Northland Signs Off-take Agreement with Standard Bank
Standard Bank to Arrange USD 120 million Standby L/C Facilities
Luxembourg, November 19, 2010: Northland Resources S.A. (TSX: NAU, OSE: NAUR - "Northland" or "the Company") is pleased to announce the conclusion of a long-term off-take agreement with Standard Bank Plc ("Standard Bank" or the "Bank") for up to 3 million tonnes of iron ore pellet feed per year from the Kaunisvaara Iron Ore Project in Northern Sweden.
Standard Bank has a long and successful history of trading physical commodities globally, and especially in Asia. The Bank's commodity and emerging market expertise and ability to trade physical iron ore directly with customers in China via its local trading company, Standard Resources China (SRC), make it uniquely positioned to leverage global bulk commodity trade flows. Access to end-use customers through the bank's strong presence in China is supported by the bank's strategic alliance with Industrial & Commercial Bank of China (ICBC) - the world's largest bank which holds a 20% stake in Standard Bank.
In addition to the off-take agreement, the parties will enter into a marketing and sales agreement to co-ordinate and co-operate on marketing and sales activities in order to maximize the value added from customized funding and other arrangements for end-use customers of both Northland and Standard Bank.
The entire production from Kaunisvaara is now sold on long-term off-take agreements where Standard Bank has committed to take 60% of the volume and Stemcor and Tata Steel will each take 20% respectively, as previously announced.
"We are very pleased with the agreement with Standard Bank. They are bringing great value to our project with their strong strategic position in Asia and have the potential of introducing Northland to a customer base that can best benefit from Northland's high value product. The co-operation on marketing and sales will provide great flexibility and will create opportunities for sales into other global markets as and when they develop" says Karl-Axel Waplan, President and CEO of Northland.
"The transaction with Northland Resources demonstrates Standard Bank's commitment to supporting the development of world class projects. Our experience in providing the full value chain from structured finance right through to physical commodity sales, coupled with our strong position in Asia were key factors in the two parties coming together" says Bruce Garner, Managing Director and Global Head of Commodities.
Update on Financing
The Standard Bank off-take agreement is subject to financial support and the parties have entered into a letter of intent for a plant and equipment guarantee facility for up to USD 80 million and a cost overrun facility for USD 40 million which will cover part of the cost overrun account that is required by the Senior Lenders.
The first facility is expected to be available in 2011 to cover part of the vendor's exposure for committing long lead items to the Kaunisvaara Iron Ore Project, and the second facility guaranteeing the cost overrun account is expected to be in place before draw down on the Senior Loan in 2012.
The Company has agreed on a term sheet for the Senior Loan which will be applied to cover part of the expected capital expenditures as presented in the Definitive Feasibility Study on the Kaunisvaara Project. The Senior Loan is for up to USD 400 million and a minimum term of 8 years. It is to be arranged by the three lead banks Société Générale, WestLB AG and UniCredit and is subject to inter alia satisfactory due diligence, final credit approvals and syndication.
Previously, the Company signed a term sheet with Caterpillar Financial for a mobile equipment lease facility of up to USD 50 million, and a letter of intent with Stemcor for a credit facility of USD 50 million in combination with their off-take agreement.
The total capital expenditures and financing requirements for the Kaunisvaara Iron Ore Project will depend on a number of factors. As such the Company is considering additional sources of financing in order to complete the required financing for the construction of the Kaunisvaara Iron Ore Project and other projects in the Company's portfolio.
Northland is a development-stage mining company with a portfolio of iron projects in northern Sweden and Finland. Northland's Kaunisvaara Project contemplates the staged development of magnetite iron ore deposits that would provide feed to a single, multi-line processing facility in Sweden, producing a high-grade, high-quality magnetite iron concentrate. The results of the Definitive Feasibility Study on the Kaunisvaara Project were released September 27, 2010.
President & CEO
Northland Resources S.A.
For more information, please contact:
Karl-Axel Waplan, President and CEO: +46 705 104 239
Anders Hvide, Executive Chairman: +47 92 88 98 58
Eva Kaijser, Chief Financial Officer: +46 70 932 09 01
Marguerite Manshreck-Head, Investor Relations, Canada: + 1 647 224 7882
Or visit our website: www.northland.eu
Janice Garraway, External Communications: +44 20 3145 5092