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Three main focus areas Northland Resources

VIEWS: 5 PAGES: 16

									           On Track to Deliver Revenues
                     Q1 2013
                                                Northland Resources Capital Markets Day 2012
                                                         Peder Zetterberg, Acting CFO

Please see Cautionary Statement on last slide                                                  September 25,2012
On Track to Deliver Revenues Q1 2013



  Three main focus areas:

  -   Short and long term financing

  -   Ensuring rigorous cost control

  -   Establishing a robust operational and
      financial group structure




                               2
Sufficient Funding to Generate Revenues

                                                        Bond Facility Overview
     Recent Capital Raising, USDm
                                                           Amount USD 350 million
 Equity fundraising (Dec 2010)*               250
                                                             NOK 460 million
 Equity fundraising (Feb 2012)*               325            USD 270 million
 Bond issuance (Mar 2012)                     350          First drawdown of USD 150 million
 Caterpillar financial mobile                               completed on July 2, 2012
                                              65
 equipment lease facility                                  Second drawdown of USD 90
 Atlas Copco equipment lease                  8             million completed on September 21,
                                                            2012
 Total Raised                                 998
 Cost Overrun Facility provided
                                                           Maturity date: March 2017
                                              40
 by Standard Bank                                          13% coupon, payable in
 Letter of Intent signed with
                                              50
                                                            semi-annual installments
 Stemcor
                                                           Listed on Oslo Børs
 * Majority for the Kaunisvaara development
                                                            (ticker NORES01 and NORES02)



                                                    3
Bond Structure: 3 Key Controls

  Bond Trustee, Norsk Tillitsmann ASA
   Monitors compliance of the issuer’s obligations; informs
   bondholders; pays interest; authorizes draw-down from the
   escrow accounts

  Independent Engineer, Royal HaskoningDHV
   (formerly named Turgis)
   Monitors Project construction plan; countersigns issuer’s request
   for draw down from Escrow Accounts through a Cost-to-Complete
   (”CTC”) calculation; produces quarterly reports based on site visits.
   This process is also valid for the Cost Overrun Facility (”COF”)
  Security agent, Nordea
   Holds the security interests on behalf of bondholders;
   monitors compliance by the issuer


                                    4
Fulfilling the Cost-to-Complete Test

 Background and conditions
  Northland is allowed to draw down from the bond escrow accounts
   an amount equal to 60 days of expenditure. Before each drawdown,
   a CTC test up to project completion needs to be conducted and a
   company certificate countersigned by the Independent Engineer
  Iron ore price is not a covenant or condition precedent
  Project completion means the earliest date on which the
   Independent Engineer has certified to the Issuer and the Trustee
   that 400,000 tonnes wmt of iron ore concentrate with at least 65%
   Fe content has been delivered to customers




                                    5
The Role of the Independent Engineer




  Independent Engineer approved by the Trustee
  Construction monitoring (including the CTC Test)
  Pre-completion operational monitoring
  Verification of completion for the bond
   (compliance with the CTC Tests)
  Post-completion monitoring
  Post Project Bond Completion monitoring and
   Cost Overrun Facility Completion Test

                                 6
Sufficient Funds to Bond Completion
Estimated May 2013
                                                USDm
 Forecasted total Capex to project completion      761
 Capex to 2012-06-30                             (435)
 Remaining Capex to project completion             326
 Interest payable                                   47
 Total Uses                                        373

 Cash and cash equivalents                        207
 Senior secured notes                             203
 Caterpillar equipment lease facility              65
 Atlas Copco equipment lease facility               8
 Total Sources available                          483

 Capex funding for ramp-up (Sources – Uses)       110
 Cost Overrun Facility (Standard Bank)             40
 Letter of Intent (Stemcor)                        50

                                        7
Kaunisvaara: Positive Cash Flow
6 Months from Start-up


                                Operating cash flow




  January-13   February-13   March-13   April-13   May-13   June-13   July-13




                                           8
Development Capex to end 2014
estimated to increase to USD 956m
Kaunisvaara Development Capex                                          Development Capex estimate to
                                                                        reach full annualized production
                                                                        of 4.0 dmtpa* increased by 9% to
                          Increase due to                               USD 956m compared with
                        including logistical                            DFS Update, Feb 2012
    USDm                      solution
                                                    956                Development Capex increase caused
                                875                                     by:
          765
                                                                        – Increased civil engineering work
                                                                          and buildings costs, tyres for
                                                                          mining equipment
                                                                        – Rail cars not being included in the
                                                                          DFS. Rental solution is being
                                                                          negotiated currently, which could
                                                                          reduce Capex substantially
                                                                        – Increased cost for rail upgrading in
                                                                          Norway and the inclusion of
                                                                          railcars
    DFS (May-11)            DFS Update         Update (Sept-12)
                             (Feb-12)


* Dry metric tonnes per annum                                     9
Total Project Capex until 2014

 Current Capex estimate of USD 956m vs. USD 765m Capex estimate
  of Original DFS (May 2011)
 Capex for May 2011 DFS excluded full cost of logistics solution given
  plans to lease key logistical items e.g. rail cars
    - Capex for the rail cars has now been included in the revised total of USD 956m,
       although a leasing solution is still being pursued

 Board decision to start execution on DFS before Basic Engineering
  studies complete has enabled Northland to reach production 18-24
  months earlier than otherwise would have been possible.
  This has also resulted in a limited Capex increase as some required
  data was not obtainable
 Exchange rate differences versus assumptions in the Original DFS
  have also resulted in a limited Capex increase


                                              10
Industry Precedent for Capex Overruns

Project Capex Overruns
                                                                                                                 “Increasing costs are an
               +144%
                                                                                                                  industry wide problem…”
USD m
                             6,100
                                                                                                                 “We probably cannot
                                                          +114%                                                   develop as many
                                                                         5,034                                    projects as we could
                                                                                                                  have done a couple of
                                                                                                                  years ago spending the
                                                                                              +45%
                                                                                                                  same level of money.”
                                                                                                                 “Something that you
                                                                                                     2,825
        2,500                                                                                                     would have planned to
                                                 2,350
                                                                                                                  have built four years ago
                                                                                      1,950
                                                                                                                  might be 50 or even 100
                                                                                                                  percent more expensive
                                                                                                                  to build now.”
                                                                                                                    – Tom Albanese, CEO,
                                                                                                                         Rio Tinto, 10 May
    Budget May-        Estimate as of Budgeted Jun-
                                  1)          2)
                                                                     Latest
                                                                            3)
                                                                                 DFS Jul 2005     May-08                              2012
       2006                Apr-12          07                       Estimate                    Construction
                                                                                               Report (Final
                                                                                                           4)
                                                                                                 Estimate)
               Sino Iron                              Minas Rio                        Chichester Range
             CITIC Pacific                          Anglo American                        Fortescue
Source: Company Filings, Media Reports
Notes:1) Australian Government Bureau of Resources and Energy
Economics ; 2) On a 100% basis; 3) Company website, under revision for           11
15% increase; 4) Construction completed in July 2008
Northland – Competitively
Positioned on Cash Costs
Peer Group Net Cash Costs1)
(USD/t) (FOB)


                                              2)
  Labrador Iron Mines - James                                                                                              53
        Grange - Savage River                                                                                    43
 Champion Minerals - Fire Lake                                                                              38
   Northern Iron - Sydvaranger                                                                         35
      Bellzone - Forecariah JV 2)                                                                 33
             Gindalbie - Karara                                                                 32
     Dannemora - Dannemora3)                                                                  31
    London Mining - Marampa                                                                  30
                                 2)
    African Minerals - Tonkolili                                                             30
               Bellzone - Kalia2)                                                       27
                Alderon - Kami                                                          27
           Sundance - Mbalam 2)                                                    21
      Northland - Kaunisvaara                                                   21
                ZIOC - Zanaga 4)                                               20
          Grange - Southdown                                                  19
          London Mining - Isua                                  7
         Adriana - Lac Otelnuk                           4

                                                   0                10        20         30                 40        50        60

1) Net cash cost calculated as FOB cash cost less premium received for
product grade > 62% Fe at a premium of US$5/t per % Fe above 62%;
2) DSO, cash cost has not been adjusted for price discount for lower grade;    12
3) Low Fe grade (50-55% Fe), cash cost not adjusted;
4) Published gross cash cost, concentrate grade not available
Robust Organizational Structure in Place

  Established corporate governance structures
     Board members with extensive experience in mining sector
     Audit, Compensation and HSE commitees

                            Board of Directors


               EHS            Compensation          Audit
             Committee          Committe          Committe




  Reporting disciplines and controls                        External auditors


     Supporting operations and all internal entities
     Providing reporting transparency to all external stakeholders

                                    13
Fully Integrated IT Processes

    Production process
Contract     Mining                 Enrichment                Distribution   Invoicing



               Process and
                                                  Logistics
               control system


                                Business Performance



           Finance       Purchase        Inventory     Maintenance

                                   Project
                                  Document

            SHEQ            HR




                                         14
On Track to Deliver Revenues Q1 2013



  Three main focus areas:

  1. Short and long term financing   
  2. Cost control   
  3. Rigorous operational and financial structure   




                              15
Cautionary Statement

  This PowerPoint presentation contains certain forward-looking statements within the meaning of the Private Securities
  Litigation Reform Act of 1995, and applicable Canadian Securities laws. We have tried, whenever possible, to identify
  these forward-looking statements using words such as “anticipates”, “believes”, “expects”, ”plans”, ”intends”, “potential”
  and similar expressions. These statements reflect our current belief and are based on currently available information.
  Accordingly, such forward-looking statements involve known and unknown risks, uncertainties and other factors which
  could cause the Company’s actual results, performance or achievements to differ materially from those expressed or
  implied by such statements.

  Readers are cautioned that forward-looking information involves known and unknown risks, uncertainties and other
  factors which may cause the actual results, performance or achievements of the Company and/or its subsidiaries to be
  materially different from any future results, performance or achievements expressed or implied by the forward-looking
  information. Such factors include, among others, those factors discussed in the section entitled “Risk Factors” in the
  Company’s listing prospectus dated February 24, 2012, its annual information form dated March 27, 2012, and the
  management’s discussion and analysis of results of operations and financial condition for the full-year ended
  December 31, 2011.

  Except as required by law, we undertake no obligation to update or advise in the event of any change, addition, or
  alteration to the information contained in this PowerPoint presentation, including such forward-looking statements. This
  PowerPoint presentation does not constitute an offer of the securities described herein.

  Resources Quoted in this Presentation
  Dr. Petri Peltonen, Managing Director of Northland Exploration Finland and 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 presentation is an
  accurate summary. Dr Peltonen is a member (CP) #306710 of the AusIMM, and member #961 of the European
  Federation of Geologist (EurGeol), being the Qualified Person for geology, resources and QA/QC. Dr. Peltonen has
  verified that the results presented in this presentation have been accurately summarized from the results reported to
  Northland.




                                                               16

								
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