Northland Resources S.A.: Press Release of Unaudited Annual Report 2012
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
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Q4 Q4
Selected Quarterly and (3 months) (3 months) 12 months 12 months
Annual Information, ended ended ended ended
(unaudited) Dec 31, Dec 31, Dec 31, Dec 31,
USD millions 2012 2011 2012 2011
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Net Profit / (Loss) (5.6) (34.3) (24.8) (38.1)
- per share, USD (0.01) (0.15) (0.05) (0.17)
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Mineral properties
expenditures, Sweden 0.5 0.5 2.4 2.7
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Mineral properties
expenditures, Finland 1.7 5.2 11.5 20.1
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Mines under construction
expenditures,
Sweden and Norway 177.9 84.7 580.1 180.2
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Cash, end of period balance 53.7 38.3 53.7 38.3
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Number of
Common shares 514,178,899 226,628,899 514,178,899 226,628,899
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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".
Significant events during 2012
January-March
-- Capital raise consisting of equity (USD 325 million) and a 13% interest
bond (USD 350 million)
-- Start of the Pitkajarvi trans-loading terminal ground work
April-June
-- Signed final logistics agreements with Savage, Peab and Grieg
-- Logistics agreement signed with Green Cargo
-- USD 40 million Cost Overrun Facility with Standard Bank was signed
-- Building permit granted in Pitkajarvi
-- Finalized financing for drill rigs and mobile equipment
-- First delivery of mobile equipment from Caterpillar, mills from Metso
and drill rigs from Atlas Copco
-- First drawdown under the 13% Bond Loan
July-September
-- Second drawdown under the 13% Bond Loan
-- Northland received confirmation of the four requested daily slots on
Malmbanan
October-December
-- First ore blast in the Tapuli mine
-- First concentrate produced
-- Dispensation for 90 tonnes trucks granted
-- Third drawdown under the 13% Bond Loan
-- Logistics chain proven when the iron ore concentrate reached the port of
Narvik
-- Full disbursement of USD 20 million bond from the additional 12.25% Bond
Loan
Significant events January 1, 2013- February 26, 2013
-- The Company is currently in a challenging financial situation following
the withdrawal of the planned long-term funding. As a consequence, the
Company is experiencing a liquidity shortage and resolved to safeguard
its main operations, held in its Swedish subsidiaries (Northland
Resources AB (publ), Northland Sweden AB and Northland Logistics AB by
filing for corporate reconstruction. A creditors' meeting will be held
on March 1, 2013, at the Lulea District Court in Sweden. At the
creditors' meeting the appointed administrator will provide information
on how the reconstruction is proceeding.
-- On February 18, 2013 the Company received notice from the Toronto Stock
Exchange (the "TSX") that they had decided to delist the Company's
common shares effective at the close of market on March 15. This is due
to the above described reconstruction. The Company's common shares have
a dual listing on the Oslo Bors (the "OSE"), ticker NAUR, and trading on
the OSE will continue at the OSE's discretion.
-- Eva Kaijser will, after her twelve months maternity leave, resume the
position as Chief Financial Officer ("CFO"), effective March 4, 2013.
Mrs. Kaijser replaces the Acting CFO, Peder Zetterberg, as planned.
-- Ramp up of production has been successful and to date Northland has
produced approximately 65,000 dmt of iron ore concentrate with 69
percent Fe-grade and quality in line with planned specifications.
-- Approximately 55,000 tonnes of iron ore concentrate is being shipped to
Tata Steel, IJmuiden, the Netherlands.
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.
-- Cold commissioning of the process plant is completed
-- First production of concentrate has occurred
-- Commissioning is close to completion, including rectification of minor
items
-- Ramp up of production has been successful and to date Northland has
produced approximately 65,000 tonnes (dmt) of concentrate with 69
percent Fe-grade and quality well in line with planned specifications
-- First concentrate has been transported by rail from Pitkajarvi to
Narvik, with the concentrate carried in rented box cars.
-- About 55,000 tonnes of concentrate was loaded onboard the first vessel
and shipped to Northland's off-take partner Tata Steel on February 25,
2013.
Mine and process plant
-- The first production blast occurred on October 18, 2012
-- The first Kaunisvaara process line was completed on schedule. Cold
commissioning has been completed, and first concentrate has been
produced.
-- During the ongoing commissioning the quality of the concentrate produced
meets the specification achieved during the test works and the project
study
-- Three haul trucks, one wheel loader, one dozer and one grader have been
installed at the mining site. Atlas Copco has delivered the second of
the two drill rigs. Early in 2012, Northland awarded a contract for the
purchase of the mine mobile equipment to PON Equipment AB for the supply
of Caterpillar mine mobile equipment. This contract covered the supply
of the first batch of the mining haulage trucks, loading shovels as well
as ancillary equipment. Subsequent to this contract, Northland procured
adequate tires for the haulage trucks to mitigate the risk of potential
supply shortages. The truck workshop has been completed.
The logistics chain
-- The complete logistics chain is working in accordance with expectations
and will enhance gradually during 2013
-- Road and rail interchange work has been completed at Pitkajarvi
-- Northland and its contractor Cliffton have obtained dispensation (to be
renewed on annual basis which is standard procedure) for operating 90
tonnes truck from the Swedish Transport Administration ("STA")
-- STA has also allocated the four rail daily slots on the rail line from
Pitkajarvi to Narvik as was requested by Northland
-- At the end of January, 2013, 12 rail cars were manufactured and
currently Kiruna Wagon manufactures two rail cars per week
-- The first 90 tonnes (gross weight) truck left Kaunisvaara on December 7,
2012, loaded with concentrate destined for Pitkajarvi
-- The first train loaded with concentrate left Pitkajarvi destined for
Narvik during the weekend December 15-16, 2012
-- The Swedish Government has committed to invest SEK 1.3 billion in the
upgrading of the road 395, from Kaunisvaara to the re-loading terminal
in Pitkajarvi. The Swedish Government has also allocated in total SEK
1.3 billion to ensure sufficient capacity on the Malmbanan rail line to
accommodate for the expected increase in volumes from Northland,
Luossavaara-Kiirunavaara AB and other customers.
The Port
-- Permits necessary for a temporary solution for the Fagernes Terminal in
the Port of Narvik are in place.
-- Construction of the permanent jetty in the Port of Narvik is progressing
according to plan, and construction of the storage building is nearing
completion
-- First shipments of conveyors for moving concentrate into and out of bulk
storage arrived on site in December 2012
-- The Ship loader is expected to be delivered in July 2013
-- The Fagernes Terminal in Narvik will be operated by Grieg Logistics AS
-- One Boom stacker is delivered and is currently assembled in Narvik
-- Northland has signed an agreement with the Norwegian National Rail
Administration (Nw.: Jernbaneverket) to invest in the upgrade and
capacity increase of the Fagernes rail line, connecting Northland's
terminal, as well as the tracks in the terminal area.
Consolidated statement of comprehensive income
2012 numbers unaudited
Year ended December 31
------------------------
2012 2011
--------------------------------------------------------------------------
USD'000 USD'000
Cost of sales (24,029) -
------------------------
Gross profit / (loss) (24,029) -
Marketing expenses (985) (752)
General and administrative expenses (22,141) (16,892)
Other operating expenses (994) (10,540)
Other income 56 92
------------------------
Operating profit / (loss) (48,093) (28,092)
Finance income 30,201 2,305
Finance expense (5,692) (11,880)
------------------------
Finance income / (expense) - net 24,509 (9,575)
------------------------
Profit / (Loss) before tax (23,584) (37,667)
Income tax (1,222) (402)
------------------------
Profit / (Loss) for the year (24,806) (38,069)
------------------------
------------------------
Other comprehensive income
Change in fair value of available-for-sale assets - 13
Foreign currency translation 5,859 (8,498)
------------------------
Total comprehensive income / (loss) for the year,
net of tax (18,947) (46,554)
------------------------
------------------------
Profit / (Loss) per share:
Basic and diluted loss for the year attributable
to the equity (USD) (0.05) (0.17)
Quarterly information, unaudited
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4rd 3nd 2st 1th
quarter quarter quarter quarter
ended ended ended ended
Dec 31, Sep 30, Jun 30, Mar 31,
2012 2012 2012 2012
---------------------------------------------------------------------------
Total income, USD '000 245 203 235 145
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Net profit (loss) USD '000 (5,583) 3,728 (21,610) (1,341)
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Net profit (loss) per share, USD (0.01) 0.01 (0.04) (0.00)
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4rd 3nd 2st 1th
quarter quarter quarter quarter
ended ended ended ended
Dec 31, Sep 30, Jun 30, Mar 31,
2011 2011 2011 2011
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Total income, USD '000 358 517 816 707
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Net profit (loss) USD '000 (34,348) (3,928) (8,665) 8,872
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Net profit (loss) per share, USD (0.15) (0.02) (0.04) 0.11
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Consolidated statement of financial position
2012 numbers unaudited
As at December 31
------------------------
2012 2011
--------------------------------------------------------------------------
USD '000 USD '000
Assets
Non-current assets
Exploration and evaluation assets 80,054 64,165
Mines under construction 678,079 236,794
Property, plant and equipment 235,262 9,345
Intangible assets 910 1,241
Financial assets 49,427 27,632
------------------------
Total non-current assets 1,043,732 339,177
------------------------
Current assets
Inventories 5,928 -
Accounts receivable 19,689 17,291
Other current assets 65,302 23,979
Cash and cash equivalents 53,739 38,324
------------------------
Total current assets 144,658 79,594
------------------------
Total assets 1,188,390 418,771
------------------------
------------------------
Equity and liabilities
Shareholders' equity
Share capital 50,425 21,592
Share premium 662,591 388,576
Reserves 36,213 29,452
Cumulative losses (124,713) (99,907)
------------------------
Total equity 624,516 339,713
------------------------
Non-current liabilities
Borrowings 358,131 4,302
Finance lease obligations 17,937 -
Provisions 28,758 327
Other non-current liabilities 7,536 -
------------------------
Total non-current liabilities 412,362 4,629
------------------------
Current liabilities
Trade and other payables 146,485 74,008
Finance lease obligations 3,789 -
Income tax liability 1,238 421
------------------------
Total current liabilities 151,512 74,429
------------------------
Total equity and liabilities 1,188,390 418,771
------------------------
------------------------
Consolidated statement of changes in equity
2012 numbers unaudited
Attributable to the owners of
Northland Resources S.A.
Share capital
------------------------------------
Number of Issued and Share
shares fully paid premium
----------------------------------------------------------------
USD'000 USD'000
Balance as at January 01,
2012 226,628,899 21,592 388,576
------------------------------------
Profit / (Loss) for the year - - -
Other comprehensive income
Foreign currency translation - - -
Change in fair value of
available-for-sale assets - - -
Amount transferred to profit
or loss under caption
'finance expense' due to
significant decline in fair
value of the available-for-
sale assets - - -
------------------------------------
Total comprehensive profit /
(loss) - -
Transactions with owners in
their capacity as owners:
Issuance of new shares 287,500,000 28,828 296,925
Exercise of stock options 50,000 5 141
Share issuance costs - - (23,051)
Share-based payments - - -
------------------------------------
Balance as at December 31,
2012 514,178,899 50,425 662,591
------------------------------------
------------------------------------
Attributable to the owners of Northland
Resources S.A.
Reserves
------------------------------------------------
Foreign
Share option currency Fair value Other
reserve translation reserve reserves
----------------------------------------------------------------------------
USD'000 USD'000 USD'000 USD'000
Balance as at January 01,
2012 18,629 9,757 13 1,053
------------------------------------------------
Profit / (Loss) for the year - - - -
Other comprehensive income
Foreign currency translation - 5,859 - -
Change in fair value of
available-for-sale assets - - (533) -
Amount transferred to profit
or loss under caption
'finance expense' due to
significant decline in fair
value of the available-for-
sale assets - - 520 -
------------------------------------------------
Total comprehensive profit /
(loss) - 5,859 - -
Transactions with owners in
their capacity as owners:
Issuance of new shares - - - -
Exercise of stock options (94) - - -
Share issuance costs - - -
Share-based payments 1,009 - - -
------------------------------------------------
Balance as at December 31,
2012 19,544 15,616 - 1,053
------------------------------------------------
------------------------------------------------
Attributable to the owners of Northland
Resources S.A.
Cumulative Total
losses equity
----------------------------------------------------
USD'000 USD'000
Balance as at January 01,
2012 (99,907) 339,713
------------------------
Profit / (Loss) for the year (24,806) (24,806)
Other comprehensive income
Foreign currency translation - 5,859
Change in fair value of
available-for-sale assets - (533)
Amount transferred to profit
or loss under caption
'finance expense' due to
significant decline in fair
value of the available-for-
sale assets - 520
------------------------
Total comprehensive profit /
(loss) (24,806) (19,480)
Transactions with owners in
their capacity as owners:
Issuance of new shares - 325,753
Exercise of stock options - 52
Share issuance costs - (23,051)
Share-based payments - 1,009
------------------------
Balance as at December 31,
2012 (124,713) 624,516
------------------------
------------------------
Consolidated statement of changes in equity (ctd)
2012 numbers unaudited
Attributable to the owners of
Northland Resources S.A.
Share capital
------------------------------------
Number of Issued and Share
shares fully paid premium
----------------------------------------------------------------
USD'000 USD'000
Balance as at January 01,
2011 224,418,899 21,369 385,041
------------------------------------
Profit / (Loss) for the year - - -
Other comprehensive income
Foreign currency translation - - -
Change in fair value of
available-for-sale assets - - -
------------------------------------
Total comprehensive profit
(loss) - -
Transactions with owners in
their capacity as owners:
Exercise of stock options 2,210,000 223 3,795
Share issuance costs - - (260)
Share-based payments - - -
Issuance of warrants - - -
------------------------------------
Balance as at December 31,
2011 226,628,899 21,592 388,576
------------------------------------
------------------------------------
Attributable to the owners of Northland
Resources S.A.
Reserves
------------------------------------------------
Foreign
Share option currency Fair value Other
reserve translation reserve reserves
----------------------------------------------------------------------------
USD'000 USD'000 USD'000 USD'000
Balance as at January 01,
2011 17,292 18,255 - -
------------------------------------------------
Profit / (Loss) for the year - - - -
Other comprehensive income
Foreign currency translation - (8,498) - -
Change in fair value of
available-for-sale assets - - 13 -
------------------------------------------------
Total comprehensive profit
(loss) - (8,498) 13 -
Transactions with owners in
their capacity as owners:
Exercise of stock options (1,679) - - -
Share issuance costs - - -
Share-based payments 3,016 - -
Issuance of warrants - - - 1,053
------------------------------------------------
Balance as at December 31,
2011 18,629 9,757 13 1,053
------------------------------------------------
------------------------------------------------
Attributable to the owners of Northland
Resources S.A.
Cumulative Total
losses equity
----------------------------------------------------
USD'000 USD'000
Balance as at January 01,
2011 (61,838) 380,119
------------------------
Profit / (Loss) for the year (38,069) (38,069)
Other comprehensive income
Foreign currency translation - (8,498)
Change in fair value of
available-for-sale assets - 13
------------------------
Total comprehensive profit
(loss) (38,069) (46,554)
Transactions with owners in
their capacity as owners:
Exercise of stock options - 2,339
Share issuance costs - (260)
Share-based payments - 3,016
Issuance of warrants - 1,053
------------------------
Balance as at December 31,
2011 (99,907) 339,713
------------------------
------------------------
Consolidated statement of cash flows
2012 numbers unaudited
Year ended December 31
------------------------
2012 2011
--------------------------------------------------------------------------
USD'000 USD'000
Operating activities
Loss for the year before taxation (23,584) (37,667)
Adjustments for non-monetary items:
Impairment of exploration and evaluation assets 9,036
Interest income (632) -
Interest expense 1,882 -
Depreciation and amortization 4,905 374
Share-based payments 770 2,249
Loss on disposal of assets,net 1,097
Foreign exchange (gain) / loss (28,914) 104
Other non-monetary items 1,004 (12)
------------------------
(44,569) (24,819)
Changes in working capital
Inventories (858) -
Accounts receivable (1,247) (30,194)
Other current assets (51,336) (1,067)
Trade and other payables 38,553 12,520
------------------------
Cash flows used in operating activities (59,457) (43,560)
Income tax paid (309) -
------------------------
Net cash used in operating activities (59,766) (43,560)
------------------------
Cash flows from investing activities
Investment in exploration and evaluation assets (16,416) (20,496)
Acquisition of PPE including Mines under
construction (559,826) (139,468)
Long-term receivable (21,487) (19,286)
Interest received 632 -
------------------------
Net cash used in investing activities (597,097) (179,250)
------------------------
Cash flows from financing activities
Proceeds from issuance of ordinary shares 325,802 2,339
Share issuance costs (23,050) (1,430)
Net proceeds from borrowings 364,254 4,302
Transaction costs on fund raising (6,039) (899)
Interest paid (1,882) -
------------------------
Net cash from financing activities 659,085 4,312
------------------------
Change in cash and cash equivalents 2,222 (218,498)
Effect of changes in exchange rates 13,194 5,386
Cash and cash equivalents at beginning of the year 38,323 251,435
------------------------
Cash and cash equivalents at end of the year 53,739 38,323
------------------------
------------------------
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:
Sweden Finland Norway Other Total
--------------------------------------------------
USD'000 USD'000 USD'000 USD'000 USD'000
December 31, 2012
Statement of
comprehensive income
Depreciation and
amortisation (being part
of the 'Cost of sales') 4,359 - - - 4,359
Depreciation and
amortisation (being part
of the 'General and
administrative charges' 203 102 - 233 538
Write-offs 274 583 - 137 994
Net income / (loss) (88,422) (10,412) (11,084) 85,112 (24,806)
--------------------------------------------------
Statement of financial
position
Exploration and
evaluation assets 16,904 63,150 - - 80,054
Mines under construction 539,681 - 138,398 - 678,079
Property, plant and
equipment& intangible
assets 229,511 6,659 - 2 236,172
Current assets 113,994 1,435 8,487 20,742 144,658
Financial assets 48,902 - - 525 49,427
--------------------------------------------------
Total assets 948,992 71,244 146,885 21,269 1,188,390
--------------------------------------------------
Capital expenditure 518,798 66 119,789 - 638,653
--------------------------------------------------
Borrowings 353,727 4,404 - 358,131
Finance lease obligations 21,725 - - 21,725
Provisions 28,758 - - 28,758
Other liabilities 135,065 1,702 16,312 2,181 155,260
--------------------------------------------------
Total liabilities 539,275 6,106 16,312 2,181 563,874
--------------------------------------------------
--------------------------------------------------
Sweden Finland Norway Other Total
--------------------------------------------------
USD'000 USD'000 USD'000 USD'000 USD'000
December 31, 2011
Statement of
comprehensive income
Depreciation and
amortisation 63 67 - 244 374
Write-offs 10,093 439 - - 10,532
Net loss (47,338) (6,345) (17) 15,631 (38,069)
--------------------------------------------------
Statement of financial
position
Exploration and
evaluation assets 13,564 50,601 - - 64,165
Mines under construction 225,756 - 11,038 - 236,794
Property, plant and
equipment& intangible
assets 3,377 6,846 - 363 10,586
Current assets 57,564 3,608 5,466 12,956 79,594
Financial assets 27,632 - - - 27,632
--------------------------------------------------
Total assets 327,893 61,055 16,504 13,319 418,771
--------------------------------------------------
Capital expenditure 170,165 6,595 11,538 - 188,298
--------------------------------------------------
Borrowings - 4,302 - - 4,302
Finance lease obligations - - - - -
Provisions 327 - - - 327
Other liabilities 66,310 4,364 1,655 2,100 74,429
--------------------------------------------------
Total liabilities 66,637 8,666 1,655 2,100 79,058
--------------------------------------------------
--------------------------------------------------
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
USD'000
---------------
Cost as at December 31, 2010 74,950
Transferred from exploration and evaluation assets 1,142
Transferred to exploration and evaluation assets (1,457)
Transferred to property, plant and equipment (554)
Additions 180,210
Net exchange differences (11,515)
Write-offs (5,894)
Other (88)
---------------
Cost as at December 31, 2011 236,794
Transferred from property, plant and equipment 578
Transferred to property, plant and equipment (216,899)
Additions 580,080
Transferred to inventories (5,070)
Net exchange differences 38,567
Capitalized borrowing costs(i) 44,029
---------------
Cost as at December 31, 2012 678,079
---------------
---------------
(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
USD'000
---------------
Cost as at December 31, 2010 5,075
Additions 7,303
Disposals (9)
Transferred from Mines under construction 554
Transferred to intangible assets (88)
Impairment (1,443)
Net exchange differences (749)
---------------
Cost as at December 31, 2011 10,643
Additions 13,661
Disposals (164)
Transferred from Mines under construction 216,899
Transferred to Mines under construction (578)
Net exchange differences 657
---------------
Cost as at December 31, 2012 241,118
---------------
---------------
Accumulated depreciation as at December 31, 2010 (941)
Additions (415)
Reclassification 4
Net exchange differences 54
Accumulated depreciation as at December 31, 2011 (1,298)
Additions (4,560)
Disposals 155
Transferred to intangible assets, net 11
Net exchange differences (164)
Accumulated depreciation as at December 31, 2012 (5,856)
Net book value as at December 31, 2011 9,345
Net book value as at December 31, 2012 235,262
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:
As at December 31
------------------
Country of
Entity's name incorporation 2012 2011
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Northland Resources S.A. Luxembourg Parent Parent
Northland Resources S.A - Swiss branch Switzerland 100% 100%
Parent directly owns the following
entities:
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North American Gold (Barbados) Inc. (i) Barbados - 100%
Northland Sweden AB (formerly Northland
Resources Tapuli Mine AB) Sweden 100% 100%
Northland Mines OY Finland 100% 100%
Parent indirectly owns the following
entities through Northland Sweden AB:
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Northland Exploration Sweden AB (formerly
Barsele Guld AB) Sweden 100% 100%
Northland Resources AB Sweden 100% 100%
Northland Logistics AB (formerly Northland
Exploration Sweden AB) Sweden 100% 100%
Northland Logistics AS Norway 100% 100%
Parent indirectly owns the following
entity through Northland Mines OY:
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Northland Exploration Finland OY Finland 100% 100%
(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:
Year ended December 31
2012 2011
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USD'000 USD'000
Consultancy fees 1,398 637
Management fees - 288
Share-based payments 61 411
Termination benefits - 165
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Total 1,459 1,501
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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
Year ended December 31
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2012 2011
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USD'000 USD'000
Salaries and directors fees 3,594 2,873
Share-based payments 596 2,086
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Total 4,190 4,959
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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.
As at December 31
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2012 2011
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USD'000 USD'000
Accounts receivable - 71
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Accounts payable (166) (2)
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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 www.sedar.com or on the Company's website www.northland.eu.
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
www.northland.eu
