Northland Moves to Feasibility Study after Positive PEA on
Kaunisvaara Iron Ore Concentrate Project
(Thomson Reuters ONE) - September 7, 2009 Northland Resources Inc. (Northland) is pleased toannounce the positive outcome of the Preliminary Economic Assessment(PEA) on its 100%-owned Kaunisvaara Project ("the Project") innorthern Sweden."The PEA demonstrates that the Kaunisvaara Project stands to be afinancially rewarding project with robust operating margins and highrates of return", said Anders Hvide, Northland's Executive Chairman."The findings of the PEA put Northland firmly on the way to becominga substantial iron ore producer in Europe," said Buck Morrow,Northland's President and CEO.Highlights of the PEA include: * The PEA confirms that the Kaunisvaara Project, which includes the Tapuli, Sahavaara and Pellivuoma magnetite iron ore deposits in northern Sweden is technically feasible and financially positive. * Using a discount rate of 8%, the Project has a potential Net Present Value (NPV) of USD 393 million and an Internal Rate of Return (IRR) of 21.1 %. * Subject to securing all relevant permits and financing, the production of iron ore concentrate is forecast to begin in 2012 at a rate close to 2 Mt per year, increasing to 5 Mt per year in 2014. * The Project is estimated to have a 24 year Life of Mine based on NI 43-101 defined resources. * Northland will need to secure financing of approximately USD 417 million as the total CAPEX will be partially funded by Project cash flow. Total CAPEX to reach 5 Mt of concentrate capacity is USD 617 million. The CAPEX figure includes a 15% contingency (excluding mine mobile equipment). * Total OPEX per tonne concentrate delivered FOB at the port of Kemi, Finland, is estimated to average USD 38.64/t for the Life of Mine and average USD 34.04/t over the first 10 years of operation. The OPEX figure includes a 15% contingency (excluding royalty and transport). * Turner & Townsend were engaged as a peer reviewer to provide an independent review of both the CAPEX and OPEX figures in the PEA as compiled by Aker Solutions.Please note that the PEA is preliminary in nature. It includesinferred mineral resources that are considered too geologicallyspeculative to have economic considerations applied to them thatwould enable them to be categorized as mineral reserves. There is nocertainty the PEA will be realized.Northland presented the results of the Kaunisvaara Project PEA toGulf Industrial Investment Co. (GIIC) in conjunction with theMemorandum of Understanding between the parties for the delivery ofup to 3 Mtpa off-take. GIIC and Northland are encouraged by the PEAresults and Northland will now consider the best strategy foracquiring funding and moving the Project forward. Discussionsbetween Northland and GIIC will continue to progress towards a finalagreement in order to meet part of GIIC's long-term concentraterequirements.PEA OverviewNorthland will stage the development of its iron ore projects,beginning with Northland's Swedish projects - Tapuli, Sahavaara andPellivuoma - which will provide feed to a single, multi-lineprocessing facility in Sweden (together called "the KaunisvaaraProject").The PEA commenced in January 2009, with Aker Solutions beingresponsible for overall study management and coordination, acting inconsultation with specialist service groups and sub-consultantsincluding:+-------------------------------------------------------------------+| Study Management & | Aker Solutions || Coordination | ||-------------------------+-----------------------------------------|| Geology and Resources | GeoVista & Micon International Ltd. || | (Tapuli) || | Chlumsky, Armbrust & Meyer (Sahavaara) || | GeoVista (Pellivuoma) ||-------------------------+-----------------------------------------|| Mine Scheduling | Scott Wilson (Sahavaara) || | Micon (Tapuli & Pellivuoma) ||-------------------------+-----------------------------------------|| Processing Plant | Metso ||-------------------------+-----------------------------------------|| Rail Infrastructure | Scott Wilson/Railize ||-------------------------+-----------------------------------------|| Capital Cost Estimate | Aker Solutions || Compilation | ||-------------------------+-----------------------------------------|| Operating Cost Estimate | Aker Solutions || Compilation | ||-------------------------+-----------------------------------------|| Financial Analysis | An international accounting firm |+-------------------------------------------------------------------+PEA ResultsUsing the Base Case Scenario, the Project has a potential NPV of USD393 million and an IRR of 21.1 %. The capital payback period is 5.8years. A real discount rate of 8% and a USD:SEK exchange rate of1:8.13 were applied in these calculations. The product pricing usedis described in the next section. We have provided a sensitivityanalysis on the Base Case below.Capital and Operating Cost Estimates were compiled by Aker Solutionsbased on information provided by all consultants involved in theproduction of the PEA.Total CAPEX has been estimated at USD 617 million. This is based on apipeline solution from the Kaunisvaara process facility in Sweden toÿkäsjokisuu in Finland where an existing rail line is situated.Dewatering and loading facilities will be built in ÿkäsjokisuu. Therail line is presently being upgraded by the Finnish rail authorityto handle up to 3 million tonnes per year of concentrate.Discussions are ongoing with the Finnish rail authority to increasethe rail capacity up to 8 - 10 million tonnes per year fromÿkäsjokisuu. A study is ongoing with the Finnish and Swedish railauthorities for an extension of the existing rail line to theKaunisvaara Project.Total OPEX has been estimated at an average of USD 38.64/t ofconcentrate delivered Free on Board ("FOB") to the Port of Kemi,Finland, over the Life of Mine, with a noticeably lower averageoperating cost of USD 34.04/t during the first 10 years of operation.The capital and operating costs were developed to an accuracy of plusor minus 30 per cent and include all direct and indirect costs, EPCMcosts, and contingency and accuracy provisions.(see pdf)The Kaunisvaara Project will be able to produce 5 Mtpa of iron oreconcentrate based on the PEA design basis maximum feed rate of 12.7Mtpa. The PEA indicates that the total Project life will be 24years; during years 3 to 16 the concentrate production will be 5Mtpa, and will then gradually drop off during the remaining 8 years.(see pdf)Product Pricing(see pdf)The product price forecast, as used in the Base Case of the PEA, hasbeen based on price predictions for Carajas fines delivered toEurope, as derived from the confidential internal reports receivedfrom several analysts. It has been assumed that Northland's productshould achieve the same price as the premium product Carajas fines.The forecast price also includes the freight rate differential thatcan be expected to be gained by Northland when shipping to theEuropean market (when compared with those producers shipping fromBrazil). Northland has used a freight rate differential of USD5.00/t.In evaluating Northland's market potential in the North Africanregion, the consensus of opinion is that there is only likely to be asmall difference in the freight rates from Brazil and Kemi to thoselocations. However, the quality advantages in the chemistry,physical properties and value in use may exact a premium price forNorthland's products in the DR pellet feed market. Therefore, it ispossible that Northland's quality advantages could provide a similaroverall price differential to the North African market thatNorthland's freight differential provides to the European market.Sensitivity AnalysisThe following sensitivity analyses have been run while keeping allother variables in the Base Case the same.+-------------------------------------------------------------------+| | NPV8 | IRR | Max Cash Req | Payback || | USD M | % | USD M | years ||------------------------+-------+------+-----------------+---------|| Base Case | 393 | 21.1 | 417 | 5.8 ||------------------------+-------+------+-----------------+---------|| Increase Price 10% | 613 | 26.7 | 385 | 5.1 ||------------------------+-------+------+-----------------+---------|| Increase Price 20% | 832 | 31.8 | 352 | 4.7 ||------------------------+-------+------+-----------------+---------|| Decrease Price 10% | 173 | 14.6 | 450 | 6.9 ||------------------------+-------+------+-----------------+---------|| Decrease Price 20% | (47) | 5.7 | 483 | 9.3 ||------------------------+-------+------+-----------------+---------|| Increase CAPEX 10% | 332 | 18.4 | 475 | 6.3 ||------------------------+-------+------+-----------------+---------|| Increase CAPEX 20% | 271 | 16.0 | 532 | 6.7 ||------------------------+-------+------+-----------------+---------|| Decrease CAPEX 10% | 453 | 24.2 | 360 | 5.4 ||------------------------+-------+------+-----------------+---------|| Decrease CAPEX 20% | 514 | 27.8 | 303 | 5.0 ||------------------------+-------+------+-----------------+---------|| Increase OPEX 10% | 273 | 17.8 | 435 | 6.3 ||------------------------+-------+------+-----------------+---------|| Increase OPEX 20% | 153 | 14.1 | 452 | 6.9 ||------------------------+-------+------+-----------------+---------|| Decrease OPEX 10% | 513 | 24.0 | 400 | 5.5 ||------------------------+-------+------+-----------------+---------|| Decrease OPEX 20% | 633 | 26.8 | 383 | 5.2 ||------------------------+-------+------+-----------------+---------|| Increase USD vs SEK | 462 | 23.7 | 379 | 5.5 || 10% | | | | ||------------------------+-------+------+-----------------+---------|| Increase USD vs SEK | 520 | 26.1 | 347 | 5.2 || 20% | | | | ||------------------------+-------+------+-----------------+---------|| Decrease USD vs SEK | 308 | 18.0 | 464 | 6.3 || 10% | | | | ||------------------------+-------+------+-----------------+---------|| Decrease USD vs SEK | 202 | 14.5 | 523 | 7.0 || 20% | | | | |+-------------------------------------------------------------------+PermittingEnvironmental permitting of the Tapuli mine and the Kaunisvaara milland any related activities will be the responsibility of theSwedish-Finnish Border River Commission, which has authority over allwater-related projects in the border river's watershed. Acomprehensive application was filed in June and the permittingprocess is underway, with responses from the reference authoritiesrequested by September 30th. A hearing before the Commission isanticipated early this fall and a permit may be issued, earliest, bythe end of the year. Tapuli has already been granted an ExploitationConcession by the Swedish Mine Inspector.An Exploitation Concession application for the Sahavaara project willbe filed with the Chief Mine Inspector in September. The next stepwill be the preparation of an Environmental Permit Application forSahavaara, which contemplates an open pit operation and ore treatmentat the Kaunisvaara mill. The goal is to file this application earlyin 2010.Pellivuoma has been included in a comprehensive environmentalbaseline study that will be completed by next year. An ExploitationConcession application will be completed as soon as sufficientinformation on the mineral resource is available.Resources and MiningThe Tapuli open pit contains a mineral resource (measured andindicated) of 71.5 million tonnes at an average grade of 25% Fe withan overall stripping ratio of 2.1:1 (waste to ore). Mining isexpected to consist of a conventional loader and truck open pitoperation, moving approximately 25 million tonnes total material peryear. Crusher feed will be hauled to the pit rim, crushed andtransported by conveyor to the processing plant.The Sahavaara open pit, located 4 km to the south of Tapuli, containsa mineral resource (measured and indicated) of 91.0 million tonnes atan average grade of 43% Fe and an inferred resource of 1.8 milliontonnes at an average grade of 43% Fe with an overall stripping ratioof 4.6:1 (waste to ore). Like Tapuli, the mining is expected toconsist of a conventional loader and truck open pit operation, movingapproximately 35 million tonnes total material per year. Crusherfeed will be hauled to the pit rim, crushed and then transported byconveyor to the processing plant.The third open pit mine, Pellivuoma, is located 15 km to thesouthwest of Sahavaara and contains an indicated mineral resource of33.8 million tonnes at an average grade of 30% Fe and an inferredresource of 37.4 million tonnes at an average grade of 30% Fe. Theoverall stripping ratio is expected to reach 2.8:1 (waste to ore).Like the other two mines, the Pellivuoma mine consists of aconventional loader and truck open pit operation, movingapproximately 20 million tonnes total material per year. Crusherfeed will be hauled to the pit rim, crushed and then transported byconveyor to the processing plant.Brief Description of Mineral Processes for Tapuli, Sahavaara andPellivuomaProcess development work has been conducted on all the resources bythe Northland staff and consultants and has resulted in process flowsheets that are both simple and flexible and are consequently able toaccommodate feed ore variability.All processes are based on primary crushing at the mine sites andtransport to the Kaunisvaara beneficiation plant, which includes theprimary grinding plant using AG or SAG (Autogenous or Semi-AutogenousGrinding) mills. There are two process lines capable of processingores from multiple deposits at any given time. The first separationstage consists of wet cobbing (with low-intensity magnetic separators- LIMS), which shall reject a substantial portion as a waste materialwith minimal loss of iron units. The cobbing magnetic concentrate isthen ground by efficient, low-energy mills to a size suitable forfinal stage magnetic separation, again using LIMS.The vast majority of the Tapuli feed will not require furtherprocessing, to achieve the high grade concentrate which will bedewatered and readied for transportation to the port. Afterdewatering to recover process water, the tailing slurry will bepumped to a tailings disposal area, where it will be combined withthe cobbing waste and tailings from other ore processing.In order to achieve the target quality of concentrate, most of thefeed from Sahavaara and Pellivuoma requires further upgrading byremoving sulphide minerals using simple flotation techniques (See theflow sheet below).The PEA shows transportation by pipeline from the process plant to atrain loading station across the border in Finland, where the pumpedconcentrate will be filtered to a low moisture level before beingloaded onto railroad wagons for further transport to the harbour atKemi.(see pdf)Infrastructure/LogisticsTransport costs of the iron ore concentrate from the mining area tothe end customer are crucial for the feasibility of the project.Therefore Northland, in close cooperation with Swedish and Finnishtransport authorities, has spent a lot of effort in finding the bestpossible transport solution. Ideally, such a solution would include; * Cross-border electrified rail link between Kaunisvaara and Kemi, * Custom-designed and built iron ore loading terminal in the Port of Kemi and * Regular year-round shipments in up to Handymax size vessels via trans loading at sea as well as through one or two hub ports.However, as the time frame within which the cross-border rail linkinto Sweden has to be completed is very tight and not controlled byNorthland, Northland has based the PEA on building a pipeline fromKaunisvaara to ÿkäsjokisuu. This will mitigate the risk of delays inthe rail construction and serve as an acceptable alternative. Thefinal decision on rail vs pipeline has to be taken at the latest inthe beginning of 2010.The PEA assumes that the power for the project will be supplied byFinland, although a Swedish alternative is still being considered. Afinal decision on this matter will be based entirely on the economicsfor the project.Development ScheduleA provisional timetable for development of the project is as follows:+----------------------------------------------+| Feasibility Study Start | August 2009 ||--------------------------------+-------------|| Feasibility Study Completion | 2Q 2010 ||--------------------------------+-------------|| Commence Basic Engineering | 2Q 2010 ||--------------------------------+-------------|| Commence Detailed Engineering | 3Q 2010 ||--------------------------------+-------------|| Procurement of Long Lead Items | 2Q 2010 ||--------------------------------+-------------|| Commence Site Clearance | 2Q 2010 ||--------------------------------+-------------|| Commence Site Construction | 3Q 2010 ||--------------------------------+-------------|| Commence Operations Tapuli | 2012 ||--------------------------------+-------------|| Commence Operations Sahavaara | 2013 |+----------------------------------------------+The Kaunisvaara Project will involve the staged development ofseveral mines, and a centralised processing plant. Projectdevelopment will commence immediately upon the finalisation of theFeasibility Study, which is estimated to be complete during Q2 2010.It is intended that toward the end of the Feasibility Study, thebasic engineering will commence, leading on to detailed engineeringlater in 2010. In order to fast-track the overall development of theProject, a number of items will be developed in tandem. Theplacement of orders for long-lead items is another criticaldeterminant of the overall schedule.The PEA technical report will be filed on SEDAR and Northland'swebsite www.northlandresourcesinc.com within 45 days.Independent Peer ReviewTurner & Townsend were engaged as a peer reviewer to provide anindependent review of both the CAPEX and OPEX figures in the PEA ascompiled by Aker Solutions. The opinion follows:Turner & Townsend: It is our opinion based on the informationprovided to us that the PEA Capital Expenditure estimate in respectof the Tapuli, Sahavaara and Pellivuoma projects has where visible tous been constructed in line with the general guidance provided by theInstitute of Cost Engineers in respect of level 4 design concept. Webelieve that level 4 design concept to be comparable to the PEArequirement and that the estimate conforms, as far as it is possibleto ascertain, to the accepted industry standard of ± 30% accuracyand 15% contingency.The following persons whom are qualified persons under NI 43-101 andare independent of the company, have reviewed and approved thetechnical information in this press release.Aker SolutionsMike Butler, MIMMM, Associate DirectorGeoVista ABThomas Lindholm, MSc, MAusIMM, Senior Mining EngineerMicon InternationalDibya Kanti Mukhopadhyay, MAusIMM, Senior Economic GeologistDayan J. Anderson, MMSA, Senior Mining EngineerScott Wilson MiningDavid Smith, Technical Director, Mining and EnvironmentCAUTION REGARDING FORWARD-LOOKING INFORMATIONThis press release contains forward-looking information within themeaning of securities laws. Except for statements of historical factrelating to the Company, certain information contained hereinconstitutes ''forward-looking information'' under Canadian securitieslegislation. Forward-looking information includes, but is not limitedto, statements with respect to mineral reserve and resourceestimates; the ability to realize estimated mineral reserves and toconvert mineral resources into mineral reserves; terms and costs offuture exploration; mineralization projections; receipt of allnecessary approvals; the parameters and assumptions underlying themineral resource estimates and iron ore prices. Generally,forward-looking information can be identified by the use offorward-looking terminology such as ''plans'', ''expects'' or ''doesnot expect'', ''is expected'', ''budget'', ''scheduled'',''estimates'', ''forecasts'', ''intends'', ''anticipates'' or ''doesnot anticipate'', or ''believes'', or variations of such words andphrases or statements that certain actions, events or results''may'', ''could'', ''would'', ''might'' or ''will be taken'',''occur'' or ''be achieved''. Forward-looking statements are based onthe opinions and estimates of management as of the date suchstatements are made. Estimates regarding the mineral resources, asoutlined above and in the technical report, have been based onknowledge of company management and the knowledge and experience ofthird party experts. Forward-looking information is subject to knownand unknown risks, uncertainties and other factors that may cause theactual results, level of activity, performance or achievements ofNorthland Resources Inc to be materially different from thoseexpressed or implied by such forward-looking information. Althoughmanagement of Northland Resources Inc has attempted to identifyimportant factors that could cause actual results to differmaterially from those contained in forward-looking information, theremay be other factors that cause results not to be as anticipated,estimated or intended. There can be no assurance that such statementswill prove to be accurate, as actual results and future events coulddiffer materially from those anticipated in such statements.Accordingly, readers should not place undue reliance onforward-looking information. Northland Resources Inc. does notundertake to update any forward-looking information, except inaccordance with applicable securities laws.For More Information, Contact:Anders Hvide, Executive Chairman, Oslo: Tel. +47 92 88 98 58Deborah Craig, Vice President, Northland Resources AB, Stockholm:Tel. +46 70 638 4300Visit our website: www.northlandresourcesinc.comThe press release (including pictures) can be downloaded from thefollowing link.http://hugin.info/137015/R/1339744/320017.pdfThis announcement was originally distributed by Hugin. The issuer is solely responsible for the content of this announcement.
Datum: 07.09.2009 - 07:10 Uhr
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