Nordic Mining ASA (OAX:NOM) - Interim report per 30 September 2020

Please find enclosed Nordic Mining’s interim report and company presentation for the third quarter of 2020. The interim report and company updates will be presented digitally today, Tuesday 3 November 2020 at 10.00 (CET). The presentation and Q&A session will be held in English and transferred via webcast at:  https://channel.royalcast.com/hegnarmedia/#!/hegnarmedia/20201103_5

You will have the opportunity to post questions online throughout the webcast session.

Important events in the third quarter of 2020 and year to date:

CORPORATE

Fully financed for ongoing DFS update and further into 2021

The Company continues to progress development activities for the Engebø project strategically toward update of the Definitive Feasibility Study (DFS). Total operating expenditures were reduced to NOK –6.0 million, compared to –7.7 million in the second quarter of 2020. The Group’s cash balance at 30 September 2020 was NOK 49.5 million. The Group has no interest-bearing debt and is fully financed for the ongoing DFS update and further into 2021 based on current plans and forecasts.

Strengthening of Management

The Group’s new CFO Christian Gjerde took up his position effective from 1 August 2020.

Titanium and lithium added to EU’s list of Critical Raw Materials

In September, the European Commission added titanium and lithium to its list of Critical Raw Materials to reflect the changed economic importance of the minerals in the transition towards a green and digital economy, and the need to develop resilient value chains for Europe's industrial ecosystems by reducing dependency on third countries, diversifying supply sources and improving resource efficiency and circularity.

ENGEBØ RUTILE AND GARNET PROJECT (100% ownership)

Definitive Feasibility Study reinforced Engebø as a world class rutile and garnet project

In January 2020, the Company published the results of the DFS for the Engebø project. The study reinforced Engebø as a world class rutile and garnet project and outlines the execution plan for the project.

Financial highlights from DFS:

• • Pre-tax NPV@8%     USD 450 million
  • Pre-tax IRR               21.9%
  • Post-tax NPV@8%   USD 344 million
  • Post-tax IRR             19.8%
• Strong cashflow and short payback support bankability:
  • Average annual free cashflow first 15 years of USD 70 million
  • Net operating cashflow (undiscounted) of USD 2,160 million
  • Initial capex of USD 311 million and deferred capex of USD 25 million (underground)  
  • Pay-back period < 5 years

Engebø DFS update in progress – material reduction of CAPEX expected

Following the finalization of the DFS Nordic Mining initiated, as a result of the uncertainties caused by the Covid-pandemic, a third-party Value Engineering review was undertaken by engineering company Ausenco, with the purpose to increase the project’s robustness to future market conditions. The review identified specific opportunities to materially reduce the initial project capital expenditure, and further improve the economic utilization of the Engebø deposit.

In early October, Nordic Mining appointed engineering companies Hatch and Axe Valley Mining to confirm and develop the opportunities identified to DFS-level for an update of the Engebø DFS.

The DFS update will focus on the following optimization opportunities:

• Reduce process plant footprint by changing construction strategy, and fit-for-purpose infrastructure, lay-out and buildings
• Early involvement of selected suppliers to optimize engineering and costing of main construction packages
• Reduce carbon footprint by use of alternative technologies, including use of electrical dryers
• Implement targeted mining strategy to maximize extraction of high-grade ore and postpone and minimize waste rock mining
• Revisions to underground mining strategy that focus on high-grade ore and increased overall extraction through the application of backfilling
• Optimize initial garnet capacity as a result of the market uncertainty caused by the Covid-pandemic

Engebø operating license completes the main regulatory permits for the project

On 17 June, the Directorate of Mining granted the operating license for the Engebø project. The license is granted for the life of mine of the project which includes an open pit and underground phase. The license regulates operational scope, methodology and procedures to secure safe and efficient production of the mineral resources and follows the strict regulation practice for Norwegian mining operations which implies high standards for environment, health and safety. The operating license completes the main regulatory permits for the project.

Environmental, Social and Governance at the core of Nordic Mining’s corporate strategy

Nordic Mining is continuously investigating measures to further improve the environmental and social aspects of the Engebø project. In June 2020, an application was submitted to the Environment Agency for substitution of chemicals that will be use in ore processing. The planned consumption is a 99% reduction compared with the granted chemicals in the environmental permit of 2015. Further, Nordic Mining is evaluating, as part of the update of the DFS, the use of (renewable) electric drying instead of natural gas to reduce climate footprint, and optimizing plant lay-out and configuration in order to reduce the physical footprint of the project.

The Company is in process of planning for implementation of integrated environmental and social management system to ensure environmental and social issues are managed in accordance with IFC Performance Standards and the Equator Principles, and all Norwegian permits and regulations.

Long-term fundamentals supportive for Engebø project

The market outlook for rutile and garnet remains uncertain in the short to medium term as a result of the Covid-pandemic. For rutile, long term fundamentals remain strong with global supply of rutile expected to be continuously reduced in the coming year as mineral deposits are depleted, at the same time as demand for rutile as a high-grade titanium feedstock is expected to remain strong driven by its value and importance for industrial applications. Rutile price in the first three quarters of 2020 is reported to be around USD 1,200 per tonne (FOB), which is above the long-term price used in the Engebø DFS.

For garnet, demand has been impacted by reduced economic activity and lower oil price, however prices are reported to remain relatively strong in Europe and U.S. The main producers of garnet are today located in Australia, China, India and South-Africa, with no production in Europe. European garnet buyers have indicated that long-term supply of high-quality garnet from Europe is important for supply security. Nordic Mining is in concrete discussions with companies for long-term offtake agreements for a considerable portion of the expected garnet production volume.

KELIBER LITHIUM PROJECT (16.3% ownership)

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

Keliber’s updated DFS for the lithium project was presented in February 2019 based on production of lithium hydroxide. In 2020 lithium prices have been under pressure driven by the uncertainties caused by the Covid-pandemic, however, increase in Electrical Vehicle manufacturing and strong sales are improving the lithium market outlook. EU indicated in their 2020 list of Critical Raw Materials that Europe will 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 European battery manufacturers. Depending of the rate of recovery of economies and the pace of transition towards greener and more sustainable solutions, a substantial recovery the lithium market is expected.

Ongoing project update and review

Keliber continues to advance the lithium project in various fields including technical planning, permitting, ore potential, market assessments and financing. This also includes activities to optimize the business case compared with the updated DFS published in February 2019. Decisions have been taken 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.

Positive interest from external investors towards Keliber-project

Keliber is in the process to raise EUR 30 million to finance the remaining planned project development activities up to project financing for project construction. Keliber stated in their “Progress Report Q3 2020” that they are in detailed discussions and negotiations with a handful of possible investors, and that they expect to close the financing by end of 2020.

Further, the company state that discussions with investors are based on the company’s latest projection of project economics with post-tax-IRR of 22%, expected cost leader in lithium hydroxide in 2025 and growing lithium demand as presented by Roskill in June 2020.

Oslo, 3 November 2020
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 a 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 16.3% 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 Oslo Axess with ticker symbol "NOM".