Positive Results from Finnish IOCG Project; Northland Likely To Seek Partners

Luxembourg, May 12, 2010  Northland Resources S.A. (TSX: NAU, OSE: NAUR - "Northland" or "the Company") is pleased to announce the positive outcome of the Preliminary Economic Assessment (PEA) on its 100%-owned Hannukainen Iron Oxide-Copper-Gold (IOCG) Project ("the Project") located in northern Finland.  Watts, Griffis and McOuat Limited ("WGM"), Consulting Geologists and Engineers of Toronto, Canada, was responsible for the overall PEA, and was supported by Hatch Engineering ("Hatch"), Northland for various aspects of the study and an international accounting firm was engaged to assist with the development of the economic model.

"The results of the PEA demonstrate that the Hannukainen IOCG Project has the potential to be a financially rewarding project with robust operating margins and high rates of return", said Bill Wagener, Northland's Executive Vice President - Finland.

"We are pleased that the Company's portfolio now includes two iron projects with completed PEAs that indicate that the projects are technically and economically viable; the Kaunisvaara Iron Concentrate Project (Sweden) and now the Hannukainen IOCG Project (Finland).  The priority of Northland is to complete the Feasibility Study currently underway on the Kaunisvaara Project and to secure financing for that project.  With respect to Hannukainen, we will likely seek partners to participate in the project before proceeding to the Feasibility Study stage", said Karl-Axel Waplan, President and CEO.

Highlights of the PEA include:

• Using a discount rate of 8%, the Project has a potential Net Present Value (NPV) of US $471 million, an Internal Rate of Return (IRR) of 32.5% and a 2.4 year payback period from first production.
• Total Operating Cost (OPEX) per tonne of iron concentrate, including Cu and Au credits, delivered FOB at the port of Kemi, Finland, is estimated to average US $31.86/tonne for the Life of Mine (LOM), and averages US $26.35 over the first 10 years of operation.  The OPEX figures include contingency, royalty, transport and port loading.
• Capital expenditure (CAPEX) to first production is estimated at US $371M and maximum negative cash is US $382M.
• The updated Hannukainen mineral resources contained within a US 110 cents/dmtu (dmtu = dry metric tonne unit) Iron (Fe) price, 15% Fe cut off and within an optimized pitshell are 101M tonnes Measured and 9M tonnes Indicated for a total of 110M tonnes grading 33.9%Fe, and 0.17% Copper (Cu).
• The PEA, based on a more conservative Fe pricing assumption of US 85 cents/dmtu, a 20% Fe cut off and within an optimized designed pit identified 75M mineable tonnes of process plant feed at a grade of 35.7% Fe.  This entire tonnage is classified as Measured and Indicated mineral resources.
• The PEA envisions Hannukainen beginning production in 2014 with an estimated 14 year Mine Life based on the NI 43-101 defined surface mineable mineral resources at Hannukainen.
• The production rate is planned at 2M tonnes per year of Fe concentrate at approximately 69% Fe.  In addition, significant value is derived from the production of a Copper/Gold (Cu/Au) concentrate which is a by-product of the Fe processing.  The Cu/Au concentrate is estimated to contain 25% Cu and 5.4 grams per tonne Au with 7.7 grams per tonne Au in the early years.  The LOM average annual Cu/Au concentrate production is 35,000 tonnes per year.
• Additional mineral resources were identified in areas that were not included in the PEA.  An underground resource at Hannukainen was estimated at 88M tonnes Inferred mineral resources grading 31.7% Fe at a 20% Fe cut off.  A new resource was defined at the nearby (4 kms north) Kuervitikko deposit with Indicated mineral resources of 26M tonnes grading 24% Fe and Inferred mineral resources of 19M tonnes grading 22% Fe at a 15% Fe cut off.
• WGM completed the mineral resource estimates for Hannukainen and Kuervitikko.  Hatch, supported by Northland, developed the capital and operating costs.  Raw Materials Group (RMG) developed the Fe pricing assumptions and CRU Strategies (CRU) developed the Cu pricing assumptions.  An international accounting firm was engaged to assist with the development of the economic model.  The final report will be posted on SEDAR within 45 days.

Resources

Hannukainen - The Hannukainen mineral resource was updated with an additional 245 drill holes that have been completed since the initial resource report in 2007.  This exploration and infill drilling increased the total global tonnage of Hannukainen by 29%. Due to the 50m centered infill drilling, the proportion of Measured and Indicated tonnage at a 15% Fe cut off also increased by 76% over the previous 2007 estimate.

The mineral resources for Hannukainen estimated by WGM outline a total of 110MT of Measured and Indicated mineral resources.  These are stated at a 15% Fe cut off and are contained within a US 110 cents/dmtu Fe price optimized pit shell.

Utilizing the resource above, the PEA was based on a more conservative US 85 cents/dmtu Fe price, US $2.20/lb Cu price and US $850/oz Au price and identified 75M tonnes of process plant feed averaging 35.7% Fe, 0.19% Cu and 78 PPB Au over the life of the mine. This entire tonnage was comprised of Measured and Indicated mineral resources.

Hannukainen Underground - In addition, an underground Inferred mineral resource of 88M tonnes grading 31.7% Fe, at a 20% Fe cut off, was identified but not included in the PEA.  The underground tonnage figures shown below are stated at a higher 20% Fe cut off to reflect additional underground mining costs.

Kuervitikko - A new mineral resource estimate for the Kuervitikko satellite deposit, located 4 kms to the north of Hannukainen, has the potential to extend the operating life of the processing facilities.  The Kuervitikko mineral resource was not included in the Hannukainen PEA.  The mineral resource estimate was based on the available historic information and 122 drill holes completed by the Company and is stated at a 15% Fe cut off which approximates what is considered potentially economically viable towards the end of the anticipated Hannukainen mine life.

Note: The inpit mineral resource for the Hannukainen deposit was constrained within mineralized solids defined by a 12% Fe cut off and within a Lerchs-Grossman pit shell using the following assumptions; a metal price of US 110 cents/dmtu for magnetite concentrate; US $2.20/lb Cu; US $850/oz Au; slope angles varying between 35-53 degrees; mining recovery of 98%; mining dilution of 2%; mine operating cost of US $1.75/tonne; process cost, G&A and Transport Cost of US $11.92/tonne ore; concentrate grade of 68.50%Fe; Recoverable Fe% = 0.003349975* (Fetot - ((0.8645x Cu/10000) + (0.45 x 0.873 x (S-(Cu/10000x0.9941))) + (0.55 x 1.5 x (S-(Cu/10000x0.9941)))))^2+(0.90843175*(Fetot - ((0.8645x Cu/10000) + (0.45 x 0.873 x (S-(Cu/10000x0.9941))) + (0.55 x 1.5 x (S-(Cu/10000x0.9941))))) -6.374900458; Cu% Recovery = 109.77x Cu%_Head + 63.243; Au% Recovery = 246.46 x Aug/t_Head + 7.1886.

The PEA pit shell was defined using the same assumptions as above however with a US 85 cents/dmtu Fe price assumption.  The underground mineral resources for Hannukainen deposit were below the US 110 cents/dmtu Fe price pit shell and above a 20% Fe cut off.  The Kuervitikko mineral resources were stated using a 15%Fe cut off.      

Resource Classification

Resource classification was based on a variety of criteria including quality assurance and quality control (QA/QC) program verification of data and protocols, drill hole density and geological continuity.

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Database Validation

The QA/QC program for Northland's Hannukainen and Kuervitikko drilling consists of alternating the insertion of a blank or standard sample on a regular basis within the sample train. Because Northland employs several standards with varying grades these are also alternated. Also, samples are flagged regularly for the primary laboratory to prepare a lab duplicate for analysis by a second laboratory. The ALS Chemex analytical laboratory analyzed the samples in batches of 81 and each batch has multiple samples for testing for cross contamination and reproducibility of results.

WGM found that the results of the above described QA/QC program indicates that Northland's Hannukainen and Kuervitikko assay databases were appropriate for mineral resource estimation.

Data Verification

Richard Risto P.Geo., WGM Senior Associate Geologist is a Qualified Person as defined by National Instrument 43-101 and as qualified person completed the verification of data on which the Hannukainen and Kuervitikko resource estimates were based. This verification included an assessment of QA/QC data, sample preparation and assay methodologies, core recoveries, density data, data inputs, survey data and validation of historic exploration data used in the estimate. Data was validated by using field checks, statistical methods and evaluating written protocols.

Qualified Person

Vladimir Benes, Ph.D., Vice President of Exploration for Northland Resources S.A., is the Qualified Person in accordance with National Instrument 43-101 responsible for overseeing the execution of Northland's exploration programs and for verifying that the information presented in this news release is an accurate summary. Dr. Benes is a fellow member of the Australasian Institute of Mining and Metallurgy (Member #300308). Mineral resources of the Hannukainen and Kuervitikko projects have been estimated and categorized for reporting purposes by Mr. Kurt Breede, P. Eng., Vice-President of WGM. Mr. Breede is a Qualified Person as defined by the National Instrument 43-101 and is an independent consultant to Northland Resources S.A.

PEA Overview

The PEA modeled the development of the Hannukainen deposit but did not include the nearby (4 kms north) Kuervitikko resource.  It is anticipated that as Northland identifies suitable adjacent resources, they will be developed to provide feed to the processing facility located adjacent to the Hannukainen deposit.

The PEA commenced in November 2009, with WGM being responsible for the overall study, supported by Hatch who provided the engineering detail, capital and operating cost estimates.  Northland provided infrastructure costing and an international accounting firm was engaged to develop the economic model.  RMG provided the Fe pricing scenarios and CRU provided a Cu pricing scenario.

PEA Results

Using the Base Case Scenario, the Project has a potential NPV of US $471 million and an IRR of 32.5%.  The capital payback period is 2.4 years.  The maximum negative cash position was US $382 million.  A real discount rate of 8% and a USD/Euro exchange rate of 1.28/1.00 were applied in these calculations.  The product pricing used is described in the next section.  Sensitivity Analysis on the Base Case is provided as well.

Capital and Operating Cost Estimates were compiled by Hatch based on information developed by their teams and as provided by Northland. 

Total CAPEX to first production has been estimated at US $371 million. This is based on the development of the Hannukainen mine with adjacent processing facilities.  Fe concentrates are transported via pipeline from the processing facilities to a filter plant and rail loadout facility at the rail head approximately 11 kms southwest of the mining operation.  Fe concentrate will be dried at the filter plant for loading on rail and shipment to the Port of Kemi for vessel loading.  The rail line is presently being upgraded by the Finnish rail authority to handle up to 3 million tonnes per year of concentrate.  Discussions are ongoing with the Finnish rail authority to increase the rail capacity to more than 7 million tonnes per year to accommodate both of Northland's projects in Sweden and Finland.

Total OPEX has been estimated at an average of US $54.72 /tonne of Fe concentrate delivered Free on Board ("FOB") to the Port of Kemi, Finland, over the Life of Mine.  However, there are significant credits due to the Cu/Au concentrate produced in conjunction with the Fe concentrate.  These Cu/Au credits average US $22.86 per tonne of Fe concentrate over the life of the mine.  After adjustment for the Cu/Au credits the average OPEX for the Fe concentrate is reduced to US $31.86 per tonne.  The Cu/Au concentrate averages 35,000 tonnes per year but with significantly higher benefits in the first 4 years.  The capital and operating costs were developed to an accuracy of plus or minus 30 per cent and include all direct and indirect costs, EPCM costs, and contingency and accuracy provisions.

The table below shows the Fe concentrates operating costs per tonne delivered FOB at Port of Kemi after reductions from the Cu/Au concentrate credits.  Total Operating Cost (OPEX) per tonne of iron concentrate, including Cu and Au credits, delivered FOB at the port of Kemi, Finland, is estimated to average US $31.86/tonne for the Life of Mine, and averages US $26.35 over the first 10 years of operation.  The OPEX figures include contingency, royalty, transport and port loading.  Note that in years 1 through 4 the Cu/Au concentrate revenues are substantial enough to nearly offset the entire cost of Fe concentrate production, processing, transportation and port loading.

(see pdf)

The following table shows the year by year value of the Cu/Au concentrate in US $/dry metric tonne of Fe concentrate.

(see pdf)

The Hannukainen IOCG Project is planned to produce approximately 2 Mtpa of iron ore concentrate per year and an average of 35,000 tonnes per year of Cu/Au concentrate based on the PEA design basis maximum feed rate of 6.5 Mtpa.  The Life of Mine average feed rate is 5.4M tonne per year.  The PEA indicates that the total Project life will be 14 years and excludes the Kuervitikko satellite deposit and the Hannukainen underground resources.  The table below shows the year by year Fe concentrate and Cu/Au concentrate production.

(see pdf)

Product Pricing

Fe Concentrate - The Fe concentrate pricing was developed Raw Materials Group (RMG).  RMG put forth two pricing scenarios, a High-Point case and a Low-Point case.  The Base Case pricing used an average of these two price projections.  In addition, a Stress Test was also modeled based on a flat Fe concentrate price of US 83 cents/dmtu.  The results of these economic sensitivities are shown in a table further below.  The table below shows the Fe concentrate pricing scenarios modeled.  All prices are expressed in nominal dollars.

(see pdf)

Cu/Au Concentrate - The Cu/Au concentrate was valued based on the Cu price prediction developed by CRU and an Au price of US $850 / ounce flat.  Cu/Au concentrate is expected to contain 25% Cu and 5.4 Grams per tonne Au with 7.7 grams per tonne Au in the early years, concentrate value was reduced by transportation costs and industry standard smelting charges.  In the Stress Test Case, Cu price was reduced to US $1.80 / pound and Au to US $500 / ounce.  In the Upside case Cu pricing was held flat at US $3.00 / pound and Au at US $1,000 / ounce.  The table below shows the Cu pricing used in the Base Case.  

(see pdf)                                                        

Sensitivity Analysis

The following sensitivity analyses have been modelled.

Permitting

The PEA provided the development alternatives necessary for submission of the Environmental Impact Assessment (EIA) Program to the Finnish environmental authorities.  The submission will be finalized in the near future and delivered to the authorities for processing.  The EIA process is an interactive process that includes all stakeholders and the evaluation of alternative site development options.  Processing time is typically one to two years.

Resources and Mining

The Hannukainen open pit contains mineral resources that may potentially be mined of 75 million tonnes of iron ore at an average grade of 35.7% Fe with an overall stripping ratio of 3.6:1 (waste to ore).  The current mining plan will produce an average of 5.4M tonnes of plant feed per year and remove an average of 19.2M tonnes per year of waste.

Mining is planned to utilize an all diesel fleet of shovels and 180 tonne trucks, moving approximately 25 million tonnes of total material per year.  Pre-stripping will be reduced by the ability to start mining in the historic Hannukainen pit which will also provide sufficient working room to allow full production in the first year of mining.  Crusher feed will be hauled to the pit rim, crushed and transported by conveyor to the processing plant.

Mineral Processes

Process development work has been conducted on the Hannukainen resource by Northland staff and consultants, with all testwork being conducted by SGS Minerals Services. The resulting flowsheet consists of standard mineral processing technologies and has proved to be capable of efficiently and effectively processing the predicted range of feed ore grades. The initial primary crushing of the feed ore will be done using a gyratory crusher (currently owned by Northland) before the crushed ore is fed to the beneficiation plant (summarised in the flow sheet below).  All crushing and beneficiation work will be conducted at the mine site.

The crushed ore is initially fed to a grinding circuit, consisting of one semi-autogenous grinding (SAG) mill and two ball mills (in parallel), resulting in a ground ore with a P₈₀ of approximately 100µm. The ground ore then passes into a flotation circuit designed to remove (and subsequently upgrade) the Cu into a concentrate containing approximately 25% Cu and 5.4 grams per tonne Au with 7.7 grams per tonne Au in the early years.  The remaining iron-bearing minerals then pass through three stages of low-intensity magnetic separation (LIMS) to remove the non-magnetic minerals. The magnetic minerals proceed to a final flotation stage, designed to remove the pyrrhotite, resulting in an iron concentrate containing approximately 69% Fe, 2.6% SiO₂, 0.5% Al₂O_3, 0.6% MgO, 0.05% S and 0.002% Cu.

The iron concentrate and a combined tailings stream are then pumped in separate lines to a dewatering plant at Rautavaara. The iron concentrate will be filtered to a 6% moisture content in preparation for railcar loading for transportation to the Port of Kemi. The copper concentrate will be filtered to a 10% moisture content and bagged at the plant site for transport via container to a nearby smelter. The tailings will be disposed of in the nearby Rautavaara tailings facility which served as a tailings disposal facility for the historic operations and has significant remaining storage capacity.

A simplified flowsheet is shown below:

(see pdf) 

Infrastructure/Logistics

Transport costs of the iron ore concentrate from the mining area to the end customer are crucial for the feasibility of the project.  Northland is in close cooperation with both the Swedish and Finnish transport authorities to develop an efficient logistic solution for its Swedish and Finnish projects.  The rail head at Rautavaara is approximately 11 kms southwest of the Hannukainen mine and processing facilities; this will make a suitable area for the installation of a filter plant and rail loadout facility.  The location at Rautavaara previously had an installed rail loadout used by the historic mining operations at Hannukainen.  While the spur from Kolari to Rautavaara has not been used since the early 1990's, the rail grade, bridges and most of the track are still in place.  The cost of refurbishment of the rail line from Kolari to Rautavaara was assumed to be included in the rail transportation rate.

In support of Northland's Swedish project the Company has been in discussions with the Port of Kemi and several port operators.  The Company has executed a Memorandum of Understanding with the Port of Kemi and a Letter of Intent for the "build-and-operate" of the terminal itself with Kemi Bulk Terminal which is a JV between Havator and Euroports.  It is assumed in the Hannukainen PEA that the Fe concentrates would be shipped through the Port of Kemi using the same facilities developed for the Swedish projects.

The PEA assumes that the power for the project will be supplied via the Finnish power grid.  Examination of the electricity generation capacity indicates that sufficient power is available for the facilities.  There may be a need to upgrade some of the transmission lines and the cost of this upgrade has been included in the electricity consumption charges.

Development Schedule

A provisional timetable for development of the project is as follows:

The NI 43-101 Technical Report in support of the PEA will be filed on SEDAR (www.sedar.com) and Northland's website within 45 days.

ITmk3 Scoping Study

Separately to, but in parallel with the Hannukainen PEA, Northland conducted a scoping study to examine the potential viability for operating an ITmk3® iron making plant, to produce iron nuggets from Fe concentrates.  This facility could provide a "value added" alternative market for Northland's Fe concentrates.  The study modeled a production facility located in southern Finland producing Iron Nuggets from iron concentrates.  Kobe Steel Ltd. of Japan and Midrex Technologies Inc. (a wholly-owned subsidiary of Kobe Steel Ltd.) of Charlotte, North Carolina, USA, are the suppliers of the ITmk3® iron making technology and contributed capital and operating cost data for the study.  In evaluating the economics of the ITmk3® facility all raw materials including Fe concentrate were assumed purchased at predicted world market prices.

The results of the Study demonstrate that the ITmk3® Project has the potential to be a financially rewarding project with robust operating margins and high rates of return.

Highlights of the study are:

• Using a discount rate of 8% the project has a potential Net Present Value (NPV) of US $816 million, an Internal Rate of Return (IRR) of 22.8% and a payback period of 3.9 years from first production.
• The project assumes that there will be a phased development of two of 0.5 million tonne per year units to provide a total output of 1.0 million tonnes per year of iron nuggets.
• Capital expenditure for first unit is estimated to US $335 million and the maximum negative cash over the project is estimated at US $530 million. The CAPEX figures are within a ±30% accuracy and have an inbuilt contingency of 15%.
• Total OPEX per tonne of nuggets is estimated to be US $297. The OPEX figures are within a ±30% accuracy and have an inbuilt contingency of 15%.

Market reports by Midrex and Raw Materials Group have been used to define a potential target market in excess of 100 customers within Europe where iron nuggets could replace the use of either other pig-iron sales or the even larger market of higher quality scrap.

Cautionary Statements

The effective date of the Hannukainen and Kuervitikko mineral resource estimates is May 12, 2010. The Fe% presented in the above tables is not meant to imply recoverable product. Mineral resources for the Hannukainen and Kuervitikko Iron Projects have been estimated and classified according to the "CIM Standards on Mineral Resources and Reserves: Definitions and Guidelines (December 2005) by K. Breede an independent Qualified Person as defined by National Instrument 43-101.

Mineral resources were estimated in conformity with generally accepted CIM "Estimation and Mineral Resources and Mineral Reserve Best Practices Guidelines". WGM is not aware of any known environmental, permitting, legal, title, taxation, socio-economic, marketing or other relevant issues that could potentially affect the estimate of mineral resources. The mineral resources may be affected by subsequent assessments of mining, environmental, processing, permitting, taxation, socio-economic and other factors. There is insufficient information at this stage to assess the extent to which the resources will be affected by these factors that are more fully assessed in a feasibility study.

Please note that the PEA is preliminary in nature. There is no certainty the results of the PEA will be realized.

The quantity and grade of reported Inferred mineral resources in this estimation are uncertain in nature and there has been insufficient exploration to define these Inferred mineral resources as an Indicated or Measured mineral resource, and it is uncertain if further exploration will result in upgrading them to an Indicated or Measured mineral resource category.

ON BEHALF OF THE BOARD

"Karl-Axel Waplan"

President & CEO

Northland Resources S.A.

For more information please contact:

Or visit our website at: www.northland.eu

CAUTION REGARDING FORWARD-LOOKING INFORMATION

This press release contains forward-looking information within the meaning of securities laws. Except for statements of historical fact relating to the Company, certain information contained herein constitutes ''forward-looking information'' under Canadian securities legislation. Forward-looking information includes, but is not limited to, statements with respect to mineral reserve and resource estimates; the ability to realize estimated mineral reserves and to convert mineral resources into mineral reserves; terms and costs of future exploration; mineralization projections; receipt of all necessary approvals; the parameters and assumptions underlying the mineral resource estimates and iron ore prices. Generally, forward-looking information can be identified by the use of forward-looking terminology such as ''plans'', ''expects'' or ''does not expect'', ''is expected'', ''budget'', ''scheduled'', ''estimates'', ''forecasts'', ''intends'', ''anticipates'' or ''does not anticipate'', or ''believes'', or variations of such words and phrases or statements that certain actions, events or results ''may'', ''could'', ''would'', ''might'' or ''will be taken'', ''occur'' or ''be achieved''. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made. Estimates regarding the mineral resources, as outlined above and in the technical report, have been based on knowledge of company management and the knowledge and experience of third party experts. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Northland Resources Inc to be materially different from those expressed or implied by such forward-looking information. Although management of Northland Resources Inc has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking information. Northland Resources Inc. does not undertake to update any forward-looking information, except in accordance with applicable

This information is subject of the disclosure requirements acc. to §5-12 vphl (Norwegian Securities Trading Act)

The press release (including all tables) can be downloaded from the following link: