Interim Report January – September 2020
Significant events during the third quarter 2020
- Whittle Consulting is working on the Blötberget optimisation study.
- A short-term loan amounting to SEK 5 million was raised in August.
Third quarter, 1 July – 30 September 2020
- Income amounted to SEK 0 million (0)
- Earnings after tax amounted to SEK – 2.4 million (–3.1)
- Investments in the period July - September totalled SEK 1.5 million (3.3)
- Basic earnings per share were SEK –0.08 (–0.15)
Interim period, 1 January – 30 September 2020
- Income amounted to SEK 0 million (0)
- Earnings after tax amounted to SEK –6.9 million (–8.3)
- Investments in the period July - September totalled SEK 2.4 million (12.1)
- Basic earnings per share were SEK –0.23 (–0.42)
- Cash and cash equivalents on 30 September 2020 amounted to SEK 8.1 million (5.8)
Significant events after the end of the period
- Whittle Consulting presented the optimisation study for Blötberget
With the goal of optimising the mine
The period was dominated by the work on the optimization study and at the end of September, Whittle Consulting presented the preliminary results for the baseline scenario in the study. The result was positive and the net present value increased sharply.
The baseline scenario entails, somewhat simplified, that, based on our definitive feasibility study, DFS, we have optimised the mining schedules while otherwise adhering to the assumptions and limitations specified in that study. More specifically, we adjusted the schedule for when we plan to mine specific parts of the mine based on economic cut-off rather than just iron content. The cost of mining and extraction varies based on where in the mine the mining takes place, for example, and the cost of processing varies as the hardness of the ore differs in different areas. In addition, magnetite and hematite have different enrichment properties and different market prices.
The optimisation of the DFS mining plans raised the estimated net present value (NPV) to USD 145.4 million, which is an increase of more than 30% relative to the feasibility study.
Subsequently, we analysed the possibilities of optimising production in the concentrator and maximising early production of magnetite. We found that a significant improvement is possible here, too, although to optimise the grinding capabilities it requires the production of a third product in the form of a coarser magnetite concentrate with 67-68%Fe content.
This modified baseline scenario shows an NPV of just over USD 172 million and an internal rate of return of 21.2% before tax.
We also simulated scenarios where the assumptions deviate to some extent from those used in the feasibility study. For example, some simulations assumed reduced investment costs through the use of contractors and a simpler design of the facilities. Also, according to historical documentation, there are approximately 5 million tonnes left to mine in the old Blötberget mine, but the old mine was omitted from the feasibility study. Assumptions about the mining of this mineralisation, as well as reduced investment costs and the use of contractors, further increase the NPV to between USD 180 and 255 million.
Discussions with suppliers and contractors have led to proposals and quotations in all major capital expenditure areas. Most recently, we received a proposal for the design of electrification, automation and control systems, and we are ready to start the detailed design of these systems as soon as we have secured financing for this work.
The financing for the period up through to the start of construction must be raised in several stages. We want to get started quickly with the final preparations for the final designs to initiate the construction project and are therefore looking for a capital injection before raising the larger financing needed for construction. Regarding the latter, we are currently evaluating different types of loan-based financing. Of course, we would like to receive the most favourable terms, but unfortunately the most inexpensive loans take time, so we may need to make a trade-off as we are anxious to get started quickly on building the mine.
We will not know how long it will take to raise the financing until the work is done. Therefore, we must have a somewhat fluid schedule until the financing has been secured for the entire project. After that, we estimate that construction will take approximately two years.
The market
The market remained essentially stable at a high level, mainly driven by China, which rebounded strongly in terms of growth and consumption. However, supporting the prices there were some supply problems and stricter environmental requirements, primarily in China but also elsewhere.
The realization that all producers will incur increased costs to account for all the social and safety-related issues raised in recent years has contributed to price increases on the futures market.
Carbon-free steel production is developing rapidly, and the interim phases include DRI technology and thereby the need for high-quality iron ores. This trend is highly advantageous for Nordic Iron Ore.
For further information please contact:
Lennart Eliasson Managing Director
phone: +46 70 640 5177
lennart.eliasson@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. The Company has all the necessary permits in place for the mine in Blötberget and will be able to produce iron ore of extremely high quality.
For more information, see www.nordicironore.se.
Nordic Iron Ore’s shares and warrants are listed at Nasdaq First North Growth Market. Wildeco is the company’s Certified Adviser (info@wildeco.se tel +46-8-545 271 00).