Kallak North Exploitation Concession Update

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations ("MAR") (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain. 

For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of Kurt Budge, Chief Executive Officer. 

1 February 2018

Beowulf (AIM: BEM; Aktietorget: BEO), the mineral exploration and development company, focused on the Kallak magnetite iron ore project and the Åtvidaberg polymetallic exploration licence in Sweden, and its graphite portfolio in Finland, has responded to the Government, as the Government seeks comments from interested parties on the County Administrative Board (“CAB”) for the County of Norrbotten statement dated 30 November 2017.

The Company has summarised the main points used by the CAB to support its latest position, that an Exploitation Concession for Kallak North should not be awarded. 

The CAB has argued that the estimated 14-year production life of Kallak, as included in the original application, is of such short duration, that it does not justify Government investment in infrastructure, it does not support a socio-economic case, and it is not a reasonable use of natural resources.  In addition, given the 14-year production life, the CAB views reindeer herding as the best use of land.  Finally, that risks to the World Heritage Status of Laponia remain unclear.

In its response, the Company has summarised chronologically the CAB’s handling of the Company’s application, and the involvement of other authorities.  Also, the Company has detailed its interpretation of the Swedish Minerals Act, the Environmental Code, and the roles of each authority, in assessing the Company’s application for an Exploitation Concession.

Mine Production Life

The Company has argued that a mine at Kallak is likely to be in production for much longer than 14 years, based on existing knowledge of the orebodies at Kallak North and Kallak South; a fact acknowledged by the CAB in its July 2015 statement, when it supported both the economic case for Kallak, and the Company's application. 

In addition, the Company argues that mining projects, in general, add to their resource inventories, and apply for permits over time, extending their production lives. There are examples of mines in Sweden, which have been in production for decades, and in some cases centuries.

Infrastructure Investment

The CAB asserts that the Swedish Government may have to invest in infrastructure to facilitate a mine at Kallak, and by using a 14-year mine life the CAB states that there is no case to support this.  The Company has never suggested that the Government needs to invest in infrastructure associated with Kallak.

It is fact, that potential infrastructure partners in the region have their own expansion and investment plans, including Inlandsbanan and the Port of Luleå. Additionally, LKAB, with Trafikverket, is working on increasing the capacity of the Ore Railway Line. 

The Company also notes that the prescribed process for handling the Kallak application, referring to the Swedish Mineral Act and Environmental Code, and the SAC’s judgement in the Norra Kärr case, does not require full assessment of matters regarding transport at this stage of permitting. 

Reindeer Herding

The Company has reminded the Government that for four years since February 2013, when Kallak was designated by the Swedish Geological Unit (“SGU”) as an Area of National Interest (“ANI”), there were no competing national interests. 

Before February 2017, when Sametinget placed national interest for reindeer herding directly on top of Kallak, there were no conflicting national interests for the Concession Area, or for those areas taken by operational facilities necessary to support mining.  A fact recognised by the CAB in its July 2015 statement, when it supported both the economic case for Kallak, and the Company's application. 

In the CAB’s latest statement, it has given no consideration to the years since the Company submitted its original application, in April 2013, the Company’s engagement with the CAB, and continued investment in Kallak, when there were no conflicting national interests.  The CAB now argues in favour of national interest for reindeer herding.

The CAB has not acknowledged that mining and reindeer herding can prosper side by side, despite providing no evidence to the contrary.  Previously, the Company has stated that there are no examples in Sweden of any reindeer herding community being closed by any form of industrial activity, not just mining.  Yet, there are many examples of companies reaching agreements with reindeer herding communities, as projects progress towards eventual operation, which benefit all parties concerned.

In the Kallak application, the Company has included preventative, precautionary, and compensatory frameworks, to be developed into management plans in consultation with the reindeer herding communities, at the appropriate time, and when details are available to have meaningful discussions and make definitive agreements.

The Company has restated key numbers, that Kallak's area of 13.6 square kilometres ("km2") compares to Jåhkågaska tjellde’s 2,640km2 of grazing land or 0.5 per cent, and that reindeer herding in Sweden covers 220,000 km2, representing almost half of the country. 

Laponia  

Kallak is situated, at the closest point, approximately 34 kilometres away from Laponia. 

Laponia's boundary has been established to protect what lies within the boundary, and not to restrict development, such as Kallak, which is located far beyond any conceivable 'buffer zone'.

It is the Company’s view that suggesting Kallak could have such an impact on Laponia as to threaten Laponia’s World Heritage Status is not a reasonable argument.  The Company’s ambition, to develop a modern and sustainable mining operation, in partnership with the community, protecting all interests, will further ensure that Laponia is unaffected.

The Kallak application and the Company’s Heritage Impact Assessment have comprehensively assessed the direct and indirect effects of Kallak on Laponia.  The Company maintains that mining and reindeer herding can prosper side by side, and there should be no material impact on reindeer herding in Laponia, and when it comes to transport, environmental permitting will safeguard the interests of Laponia.

Kurt Budge, CEO, commented:

“The CAB’s statement on 30 November 2017 reads as though it has tried to justify its latest position, that an Exploitation Concession for Kallak North should not be awarded, through flawed analysis and biased conclusions.

“It is remarkable that the CAB bases its analysis on a 14-year mine life, ignoring the data it used to support the economic case for Kallak in its statement in July 2015.  With its latest statement, the CAB has chosen to ignore the potential of additional resource at Kallak, which the Company believes it is fully aware of.

“The CAB ignores the fact that the Company addressed its October 2014 concern regarding a transport issue outside of the Concession Area being applied for, when the Company, in November 2014, eliminated the Jelka-Rimakåbbå transport route from future planning, and the possible interaction of that route with reindeer herding.

“Before February 2017, when Sametinget put national interest for reindeer herding directly on top of Kallak, there were no conflicting national interests at Kallak.  The CAB acknowledged this fact in its July 2015 statement, when it supported both the economic case for Kallak, and the Company's application. 

“Yet, the national interest for reindeer herding is now one of the CAB’s key arguments, which makes the whole application process appear inconsistent and arbitrary.  The CAB has ignored the years before Sametinget’s move, during which the Company made its application, engaged with the CAB, and continued to invest in Kallak. 

“It is our belief that neither the Government, the Mining Inspectorate, many Swedish politicians, local and regional authorities, nor businesses, who support and crave new investment, economic growth, and job creation in the north of Sweden, accept that the CAB has followed the prescribed process for dealing with our application, at any stage since I became involved in October 2014.

“The CAB’s actions have damaged the attractiveness of doing business in Norrbotten, and Sweden.  It has shown no regard for the SEK 72 million that Beowulf has invested in Kallak, and no respect for the work that we are doing locally, to create a business opportunity that has the potential to transform Jokkmokk.

“Over the last three years, we have forged strong working relationships in Jokkmokk, with the City of Jokkmokk, landowners, and entrepreneurs.  Perpetual waiting, for different authorities at different times to decide on what happens next with our application, has impeded our ability to progress matters with reindeer herding communities.

“In September 2017, Mr. Damberg, the Minister for Enterprise and Innovation, was quoted in the Swedish media as saying that Swedish law is enough for testing our application, and that the permitting process should be "by the book”.  If Mr. Damberg is true to his word, and given the Mining Inspectorate’s comments in recent days, then we should see the Concession awarded.  No authority has highlighted specific deficiencies in our application that warrant any other outcome.”

An interview with Kurt Budge, CEO can be listened to by following the link below:

https://www.brrmedia.co.uk/broadcasts-embed/5a71c059e3e5740e6b753d1d/event?popup=true  

Enquiries:

Cautionary Statement

Statements and assumptions made in this document with respect to the Company’s current plans, estimates, strategies and beliefs, and other statements that are not historical facts, are forward-looking statements about the future performance of Beowulf. Forward-looking statements include, but are not limited to, those using words such as "may", "might", "seeks", "expects", "anticipates", "estimates", "believes", "projects", "plans", strategy", "forecast" and similar expressions. These statements reflect management's expectations and assumptions in light of currently available information. They are subject to a number of risks and uncertainties, including, but not limited to , (i) changes in the economic, regulatory and political environments in the countries where Beowulf operates; (ii) changes relating to the geological information available in respect of the various projects undertaken; (iii) Beowulf’s continued ability to secure enough financing to carry on its operations as a going concern; (iv) the success of its potential joint ventures and alliances, if any; (v) metal prices, particularly as regards iron ore. In the light of the many risks and uncertainties surrounding any mineral project at an early stage of its development, the actual results could differ materially from those presented and forecast in this document. Beowulf assumes no unconditional obligation to immediately update any such statements and/or forecasts.