Northland Resources Operational Update – September 2012
Luxembourg, September 25, 2012 – Northland Resources S.A. (TSX: NAU, OSL: NAUR, Frankfurt: NPK – “Northland” or the “Company”) announces its fourth bi-monthly operational and construction update on the Kaunisvaara project. During this period, July 1-September 21, among other important milestones, Northland fulfilled its second Cost-to-Complete test and has now executed its second drawdown of USD 90 million from the bond facility.
- The schedule for the Kaunisvaara project remains unchanged, with production at the Tapuli Mine scheduled to commence in November 2012, with shipments of concentrate starting in first quarter 2013.
- The first Kaunisvaara process line was 91% complete and remains on schedule.
- The independent engineer, Royal HaskoningDHV (formerly named Turgis), has confirmed the second Cost-to-Complete test, and the report was approved by the Trustee, Norsk Tillitsmann. A second drawdown from the bond agreement of USD 90 million was executed September 21, 2012.
- The Swedish government will finance further improvements to the Malmbanan railway as well as to the public road between Kaunisvaara and Svappavaara.
- Northland has been granted all four requested slots on the Malmbanan railway, starting December 8, 2012.
- First blasting of 400,000 tonnes waste rock at the Tapuli mine was successfully completed on September 21, 2012.
- The Company plans to increase production volume to 1.4 dmt in 2013 and to reach the production capacity of 4.0 dmtpa in the third quarter of 2014, one quarter earlier than previously expected.
- Approximately 3,697,000 m3 of the Tapuli overburden has been removed. The current average rate is more than 100,000 m3 per week. Pre-stripping of the Tapuli central part is close to completion.
- The first Kaunisvaara process line is 91% complete and remains on schedule. The second Kaunisvaara process line is 52% complete.
- The Sahavaara mine and related investments are 32% complete.
- Power feed cables from substation into electrical rooms have been installed.
- Mechanical completion for the Tapuli Line is on track.
- Construction of the substation is near completion and installation is progressing according to plan.
- The following mobile mining equipment has been delivered from Pon-Cat:
- 1 wheel loader, model 994
- 2 trucks, model 793F
- 1 dozer, model D10T
- 1 grader, model 16M
- Start-up and performance tests for the Caterpillar equipment as well as the two SmartROC D65 LF drill rigs from Atlas Copco were completed, and they are now in use.
THE LOGISTICS CHAIN
- The build-out of the logistics chain is on schedule for the commencement of deliveries to customers in the first quarter of 2013.
- The Swedish government has announced its intention to invest in improved infrastructure in the County of Norrbotten:
- SEK 800 million will be allocated to improve the Malmbanan railway, in addition to the SEK 500 million approved last year.
- SEK 1.3 billion will be allocated to improve the public road between Kaunisvaara and Svappavaara where the Northland iron ore concentrate will be transported by truck.
- Peab subsidiary, Swerock/Cliffton, has entered into an agreement with one of the world’s leading manufacturers of trucks, Scania, for the purchase of 400 truck-and-trailer combinations and services during a nine-year period. The truck-trailer combinations will be optimized for a gross weight of up to 90 tonnes.
- Swerock/Cliffton has tested a rig weighing the maximum 90 tonnes to confirm and optimize future transportation. The results have been very positive.
- Four train slots were granted on Malmbanan, starting December 8, 2012. This gives Northland sufficient capacity to transport 4 million tonnes per year of high-grade concentrate.
- The improved roads are expected to be ready for trucking in early 2013.
Pitkäjärvi trans-loading terminal:
- Construction work at the terminal is progressing well and according to plan.
- Road and rail interchange work is on schedule.
- 95% of railway tracks including the switches are in place. The ballast for the railtracks is 95% complete.
- Anchor bolts, power lines and electrification are operational.
- Manufacturing of the rail cars by Kiruna wagon is ongoing and as contracted.
- Construction of the Fagernes Terminal in the Port of Narvik remains on schedule to handle the first shipment in 2013.
- Jetty civil works are progressing according to plan.
- Storage and de-icing facilities are progressing according to plan: land works have commenced with 70% of excavation work completed.
- On September 21, Norwegian Rail Administration (“NRA”) and Northland signed an agreement which will ensure that NRA will do the necessary improvements of the rail connection to Fagernes port from Narvik station and necessary works on the rail in Fagernes.
Independent engineer Royal HaskoningDHV (“Royal Haskoning“, formerly named Turgis) as well as the bond holder trustee, Norsk Tillitsmann ASA (“Norsk Tillitsmann”), have confirmed Northland’s fulfillment of its second Cost-to-Complete test. Consequently, Northland was able to execute the second drawdown of about USD 90 million from its USD 350 million bond loan facility on September 21.
The Company now has sufficient funds to start production at the Kaunisvaara project and thereby generate revenues during the first quarter of 2013. This is due to the bond drawdown; leases nearing completion; and the Cost Overrun Facility provided by Standard Bank.
Northland’s Capex to reach full production (4.0 million dmtpa) is expected to increase to USD 956 million (previously USD 875m). The new Capex is 9% above the prediction in the capital raising completed February 2012 due to increased civils and engineering work and buildings costs (including upgrades), as well as tires for mobile equipment and increased costs for rail upgrading. The cost of rail cars is now also included in the new Capex, which they were not in February, 2012. Northland’s intention is to sign a lease/rental agreement for the rail cars and storages, which would further reduce Capex.
The Kaunisvaara Project
Site works are progressing well in Kaunisvaara. Mechanical completion for the Tapuli Line is on-track. Primary crusher for the Tapuli mine is in place. Gear units and Cyclopacs of the VertiMills are installed.
Steel installations are completed for the Tapuli stockpile, roofing and installations are ongoing. In the Process Plant building, only electrical installations are still ongoing for the first process line.
Inner walls and flooring are completed for the truck workshop, internal installations are still ongoing. The workshop is sufficiently complete for Pon-Cat when access is required.
Pipeline from Muonio River has been pressurized and the pump station is working. Tailings pipe-line is ready to receive water and water has been successfully pumped into the clearing pond basin.
Conveyor belt is being installed. Substation works are progressing to plan with the transformers and other major equipment having been delivered on time.
Vattenfall is slightly ahead of program for the power supply lines. A power line from last pole in Kaunisvaara to the incoming portal in the substation has been installed.
Health & Safety
Lost Time Injury Frequency Rate (“LTIFR”) according to the Swedish standard from the start of the project until end of August 2012 was 5.34 (6.39 for the previous period that ended June 30).
The corresponding number according the international standard for the same period was 0.89 per 200,000 worked hours (previous period: 1.06).
There was one LTIFR incident reported for both the International and Swedish standards during this period, July 1-August 31 (previous two-month period: one).
A total of 49 Near Hits were reported for the same period (previous two-month period: 54).
Northland Resources took over the site safety coordination on April 1, 2012. The operations staff are preparing for takeover from the project organization during third quarter of 2012. A safety coordinator was recruited in June.
Pellivuoma is located approximately 15 km west of Sahavaara. The Company controls 100% of the exploration permit, which totals 11,346 hectares. The deposit constitutes potentially significant additional tonnage in the Kaunisvaara area.
Following a review of the ongoing definitive feasibility study (“DFS”) work at Pellivuoma in early 2012, management modified the scope of the DFS to ensure that Pellivuoma is developed in the most cost, output and financially-rewarding manner with the Kaunisvaara mining and processing site. Potential scenarios include an increase in the production of high-grade concentrate or an extension of the life of the Kaunisvaara operation in combination with an increase of the production. The DFS is expected to be completed in the beginning of 2013.
Next Operational Update
The Operational Update for the period up to October/November 2012 will be published on November 21, 2012.
Financial Statements and MD&A for the third quarter 2012
The Company will publish its Financial Statements and Management’s Discussion and Analysis for the period ending September 31, 2012, on November 14, 2012.
 Dry million tonnes
 Dry million tonnes per annum
 Lost Time Injury Swedish standard as adopted by SveMin members: Absence of one shift or more from regular duty following the accident. Reference period: 1 million worked hours.
 International Lost Time Injury definition: Absence of three shifts or more from regular duty following the accident. Reference period: 200,000 worked hours.
President & CEO, Northland Resources S.A.
For more information, please contact:
Karl-Axel Waplan, President and CEO: +46 705 104 239
Peder Zetterberg, Acting CFO, +46 708 652 120
Anders Antonsson, Vice President – Investor Relations: +46 709 994 970
Marguerite Manshreck-Head, Investors Relations, Canada: +1 647 224 7882
Or visit our website: www.northland.eu
Northland Resources a near-production stage mining company with a portfolio of iron ore projects in northern Sweden and Finland. The Company’s Kaunisvaara Project will initially exploit two magnetite iron ore deposits in Sweden. The process will yield a high-grade, high-quality magnetite iron concentrate. The construction of the Kaunisvaara project in Sweden is well underway and mining is planned to start in the fourth quarter of 2012. Northland Resources has entered into off-take contracts for the entire production from Kaunisvaara. The Company is also preparing a Definitive Feasibility Study (“DFS”) for its Hannukainen Iron Oxide Copper Gold (“IOCG”) Project in Kolari, northern Finland and for its Pellivuoma deposit 15 km from the Kaunisvaara process plant.