Interim Report January – September 2014

Significant events during the third quarter of 2014

•  A supplementary drilling programme for Blötberget was started at the beginning of July
•  The consulting firm DMT was engaged to provide an independent review of the feasibility study
•  Financing totalling approximately SEK 58 million before issue expenses was secured through a directed share issue and a rights issue.

Third quarter, 1 July – 30 September 2014

•  Income amounted to SEK 0 million (0)
•  Earnings after tax amounted to SEK -8.4 million (-3.0)
•  The investments during the period July – September amounted to SEK 9.3 million (2.6)
•  Basic earnings per share were SEK -0.73 (-0.26)

Interim period, 1 January – 30 September 2014

•  Income amounted to SEK 0 million (0)
•  Earnings after tax were SEK -19.5 million (-12.1)
•  Investments during the period January – September amounted to SEK 15.3 million (10.1)
•  Basic earnings per share were SEK -1.69 (-1.05)
•  Cash and cash equivalents on 30 September 2014 amounted to SEK 0.1 million (3.4)

Significant events after the period end

•  Convertible loans were converted to shares via an offset issue. Liabilities of SEK 12,217,500 were thereby converted to equity capital and 610,875 new shares were issued.
•  Test enrichment on a pilot scale of about 20 tonnes of crude ore from Blötberget by GTK in Finland began in November.

New share issues give us room for manoeuvre in a difficult market situation.

It is gratifying to note that the Company was able, despite a declining market for iron ore, to raise a significant amount of capital in the autumn. The successful outcome of the issues has sent positive signals in what is otherwise a rather gloomy market for iron ore. They brought SEK 58 million before issue expenses, providing the Company with some financial leeway to meet what will hopefully be a brief recession.

The price of iron ore has fallen sharply in recent months in reaction to the oversupply of ore that has arisen since several new low-cost mines in Australia started production and began to deliver ore. In a market of oversupply the producer with the highest marginal cost should be eliminated first; however, this does not seem to be the case at the moment!

The impact of the price fall has been greater owing to the fact that growth in China is expected to be somewhat lower, while at the same time Chinese high-cost mines now appear to be in a position to continue their unprofitable ore production, thereby delaying a price recovery. This may be due to inertia on the part of Chinese steelworks when it comes to switching their production of crude ore in the long term to imported low-grade ore, despite this being less expensive.

The question is how long this can continue. In the meantime it is a fact that China, as a nation and consumer of more than 50 per cent of the world’s production of iron ore, benefits when the spot price is put under heavy pressure.

Expectations of a price recovery in the near future should therefore be tempered until supply and demand settle down. Meanwhile the demand for iron ore is growing all the time, which means that there will be a balance between supply and demand over time.

It is not all gloom, however. There are factors which partly compensate for the price fall, especially where our planned products are concerned. The price premium for higher grades of ore tends to increase when the spot price of standard ore is falling. This is because there is, and there will continue to be, a shortfall of quality ore in the market. Moreover, the weakening of the Swedish krona benefits the Company and increases our competitiveness.

The prevailing market situation, however, means that the Company must be prepared to cope with a fairly long period of recession. Adjustments will be made to the work that is in progress within the scope of the feasibility study in order to create greater financial leeway.

This is likely to mean that the completion of the feasibility study will be postponed and that the restart of iron ore production in Blötberget will be delayed.

Finally, I would like to convey the Company’s thanks to all the new and existing shareholders who are supporting us. It is this support and the many positive advantages that Ludvika Mines have which make our company unique.

Christer Lindqvist

CEO Nordic Iron Ore

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

Nordic Iron Ore AB is a mining development company that aims to resume and develop iron ore production at Ludvika Mines in Blötberget and Håksberg. The Company has all the essential permits in place, and will be able to produce iron concentrate of extremely high quality from significant mineral resources. For more information, see www.nordicironore.se.