure 11: The Steel making process
The nature of the iron ore market is similar to other competitive commodity markets; over time, the
price reflects the balance between demand and supply with high (low) levels of capacity utilization
leading to high (low) prices. The market is inherently cyclical, like other commodity markets; demand
mainly reflects swings in the economy, with an upward underlying trend driven by GDP growth,
especially in China and other developing economies as they go through industrialization and
urbanization processes. Supply, on the other hand, is fairly inelastic in the short-term; production may
be curtailed, but new production has a relatively long lead time.
One peculiarity with the iron ore market, however, compared to other commodity markets, is that
freight costs are relatively high compared to the underlying price of iron ore, which has significant
implications for global trade patterns and prices. In addition, unlike most other commodity markets,
pricing in the iron ore market is still to some extent based on long term contracts and negotiations.
However, after the global financial crisis in 2008 spot pricing and index linked pricing in combination
with a rapidly growing futures market has emerged.
12.3.3 The iron ore mining industry
The iron ore industry is a highly consolidated industry, with the market being dominated by three
large players; Vale (based in Brazil), Rio Tinto and BHP Billiton (both based in Australia). These three
companies in total account for approximately 40% of global production and approximately 70% of the
iron ore supplied to the seaborne market. In addition, there is a wide variety of smaller exploration
and production companies, both privately and publicly held. In contrast, the steel industry (i.e. the
consumers of iron ore) is very fragmented, and the top three producers account only for about 12% of
world production.
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Figure 12: Top iron ore and steel producers of the world
Top iron ore producers 2009 (% of world capacity)
Top steel producers 2009, % of world production
2% 2% 2%
2% 1% 1%
Top 10
3% 3% 2%
Evraz
Others
Top 10
BHP Billiton
Rio Tinto
Vale
6%
Severstal
10 %
0%
0%
23 %
Ansteel
10 %
9%
Tata Steel
12 %
JFE
19 %
Jiangsu
Shagang
40 %
30 %
20 %
30 %
20 %
60 %
50 %
Nippon Steel
38 %
POSCO
50 %
Baosteel
60 %
40 %
77 %
80 %
70 %
Others
62 %
ArcelorMittal
70 %
Source: James F. King, World Steel Association, Pareto Research.
Economies of scale have been an important force for the high level of consolidation in the iron ore
industry. Both Australia and Brazil, the two main producing regions, in addition to China, have large
mine sites, usually in remote locations and hundreds of kilometers from the nearest port. Hence,
exploiting such resources requires substantial amounts of invested capital upfront in order to build the
mine and processing plant, and set up the necessary infrastructure (e.g. railway, port, power, water,
etc). In order to generate returns that justify such large investments, the mining, processing and
transportation have to be accomplished in a very cost efficient way, thus favoring large scale
operations and generally by extension large companies. In addition, the substantial initial investments
also mean that the entry barriers in general are high. As a result of these factors, Vale accounts for
approximately 80% of total Brazilian production, and Rio Tinto and BHP Billiton account for over
approximately 80% of Australian production.
The large producers of iron are investing heavily to put new projects into production, and expanding
operations at existing projects. There is also increased activity among the exploration and
development companies and junior producers. However, many exploration and development projects
have issues with regards to ore quality and access to infrastructure that can prevent projects from ever
coming into production. China and India are also increasing their supply, but this production is likely
to be replaced as Chinese and Indian supply is often high cost and lower quality compared to Brazilian,
Australian and European iron. The global credit crisis of 2008 and 2009 led to a spending cut and
postponement of many projects.
12.3.4 Supply and demand
World production of iron ore in 2009 was about 2,244 Mt of raw ore. Of this, about 960 Mt was
exported. Australia (381 Mt), Brazil (266 Mt) and India (91 Mt) were the largest exporting countries.
The largest importer was China (628 Mt). It should be noted that China has a large domestic
production (881 Mt), but this is often low grade and with impurities, so Chinese steel mills need to
blend with higher grade and cleaner ore in order to produce higher quality steel. Total African exports
were 55 Mt.
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Figure 13: Iron Ore production, exports, imports and apparent consumption 2009
Source: International Iron and Steel Institute (World Steel in Figures 2011).
12.3.5
Iron ore demand
Iron ore demand is highly correlated to steel production (and therefore GDP) as iron ore is used to
produce iron, which is the main raw material in production of steel. About 98% of global iron ore
production is used to manufacture steel. Hence, in line with growing steel production, demand for iron
ore also increases. This is illustrated in Figure 14 below, showing steel production and (implied) iron
ore demand from 1965-2010. The world iron ore production has been used as a proxy for world iron
ore demand, which is reasonable on the assumption that changes in inventory levels from year to year
are small compared to total production/demand.
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Figure 14: World Iron Ore Demand (implied) Vs Crude Steel Production
World iron ore and crude steel production (mtons)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
1965
1970
1975
1980
World iron ore production
1985
1990
1995
2000
2005
2010
World crude steel production
Source: ABARE; Pareto Research.
The close relationship between steel production, therefore iron ore demand, and GDP is illustrated
below. GDP growth is a key driver for steel production (and therefore iron ore demand).
Figure 15: US crude steel production vs. Industrial production growth y/y
World crude steel production (% chg, y/y)
World GDP (% chg, y/y)
15 %
6%
5%
10 %
4%
5%
3%
0%
2%
1%
-5 %
0%
-10 %
1981
1986
1991
1996
World crude steel production y/y
2001
2006
-1 %
2011e
World GDP y/y
Source: World Steel Association, IMF, Pareto Research.
Closer examination of the relationship between steel production and GDP confirm that the amount of
steel produced per capita is closely related to GDP per capita. Hence, iron ore demand is highly
leveraged towards industrialization and urbanization of developing economies and their road up the
steel intensity curve. This follows naturally, given steel’s large usage in construction of roads,
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buildings, railways and other infrastructure, in addition to cars, cables, trucks, heavy equipment,
ships, rigs and appliances; all of which are key parts of any industrialization and urbanization process.
Figure 16: Steel Intensity Curve in Economies of Different Development
Peak Point
Point of
saturation
South Korea
Point of
inflection
USA
Trigger
point
Indonesia
Source: Metal Strategies and RMG.
As should be expected, steel production is also highly correlated to industrial production, which is
illustrated in Figure 17 below showing year on year growth in US crude steel production and US
industrial production.
Figure 17: US Crude Steel Production vs. Industrial Production Year on Year Growth
US crude steel prod. (% chg, y/y)
US industrial prod. (% chg, y/y)
40 %
10.0%
30 %
7.5%
20 %
5.0%
10 %
2.5%
0%
0.0%
-10 %
-2.5%
-20 %
-5.0%
-30 %
-7.5%
-40 %
-10.0%
1985
1990
1995
US crude steel production y/y
2000
2005
2010
US industrial production y/y
Source: World Steel Association, CRU, Pareto Research.
12.3.6 Reserves overview
As of 2011, world remaining crude reserves were 180,000 Mt according to the USGS, implying a
remaining reserve life of 80 years at 2009 production level. When it comes to resources, world
remaining resources are estimated at 230 Bn tons, implying 102 years of remaining resource life at
2009 production level. The top 5 countries in terms of remaining (crude) reserves are Ukraine, Russia,
China, Australia and Brazil. A full overview of remaining reserves is illustrated below. It is important
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to note that these figures are crude ore, and that the grade varies a lot from country to county. China
for instance has a relatively large reserve base, but the quality of the ore is lower with grades ranging
from 20% to 40% Fe compared to 50% to 60% Fe for Brazil and Australia.
Figure 18: Crude Iron Reserve Base
Crude iron ore reserve base (Mtons)
35,000
30,000
25,000
20,000
15,000
10,000
5,000
Mexico
South Africa
Mauritania
Iran
Sweden
Venezuela
Canada
US
India
Kazakhstan
Other
China
Australia
Russia
Brazil
Ukraine
-
Source: USGS, ABARE, Pareto Research.
12.3.7
Seaborne trade
Seaborne trade is an important part of the iron ore market; about 50% of global iron ore production is
shipped long distances and constitutes the seaborne market, while the remaining part is either used
domestically or transported relatively short distances over land. In addition, the fact that freight costs
are relatively high compared to the price of iron ore, the seaborne market and the global trade patterns
are even more important as they are key determinants in setting the price of landed iron ore.
Figure 19: Global Seaborne Trade vs Global Iron ore production 2001-2010
World iron ore production and seaborne imports (mtons)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
Seaborne share
60%
55%
50%
45%
40%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
World iron ore production (lhs)
World seaborne iron ore imports (lhs)
Seaborne share (rhs)
Source: Clarkson, Pareto Research.
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The seaborne market serves two main regions: Europe and Asia. In Europe the importers are countries
of the European Union, while China, Japan and Korea are the key importers in Asia. The main
suppliers to seaborne trade are Australia and Brazil. An overview of global trade patterns is shown
below.
Figure 20: Seaborne trade Overview (2009)
Source: World Steel Association, Pareto Research.
12.3.8 Iron ore pricing
Iron ore was traditionally sold via annual contracts that specifying the price and amount of volume
(typically a range) the steelmaker must take. Each year, the first negotiated price settlement formed
the basis for the rest of the negotiations and was thus considered as the benchmark price. Vale
traditionally set the benchmark price in Europe, while Rio Tinto and BHP Billiton historically set the
price in Asia, though during the last years of the benchmark pricing system, Vale also set the
benchmark price in Asia as well. The price of iron ore from other producers was then reflecting the
benchmark price, adjusted for differences in the quality of the ore and freight costs. Towards the end
of the period with benchmark pricing, China overtook Japan as the key price negotiator for the world’s
steel mills. In parallel with the benchmark system, a spot and futures market has emerged and has
now become the most common pricing method used. The volume on the spot market has traditionally
been much lower than the volume traded with the benchmark system; however, the spot market has
gained increased importance over the last couple of years as the major suppliers have decided to sell an
increasing share of their production at the spot price.
12.3.9 Price basics
The key reference prices in the iron ore market are the Chinese spot prices and the contract prices for
Vale, BHP and Rio Tinto usually based on quarterly average spot prices. During the last few months of
2011 the quarterly average prices were replaced by monthly prices. Prices are most commonly quoted
CIF (including cost, insurance and freight/cost and freight). FOB prices can also still be quoted where
the FOB quoted price equals the CIF/CFR price less freight costs (and insurance).
Freight costs contribute to a significant part of the CIF price. For instance, at its peak in 2008, freight
costs from Brazil to China were above USD 100/ton, thus being more than 100% of the FOB price. As a
consequence, freight costs are key determinants for the relationship between FOB prices; Australian
FOB prices to Asia therefore generally have a premium to Brazilian FOB prices to Asia, since the
freight costs are much higher for Brazil-Asia than Australia-Asia. In other words, their CIF prices are
equal, but not their FOB prices due to the differences in freight costs. This dynamic was in particular
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evident in 2008, when freights costs were peaking and enabled Australian producers to receive a
record high premium (USD 20/ton) to their benchmark prices.
Figure 21: Freight costs vs. FOB price, spot Brazil-China (LHS) and spot Australia-China
(RHS)
Iron ore price (USD/ton, 63.5% Fe)
Iron ore price (USD/ton, 63.5% Fe)
250
250
200
200
150
150
100
100
50
50
0
Feb-07
Nov-07
Freight costs
Aug-08
May-09
Feb-10
Brazil-China implied FOB price
Nov-10
Aug-11
0
Feb-07
Nov-07
Freight costs
Aug-08
May-09
Feb-10
Nov-10
Aug-11
Australia-China implied FOB price
Source: Clarkson, Datastream, Pareto Research.
The benchmark prices were quoted in USD per ton on a 100% Fe basis or equivalent US cents per
dmtu (dry metric ton iron unit). Hence, in order to compare the benchmark price to a price in the spot
market, the benchmark price was multiplied by the grade of the spot price’s iron ore. To calculate the
iron ore sales price for a specific product, the product’s moisture was also deducted. For instance, for a
product with 65% of Fe content and 8% of humidity, the sales price per ton was the reference price (in
US cents/dmtu) times 65 (metallic unit) times (1-0.08) (one less the humidity). At the point when the
benchmark system was abandoned, it should be noted that steelmakers have begun paying a premium
for higher grade product (typically expressed as a USD value per each Fe% point over the standard
quote) and paying less for lower grade product than the Fe% arithmetic would imply. Also, customers
are willing to pay for a VIU based on the products specific characteristics, and how the product
performs in the customer’s iron and steelmaking processes. As such the pricing of iron ore has evolved
into a complex issue, making it more difficult to compare like-for-like realized prices from producers,
as their product specification varies.
12.3.10 Future developments; trade in the spot market likely to increase
The annual benchmark negotiation process came to an end in early 2010. In spite of vocal opposition
mainly from Chinese steel companies, with strong support from Japanese and European steel mills,
there was nothing that could make it survive. When Chinese steel demand quickly recovered at the end
of 2009 and in early 2010 and iron ore spot prices soared with no real support left for the old system.
Shanghai Baosteel Group Corporation and CISA representing the Chinese steel industry tried to hold
out and even called for a boycott of the Big 3 (Vale, BHP Billiton and Rio Tinto) but this proposal was
more indicative of the powerlessness of the Chinese steel industry and its inability to change the course
of events than a real threat. The quarterly semi-negotiated pricing which has prevailed for a couple of
years now seems to be replaced by even shorter terms going forward.
The demise of the benchmark system became more and more evident in late 2009 although at that
stage the outcome of the dispute between the steel companies and the iron ore miners was not certain.
The 2009 negotiations were never formally concluded as far as the Chinese traders were concerned
and no deal was made between the Chinese traders and the Big 3. After several months of trying to
reach an agreement the negotiations were just quietly ended and Chinese traders used the prices
agreed to by Japanese steel works and others. A growing part of Chinese supplies was further bought
on the spot market. It has been estimated that the prices of as much as 40% of total seaborne exports,
55% of Chinese imports, and virtually all of its domestic production, have been made on spot basis.
The Chinese traders have all through the years that they have led the negotiations tried to underline
the long term relations between steel companies and iron ore miners and their mutual dependency.
Many Chinese iron ore buyers, however, have acted in exactly the opposite way, choosing to use the
spot price when it was lower than the benchmark price and vice versa. Some steel companies have also
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Listing Prospectus
sold on the deliveries they have received under long term contracts at spot prices making good profits.
The major factor causing the old system to collapse was however the strong demand for more iron ore
in China. When prices fell in late 2008 and in early 2009 domestic iron ore producers could not
deliver as much ore as they had earlier done and imports soared. Many Chinese steel companies were
desperate for iron ore and even low quality exporters in India and elsewhere in South East Asia have
been successful in selling their products to China. The Chinese traders were hence not able to negotiate
with a united front, not even during the global financial crisis as there were always some steel
companies that were in need of iron ore and were prepared to also buy at high spot prices. CISA
represented mostly the majors while the many small steel companies acted independently.
Equally, the Big 3 have also been pursuing various strategies as far as pricing is concerned. BHP
Billiton has been the prime advocate for a spot price system. Vale has been trying to maintain the
benchmark system while Rio Tinto has been pushing in both directions sometimes defending the
benchmark, sometimes supporting the spot market system. When Vale announced in early 2010 its
intention to use a quarterly pricing model it was clear that BHP Billiton had managed to bring the old
system down. However, as for the longer term future, the contradictions which have build up between
the Chinese traders accounting for 70% of the world trade and the iron ore miners mainly represented
by the Big 3 have not been removed. On the contrary, given the Chinese business traditions of long
term relations and the cyclical nature of the steel and iron ore industries it is possible that sometime in
the future the Chinese traders will gain the upper hand, with serious negative impact on the iron ore
miners. It seems as if the corporate memory of the close relations between iron ore miners and the
steel mills have been lost even in long established companies such as BHP Billiton and Rio Tinto.
Quarterly profits have been given prominence over medium and long term considerations.
The new price establishment model has brought uncertainty and reduced transparency in the iron ore
market, at least in the short term. Prices are no longer announced like they used to be and the
published series of spot prices are still not fully reliable. The spot price of exports to China is used as a
basis for pricing in all parts of the world and although there are three main sources available: Metal
Bulletin Inc., Steel Business Briefing Ltd and Platts (part of the Mcgraw-Hill Companies), it is still not
clear how representative these sources are and how secure against manipulations they are. It should be
pointed out that so far they are well correlated. An absence of such a correlation would have been a
serious cause for concern. Some companies, notably Swedish exporter LKAB, have negotiated annual
contracts but their model of pricing has not been published. There is still a long way to go before iron
ore prices are set on a completely transparent exchange under full control against any type of
manipulations as are the prices of copper, nickel or other base metals. But this is the direction in which
iron ore is moving. When looking back, it took between 5 and 15 years when aluminum and nickel
moved away from so called producer prices and became fully integrated and traded on the London
Metal Exchange. There is really nothing stopping either an iron ore contract or using a steel contract as
the basis for iron ore trade. The latter is the way that for example copper concentrates are traded.
In 2011, spot iron ore prices in China traded relatively steady in a USD 160-190/ton range (62% Fe)
through September, and averaged 23% higher than in January-September 2010. Since
October/November 2011, prices have come down to USD 130-140/ton due to strict financial policies in
China, subsequent cuts in production among smaller Chinese steel mills and global macro uncertainty.
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Figure 22: Benchmark prices Brazil-Europe 1980-2010
Iron ore prices (FOB UScents/dmtu)
200
180
160
140
120
100
80
60
40
20
0
1980
1985
1990
1995
2000
2005
2010
Brazil-Europe, Vale SSF
Source: UNCTAD, Pareto Research.
The main driver for the price rally over the last 5-6 years has been the tremendous growth in China
and the industrialization and urbanization process the country has entered into. As discussed earlier,
iron ore demand is highly leveraged towards GDP growth and developing economies’ progression up
the steel intensity curve. Figure 23 below shows implied Chinese demand for iron ore vs. the
benchmark prices. As China is far from self supplied, a major part (more than 40% in 2009) of the
demand is met by seaborne imports, thus driving benchmark prices upwards.
As iron ore is one of the main raw materials for steel production, iron ore prices are closely related to
steel prices, especially in China as shown below. The close relationship further suggests that steel
producers to a large extent have been able to pass on increases in the iron ore price.
Figure 23: Chinese imports vs. Iron ore benchmark prices
China steel price (USD/ton)
Iron ore price (CFR China USD/ton)
250
900
800
200
700
150
600
100
500
400
50
0
Jan-05
300
200
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
China import Indian iron ore 63% Fe (CFR China)
China steel rebar 25 mm spot avg price
Source: Bloomberg, Pareto Research.
Product pricing and marketing
Over the past years, the new global pricing mechanism for iron ore, which is largely based on spot
pricing and indices instead of benchmark pricing, has become a much more reliable indicator of the
true market value for various product qualities. Real-time, third party quotes from Platts (IODEX), the
Steel Index (TSI) and Metal Bulletin (MBIO) currently provide the market and investors with greatly
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improved transparency on the premium for high grade/low impurity products, like the Kaunisvaara
pellet feed.
The Group has long been convinced that the market will highly value the high Fe-content (69%). This
has been supported by RMG whose May 2, 2011 report2, estimated the Fe premium to be USD 7 per
Fe-unit (i.e. USD 7 x 7% = USD 49 Fe premium per ton of concentrate). The revised estimate results in
a higher FOB prices than in the September 2010 DFS (USD 137 per tonne, compared to USD 101 per
tonne) using the same base assumptions about the overall market and shipping costs.
The Group believes that it will produce a product with additional VIU. The Kaunisvaara concentrate is
a high-grade magnetite pellet feed with low impurities (0.046% S, 1.10% SiO2, 0.18% Al2O3, 0.04% P,
as well as 2.65% MgO).The main advantages include:
•
ready ground for use in pelletizing. No additional material preparation such as dry
grinding is necessary;
•
energy from the magnetite oxidation lowers the pellet plant fuel consumption;
•
low silica and alumina lead to lower flux additions and lower energy consumption in
electric arc and BF iron making;
•
high MgO content replaces other fluxes used in pelletizing and iron making;
•
low in harmful trace impurities including K, Na, P and V; and
•
significant reduction in CO2 emissions by replacing fluxes and energy.
While the VIU described above may not apply to every end customer, and will not result in a uniform
increase to the price the Group is able to charge under its off-take contracts, for those customers to
whom it does apply, the Group believes a conservative estimate of the amount of VIU premium which
it is reasonable to assume the Group’s product is likely to be able to charge is approximately USD 4.75
per tonne.
In addition, the Kaunisvaara concentrate will have a lower shipping cost per iron unit because of the
higher iron content and the lower moisture.
Figure 24: Calculation of Margin for Asian deliveries (USD per ton)
USD/t Concentrate
200
150
36
5
100
81
168
50
137
119
56
0
Reference Price
China
69% Fe Price
China
Freight Narvik China
VIU premium
Price FOB Narvik
Cash cost and
Margin
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Above price example based on:
•
Long term DFS price forecast 2015-2025 by RMG for Carajas pellet feed of USD
110/tonne concentrate
•
Converted to 62% Fe reference product CFR China using 192 c/dmtu
•
Calculation of Northland CFR price using long term Fe-premium of USD 7 per Fe %
unit, as forecast by RMG
•
Shipping costs long term as forecast by RMG in original DFS study
•
New Opex per January 2012: 56 USD/tonne (as per January 2012, new plan)
•
Current price CFR China is USD 140/tonne concentrate
Figure 25: References Prices in USD/DMT July 2009-January 2012
Prices in USD/DMT CFR China 2009 - 2012
300
50
45
250
35
200
30
150
25
20
100
15
Premium in USD / FE unit
Prices in USD / DMT for different products
40
10
50
05
00
00
69% Fe - current pricing (expected price when Fe- premium and premium for low alumina are added)
69% Fe - historic pricing (prices set in c/dmtu without any extra premium for higher Fe)
TSI 58% Fe
TSI 62% Fe
Premium per Fe unit
Higher grade products are paid a premium per additional Fe unit, e.g. the TSI 58% price on February 1, 2011 was USD
159.40/DMT, while the 62% was the same day at USD 185.60/DMT. This gives a premium per additional Fe unit above the
index-price of USD 6.55. The green line represents high-grade iron ore concentrates, similar to the Issuer’s.
12.4
World steel overview
12.4.1
Long-term historical trends
From a long-term trend perspective, the Issuer’s positions the world steel market in the midst of a
second major surge, interrupted by the recent financial and economic crisis. As shown in Figure 26
below, the world steel industry has experienced five distinct and major development periods:
•
The “early development years” from pre-1900s through 1920
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•
The “first plateau” from 1920 through the end of WWII in 1945 including the Great
Depression
•
The “first surge” from 1945 through 1972 with, most notably, the build-up of steel
industries in the U.S., Europe and Japan
•
The “second plateau” from 1972 through late-1990s and early-2000s including the oil
shocks and “stagflation” of the 1970s and 1980s, four recessionary periods in the U.S.
and other parts of the world, the collapse of the former Soviet Union, and the Asia and
other regional financial crises in the late-1990s
•
The “second surge” starting in the early 2000s and continuing to the present time
dominated by the growth of the Chinese economy and steel industry.
Figure 26: Long-term world steel stage assessment
(Mt)
1,500
1,250
Early
Early
5%
5%
11ststPlateau
Plateau
2%
2%
WW-1
WW-2
Depression
11ststSurge
Surge
7%
7%
22ndndPlateau
Plateau
1%
1%
22ndndSurge
Surge
6%
6%
1,000
750
500
250
Fall of USSR
Start of US$ Weakening
Oil Crises
0
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
As seen from Figure 26, which shows crude steel production, there was a clear trend break in 2001.
From that year until 2007, world crude steel production grew at an average annual rate of just below
7%, with China accounting for close to 70% of the total increase.
The deep recession resulted in a sharp downturn in global steel demand and production. In 2008,
production fell by 1.5% and in 2009 by 7%. This was still much less than expected – in mid-2009, the
World Steel Association and OECD both forecast declines for that year by 10-15%. The faster than
expected recovery was mainly due to the dynamic rebound in China. Steel output in the rest of the
world declined by 21% in 2009.
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Figure 27: World and Chinese crude steel production, Mt
Source: World Steel Association
12.4.2 Most recent 10 to 25 years
In sharp contrast to the last 10 years, in the 25 years immediately preceding, from 1975 to 2000, world
crude steel production growth averaged only a slight 0.8% per year, with 12 of the 25 years showing
outright declines. Even if one removes the impact of the collapse of the former Soviet Union, the net
world growth rate was still only 1.2%. China grew by only an average 6.6% CAGR from 1975 to 2000,
recording low double-digit annual gains (mostly in the 10-15% range) in only five of the 25 years.
However, since the early 2000s, the world steel market has been experiencing a pronounced surge in
output and demand driven by the phenomenal growth in steel production and consumption in China.
There was a clear trend break in terms of world crude steel production at the start of the decade, and
through 2007, it grew at an average annual rate of just below 7%, with China accounting for close to
70% of the total increase.
Moreover, in the 10 years from 2000 to 2010, China’s crude steel production has grown almost fivefold from 127 Mt and 15% of world output in 2000 to a projected 625 Mt and 46% of world output in
2010.
•
To put this into perspective, the 27-member EU produced a combined 210 Mt of crude
steel in 2007 (the recent peak output year) – which represents only 42% of the 2010
projected output of China. China, therefore, has incrementally added the equivalent of
two and one-half entire EU-27 steel industries in the last 10 years, and the Issuer
believes could add a third in the next 10 years.
•
The world’s two other large, but single-country, producers are Japan and United
States with 120 Mt and 97 Mt of crude steel produced in 2007 (the most recent peak
year). Taken on average (109 Mt), these two countries produced only 22% of the
projected 2010 output of China. Again, China has incrementally added the equivalent
of nearly five steel industries the size of the average of Japan and the United States in
the last 10 years.
•
The other eight leading world steel-producing countries lag even farther behind in
terms of recent peak-year crude steel output (2007, except where noted) relative to
China, with individual country output ranging from 27 Mt to 72 Mt which, on average
(50 Mt), is only 8% the projected size of China in 2010:
•
Russia
72 Mt
•
India
57 Mt (2009)
•
S. Korea
54 Mt (2008)
•
Germany
49 Mt
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Listing Prospectus
•
Ukraine
43 Mt
•
Brazil
34 Mt
•
Italy
32 Mt
•
Turkey
27 Mt (2008)
12.4.3 Underlying developments
Within these current overall developments in the steel industry are several important underlying subtrends or points worth considering. The first is the fact that, as world steel output has surged, the
portion or percentage share that is produced via iron ore-using integrated steel plants with BFs has
increased slowly and steadily from 66% in 2000 to 69% in 2009. In other words:
•
Integrated (iron ore-using) crude steel output has increased by 56% or nearly 300 Mt
from about 530 Mt in 2000 to about 825 Mt in 2007. This is most pronounced in
China where over 90% of steel output growth is in BF-based steel capacity.
•
EAF-based crude steel output has only increased 40% or about 100 Mt from 270 Mt in
2006 to 375 Mt in 2007. Even here, a significant portion of this growth has involved
either sheet minimills such as Nucor Corporation and Steel Dynamics Inc. or
minimills in scrap-scarce regions that require increased use of DRI, HBI and MPI.
Another consideration is that the growth in China and that which is just commencing in India, appear
to be very similar in nature on a duration and percentage change basis, the latter using a 10-year
moving average calculation. This is shown in Figure 28 below. The only major difference is that China
and India are starting their respective growth surges from a much higher volume standpoint compared
countries developed earlier.
Figure 28: Comparative steel sector development patterns
China
China has provided the main dynamic element in the world economy over the past several years and
has been the main driving force behind the current recovery.
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13.
ORGINISATIONAL STRUCTURE
The Figure below illustrates the current ownership and corporate structure of the corporate group to
which the Issuer belongs. The Issuer is a wholly owned subsidiary of Northland Sweden AB, which in
turn is wholly owned subsidiary of Northland Resources S.A, the Parent Guarantor.
The Issuer has one direct and one indirect subsidiary. Northland Logistics AB is incorporated in
Sweden and is a wholly owned by the Issuer. Northland Logistics AS is incorporated in Norway and is
wholly owned by Northland Logistics AB.
Northland Mines Oy is a wholly owned subsidiary of the Parent Guarantor and Northland Exploration
Finland Oy is a wholly owned subsidiary of Northland Mines Oy.
Northland Resources
S.A.
(the Parent Guarantor)
Northland Sweden AB
Northland Resources AB
(publ)
(the Issuer)
Northland Exploration
Sweden AB
Northland Mines Oy
Northland Exploration
Finland Oy
Northland Logistics AB
Northland Logistics AS
As further described in Section 12.1 (Business Overview), the Issuer is the Group’s primary operating
company with respect to the Kaunisvaara Project.
The Issuer’s two wholly owned subsidiaries; Northland Logistics AB and Northland Logistics AS, will
be operating the logistics chain from Kaunisvaara to the port of Narvik. Thus, the Issuer will be
dependent on its subsidiaries for the duration of the Kaunisvaara Project. Also, the Issuer is partially
dependent on its parent companies, Northland Sweden AB and Northland Resources S.A., for the
financing of the Kaunisvaara Project.
As the business operations of the Group in relation to the Kaunisvaara Project is conducted by the
Issuer and its subsidiaries, the financial position of the Parent Guarantor is dependant on and directly
linked to business operations of the aforesaid companies.
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14.
INFORMATION REGARDING TRENDS
The Issuer and the Parent Guarantor have not experienced any changes or trends outside the ordinary
course of business that are significant to the Issuer and the Parent Guarantor after December 31, 2011,
and to the date of this Prospectus.
Over the last couple of years, mineral prices have fluctuated significantly. Of special interest to the
Issuer and the Parent Guarantor is the development of the iron ore price, which in the last years has
increased significantly, but with significant volatility. For further information about development in
the iron market please refer to Section 12.3.2 (The Iron Ore Market).
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15.
BOARD OF DIRECTORS, MANAGEMENT AND SUPERVISORY BODIES
15.1
Board of Directors
The Board of Directors of the Issuer and the Parent Guarantor are responsible for administering the
Issuer’s respective the Parent Guarantor’s affairs and providing strategic direction, and for ensuring
that the operations are organized in a satisfactory manner.
The following table sets forth certain information regarding the members of the Parent Guarantor’s,
Project Guarantor’s, the Issuer’s and its subsidiaries’ board of directors (as per the date of this
Prospectus).
Company
Name
Position
Anders Hvide
Executive Chairman
Matti Kinnunen
Director
Tuomo Mäkelä
Director
Stuart Pettifor
Director
Birger Solberg
Director
Karl-Axel Waplan
Chairman
Peder Zetterberg
Peter Pernlöf
Director
Karl-Axel Waplan
Chairman
Peter Pernlöf
Peder Zetterberg
Director
Karl-Axel Waplan
Chairman
Willy Sundling
Peder Zetterberg
Director
Karl-Axel Waplan
Chairman
Willy Sundling
Peder Zetterberg
Director
Northland Sweden AB
Northland Logistics AB
Northland Logistics AS
Below follows a brief summary of the qualifications of and positions previously held by each of the
members of the Board of Directors set forth above.
Anders Hvide (48), Executive Chairman
Mr. Hvide has an extensive history in the financial markets. Until 2008, he was a Partner and
Managing Director of Metals and Mining, and Corporate Finance for Pareto Securities AS. Before
joining Pareto in 2000, Mr. Hvide was Vice President of Finance for Crew Development Corp. Mr.
Hvide has experience from M&A transactions and corporate advisory for many industrial companies.
Mr. Hvide holds an MBA from Harvard University’s Management School of Business Administration,
and was educated at the University of Southern California. Mr. Hvide resides in Oslo, Norway.
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Matti Kinnunen (53), Director
Mr. Kinnunen is presently involved in international mining, mineral and metal trading. He joined the
board of Carnegie Holding AB, a leading Scandinavian investment bank in 1991 and subsequently held
a number of senior positions at Carnegie’s head office in Stockholm as well as in Finland, Norway,
Denmark, Luxembourg, the United Kingdom and the United States, mostly as chairman. He was the
COO of the Carnegie Group from 2003 to 2007 and deputy CEO of the Carnegie Group when he left in
mid-2008. Mr. Kinnunen also served as a board member of what is today Nasdaq OMX Nordic Ltd.
from 1996 until 2009. Mr. Kinnunen was educated at the Stockholm School of Economics. He resides
in Värmdö, Sweden.
Tuomo Mäkelä (61), Director
Mr. Mäkelä is the President of Outokumpu Mining Oy, a Finland-based unit of the Outokumpu Group,
an international stainless steel organization with annual sales of over EUR 5 billion. He has over 30
years of experience directing exploration and development operations on steel alloy metals and base
and precious metal properties located in Latin America, Canada, Spain, Russia, the Nordic countries
and Europe. Mr. Mäkelä resides in Oulu, Finland.
Stuart Pettifor (66), Director
Mr. Pettifor is a past Director and COO of Corus Steel, and has operated steel mills in the UK,
Netherlands, Sweden and USA. In 1994 he became Managing Director Section Plates and Commercial
steels, which was British Steel’s largest business with a turnover of GBP 5.0 billion. In 2001, Mr.
Pettifor was appointed to the Board of Directors of Corus Steel with the responsibility of restoring both
the Dutch and UK operations to profitability. In 2002 he was appointed acting COO of Corus Steel. He
is now retired and serves as a director of two other companies. Mr. Pettifor resides in Stokesley,
England.
Birger Solberg (52), Director
Mr. Solberg is the Managing Director and CEO of Sibelco Nordic, a leading supplier of industrial
minerals for the steel, glass and ceramic industries. He holds an MSc from the Norwegian Institute of
Technology and completed the Advanced Management Program at Insead in France. He sits on the
board of a number of European industrial minerals companies and has broad international experience
in the extraction, sales and marketing of industrial minerals, particularly some of the key minerals
used in the iron and steel industry. Mr. Solberg resides in Oslo, Norway.
The business address for the members of the Board of Directors of the Parent Guarantor is Anders
Hvide c/o Northland Resources S.A., Scorpio Building 7A, rue Robert Stümper, L-2557 Luxembourg,
Luxembourg.
Karl-Axel Waplan (60), Chairman, President and CEO
Mr. Waplan has a Master of Science in Mechanical Engineering at the Royal Institute of Technology,
Stockholm, Sweden. In the late 1990s he was Vice President of Marketing and Sales for Boliden Ltd,
and a member of Boliden’s Executive Management Committee. He was directly responsible for
supervising the development of Boliden’s Storliden mine. In 2003 he joined the management team of
Sudamin Ltd. and was COO for the Ferro Alloys and Noble Alloys activities. He joined Lundin Mining
Company in May 2004 as Executive Vice President Operations, and was President and CEO from April
2005 until January 2008. Mr. Waplan joined the Issuer in 2008. Mr. Waplan resides in Stockholm,
Sweden.
Peder Zetterberg (61), Director, Managing Director and Acting CFO
Mr. Zetterberg has more than 30 years of international experience from CEO and CFO positions. Prior
to joining the Issuer, Mr. Zetterberg, served as the CEO for the Swedish listed company BRIO Group.
He was CFO and Responsible for Business development at Sveaskog, Sweden’s largest forest owner
and leading supplier of timber, pulpwood and bio-fuel. Mr. Zetterberg holds a B.Sc from Stockholm
University and resides in Stockholm, Sweden.
Peter Pernlöf (64), Director and Managing Director
Mr. Pernlöf joined the Issuer in December 2010 and has been acting as Vice President for Procurement
and Energy. Recently he was elected as Managing Director and Director in the Issuer and Director in
Northland Sweden AB. Prior to joining the Issuer, he served as the CEO of BasEl AB. He previously
worked as a consultant in energy, procurements and logistics. His experience also includes more than
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10 years at Boliden AB, where he held the position of vice president of procurement. He has had a
career of more than 35 years in managerial positions, both in procurement and operations, in Sweden
and internationally. Mr. Pernlöf resides in Trensum, Sweden.
Willy Sundling (58), Director, Managing Director and Project Manager – Logistics for
the Kaunisvaara Project
Logistics is key to the overall success of both projects and Mr. Sundling has the relevant experience
and expertise. Prior to this assignment, Mr. Sundling worked for four years as the General
Municipality Manager for Kalix Municipality. Prior to Kalix, Mr. Sundling was the Project Manager for
two of the largest investment projects in the Luleå region, the construction of the cultural centre in
Luleå and the construction of the new secondary school in Luleå. Mr Sundling is also Managing
Director of Northland Logistics AB and Northland Logistics AS and resides in Luleå, Sweden.
The business address of Mr. Waplan and Mr. Zetterberg is 7a, rue Robert Stümper L-2557
Luxembourg, Luxembourg and the business address of Mr. Pernlöf and Mr. Sundling is Datavägen 14,
SE-977 54 Luleå, Sweden.
15.2
Management
The management of the Issuer and the Parent Guarantor is responsible for the day-to-day
management of the Issuer’s respective the Parent Guarantor’s affairs and for the implementation of
key strategic decisions taken by the Board of Directors in the respective company. The management
consists of Mr. Jonas Lundström (Vice President – Human Resources and Corporate Communication),
Mr. Hans Nilsson (Vice President – Marketing), Mr. Peter Pernlöf (Director and Managing Director),
Mr. Willy Sundling (Project Manager – Logistics for the Kaunisvaara Project), Mr. Karl-Axel Waplan
(Chairman), Mr. Peder Zetterberg (Director and Acting CFO), Eva Kaiser (CFO, on parental leave
2012), Mr. Jukka Jokela (Vice President – Finnish Operations & Managing Director for Northland
Mines OY, Dr. Petri Peltonen (Vice President – Exploration), Mr. Manfred Lindvall (Vice President Environment, Health & Safety and acting Vice President – Swedish Operations) and Mr. Anders
Antonsson (Vice President – Investor Relations).
The business address for Mr. Lundström, Mr. Nilsson, Mr. Lindvall Mr. Antonsson and Mrs. Kaiser is
Datavägen 14, SE-977 54 Luleå, Sweden. The business address for Dr. Peltonen and Mr. Jokela is
Asematie 4, FIN-95900 Kolari, Finland.
A brief summary of the qualifications of and positions previously held by each of Mr. Waplan, Mr.
Zetterberg, Mr. Pernlöf and Mr. Sundling as well as their respective business address is set forth in
Section 15.1 (Board of Directors).
Below follows a brief summary of the qualifications of and positions previously held by each of the
other persons included in the management (in addition to Mr. Waplan, Mr. Zetterberg, Mr. Pernlöf
and Mr. Sundling).
Jonas Lundström (40), Vice President – Human Resources and Corporate
Communications
Mr. Lundström joined the Issuer in 2008 as Director of Corporate Communications, after working as a
consultant to the Issuer in various capacities. Prior to joining the Issuer, he held the position of
President and CEO of the Norrbotten Chamber of Commerce for more than 5 years. He also has
experience in Nordic politics, as a Deputy Mayor of the City of Luleå, Chairman of the Board of
Education during 2000-2002, as well as being an appointed member of the North Calotte Council. Mr.
Lundström brings more than 10 years of experience and holds a B.Sc. in Political Science from Luleå
University of Technology in Sweden. Mr. Lundström resides in Luleå, Sweden.
Hans Nilsson (53), Vice President – Marketing
Mr. Nilsson joined the Issuer in 2008 as Senior Logistics Manager. Prior to joining the Issuer,
Mr. Nilsson was the Sales and Marketing Manager, Industrial Sales, for GEE Energy GmbH, a German
Bio Energy Company. He was the General Manager of the LKAB iron ore port in Luleå in the early
1990’s, Regional Sales Manager for LKAB in Singapore and later Regional Sales Manager in Minelco
AB. He has also held the position of CEO for TallOil Canada, a subsidiary to TallOil AB, which is a
Swedish bio-energy company. Dating back to the late 1980’s, Mr. Nilsson has held several managerial
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positions for LKAB in Sales & Marketing and Shipping Logistics. He has more than 30 years
experience. Mr. Nilsson holds a B.Sc., Business Administration, from the Luleå University of
Technology. Mr. Nilsson resides in Luleå, Sweden.
Manfred Lindvall (59) – Vice President, Environment, Health & Safety and acting Vice
President – Swedish Operations
Mr. Lindvall joined the Company in 2008, after serving as Vice President, Environment, Health &
Safety for Lundin Mining Corporation from 2006 to 2008. Prior to that, Mr. Lindvall worked with
Boliden in various capacities from 1988 to 2006, his latest position being Vice President, EHS. He also
worked at LKAB for 12 years. Mr. Lindvall holds an Engineering Licentiate degree in Applied Geology,
as well as an MSc degree in Mining and Metallurgy from the Luleå University of Technology. In
addition to his position as VP – EHS, Mr. Lindvall is Managing Director for Northland Resources AB.
He is a native of Norrbotten County in northern Sweden where the Company is developing its
Kaunisvaara project. Mr. Lindvall resides in Skellefteå, Sweden.
Anders Antonsson (47) – Vice President – Investor Relations
Mr. Antonsson joined the Group in April 2011. Mr. Antonsson has over 15 years experience in investor
relations, including positions as Director of IR and Corporate Communication at Intrum Justitia,
Scancem and Trelleborg Group, most recently as consultant in Investor Relations. Mr. Antonsson
received a Bachelor of Social Sciences from the Lund University, Sweden. Mr. Antonsson resides in
Malmö, Sweden.
Eva Kaijser (39) – CFO
Mrs. Kaijser joined the Group in April 2010. She has over 10 years of experience working with Boliden
AB, a European metals producer. She has been a member of Boliden Group management since 2007.
Most recently, she served as Senior Vice President, Strategy and Business Development and before
that Senior Vice President, Information and Investor Relations. Mrs. Kaijser also has experience as
Finance and Treasury Manager and Group Controller in Boliden. Mrs. Kaijser holds a B.Sc., Business
Administration and Economics, from Stockholm University, and resides in Danderyd, Sweden.
Currently on maternity leave.
Jukka Jokela (57) – Vice President – Finnish Operations & Managing Director for
Northland Mines OY
Mr. Jokela is responsible for all the contacts with authorities and other stakeholders. He was
appointed managing director of Northland Mines Oy in December 2010. From September 2008 to
December 2010, he served as the senior manager regional exploration and as the managing director of
Northland Exploration Finland Oy. Mr. Jokela has over 25 years of international experience in mineral
exploration, geological research and project and company management in different mining and
exploration companies (including Outokumpu Mining Oy, Polar Mining Oy, Store Norske Gull AS, and
the Geological Survey of Finland). Mr. Jokela received an MSc in Geology and Mineralogy from the
University of Turku, Finland. Mr. Jokela resides in Espoo, Finland.
Petri Peltonen (50) – Vice President – Exploration
Dr. Petri Peltonen joined the Group in 2008 as Senior Project Manager of Exploration, being involved
in regional exploration and geological modeling of the Kaunisvaara and Hannukainen Deposits. Dr.
Peltonen has more than 20 years international experience in research and mineral exploration on
several commodities, including iron, nickel, gold and diamonds. Currently, he holds the dual positions
of Vice President – Exploration and Managing Director of Northland Exploration Finland Oy, and
serves as the Company’s appointee at the Board of Directors of Orex Minerals Ltd. He has an extensive
publication record with over 100 scientific papers and holds a Doctorate in Economic Geology from
the University of Turku, Finland. Dr. Peltonen resides in Espoo, Finland.
15.3
Conflicts of Interests
As at the date of this Prospectus, there are no conflicts of interest between the duties to the Issuer
respective the Parent Guarantor and the private interests of any member of the Board of Directors or
Management of the Issuer and the Parent Guarantor.
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15.4
Committees of the Issuer
The Issuer has not established audit and remuneration committees or any other committees. The
corporate governance bodies of the Group are established in the Parent Guarantor, including an audit
committee, compensation committee, nomination committee and environmental health and safety
committee, see below. The Issuer is subject to the decisions and guidelines implemented by the said
committees.
15.5
Committees of the Parent Guarantor
To assist the Board of Directors of the Parent Guarantor in achieving high standards of corporate
governance, the Board of Directors has established an audit committee (the “Audit Committee”), a
compensation committee (the “Compensation Committee”), a nomination committee (the
“Nomination Committee”) and an Environmental Health and Safety Committee (the “EHS
Committee”), each as more particularly described below.
15.5.1
Audit Committee
The Parent Guarantor’s audit committee is presently comprised of Mr. Matti Kinnunen (Chairman),
Mr. Tuomo Mäkelä and Mr. Stuart Pettifor. The Audit Committee is appointed by the Board of
Directors to assist the Board of Directors in fulfilling its oversight responsibilities by reviewing the
financial information to be provided to the shareholders and others, the systems of internal controls
and management information systems established by management and the Parent Guarantor’s
external audit process and monitoring compliance with the Parent Guarantor’s legal and regulatory
requirements with respect to its financial statements. The Audit Committee has adopted a written
charter that sets out its mandate and responsibilities.
The duties of the Audit Committee include:
15.5.2
•
reviewing the Parent Guarantor’s annual and interim financial statements;
•
reviewing the evaluation of internal controls by the external auditor, together with
management’s response;
•
nominating and recommending the remuneration for, and monitoring the scope and
performance of, the external auditor;
•
ensuring that adequate procedures are in place for the review of the Parent
Guarantor’s public disclosure of financial information extracted or derived from the
Parent Guarantor’s financial reports;
•
reviewing the effectiveness of management information and other systems of internal
control;
•
establishing procedures for the receipt, retention and treatment of complaints
received by the Parent Guarantor regarding accounting, internal accounting controls,
or auditing matters; and
•
reviewing significant transactions that are not a normal part of the Parent Guarantor’s
business or are outside of delegation.
Compensation Committee
On March 10, 2008, the Board of Directors of the Parent Guarantor formed a formal compensation
committee (the “Compensation Committee”) to assist the Board of Directors in discharging its
oversight responsibilities relating to compensation (including benefits, stock options, share
compensation awards and bonuses), including the compensation of key senior management employees
of the Parent Guarantor. The Compensation Committee is presently comprised of Mr. Stuart Pettifor,
Mr. Birger Solberg and Mr. Tuomo Mäkelä.
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15.5.3
Nomination Committee
The Board of Directors of the Parent Guarantor has established a Nomination Committee, which has
the mandate of reviewing overall board composition and proposing candidates for election to the
Board of Directors. The members of the Nomination Committee are Mr. Birger Solberg (Chairman),
Mr. Tuomo Mäkelä and Mr. Stuart Pettifor.
15.5.4
Environmental, Health & Safety (EHS) Committee
An EHS Committee was established on May 18, 2011 to advise and make recommendations to the
Board of Directors of the Parent Guarantor in its oversight role with respect to the Parent Guarantor’s
strategy, policies and programs concerning its health, safety and environmental activities. The
Committee includes Mr. Stuart Pettifor (Chairman) and Mr. Birger Solberg.
15.6
Corporate Governance with respect to the Parent Guarantor
The Parent Guarantor’s corporate governance is based primarily on Luxembourg corporate law. Parent
Guarantor’s Articles of Association, which were ratified by the shareholders of the Parent Guarantor at
an extraordinary general meeting held on January 15, 2010, have been drafted to comply with
Luxembourg law. The Articles of Association determine, among other things, shareholder rights, how
general meetings of the shareholders are convened, the role of the Board of Directors and how Board
members are appointed. Because the Toronto Stock Exchange is the primary listing for the Parent
Guarantor’s common shares, the Parent Guarantor must comply with Canadian securities law, and in
particular National Policy 101, “Disclosure of Corporate Governance Practices”, and National Policy
201, “Corporate Governance Guidelines”. The Information Circular that is mailed by the Parent
Guarantor to shareholders as part of the annual general meeting materials includes disclosure
concerning the Parent Guarantor’s corporate governance practices. In addition, the Parent Guarantor
must adhere to the disclosure provisions of the EU Transparency Directive, as the Parent Guarantor’s
common shares are traded on the Oslo Børs.
15.7
The Swedish Corporate Governance Code
Neither the shares of the Issuer nor the Parent Guarantor are listed on any stock exchange or
otherwise traded on a trading platform in Sweden. Thus, the Swedish Corporate Governance Code is
not applicable to the Issuer or the Parent Guarantor.
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16.
MAJOR SHAREHOLDERS OF THE ISSUER
As at the date of this Prospectus, the Issuer is wholly owned by the Project Guarantor which in turn is
wholly owned by the Parent Guarantor. The Parent Guarantor is listed on the Toronto Stock Exchange,
the Oslo Børs and the Frankfurt Open Market, the unofficial market organized by the Deutsche Börse
in Germany.
The Bonds are, inter alia, secured by a pledge over all shares in the Project Guarantor and the Issuer.
Consequently, a future enforcement of the pledge over these shares may result in a direct or indirect
change of control of the Issuer.
The Issuer is not aware of any arrangements, other than the above, the operation of which may at a
subsequent date result in a change of control of the Issuer.
17.
MAJOR SHAREHOLDERS OF THE PARENT GUARANTOR
As of February 14, 2012, the Parent Guarantor had a total of 2,950 shareholders registered with the
VPS. The table below sets forth the 20 largest shareholders trading on the Oslo Børs, and registered in
the VPS. As of February 14, 2012, there were 179,751,837 shares registered via the VPS, of a total of
226,628,899 shares outstanding in the Parent Guarantor, representing approximately 79.3% of the
total number of shares in the Parent Guarantor. The following table shows the largest shareholders
registered in the VPS and their shareholdings as a percentage of the shares held in the VPS.
Shareholders
Number of Shares
Percentage (%)
1
AVANZA BANK (Custodian Bank)
23,623,777
13.14
2
NORDNET BANK (Custodian Bank)
10,653,526
5.93
3
SKANDINAVISKA ENSKILDA BANKEN (Custodian Bank)
7,474,243
4.16
4
SWEDBANK (Custodian Bank)
7,234,833
4.02
5
HANDELSBANKEN (Custodian Bank)
7,230,186
4.02
6
STATE STREET BANK (Custodian Bank)
6,023,266
3.35
7
FINNISH INDUSTRY INVESTMENT
4,522,000
2.52
8
EUROCLEAR BANK S.A.
3,766,565
2.10
9
HOLBERG NORDEN VERDIPAPERFONDET
3,468,569
1.93
3,127,531
1.74
10
BANK OF NEW YORK (Custodian Bank)
11
HANDELSBANKEN HELSINKI (Custodian Bank)
3,103,400
1.73
12
JP MORGAN CHASE HAYWOOD SECURITIES
(Custodian Bank)
3,009,247
1.67
13
THE BANK OF NOVA SCOTIA
3,000,000
1.67
14
BANK JULIUS BAER
2,759,824
1.54
15
HOLBERG NORGE VERDIPAPERFONDET
2,474.416
1.38
16
JP MORGAN CHASE BANK NORDEA TREATY ACC
2,002,418
1.11
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17
CITIBANK
1,991,416
1.11
18
KLP AKSJE NORGE
1,713,578
0.96
19
GLEFF AS
1,700,000
0.95
20
SVITHUN FINANS AS
1,700,000
0.95
100,596,795
55.98
Total 20 largest shareholders
Neither in North America nor in Luxembourg is common for shareholders to register their holdings in
publicly listed companies directly in their own name. Rather, their shares will commonly be held via a
nominee, and the Parent Guarantor has limited access to information regarding the identity of the
beneficial owner.
The Issuer is not aware of any arrangements, the operation of which may at a subsequent date result in
a change of control of the Parent Guarantor. Furthermore, the Issuer is not aware of any shareholders’
agreements related to the shares in the Parent Guarantor.
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18.
FINANCIAL INFORMATION REGARDING THE ISSUER’S
LIABILITIES, FINANCIAL POSITION AND RESULTS
18.1
Historical financial information
ASSETS
AND
The Issuer’s financial statements have been prepared in accordance with accounting principles
generally accepted in Sweden. The Issuer’s current accounting policies are shown in the annual
financial statements for 2011 Note 1.
18.2
Financial statements
See Section 8.1 (General).
18.3
Auditing of annual financial information
The historical annual financial information for the year ended December 31, 2011, the period ended
December 31, 2010 and the year ended January 31, 2010 have been audited by the Issuer’s auditor.
18.4
Date of the last annual audited financial information
The date of the last audit financial information of the Issuer is December 31, 2011.
18.5
Legal and arbitration proceedings
The Issuer has not been involved in any governmental, legal or arbitration claims and/or proceedings
during the previous 12 months which may have or have had significant effects on the Issuer’s financial
position or profitability, and the Issuer is not aware of any such proceedings pending.
18.6
Significant changes in the Issuer’s financial situation or trading position since
December 31, 2011
the second drawdown was exercised on February 16, 2012. The bridge facility has as at the date of this
On May 1, 2012, the Issuer entered into an agreement with the Standard Bank of South Africa for a
senior secured cost overrun facility to finance potential cost overruns up to a maximum of USD 40
million. The facility will be senior secured but subordinated to the Bonds and will mature after the
Bonds mature.
position of the Issuer subsequent to December 31, 2011.
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19.
FINANCIAL INFORMATION REGARDING THE PARENT GUARANTOR’S ASSETS
AND LIABILITIES, FINANCIAL POSITION AND RESULTS
19.1
Historical financial information
The Parent Guarantor’s financial statements have been prepared in accordance with IFRS, as adopted
by the EU on September 10, 2010. The Parent Guarantor’s current accounting policies are shown in
the annual consolidated financial statements for 2011 Note 4.
19.2
Financial statements
See Section 9.1 (General).
19.3
Auditing of annual financial information
The historical annual financial information for the year ended December 31, 2011, the period ended
December 31, 2010 and the year ended January 31, 2010 have been audited by the Parent Guarantor’s
auditor, see further Section 7.2 (Independent Auditor of the Parent Guarantor).
19.4
Date of the last annual audited financial information
The date of the last audit financial information of the Parent Guarantor is December 31, 2011.
19.5
Legal and arbitration proceedings
The Parent Guarantor has not been involved in any governmental, legal or arbitration claims and/or
proceedings during the previous 12 months which may have or have had significant effects on the
Parent Guarantor’s financial position or profitability, and the Issuer is not aware of any such
proceedings pending.
19.6
Significant changes in the Parent Guarantor’s financial situation or trading
position since December 31, 2011
the second drawdown was exercised on February 16, 2012. The bridge facility has as at the date of this
On May 1, 2012, the Issuer entered into an agreement with the Standard Bank of South Africa for a
senior secured cost overrun facility to finance potential cost overruns up to a maximum of USD 40
million. The facility will be senior secured but subordinated to the Bonds and will mature after the
Bonds mature.
position of the Parent Guarantor subsequent to December 31, 2011.
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20.
ADDITIONAL INFORMATION
20.1
Share capital of the Issuer
At the date of this Prospectus, the Issuer’s share capital amounts to SEK 500,000, divided into
5,000 shares. All shares are of the same class. All shares have a par value of SEK 100 per share. The
maximum share capital under the Issuer’s articles of association amounts to SEK 2 000,000,
corresponding to a maximum of 20,000 shares. All issued shares are fully paid. Each share represents
an equal percentage of the Issuer’s share capital.
20.2
Share capital of the Parent Guarantor
As at the date of this Prospectus, the authorized share capital of the Parent Guarantor is CAD
937,680,525. The Parent Guarantor has 514,128,899 shares issued and outstanding, all of which are
fully paid, for a total issued share capital of CAD 51,412,889.9. Each share carries one vote and gives
equal rights in the Parent Guarantor. The Parent Guarantor has only one class of shares outstanding.
The shares have no nominal value.
20.3
Articles of Association of the Issuer
BOLAGSORDNING
ARTICLES OF ASSOCIATION
Org nr 556656-1675
Reg no 556656-1675
1. Bolagets firma/Corporate name
Bolagets firma är Northland Resources AB (publ).
The name of the company is Northland Resources AB (publ).
2. Styrelsens säte/Registered office
Styrelsen har sitt säte i Luleå.
The registered office of the company shall be in Luleå.
3. Verksamhet/Business activities
Bolaget skall direkt eller indirekt genom dotterbolag eller andelar i andra företag bedriva verksamhet
bestående i prospektering och exploatering av mineralfyndigheter, handel med sliger och metaller,
förvaltning av fast och lös egendom samt därmed förenlig verksamhet.
The company shall directly or indirectly through subsidiaries or shares in other companies conduct
business by exploration and exploitation of mineral Deposits, trading in ore concentrates and metals,
management of immovable and movable assets and other compatible business.
4. Aktiekapital och antal aktier/Share capital and number of shares
Aktiekapitalet skall utgöra lägst 500.000 kronor och högst 2.000.000 kronor. Antalet aktier skall vara
lägst 5.000 och högst 20.000.
The share capital shall be at least SEK 500,000 and no more than SEK 2,000,000. The number of
shares shall be at least 5,000 and no more than 20,000.
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5. Styrelse/The Board of Directors
Styrelsen ska bestå av tre till fem ledamöter med högst fem suppleanter.
The board of directors shall consist of three to five directors with no more than five deputy directors.
6. Revisor/Auditor
Bolaget skall ha en eller två revisorer med högst två suppleanter eller ett eller två
registrerade revisionsbolag.
The company shall have one or two auditors with no more than two deputy auditors or one or two
registered accounting firms.
7. Kallelse/Notice to convene a shareholders' meeting
Kallelse till bolagsstämma ska ske genom annonsering i Post- och Inrikes Tidningar samt på
bolagets webbplats. Vid tidpunkten för kallelse ska information om att kallelse skett annonseras i
Dagens Industri. Kallelsen ska genast och utan kostnad för mottagaren skickas med post till de
aktieägare som begär det och uppger sin postadress.
Notices of general meetings shall be made by announcement in the Swedish Gazettes (Sw. Post- och
Inrikes Tidningar) and on the company’s webpage. At the time of the notice information that
notice has been made shall be announced in Dagens Industri. The notice shall be immediately and
free of charge be sent by mail to shareholders that so requests and provides mail address.
8. Ärenden på årsstämma/Matters to be dealt with at the annual general meeting
Årsstämma hålles årligen inom sex månader från räkenskapsårets utgång. På årsstämma skall följande
ärenden förekomma:
1.
Val av ordförande vid stämman.
2.
Upprättande och godkännande av röstlängd.
3.
Godkännande av förslaget till dagordning.
4.
Val av en eller flera justeringsmän.
5.
Frågan om stämman blivit behörigen sammankallad.
6.
Framläggande av årsredovisning och revisionsberättelse samt i förekommande
fall koncernredovisning och koncernrevisionsberättelse.
7.
a)
Fastställande av resultaträkning och balansräkning samt i
förekommande fall koncernresultaträkning och koncernbalansräkning.
b)
Beslut om dispositioner av bolagets vinst eller förlust enligt den fastställda
balansräkningen.
c)
Beslut om ansvarsfrihet för styrelsen och verkställande direktör
när sådan förekommer.
8
Fastställande av arvode åt styrelse och revisor.
9.
Val av styrelse och i förekommande fall styrelsesuppleanter, revisor och
eventuella revisorssuppleanter.
10.
Annat ärende, som hänskjutits till stämman enligt aktiebolagslagen eller
bolagsordningen.
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The annual general meeting shall be held annually within six months after the end of the financial
year. At the annual general meeting, the following matters shall be considered:
1.
Election of a chairman of the meeting.
2.
Preparation and approval of the voting list
3.
Approval of the agenda for the meeting.
4.
Election of one or more persons to certify the minutes.
5.
The issue of whether the meeting has been duly called.
6.
Presentation of the annual report and the auditor's report and, if any, the group annual
report and the group auditor's report.
7.
a)
b)
c)
Adoption of income statement and balance sheet and, if any, the group income
statement and the group balance sheet.
Decision regarding the profit or loss of the company in accordance with the adopted
balance sheet.
Decision regarding discharge from liability for the board of directors and the general
manager, if any.
8.
Determining the fees for the board of directors and the auditor.
9.
Election of board of directors and, if applicable, deputy directors, auditor and any deputy
auditor.
10.
Any other mutter which have been referred to the meeting according to the Companies Act or
the articles of association.
9. Räkenskapsår/Financial year
Bolagets räkenskapsår skall omfatta 1 januari - 31 december.
The company’s financial year shall be 1 January - 31 December.
20.4
Articles of Association of the Parent Guarantor
20.4.1 Purpose
Pursuant to Article 3.1 of the Articles of Association, the Parent Guarantor is in the business of
acquiring, exploring and developing mineral properties. The Parent Guarantor may further acquire
participations in Luxembourg or abroad, in any companies or enterprises in any form whatsoever and
manage such participations. The Parent Guarantor may in particular acquire by subscription, purchase
and exchange or in any other manner any stock, shares and other participation securities, bonds,
debentures, certificates of deposit and other debt instruments and more generally, any securities and
financial instruments issued by any public or private entity. It may participate in the creation,
development, management and control of any company or enterprise. It may further invest in the
acquisition and management of a portfolio of patents or other intellectual property rights of any nature
or origin.
Furthermore, the Parent Guarantor may borrow in any form. It may issue notes, bonds and any kind of
debt and equity securities. The Parent Guarantor may lend funds including, without limitation, the
proceeds of any borrowings, to its subsidiaries, affiliated companies and any other companies. The
Parent Guarantor may also give guarantees and pledge, transfer, encumber or otherwise create and
grant security over all or some of its assets to guarantee its own obligations and those of any other
company, and, generally, for its own benefit and that of any other company or person.
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The Parent Guarantor may use any techniques and instruments to efficiently manage its investments
and to protect itself against credit risks, currency exchange exposure, interest rate risks and other
risks. The Parent Guarantor may carry out any commercial, financial or industrial operations and any
transactions with respect to real estate or movable property, which directly or indirectly, favour or
relate to its corporate object.
20.4.2 Appointment of Directors
Directors are appointed by the general meeting of the Parent Guarantor for a maximum of six years.
Their mandate is renewable. The general meeting of the Parent Guarantor is also entitled to remove
any Directors at any time and with or without cause (ad nutum). Directors do not need to be
shareholders and there are no nationality, residency or qualification requirements in order for a
person to act or continue to act as a Director of the Parent Guarantor.
20.4.3 Powers of management
The Board of Directors has the widest powers to manage the affairs of the Parent Guarantor subject to
the rights expressly reserved to the general meeting of the Parent Guarantor by the Luxembourg
Companies Act and the Articles of Association.
20.4.4 Appointment and powers of the executive committee
The Board of Directors may, by resolution, appoint one or several managing directors (délégués à la
gestion journalière) in charge of the day-to-day management of the Parent Guarantor. The authority of
a managing director to bind the Parent Guarantor towards third parties is limited to day-to-day
management duties.
20.4.5 Officers
The Board of Directors may, from time to time, appoint such officers, if any, as the Board of Directors
determines and the Board of Directors may, at any time, terminate any such appointment.
The Board of Directors may, for each officer:
1.
determine the functions and duties of the officer;
2.
subject to the terms of the Luxembourg Companies Act, entrust to and confer on the officer
any of the powers exercisable by the Board of Directors on such terms and conditions and with
such restrictions as the Board of Directors think fit; and
3.
revoke, withdraw, alter or vary all or any of the functions, duties and powers of the officer.
One person may hold more than one position as an officer of the Parent Guarantor. Any person
appointed as the chair of the Board of Directors must be a director. Any other officer need not be a
director.
20.4.6 Alterations
The extraordinary general meeting of the Parent Guarantor may amend the Articles of Association only
if at least half of the share capital is represented and the agenda indicates the proposed amendments to
the Articles of Association as well as the text of any proposed amendments to the object or form of the
Parent Guarantor. If this quorum is not reached, a second general meeting may be convened. The
second general meeting deliberates regardless of the proportion of the capital represented. At each
general meeting, resolutions must be adopted by at least two-thirds of the votes cast.
Any change in the nationality of the Parent Guarantor and any increases of shareholders’
commitments in the Parent Guarantor require the unanimous consent of the shareholders and
bondholders, if any.
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Listing Prospectus
20.4.7 Meeting of shareholders
The Parent Guarantor’s annual general meeting is held on the third Wednesday of May of each year at
10.00am at the Parent Guarantor’s registered office or such other place as specified in the convening
notice to the meeting.
The Board of Directors may, whenever it thinks fit, call a general meeting of shareholders.
Shareholders holding at least 10% of the Parent Guarantor’s share capital are also entitled to require
the Board of Directors to convene a general meeting of the Parent Guarantor. The Parent Guarantor
must publish or may send notice by registered mail of the date, time, location and agenda of any
general meeting of shareholders as well as other information relevant for the shareholders to exercise
their voting rights to each shareholder entitled to attend the meeting, to each Director, and to the
auditor of the Parent Guarantor, at least 21 days before the meeting. At any general meeting, each
Share entitles its holder to one vote.
The Transfer Agent in Canada will receive the notice of a general meeting and will forward the notice
together with any proxy documents to Nordea, acting nominee for the Parent Guarantor’s
shareholders trading on the Oslo Børs and registered in the VPS system. Shareholders registered in the
VPS system must execute their voting via Nordea. Nordea will, upon receipt of voting instructions
from the beneficial shareholders, instruct its Canadian custodian accordingly. If no voting instructions
are received from the beneficial shareholders, their shares will not be voted for. For the purpose of
Nordea’s collection of and reporting of voting instructions totals to its custodian, the return deadline
set towards the shareholders in the VPS system for their voting instructions will be set two business
days before the proxy cut-off deadline set by Parent Guarantor.
122
Listing Prospectus
21.
MATERIAL AGREEMENTS
The Parent Guarantor is the parent company of the Group, and is a holding company with no
operating activities. The Parent Guarantor is therefore not a party to any material agreements relating
to the business operations of the Group other than, in certain cases, as guarantor for the relevant
operating company’s obligations under such agreements.
The following Section provides a summary of the material agreements which the Issuer, including its
subsidiaries, has as at the date of this Prospectus entered into relating to the construction and
operation of the Kaunisvaara Project. The following summaries are not intended to be a full statement
of the terms of the agreements referred to.
The table sets out those project agreements that have, as at the date of this Prospectus, been executed
with respect to the Kaunisvaara Project.
In addition to those agreements described below, it is expected that certain other agreements for
supply of equipment and/or services will be required during the construction and operation of the
Kaunisvaara Project, but these agreements are considered to be less significant than the below
mentioned agreements and generally represent equipment and/or services that are readily available in
the marketplace.
21.1
Executed Material Agreements
Agreements
Description
Construction and Supply Agreements
1
Process plant supply agreement with
Metso Minerals (Sweden) AB
Agreement for the supply of mineral processing equipment and services
for the two processing lines of the Kaunisvaara Project, and basic
engineering for the process plant system of the Kaunisvaara Project.
2
Long lead items supply agreement
with Metso Minerals (Sweden) AB
Agreement for the supply of long lead items in respect of the mineral
processing plant for the Kaunisvaara Project.
3
Mobile mining equipment supply
agreement with PON Equipment AB
Agreement for the supply of Caterpillar mobile mining equipment for use
at the Kaunisvaara Project site.
4
Power connection agreement with
Vattenfall Eldistribution AB
Agreement for the construction of new overhead power lines to the
Kaunisvaara Project site.
5
Agreement for supply of explosives,
accessories and services with Forcit
Sweden AB
Agreement for the supply of explosives, accessories and services in
connection with the Kaunisvaara Project.
6
Water system agreement with
FineWeld Sverige AB
Agreement for the engineering and design of all pump stations and related
civil works for the water and piping systems for the Kaunisvaara Project.
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Listing Prospectus
Agreements
Description
7
Industrial area civil and building
agreement with Peab Sverige AB
Agreement for the civil works for the Kaunisvaara Project, including
detailed engineering, earthworks, foundations, buildings and related
works.
8
Main power supply line agreement
with Vattenfall Eldistribution AB
Agreement for the main power supply with a capacity of 130 kV for the
process plant.
9
Removal of overburden agreement
with Peab Sverige AB
Agreement to remove an overburden consisting of peat, moraine and
waste rock at the Tapuli mine.
10
Port of Narvik lease agreement
Agreement with the Port of Narvik which grants the permit to lease the
Narvik Terminal for a period of 10 years, plus extension options.
11
Agreement for the purchase of a
shiploader with Sandvik Mining and
Construction Norge AS
Agreement for the purchase of a shiploader at Narvik with a 3,600 tph
loading capacity.
13
Mobile mining equipment
maintenance agreement with PON
Equipment AB
Agreement for the ongoing maintenance and repair of the mobile mining
equipment for the Kaunisvaara Project.
14
Wagon manufacturing contract with
Kiruna Wagon AB
Manufacturing contract in relation to the design and manufacture of rail
wagons for the Kaunisvaara Project.
15
Rail operation agreement with Green
Cargo
Agreement for the operation and management of the rail operations.
16
Port construction agreement with
Peab Sverige AB NUF
Agreement for the construction of the port facilities terminal in Narvik.
17
Port operation and management
agreement with Grieg Logistics AS
Agreement for the operation and management of the port operations.
18
Logistics operating agreement
Agreement between Northland Logistics AB and Northland Resources AB
for the provision of transportation and logistics services.
124
Listing Prospectus
Agreements
Description
19
Logistics management agreement
Agreement between Northland Logistics AB and Savage Logistics AB for
the overall management and coordination of the Kaunisvaara Project
logistics solutions.
20
Life cycle services agreement with
Metso Minerals (Sweden) AB
Agreement regarding equipment services, maintenance and supply and
repair of parts.
22
Materials handling and
transportation services agreement
with Swerock AB
Agreement for the provision of various materials handling and
transportation services for the Kaunisvaara Project.
Off-take Contracts
23
Iron ore supply agreement with
Stemcor UK Ltd
Agreement for the supply of a certain percentage of the annual iron ore
concentrate production of the Kaunisvaara Project.
24
Iron ore supply agreement with
Standard Bank Plc
Agreement for the supply of a certain percentage of the annual iron ore
25
Iron ore supply agreement with Tata
Steel UK Ltd
Agreement for the supply of a fixed amount of the annual iron ore
125
Listing Prospectus
22.
STATEMENT REGARDING SOURCES AND EXPERT OPINIONS
22.1
General
The Issuer confirms that when information in this Prospectus has been sourced from a third party it
has been accurately reproduced and as far as the Issuer is aware and is able to ascertain from the
information published by that third party, no facts have been omitted which would render the
reproduced information inaccurate or misleading. The third party information has been sourced from
the technical reports set out herein.
22.2
Expert Opinions
Certain information included in this Prospectus regarding estimated Mineral Resources owned by the
Issuer is based on estimates of the resources prepared by or derived from estimates audited by SRK
Consulting (UK) Ltd.
Below is a brief overview of the consultant that has provided or assisted in the development of resource
estimates.
SRK Consulting (UK) Ltd. is an independent natural resource consultancy, and all such information
has been so included or incorporated in reliance on the authority of that firm as experts regarding the
matters contained in their report.
SRK Consulting (UK) Ltd. has its offices at 5th floor, Churchill House, 17 Churchill Way, Cardiff, CF10
2HH, United Kingdom. SRK Consulting (UK) Ltd. is part of the international SRK Group, which
employs more than 900 professional engineers and scientists based at over 36 offices in 16 different
countries worldwide. SRK Consulting (UK) Ltd. was established in 1988 and now employ over 60 full
time technical specialists providing experienced support for all aspects of the natural resource
industry. SRK Consulting (UK) Ltd. ensures its independence by holding no equity in any project.
Except for the provision of professional services on a fee basis, SRK Consulting (UK) Ltd. has no
commercial arrangement with any other person or company involved in the interests which are the
subject of SRK Consulting (UK) Ltd.’s report.
SRK Consulting (UK) Ltd. provides a comprehensive range of consulting services to the resource
industry, including geological modeling, resource estimation, mine design and scheduling,
geotechnics, water management, tailings disposal, metallurgy, environmental management,
geochemistry and technical-economic modeling.
SRK Consulting (UK) Ltd. has given and not withdrawn its written consent to the inclusion of the
contents of those parts of the Prospectus, in the form and context in which it is included.
126
Listing Prospectus
23.
DOCUMENTS ON DISPLY AND INCORPORATED BY REFERENCE
23.1
Documents regarding the Issuer on display
Copies of the following documents will during the life of this Prospectus be available for inspection at
any time during normal working hours on any business day free of charge at the registered office of the
Issuer:
•
the Articles of Association
•
the Certificate of Incorporation
•
all reports, letters, and other documents, historical financial information, valuations and
statements prepared by any expert at the Issuers request and part of which is included or
referred to in this Prospectus
•
the historical financial information of the Issuer and its subsidiaries, as applicable, for
each of the three financial years preceding the publication of this Prospectus
The following documents will during the life of this Prospectus be available for inspection at any time
on www.sedar.com and www.northland.eu:
23.2
•
the Technical Review of the Kaunisvaara Iron Project, June 1, 2011 by SRK Consulting
(UK) Ltd.
•
the Technical Review of the Kaunisvaara Iron Project, October 3, 2010 by SRK Consulting
(UK) Ltd.
•
the Mineral Resource Estimate for the Tapuli Iron project, Pajala Municipality,
Norrbotten County, Sweden, March 26, 2010 by SRK Consulting (UK) Ltd.
•
the Mineral Resource Estimate for the Sahavaara Iron project, Pajala Municipality,
•
the Mineral Resource Estimate for the Pellivuoma Iron project, Pajala Municipality,
Documents regarding the Parent Guarantor on display
Copies of the following documents will during the life of this Prospectus be available for inspection at
any time during normal working hours on any business day free of charge at the registered office of the
Parent Guarantor:
23.3
•
the Articles of Association
•
the Certificate of Incorporation and Certificate of Name Changes
•
the historical financial information of the Parent Guarantor for each of the three financial
years preceding the publication of this Prospectus
Documents regarding the Issuer incorporated by reference
The following documents are incorporated in and form part of this Prospectus:
•
the annual report 2011 containing the audited financial statements for the year ended
December 31, 2011 with comparative figures for 11 months December 31, 2010 and year ended
January 31, 2010
127
Listing Prospectus
•
the annual report 2010 containing the audited financial statements for the 11 months ended 31
December 2010 with comparative figures for the year ended January 31, 2010
•
the annual report 2010 containing the audited consolidated financial statements for the year
ended January 31, 2010 with comparative figures for the year ended January 31, 2009
This Prospectus and the documents incorporated by reference in accordance with the above will be
available at the Issuer’s web site www.northland.eu.
23.4
Documents regarding the Parent Guarantor incorporated by reference
The following documents are incorporated in and form part of this Prospectus:
•
the annual report 2011 containing the audited consolidated financial statements for the
year ended December 31, 2011, with comparative figures for 11 months December 31, 2010
and year ended January 31, 2010
•
the annual report 2010 containing the audited consolidated financial statements for the 11
months ended 31 December 2010, with comparative figures for the year ended January 31,
2010
•
the annual report 2010 containing the audited consolidated financial statements for the
year ended January 31, 2010 with comparative figures for 2009 and 2008
This Prospectus and the documents incorporated by reference in accordance with the above will be
available at the Parent Guarantor’s web site www.northland.eu.
128
Listing Prospectus
24.
DEFINITIONS AND GLOSSARY OF TERMS
The following definitions and glossary apply in this Prospectus unless otherwise dictated by the
context, including the foregoing pages of this Prospectus.
ALS Chemex:
The mineral division of the ALS Laboratory Group.
Articles of Association:
The articles of association of the Issuer or the Parent Guarantor, as
applicable.
Assay:
A quantitative test of minerals and ore by chemical and/or fire
techniques.
Au:
Gold.
Beneficiation:
Preparation of ores by drying, flotation or magnetic separation to
improve the grade by removing associated impurities.
BF:
Blast furnace.
BHP Billiton:
BHP Billiton Limited.
BIF:
Banded iron formation.
Big 3:
Rio Tinto, BHP Billiton and Vale.
Board of Directors or Board:
The Board of Directors of the Issuer or the Parent Guarantor, as
applicable.
Bond Agreement:
The bond agreement relating to the Bonds.
Bonds:
270,000,000 and NOK 460,000,000 Senior Secured Bond Issue,
2012/2017
Bond Trustee:
Norsk Tillitsmann ASA, in its capacity as Bond Trustee under the
Bond Agreement
CAD:
Canadian Dollars, the lawful currency of Canada.
CAGR:
Compound annual growth rate.
Capex:
Capital expenditure.
Caterpillar:
Caterpillar Financial Nordic Services AB.
CEO:
Chief executive officer.
CFO:
Chief financial officer.
CFR:
Cost and Freight.
CIF:
Cost, Insurance and Freight.
CIM:
Canadian Institute of Mining.
CIM Code:
Canadian Institute of Mining, Metallurgy and Petroleum Standards
on Mineral Resources and Mineral Reserves: Definitions and
Guidelines (December 2005).
129
Listing Prospectus
CISA:
China Iron and Steel Association.
Claim:
Description by boundaries of real property in which metal ore
and/or minerals may be located. A claim application on state
owned or private land must be filed with the relevant national
agency, and the claim must be “worked” by active exploration being
conducted and claim area being prepared for mining within a
specific period of time.
Concession:
A grant of mining rights especially by a government in return for
services or for a particular use.
COO:
Chief operating officer.
CRU:
CRU Group.
Cu:
Copper.
Definitive Feasibility Study or DFS:
A comprehensive design and costing study of the selected option
for the development of a mineral project in which appropriate
assessments have been made of realistically assumed, geological,
mining, metallurgical, economic, marketing, legal, environmental,
social governmental, engineering, operational and all other
modifying factors which are considered in sufficient detail to
demonstrate at the time of reporting (i) that extraction is
reasonably justified (economically mine-able) and (ii) the factors
finance the development of the project.
Deposit:
A mineralized body which has been physically delineated by
sufficient drilling, trenching and/or underground work, and found
to contain a sufficient average grade of metal or metals to warrant
further exploration and / or development expenditures.
Draw-down or Disbursement:
A release of funds from the Escrow Account.
Dmt:
Dry metric tonnes.
Dmtu:
Dry metric tonne units.
Dmtpa:
Dry metric tonnes per annum.
Down dip:
Expression used to indicate the direction and depth of the ore
body.
Direct reduction or DR:
In relation to processing in steel production, a “direct reduction”
furnace or “direct reduction” pellet feed, as the case may be.
DRI:
Direct-Reduced Iron, which is produced from the direct reduction
of iron ore (in form of lumps, pellets or fines) by a reducing gas
produced from natural gas or coal. Direct-reduced iron is richer in
iron than pig iron, typically 90-94% total iron, as opposed to about
93% for molten pig iron, and an excellent feedstock for the electric
furnaces used by mini mills, allowing them to use lower grades of
scrap for the rest of the charge.
DTT:
Davis Magnetic Tube Test - the standard test used to predict
magnetic ores response.
EAF:
Electric arc furnace.
130
Listing Prospectus
EEA:
European Economic Area.
EIA:
Environmental impact assessment.
Environmental Code:
The Swedish
1998:808)).
Environmental Court:
The Swedish Environmental Court (Sw. miljödomstolen) in Umeå.
Escrow Accounts:
The escrow accounts to be established by Northland Resources
which account will be pledged and blocked in favour of the Trustee
and into which the net proceeds of the Bond Issue will be
transferred pending Draw-down.
EU:
The European Union.
EUR:
The lawful currency of the EU member states who have adopted
the Euro as their sole national currency.
Fe:
Iron.
FineWeld:
FineWeld Sverige AB.
Flowsheet:
Diagram showing progress of material or ore through a preparation
or treatment plant.
FOB:
Free on board.
G&A:
General and administrative expenses.
GBP:
Pound, the lawful currency of Great Britain.
GIS:
Geographic information systems (or geospatial information
systems), a set of tools that capture, store, analyze, manage, and
present data that is linked to location(s). In the simplest terms, GIS
is the merging of cartography, statistical analysis, and database
technology.
Grade:
Relative quantity or the percentage of ore mineral or metal content
in an ore body.
Greenstone Belt:
Means zones of variably metamorphosed mafic to ultramafic
volcanic sequences with associated sedimentary rocks that occur
within Archaean and Proterozoic cratons between granite and
gneiss bodies. The name comes from the green hue imparted by the
colour of the metamorphic minerals within the mafic rocks.
Chlorite, actinolite and other green amphiboles are the typical
green minerals.
Group:
Northland Resources S.A., Northland Sweden AB, Northland
Resources AB (publ), Northland Logistics AB and Northland
Logistics AS.
G/t:
Grams per tonne.
GTK:
The Finnish Geological Survey.
HBI:
Hot briquetted iron.
Environmental
Code
(Sw.
miljöbalken
(SFS
131
Listing Prospectus
HYL:
A variant of DRI production that is able to process ores with
elevated levels of sulphur.
IFRS:
International Financing Reporting Standards, issued by the
International Financial Reporting Interpretations Committee
(IFRIC) (formerly, the “Standing Interpretations Committee”
(SIC)).
Indicated Mineral Resource:
Means the part of a Mineral Resource for which quantity, grade or
quality, densities, shape and physical characteristics can be
estimated with a level of confidence sufficient to allow the
appropriate application of technical and economic parameters, to
support mine planning and evaluation of the economic viability of
the mineral deposit. The estimate is based on detailed and reliable
exploration and testing information gathered through appropriate
techniques from locations, such as outcrops, trenches, pits
workings and drill holes that are spaced closely enough for
geological and grade continuity to be reasonably assumed.
Inferred mineral resource:
Means the part of a Mineral Resource for which quantity and grade
or quality can be estimated on the basis of geological evidence and
limited sampling and reasonably assumed, but not verified,
geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate
techniques from locations such as outcrops, trenches, pits,
workings and drill holes.
IRR:
Internal Rate of Return.
ISIN:
International Securities Identification Number.
Issuer:
Kaunisvaara Project:
A development stage exploration project which when constructed
will comprise two conventional open pit mines and a magnetite
processing operation producing a concentrate product.
Kiruna Wagon:
Swedish manufacturer of ore wagons with a capacity of up to 100
metric tonnes.
LKAB:
A Swedish state owned mining company.
LOM:
Life of mine.
Management:
The management of the Group.
Measured Mineral Resource:
Means that part of a Mineral Resource for which quantity, grade or
quality, densities, shape, and physical characteristics are so well
established that they can be estimated with confidence sufficient to
allow the appropriate application of technical and economic
parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on detailed
and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes that are spaced
closely enough to confirm both geological and grade continuity.
Metallurgical:
Describing the science concerned with the production, purification
and properties of metals and their applications.
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Listing Prospectus
Metso:
Metso Minerals (Sweden) AB.
Mill:
Equipment used to grind crushed rocks to the desired size for
mineral extraction.
Mineral Reserve:
Means the economically mineable part of a Measured or Indicated
Mineral Resource demonstrated by at least a preliminary feasibility
study. This study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can
be justified. A Mineral Reserve includes diluting materials and
allowances for losses that may occur when the material is mined.
Mineral Resource:
Means a concentration or occurrence of natural, solid, inorganic or
fossilised organic material in or on the Earth’s crust in such form
and quantity and of such a grade or quality that it has reasonable
prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a Mineral Resource are
known, estimated or interpreted from specific geological evidence
and knowledge.
Mt:
Million tonnes.
Mtpa:
Million tonnes per annum.
NI 43-101:
The Canadian National Instrument 43-101 – Standard of
Disclosure for Mineral Projects of the Canadian Securities
Administrators.
NOK:
Norwegian Kroner, the lawful currency of Norway.
Northland Resources:
NPV:
Net present value.
Opex:
Operating cost.
Ore:
Material from which a mineral or minerals of economic value can
be extracted.
Oslo Børs:
Oslo Børs ASA, a regulated market within the meaning of Directive
2004/39/EC of the European Parliament and of the Council of 21
April 2004 on markets in financial instruments (MiFID).
Parent Guarantor:
Peab:
Peab Sverige AB.
Pellet:
A small spherical marble-sized ball of iron ore used in steelmaking.
Pre-feasibility study/PFS:
A comprehensive study of the viability of a mineral project that has
advanced to a stage where the mining method, in the case of
underground mining, or the pit configuration, in the case of an
open pit, has been established, and where an effective method of
mineral processing has been determined. This study must include a
financial analysis based on reasonable assumptions of technical,
engineering, operating and economic factors and evaluation of
other relevant factors which are sufficient for a qualified person
acting reasonably, to determine if all or part of the mineral
133
Listing Prospectus
resource may be classified as a Mineral Reserve.
Preliminary Economic Assessment
or PEA:
The first level of engineering study that is performed on a mineral
deposit to determine its economic viability. This is usually
performed to determine whether the expense of a full prefeasibility study and later full feasibility study is warranted. The
studies may be completed internally by the Group or by
independent engineers.
Probable Mineral Reserve:
The economically mineable part of an Indicated and, in some
circumstances, a Measured Mineral Resource demonstrated by at
least a preliminary feasibility study. This study must include
adequate information on mining, processing, metallurgical,
economic and other relevant factors that demonstrate, at the time
of reporting, that economic extraction can be justified.
Proven Mineral Reserve:
The economically mineable part of a Measured Mineral Resource
demonstrated by at least a preliminary feasibility study. This
preliminary feasibility study must include adequate information on
mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting that, economic
extraction is justified.
Pöyry:
Pöyry Sweden AB.
QA/QC:
Quality control work.
Qualified Person:
Defined in NI43-101 as an individual who is an engineer or
geoscientist with at least five years of experience in mineral
exploration, mine development or operation or mineral project
assessment, or any combination of these; has experience relevant
to the subject matter of the mineral project and the technical
report; and is a member in good standing of a professional
association.
Rio Tinto:
Rio Tinto Limited.
RMG:
The Raw Materials Group.
Securities Act:
The United States Securities Act of 1933, as amended.
SEK:
Swedish Kroner, the lawful currency of Sweden.
SGA:
Studiengesellschaft für Eisenerzaufbereitung GmbH.
SGU:
The Swedish Geological Survey.
Shear Zone:
A structural discontinuity surface in the Earth’s crust and upper
mantle. Because the discontinuity surface usually passes through a
wide depth-range, a great variety of different rock types with their
characteristic structures are produced.
SiO2:
Silica.
Sinter:
Process for agglomerating ore concentrate in which partial
reduction of minerals may take place and some impurities may be
expelled prior to subsequent smelting and refining.
Sinter feed:
Iron ore product used to make sinter.
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Listing Prospectus
STA:
The Swedish Transport Administration (Sw. Trafikverket).
Swedish Minerals Act:
The Swedish Minerals Act (Sw. Minerallag (SFS 1991:45)).
Swedish Mines Inspector:
The Mining Inspectorate of Sweden (Sw. Bergsstaten).
Tailings:
Material that remains after all metals/minerals considered
economic have been removed from the ore.
Technical Report:
A document drawn up by a technical expert in the particular field
that describes the process, progress, or results of technical or
scientific research.
Tonne:
A metric tonne (1,000kg).
USD:
US Dollars, the lawful currency of the United States of America.
USGS
United States Geological Survey.
Vale:
Companhia Vale do Rio Doce.
VIU:
Value-in-use.
VPS:
The Norwegian Central Securities Depository.
135
ANNEX 1 – BOND AGREEMENT

Northland Resources AB (publ)

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