Interim Report January – June 2015

Significant events during the second quarter 2015

• A declaration of intent was signed with a large international trading house
• A technical report on the feasibility study for Blötberget was completed
• An updated estimate of the mineral resources in Blötberget was announced
• An application for a mining concession for the southern Väsman field was submitted to the Swedish Mining Inspectorate
• In order to reduce fixed costs, all permanent-employee contracts were terminated

Second quarter, 1 April – 30 June 2015

• Income amounted to SEK 0 million (0)
• Earnings after tax amounted to SEK –4.4 million (–5.3)
• Investments in the period April–June totalled SEK 3.5 million (2.7)
• Basic earnings per share were SEK –0.31 (–0.46)

Interim period, 1 January – 30 June 2015

• Income amounted to SEK 0 million (0)
• Earnings after tax amounted to SEK –8.2 million (–11.1)
• Investments in the period October–December totalled SEK 8.8 million (5.9)
• Basic earnings per share were SEK –0.56 (–0.96)
• Cash and cash equivalents on 30 June 2015 amounted to SEK 3.9 million (2.4)

Significant events after the end of the period

• The Country Administrative Board approved the Company’s proposed plan to compensate for nature conservation values. 

Comments from the CEO

Making progress in an insecure environment

The market remains volatile and times are generally difficult for iron ore projects. Developments in China continue to affect the spot market price for iron ore, with substantial fluctuations, not least as a result of dramatic events in the Chinese equity market and reports of cutbacks in Chinese steel production due, among other things, to increased environmental requirements and falling demand.

Views regarding the long-term price trend are divided, however, although fresh analyses from the two investments banks JP Morgan and Morgan Stanley conclude that the long-term spot price for 62% Fe iron ore will be about 75 dollars per tonne.

What is overlooked in the general debate about the price of iron ore is the interaction – important for producers – between the iron-ore price, quality, the dollar exchange rate and the cost of ocean freight. For our part, I can say that the fall in the dollar price for iron ore, which began one year ago, has been largely offset by a weaker Swedish krona, lower energy prices and falling ocean freight. The long-term spot price for 62 per cent iron ore previously assumed by us in our calculations was 110 dollars per tonne, based on an exchange rate of 7 kronor, whereas today we base our calculations on a long-term price of 75 dollars per tonne and an exchange rate of 8.6 kronor. Compared with the assumptions we previously made regarding quality premiums and ocean freight, our calculations now indicate under the new circumstances that the expected contribution margin will largely be the same.

According to Metal Bulletin, a price premium is paid for high-grade concentrate in relation to the more generally known spot price for 62 per cent iron ore. The difference between this and Metal Bulletin’s published market price index for 66% iron concentrate, which is the relevant index for high-grade concentrate, has for several years been reflected in an upward trend. This indicates that the demand for high-grade iron ore continues to outstrip supply, and our contacts with customers anticipate that the shortage of quality ore will increase.

In June we attended Metal Bulletin’s large annual iron ore conference in Vienna, at which we, as the only mining development company, were invited to give a presentation on our ongoing feasibility study. The results of the study, and, in particular, the quality of our product attracted considerable attention.

In connection with the conference we also signed an important declaration of intent with a large international trading house. This agreement, which was negotiated during the spring, is expected by us to result in binding delivery contracts for most of the planned production from Blötberget. It is also confirmation of the great interest in the market place for our high-grade iron-ore product.

During the period we also continued to work on securing the financing for the final part of the project study. As this had taken a fairly long time and in view of the decreasing liquidity, the Board decided to implement a programme aimed at substantially reducing fixed expenses. This work is continuing and the aim is to make a rights issue in the autumn.

In conclusion, it is gratifying to be able to report that we reached another important milestone for Ludvika Mines during the period, when we submitted an application for a mining concession for the southern part of the Väsman field.

Christer Lindqvist

VD Nordic Iron Ore

For further information: Christer Lindqvist, CEO 46 (0)240-88301
                                           christer.lindqvist@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.