Northland Comments on its Project Development Program

October 9, 2008:  Northland Resources would like to comment on the impact of the recent global credit crisis on its iron ore projects in Sweden and Finland.
 
Management understands clearly that it would be prudent to investigate adjustments to its project development planning on the assumption that the difficult credit conditions may persist for the foreseeable future.
 
The Company is looking at options for reducing the upfront capital expenditures (CAPEX) through improved engineering design and revised development timing.  The aim is to put in place a plan that will allow the projects to be moved to production at a pace that can be financed under the prevailing markets.
 
Buck Morrow, the President of Northland, said "These are difficult and challenging times for the mining sector which offer an opportunity for our technical team and management to draw up sharper development, financing and operating plans than we originally proposed.  We remain optimistic about the iron ore markets and our plans for our projects, but we also recognize that we owe it to our shareholders to be realistic about market conditions.  Even though we still have $115-million in cash, we will be applying the necessary level of prudence to our planning recognizing that we must attack the current economic conditions realistically."
 
Capital Expenditures and Development Timing
 
Northland's project development team is working to reduce CAPEX by refining the design of the Tapuli, Stora Sahavaara, Pellivuoma and Hannukainen projects.  A number of different scenarios are being considered:
  • The Preliminary Economic Assessment (PEA) published in June assumed that each project would have a dedicated mineral processing plant.  This is clearly one area of the design where substantial CAPEX savings are possible, and the option of a single processing plant is now being examined in detail for Tapuli, Pellivuoma and Stora Sahavaara.  The single plant option will not only offer lower CAPEX but will also extend the productive life of the facilities.
  • The work has also highlighted that the proposed production rates discussed in the PEA (3-million tonnes from Tapuli and 5-million tonnes from Stora Sahavaara) may not provide the best return on capital.  A lower throughput from Stora Sahavaara to augment the planned 3mty from Tapuli, with additional long-term tonnages coming from Pellivuoma, is likely to result in a longer mine and plant life and may actually provide the best overall returns.
  • To avoid the need for excessive upfront development capital, and to reduce the reliance on borrowed capital, the Company is focusing on fast-tracking development of the Tapuli iron project in Sweden and achieving cash flow as soon as possible.  Development of the projects would be staged so that substantial amounts of the required CAPEX would come from cash flow.
  • Northland has had initial discussions with a major bank over a lease-to-buy arrangement for key equipment for Tapuli.  The bank would buy some of the major pieces of processing equipment and enter into a lease-purchase arrange with Northland, reducing the initial CAPEX requirements.
  • The timing of first production is dictated in part by the permitting schedule. Northland is waiting for its Exploitation Concession Application (ECA) to be granted, which is likely to happen in the current quarter.  Once the ECA has been granted, the environmental permit application must be submitted.  Approval by the Environmental Court is likely to take 12 months, after which construction will commence.
Northland has sufficient funds to maintain momentum on development of its key projects.
 
Northland's cash position as at September 1, 2008 was about CAD$115 million after payment for the recently acquired crusher (see Northland News Release dated Aug. 21, 2008).  The Company has reduced the burn rate while maintaining the pace of development of its priority projects in Sweden and Finland.
 
The cash is held in liquid, overnight deposits with major financial institutions that to date have not reported any significant exposure to the current credit crunch.  Northland has no short or long term debt.
 
Rail Upgrades for Northland's Iron Ore Projects
 
The Finnish Government has established a working group to consider investments in transportation infrastructure, serving several proposed mining projects in northern Finland, including Northland's iron ore projects in Finland and Sweden.  The working group, which will be chaired by Mr. Juhani Tervala, Director-General of the Ministry of Transport and Communications, will determine the amount and structure of any financial investment by the State.
 
The establishment of the working group on September 30th follows a directive by the Finnish government, issued on September 16th, in which the government proposed a range of financing alternatives in support of mine development (see www.lvm.fi/web/fi/tiedote/view/492180).  An English translation can be found on Northland's website at www.northlandresourcesinc.com.
 
The working group will take into consideration the impact of the proposed mining projects on the socio-economic development of northern Finland and will establish how the different track alternatives would benefit the forestry industry, tourism, and other potential mining projects in Lapland, as well as rail connections to the Arctic Ocean.
 
(A copy of the Government statement, issued on October 1, 2008, can be found in the original Finnish, at www.lvm.fi/web/fi/tiedote/view/544272 and an English translation, provided by Cool Marketing Finland Oy on behalf of Northland, can be found on Northland's website at www.northlandresourcesinc.com.)
 
 
Northland is a well-structured, debt free mining company with a portfolio of high quality iron, gold, and base metal development projects in Sweden and Finland.
 
ON BEHALF OF THE BOARD
"Buck Morrow"
NORTHLAND RESOURCES INC.
 
The Toronto Stock Exchange has neither approved nor disapproved the contents of this news release.
 
CONTACT INFORMATION
Northland Resources Inc.
Buck Morrow, President


Investor Relations:
North America, Ralph Rushton: Toll Free: 1-866-719-8962
 
Europe, Deb Craig: Tel. + 46-70-638-4300

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