Luxembourg, July 19, 2012 � Northland Resources S.A. (TSX: NAU, OSE: NAUR, Frankfurt: NPK � �Northland� or the �Company�) announces its third bi-monthly operational and construction update on its Kaunisvaara project. During this period, May 1 � June 30, several important milestones were reached, the most significant being the first drawdown from the USD 350 million Bond Loan Facility of approximately USD 155 million.
- The schedule for the Kaunisvaara project remains unchanged, with production at the Tapuli Mine scheduled to commence in Q4 2012 and with shipments of concentrate starting in Q1 2013.
- At the end of June, the independent engineering consultant, Turgis, confirmed that Northland Resources had passed the �cost-of-complete� test allowing the Company to draw down USD 155 million from the USD 350 million Bond Loan Facility.
- The first Kaunisvaara process line was 75% complete and remains on schedule.
- During the period, Northland Resources finalized the USD 65 million financing of mobile mining equipment from Caterpillar and the USD 8 million financing for drill rigs from Atlas Copco. A total of 23 vehicles and 5 drill rigs will be delivered from two suppliers.
- Major components for primary crusher, SAG/AG mills and VertiMill have started to arrive on site.
- Rating agency Standard & Poor�s assigned a B- rating to Northland Resources�s senior secured notes. The rating outlook is stable and the recovery rating is 4. In addition, rating agency Moody�s assigned a Corporate Family Rating of Caa1 to Northland Resources AB and a Caa1 (Loss Given Default 3, 46%) rating to the USD 350 million of senior secured notes. The rating outlook is stable.
THE MINE
- Approximately 3,095,100 m3 of the Tapuli overburden has been removed. The current average rate more than 80,000 m3 per week, and the pre-stripping is ahead of schedule.
- The first Kaunisvaara process line was 75% complete and remains on schedule. The second Kaunisvaara process line was 46% complete.
- The Sahavaara mine and related investments were 29% complete.
- The first of the mobile equipment � two haul trucks, one wheel loader and one dozer, arrived at the mining site on schedule.
- Atlas Copco delivered the first of two SmartROC D65 drill rigs.
THE LOGISTICS CHAIN
- The build-out of the logistics chain is on schedule for the commencement of deliveries to customers in Q1 2013.
Pitk�j�rvi transloading terminal:
- Construction work at the terminal is progressing well.
- Road and rail interchange work is on schedule.
- Work is progressing well with Peab and the Swedish Transport Authority on the construction of the roads and railroad spurs. Excavation and terracing activities have been completed.
- The roads are expected to ready for use in early 2013.
The Port
- Construction of the Fagernes Terminal in the Port of Narvik remains on schedule to handle the first shipment in 2013.
- The ship-loader contract has been signed.
- The de-icing facility contract has been signed.
- Northland Resources and the Norwegian National Rail Administration (Jernbaneverket) have agreed on the optimal location for the de-icing plant and unloading station. Both facilities will be built in close proximity to the Northland Resources�s storage building.
Financing
On July 2, 2012 Northland Resources made the first drawdown of approximately USD 155 million from its USD 350 million Bond Loan Facility. The Bond Trustee (Norsk Tillitsmann), confirmed that Northland Resources had passed a �cost-to-complete� test and that the Kaunisvaara project was advancing according to schedule.
The second drawdown is expected to be made at the end of August 2012. This is expected to ensure that the production of high quality iron ore concentrate will commence in the fourth quarter of this year.
The Senior Secured Bond issue 2017 is traded on Oslo B�rs under the ticker NORES01 for the NOK 460,000,000 tranche and under ticker NORES02 for the USD 270,000,000 tranche. The final maturity date for both tranches is March 6, 2017.
During the period, Northland Resources finalized the financing of its mobile mining equipment consisting of 23 Caterpillar machines which will be delivered by Pon Equipment. As mentioned above, a total of USD 73 million of financing is being provided by Caterpillar Financial Nordic Services AB and by Atlas Copco Customer Finance.
No further financial update is included in this document as the Company will announce its second quarter 2012 financial results on August 9, 2012.
The Kaunisvaara Project
Major components for Primary Crusher, SAG/AG mills and VertiMill have started to arrive on site. All the other components will arrive at the beginning of Q3 2012.
Items that are close to completion include: the welding on the thickener tank steel structure, the overland conveyor from the crusher to the big screener (grizzly), purging basin earthworks and removal of trees and bushes for access roads.
The work on the Tapuli primary crusher is in the final stage with reinforcing and concreting works ongoing at the crusher and adjacent conveyor. The Tapuli ore shed is built and the Sahavaara ore shed is 50% complete.
The truck workshop is being constructed according to plan, with the current work focused on the pouring of concrete, and installing roof panels and the electrical wiring.
At the process plant, the SAG/AG mills and VertiMill from Metso are being assembled, including the electrical wiring. In addition, the assembly of roof and wall panels for the electrical building is ongoing.
The construction of the power supply works is on schedule. Vattenfall Eldistribution AB has continued the erection of the 150 kV power line and the ground preparation for the substation has been initiated.
Northland Resources has contracted SGS Sweden AB to operate the analytical lab at the Kaunisvaara site. The contract will run until 2017.
Quality Control
In an effort to ensure that all the long lead items for the process plant are functionally operational and that Northland Resources personnel have received the required training to operate the processing facility, Northland Resources has contracted Metso to monitor the work and ensure it meets the expected quality control.
Metso is the largest supplier to the Kaunisvaara project and they have assumed the responsibility for the start-up, operation and maintenance of these items. The service contract for the Kaunisvaara process plant includes staffing for the commissioning and completion of the project, performance-guarantee testing, control of scheduling and quality, inventorying of spare parts and maintenance of the equipment.
Northland Resources is performing ongoing quality control as well as final inspection. Northland Resources is monitoring whether special tools or the like are needed for the assembly or for service and, where that is the case, to ensure that those deliveries are secured. A final check is also made regarding any requirement for special measures that need to be taken at the mine to receive and store the equipment prior to assembly.
Health & Safety
Lost Time Injury Frequency Rate (�LTIFR�) according to the Swedish standard[1] from the start of the project until end of June 2012 was 6.39 (corresponding figures for previous period not available).
The corresponding number according the international standard[2] for the same period was 1.06 per 200,000 worked hours (previous period: 1.79).
There were zero LTIFR incidents to report for both International and Swedish standards during this period. A total of 32 Near Hits were reported (previous period: 30).
At the end of the second quarter of 2012, 474 people were trained for the obligatory site safety program.
Northland Resources took over the site safety coordination on April 1, 2012. The operations staff are preparing for takeover from the project organization during third quarter of 2012. A safety coordinator was recruited in June.
Pellivuoma
Pellivuoma is located approximately 15 km west of Sahavaara. The Company controls 100% of the exploration permit, which totals 11,346 hectares. The deposit constitutes a significant addition to the potential tonnage in the Kaunisvaara area.
Following a review of the ongoing definitive feasibility study (�DFS�) work at Pellivuoma in early 2012, management modified the scope of the DFS to ensure that Pellivuoma is developed in the most cost, output and financially-rewarding manner with the Kaunisvaara mining and processing site. Potential scenarios include an increase in the production of high grade concentrate or an extension of the life of the Kaunisvaara operation in combination with an increase of the production. The DFS is expected to be completed by the end of 2012.
Other Developments
In April 2012, the former Vice President of Swedish Operations, Bert-Ove Johansson passed away. His contribution and dedication to the Kaunisvaara project was significant, and the Company has decided to honor his memory with the naming of the newly-built access road from route 99 to the Kaunisvaara mine area �Bert-Ove Johanssons v�g�.
As a result, the new address of Northland Resources�s Kaunisvaara office is Bert-Ove Johanssons v�g 8, SE-984 91 Pajala, Sweden.
Next Operational Update
The Operational Update for the period up to August/September 2012 will be published on September 24, 2012.
Financial Statements and MD&A for the second quarter 2012
The Company will publish its Financial Statements and Management�s Discussion and Analysis for the period ending June 30, 2012, on August 9, 2012.
Capital Markets Day 2012
The Company will host an analyst and investor information day on Tuesday September 25, 2012, in London.
[1] Lost Time Injury Swedish standard as adopted by SveMin members: Absence of one shift or more from regular duty following the accident. Reference period: 1 million worked hours.
[2] International Lost Time Injury definition: Absence of three shifts or more from regular duty following the accident. Reference period: 200,000 worked hours.
�Karl-Axel Waplan�
President & CEO, Northland Resources S.A.
Northland Resources a development-stage mining company with a portfolio of iron ore projects in northern Sweden and Finland. The Company�s Kaunisvaara Project will initially exploit two magnetite iron ore deposits in Sweden. The process will yield a high-grade, high-quality magnetite iron concentrate. The construction of the Kaunisvaara project in Sweden is well underway and mining is planned to start in the fourth quarter of 2012. Northland Resources has entered into off-take contracts for the entire production from Kaunisvaara. The Company is also preparing a Definitive Feasibility Study (�DFS�) for its Hannukainen Iron Oxide Copper Gold (�IOCG�) Project in Kolari, northern Finland and for its Pellivuoma deposit 15 km from the Kaunisvaara process plant.
Important Notice
Forward-Looking Statements
This announcement may include �forward-looking� statements within the meaning of applicable securities laws. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms �believes�, �estimates�, �anticipates�, �expects�, �intends�, �may�, �will� or �should� or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements include all matters that are expectations concerning, among other things, Northland Resources�s results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which it operates. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Readers are cautioned that forward-looking statements are not guarantees of future performance and that Northland Resources�s actual results of operations, financial condition and liquidity, and the development of the industry in which it operates may differ materially from those made in or suggested by the forward-looking statements contained in this press release. In addition, even if Northland Resources�s results of operations, financial condition and liquidity, and the development of the industry in which Northland Resources operates are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.