CEO interviewed by minesite.com
Northland’s CEO was interview by minesite.com yesterday giving promising signs related to debt financing of the Kaunisvaara CapEx. He also hinted potential for lower CapEx and OpEx figures in the Definite Feasibility Study compared to the recent Preliminar Economic Assessment.
As only subscribers of minesite.com can read the whole interview, I post it here:
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September 30, 2009
Banks Are Now Lining Up To Give Northland's Swedish Iron Ore Assets The Once Over, As The Company Steps Up The Pace On Its Definitive Study
Alastair Ford
Buck Morrow, chief executive of Northland Resources, is in an optimistic frame of mind when he sits down for a chat with Minesite as one of our monthly mining company director lunches draws to a close. It's not just the wine that's lifting his spirits. Northland's iron ore assets in Scandinavia, which at one stage early in the credit crunch had looked moribund in the face of a falling iron ore price, are now very much alive and kicking, and moving forward. Partly that's a result of revised expectations. August 2008 turned out not to be the best time to be pitching a US$1.8 billion development to market, and it took a while for everyone to adjust to the new realities.
One year on, though, early in September of this year, Northland released its Preliminary Economic Assessment (PEA) for the Kaunisvaara project in north west Sweden. In the accompanying press release, Buck stated that the PEA put Northland "firmly on the way to becoming a substantial iron ore producer in Europe". He wasn't kidding. The current plan is for an operation producing two million tonnes of high quality concentrate per year to be up and running by 2012, with production then slated to rise to five million tonnes by 2014. The current resource base provides for a 24 year mine life, and the overall parameters of the project show an NPV at an eight per cent discount of US$393 million, offering an internal rate of return of 21 per cent. The first phase of the project will cost US$420 million to build, with a further US$197 million required to move production up to the five million tonnes level.That's certainly something for investors to chew over, over a smorgasbord or two.
There's plenty of room to tighten those numbers up, though, as Buck emphasizes. As soon as the PEA was completed, a definitive feasibility study (DFS) got underway, and this ought to be able to shave serious money off the company's cost projections for many of the big ticket items, which went into the PEA at list price. What's more the DFS ought to be able to drill down further into the cost projections. At the moment, costs are projected at US$36.80 per tonne over the life of the project, but during the projected payback period costs ought to be lower, at US$34.00 per tonne. That ought to encourage the bankers.
Something's been encouraging them at any rate. From his new base in London, Buck has been touring the European banks sounding out interest on funding. And, it's the interest that a recent trip to Germany garnered, that's really the cause of his current optimism. Two German banks have shown considerable interest in putting up the projected US$250 million debt portion of the required US$420 million, to the extent that they will be undertaking site visits imminently. The strength of that interest means that other smaller parties may also now want to come in, and such is the confidence inside Northland that when Buck says, "At the end of the day we will get these things financed", all the old doubts seem to have dropped away.
Still on the backburner, for now at least, are Northland's assets on the Finnish side of the border. The company is looking to bring in a joint venture on those fairly soon, but lest anyone think the Finns mind playing second fiddle to the Swedes in the immediate term, it's worth noting that the Finnish government is putting up ?84 million in funding for a railway to allow Northland to ship its Swedish product through Finland and down to the port of Kemi for export. That's some serious support there, and in a sense it comes as no surprise when Buck Morrow says, "I love the Finns". Wouldn't you? Still, with the global economy ticking up, and Northland making noises long-term about delivering a resource of a billion tonnes up at Kaunisvaara, it's clear the company will be around for a long time. The Finns no doubt calculate that that investment will pay for itself in due course.
Source:
https://www.minesite.com/nc/cnd/minews/singlenews/article/banks-are-now-lining-up-to-give-northlands-swedish-iron-ore-assets-the-once-over-as-the-company-st/1.html