Northland Resources S.A.: Press Release of Unaudited Annual Report 2012
(firmenpresse) - LUXEMBOURG, LUXEMBOURG -- (Marketwire) -- 02/26/13 -- Northland Resources S.A. (TSX: NAU)(OSLO: NAUR)(FRANKFURT: NPK)(OMX: NAURo) -
Results of operations
For the three months ended December 31, 2012, the Company had a consolidated net loss of USD 5.6 million (USD 0.01 per share) compared to a net loss of USD 34.3 million (USD 0.15 per share) for the three months ended December 31, 2011.
For the twelve months ended December 31, 2012, the Company had a consolidated net loss of USD 24.8 million (USD 0.05 per share) compared to a net loss of USD 38.1 million (USD 0.17 per share) for the twelve months ended December 31, 2011.
The operating loss during the three months ended December 31, 2012 was USD 20.8 million compared to a loss of USD 15.3 million for the same period in 2011.
The operating loss during the twelve months ended December 31, 2012 was USD 48.1 million compared to a loss of USD 28.1 million for the same period in 2011.
Net financial items were positive with USD 24.5 million for the 12 month period ended at December 31, 2012, compared to a loss of USD 9.6 million for the same period 2011.
Number of employees at the end of December 2012 was 199, compared to 87 at the end December 2011.
Summary of selected quarterly and annual data as at December 31, 2012 and 2011
This table is for information only and does not form part of the condensed financial statements
Comment from the President and CEO
"Northland has invested more than USD 900 million in the Kaunisvaara project and developed the mining site from bog to mine in less than two years. The production ramp-up has been successful and to date Northland has produced approximately 71,400 tonnes of iron ore in the process plant which is more than 65,000 dry metric tonnes ("dmt") of iron ore concentrate with Fe-grade and quality in accordance with planned product specifications.
At the end of 2012, upon completion of several project milestones and in connection with finalizing the detailed bottom-up budget, it became obvious that the Company was facing need of additional funding to cover higher than expected capital expenditures for the installation of the first and second process lines and logistics, as well as higher initial operating expenditures for the first two years. The intention was to complete the funding by a combination of an equity issue and a bond tap issue during January 2013. However, the reaction from the market had a severe effect on the Company's share price and the Company decided to withdraw the contemplated transaction on February 5, 2013. To safeguard Northland's assets and operations as well as the interest of its stakeholders, the Company filed for reconstruction for its Swedish subsidiaries where the Kaunisvaara project is legally held.
On February 21, 2013 Northland received consent from the necessary majority of the bondholders for a release of USD 6 million out of the USD 72.6 million held in an escrow account by the bond trustee. This support together with discussions with the key suppliers to reduce burn-rate will enable the Company to continue its production at Kaunisvaara and transport the iron ore concentrate to Narvik beyond March 4, as previously contemplated.
The Company is now undergoing a challenging period, but I am convinced that we soon will be able to present a long term financial solution to ensure the Company a strong base for continued development of the Company and the Kaunisvaara project. It is important to remember that Northland has considerable assets consisting of ore reserves, a reliable infrastructure and a vital operation that is producing 3-4,000 tonnes of high grade concentrate per day. We also have a strong end-customer base to ship to, such as our first customer Tata Steel in the Netherlands.
Our main focus now is to solve the liquidity shortage, optimize the logistics chain and reach full production in 2014".
SWEDEN
Kaunisvaara Project
The Group has executed the Kaunisvaara project mine and process plant project in less than two years. During this period the Group has constructed the industrial area, removed more than 5 million m3 of overburden from the Tapuli mine, and installed and commissioned the first process line, including a primary crusher, conveyor belts, grizzly building as well as stock pile buildings and the process plant. During December, 2012, Northland produced its first iron ore concentrate in the process plant.
Notes to the Consolidated Financial Statements
Segment information
Segment information is provided on the basis of geographic segments as the Group monitors its business according to the geographic locations of its resource properties in Sweden, Finland and Norway. The business segments presented reflect the management structure of the Group and the way in which the Group's management reviews business performance.
Corporate functions and dormant entities are classified together within "Other".
The segment information provided to the Committee for the reportable segments is as follows:
As the management does review segment assets and liabilities, the Group has continued to disclose this information in a manner consistent with the consolidated statement financial position. The measure of the statement of cash flows information has not been disclosed for each reportable segment as this information is not regularly provided.
Mines under construction
(i)100% for the first quarter, 97% for the second quarter, 96% for the third quarter and 89% for the fourth quarter of the effective interest charges related to the Bonds (effective rate of 15.2%), net of interest income resulting from the bond escrow accounts, has been capitalized for a total amount of USD 44.2 million for the twelve months ended December 31, 2012. In the fourth quarter, USD 0.2 million of the capitalized interest has been amortized. In addition, USD 2.9 million of effective interest charges related to the Standard Bank bridge loan 2011 - 2012 has been capitalized, representing a capitalization rate of 94% (effective interest rate on the bridge loan of 120%).
Mines under construction' are not depreciated until construction is completed. This is signified by the formal commissioning of the mine for production.
Upon completion of the mine construction, the assets are transferred into property, plant and equipment or mine properties and are subjected to normal depreciation at their estimated useful lives, in accordance to IAS 16.
Amounts written off are classified under caption 'Other operating expenses'. The management has performed an impairment test on the cost incurred in the year under review and has concluded that no amount to be written off.
Property, plant and equipment
Changes in contingent liabilities
In fourth quarter 2012 the Company booked the full provision for estimated restoration costs related to the Tapuli mine and to the cost of dismantling and removal of the standing buildings. This has increased the provision in the statement of financial position to USD 28.8 million compared to USD 1.2 million as at third quarter of 2012. This provision has been included to the cost of tangible assets. Consequently the contingent liability for the restoration costs amounts to USD 17.1 million, to be compared with USD 35.1 million, as estimated in the third quarter of 2012 which do not include the costs of dismantling and removal of the standing buildings. The remaining contingent liability is related to the Sahavaara mine and assets yet not activated during the reporting period.
Related party transactions
Relationships
Companies and persons which control or to a significant extent influence the Company or its subsidiaries or which are controlled or to a significant extent influenced by the Company or its subsidiaries are to be regarded as related parties under IAS 24. Therefore, for the Group, the related parties comprise subsidiaries and key management personnel.
Terms and conditions of transactions with related parties
The Group in the normal course of business carries out transactions with related parties on commercial or agreed upon terms and conditions. Outstanding balances at the year-end are unsecured and interest free and settlement occurs in cash or share based payment. There have been no guarantees provided or received for any related party receivables or payables.
The consolidated financial statements include the financial statements of the Company and the subsidiaries listed in the following table:
(i) North American Gold (Barbados) Inc. was dissolved in the reporting year
Transactions with common key management and directors:
The Group incurred charges with entities having a common key management and directors in the normal course of operations as detailed in the table below:
These charges were measured by the exchange amount, which is the amount agreed upon by the transacting parties.
The Company paid fees to a private company controlled by a director of the Company for consulting services performed outside of his capacity as a director.
Compensation to key management personnel and directors of the Group
Share-based payments are the fair value of options granted to key management personnel and directors.
Accounts receivable and payable
Accounts receivable included amounts due from an officer of the Group.
Accounts payable included amounts due to key management and director of the Group and to an entity with a common director.
Commitments under purchase agreements
The Group has entered into purchase agreements for the pre-development of the mine construction, long-term operational services and the completion of power station procurement facilities at the Kaunisvaara site. The total estimates for the related purchase commitments arising under these agreements as at December 31, 2012 amount to USD 1,386.8 million (December 31, 2011: USD 522.3 million).
Commitments under off-take agreements
The entire planned production of 4.4 million dry metric tonnes per year has now been fully committed in firm off-take agreements with three global, well-established and solid partners, for terms of up to 10 years. 20% of production has been committed to Stemcor UK Ltd and to Tata Steel UK each and the remaining 60% to Standard Bank Plc.
About Northland Resources S.A.
Northland's common shares are primary listed on the Toronto Stock Exchange (the "TSX") under the symbol NAU. Due to the Company's current financial situation, the company being under reconstruction, the TSX has decided to delist the Company's common shares effective at the close of market on the TSX March 15, 2013. In the meantime trading on the TSX is suspended. Trading is continuing, on the Oslo Bors under the symbol NAUR, on Nasdaq OMX Stockholm under the symbol NAURo and on the Frankfurt Borse under the symbol NPK.
As a Luxembourg-domiciled company with shares listed on an exchange in the European Economic Area, the Company is subject to the rules and regulations of the Commission de Surveillance du Secteur Financier. These regulations include a requirement to file information in accordance with International Financial Reporting Standards ("IFRS") as endorsed by the European Union ("EU").
Forward-looking information
Certain statements contained in this Year-End Press release and elsewhere constitute forward-looking statements. Such forward-looking statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statements were made, and readers are advised to consider such forward-looking statements in light of the risks set in the Annual Report 2011.
Liquidity and capital resources
On February 2, 2012, the Company launched an equity offering of new shares mainly to institutional investors at a rate of NOK 6.50 / CAD 1.13 per share. It closed on February 23, 2012 giving gross proceeds equivalent to USD 325 million.
At the same time an offer of a senior secured five-year bond was launched for an equivalent of USD 350 million. This offering was also fully subscribed and completed on March 6, 2012. The Senior Secured Bond issue 2017 is traded on Oslo Bors 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.
Interest bearing debt as at December 31, 2012 totaled USD 358.1 million (net of deferred financing fees), up from USD 4.3 million at the end of December 2011. The Company's cash and cash equivalents as at December 31, 2012 totaled USD 53.7 million, compared to USD 38.3 million as at December 31, 2011.
During 2012, the Company passed three "cost-to-complete" tests by the independent engineer consulting firm Royal HaskoningDHV (formerly named Turgis). Following these tests the Company has drawn down a total of USD 265 million from the USD 350 million Bond Loan Facility.
In the middle of the fourth quarter of 2012, a liquidity shortfall was quantified based on a detailed preliminary budget that included remaining capital expenditure ("Capex") and operating cash flow for the next 24 months. This was due to lower than expected operating cash flow which has been considerably influenced by iron ore price estimates, USD/SEK exchange rates as well as higher than estimated costs during the ramp up. In total this amounts to USD 144 million. Additional Capex was identified, this in addition to what was previously reported at the Capital Markets Day in September 2012 where Capex of USD 956 million was presented to reach full production of both process lines. The new plan of January 2013 includes additional costs to finalize the logistic investments in Narvik and Pitkajarvi, as well as higher than anticipated costs for installation of the first and second process line. In total USD 140 million of Capex have been added to the USD 956 for the period until December 31, 2014. This is to cover the complete installation of the second process line as well as the completion of all logistic works and the required investments in the permanent solution for the tailings management facility. To cover the peak financing need, interest and fees, as well as a USD 45 million contingency, the Company initiated in January 2013 a capital raise of USD 375 million through a combined equity and bond issue.
Going Concern and long term financial solution
Since the process of raising additional capital did not turn out as expected, other avenues to cover the capital need had to be explored. In order to conduct this in an orderly manner the Board of Northland Resources S.A. together with the Boards of the Swedish entities decided to file for reconstruction for the Swedish entities on February 8 and 12, 2013. To strengthen the short term liquidity of the Company the bondholders will during the present week make USD 6 million available as a short term cash support.
At present there is an intensive work ongoing to find the best possible financial solution for the Company and its stakeholders. Since there is a substantial number of industrial, as well as financial investors, seriously interested in participating in the funding, the Board of Directors and the Management is confident that it is possible to obtain an appropriate solution within the near future. Consequently the Board has decided that the going concern principle still can be applied. With these additional funds the finalization of the Kaunisvaara project with the Tapuli mine and the two process lines would be safeguarded. This would then bring the production volume well above the point where a positive cash flow is assured.
Accounting policies
The unaudited interim condensed consolidated financial statements of Northland Resources S.A. have been prepared in accordance with IAS 34 of International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) as adopted by the European Union. With respect to the Company's unaudited interim condensed consolidated financial statements for the twelve months ended December 31, 2012, there are no material differences between IFRS as adopted by the European Union and the one issued by the IASB.
The unaudited interim condensed consolidated financial statements have been prepared under the historical cost convention. In addition these unaudited interim condensed consolidated financial statements have been prepared using the accrual basis of accounting, except for cash flow information.
The unaudited interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Group's consolidated financial statements as at December 31, 2011. The preparation of the interim consolidated financial statements in conformity with IFRS, as endorsed by the European Union, requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. Estimates and judgments are continually evaluated and are based on historical experience as adjusted for current market conditions and other factors. However, actual outcomes can differ from these estimates.
Coming Report Dates
March 26, 2013: Audited Financial Statement and MD&A for Q4 2012
May 8, 2013: Financial Statement and MD&A for Q1 2013
August 8, 2013: Financial Statement and MD&A for Q2 2013
November 14, 2013: Financial Statement and MD&A for Q3 2013
Annual General Meeting
The 2013 Annual General Meeting of Northland S.A. will be held on Thursday, May 16, 2013 in Luxembourg.
Additional information relating to the Company, including the Company's Annual Information Form, is available on SEDAR at or on the Company's website .
Contacts:
Northland Resources S.A.
Karl-Axel Waplan
President and CEO
+46 705 104 239
Northland Resources S.A.
Peder Zetterberg
Acting CFO
+46 708 652 120
Northland Resources S.A.
Anders Antonsson
Vice President - Investor Relations
+46 709 994 970
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Datum: 26.02.2013 - 13:21 Uhr
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