Interim Report January – June 2016

Significant events during the second quarter 2016

  • An application for mining concession in an area directly adjacent to Blötberget was submitted to Bergsstaten in the beginning of April.
  • Additional test enrichment on a pilot scale of crude ore from Blötberget performed at SGA and Weir Minerals in Germany.
  • Income amounted to SEK 0 million (0)
  • Earnings after tax amounted to SEK –2.4 million (–4.4)
  • Investments in the period April–June totalled SEK 0.8 million (3.5)
  • Basic earnings per share were SEK –0.07 (–0. 31)

Second quarter, 1 April – 30 June 2016Interim period, 1 January – 30 June 2016

  • Income amounted to SEK 0 million (0)
  • Earnings after tax amounted to SEK –4,8 million (–8.2)
  • Investments in the period January–June totalled SEK 2.9 million (8.8)
  • Basic earnings per share were SEK –0.13 (–0.56)
  • Cash and cash equivalents on 30 June 2016 amounted to SEK 4.3 million (3.9)

The marketing follow up to recent process improvements brings about renewed interest.

The second -quarter of the year has seen NIO to continue to evaluate the process improvements made during the recent testwork programme and relate that to the market for iron ore. It is clear that the refined process flowsheet derived from the recent testwork programme in Germany provides considerable flexibility in the product(s) that can be made. NIO is now having discussions with an expanded potential market for NIO products. NIO needs to, therefore, engage and evaluate this expanded potential market and establish the products that can secure the largest margin and long-term sales agreements.

Efforts by NIO have brought about expanded interest from a wider potential market, with significant discussions underway for off-take agreements. Several potential off-takers have tested products from NIO for use in their processes and as a consequence have expressed interest in NIO products. Further tests are planned by several potential buyers in the coming months, after which it is hoped that some conditional agreements can be made.

In parallel with the continued marketing efforts NIO and as a result of the provisional improved OPEX numbers generated from the process improvements, NIO is seeking to engage with new investors and industrial partners. Exploratory discussions have started with a number of possible candidates which are hoped to be developed in the coming months.

Logistics continues to be a major OPEX cost item for delivery of the product to customers. The efficiency and cost of these logistics can have a significant impact. The Swedish government continues to invest in the improvements to the rail line between Ludvika and Oxelösunds hamn, with a budget increase from SEK 450M to SEK 750M and with an expectation that there will be a further increase to SEK1.1bn. Work on the improvements to the line have already started and will continue for the next 4-5 years. These improvements to the logistics solution should be largely completed by the time that NIO gets into production, helping to ensure that NIO starts production with an efficient logistics solution from the mine to the port available.

 NIO is in the final stages of formulating an agreement with the selected logistics solution provider, who will then assist with the evaluation of the best solutions for delivery to specific markets. This will ensure that NIO can identify the markets that give the best net margins of profit and enable NIO to develop a production schedule over the first years of operations. 

NIO is, also, looking to advance the next technical stage of the DFS; which is namely to add to the resource model and improve the mine life, evaluate and integrate the geophysical and rock mechanics data into the block models, design the mine infrastructure, equipment specifications and the mine schedule. The pace of the development will, however, ultimately depend upon the ability of the project to attract further financing.

The iron ore market has lost most of the ground made in the first quarter of the year, with iron ore prices falling from the highs around $60/t to the current lows around $50/t for Fe62% C&F China, with an average of around $53/t recently. The price is expected, by many, to continue to hang around the $50/t level for a while. Despite continued closure of Chine mined iron ore capacity and increasing demand for imported ore some analysts continue to paint a gloomy picture with iron ore prices remaining below the $50/t level. However what is beginning to change is the view as to when iron ore prices may begin to rise and most analysts agree that this is likely to be between 2018 and 2020, when the economic cycle is expected to move upwards and with it iron ore. It should also be noted that a general slowdown in the global economy is likely to reverse; and indeed in Europe there are certainly signs that this process may have started with significant improvements to the steel industry margins in recent months. This fact appears to be a continuation of the early signs of recovery in the mining and steel sectors detected in Q1 this year and reinforces management view that the company is in a good position to complete the feasibility study and be ready to start production when the market really begins to pick up again.

Paul Marsden

Managing Director, Nordic Iron Ore AB (publ)




For further information please contact:

Paul Marsden Managing Director
tel: 46 240 883 05

paul.marsden@nordicironore.se

Nordic Iron Ore Group is a mining company with the ambition to revive and develop the iron ore production of Ludvika Mines in Blötberget and Håksberg. The company also intends to expand its mineral resources, and upgrade them to ore reserves, primarily through exploration and other studies of the connecting Väsman field. For more information, see www.nordicironore.se.

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