Nordic Mining ASA (EN Expand:NOM) - Interim report per 30 June 2021

Please find enclosed Nordic Mining’s interim report and company presentation for the second quarter of 2021. The interim report and company updates will be presented digitally today, Friday 13 August 2021 at 10.00 (CET). The presentation and Q&A session will be held in English and transferred via webcast. You will have the opportunity to post questions online throughout the webcast session. The webcast will be available on: https://channel.royalcast.com/landingpage/hegnarmedia/20210813_5/

Important events in the second quarter of 2021 and year to date:

CORPORATE

Successful capital raise of NOK 80 million

In February 2021, Nordic Mining completed a private placement with gross proceeds of NOK 80 million. The capital raise enabled the Company to participate in  Keliber’s equity issue in March/April to retain an ownership of 14.3%. The remaining funds will be used towards securing financing for the Engebø project, and preparing for execution, as well as development of the Group's position within the seabed mineral resources area, and for general corporate purposes and business development.

ENGEBØ RUTILE AND GARNET PROJECT (100% ownership)

Updated Definitive Feasibility Study reconfirms Engebø as a world class mineral project

In May 2021 Nordic Mining ASA completed the Updated Definitive Feasibility study (“UDFS”) for the Engebø Rutile and Garnet project. The UDFS is an update of the DFS which was completed in January 2020. The UDFS confirmed Engebø as a sustainable and economically robust mineral project with reduced financing risk, improved financial resilience, and attractive financials returns.

Key UDFS economic figures and highlights:

• • Pre-tax NPV@8% of USD 355 million
  • Pre-tax IRR of 22.5%
  • Post-tax NPV@8% of USD 260 million
  • Post-tax IRR of 19.8%

• High-margin cash flow and short pay-back support bankability:
  • Initial capital investment of USD 218 million reduced from USD 311 million in DFS, maintaining a Run-of-Mine (ROM) of 1.5 Mtpa
  • Life of Mine EBITDA of USD 2.1 billion, corresponding to an EBITDA-margin of 68%
  • Life of Mine Operating Cash Flow of USD 1.7 billion
  • Free Cash Flow the first 10 years of full operations of USD 51 million per annum
  • Pay-back period of 4.4 years from start of production

• Reduced environmental footprint:
  • 99% reduction in consumption of approved chemicals in the production process (compared with the 2016 environmental permit)
  • ~ 80% reduction of CO2 emissions
  • ~ 40% reduction of the process plant facilities footprint

Long-term offtake agreements signed for the full rutile production from Engebø

In July 2021 Nordic Mining signed term sheets for offtake of rutile with a reputable Japanese trading house and Kronos (US), INC., a globally leading pigment producer and, which subject to the entering into of the final offtake agreement, will secure sales for all the annual production of rutile for the first five years of production. The term sheet with the Japanese trading house builds on the Heads of Agreement signed in January 2019 for offtake of rutile and participation in the financing for the Engebø project.

The parties will start the process of finalizing the final offtake agreement, which in respect of the Japanese trading house will be negotiated in parallel with negotiating their participation in the financing of the Engebø project.

Engineering, Procurement and Construction and Project Management Consultant partners commissioned for construction

Nordic Mining signed in May 2021 Letters of Intent with Sunnfjord Industripartner AS, Åsen & Øvrelid AS, Nordic Bulk AS, and Normatic AS as partners for Engineering, Procurement and Construction (together EPCs) and leading engineering companies Hatch and Sweco as Project Management Consultant (PMC). The Letters of Intent are a formalization of EPCs contributions towards the UDFS and the optimized contracting and execution strategy developed as part of the UDFS. The PMC will be integrated in the owners’ team, reporting to the Engebø Project Director, and will be responsible for process design, and overall engineering coordination and integration of the selected partners for Engineering, Procurement and Construction. The parties plan to formalize the final EPC and PMC contracts during Q3 2021.

Following the commissioning of the EPCs and PMC the Company has started Pre-Construction work to advance selected Detailed Engineering activities earlier than UDFS project schedule, increasing flexibility on schedule for construction activities.

Financial advisors appointed for financing of the Engebø project

In June 2021, Nordic Mining appointed Clarkson Platou Securities AS and SpareBank 1 Markets AS to advice on the project financing for the Engebø project. Pre-sounding with selected and strategic and financial investors to explore available equity and debt structures has started and the process to engage an Independent Technical Engineer for the financing transaction is ongoing. The formal financing process is planned to start later this year, with aim to conduct and execute financing by year-end 2021.

Implementation of environmental and social management systems

The Company is implementing an integrated and comprehensive Environmental and Social Management System (ESMS) for the Engebø project to ensure environmental and social issues are managed in accordance with International Finance Corporation’s (IFC) Performance Standards and the Equator Principles, as well as Norwegian permits and regulations.

The Company has implemented a Stakeholder Engagement Plan to strengthen and build sustainable stakeholder relations prior to, and during construction, and further into the production phase, and is in the process of finalizing a Waste Management Plan. The management plans have been reviewed by the international mining consultancy firm SRK Consulting (SRK) to ensure compliance with the IFC standards. A local resource group has been established with participation from key stakeholder groups to participate in the Company’s environmental monitoring program.

Revised discharge permit granted

In January 2021, the Environment Agency granted a revised discharge permit implying a substitution of chemicals from the original permit, commenting that the significant reduction in chemical consumption will have lower impact on the environment than the previously planned consumption.

Increasing demand for high-grade feedstock and supply uncertainty underpins fundamentals for Engebø

Rutile demand continues to strengthen with recovery in Europe and USA in the aftermath of the Covid-pandemic. Demand for high-grade feedstock is reported to have been particularly strong in the US as result of chlorine supply challenges for pigment production, with pigment producers having to increase the usage of rutile to optimize production and capacity utilization in line with the increasing demand. The average rutile price in the first half of 2021 is reported to be around USD 1,230 per tonne (FOB), which is up around USD 30 per tonne compared to the first quarter of 2021.

In May 2021, Iluka announced that it will suspend the production of rutile in Sierra Leone from November this year as a result of poor economic performance. This will reduce the global supply of rutile by more than 140,000 tons per year. Iluka has indicated that the operations can be suspended for up to two years, and if no progress is made, that the mine could move into closure. Furthermore, the force majeure situation at Rio Tinto’s Richards Bay plant in South Africa has made the plant’s future stability of high-titanium slag supply uncertain. This represents a considerable short to medium term supply uncertainty, which will continue to drive a tightening of the rutile market, with downstream users now more active in securing rutile raw materials, and with spot supply of rutile being very tight.

The garnet demand in 2020 was impacted by reduced economic activity and lower oil price. Prices of garnet to end-customers in the main markets in Europe and USA have to a large extent been reported to remain unaffected, despite demand having contracted with an estimated 20–25%. The existing main producers of garnet are in Australia, China, India, and South-Africa, with no production in Europe. In the USA, domestic production is significantly short of the demand. Various garnet buyers have indicated that long-term supply of high-quality garnet from Europe is important for supply security and efficient logistics. Nordic Mining has provided garnet samples for testing, and the results compare well with industrial reference qualities. Positive discussions continue with potential distributors for long-term offtake agreements. 

KELIBER LITHIUM PROJECT (14.3% ownership)

Measured and Indicated Mineral Resources of Rapasaari deposit increased by more than 30%

In May 2021, Keliber increased the Measured and Indicated Mineral Resources of the Rapasaari deposit to 8.10 million tonnes. This is an increase of 31% from the previous resource estimate. Including Inferred Mineral Resource, the increase is 17.4%. The total Measured and Indicated Mineral Resources of Keliber now total 13.69 million tonnes (previously 11.77). Including the Inferred Mineral Resources, the total Mineral Resources are 15.62 million tonnes (previously14.19). The average Li₂O grade of the Keliber’s combined Mineral Resources is 1.05%.

Keliber’s Mineral Resource estimates comply with the JORC 2012 code, and are reported at a cut-off grade of 0.50% Li₂O.

Building international partnership with leading international mining company

In February 2021, Keliber entered into an investment agreement with the leading international mining company Sibanye-Stillwater Limited (SSW) for an initial phased equity investment of EUR 30 million for approximately 30% shareholding in Keliber. In March, the first tranche of the initial investment was closed with SSW subscribing for shares for EUR 15 million, and at the same time a share issue of up to 250,000 shares was opened to existing shareholders of Keliber. In the issue, which was conducted in March/April 2021, Nordic Mining was allocated in total 58,975 shares at an issue price of EUR 40 per share corresponding to approximately 23.6% of the share issue, to retain an ownership of 14.3%. SSW plans to play a key role as an industrial anchor investor in the project financing planned for mid-2022 and has in accordance with the investment agreement the option to secure a majority shareholding in Keliber, following the completion of the updated Feasibility Study.

Project update and review

Keliber continues to advance the lithium project including technical planning, permitting, ore potential, market assessments and financing. The company have decided to increase the production capacity for lithium hydroxide from 12,000 to 15,000 tonnes per year. Further, the concentrator plant will be moved closer to the main spodumene deposits to increase efficiency and reduce environmental footprint. Basic engineering work is ongoing related to the concentrator, tailings disposal solutions and the chemical plant.

Environmental permit applications for all main activities have been submitted. The EIA report for the concentrator and main mining areas was submitted to the authorities in November 2020. In June 2021 Keliber submitted applications for environmental and water management permits for the Rapasaari mine and the Päiväneva concentrator, following the Vaasa Administrative Court rejection of the appeals to the permits. The environmental permit application for the Kokkola chemical plant was submitted in December 2020. In June 2021 the ELY Centre for South Ostrobothnia issued a reasoned conclusion on the updated Environmental Impact Assessment (EIA) report for the Kokkola chemical plant stating that the plant does not have a significant environmental impact. Keliber expects the permit decision by end of 2021.

Keliber is expected to complete an update of the DFS early in 2022.

Electrical Vehicle market and shift to e-mobility driving lithium market outlook

In the first part of 2020, lithium prices were under pressure driven by the uncertainties caused by the Covid-pandemic. In the second half of the year, economic activity including electrical vehicle manufacturing picked up and the market balance for lithium was tightening. The ongoing and expected recovery of economies and the pace of transition towards greener and more sustainable solutions are expected to fuel the lithium market in the coming years.

In the 2020 list of Critical Raw Materials, the European Union indicated that Europe would need about 60 times more lithium, which is critical for a shift to e-mobility, for EV batteries and energy storage by 2050. The first European battery giga-factories are coming to production in 2021, and with more giga-factories in project phase, including significant battery initiatives in the Nordic countries.

Keliber’s targeted position as a low-cost producer and the first producer in Europe of battery-grade lithium hydroxide is expected to be an advantage when it comes to future sales to battery manufacturers.

NORDIC OCEAN RESOURCES (NORA) (100% ownership)

Nordic Mining has taken pioneering initiatives related to seabed mineral in Norway through the subsidiary Nordic Ocean Resources (NORA) giving the Company valuable knowledge for business development. NORA participated in the MarMine project on marine mineral resources coordinated by the Norwegian University of Science and Technology (NTNU). Research assessments indicate an attractive potential for discovery of metallic ore deposits with possible significant economic values within Norway’s exclusive economic zone.

In 2019, the new Seabed Minerals Act came into force as result of systematic mapping of seabed minerals by the Norwegian Petroleum Directorate. Prior to opening for seabed mineral extraction, an environmental impact assessment must be carried out and in January 2021 the Ministry of Petroleum and Energy on issued a hearing for a proposal for an impact assessment program.

Nordic Mining have, in light of the positive developments on the regulation of seabed minerals, and increased focus on how the Norwegian mining industry can play an important role on seabed minerals to support the green transition, increased the efforts to commercializing the Groups understanding and positioning on seabed minerals developed through the pioneering initiatives of NORA.

Oslo, 13 August 2021
Nordic Mining ASA

Nordic Mining ASA (www.nordicmining.com)

Nordic Mining ASA (“Nordic Mining” or the “Company”) is a resource company with focus on high-end industrial minerals and metals. The Company’s project portfolio is of high international standard and holds significant economic potential. The Company’s assets are in the Nordic region.

Nordic Mining is undertaking a large-scale project development at Engebø on the west coast of Norway where the Company has rights and permits to a substantial eclogite deposit with rutile and garnet. Nordic Mining also holds 14.3% of the shares in Keliber Oy, which is developing a lithium project in Finland to become the first European producer of battery grade lithium hydroxide.

In addition, Nordic Mining holds interests in other initiatives at various stages of development. This includes patented rights for a new technology for production of alumina and exploration of seabed minerals.

Nordic Mining is listed on Euronext Expand Oslo with ticker symbol “NOM”.